Affordable Rent Product

SELHP Strategy & Development Group

This presentation

‘Refresher’ – what is “Affordable Rent”

Homes and Communities Agency funded programme 2011-15

Housing implications and context

Planning implications?

Refresher – what is “Affordable Rent”?

Offered by developing housing associations (“Registered Providers”) following finalisation of contracts with the Homes & Communities Agency (HCA) - any time nowRents of up to 80% of market rents Intended to provide an alternative to social rent – they are not ‘intermediate housing’Therefore subject to borough nominations and Choice Based Lettings.  Eligible for housing benefit Will be added to definition of affordable housing (PPS3)

Refresher – what is “Affordable Rent”? : Principles - Less Grant goes further

Increased rents (inc. from re-lets)

=

more money to service loan

=

more development for the low level of grant

(150,000 homes over 4 years)

(Grant was £100k/unit, now £20-30k)

Refresher – what is “Affordable Rent”? - How do rents compare?

Indicative 2 Bedroom Weekly Rent Levels - SE28

£196

£157

£184

£95

£0

£30

£60

£90

£120

£150

£180

£210

Market 80% Market Local HousingAllowance

Target Rent andservice

Service Charge

Extra income to service borrowing

Refresher – what is “Affordable Rent”? How Do Rents Compare?

SE281 Bed 2 Bed 3 Bed 4 Bed

Market £156 £196 £242 £27780% Market or 80%LHA £125 £157 £194 £22260% Market or 60%LHA £93 £118 £145 £16650% Market or 50%LHA £78 £98 £121 £138LHA Median £156 £190 £230 £30030th percentil LHA £150 £179 £208 £277

Target rent £74 £85 £103 £104Service charge £11 £11 £3 £6Target and service £86 £95 £107 £111

Bedrooms

Current charge

New Charge

Refresher – what is “Affordable Rent”? Are they affordable?

Gross Annual Income1 Bed 2 Bed 3 Bed 4 Bed

80% Market or 80%LHA £23,143 £29,181 £36,000 £41,14360% Market or 60%LHA £17,357 £21,886 £27,000 £30,85750% Market or 50%LHA £14,464 £18,238 £22,500 £25,714

above universal benefit level

Bedrooms

Bedrooms required Bedspaces required

Total benefits claimed

excluding Housing

costs

Remainder of benefits

available for Rent & Service Charge

Suffiient balance

for rent at 50%

Suffiient balance

for rent at 60%

Suffiient balance

for rent at 80%

Suffiient balance

for average

target rent plus s/c

Single under 25 0 1 £51.85 £298.15 yes yes yes yesSingle over 25 1 1 £65.45 £284.55 yes yes yes yesCouple with no dependants 1 2 £102.75 £403.25 yes yes yes yesCouple with 1 child 2 3 £184.11 £321.89 yes yes yes yesCouple with 2 children 2 4 £248.09 £257.91 yes yes yes yesCouple with 3 children 3 5 £312.07 £193.93 yes yes yes yesCouple with 4 children 3 6 £376.05 £129.95 yes no no yesCouple with 5 children 4 7 £440.03 £65.97 no no no noCouple with 6 children 4 8 £504.01 £1.99 no no no noSingle parent with 1 child 2 3 £146.81 £359.19 yes yes yes yesSingle parent with 2 children 2 3 £210.79 £295.21 yes yes yes yesSingle parent with 3 children 3 4 £274.77 £231.23 yes yes yes yesSingle parent with 4 children 3 5 £338.75 £167.25 yes yes no yesSingle parent with 5 children 4 6 £402.73 £103.27 no no no noSingle parent with 6 children 4 7 £466.71 £39.29 no no no noLone parent under 18 1 2 £51.85 £454.15 yes yes yes yesLone parent over 18 1 2 £65.45 £440.55 yes yes yes yes

= residual income insufficient to cover rent

Balance for Rent

HCA Programme 2011-15: the national picture

2008-11 £8.5bn

2011-15 £4.5bn of which £2.3bn committed

i.e. ‘new’ funding in 2011-15 is £2.2bn

HCA Programme 2011-15: the national picture

Registered Providers were invited to put forward ‘offers - based on framework published in Feb 2011.

“It is now up to you to deliver the homes we need” - The Rt Hon Grant Shapps MP, Minister for Housing and Local Government

“Our expectation is that s106 schemes can be delivered at nil grant input for both affordable home ownership and for Affordable Rent”.

HCA Programme 2011-15: the national picture

Deadline for ‘submitting offers” was May 3rd.

Negotiation with Registered Providers in May and June. Collation of national programme by HCA in July – RPs informed of indicative programme.

No local authority input or consultation about indicative offers.

Contracts between HCA and RPs due to be signed in September.

HCA Programme 2011-15: the London picture

London programme based on advice of HCA London Board chaired by the Mayor and including borough representation.

HCA London transfers to GLA in 2012.

£1.8bn of £4.5bn thought to be allocated to London

GLA/HCA London has confirmed that rents for 3 and 4 beds will be a lot less than 80% of market

HCA Programme 2011-15: the local picture

Not entirely clear since HCA now has a ‘South Operating Area’ rather than a SE Area’.

Local housing associations have been asked to indicate extent of expected programme. Many are reticent.

3 elements to any programme:

1. Commitments made in 2010-11 and before

2. Scheme specific allocations

3. Indicative programme

HCA Programme 2011-15: the local picture

1. Commitments made in 2010-11 and before

HCA forecast:

Bexley £13.2m

Bromley £10.4m

Greenwich £36.3m

Lewisham £32.5m

Southwark £42.9m

TOTAL £135.3m

HCA Programme 2011-15: the local picture

2. Scheme specific allocations

Bexley 640 homes

Bromley 198

Greenwich 432

Lewisham 399

Southwark 927

TOTAL 2626

IF each home represents £30,000 grant – total = £79m

HCA Programme 2011-15: the local picture

3. Indicative programme

Maybe c.£100m in SE London??

Registered Providers will agree indicative programmes with HCA. These will not be based on particular sites – or particular boroughs. “Cash programme” approach?

Will RPs be looking for suitable sites to utilise their £s? Or will owners of sites be seeking out the RPs with £s?

Housing implications and context

The Localism Bill will give boroughs duty to produce Strategic Policies on Tenancies. But in the meantime lettings to “Affordable Rent” will take place. We are drafting interim advice about these lettings/nominations.

Government is also introducing power for social landlords to introduce fixed term tenancies e.g. 5 years.

Housing implications and context

There’s scope for confusion about “exemptions”Exemptions will normally be households with existing (secure) tenancies at ‘social’ rents.It may not be fair or realistic to expect them to move to fixed term tenancies at higher rents – e.g. decants, under occupiers, domestic violence cases.We calculate about 1500 cases each year in SE London.To expect a landlord to grant such a household a ‘lifetime’ tenancy not a fixed term one may be straightforward.GLA expects RPs to provide some new homes at ‘social’ rents for exemptions – but which ones?

Housing implications and context

Welfare Reform Bill “Making work pay”.

Flagship is Universal Credit. Most benefits including what is now Housing Benefit or Local Housing Allowance will be included in this. It will be capped at level reflecting average household incomes e.g. for families £26,000 p.a.

In London 80% market rents tip larger households over this cap:

Housing implications and context

Use and role of the Private Rented Sector

Government will allow councils to ‘discharge duty’ to homelessness households in the private rented sector.

Use of PRS has increased significantly – but may have peaked??

Planning implications and context?

Is “Affordable Rent” affordable housing?

If so, on what basis?

Does housing become ‘affordable’ simply if it is possible to rent it with housing costs being covered by benefits?

Is housing unaffordable if rent cannot be covered by benefits?

Planning implications and context?

NB. Local Housing Allowance (LHA) – the maximum that can be paid as Housing Benefit for private tenants is based on the 30th percentile of the market and will increase by Consumer Price Index (i.e. probably decrease in real terms)

Is LHA the basis for ‘affordability’?

Planning implications and context

Intermediate housing

Shared ownership will still exist.

Local planning definitions of affordability have been based on knowledge of income levels at which households are excluded from the market.

Incomes of households in “Affordable Rent” may need to be higher than this if they wish to not be benefit dependent.

Intermediate housing: postscript

An update on the presentation in April…Shared ownership was usually known as “New Build HomeBuy” In London the Mayor has introduced the brand “First Steps”The HomeBuy Agent responsible for Headline marketing etc is now the “First Steps Agent”

Intermediate housing: postscript

Introduction of ‘First Buy’ – new properties offered to first time buyers - 20% interest free equity loan for 5 years

Government now requires that members of the Armed Forces be top priority along with existing social housing tenants

Summary of NBHB sales (SE London)

05/06 06/07 07/08 08/09 09/10 10/11

Sales to existing tenants

11% 9% 6% 8.7% 5.5% 3%

Sales to BME

34% 34% 32% 43% 27.5% 18%

Ave. household income

£27,411 £28,959 £26,859 £29,857 £30,897 £32,143

Ave. share purchased

39% 41.5% 40% 38% 36% 35%