The Affordable Rent Model in London: Delivery, Viability, Potential

Report launch

The Affordable Rent Model in London: Delivery, Viability, Potential 19 June 2013

Report launch

The Affordable Rent Model in London: Delivery, Viability, Potential

Lisa Taylor

Interim Director, Future of London

Agenda The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

9.00

Arrivals and light breakfast

9.30

Welcome – Lisa Taylor, Future of London

9.35

Chair’s introduction – David Lunts, GLA

9.40

Key findings, conclusions & recommendations from the research – Andrew Heywood

10.10

Responses:

10.25

Questions and discussion

10.55

Chair’s summing up – David Lunts

11.00

Coffee and networking

11.30

Close.

• Mark Baigent, RB Greenwich • Daniel Arnold, Peabody

Our research project The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

• Supported by the Oak Foundation’s Housing and Homelessness programme • Research project from January to June 2013

Our research project The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

Project focus: • Who is building ARM in London and why

• How much ARM is being built and where • The extent to which ARM is viable in the short term and after 2015/16 • Whether ARM is consistent with housing strategy and housing need in London

• What part ARM should play after 2015/16

Our research project The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

What this project has included: • Review of existing literature • Interviews with HAs, LAs, and other stakeholders • Analysis of the data on ARM in London • Case studies highlighting aspects of ARM development • A final report: ‘The Affordable Rent Model in London: Delivery, Viability, Potential’

Report launch

The Affordable Rent Model in London: Delivery, Viability, Potential

David Lunts

Executive Director of Housing and Land, GLA Chair, Future of London

Report launch

The Affordable Rent Model in London: Delivery, Viability, Potential

Andrew Heywood

Lead researcher & independent housing consultant

The AHP in London The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

The Affordable Housing Programme 2011-15: • 58 Organisations

• 22,268 homes to be built by 2015 • Includes 16,478/16,614 Affordable Rent Model homes

• The AHP forms part of the larger GLA affordable programme to build 55,000 homes by 2015

ARM completions/conversions The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM starts and completions The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM distribution The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM distribution The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM distribution The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM distribution by size The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

• 31 December 2012: only 7% of conversions were three bedrooms or more (CORE) with virtually no 4+ bedroom homes.

• 31 March 2013: the GLA estimated that 34% of completed new-build ARM homes (170/498) were of 3+ bedrooms.

• The Mayor’s target is for 36% of homes to be “familysized” (3+ bedrooms) and the current GLA forecast is for 33% to be family-sized by 2015.

ARM tenancies The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM: harder to let?

The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

Who is ARM housing?

The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

Who is ARM housing?

The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

Eligibility for housing benefit The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

Local authority referrals The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM rent levels The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM rents v. market rents The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM rents by bedroom numbers The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM rents at postcode level The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM rents and social rents The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM: variations in rents The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

• ARM rents vary widely both between boroughs, within boroughs and when compared to corresponding social rents.

• This may limit tenant mobility, erode work incentives and ultimately be hard to justify.

ARM rents and household incomes The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

ARM rents/incomes The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

• In only three boroughs do median ARM rents amount to 35% or more of the median household income for that borough.

• ARM appears affordable for those in the £20,000£40,000 bracket.

• Nevertheless there is an indication of a wider housing market failure here.

• ARM rents are above LHA levels in a few cases.

House prices: London The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

Risks and challenges for RPs The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

• Biggest risk: Welfare reform: – Cap – Bedroom tax – Direct payment • Conversions: getting the number and uplift

• Local authority nominations policies • Greater reliance on cross subsidy • Erosion of financial capacity

Issues The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

• Will ARM achieve the GLA target by 2015?

• ARM represents a shift from supply-side (capital) subsidy to a revenue, demand-side subsidy (housing benefit); is this sensible?

• What place does ARM have in an affordable housing strategy post 2015?

Recommendations The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

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Recommendation 1 - Currently ARM is designated as “social housing” rather than as an intermediate tenure. However, research shows that ARM is more viable housing working households. Government should therefore re-assess its current designation of ARM as “social housing” and decide whether some increase in the housing benefit bill can be justified in the interests of promoting new affordable housing supply via ARM.

•

Recommendation 2 - The newly introduced cap on welfare benefits which forms part of the programme of welfare reforms will bear particularly heavily on London and is already distorting the ARM programme in terms of rent levels and could ultimately prejudice the ability to build a proper balance of family-sized properties. The cap also increases the business risks for Registered Providers and thus risks reducing outputs. The government, in conjunction with the GLA, should consider whether there is a case for raising the level of the cap in London in order to promote the strategic housing aims for the capital.

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Recommendation 3 - Notwithstanding the need to reconsider the level of the benefit cap in London, the GLA should monitor closely the progress of ARM development to ensure that its own requirement for 36% of new homes to be “family-sized” is being met and should examine what steps might be necessary to ensure that the 36% target is fulfilled.

Recommendations The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

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Recommendation 4 - The GLA should confer with local authorities as a matter of urgency to determine their likely future policies in regard to tenant referrals and priorities in relation to ARM properties. The GLA should consider whether further encouragement to amend these policies to favour working households is desirable. Any conclusions should take account of the need to maintain provision for homeless families.

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Recommendation 5 - The GLA should monitor the concentration and distribution of ARM development in the context of existing social rented provision to ensure that the Mayor’s concern “that there should be no segregation of London’s population by housing tenure” does not risk being excessively compromised over time with negative implications for the development of sustainable and vibrant communities.

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Recommendation 6 - THE GLA should work with local authorities and PRPs to examine ways in which rent structures for similar properties within boroughs can be made more coherent, and to look for possible interventions to mitigate the very wide variations in ARM rents between boroughs.

Recommendations The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

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Recommendation 7 - The GLA should analyse the implications for the ARM programme of linking ARM rents for different sizes/types of ARM properties to a particular percentile point in relation to median incomes in different boroughs, with the aim of setting rents that are affordable for different sized households.

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Recommendation 8 - The GLA should work with local authorities to commission qualitative and quantitative research into the views and attitudes of ARM tenants and prospective tenants about ARM as a programme and, importantly, about tenant experience as consumers of ARM. Such research should be London-wide but should aim to explore a range of social, economic and geographical variables insofar as they may have an impact on the tenant experience.

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Recommendation 9 – The government should seek to resolve the current tensions between its affordable housing policy and welfare reform policies; these tensions have undermined the move from capital towards revenue subsidy implicit in ARM, and threaten future programme levels in London.

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Recommendation 10 - Government and the GLA should be realistic in setting out goals for any forthcoming ARM programme and ensure that there is certainty over the longer-term future of such programmes.

Recommendations The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

• Recommendation 11 - The GLA should work with the HCA and DCLG to assess the merits of re-targeting ARM towards working households within a model of development across four tenures, including – – – –

grant-funded social renting, market renting, building for shared ownership/equity open market sale.

Andrew Heywood The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

Housing, Mortgage markets, Regulation, Governance, Europe • • • • •

Housing: finance, policy, low-cost homeownership.

Mortgage markets: trends, opportunities, threats.

Regulation: policy, practice, lenders, housing providers.

Governance: effective decision making, strategy, audit.

Europe: housing and mortgage markets, regulation.

Andrew Heywood is an independent consultant specialising in the above areas and an associate of leading consultants Campbell Tickell. A visiting fellow of the Land Economy Unit of Cambridge University and of the Smith Institute, Andrew has written and spoken extensively on housing and lending issues. He is Editor of the journal Housing Finance International (www.housingfinance.org). Andrew was formerly Deputy Head of Policy at the Council of Mortgage Lenders. He has been at the centre of housing, housing finance and mortgage market developments for many years and has unrivalled contacts amongst policy makers, housing providers and lenders.

Andrew Heywood Consulting: a.heywood53@btinternet.com 01440 730 218 / 07929 512 057

Report launch

The Affordable Rent Model in London: Delivery, Viability, Potential

Mark Baigent

Project Director, Housing Services, RB Greenwich

Report launch

The Affordable Rent Model in London: Delivery, Viability, Potential

Daniel Arnold

Senior Policy Officer, Peabody

The final report The Affordable Rent Model in London: Delivery, Viability, Potential • 19 June 2013

The Affordable Rent Model in London: Delivery, Viability, Potential Executive Summary available as separate document Available on our website: www.futureoflondon.org.uk