Calls for reductions in housing costs to boost the economy and reduce poverty have been on the increase. So how will the UK’s social housing sector approach rent increases due in April 2014? Peter Hall reviews the facts and alternatives available.

"Reducing Housing Costs

Faisal Islam led the way on calls for this last year, outlining how reducing housing costs would boost the economy via increased disposable incomes. Shelter joined in with a blog on boosting wages or cutting rents and even Helen Barnard from the JRF recently highlighted in a New Statesman article that increasing the minimum wage won’t be enough to tackle ‘poverty –  reductions in housing costs will also be required.

Or Increasing Housing Costs

It’s time of the year when the good and great in social housing up & down the country will be facing the elephant in the room – proposed rent increases from April 2014...."

Are the financially deluded having conversations with the financially excluded? What will they talk about then...?
Barry Marlow outlines the case for overcoming the financial delusion which has persisted in UK social housing.

I came across this view on a half term break in Devon last week. Outstanding isn’t it? Imagine waking up to that each day and then watching the sun set from it each evening.

It’s even more impressive when you realise it’s the view from the front of a 3 bed North Devon Council House on Worth Road in Ilfracombe as below.

And the rent for this home is only £94 per week,compared to the average (according to Zoopla) in the area of £600pcm.

Not many social housing properties will have views like this, but it’s a view many prospective owners and private renters ineligible for ‘social housing’ nearby will pay very handsomely for. Yet there are two similar social housing properties with uninspiring views currently on the DevonHomeChoice listings at the very same rent per week.

Is it time to release the shackle on social housing rents that is ‘rent restructuring’ and move towards a market based approach which mirrors valuation methodologies of homes for sale and private rents? Properties in well managed and maintained neighbourhoods or with good views like this could attract premium rents. Others would need to have rents adjusted based on demand. If demand is low, or the property or even neighbourhood poorly managed/maintained, rents would need to reflect what people are prepared to pay. Not some abstract Whitehall construed formula  based on valuations of properties in 2001, average incomes, and the number of bedrooms as is currently the case, and which many landlords have not managed to implement fully yet.

The NHF recently called for HA’s to be free to set their own rents, and as L&Q CE David Montague recently outlined, rent policy at the moment is based on the luck of the draw anyway. Those who say it will be inequitable to charge differential rents please do read the link above  - the inequity of neighbours in the same properties paying different rents is already happening depending on when they got their tenancy. Pay to stay proposals will extend these differentials on the basis of tenant’s income. Is it OK to charge a higher rent based on high income, but not a lower rent based on lower incomes or demand?    

Setting rents based on demand could be as transparent as you can get for customers. Some winners, some losers – depending on the emphasis given to ‘social returns’ on investment by their landlords.  And that's the tip of the iceberg of potential benefits: freeing up higher returns on assets to deliver more new homes, better Vfm, and socially responsible commercial approaches etc?

Even if you don't agree, at the very least, this view from Worth Road could be a contender in a 'best view from social housing in the UK' photo competition?

About the Author

Peter Hall is MD of PHHS: follow him via @Phhsl

Follow the conversation about this article on LinkedIn at The Social Housing Store

When Eastlands Homes placed an article in its tenants newsletter earlier this year asking tenants to think about whether they could really afford Sky, cigarettes, bingo, drinks and other non-essentials, it caused an 'interesting' debate on what is essential in the context of paying your way

Stephen Covey once said, “Trust is the glue of life. It’s the most essential ingredient in effective communication”. In this article, Barry Marlow outlines how success in managing and advising someone else on their budget takes skill and trust, and if you really want to engage with tenants in debt who might be reluctant to talk to you, don't pre-judge them.

Commercialisation. It’s the new buzz word in the social housing sector alongside ’big data’.

But aside from diversifying into areas such as market rent , shared ownership and build for sale, is there a real understanding of the extent of commercialisation required?

Is there an inevitable need to adopt a more commercial approach merely to survive?

Buried amidst all the changes that have taken place in the last few years across the housing sector is a significant regulatory change.

The Homes and Communities Agency has confirmed that English Social Housing landlords can now take deposits from new tenants.

In this article, Peter Hall and Barry Marlow outline how reviewing an approach to tenancy deposits could be an effective tool in the box to help landlords maximise income in the new era of direct payments by tenants.

Peter Hall (@PHHSl) writes passionately about the bedroom tax, asking Why aren't more landlords reclassifying homes to ease the real pain being caused?

There’s been a lot of press this week on 100 days of the bedroom tax and its impact. The NHF highlighting the impact in the North West citing £21m lost income. Aragon taking the time, effort and presumably significant resource to produce a glossy brochure on the impact on its business (a £7,000 increase in arrears while 5 staff have been recruited to help people affected ‘budget’ better!) And then I see that a man slashed his throat in a job centre after complaining about the impact of the bedroom tax.

All this time, effort and negative impact on businesses, and most importantly, individuals, when all the time landlords have it in their power in one fell swoop to take away all misery and suffering it’s causing – as I’ve written in detail about elsewhere - by reclassifying properties. Simple. Change it from a 3 Bed to a 2 Bed for rent purposes and charge a lower rent. Or a 2 bed to a 1 bed. Some have done so. Why aren’t others following suit?

The housing sector is rightly very proud of its origins in the philanthropic Peabodys and Rowntrees, among others. Surely it makes business and philanthropic sense to simply reclassify homes and reduce the rent charge (even temporarily) in the circumstances?

What rational business would sit back and see £000’s being lost on rental income merely because the property is ‘hard to let’ because of the bedroom tax,  or even consider demolition rather than just reduce the rent by a few £’s a week?

Does it make sense to employ 5 people to help with budgeting when those badly affected have no budget to speak of or hope of a move or work in the near future? Does it make business sense to spend £’s chasing arrears which you’ll never recover?

And what genuinely philanthropic business would see the physical and emotional human hardship and turmoil being caused by the bedroom tax, and choose not to act in the most simple manner to end that simply because ( as I’ve seen commented elsewhere)  ‘we can’t allow rent policy to be dictated by government welfare policy’ or some notional fear of lenders not liking what they see. Especially with HA surpluses rising yet again for the last financial year. L&Q up to £100m. Home Group doubling to £64m. Hyde £25m. Riverside £22m. The reductions in rents by reclassifying properties and saying they have less bedrooms are a drop in the ocean compared to those levels.

Come on #ukhousing. Do that maths. Get creative. Don't do what you're told to do. Do what you know is right. Ask all of your tenants rather than your FD or your board what they would rather you do and give them some genuine options on where savings could be made elsewhere to keep services going , still maintain and improve existing stock , and deliver much needed smaller new homes for those affected to move into. I’m betting most would happily agree to their fellow tenants being given some reprieve on a ‘there but for the grace of god go I’ basis! And it needn't be permanent. Just give those affected some relief  for a limited period at least while other options are worked through - lodgers, downsizing etc.

If I’m barking up the wrong tree, let me know. But if you’re a fellow housing professional, tenant or interested observer who feels the same, tweet away at #sayyestoreclassify!

Peter Hall (@phhsl) reflects on the CIH 2013 Housing Conference

At last week’s CIH 2013 housing conference, I was struck by how much of the debate seemed to be a sort of Groundhog Day for the sector, with the same old calls from the sector for more social housing and the same responses from the government.

With the CSR announcement equating to £3bn of capital subsidy and £5bn of public land to be made available for new homes from 2015, and certainty on rents provided via CPI, surely the sector could and should start delivering, and break free of it's Groundhog Day…?

Peter Hall (@PHHSl) reflects on key questions discussed in a session at #housingcamp held at Thames Valley HA's offices on 18th May, with some useful history thrown in for good measure!

Value for Money isn't rocket science. But in some respects it has its roots in the stone age. Our successful ancestors certainly would have looked for a mixture of good cost, performance and quality from the stones and rocks they used. Those who didn't probably aren't in our DNA.

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