LEWES TENANCY STRATEGY
Lewes District council is deciding on its strategy on “affordable rents” for housing associations. It may apply this policy to council tenancies later. It also proposes a new form of insecure tenancy agreement. I’m a housing and benefits consultant based in Lewes advising hundreds of housing associations up and down the country. So I wanted to give you some information based on my experience.
Who is affected and who should be consulted?
The issue only affects new tenants. It does not directly affect existing tenants although they could be affected if they want to transfer. It will apply to new developments and many re-lets, where a house or flat becomes empty
The new tenancies, with limited security of tenure, are likely to apply to all new social housing, but the new rents will not apply to Lewes council housing for the time being.
But the rents used for housing associations now are likely to be used for new council tenants later.
So it is vital that people on the council waiting list are consulted since they will be most directly affected.
Do things have to change?
No. Many smaller associations have decided not to change their policies. But many of the larger ones active in the district do want to increase their rents and make tenants less secure. It is up to the council to decide whether or not it wants to let them and whether or not it wants to apply the policies to council housing.
What sort of rents would be charged?
The government wants associations to charge up to 80% of the commercial market rent. Although the theory is that this is only the maximum, there have been a lot of cases where funding has been refused for new housing schemes where rents lower than this are proposed.
What does this mean in Lewes district?
The easiest way to find out what this might mean is to look at “reference rents”. These are figures that are currently used when there is a dispute about whether housing association rents are too high. They represent the average commercial rent for the size of the property in the area.
In March 2012 these were the reference rents covering Peacehaven, Newhaven and Lewes (Seaford is slightly lower):
One bedroomed property £150 per week
2 bedroomed property £210.58
3 bedrooms £242.31
Of course, the average varies depending on what part of the district you are in. A survey of the Rightmove site on 20/3/12 shows this range of rents
1 bedroomed £121-138
2 bedroomed £230-312 (mainly in Corsica Hall)
3 bedroomed £196-277
1 bedroomed £133-162
2 bedroomed £173-219
3 bedroomed £219-288
1 bedroomed £104-162
2 bedroomed £173-202
3 bedroomed £185- 231
1 bedroomed £167-185
2 bedroomed £173-219
3 bedroomed £219 (one only)
These figures are a little less reliable because a comparatively small number of rents are shown for each area.
So, based on this, we can expect 80% market rents to work out roughly like this:
1 bedroomed £120 per week
2 bedroomed £155
3 bedroomed £170
Rents might be a little more in Lewes and a little less in Newhaven.
Does this kind of rent look affordable to you?
Who do you think could afford these kinds of rents?
Current Lewes council rents are being advertised at £70 for one bedroom, £70-90 for two bedrooms and £80 plus for three bedrooms according to the Homemove site
Caught in the poverty trap
We live in an area of high costs and low wages. So high rents are a particular problem for us.
More and more people will be forced onto housing benefit, even though they are working. This will increase the housing benefit bill and make it difficult for people to see any significant advantage from working or increasing their hours.
The decisions that the council will need to take over the next year over council tax benefit for working people will be crucial, but people on housing and council tax benefit are likely to lose around 91p for every extra pound they earn once universal credit is introduced.
It works like this:
For each extra £1 of income:
32p is lost in tax and national insurance, leaving 68p,
65% of the 68p lost in a reduction of universal credit, a further reduction of 44p, leaving 24p,
a further reduction of council tax benefit of perhaps 22% of the 68p- (depending on what the council decides) lost in a reduction of council tax benefit- a further reduction of 15p, leaving 9p
From this 9p people will have to meet any extra work expenses, for example transport costs if they are working extra days.
Trapped in rented housing
If you have more than £16,000 worth of savings and you are under pension age then you can’t get housing benefit and if you have more than £6,000 then your benefit is drastically reduced. This means that you cannot save unless your income is so high that you are well above housing benefit level. So for many working people bang goes the chance of saving to buy somewhere. You will be stuck in rented housing, whether you like it or not.
The benefits cap
It is no better for those who are not able to get a job. They will be limited to a total benefit entitlement of £500 per week (less for single people) from next April. At current benefit rates here is the maximum amount sick and unemployed people will have in benefit to pay their rent.
couple 18+, 4 children £114
couple 18+, 5 children £51
Lone parent 18+, 4 children £157
lone parent 18+ 5, children £95
(a detailed explanation of these figures is available if required)
You can see that this is less than the likely “affordable” rent. Tenants would have to pay any extra out of the amount intended for food etc.
Even worse is the bedroom tax, which will be introduced for council and housing association tenants at the same time. One bedroom will be allowed for a couple or single adult, two children of opposite sexes under 10 will be expected to share, as will children of the same sex over this age.
If you have “too many bedrooms” then your benefit will be worked out on a rent that is lower than what you have to pay. If you have one extra bedroom then there will be a 14% reduction. If you have two or more extra bedrooms then the reduction will be 25%. It is important to understand that there is normally no period of grace. If your son or daughter leaves home the new limits will apply immediately.
Higher rents mean that the amount of the bedroom tax is greater.
Will higher rents mean that more homes can be built?
The government says that we need higher rents to fund more homes. But I think you have to treat this claim with a lot of caution.
A lot of the housing associations operating in the area are national or regional. There is nothing to stop them taking the money from high rents here and spending it building new homes in cheaper areas, like Sittingbourne, Margate or Newcastle. In fact, from a financial point of view, it would be sensible to do so.
The council could build more homes, but it would need to start charging these high rents to do so, and even then the government might not agree. Plus there are not many sites suitable for new housing in the area which are not in the hands of private developers already. Before you accept this argument ask where the sites for these new homes would actually be.
What about flexible tenancies?
These tenancies are for fixed periods. These can be as short as two years. It is up to the landlord to decide how long they will be. At the end of this period you have no right to stay. At the moment most landlords are offering 5 years.
These are applying to an increasing number of housing association lettings and the council plans to introduce them for new council tenants.
The idea is that you can be evicted if you no longer “need” your home or if someone “needs” it more than you do.
We have already seen the effects in Lewes of fixed term lettings in the private sector. People tend to have little investment in the area that they are living in because they don’t know how long they will be there. People face the prospect of losing their jobs, their schools and their support networks.
We talk a lot about the need to build stable communities, but this policy will damage them. The problems are not as great as in the private sector, where the fixed period can be as short as six months, but imagine being in the last year of your tenancy and not knowing whether you could stay.
Will flexible tenancies make more housing available for those in need?
If you answer “yes” to this question then you have to ask who will be made to leave, who does not leave now, and where they would go.
You need an income of about £40,000 a year to be able to afford to buy even the cheapest one bedroomed flat in the area. There are very few prospective council or housing association tenants who have even that. Something larger will obviously cost a lot more.
I’ve explained how high rents stop people on housing benefit saving money. It should also be obvious that people not on housing benefit will find it difficult to save for a deposit if rents go up.
So the people you would have to evict at the end of the tenancies would have to rent in the private sector. Someone would have to look at the list of tenants and potential tenants and say “You are the most deserving, but you deserve less”. Is this what we want?
Everybody probably has one neighbour that they think should move, but would you want to have someone in judgement over you and whether you can keep your home?
The council does not have to adopt a tenancy strategy involving “affordable” rents and “flexible” tenancies, and many councils have not done so.
There are particular reasons why such a strategy would be bad for Lewes.
The high commercial rents in the area
The low wages in the area
The need to build and retain stable communities
The impact of the total benefit cap
The poverty trap
The increased difficulties for potential home owners
The increased impact of the bedroom tax
The low level of the likely increase in housing availability.
The fact that the worst impact is likely to fall on hard working people working for low or modest wages.