Housing and Planning Act

 

The Housing and Planning Act became law on May 12, 2016, after completing its passage through Parliament. It is expected to have a big impact on housing in Hackney.

In its current form, it will likely mean far less social housing available for people on waiting lists, increased rent for some Council tenants, less choice for existing Council tenants looking to move, and fewer genuinely affordable new homes being built.

Headline potential impacts for Hackney include:

  • the Council forced to sell up to 700 Council homes on the open market over the next five years - properties currently used to house families living in temporary accommodation or people on lower incomes in housing need. Proceeds from the sales go to the Government
  • council households with a combined income of more than £40,000 will have to pay an extra 15p rent for every pound earned above this threshold. For example, a household income of £50,000 could result in annual rent increase of £1,500. Proceeds go to the Government to help it pay off the national debt
  • far fewer genuinely affordable new build properties, such as shared-ownership or social rent, with the Council and developers pressured to build £450,000 'Starter Homes' instead.
  • the Council having to spend an extra £18 million a year on housing-related costs due to the likely increase in numbers of families in temporary accommodation and their longer wait for a permanent home

This page provides a summary of the Act's main housing proposals and their potential impact on Hackney, and what the Council has done and will be doing to try to change and/or mitigate what it considers some of the most challenging policies.  

Despite now being law, there are still many policy details which need to be worked out in the coming months, including when each new policy will start.  

The Act's headline proposals and the impact on Hackney

Right to Buy 2 (the forced sale of Council homes)

The Bill extends the 'Right to Buy' (RTB) to Housing Association tenants who will be eligible to buy their home if they have three years or more residency and could be offered a discount of up to £103,900. After a designated period (currently unknown) they could then sell the property on the open market for its full value.

The Government is planning to refund housing associations for this RTB discount. To recoup this cost it will force councils to sell some of their social housing (when it becomes vacant) on the open market and then pass the proceeds to the Government as a levy payment. There is likely to be a value threshold and formula which will dictate how many homes a council must sell. These details have yet to be determined.

It is expected that selling Council housing on the open market will reduce significantly the amount of social housing available in areas such as Hackney It is currently unclear whether the Council will be able to retain enough of the sales receipt to build a true like for like replacement home in the same area.

Impact on Hackney

Until we know the value threshold over which homes should be sold, it is difficult to establish the impact. Early modelling by the Council indicates that up to 700 Council homes over the next five years might have to be sold. More than 50% of the Council's homes are valued at over £300,000 and could be at risk of forced sale when they become empty, wiping out homes that are truly affordable for working households on low incomes. Many of these homes are likely to be family-sized, ground floor homes or newly built properties.

There are more than 2,500 households living in temporary accommodation provided by the Council and waiting for a permanent home, if void properties are sold off rather than being made available for these families, they will have to wait longer costing more in terms of disruption and housing costs.

Pay to Stay (increased rents for social tenants)

Council tenants whose household has a combined annual income of more than £40,000 will have to pay more rent. The full details are not yet confirmed, but it's expected that for every pound a household earns over £40,000, they pay 15p a year more in rent, up to a cap based on market rate.

The Government has indicated during debates in Parliament that Tax Credits, Child Benefit, Disability Living Allowance, Housing Benefit and Universal Credit will not be considered as income.

Any additional rental income the Council collects through Pay to Stay (minus an administration fee) has to paid to the Government, which intends to spend the proceeds paying off the national debt. This means local residents paying higher rent but receiving the same level of service.

Impact on Hackney

The Government has not yet provided precise information on how the rent scaling will work. Also, the Council does not currently hold data on tenant incomes. As such, we are not able to estimate accurately the number of households that might be affected and how much additional rent they will have to pay.

However, as an example, a council household with a combined income of £50,000, who currently pay £434 a month (average social rent for a two-bed), would see their annual rent increase by £1,500, or an extra £125 a month (a 29 percent rise).

More detailed examples of how Pay to Stay could impact Hackney residents is available in the Council's consultation submission [pdf, 260.78Kb] to Government.

Starter Homes

'Starter Homes' are new-build properties available at a 20% discount for 1st-time buyers aged between 23 and 40.  They have been classed as 'affordable housing' by the Government.

'Affordable housing' currently means either social rent, shared ownership or affordable rent. When considering planning applications, councils used to have more control over deciding what 'affordable rent' was locally. In 2011, the Government and the previous London Mayor Boris Johnson changed this to mean up to 80% of local market rent levels.

Developers will be encouraged to offer Starter Homes as part of their 'affordable housing' provision. Councils will have an obligation to promote Starter Homes even if they feel they will not met housing need or be truly affordable in their area.

Generally, developers are currently supposed to provide a 50/50 split of market and affordable housing when building a new development Starter Homes are expected to be significantly more expensive than any of the current options which are classed as 'affordable housing' provision. On all new developments comprising 10 or more properties, councils will be forced to include Starter Homes.

Impact on Hackney

Hackney has an acute need for new homes that are genuinely affordable to households on low to middle incomes. Promoting Starter Homes will not meet this need. Starter Homes, though they may help to meet the needs of a narrow group of relatively wealthy under-40s, would be completely unaffordable to the vast majority of households in Hackney.

Based on the average price of a flat in Hackney, the price of a Starter Home would be capped at the maximum price of £450,000. Even with a 10% deposit, we estimate that a household would need an annual income of £115,000 to raise the mortgage necessary to afford a home of this value, far in excess of the median income of households in employment in the borough of £35,140.

The Council has serious concerns that the inclusion of Starter Homes within a new definition of Affordable Housing would displace a large proportion of genuinely affordable new homes that might otherwise be built, and in doing so reduce the supply of this type of housing available to those on low to middle incomes.

The Council believes that the introduction of a requirement to provide Starter Homes, alongside other Government policies such as the forced sale of 'higher value' council homes, will seriously affect the ability of the Council to house families on the waiting list and living in expensive temporary accommodation. It is expected that substantial additional costs will fall on both the Council and on the Treasury (through additional Housing Benefit payments). Overall this is forecast to be an extra £18 million a year.

Major lenders have raised concerns that Starter Homes will distort local housing markets and encourage buyers to overpay, stoking inflationary pressures in the market. Findings from private sector property experts, Savills, indicate that a requirement for Starter Homes could reduce the proportion of genuinely affordable housing delivered on new sites by over 50%, and that the proposals will result in the delivery of few, if any, additional homes over those that would already have been built. 

End of lifetime tenancies

Councils will no longer be able to offer new tenants lifetime tenancies. Instead, there will be fixed-term tenancies of between two and ten years, which will be reviewed at the end of each term and perhaps, depending on further advice from the Government, this could be longer for tenants with children.

Existing tenants who have to move as a result of regeneration or major works will maintain their current lifetime tenancy. Succession rights to a deceased tenant's property will remain for spouses or civil partners, though the new tenancy will be a fixed-term tenancy. This is a substantial reduction in the tenancy succession rights for existing tenants.

The Council argued that this change could have a negative impact on communities and individual tenants and successfully argued that two-to-five year tenancies were too short. 

Private rented sector

Banning orders

This part of the Act creates a new 'banning order' concept, to enable a Tribunal to ban a person from letting a home or engaging in letting agency or property management work in England.

The banning order may be requested by a Council against a landlord or agent who has committed a banning order offence. The scope of what constitutes such an offence will be defined in regulations and the Bill sets out the considerations that the Tribunal must take into account. A ban must be for 6 months at least and a financial penalty for breach can be up to a maximum of £5,000. 

Database of rogue landlords and lettings agents

The Government will operate a database of 'rogue' landlords and letting agents. Councils will be responsible for updating the database when banning orders are issued, and can use it to help exercise their functions. The Bill makes provision for Councils to have access to the information in the database but the Government currently has no intention to make it public.

Rent repayment orders

A tribunal will be able to impose a rent repayment order (RRO) on a landlord who has committed an offence, which a tenant can apply for directly. The rent can be recouped by the tenant if they have paid it, or by a Council if the rent was from Housing Benefit or Universal Credit. The Secretary of State will make regulations as to how the money recovered will be spent. There is a new duty on local authorities to consider applying for an RRO where a landlord is convicted of any of the relevant offences.

Impact on Hackney

The number of privately renting households has doubled in the past decade in Hackney. The powers outlined by the Government in the Housing and Planning Act will enable the Council to take action against bad landlords operating in the Borough. However it is difficult to assess at this time the full impact that these measures will have. The Council will be looking to take further steps itself with respect to targeted enforcement in the private rented sector, which it hopes will maximise the effect of the Government's measures to ensure good standards in the sector and tough action against poor landlords.

What is the Council doing?

Making the case direct to Government

The Council has regularly undertaken modelling to assess the impact of many of the Housing and Planning Bill's provisions on Hackney and its residents. We have shared this modelling with the Government when it has asked for views on aspects of the Bill. This has normally been in the form of written or oral evidence (examples below).

The Council has also used these opportunities to put forward a range of suggestions on how the Bill could be improved, some of which the Government has accepted.

Right to Buy 2 (the forced sale of Council homes)

The Council has regularly undertaken modelling to assess the impact of many of the Housing and Planning Bill's provisions on Hackney and its residents. We have shared this modelling with the Government when it has asked for views on aspects of the Bill. This has normally been in the form of written or oral evidence (examples below).

The Council has also used these opportunities to put forward a range of suggestions on how the Bill could be improved, some of which the Government has accepted.

Pay to Stay (increased rents for social tenants)

Hackney has raised its concern that Pay to Stay will act as a significant disincentive to work and aspiration and would also result in significant additional housing benefit costs for the government. The Council has made the case that there should be exempted income when calculating who should pay a higher rent.

The Government has now accepted many of the points being made by the Council. Whilst are it is not minded to drop Pay to Stay completely, or increase the £40,000 income threshold, they have agreed to index link the threshold annually to inflation. Tax credits, Child Benefit, Housing Benefit, Disability Living Allowance and Universal Credit will not now be considered as income. 

End of lifetime tenancies

Originally the Government's proposals were that Councils could only offer tenancies from between two and five years. Hackney made the case for Councils to be able to offer longer tenancies.

The Government has now agreed that councils will now be able to offer up to 10 year tenancies to new tenants, depending on circumstances to be confirmed. 

Private rented sector

The Council has been calling for the Government, through its 10 steps to a better private sector renting campaign, to take action on the private rented sector. The campaign focused on improving affordability, the quality of management standards, security of tenure, information accessibility, and health and safety.

The Government subsequently made provision within the Bill for landlord banning orders. It has also taken steps to respond to the Council's requests on action to stop retaliatory evictions, smoke and carbon monoxide alarms, electrical tests and transparency of lettings agent fees. However the Government missed an opportunity to improve PRS affordability and make tenancies more secure, two key asks in the Council's '10 Steps to a Better private Renting' campaign.

Written and oral submissions

Making the case to other organisations

The Council has shared its modelling and its assessment the Housing and Planning Bill will have for the Council and Hackney residents with other organisations when possible, so as to inform their organisations of wider issues.

Examples include:

Public awareness-raising and community events

Hackney Council / Hackney Homes provided a public briefing to tenants, explaining the potential impact of the Bill. See the Housing Bill [pdf, 5.87Mb] presentation. A similar briefing was also provided to the Woodberry Down Community Organisation Board.

Public panel discussion with housing experts called Hackney: A Place to Call Home, at Stoke Newington Town Hall. See the Hackney A Place to Call Home [pdf, 1.26Mb] presentation.

The Living in Hackney Scrutiny Commission published a report into Forced Sales and Right to Buy. The Council's Cabinet provided a response to this.

Cllr Glanville has spoken in the media about the impact of the Bill on many occasions. Examples include:

The legislative process and what's next

The Housing and Planning Bill was introduced to the House of Commons on 13 October 2015 and had its first set piece debate. The Second Reading took place on 2 November.

The content and implications of the Bill generated considerable controversy both inside Parliament and outside. It has taken more than five months to pass through Parliament.

Due to the important content and lack of detail within the Bill there have been numerous proposed amendments to it, some of which the Government has taken note of, many of which it has not.

Work will now begin on agreeing the finer policy details, including when the different polices will start. There are likely to be more Government consultations and opportunities for MPs to debate these proposals in Parliament.

The Council will, where possible, feed into these discussions to try to ensure policies are worked out in ways which help address the needs of Hackney.

 

Page updated: 20/05/2016 16:09:38

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