Council response to St Michael's Gate Call-In meeting

STRONG AND SUPPORTIVE COMMUNITIES SCRUTINY COMMITTEE

Agenda Item No. 3a

19 OCTOBER 2016

Public Report

Report of the Service Director for Adults and Communities Contact Officer

Adrian Chapman

Tel. 863887

RESPONSE TO CALL-IN OF AN EXECUTIVE DECISION: LEASE WITH STEF AND PHILIPS LTD FOR THE USE OF ST MICHAEL’S GATE, PARNWELL AS INTERIM ACCOMMODATION FOR HOMELESS FAMILIES SEPT16/CMDN/62 1.

PURPOSE

1.1

To respond to a request to call-in the Executive Decision made by the Cabinet Member for Resources regarding the lease with Stef and Philips Ltd for the use of St Michael’s Gate, Parnwell as interim accommodation for homeless families.

2.

RECOMMENDATIONS

2.1

That the Strong and Supportive Communities Scrutiny Committee rejects the call-in.

3.

LINKS TO THE CORPORATE PRIORITIES AND RELEVANT CABINET PORTFOLIO

3.1

The decision is a property matter and so has been made by the Cabinet Member for Resources. However, responsibility for housing matters falls within the remit of the Cabinet Member for Communities and Environment Capital who has been a significant consultee in the decision-making process.

4.

BACKGROUND

4.1

On 30th September 2016 the Cabinet Member for Resources made an executive decision relating to the lease with Stef and Philips Ltd for the use of St Michael’s Gate, Parnwell as interim accommodation for homeless families. In accordance with the Constitution this decision was published on 30th September 2016.

4.2

On 5th October 2016 Councillor Fower supported by Councillor Sandford and Councillor Davidson submitted a request to call-in this decision on the following grounds: Criteria 4. The decision does not follow the principles of good decision making set out in Article 11 of the council’s constitution, specifically that the decision maker did not: a) Realistically consider all alternatives and, where reasonably possible, consider the views of the public b) Take account of all relevant matters, both in general and specific, and ignore any irrelevant matters c) Act for proper purpose and in the interest of the public d) Be responsible for their decisions and be prepared to give reasons for them

5.

KEY ISSUES

5.1

Since April 2016 we have been managing an increase in households approaching the council who are homeless or at risk of becoming homeless. 752 households have presented to us as homeless between April and September 2016, with 277 being accepted. This is compared to 600 presentations and 240 acceptances for the same period last year. In addition, we have not been able to accommodate all households in permanent accommodation as there is a severe shortage of suitable properties. 336 properties have been allocated through the council's choice based lettings scheme in the first 6 months of this financial year compared to 637 in the same period last year.

5.2

This has led to a sharp increase in the use of temporary accommodation which is used to meet the council’s statutory duties towards homeless households. Like any other council, we typically use both hostel and bed and breakfast accommodation for households who have no other housing options available to them, whilst we make our statutory enquiries into their homelessness. As a result of the increase since April 2016, we have had to make use of budget hotel accommodation for some homeless households as we have no other capacity in our contracted hostel or bed and breakfast accommodation. The following chart shows the number of people in temporary accommodation, including a sharp increase from April 2016.

5.3

Aside from the impacts on households accommodated in this form of temporary accommodation, there is a significant financial impact on the council. If we do nothing and demand remains static the full-year forecast for 2016/17 is a pressure of £1.444m and for 2017/18 a pressure of £1.965m. These financial projections are based on 98 homeless households being accommodated at St Michael's Gate. If the numbers of homeless households in the city were higher than this, then the financial pressure on the council would increase. The council receives back from Government a housing benefit subsidy to support the costs of delivering housing benefit to our residents. The amount we can reclaim is linked to the Local Housing Allowance (2011 rates) which is a rate set by Government to calculate the amount of housing benefit a household will receive if they rent from the private sector. Where non self-contained accommodation is used (i.e. where there are no private kitchen or bathroom facilities) the amount of housing benefit subsidy the council can reclaim is set at the 1-bedroom Local Housing Allowance rate of £92 per week. The average cost per room of temporary bed and breakfast or hotel accommodation is £480 per week.

5.4

The council finds itself in this position for a number of reasons, most notably the sharp decline in available affordable or social housing of the correct size coupled with the full but unintended impacts of welfare reform (typically the spare room subsidy, benefit cap, freezing of Local Housing Allowance rates and the start of Universal Credit rollout in Peterborough). We have

5.5

managed homelessness well in Peterborough over many years whilst local authorities elsewhere have continued to struggle to control impacts and costs, but Peterborough too is now catching up with other areas.

In addition, there are further changes being made to welfare benefits that could further negatively impact on this position:  a reduction to the existing housing benefit cap due at the end of November, meaning households may have their housing benefit award amounts reduced to bring them in line with the cap  removal of the £60 management fee which is received on top of housing benefit for selfcontained accommodation only. We do anticipate that there will be a replacement for this grant subject to consultation, although it could be of a lesser value  the continued roll-out of Universal Credit impacting the way housing benefit is received (direct to the tenant rather than to the landlord further increasing the risk of non-payment of rent)

5.6

Given the impact on households of being accommodated in temporary accommodation coupled with the significant financial impacts of having to make use of non-self-contained accommodation, the council has to act to identify and make use of self-contained and more suitable temporary accommodation as swiftly as possible.

5.7

St Michael’s Gate

5.7.1 The council was approached by Stef and Philips Ltd in May 2016. Stef and Philips Ltd describe themselves as a ‘provider of social housing solutions, predominantly operating in London and the Home Counties’. At the time of their initial contact with us they were close to completing on the purchase of all 74 properties at St Michael’s Gate, Parnwell. These properties were being purchased from the open market after their previous private sector owners put them up for sale.

Most of the 74 properties were let to tenants at the time.

5.7.2 Stef and Philips Ltd work directly with local authorities, and they approached us to discuss the potential for the council to make use of St Michael’s Gate for interim accommodation. Discussions with them confirmed that they would be seeking vacant possession of all of the properties in order to refurbish them before offering them back to a local authority. Discussions also confirmed that if this council decided not to enter into a formal agreement with Stef and Philips Ltd, they would contract with another council who would use the accommodation for their own homeless households.

5.7.3 There is currently capacity to accommodate 74 households at St Michael’s Gate, but Stef and Philips Ltd’s plan is to refurbish and renovate some of the households to increase bedroom numbers thereby increasing capacity to 98 households.

5.8

Current tenants

5.8.1 The council’s main priority, regardless of whether or not we enter into a formal agreement with Stef and Philips Ltd, is to support the existing tenants at St Michael’s Gate whose tenancies have come to an end. The council has statutory duties in this regard, including providing housing advice and making statutory decisions about homelessness. To help ensure these duties are met we have identified a single point of contact within our housing service whom tenants can liaise with. The council also has responsibility for ensuring that any landlord complies with legislation that serves to protect tenants’ rights. Again, regardless of whether or not we were to enter into a formal agreement, we will be closely monitoring the processes that Stef and Philips Ltd is deploying to seek vacant possession to ensure it is fully compliant with the law. There is no suggestion that this is not the case.

5.8.2 At the time of writing, our understanding is that Stef and Philips Ltd has at least 53 tenants at St Michael’s Gate. Of the other 21 properties, 11 are currently vacant and the council is as yet unaware of the status of any tenancy agreements or whether the property is vacant for the final 10. Discussions are ongoing to understand the status of tenancy arrangements for all 74 properties.

5.8.3 Of the 53 tenants we are already aware of, 51 have assured shorthold tenancy agreements in place. An assured shorthold tenancy entitles the landlord to apply for a possession order, after a valid notice requiring possession has expired without having to give reason. This can be served six months after the tenancy has started. Stef and Philips Ltd has informed us that it will be invoking this right and will be ending the assured shorthold tenancies of these tenants. Two further tenants have assured tenancies in place. An assured tenancy provides the tenant with additional protection as it doesn’t have a fixed term minimum period. To seek vacant possession of these properties, Stef and Philips Ltd will need to undertake a different legal process.

5.9

Financial implications

5.9.1 As the accommodation at St Michael’s Gate will be self-contained (i.e. each unit will have its own kitchen and bathroom facilities), the amount of housing subsidy the council can reclaim from Government will not be capped at the 1-bedroom non-self-contained rate. Additionally, Stef and Philips Ltd will charge the council a nightly rate to use the accommodation at St Michael’s Gate, with this rate being significantly lower than the costs being incurred by the council for bed and breakfast and hotel accommodation.

5.9.2 The nightly rates proposed by Stef and Philips Ltd are set out below: Accommodation type

Nightly rate

Number of units

Total annual cost

HMO/1 Bed flat

£18.50

40

£270,100

2 bedroom House

£22.50

6

£49,275

3 Bedroom House

£32.50

41

£486,362

4 Bedroom House

£40.00

11

£160,600

98

£966,337

Totals

5.9.3 As the housing benefit subsidy the council can reclaim if we use self-contained temporary accommodation is not capped at the 1-bedroom Local Housing Allowance rate, use of the accommodation at St Michael’s Gate would reduce the council’s forecast overspend position significantly (n.b. please note the comment at 5.3 regarding the numbers of homeless households). The table below shows the costs of non-self-contained accommodation (bed and breakfast and hotel) compared to the Stef and Philips Ltd nightly rates and the levels of housing benefit subsidy the council could claim over the period of a full year: Bedroom Need

Number of Households

B&B costs

Housing Benefit Subsidy level

Net costs

Stef and Philips Costs

Housing Benefit Subsidy level

Net Costs

HMO/1 bedroom

40

£988,400

£192,005

£796,395

£270,100

£270,100

£0

2 bedroom

6

£149,760

£28,801

£120,959

£49,275

£49,275

£0

3 Bedroom

41

£1,023,360

£196,805

£826,555

£486,362

£391.393

£94,969

4 Bedroom

11

£274,560

£52,801

£221,759

£160,600

£128,763

£31,837

Totals

98

£2,436,080

£470,412

£1,965,668

£966,337

£839,531

£126,806

5.9.4 Based on this financial information, by entering into an agreement with Stef and Philips Ltd we will reduce the forecast overspend in 2017/18 from £1.965m to £0.12m.

5.9.5 Although, as can be seen above, the nightly rate set by Stef and Philips Ltd is broadly in line with the housing benefit subsidy levels, we understand that entering into a formal agreement with a council instead of directly renting properties to the existing tenants is the core operating model of the company and gives them a single contract to manage with one organisation rather than multiple tenancy agreements with individual households.

6.

RESPONSE TO THE REASONS FOR CALL-IN

6.1

The detailed reasons for call-in are as follows: “74 residents faced losing their homes as a result of a planned procedure, which involves Peterborough City Council and private (Stef and Philips Ltd) landlords to evict tenants in order to then provide homeless people with temporary accommodation.

“We the Liberal Democrats believe this is morally wrong on every level and not in keeping with the Peterborough City Council obligations of upholding due care to its wider community and demonstrating fairness to local tax payers.”

The response to these reasons is set out below.

6.2

A number of important facts led the council to making the decision to seek to enter into a formal agreement with Stef and Philips Ltd. If we were to decide against a formal agreement:  



The council will still have to support those families who have lost their homes as a result of their tenancies ending as this company intends to secure vacant possession to offer the properties to our council or another council for homeless families.

Another council will place its own homeless families in this accommodation. We will not know these families but many will undoubtedly come with needs for our services – which this council will have to assess and provide for. This will create a further pressure on the council’s budget and for some of our services including education, social care and health.

Many of the families that arrive in the city to use the interim accommodation may then stay in the city longer term, whilst more residents from other council areas arrive to use the homes they have vacated. The number of new residents arriving from other areas could therefore increase continuously.

The budgetary pressure of £1.2m, which this council is trying to reduce through the use of this interim accommodation, will remain a pressure and without suitable accommodation our families will still be accommodated in hotels. The council will have to reduce other services to the sum of £1.2m and any additional sums as a result of being responsible for other councils’ homeless households.

6.3

We know that Stef and Philips Ltd work with other councils. Recent enquiries with some of those authorities have confirmed that Stef and Phillips Ltd provide them a good service. For example Barnet Council have confirmed that they currently utilise 60 units of accommodation from Stef and Philips Ltd, 12 of which are in Barnet and the remaining 48 are in Luton.

6.4

It is important to clarify that the council has no control over the actions of Stef and Philips Ltd in relation to the company seeking vacant possession of the properties. In the majority of cases, Stef and Philips Ltd is exercising its rights in law to end assured shorthold tenancies which have gone beyond their initial fixed term period. There is an automatic right in law for a landlord to act in this way where they wish to secure vacant possession of their properties, and this approach is used by landlords across Peterborough and beyond.

6.5

As described above, one of the key factors used in making the decision to enter into an agreement with Stef and Philips Ltd is the consequence of large numbers of families being accommodated at St Michael’s Gate from other council areas. Councils already place their

homeless households outside their own boundaries in a large number of cases. As at 30th June 2016, of the 73,120 households in temporary accommodation in England, 20,660 (28%) were in accommodation in another local authority district. This is an increase of 17% from 17,640 at the same date last year (26% of the total). Of the 20,660 accommodated in another local authority district, 18,700 were from London authorities (91% of the England total). This is an increase of 14% from the same date last year when 16,370 such households were placed by London authorities.

6.6

It is felt that doing nothing to mitigate against the impact of new households coming to live in Peterborough and accessing services is not an acceptable position to take. It is highly likely that a number of these households will choose to settle in Peterborough longer term, to be replaced at St Michael’s Gate with new homeless families from other council areas. The impact on our established communities and on already pressured public services will be significant and we have a duty to ensure our residents receive the best value services that are available when they need them most. It is because we must uphold due care to our wider community and demonstrate fairness to local tax payers that we believe we have no option but to progress with the decision to enter into an agreement with Stef and Philips Ltd.

6.7

Accepting that whatever the council decides to do, the existing residents of St Michael’s Gate will still be required to leave their homes, our attention must turn to supporting those residents to find alternative accommodation as quickly as possible. Every household has received a letter setting out the services and advice that the council has available to them and encourages them to make contact with us. We have identified a single point of contact within our housing needs service to make it easier for households to contact us and discuss their situation. The officer will lead on the following services for any household at St Michael’s Gate that approaches us for help:      

6.8

Applications to join the housing register and support with the choice based lettings scheme Assessments on homelessness applications Carrying out affordability assessments Liaising with the new owners of St Michael’s Gate on tenancy queries Support in liaising with potential new landlords in securing properties in the private sector Assessing whether financial assistance is available to support you in moving to alternative accommodation in the private sector.

As stated previously, if the council decides not to enter into a formal agreement with Stef and Philips Ltd the company will still seek vacant possession of all the properties at St Michael’s Gate, but they will be leased to another council to house their homeless households.

By agreeing to enter into a formal agreement:    

The council will continue to support those families who have lost their homes as a result of their tenancies ending to find new properties The council will be in a position to house Peterborough households at St Michael’s Gate, which we can properly allocate and manage The budgetary pressure will be significantly reduced thereby preventing the council from making cuts to other services The council will not have to manage another council’s homeless families

7.

IMPLICATIONS

7.1

The financial and legal implications are set out in section 9 of the Cabinet Member Decision Notice.

8.

BACKGROUND DOCUMENTS Used to prepare this report, in accordance with the Local Government (Access to Information) Act 1985

8.1

Department for Communities and Local Government Housing Statistical Release, September 2016.