This is a letter sent by Swindon Tenants Campaign Group to Swindon Borough Councillors.

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To Swindon Borough Councillors

‘Fixed term tenancies’ and ‘pay to stay’ – we need more Council Housing not  means tested housing

Two aspects of government policy, one implemented, one under consultation, threaten to turn Council housing into a means tested tenure. ‘Fixed term tenancies’, if introduced (the Council is not obliged to introduce them) would apply a means test to new tenants. ‘Pay to stay’ would extend the means test to all tenants. Swindon Tenants Campaign Group is opposed to transforming social housing into means tested housing, as we explain below. We are calling on Swindon Council to reject ‘fixed term tenancies’ and to oppose ‘pay to stay’ in the consultation taking place.

Fixed term tenancy

Every Local Authority (LA) which has Council housing stock has to consult on a ‘tenancy strategy’. One of the key issues this includes is the question of ‘fixed term tenancies’ which a LA can introduce if it so chooses. However, it is not obliged to. It can maintain the current secure tenancies. ‘Fixed term tenancies’ would apply to new tenants only. They would be for a minimum of two years though we understand that Swindon Council is considering 5 year fixed term tenancies. If introduced the Council would have to decide in the case of each household whether or not to renew the tenancy or tell the tenant/s they had to leave; that is to evict them.

What criteria would they use to make that decision? One would obviously be the economic circumstances of an individual or family. If their income increased then they could be considered not to ‘need’ the tenancy; they might be deemed able to afford to take out a mortgage to buy a house, or to move to private rented accommodation (currently as much as double the cost of Council rent in Swindon). The Council would in effect be saying to the tenant/s that they were earning ‘too much’ to justify keeping a council tenancy. How much would ‘too much’ be? The Council would have to decide what income level was the cut-off point after which they would show the tenant the door. This would inevitably be an arbitrary figure and would create much bad feeling if somebody was asked to leave because they were earning a few pounds over the cut-off point.

Fundamentally ‘fixed term tenancies’ would mean the introduction of a means tested tenancy (for new tenants) with the logical implication that council housing was only for the very poor, pushing out people who might, for instance, get a better paid job. This would most likely lead to a decline in the numbers of tenants in work. Whilst we don’t have a figure for Swindon we know that nationally around 22% of tenants of working age are in fulltime work, 10% part-time (these are ‘heads’ of households). The last English Housing Survey suggests 41% of ‘social housing’ homes have at least one household member in work. The introduction of a ‘fixed term tenancy’ would almost certainly create a situation whereby only those who were unemployed or unfit for work, or on low wages if they did work, would remain as tenants.

How can you develop ‘mixed communities’ (something which the government says it is in favour of) if the shortage of available housing, and government policy, ensures that only the very poor, be they in work or out of it, have any hope of gaining a tenancy? Moreover, as tenants approach the end of their fixed term the threat of losing their tenancy would inevitably act as a disincentive to work.

Administrative burden

The adoption of fixed term tenancies would also place an onerous administrative burden on a LA. Whilst the numbers of people affected might not be so big to begin with, as existing tenants would maintain their secure tenancy, it would not take very long until a majority of tenants were on a fixed term tenancy. We have an annual turnover of tenants of around 1,000 each year, so within 5 years the Council would have to manage fixed term tenancies on around half of the stock. Whilst we can’t judge how many people would be told to leave, it would certainly increase the number of voids (and thus, lost rent) and would significantly increase the cost in staff time in examining the income of tenants and deciding whether or not they should be granted a renewal of their tenancy. It is not beyond the bounds of possibility that the circumstances of somebody who lost a tenancy might change later on and the Council would pick up the responsibility of housing such people once again in the future. In all probability there would many appeals against a decision to end the tenancy which the Council would have to deal with.

Ironically this policy would probably mean that the people told to leave would be paying full rent, thus eroding the guaranteed income stream for the council; replacing them with a tenant who would most likely be on Housing Benefit. With the introduction of Universal Credit the HB element of it will be given directly to the tenant, hence the Council is concerned that arrears might rise significantly. The higher the percentage of tenants on HB the greater the chance of arrears as a result of the ‘bedroom tax’ since many people who might like to move will be unable to owing to the shortage of homes of the ‘right’ size.

Minefield

The criteria for determining who should or should not have their tenancy renewed would be a minefield. This is shown by the response of Swindon Borough Council to the government’s consultation and the consideration of what exceptions would be made. If the same criteria isn’t applied to everybody then Council officers would have to make a potentially life changing decision for someone based on criteria which threaten all manner of injustices when you have to decide if this or that person or family has to leave.

One of the questions the consultation asked was “will the same criteria be applied equally to all tenants or will certain categories be exempted, or allowed to have their tenancy renewed at the end of the five years?” In reply SBC said: “For example the Council would find it hard to justify the termination of a tenancy whilst children were still at school.” It also said that “The basis for any minimum fixed term of tenancy must be that the household in question must be capable at some point in the future of accessing unsubsidised housing in the local housing market. This will be unlikely for some groups and therefore lifetime tenancy must remain an option.”

To the question “Do you think that older people and those with long term illness or disability should continue to be provided with a guarantee of a social home for life through the Tenancy Standard?” SBC answered “Yes”.

To the question as to whether or not there are other categories of people who should be guaranteed “a home for life”, SBC responded:

“For some households that have experienced considerable instability the prospect of a fixed term tenancy may be inappropriate and not conducive to successfully living independently on a permanent basis. For these households the anxiety created by fixed terms should not apply. Examples include severe cases where members of the household have been the victims of crime e.g. domestic violence.”

These responses show the difficulty of deciding who should keep their tenancy or be thrown out. Fixed term tenancies would increase the power of Council staff over tenants and frankly would introduce an element of fear for their future. Even the Council response to the  government consultation recognises the “anxiety” that fixed term tenancies would produce.

Contrary to those who think that home ownership is necessary to create pride and a sense of responsibility, tenants who have security of tenure tend to treat their accommodation as their home, rather than as transient property. Insecurity of tenure might well have a negative impact on the way they treat the property.

Part of the motivation for the idea of fixed term tenancies is that it will supposedly enable the ‘best use’ of stock; the same idea behind the ‘bedroom tax’ which will financially penalise tenants who currently receive Housing Benefit if they have ‘too many’ bedrooms. Yet however the allocation of homes is handled, the fact is that there is a massive shortage of housing which can only be addressed by a large scale Council house building programme. However, you manage the waiting lists and the existing tenants, the fundamental problem remains the shortage of available housing.

Finally, It should be said that managing and policing fixed term tenancies would be a waste of resources which could be better spent on our housing stock and the service we offer to our tenants.

‘Pay to stay’

The coalition government has just published a consultation document on a proposal to introduce increased rent for ‘high earners’ who are ‘social housing’ tenants (Council or Housing Association tenants). The rationale of the government is that it is unfair for tenants who have high incomes to be ‘subsidised’ by paying a ‘social rent’. In fact the ‘subsidy’ which the government talks of is a fiction. What they call a ‘subsidy’ is in fact only an estimate of the difference between a ‘social rent’ and a market rent. In other words a tenant would have to pay x amount more if they were paying a market rent in the private sector than they are for their ‘social rent’ home.

Subsidy normally means an amount of money paid by the government to subsidise some service, in this case housing. In fact the government is paying no subsidy. In launching its ‘self-financing’ system in April, it gave most Councils a debt which was supposed to be a ‘one-off settlement’ of the so-called historic national housing debt. This debt burden imposed upon them is exacerbated by the fact that Councils have to pay an annual interest to the government for borrowing this money.

Prior to the introduction of ‘self-financing’ there was a progressive growth of ‘negative subsidy’ which Councils paid to the government. In 2010/11, the last year of the old system, it was £907 million. Actual Government subsidy (according to the figures of the Department of Communities and Local Government) which a minority of Councils received was £413 million. So the government was actually being funded by Council tenants to the tune of nearly £500 million in the last year of the old system. This is hardly ‘unfair to taxpayers’ who were not funding housing through their taxes.

Threshold

The government consultation suggests that the threshold at which tenants would be charged a higher rent could be £60,000, £80,000 or £100,000 per year. It appears to favour £60,000 as the threshold. This would be the earnings of the nominal ‘household reference person’ or “the two highest earning individuals whose joint income is at or above the threshold”. In fact for all the furore about the ‘scandalous’ situation where well-off people are supposedly being subsidised, the government is not really sure how many households have combined earnings of over £60,000 a year. It’s really just a guess because tenants who do not claim housing benefit do not have to reveal their income to LAs or Housing Associations. It’s very rough estimate varies considerably from 12,000 to 34,000 households. The higher figure would represent less than 1 in every 100 social housing households in England, the lower figure roughly less than one in every three hundred. The infamous tenants who are said to earn £100,000 or more per year, who have been used to try to whip up a scandal about ‘subsidising’ those who earn enough to ‘stand on their own feet’, constitute according to the government’s own guess as little as 1,000 households (6,000 at the upper level), an infinitesimal fraction of the tenant body.

Let’s assume for one moment that the government’s upper estimates are accurate. That would mean Councils having the opportunity of charging a market rent on less than one in every 100 properties. To say it would have a marginal impact on their income would be an understatement. According to the housing website 24dash.com government officials have said that ‘pay to stay’ would raise £21.6 million nationally.

What would be the cost of this tiny increase in income? The consultation paper does admit that there would be a cost for Councils in operating a system which would require them to keep track of the income of all their tenants year by year, but it makes no estimate of it, nor does it offer money to assist Councils with additional costs. These extra costs would have to be paid for out of the additional rent raised. Whether there would be much additional rent raised is highly dubious because any tenant faced with the prospect of their rent being doubled would more than likely take up the ‘right to buy’. Given the high levels of discount it would probably be cheaper for them to buy than to pay the big increase in rent. So the chances are that ‘pay to stay’ would simply lead to the loss of more homes than would otherwise have been the case.

The consultation indicates that although there are legal hurdles to overcome, their intention is to apply ‘pay to stay’ to all tenants. The document says “Existing social tenants … would need to be given adequate notice of any proposed changes in rent levels.” Social landlords have no legal right to demand information on income in order to determine rent so the government says it would have to introduce new primary legislation in Parliament. This would mean that the means test would have to be applied to all tenants to make sure that any of them crossing the threshold had their rent increased. Keeping track of the earnings of all their tenants would be a daunting prospect for LA housing departments. It would be akin to painting the proverbial Forth Bridge. It would have to keep tabs on all changes of income, at least annually.

It would be very unlikely that any increased income through higher rents on such a tiny proportion of their tenants would provide anywhere near sufficient funds to pay for the additional administration costs of keeping tabs on the earnings of all their tenants. It would frankly be a nightmare to implement. Ultimately tenants would pay the cost because money spent on this massive administration task would mean less money spent on the upkeep of their homes.

There is another sting in the tail in the consultation. It is suggested that some of the extra money which Councils might get from charging higher rents might have to be handed over to the Homes and Communities Agency. The document admits that this would be complicated because if a tenant subsequently loses a job or there is a significant change in their economic circumstances then they would revert to a social rent. What would the HCA then do? Hand the money back? It seems unlikely, but the discussion document has nothing to say on what might happen in such circumstances.

Who are these high earners and how do they get Council or Housing Association tenancies? There is little information available about them. Given the shortage of ‘social housing’ and the size of the waiting lists the chances of anybody on £60,000 a year becoming a tenant today are negligible. There might be some cases where a child of the family grows up, ends up with high paid employment, and subsequently takes over a tenancy when their parents die. There may be other cases where a relationship leads to another person moving in, and they might be a high earner or the combined earnings of two people would greatly enhance the household income. But there can be few if any cases where a household earning such an income would be given a social tenancy from the waiting list. Moreover, given the long term stigmatisation of Council housing and Council tenants it’s difficult to imagine many people earning such a high salary being keen to become a ‘social tenant’.

Finally, ‘pay to stay’ would contradict the introduction of ‘fixed term tenancies’. Consider this: if an individual or a couple earning more than £60,000 a year can stay as a Council tenant (albeit with a big rent increase) then what possible reason would any Council have to tell tenants on a fixed term tenancy that they had to leave? What sense would it make for the Council to have to administer fixed term tenancies when high earning families (even if tiny numbers) could keep their tenancy?

Means tested Council housing

The above are sufficient practical reasons to oppose fixed term tenancies and ‘pay to stay’. The more fundamental reason, however, is that it would turn Council housing into means tested housing. A means test based on income would treat ‘social housing’ as a tenure only for the poor. Indeed the consultation says as much, suggesting that ‘social housing’ is only for “the most vulnerable in society”. If the probable threshold can be said to be high, once you set an earnings threshold then it can easily be lowered. It would in any case be for two salaries.

Council housing was never a means tested tenure. The mass building programmes begun after the second world war were carried out to address a national housing crisis reflected in overcrowding and widespread slum conditions in rented housing. Whilst before the war Council housing had been for ‘the working classes’, the Atlee government abandoned this definition and said that Council house building was to address general housing needs. Even the 1951 Conservative Party manifesto for the General Election declared housing to be a ‘social service’, second only, in their view to national defence. Labour and Conservative used to compete over the number of houses they built.

Council housing was never a tenure just for the poor. In fact before the deregulation of the private rented sector by the 1957 Housing Act, private rented accommodation was often cheaper than Council housing rents. Council estates were very much ‘mixed communities’ with a wide cross section of working people, from a cleaner to a school teacher, a factory worker to an office worker. The London overspill population (who came to Swindon for employment) and key workers were a large component of those to whom homes were allocated from the 1950s onwards in Swindon.

‘Fixed term tenancies’, together with ‘pay to stay’ would mark a dangerous step which would institutionalise ‘means testing’ in the ‘social housing’ sector and increase the already high concentration of poverty (62% of tenants are on HB). Far from moving towards creating the ‘mixed communities’ that Council estates used to be before ‘right to buy’ these policies would complete the transformation of them into the proverbial ‘ghettos for the poor’. That it is why the Council should maintain the secure tenure of their tenants, reject ‘fixed term tenancies’ and oppose the idea of ‘pay to stay’.

Ultimately the growing numbers on the housing waiting list can only be tackled by building new Council housing. If the government wants to be ‘fair to people on the waiting lists’ then they need to address the shortage of ‘social housing’. In Swindon there is a shortage of over 800 ‘affordable homes’ every year. Unless there is an increase in available stock then the waiting list numbers will continue to grow and the national and local housing crisis will deepen. We need more Council housing not means tested housing.

Martin Wicks

for Swindon Tenants Campaign Group

July 2012

PS. We would be pleased to receive feedback from you on the issues we have raised.

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