Underfunding of Council housing

Media Release: Swindon Tenants Campaign Group March 14th 2016

Tenant reps on Swindon Council’s Housing Advisory Forum (HAF) opposed the 3 year Housing Investment Programme which officers were recommending for the Cabinet to agree. The programme includes major cuts in replacement of housing components such as kitchens and bathrooms (see table below). Tenants opposed it because it would create a significant backlog of work, which would cost more in the future.

The cuts included in the proposed programme are the result of two things:

• the loss of rental income resulting from central government policies, including the decision to cut ‘social housing’ rents by 1% a year for 4 years, beginning in April 2016;

• a significant increase in spending on non-traditional (prefabricated) stock .

The rent cut alone means that Swindon is expected to take in £22.8 million less rent than it had planned for. The government has imposed the rent cut not because of any concern for tenants but to cut housing benefit paid to ‘social housing’ tenants. It has taken no account of the financial impact on local Housing Revenue Accounts.

The HAF opposed the HIP programme in line with its recommendation at its January meeting that the Council suspend its annual payment of £5 million ‘debt’ for the four years of the rent cut in order to tackle the shortfall. Taking account of interest payments this would still provide £19 million extra. The HAF also suggested using £3 million from the reserves to cover the rent loss. Together this would almost cover the lost rent over the 4 years.

Whilst suspension of the ‘debt’ payment is necessary to prevent a backlog of essential work building up, the Council should also be pressing the government for ‘debt’ write-off. When the new ‘self-financing’ system was introduced in 2012 what was said to be the national housing debt was shared out amongst local authorities. The coalition government said that the money available to them under the new system would “give Councils the resources they need to manage their own housing stock for the longer term…”. The level of ‘debt’ was in large part based on an estimate of rent income over 30 years. However, because of changes in government policy, the rent being taken in by Swindon and other Councils is much less than was estimated when the ‘debt settlement’ took place.

That’s why the Housing Advisory Forum also called on the Council to press the government to readjust the ‘debt’ level to take account of the loss of rent income resulting from central government policies. Without at least a partial ‘debt’ write-off then Councils will have insufficient funds for the maintenance of their housing stock.

STCG Secretary Martin Wicks said:

“Unfortunately, thus far the Council has ignored the advice given by tenants and the Housing Advisory Forum. Unless it agrees to suspend ‘debt’ payments, and to press the government for a readjustment of the ‘debt’ imposed in 2012, then it will have insufficient income to maintain the ‘decent homes standard’.

Swindon was given an extra £138.6 million ‘debt’, based on an estimate of rent income over 30 years which will not now be collected because of government policies since 2012.

Council housing is being under-funded because government action is responsible for less rent being taken in. It is, therefore, only reasonable that the government should readjust the ‘debt’ or else the cost of servicing it will take up an increasing proportion of the authority’s income from rent. Less money will be available for work on our housing.

If Swindon’s ruling administration is not prepared to call for, at the very least, part ‘debt’ write-off to take account of the loss of rental income, then they will share responsibility with the government for the build-up of a backlog of work and the deterioration of the condition of our housing stock.”

For further comment ring Martin Wicks on 07786 394593

Proposed budget Capital Major Repairs and improvements

extracts

	2016/17	2017/18	2018/19	Cut over 2 years compared with 2016/17
Aids and adaptations	£1,300,000	£1,100,000	£1,100,00	– £400,000
Bathrooms	£600,000	£240,000	£240,000	– £720,000
Central Heating	£1,495,200	£1,000,000	£1,000,000	– £990,400
Kitchens	£2,150,000	£1,000,000	£1,000,000	– £2,300,000
Roofs	£2,426,000	£2,000,000	£2,000,000	– £852,000
Total	£7,971,200	£5,340,000	£5,340,000	– £5,262,400

The original 3 years programme projected spending of £16.8 million a year. The proposed

programme now is for only £15.7 million for each of 3 years.

Note

Reasons for decreasing rent income:

1. The coalition government changed the rent formula which Councils had to apply, to CPI+1%, lower than the previous formula.

2. The coalition government increased discounts for ‘right to buy sales’. This increased sales. In the 3 years before the new finance system was introduced only 34 Swindon Council properties were sold. In the three years after ‘self-financing’ was introduced 161 were sold. The estimates for the ‘debt settlement’ were based on the lower sales. So with the increased discounts Swindon has lost more rent through sales than was estimated in 2012.

3. The current government’s decision to impose a 1% rent cut in each of four years will lead to Swindon Council losing around £22.8 million in rent.

4. The government is proposing to force Councils to sell off ‘high value’ homes when a tenant leaves or dies, to pay compensation to housing associations for their RTB sales. This will mean still more rent lost to Swindon and other Councils.

5. The introduction of ‘pay to stay’, which will increase rents up to market levels for so-called ‘high earners’ with household income of £30,000 or more, is likely to encourage even more RTB sales since if a tenant can obtain a mortgage it is likely to be cheaper than market rents, given the high discount.