Tag Archives: Council house

Right to Buy 2 & the 1% rent cut: time to use the Right to Transfer

In June 2015 In his keynote speech to the recent National Federation of Tenant Management Organisations (NFTMO) national conference, SHOUT’s Tim Morton warned of the dangers to social housing presented by the Government’s proposal to extend the Right to Buy to housing association tenants.  The issue being the forced sale of “high value” council properties in order  In response Leathermarket JMB, a TMO based in the London Borough of Soutwark tweeted: Right to buy for housing associations may mean that Leathermarket JMB may never let a council home ever again

They subsequently followed this up with: Lawyers tell ALL council homes class as high value for sell-off under Govt Hsg Asn plans

This is a pretty stark thought, that a community led housing organisation might never let another home to a person or family in housing need.  This is bad enough, but this is also an existential risk to TMOs in high value areas – as stock is sold off, the viability of the TMO will reduce.

Leathermarket JMB manages about 1500 homes, if just 5% of those homes become vacant each year then they would see 75 properties sold off in the first year alone.  After just 8 years, they would have lost more than a third of the stock they manage and after 14 years they would be down to just below half (732) – and that is not taking into account any Right to Buy sales.

Impact of home sales

Loss of stock on this scale would be devastating for a TMO as it would have serious implications for the level of allowances, and as such the viability of the organisation.  It would inevitably mean job losses and a degradation of services to tenants.  The TMO would lose economies of scale and have to provide services to fewer home but spread across the same geographic area with less money to do it.  Overheads as a proportion of total income would increase.

It is not just the financial impact that is of concern, but the effect on the community as the tenure mix of the community would be radically changed in a short period.  Most TMOs are quite used to managing mixed tenure communities and in the right balance this is a normal and healthy state of affairs.  In flatted estates, the interests of tenants and owner occupying leaseholders are often closely aligned and many TMOs have leaseholders as members and active participants.

However we know that 40% of homes sold under Right to Buy are now owned by private landlords, there is clearly high demand for ex-council properties as rental investments.  With the sale of empty homes at market value this pro[portion is likely to be far higher because you won’t have the contingent of former tenants who could only afford to buy because of the discount.  In areas with lots of high value properties this will lead to a rapid change in the tenure mix in the community.  A large increase in non-resident landlords and private tenants with no more security than 6-12 month assured short-hold tenancies is not going to do anything good for community stability and cohesion.

The impact of the 1% reduction in social rents

It is not just the prospect of the sale of empty homes that makes the Right to Transfer the obvious course of action for TMOs – the prospect of 4 years of 1% rent reductions should have them seriously considering it too.  TMOs with few exceptions operate using allowances from their local authority landlord, these being a proportion of the rental income.  Landlords hold the whip hand with regards to the level of allowances (my own TMO has had frozen allowances in recent years as the landlord increased rents) and tenants should be under no illusion as to what rent reductions will mean for their allowances.

1% may not sound much, but when compared with the anticipated CPI+1% increases, the real difference after 4 years is 8-12% in real terms – assuming inflation at 1-2%, if it gets higher than that then the damage is much worse.   For long term business plans the situation is compounded as future rent increases are now based on a lower starting point, so the cumulative effect on income over 30 years is massive, one estimate I’ve seen is that it blows a 20% hole in the business plan.  It is safe to say that faced with reductions on this scale, landlords will have no choice but to pass the reduction on to TMOs through reduced allowances.  If I were a local authority facing cuts to my own services  I may not be able to resist the temptation to make my managing agents take more than their fair share of the pain.  Either way, TMOs will have to try to continue to deliver services to tenants with much less money than they had planned for.

A very toxic brew

For TMOs facing the combined threats of rapid loss of stock through forced sale of voids and significant real terms cuts in allowances the future looks bleak.  For some it may mean that they cannot continue in management at all – it is a very serious existential threat.

The solution – use the Right to Transfer

This is where Right to Transfer comes in as a highly attractive alternative.  It would avoid the prospect of the sale of empty homes to fund Right to Buy for housing association tenants, thus stemming the haemorrhage of stock needed to remain viable.  It would also allow the TMO to plan a viable business case based on the whole rental income, rather than being dependent on a fraction of the rent paid in allowances.  The rent reduction would still be painful, but with the whole rent to play with there would be far more scope to manage – tenants would not be propping up council services through their rent and they would be able to plan investment to make best use of resources to suit their local needs, not rely on a borough wide plan subject to the competing interests of the local authority and the agendas of local politicians.

I say use the Right to Transfer because it puts power in the hands of tenants, but I would expect enlightened local authorities facing similar challenges, to be keen to work with TMOs on community led transfer.  Tenant ownership and the preservation of social housing has to be a better option than the prospect of stock loss and managing decline that may well be the alternative.


The Tory Right to Buy for HA tenants is fundamentally unfair

Mad Hatter's Tea Party

“Sell council houses to subsidise HA RTB sales? And I though I was mad.”

Part of me thinks that this election proposal to extend the Right to Buy (RTB) to housing association (HA) tenants is actually an admission by the Tories that they have no chance of winning a majority in this election.  In this case there is nothing to lose by floating crazy policies which you know have no chance of ever getting through coalition negotiations.

An unfair transfer from poor to rich

However, on the off-chance that they are serious, there is a serious unfairness at the heart of the proposal which will see the poorest communities subsidising the better off.  The money to pay for the policy is meant to come from selling off council houses, but only a minority of local authorities still own any housing stock – about 100 out of 326 English authorities.  This means the entire burden of funding a national policy will fall on this minority.

This would be bad enough in its own right, but if you consider the disparity between the LAs that own stock and those that don’t, it is actually much worse.  This is because the LAs who retain their council homes tend to be those urban and with more deprived communities and those who have no stock are on average leafier boroughs or rural, with wealthier populations.

If all HAs are to be reimbursed for the RTB discounts, this means that the money for HA sales in LA areas with no council homes has to come from outside the area – from LAs that do own stock.  On average this will see a transfer of assets from already poorer areas, to already richer ones.

Beggar Wolverhampton to help Elmbridge

Esher, Elmbridge Borough, Surrey

Esher, Elmbridge Borough, Surrey

For example, Elmbridge in Surrey a very pleasant place and typified by high incomes and very high property values, transferred its own council houses, so has nothing to lose from this policy.  However if an HA in Elmbridge sells a home through this RTB scheme, it will get reimbursed the full market value (likely to be a large sum) by the Government, so be well placed to build a replacement.  But how is this to be paid for?

Heath Town estate, Wolverhampton

Heath Town estate, Wolverhampton

In order to give money to the HA in Elmbridge an LA that does own stock will have to sell some homes.  For example, a place like Wolverhampton, one of the most deprived parts of the country, where the council owns lots of homes but is characterised by low property values.  Even the smart parts of the city don’t command huge house prices and on a typical housing estate a  nice modernised 3 bed semi might only be worth £75,000-£100,000 on the open market.  How  many of these homes would poor Wolverhampton be forced to sell in order to send money to wealthy Elmbridge?

No such thing as a free lunch


The Tories want a free lunch on RTB, but it will actually come at a real cost to some of the poorest in society.

Let’s not forget that you cannot simply sell council homes and use the whole receipt to fund the scheme.  There is attributable housing debt attached to all council homes which would have to be repaid, early repayment also attracts an additional cost.  The selling LA would also suffer loss of future income which would need to be recompensed or risk detriment to the current tenants.  The net receipt would therefore be far lower than the sale price.

In the example I have used, Wolverhampton could well lose two council houses to fund RTB discounts in Elmbridge which would see little net loss in affordable housing.  It is hard to see how this is anything other than a regressive redistribution of wealth from the poor to the rich.  Not only is the Tory proposal a bad one, it is also grossly unfair and will tend to increase inequality.

Bushbury Hill information house

Want to know what tenants want? Try talking to them

Bushbury Hill information house

Bushbury Hill information house

As part of our Right to Transfer process in Bushbury Hill we have recently opened what we call our Information house on the estate. Open five sessions a week, including evenings and Saturdays it offers every tenant a chance to come and chat to us about the transfer proposal. It also gives us the chance to find out from tenants which of our proposed improvements they would like to choose and if they will need the back garden fencing programme.

Tenant can choose a new fire suite

New fire suite

Don’t take offence

We know exactly what tenants want because we pounded the streets and asked them. Because our estate is nearly all houses with large gardens, three quarters of tenants need new fencing. It may seem a minor issue, but a decent fence means you can enjoy your garden in privacy and security. By and large tenants rub along just fine, but unwanted intrusions by next door’s dogs and or children can quickly grate. If you have a 100ft garden as many in Bushbury Hill do, the cost of fencing it yourself is many hundreds of pounds. Many of our tenants simply do not have this kind of money.

Ask and then listen…

It is this personal interaction with tenants that has given the board such a good understanding of the needs of our community and shape the transfer proposal accordingly. It may seem to be obvious, but if you want to know what your tenants want from the Right to Transfer (or anything else) then a conversation is the best way. This involves not just asking questions, but also listening to the answers and capturing them in a way that can be used. We have a very simple survey that we are using.

…Or not

Being led by the needs and wishes of our tenants is in our DNA as a tenant led organisation but it does beg the question, why would any landlord want to do otherwise? What I really cannot understand about the local authority’s opposition to transfer is that they have never taken the time to talk to the tenants in Bushbury Hill about the issues. How a local authority can possibly reach a meaningful conclusion about what is in the tenants best interests without engaging with the tenants is beyond me.

Choosing a transfer partner

The tenant Board at Bushbury Hill EMB have been pursuing stock transfer for at least a decade now, so no-one could accuse them of rushing into things.  However, the very small window for the current stock transfer programme means that things are currently moving at a very fast pace.  The Board has had a long time to work out what it wants to achieve with transfer, so it was not necessary to have a long and protracted partner selection process.  Choosing a transfer partner has been breathless for all concerned, but a choice has now been made and I’m confident it is a good one.

Blind Date or Invitation Only?

There is no requirement for tenants using the Right to Transfer (RTT) to hold a beauty contest when choosing a potential new landlord; the choice is theirs to make.  Assuming they want to join an existing housing association then it open to them to decide on a partner and proceed from there.  As discussed in an earlier blog, for tenant groups with few resources, getting a partner on board at the start my be the best way to make the RTT possible and there is also scope for housing associations to approach tenant groups with an offer.

However, there are clearly benefits to introducing some competition to the process as potential partners are likely to make their most generous offer.  The decision we had to make was whether to have an open process, or to invite selected HAs to take part.

Our Board decided to go with the “invitation only” approach.  They wanted to be sure only to approach organisations that were a) relatively local and b) that they would be comfortable working with.  There was also a consideration of time and resource pressure; it would have been hard for a small organisation to cope with an “all comers” process.  It was hard enough with six invitees, if  we’d had to field enquiries and visits from many more it would have been quite disruptive.

The assessment would have become unwieldy with more participants.  Board members had to analyse and consider each 30 page submission against our requirements.  It would have been a big ask of volunteers to do this for many more potential partners in the short time we had available.  Once the written submissions were assessed by the Board, this produced a short list of two who were invited to take part in the final stages of the selection.

Showcase to tenants

The next step was a showcase event giving tenants the chance to see what each potential partner was offering and to ask their own questions.  We held this event on a Saturday as this meant the majority of tenants would be able to attend, even so I was a little worried no-one would come.  In fact we had a respectable turnout and those tenants who came seemed to find it a useful exercise.  One thing I was surprised about was the length of time most tenants spent talking to the two organisations, having taken the trouble to come, they wanted to get the most out of it.

Tenant feedback

Crucially, in order to make it meaningful for the Board, we asked attendees to complete a simple response sheet, telling us what they liked about each potential partner and any other comments.  Without this feedback the showcase  would not have helped the Board in the selection process.  In fact we had lots of really good feedback from tenants, mostly positive about both potential partners.

One tenant was upset that he was not personally involved in the entire partner selection, but it would have been impractical to say the least to have a selection panel of c.1200 tenants.  To assess detailed and technical bids was hard work for our experienced tenant Board members, there would be no sensible way to include all tenants in the same way.


Prior to the final decision, the Board visited each of the potential partners to give them an opportunity to demonstrate some of their good work on the ground.  These visits were very pleasant and gave the Board the chance to meet more staff and tenants from each organisation.

It was quite tricky for them to make the best use of these visits as they needed to show things which would be relevant to Bushbury Hill post transfer.  It is fair to say that one visit was a lot better at highlighting the added value that would be available to Bushbury Hill from joining that organisation.  This wasn’t make or break, but it showed the benefit of really focussing your message on what is most important to those assessing the bid.

Presentation and interview

This was the last stage in the process and along with the written submissions, carried the greatest weight.  Board members set the interview questions and scored the answers, it was really important to them to make clear that this was a tenant led process .

For the presentation the Board asked the potential partners to consider how to help BHEMB address the social and economic challenges in Bushbury Hill in the long term.  This is pertinent because the homes are now in pretty good shape and will remain so if transfer goes through, but the other challenges that face our community remain.  We also asked how they would try to deliver a “Yes” vote in the transfer ballot – we’ve never been through it, they have, so we wanted to have some good ideas and a clear plan for involving the community

A note on scoring

There are lot of ways to do this, in the end we decided that whilst each Board member would score individually, the final score for each element or question would be a consensus score.  This is more involved than simple averaging, but the downside of averages is that outliers can significantly affect the results.  With an agreed score, people have to opportunity to discuss different views and analysis.  We had some questions where one person scored 1 and another 5, by allowing each to explain their reasoning any misunderstandings could be identified and the group could work through to reach a consensus.  No scoring system is perfect, but I think this method produced fair and accurate results.

Decision time

I don’t know what the final discussions were as the Board took this decision with no officers present.  They had two excellent options, so there wasn’t right or wrong option.  They chose Wrekin Housing Trust as their stock transfer partner.

WHT’s proposal was excellent and offers:

  • long term security of tenant control in Bushbury Hill,
  • an excellent financial offer,
  • added value in terms of new services,
  • will help us address social and economic challenges
  • provides new homes and stock diversity
  • opportunities for BHEMB to grow

All we have to do now is win the ballot…

Feasibility Study stage completed

The irony of being in the middle of the first Right to Transfer (RTT) process is that I have little time to blog about the first Right to Transfer.  Anyway there is much to update on where we have got to.

Following the vote by the members of the EMB to pursue transfer to an existing Registered Provider at their EGM, all tenants were consulted to gather their views.  The RTT regulations require the tenant group to confirm that there is no groundswell of opposition to the proposal.  In Bushbury Hill there certainly appears to be no such majority against the suggestion – in fact no tenants said they were opposed.  This comes as little surprise to me; we’ve been talking to tenants about exploring the benefits of transfer for the last 10 years and as far as I can tell, the mood is very much “Get on with it”.

So we have got on with it.  On Friday 7th March 2014 Bushbury Hill EMB became the first tenant group to provide a Feasibility Study Statement under the RTT regulations.  This provided the Council with our assessment that tenant led stock transfer is financially possible and advantageous to the tenants.  The Council now has 28 days to accept or reject the Feasibility Study Statement as valid under the regulations or to go to the Secretary of State for determination against the RTT proposal.

Time is of the essence so while we wait for the response we have started the process of choosing a partner housing association.  The tenants overwhelmingly support the EMB’s management of the estate, so whoever is chosen must guarantee the long term continuity of tenant control in Bushbury Hill.  They also need to deliver the capital investment that tenants want and deserve.  There are risks in everything, but the Board have approached potential partners that they believe can offer a good fit in terms of reputation, ethos and investment.  The outcome of this process should be known later in March.

Bushbury Hill is(n’t) Falling Down

We like a challenge at Bushbury Hill, so not only are we trying to be the first tenant led organisation to use the Right to Transfer but to do so with an estate comprising mostly of “designated defective” properties as defined by Part XVI of the Housing Act 1985.

What’s a Boswell?

683 of the 847 homes in Bushbury Hill are of a non-traditional construction type known as “Boswell” (named after the developer that built them) made of concrete cast in-situ.

The Boswell system of house construction was developed by M. A. Boswell and Co Ltd of Wolverhampton during the late 1920s, and was used by Birmingham Corporation, Liverpool Corporation and Wolverhampton Corporation Housing Authorities to provide 1370, 1500 and 1050 dwellings respectively. All these dwellings are believed to have been completed prior to 1928.

By the 1990s the Bushbury Hill Boswells were showing severe signs of distress and the Council hatched a secret plan to demolish the whole estate.   The tenants discovered this and appealed directly to the Government for funding to reject the redevelopment and renovate the existing properties. The Boswell houses had the corner pillars replaced and were clad externally with insulation and render to protect the structure from the weather and help make the properties warm.

It was the fight to save their homes and community that lit the fire of tenant activism in Bushbury Hill which eventually led to tenants exercising their Right to Manage and setting up Bushbury Hill EMB in 1998.  The Boswells were given a new lease of life and so was the community and in many ways the destiny and health of the community is still bound to the condition of these defective dwellings.

I think all the Birmingham Boswells have now been demolished, but some of the Liverpool Boswells still have a future – thanks to a tenant led stock transfer.  The Pinehurst Estate Tenants & Residents Association (PETRA) in Anfield led the campaign to save their homes and in their case the funding and investment was secured in part through a stock transfer in 1999 to CDS Housing (now merged into Plus Dane Group).  The Pinehurst Boswells were made structurally sound and improved with the help of external cladding.  As with Bushbury Hill the preservation of the Boswells went hand in had with the preservation of the community.

You want to borrow how much?

Clearly there is a slight issue when it comes to borrowing money against a housing asset that is condemned by statute as no good.  Historically levels of Right to Buy in Bushbury Hill have been lower than typical because tenants have been wary of buying a Boswell, or have not been able to obtain a mortgage to do so.

The same apply with regards to stock transfer.  In order to buy the estate and invest in tenants homes, a new landlord will need to borrow money, secured against the homes and the rental income they provide.  Understandably this is a bit of problem if potential lenders can’t be sure the properties they are lending against will still be there in 30 years time.

Stock condition

As part of the Feasibility Stage of the Right to Transfer we have commissioned a stock condition survey, which will inform the financial modelling that will determine the viability of various options under the Right to Transfer.  In addition we have also had specialist structural surveys carried out on a sample of the Boswell houses.

A particular concern was the concrete foundations of the Boswells which suffered some of the same issues as the walls, but could not be remedied in the same way.   It is fair to say that without solid foundations, tenants’ dreams of transfer would be sunk.

But if they were going to fall over, wouldn’t there be signs?

Whilst it was a worry, my personal view was that there was plenty of life in the Boswells yet.  I confess I have no technical qualifications, but it just seemed highly unlikely that the houses were going to go from sound to collapse in the next 20 years.  My reasoning was that with the houses coming up to 90 years old, if the foundations were going to fail, statistically some of them already would have done so.  To date none of the Boswell houses we manage have had structural problems, if they were really towards the end of their lives, we would be seeing evidence already.

Ironically, we have had more issues with the structure of some of the brick houses than with any of the Boswells and yet because these are of traditional construction, lenders would be quite comfortable with lending against these properties.

The man from Del Monte, he say “Yes”

In spite of my confidence, the wait for the consulting engineers to dig their holes and give their verdict was a little tense.  It was a great relief when their summary report came back and they confirmed that the Boswells will still be standing in 2044.  They will require some work over the 30 years but this amounts to a mere £100 per property per year, so nothing major to be worried about.

Naturally there are caveats and they say the Boswells won’t live for ever, but I suspect you could say the same for most of the housing stock in the UK.  Many houses over 150 years old have no foundations at all and they are still standing, so my instinct is that the Boswells will keep confounding those  who write them off.