Interim position statement on the Affordable Homes Programme 2011-15 (September 2011)

The Government's Affordable Homes Programme 2011-15

This statement provides interim guidelines for the HCA's Investment Partners operating in Hackney, to help shape as much as possible the local outcomes we would like to see from the future programme in the borough having regard to local priorities. The original interim position statement (IPS) was sent to Registered Providers in early April 2011. This update provides additional guidance for Investment Partners preparing to sign-off their AHP Framework Delivery Agreements (FDAs) with the HCA, where this includes the provision of Affordable Rent homes in Hackney through either new build or the conversion of social rented re-lets.  

We recognise and value the importance of continuing and close dialogue with all our partners on the operational and resourcing challenges emerging as we develop a Final Position Statement. This Final Position will be informed by the borough-level detail of the programme that is likely to come forward as a result of signing-off FDAs and contracts with the HCA, as well as our own further modelling as indicated in this statement. 

The Hackney context

Hackney is well placed to respond to the challenges posed by the new funding model.  We have an excellent track record in delivery of new homes. The borough is a good place to invest and we are committed to working closely with partners to make sure that this remains the case in future. The housing market in Hackney remained resilient throughout the credit crunch and recession, especially by comparison with other areas of London. The borough is a popular place to live, and we are not aware of any significant problems with market or Low Cost Home Ownership sales.  

We pride ourselves on working closely with our delivery partners, and with regional and central government, to deliver housing and regeneration for the borough. To maintain this delivery record, we will be looking to develop our dialogue with all partners over the coming months to ensure that the new model for funding new affordable homes works as effectively as possible in this borough. 

In particular, the introduction of Affordable Rents in Hackney poses significant challenges. Our interim position statement takes account of evidence, both internal and external, including work carried out by consultants on behalf of the East London Housing Partnership.  

The council's position involves balancing some crucial requirements:

1. the need for high quality new homes that are affordable and that meet the needs of current and future residents in the borough;
2. the need for housing providers to raise sufficient resources from all sources to continue the borough's excellent track record in delivering new homes;
3. making the best possible use of our existing stock of affordable homes.

Our interim planning position follows the approach outlined in this paper. However, we recognise the need for a flexible approach, taking account of the specific characteristics of individual sites, including development viability and the availability of public subsidy. At the same time, we would expect providers to be able to demonstrate good reasons for varying significantly from these guidelines. 

We have taken into account partners' views in arriving at the interim position, which we believe addresses as far as possible the three requirements described above. However, this is an interim position, and we will carry out further work with partners to model the impact of Affordable Rents in Hackney over the coming months, as well as reviewing progress at regular intervals.  

We are also commissioning updates to key elements of the evidence base for housing mix targets in the council's planning framework; namely the Housing Viability Study and Housing Needs Assessment. These updates will inform the council's final position on, for example, affordability thresholds and tenure and bedroom size mix.  

A final position will be developed alongside a Tenancy Strategy for the borough by May 2012.  

Context for the update in September 2011

Housing need in Hackney remains severe. Faced with an estimated 30 per cent decline in social rented lettings from the peak of recent years, and residents' reduced access to private rented homes locally that are within LHA subsidy limits, the council will need to maximise the scope for Affordable Rent (AR) lettings, along with all other potential supply sources, to contribute to meeting need amongst households who have traditionally been prioritised for social rented lettings, such as homeless families and overcrowded households.  

We are conscious that RP partners who have been successful in their bids for 2011-15 AHP funding will shortly be expected to sign-off a Framework Delivery Agreement (FDA) with the HCA covering their programme targets for the next four years. This, of course, will take place before it is possible to fully model the likely implications of relevant FDAs for the borough to inform the development of our Tenancy Strategy. 

It is also the case that a number of RP partners will soon be looking to start the conversion of some social rented vacant properties available for re-letting into AR lettings. Some of our partners also wish to target some or all of their AR lettings at households who can afford intermediate housing rent levels. Similarly, we understand that the HCA will in some cases be seeking to build in the use of fixed-term tenancies for AR lettings as part of the FDA negotiations. 

This updated interim position statement is therefore being issued now in order to influence decision-making by RPs and the HCA to assist the council to secure the best possible use of local housing stock to help ensure local needs can be met as effectively as possible. It covers four additional areas (the numbers in brackets refer to the sections in the amended IPS set out below, as well as providing clarifications in other areas:

• conversion of re-lets to Affordable Rent (AR) (4)
• property disposals (5)
• target groups for AR lettings (6)
• length of AR tenancies (9) 

The Council's interim position 

1. Affordability 

As market rents are particularly high in Hackney, we expect housing providers to take account of, and be able to demonstrate, affordability for local households in setting Affordable Rents in their proposals.  

Our guidelines for affordability levels for different bedroom sizes are:

Bedroom size	Percentage of local market rents
1 bedroom	Up to 70%
2 bedroom	Up to 60%
3 bedroom	Up to 50%
4 bedroom +	Up to 50%

 

We would expect relatively lower percentages to apply in areas of the borough where market rents are high, especially for one-bedroom homes, to help address the potential impact of the poverty trap for residents housed in these areas.  

In formulating the borough's final position we will, with partners, carry out a review of the operation of Affordable Rents in the borough. We will also carry out further modelling of the impact of housing benefit and tax credits on the disposable income of different types of household, and the impact on the poverty trap when people seek to move into work. An updated Housing Viability Study will help assess the viability of our proposals for affordability thresholds, and will inform a review of those thresholds.  

We will investigate whether different affordability guidelines should be set in a number of broad market areas within the borough. This would help take account of the differences in market rent levels between housing sub-markets in the borough.             

2. Tenure mix of the affordable rented housing programme 

Guidance on the guideline tenure mix for the borough is contained in our Local Development Framework (LDF) Core Strategy. This is the starting point for our planning negotiations with developers. We recognise, however, that the tenure mix for affordable rented homes does not take account of the new Affordable Rent tenure, as the Core Strategy was adopted by the council before government proposals for the new tenure were announced.  

The government has published a revision to national planning guidance (PPS3) clarifying that Affordable Rent is considered to fall within the definition of affordable housing for planning purposes. The definition is clear that affordable housing should be at a cost low enough for eligible households to afford, taking into account local incomes and local market values.  

Work we have carried out to assess the borough's requirements for new social rented and Affordable Rented lettings over the next four years underpins the following guidelines for the tenure mix of Hackney's affordable rented housing programme. The continued provision of sufficient social rented homes, particularly for families, remains our high priority.  

The guideline in the table below for the desired mix for the future affordable rented programme is across the borough and is also the basis for the council's interim planning position. The council's LDF Core Strategy is clear that tenure mix guidelines are intended to be a borough-wide target, and the mix on individual schemes will also be determined through negotiation based on individual site and neighbourhood characteristics. This would take account of the development viability of specific sites and the availability of public subsidy, as well as the fit between the proposed housing outputs of the scheme and our policy objectives.   

Updates to the Housing Viability Study and Housing Needs Assessment will help inform our final position regarding the target mix in the future affordable rented programme.  

Tenure	Proportion of affordable rented programme
Social Rent	25%
Affordable Rent	75%

 

The government's position, as set out in the HCA's framework document, is that HCA funding for social rented housing will only be considered in exceptional circumstances, such as estate regeneration. We therefore recognise that there are scheme viability challenges in providing social rented homes. However, where possible we would expect providers to seek to identify other sources of funding for this purpose, for example cross subsidy within schemes or packages. The council will look very carefully at the scope to secure, where possible, extra resources to support the provision of additional social rented homes in the borough.   

Our final position on tenure mix will be included in an Affordable Housing Supplementary Planning Document, for adoption in 2012.              

3. Bedroom size mix of the affordable housing programme 

The provision of high quality, affordable family homes is a high strategic housing priority in Hackney. Our LDF Core Strategy states that the preferred affordable housing mix will include three-bedroom or larger family housing that meets the minimum requirements in the London Plan.  

We therefore fully endorse the Mayor of London's aspiration in the London chapter of the HCA's framework document: 

"London's most pressing need is for more family-sized affordable homes. The Mayor will therefore expect providers to come forward with proposals which contain a significant element of three-bed or larger units." 

Our final position on bedroom size mix guidelines will be included in an Affordable Housing Supplementary Planning Document, for adoption in 2012.  

4. Conversion of re-lets to Affordable Rent 

Our aim is, as far as possible, to maintain the current level of stock of social rented homes in Hackney, to meet the requirements of existing tenants who need to transfer, and of new tenants for whom a social rented home best meets their needs. This is also important for sub-regional and pan-London mobility.

If a large proportion of HA social rented re-lets in the borough were to be converted to Affordable Rent, our evidence shows that over time this would have a significant impact on the size of the stock of social rented homes, and the potential impact on mobility in the borough.   

Across the borough as a whole and at this stage, we are looking to ensure that the proportion of HA re-lets converted to Affordable Rent does not exceed 22 per cent of total HA re-lets in Hackney. Given the high need for affordable family homes in the borough, we expect most conversions to be smaller 1-2 bedroom homes.  

Other additional considerations that would be taken into account include:

• if conversion was to an Affordable Rent at a level comparable to housing association target rent levels; 
• if conversion raised resources for building new affordable homes, of a type and size that are a high priority in the borough.   

The maximum guideline of 22% conversions is intended as a borough-wide target. We recognise that some individual RPs could exceed this proportion in a given year and that others will convert a smaller proportion of social rented homes or will not convert any. However, the figure is based on an assessment of borough's likely minimum future need for social rented lettings, and the council must seek to maintain an adequate future supply of suitable homes to meet the borough's projected housing needs.   

Further detailed analysis is taking place on future demand and supply for affordable rented homes in the borough over the next four years, and this will inform the council's final position. This will include an assessment of the full range of supply options that could be available to those in housing need.            

Given the shortages in various property types in the borough, our expectation is that where conversion of vacant SR lettings to AR is being considered the focus should be on the following dwelling types:      

• bed-sits and studios;
• one-bedroom homes above the 4th floor in blocks of flats that do not have a lift;
• any single flat in a converted dwelling above the ground floor, where the other properties are not owned or managed by the RP;
• a property for which the cost of works necessary to make the home decent is deemed non-viable, according to the criteria specified in the RP's asset management or disposals strategy. 

We would not like to see any of following converted to AR homes:

• single family occupancy homes containing three or more bedrooms;
• wheelchair accessible homes;
• purpose-built flats and maisonettes with ground floor access;
• flats on estates with sole or shared access to a garden;
• homes that have been vacated as a result of an under-occupation transfer;
• homes that have undergone extensive fittings of aids and adaptations to meet the needs of a physically disabled person;
• all homes that are on the Accessibility Register.    

 5. Property disposals 

We recognise that, in addition to RPs converting some of their existing social rented housing stock into AR lettings, they might also want to dispose of stock in relatively high value parts of the borough to release equity that can be used to support development in another part of the borough, or possibly in another area altogether. 

While appreciating this could have short-term benefits for collective efforts to increase affordable housing supply, our long-term goals of creating sustainable, socially cohesive and integrated communities in all neighbourhoods, remain. We would therefore need to understand how any property disposals would impact on the neighbourhood affected, in terms of both the organisation's individual stockholding in that neighbourhood, and that of the accumulative impact of property disposals planned and executed by the affordable housing sector as a whole. As part of this assessment, we would take account of any current or imminent housing developments in the pipeline for that locality.

We would therefore expect from an RP a clear written statement of the relationship between their asset management and housing development /regeneration strategies in the borough.    

We would be particularly concerned about any plans to dispose of any property type that we have previously discouraged you from converting into an AR letting.  

6. Target groups for Affordable Rented lettings 

We have already shared our concerns about the affordability of AR lettings on a sustainable basis, and section 1 sets out our interim guidelines for affordability levels for different bedroom sizes. Given the levels of need locally, we wish to make clear our unchanged expectation that our RP partners will continue to accept bids via the council's Choice Based Lettings (CBL) system to AR tenancies from our priority Housing Register groups in line with the entitlements enshrined in the London Borough of Hackney and East London Housing Partnership nomination protocols. 

We acknowledge the importance of ensuring expert benefits advice/information is available to priority Housing Register applicants prior to any CBL bids so they fully understand the implications of moving into an AR property and what happens if they get or lose a job and/or face a pay reduction for any other reason.

We have carried out detailed modelling to look at potential poverty trap issues for our traditional priority groups for social rented housing, both for families and childless households. This work indicates that our current IPS affordability levels will for most household types, with the notable exception of the largest families, not result in Universal Credit caps being triggered in 2013 for those who are unemployed.  

Further modelling and review of the operation of AR in the borough will feed into the development of our Final Position Statement on the Affordable Housing Programme 2011-15. We will work with partners to assess the implications of the introduction of Affordable Rents for Hackney residents.   

Please note that we are also undertaking a full review of our current nominations protocol, which will take account of the issues above. We will also be looking to facilitate a greater level of mutual exchanges within the borough's social rented sector. 

7. Converting social rented homes in the existing HCA programme  

We would consider requests for a limited number of conversions to Affordable Rent of funded social rented completions in 2011/12. This would be determined by our estimated requirements for social rented homes, by bedroom-size, in that year. Requests would need to be accompanied by details of the affordable housing that would be provided in Hackney in return for the resources raised. 

8. Design and sustainability standards 

We fully endorse the HCA's and Mayor of London's continued commitment to high design and sustainability standards in the affordable housing programme, as set out in the HCA's Affordable Homes Programme Framework document. 

We welcome and support the HCA's intention to advantage providers' proposals in the assessment process that meet higher than the HCA's requirements. We would particularly encourage the provision of family homes that meet exemplary design standards, and homes that meet high standards of environmental sustainability.  

9. Length of Affordable Rented tenancies

In a high need, high value area like ours, we have significant concerns about whether the introduction of fixed term social rented or Affordable Rented tenancies would help us and our partners meet the borough's housing priorities effectively. In the case of the council's social rented homes, we have taken the view that these will continue to be offered on lifetime tenancies at a social rent. We will listen to the views of housing associations regarding fixed term tenancies, and keep the situation under review, including as part of development and consultation on a Tenancy Strategy.   

However, in recognition of our statement in section 6 about target groups for AR lettings, our interim expectation is that priority Housing Register applicants successfully bidding for an AR tenancy would normally be offered a lifetime assured tenancy, as is currently the case for those offered social rented tenancies. (For clarity, where starter / introductory tenancies are in use, this expectation would apply following expiry of such a tenancy). For any non-register applicants, we continue to invite your views regarding the rationale for proposing to offer fixed-term tenancies, and for the proposed length of term.      

10. Low cost home ownership 

House prices in Hackney are beyond the reach of most potential first time buyers in the borough. To meet the needs and aspirations of these households, low cost home ownership is an important priority for the new build housing programme.  

We welcome the HCA's statement in the framework paper that it will consider proposals from providers which include affordable home ownership as part of the overall mix where such schemes have the support of the local authority and fit with the local housing market. We also welcome the recognition in the framework document that there is a clear priority for assisting existing social tenants to meet their home ownership aspirations where this is sustainable.  

The Mayor of London has set upper household income limits in the appendix to the HCA's framework paper. Where housing providers are proposing to provide low cost home ownership they should ensure, and be able to demonstrate, that a high proportion of the homes are affordable to Hackney residents on moderate incomes.

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Page updated: 11 Oct 2011