Consultation #2 – ‘Flexible Tenancy’ What is it good for? Absolutely Nothing! Say it again…

I’ve been looking at the Government’s proposals for a new ‘Flexible’ tenancy as described in section 2 of the current consultation document. I cannot see what the point of it is.

1) A Flexible Tenancy will enable social landlords to raise rents to 80% of the market rent.

Housing Associations (HAs) and other similar landlords currently use Assured Tenancies. These allow the landlord to charge upto 100% of the market rent as assessed by a Rent Assessment Committee.

Councils use Secure Tenancies and there are no legal restrictions on what rent can be charged. Ok, that’s not absolutely true: with the ring-fencing of the Housing Revenue Account (HRA) in 1988 council rents could be legally challenged – and occasionally were – as being too high or too low to balance the HRA. However, this is a moot point as the Government has announced the HRA ring-fence will be removed.

Currently both Housing Association and council rents are set using a National Rent Formula introduced by Labour in 2002 [check, might have been 2001]. The aim was for the different types of social housing to have moved to the same rent levels within 10 years. Traditionally HAs have had higher rents than councils. However, the National Rent Formula was not statutory. HAs came into line because otherwise they’d have no chance of getting development funding and from memory councils were bullied into it with the threat of revenue grant removal.

In the October budget speech George Osbourne announced the National Rent Formula was being ditched. So as it stands both HAs and councils can legally charge a full market rent for both new and existing tenants using the current form of tenancy. There is no need for Flexible Tenancies to achieve higher rents.

Normal people can skip this paragraph, but hardcore housing management / law shut-ins read on: the 1988 Act introducing Assured Tenancies is clear: when a rent rise is referred to a Rent Assessment Committee they assess if the proposed rent is above the market rent without considering any service charges being added to the rent. The consultation document does not make a distinction between ‘rent’ and ‘service charges’. As it currently reads when it talks about 80% of the market rent it is referring to both elements of what – in the private sector – is seen as simply ‘the rent’ as, for example, when calculating HB local reference rents or LHA median rents. It may be that Flexible Tenancies will end up requiring rent reductions, particularly in supported / sheltered / hostel / foyer accommodation, because of the service charges.

2) Increasing social housing rents will fund additional social housing units

Firstly, it might not be a good idea to move development funding from a grant where the Government can set an annual budget to the more open-ended Housing Benefit system. In the past where central government has said to social housing organisations “Hey, fill yer boots guys!” in this way the Government has had costs many times what they expected (for the housing geeks, I’m thinking of the 1923 Addision Act and the 2003 Transitional Housing Benefit / Supporting People feeding frenzy).

Secondly, there is no proposed mechanism in the consultation document to ensure social landlords use the additional rent income to develop new units. HAs will want to pay off existing debts, fund their appallingly inefficient maintenance programmes and bump up salaries which have been forced down for the last three years. Councils might well spend the money on lowering Council Tax or building swimming pools. For all the guff about localisation this is a serious gap in the Government’s proposals.

3) Flexible Tenancies will allow social landlords to move on wealthy tenants

The proposed Flexible Tenancies are fixed term. This is entirely unnecessary to move on tenants who have the means to provide their own housing but chose not to. That could be achieved more simply by adding an additional mandatory ground for possession to Assured and Secure Tenancies. For more discussion of this see here.

If the intention is to move all social housing to fixed term tenancies – and it seems that way – this could be achieved more simply with legislation to move councils onto Assured Tenancies and government guidance allowing everyone to use the Shorthold form of Assured Tenancies.

4) Flexible Tenancies give Housing Associaton tenants the Right To Buy

This is a bizarre proposal. If enacted, it will simply ensure – whatever other considerations – no Housing Association adopts Flexible Tenancies. Ever. End of.

5) Localisation

Now we’re getting into strange, unmapped territory here. It’s going to be left up to councils and HAs to decide whether they use the new Flexible Tenancies or stick with their existing form of tenancy. As an example of how wierd that is: the Government thinks it’s a good thing HAs should be able to decide whether their tenants get the Right To Buy. But not councils, apparently it’d be a bad thing if they could make the same decision. Except in Wales, where councils are likely to be able to suspend Right To Buy based on their local priorities. If you think about this too long your head may start hurting. Say what you like about Thatcher she’d have had no truck with this level of nonsense.

Essentially, I think the Government don’t know what they’re doing. They’ve rushed it, cobbling together a mixed bag of ideas and knee-jerk ideology without trying to resolve the contradictions. By pushing higher rents, no security and Right To Buy they’re expressing a knee-jerk instinct to make social housing look more like private rented accommodation. This instinct defeats the aim of their own exercise, which is to provide better social housing. Then they’ve filtered the proposals through the ‘Big Society’ localisation agenda resulting in some very mixed signals indeed.

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