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Initial summary and local analysis of the housing related aspects of the Summer Budget 2015.

Social Housing

Decrease social rent by 1% per annum for 4 years

For all social housing rents, local authority and housing association, to be reduced 1% per year for four years, abandoning 2013s 10 year commitment of income surety at CPI +1% per annum.

The rationale for this reduction is to in turn reduce the Housing Benefit expenditure that government pays to local authorities to cover the cost of rent that tenants cannot meet themselves.

This is the most significant announcement of the budget for social housing and one that was completely unexpected, was not discussed or consulted upon by any formal or sector bodies.

This measure effectively reduces the value of the Housing Revenue Account compared to the set trajectory of the 2013 model.

Rental income is the principal asset that councils and housing associations can borrow against to fund investment and operations and the rental income stream forms the basis of organisations’ medium term delivery and investment programmes, this announcement will render these plans challenging to deliver.

Investment into the maintenance of existing housing and the delivery of new housing (including 1:1 replacement) and into expanding the provider role of partner organisations could decrease, as the revenue stream and its borrowing capacity decreases further.

This is in addition to the depletion incurred by the reinvigorated and extended Right to Buy and valuable asset disposal.

The degree of impact will depend on how the 1% reduction is applied, whether to each tenancy, or on the net rental income, or if the limit rent in used to determine Housing Benefit subsidy ceiling.

Longer term impacts will also depend on how the government intend, if at all, to recycle savings into housing.

Making it easier to move from Shared Ownership to Outright Ownership

Government will streamline the guidance and model to make it easier for shared ownership to transfer to outright ownership, as well as extending Stamp Duty relief to tenants who hold the majority share in their home and then purchase the remainder from a social landlord.

Nottingham has a modest stock of shared ownership housing, provided by a small number of housing associations.

This will be a welcome step for tenants wishing to buy their home, especially as some feel that paying rent and a mortgage makes shared ownership an expensive product in reality.

As with Right To Buy however, additional exit of stock to ownership will reduce the asset base and income stream against which providers can borrow and deliver housing, uncertain returns making this product a less appealing investment.

This is of concern for Nottingham, where we have been keen to expand on the range of intermediate ownership products available citizens, as well as trying to retain affordable housing delivery in a market where affordable rent returns are less viable than other areas of the country.

Higher earning tenants “Pay to Stay”

Social housing tenants, who have a household income of more than £30,000, will see their rent increased from social rates to market or near market rates.

Housing Associations can recycled this uplift in rent into new housing, income raised by local authorities however will be returned to the exchequer.

The likelihood is that there will not be many tenant households with an income of this level; however making a full assessment of tenants’ incomes will be difficult as it is not currently required by the registration process nor does the government stipulate which members of the households are to be included in this calculation.

This change could also act as a disincentive to work or achieve better paid, if still lower wage employment, with rent growth outstripping that of wages.

It may also threaten mixed and balanced communities as those in employment exit social housing areas and/or further accelerate the Right To Buy. 

Lifetime tenancies to be limited

This follows on from the voluntary implementation of flexible tenancies in 2011, which Nottingham decided was not appropriate for its stock.

Should the review result in local authorities having to remove “lifetime” tenancies, it could have serious impacts for the stability of individuals and communities as well as increased tenancy administration and turnover.

Also, as the “suitability” will likely be defined on the grounds of income and occupation, removing lifetime tenancies may act as a disincentive to employment.  

Housing Finance Institute (HFI)

Established along with recommendations of the Elphicke and House and in association with the LGA; reviews will be made of local authorities’ housing delivery capacity.

As one the largest retained Housing Revenue Accounts in England and with NCC and NCH’s aspirations to deliver as broad a range of housing products as possible, it will be vital that we engage with the HFI as successfully as possible, especially in light of other announcements.

It is likely that there will be a strong focus on value for money and maximising the use of assets.

Private Rented Sector

Subletting

Government will amend the standard Assured Shorthold Tenancy agreements and remove from private and periodic tenancies clauses preventing subletting, in order that existing tenants can have a request for short term sublet of their property reasonably considered.

This will potentially free up extra accommodation for those who find themselves in difficulty and produce extra income for those who are struggling to pay rent on their existing accommodation.

To counter that however, will be concerns from landlords about the impact of less control over subletting and unintended, but negative consequences such as overcrowding.

In Nottingham, it would still be required for multiple occupation to be approved and/or licensed.

Rent-a-Room

Government will raise the tax relief on those who rent a room to a lodger from £4,250 to £7,500.

This may incur an increase in the amount of households taking in lodgers, increasing the availability of accommodation, which is positive.

Tax and costs for Landlords

To bring landlords into line with homeowners, from 2017 government will remove the ability of landlords to deduct the incurred costs from their rental income for tax purposes, bringing any tax relief they received in line with homeowners whose mortgage interest relief was removed 15 years ago. Moreover, any relief on finance costs for landlord will be reduced to the basic rate of income tax.

Landlords will also, from 2016, only be able to offset the actual charges they incur for maintenance of furnished properties, instead of the standard 10% of rental profit being deducted from their tax calculations.

This will enable greater parity between landlords and between landlords and home owners; it will also, in conjunction with cuts to tenant finances, act to cool the buy to let and PRS market which would be positive.

One potential negative outcome would be landlords exiting the market but holding onto property to ensure returns. As with HMO licensing there will need to be with need to work done with Community Protection and external partners to proactively address this. A further issue being speculated in the national press is that of landlords transferring any potential increase in costs onto the tenant by raising rental levels.

Home Ownership

Help to Buy ISA

First time buyers pay into a flexible ISA account with government topping up their savings by 25% at the point of purchase. For every £200 paid in government will put in £50, up to a maximum of £3,000 (£12,000 total ISA) for the purchase of a home of up to £250,000.

This is a positive measure that will provide assistance to those prospective first time buyers in a position to save for a deposit.

It is anticipated that uptake in Nottingham, as nationally, will be high.

It is unlikely that the ISA will have the same potential impact on house prices as the Mortgage Guarantee or Equity loan schemes (i.e. new build prices could be raised beyond previously unaffordable levels as access to mortgage finance/deposit at all was the issue, not necessarily the amount) because it is not directly tied to new development.

Development

20 Housing Zones (outside London)& Midlands Estate Regeneration study

Gedling Colliery and Harworth in Bassetlaw D.C. are among the 20 zones selected.

Research will also be undertaken into the offer posed by Midlands’ housing estates with a view to regenerating them, investing in the county towns and supporting the construction of 30,000 new homes.

Both are important locally, especially in the context of the LEP and devolution.

Compulsory purchase consultation

The government has launched a consultation into the compulsory purchase regime to make it clearer, faster and fairer to support brownfield development.

As an urban authority the recycling of brownfield land is central to enabling new delivery of housing and business. It will be necessary for NCC to fully engage with any consultation this and state clearly the barriers we have faced and what changes we require to optimise the use of brownfield assets. 

Small Builder Finance/Housing growth Partnership:

Government and Lloyds Bank are providing £100m equity to 50 schemes for small-medium scale builders (10-100 properties) to deliver c.2000 homes. 

This may be of assistance to non-volume more bespoke builders and stimulate some variation and exclusivity in the local housing offer. If it extended as a loan however, as many previous initiatives have, uptake may not be that great. 

Welfare

Ending automatic entitlement to benefits for out of work 18-21 year olds

Automatic entitlement will be replaced by earn or learn "Youth Obligations" with exceptions made for vulnerable or complex cases.  

We require the finer detail on how wide the exemptions will extend in order to determine impact and answer a number of questions:

• What about young people who are threatened with homelessness because the family home is an unsuitable environment?
• What about young people who are considered a job seeker but have a child aged over 3?
• What about care leavers whom are still considered to be looked after children until 21?
• Will it be the circumstance of the young person that is exempt or the accommodation type?  E.g. supported accommodation might carry an exemption and allow residents to claim HB but then this means that every one of these young people in the future would need to reside in supported accommodation – there isn’t enough provision locally where social housing and PRS tenancies are utilised to house people in these circumstances. 
•  Would the exemption be possible if the young person is in receipt of support (e.g. via Independent Living Support Services etc.) – if so, who is going to pay for enhanced provision of this support? 

There are currently 72 people aged under 21 on JSA and in receipt of Housing Benefit in social housing tenancies in Nottingham and 55 people aged under 21 on JSA and in receipt of Local Housing Allowance in PRS tenancies Nottingham.

Lowering of the Benefit Cap from £26,000 to £20,000

The reduction of the benefit cap is likely to impact more on larger families – it will be necessary to try and model the combined impact of the benefit cap alongside the limitation on tax credits to households with more than 2 children.  Is it likely that low income large families will face financial hardship whether they are in or out of work?

This reduction to the benefit cap is more significant in Nottingham than its initial introduction (at £26,000) because many more households locally are likely to be hit.  This could have a knock on effect on their ability to pay their rent to their social housing or PRS landlord.  The more doubt there is about a benefit recipients ability to pay their rent, the more likelihood that PRS landlords start withdrawing the availability of their properties to benefit dependent households.  This will further increase demand for social housing and the need for provision of accommodation under homelessness duties.

Increase in funding for domestic abuse victims and women’s refuge centres

This is positive.  Nottingham has made efforts to protect adequate refuge provision in the city but because other areas have not prioritized this accommodation there has been an increased demand on local resources from survivors from different areas of the UK. 

Local connection rules do not apply in circumstances of domestic violence so this has also meant that housing options are available in Nottingham to survivors who are not from Nottingham. 

An increase in refuge provision nationally will help to readdress the balance and also provide further options for Nottingham survivors for whom it is unsafe for them to remain locally.

Government to consider options to support long-term investment in private rented accommodation for homeless families

Further detail is required on what form this investment will take.

Does this mean building provision or enabling access to existing supply? 

Any enhancement of appropriate accommodation solutions for households threatened with homelessness is positive. 

In Nottingham, we have taken the opportunities extended to us through the Localism Act to discharge duty to the PRS.  Any measures taken to providing greater security of tenure for these households would be beneficial.

Integrating services for people with multiple needs

There is an increasing preference towards partnership approaches for provision of accommodation, housing related support services and homelessness prevention initiatives in Nottingham. 

The benefits of joint commissioning arrangements are acknowledged and we will be taking opportunities to be engaged in any further consultation around this. 

Mortgage Interest Payment Support changed from a benefit to a loan

Direct DWP payment to recipient, so not monitored at local authority level.

Temporary option pending getting back on track with self-sustained finances to make mortgage payments.  

If the loan is added to the mortgage care needs to be taken to ensure that the monthly repayments are not increased to an extent that would push the household back into a situation of financial hardship.

Changing the benefit to a loan could potentially act as a deterrent to households seeking advice and support with mortgage difficulties, if they fear the answer is further debt.  This in turn could see an increase in repossessions or households choosing to leave their home, increasing demand for rented accommodation.

Reduction to the income threshold for tax credits

Any action to restrict access to benefits will lead to a period (be it temporary or extended) of reduced household finances which could impact on ability to meet housing costs and / or limit availability and suitability of housing options.  In Nottingham, there are a large proportion of households whom are dependent or reliant on benefits and these changes will disproportionately impact negatively locally compared to elsewhere nationally.

with colleagues