To Swindon Council Cabinet members

You can download a PDF of this here ahp2015-18cab

At your meeting on April 23rd you have before you a document on the government’s “Affordable Homes Programme” (AHP) for 2015-18. The proposal is to put in a bid for grant in the second round of this programme. The very act of putting in a bid means accepting conditions which the government is imposing on bidders. Although the document neglects to inform you, you should know that the Housing Advisory Forum, at its last meeting, called on you not to put in a bid on the grounds that the conditions attached are unacceptable. Both Swindon Tenants Campaign Group and Swindon Tenants Voice have adopted the same point of view. 

We will explain why we think the conditions associated with the AHP are unacceptable, but firstly it’s necessary to correct a number of inaccuracies and misleading ‘spin’ in the document you will vote on.

  • Firstly it says that “The Council was one of a minority of stock holding authorities to be awarded grant funding in the last bid round. The National Affordable Housing Programme has enabled the Council to start building Council housing again in significant numbers…” This is misleading because it confuses entirely different programmes of different governments! The document neglects to mention that the Council put in a bid in ‘the last bid round’ (that is the first round of the coalition’s AHP) and failed to win any grant. The bid that the Council did win pre-dated that. They won grant in the National Affordable Homes Programme (NAHP) of the previous government. Despite the fact that this false information was pointed out at the HAF meeting it has still been left in the document. This could hardly be more misleading since the differences between the NHAP and the AHP are considerable. The grant for the NAHP was £60,000 a home, whereas the grant which was said to be available for the first bid round of the AHP was supposed to be £20,000 a home. In fact it proved to be even less than this paltry figure, just £18,838 nationally and in our area even lower at £17,545.

 

  • The Cabinet document refers to “housing an additional 150 households in new homes by March 2018”. This is completely false, since the schemes proposed include Sussex Square and the replacement of 50 ‘Woolaway’ homes. This involves demolition of 83 units, hence the schemes overall would produce only 67 additional homes. The demolitions will, of course, displace existing tenants.

 

  • We are told that rents will be “slightly higher”. The extent to which this is misleading can be gauged by the fact that AR rents are up to £61 a week higher than Council rents. Nobody could conceivably construe these rents to be “slightly higher” (see box below). Even in the case of the £14 extra for a 2 bedroom flat this is not a negligible amount for somebody on a low income or in part-time work.

 

  • The document implies that if the £3 million grant is gained then, “A successful bid would also mean that £3 million of existing capital resources can be used on providing additional capital improvements, for example this could provide over 1,000 households new kitchens to help reduce the current backlog.” ‘Could’ does not mean that this is a commitment to renew 1,000 new kitchens more than would otherwise be the case. This is ‘spin’ similar to that used at the time when the Council was trying to sell an above inflation rent increase of 3.7%. We were told that it would be possible to increase the numbers of kitchen and bathroom renewals. Yet once the 3.7% increase was imposed against the wishes of the Housing Advisory Forum and two of the tenant groups, the actual programme of works which followed showed exactly the same number of kitchens and bathrooms for the forthcoming year as for 2013-14.

The government’s conditions

The conditions that are attached to applications for grant, include

  • charging “Affordable Rent” (AR) on all new homes
  • converting existing housing stock from ‘social rent’ to AR
  • selling void stock on the open market

AR was introduced to enable the government to slash grant for building new homes, making tenants pay through higher rent, and housing providers through increased borrowing. The absurdity of AR is that it’s higher rents mean higher housing benefit payments when the avowed aim of the government is to reduce the national housing benefit bill.

The preferred option which the Council is asking you to support is for 80% of private rent levels. This means introducing rent levels of up to £61 a week above Council rents. The chances are that most of the people who would be able to pay such rents would be on full housing benefit.

Property Type ‘Social Rent’ 80% Market Rent Difference
1 Bed Flat £75.75 £73.85 – £1.90
2 Bed Flat £82.83 £96.92 + £14.09
2 Bed House £82.83 £101.54 + £18.71
3 Bed House £90.60 £129.23 + £38.63
4 Bed House £104.78 £166.15 + £61.37

What is important to bear in mind is that AR connects Council housing with the private market. Although the document does not mention it we know from a meeting with Officers that the annual rent increase for AR properties would (except in the very unlikely event of a downturn in private rental prices) be higher than the rest of the Council’s housing stock which is restricted to the government formula of CPI + 1% as a maximum. The gap between these two would increase year by year.

The purpose of Council housing was to create homes for rent outside ‘themarket’; homes which the private market would not build because there was no, or insufficient profit in them. Pushing up rents towards market rates is counter-productive. The problem we have is “an acute shortage of social housing” (as Robert Buckland has described it). The housing crisis can only be tackled if there is an increase in the number of ‘social rent’ homes available. Yet the proposal before you would have the result of reducing the number of ‘social rent’ homes available in the town. It would mean the loss of 203 homes with Council rent: the 120 conversions and 83 demolished properties replaced with AR homes. What sense does this make? It will simply worsen the crisis that we face by reducing the number of genuinely affordable homes for rent at the disposal of the Council.

Moreover, introducing AR by way of regeneration projects such as Sussex Square would create a precedent which would most likely see a repeat of this method. Hence, it poses the threat of further loss of ‘social rent’ homes in the future.

Something missing?

One risk which the Cabinet document neglects to mention is related to the short time-scale available to prepare bids. This is owing to the failure of the government to produce the guidance which it had promised before Christmas. When the Prospectus did come out it made it clear that it was expected that the ‘best bid’ would be at the initial stage. Any errors or financial shortages which emerge would have to be covered by the Council’s own resources.

“It will not be possible at any stage during the programme period to respond to changes in contract parameters by increasing the amount of funding for a scheme or for an indicative proposal.

If additional funding is needed – for whatever reason – such additional funding would have to be generated from a provider’s own resources or capacity (where that is achievable without adversely impacting their financial viability).”

Surely the document should have reported on the potential risk of having to put together a bid in short-time and the financial consequences of any mistakes given this statement from the government?

One other curious thing in the Cabinet document is the absence of details of the purchase of General Fund land. Should not the full finances involved in the proposal be available for a decision of Cabinet? Officers must know which of the listed schemes are on GF land?

Conclusion

The housing crisis in Swindon, as with the national housing crisis, can only be seriously tackled by providing more ‘social rent’ homes, especially new Council housing. Even though the bid (if grant were won) would provide 67 additional homes, it would be at the cost of having 203 less Council rent homes. This would mean pre-empting the forthcoming discussion on Housing Strategy. It would mark an acceptance by the Council of AR. It would in effect be saying that it believed that having less ‘social rent’ homes was acceptable. A vote in favour of this bid would be nothing less than a decision to follow a policy which would reduce the number of genuinely affordable homes.

We would therefore submit to you that Swindon Council should not put in a bid. The alternative would be to utilise our ‘borrowing headroom’ to build some new Council housing stock. This would mean that we could provide Council housing with Council rents. Whilst we could not build as much housing as is needed, without a change of national government policy, we would at least be able to counteract the loss of stock resulting from the ‘enhanced Right to Buy’ (another government policy which opposes building homes with ‘social rent’) and preserve the principle that Council homes should have Council rents.

One final point. Cabinet previously took a decision on Sussex Square, based on the provision of misleading information. They were told that charging Council rents would make the project ‘unviable’. This was subsequently shown to be false. With this document Cabinet members are told that rents would be ‘slightly higher’ which is patently untrue. It is one thing for Cabinet members to take decisions on the basis of full and accurate information and in full consideration of the pros and cons. However, what you are provided with is misleading information which does not even consider the negative consequences of introducing AR, and is full of ‘spin’ designed to sell the proposal by any means, however inaccurate.

Martin Wicks

on behalf of

Swindon Tenants Campaign Group

April 20th 2014

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