Housing and Planning Act
The Housing and Planning Act became law on 12 May 2016, after completing its passage through Parliament. It is expected to have a big impact on housing in Tower Hamlets.
'Starter Homes' are new-build properties available at a 20 per cent discount for first time buyers aged between 23 and 40. They have been classed as 'affordable housing' by the government and will impact on the council’s ability to negotiate other forms of affordable housing.
Right to Buy for housing association tenants
The government will extend the Right-to-Buy scheme to housing associations through a voluntary agreement, but intends to raise the funds to primarily meet the cost of the scheme through the sale of council properties as they become empty. Whilst there is a commitment to replace these homes, there is no guarantee that they will be council homes in Tower Hamlets, or at affordable rents.
End of secure tenancies
Whilst council tenants in Tower Hamlets have benefited from lifetime secure tenancies, the Act will introduce new fixed-term tenancies of up to 10 years for new tenants and allow families with children under nine years old to have a tenancy that lasts until the child’s 19th birthday.
If a council tenant no longer needs as many bedrooms as they once did for example, if older children have left home, they may be offered a new home which is more suitable.
‘Pay to Stay’
The Act includes proposals to charge households higher rents if their taxable income exceeds £40,000 per year. The money raised through the increased rents will go back to the Treasury and not be reinvested in housing.
Over the next few months the council will be hosting a series of events for residents to take part in, giving them an opportunity to air their views and ask questions of the council.
The Housing and Planning Act in detail
Despite now being law, there are still many policy details which need to be worked out in the coming months, including when each new policy will start.
The Act's headline proposals and the impact on Tower Hamlets
Extension of the Right to Buy to Housing Association tenants
In advance of the original Housing and Planning Bill going through Parliament, The National Housing Federation which represents nearly all housing associations in the country struck a deal with the government for housing associations to voluntarily offer their tenants the Right to Buy.
Those housing association tenants who will be eligible to buy their home if they have three years or more residency could be offered a discount of up to £103,900.
After a designated period (currently unknown) they could then sell the property on the open market for its full value. The full detail of the scheme is yet to be finalised and not all housing association tenants may be eligible to buy the home they currently live in.
The government is planning to refund housing associations for this RTB discount. To recoup this cost it will give councils the option to sell some of their social housing (when it becomes vacant) on the open market and then pass the proceeds to the government as a levy payment. Councils can however fund the levy through other means.
The government is still working on a formula which will determine how much the council must pay. If councils do sell their vacant housing on the open market this would reduce significantly the amount of social housing available in areas such as Tower Hamlets.
The government agreed an amendment to the Bill that will ensure that for every council house sold to fund the Right to Buy extension, at least two affordable homes are built in the capital. It is currently unclear whether the council will be able to retain enough of the sales receipt to build a true like for like replacement home in the same area.
However the council will explore all possible avenues to find other ways to meet the cost of the levy or at least sell the property to partners who would pledge to assist the council in using the property as social housing or temporary accommodation for homeless households.
There is no easy solution to finding this money but the council is committed to trying to ensure it has the least bad impact on residents.
Impact on Tower Hamlets
Until we know the value threshold over which homes could be sold, it is difficult to establish the impact. Early modelling by the council indicates that up to 125 council homes over the next five years might have to be sold. More than 62 per cent of the council's homes are valued at over £300,000 and could be at risk of sale when they become empty.
As set out in the council report on the housing revenue account to Cabinet in February 2016, for the purposes of budget planning it has been assumed that, beginning in 2016/17, an annual payment of £8.4 million will be levied on the authority, and it is not currently assumed that any stock sales will take place to offset this charge.
There are nearly 20,000 households on the waiting list of which 2000 are living in temporary accommodation provided by the council and waiting for a permanent home.
If void properties are sold off rather than being made available for these families, they will have to wait longer costing more in terms of disruption and housing costs.
Pay to Stay (increased rents for social tenants)
At the outset of the bill, the government wanted tenants earning over a certain threshold to pay market rent. After the House of Lords objected, a taper was introduced - peers pushed for 10p in the pound for every pound over thresholds of £40,000 in London, but the government finally settled on 15p in the pound for every pound over the threshold.
This means that for each additional pound earned over £40,000 a household would pay 15p per year extra.
Only taxable income will be assessed, some tenants on benefit would be exempted, and the thresholds reviewed annually and uprated to be in line with the Consumer Price Index.
The government has stated that any household in receipt of Housing Benefit or Universal Credit will be exempted from the policy and that the definition of “income” for the purposes of the policy will be “taxable income”. This will ensure that any payments a household receives from Tax Credits, Child Benefit, Disability Living Allowance and Personal Independence Payments will not count towards establishing the income thresholds.
Any additional rental income the council collects through Pay to Stay (minus an administration fee) has to paid to the government, which intends to spend the proceeds paying off the national debt. This means residents on higher incomes paying higher rent but receive the same level of service.
Impact on Tower Hamlets
The council does not currently hold data on tenant incomes. As such, we are not able to estimate accurately the number of households that might be affected and how much additional rent they will have to pay.
However, as an example, a council household with a combined income of £45,000, who currently pay £481 a month would see their annual rent increase by £750, or an extra £62 a month (a 12 percent rise).
More analysis on how the Pay to Stay could impact Tower Hamlets residents is available in the council's consultation submission to government which also sets out the Mayor’s strong objection to the proposal.
As set out in the council report on the Housing Revenue Account to Cabinet in February 2016, for budget planning purposes it has been assumed that from 2017/18 onwards, £8 million of additional rent will be payable to the government. 'Councils will act as a collection agent for the additional rent or levy and pass it straight to government. Councils are not allowed to retain the extra rent collected to use on repair and maintenance of council homes.
'Starter Homes' are new-build properties available at a 20 per cent discount for first time buyers aged between 23 and 40. They have been classed as 'affordable housing' by the government.
'Affordable housing' currently means either social rent, shared ownership or affordable rent. When considering planning applications, councils used to have more control over deciding what 'affordable rent' was locally. In 2011, the government changed this to mean up to 80 per cent of local market rent levels.
Under the Act, house building companies will be required to offer Starter Homes as part of their 'affordable housing' provision. The recent government consultation suggested that this should be at least 20 per cent of new homes on sites over 10 units.
Councils will have an obligation to promote Starter Homes even if they feel they will not met housing need or be truly affordable in their area which is the case in Tower Hamlets.
Generally, house builders are currently supposed to provide at least 35 per cent affordable housing when building a new development. Starter Homes are expected to be significantly more expensive than any of the current options which are classed as 'affordable housing' provision.
Impact in Tower Hamlets
Tower Hamlets has an acute need for new homes that are genuinely affordable to households on low to middle incomes. Promoting Starter Homes will not meet this need.
Starter Homes, though they may help to meet the needs of some people under 40, but would be completely unaffordable to the majority of households in Tower Hamlets.
The price of Starter Homes will be capped at the maximum price of £450,000 in London. We would expect many new homes to cost over £400,000. Even with a 10 per cent deposit, we estimate that a household would need an annual income of £100,000 to raise the mortgage necessary to afford a home of this value, far in excess of the median income of households in the borough of around £30,000 per annum.
The council has serious concerns that the inclusion of Starter Homes within a new definition of Affordable Housing as it would displace a large proportion of genuinely affordable new homes that might otherwise be built, and in doing so reduce the supply of this type of housing available to those on low to middle incomes.
The council believes that the introduction of a requirement to provide Starter Homes, alongside other government policies such as the forced sale of 'higher value' council homes, will seriously affect the ability of the council to house families on the waiting list and living in expensive temporary accommodation. It is expected that substantial additional costs will fall on both the council and on the Treasury (through additional Housing Benefit payments).
End of lifetime tenancies
Councils will no longer be able to offer new tenants lifetime tenancies. Instead, there will be fixed-term tenancies of between two and ten years, and also provision for families with children under nine years old to have a tenancy that lasts until the child’s 19th birthday.
Existing tenants who have to move as a result of regeneration or major works will maintain their current lifetime tenancy. Succession rights to a deceased tenant's property will remain for spouses or civil partners, though the new tenancy will be a fixed-term tenancy. This is a substantial reduction in the tenancy succession rights for existing tenants.
Private rented sector
This part of the Act creates a new 'banning order' concept, to enable a Tribunal to ban a person from letting a home or engaging in letting agency or property management work in England.
The banning order may be requested by a council against a landlord or agent who has committed a banning order offence. The scope of what constitutes such an offence will be defined in regulations and the Act sets out the considerations that the Tribunal must take into account. A ban must be for six months at least and a financial penalty for breach can be up to a maximum of £5,000.
Database of rogue landlords and lettings agents
The government will operate a database of 'rogue' landlords and letting agents. Councils will be responsible for updating the database when banning orders are issued, and can use it to help exercise their functions. The Act makes provision for councils to have access to the information in the database but the government currently has no intention to make it public.
Rent repayment orders
A tribunal will be able to impose a rent repayment order (RRO) on a landlord who has committed an offence, which a tenant can apply for directly. The rent can be recouped by the tenant if they have paid it, or by a council if the rent was from Housing Benefit or Universal Credit.
The Secretary of State will make regulations as to how the money recovered will be spent. There is a new duty on local authorities to consider applying for an RRO where a landlord is convicted of any of the relevant offences.
Impact in Tower Hamlets
The number of privately renting households has doubled in the past decade in Tower Hamlets. The powers outlined by the government in the Housing and Planning Act will enable the council to take action against bad landlords operating in the borough. However it is difficult to assess at this time the full impact that these measures will have.
The council will be looking to take further steps itself with respect to targeted enforcement in the private rented sector, which it hopes will maximise the effect of the government's measures to ensure good standards in the sector and tough action against poor landlords.
In addition the council is introducing a selective licensing scheme in the west of the borough and will review its approach to how it works with the private sector as part of the development of the new Housing Strategy.
What else is the council doing?
Making the case direct to government
The council has regularly undertaken modelling to assess the impact of many of the Housing and Planning Act's provisions on Tower Hamlets and its residents. We have shared this modelling with other local authorities and government when it has asked for views on aspects of the Act. This has normally been in the form of written evidence.
We will work with the new Mayor of London and other London Councils to see how best to respond to the replacement of council homes sold to fund the Housing Association voluntary Right to Buy scheme under the two for one proposal adopted by the government.
Written and oral submissions
- submitted written evidence to the Housing and Planning Act Committee about the impact of forced sale of council homes, Right to Buy extension, Pay to Stay, and measures to improve the private rented sector
- responded to government's Pay to Stay consultation
- responded to government's starter Homes response
- a motion was passed by full council to agree to continue making the case to government about the negative impact the Act would have on Tower Hamlets.
During its passage through Parliament there have been numerous proposed amendments to the bill (now Act), some of which the government has taken note of, many of which it has not.
Work will now begin on agreeing the finer policy details, including when the different polices will start. There are likely to be more government consultations and opportunities for MPs to debate these proposals in Parliament.
The council will, where possible, feed into these discussions to try to ensure policies are worked out in ways which help address the needs of Tower Hamlets.
We urge all residents to contribute to the development of the housing strategy and take part in the forthcoming events that will be held across the borough. These will be publicised on the council’s website and other media outlets.