Tag Archives: council tenant

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.

Democracy delayed is democracy denied

There will be a general election in May 2015; we know this because the current Parliament only has a mandate from us until that date. How would we feel if MPs attempted to carry on ruling without an election? Jolly cross, to say the least, we wouldn’t take it lying down. We don’t really do revolution in the UK, but Charles I was the last leader who tried to rule without the consent of the people through the ballot box and he ended up with his head in a basket.

Although the people of Scotland rejected independence in the 2014 referendum, it was fairly universally accepted that it was their democratic right to decide the matter. The SNP had a popular mandate to hold the referendum so any attempt to thwart this would have had serious political, legal and constitutional consequences.

Unfortunately the tenants of Bushbury Hill have had their legitimate aim of holding a ballot on tenant led stock transfer held up for close to a decade now. The chance to decide their future for themselves is all they ever have asked for.   The tenant board are elected by the tenants and have pursued transfer with the express support of their community. Over the years the EMB has repeatedly sought the approval from tenants via tests of opinion, consultations and votes at general meetings.

As we approach the anniversary of tenants serving the local authority with a Right to Transfer notice, tenants are quite rightly asking “when will I be allowed to vote?” They might well look at their fellow tenants in Gloucester, Salford and County Durham and think it unfair that they have all had the chance to vote on transfer, in spite of starting the process after Bushbury Hill.

It is my view that whatever the philosophical objections for opposing the tenants’ transfer proposal, it is unsupportable to delay the ballot a moment longer. The tenants of Bushbury Hill are ready to vote, they have the legal right to vote, so let them decide.

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.

Right to transfer offers written by councils that oppose them? This is illogical.

The current statutory guidance on consulting tenants about a housing transfer was published in July 2009 and takes no account of tenant led schemes under the Right to Transfer (RTT) which had been enacted in 2008 but not implemented by regulation until December 2013. This means that the Offer Document to tenants is the responsibility of the very council that opposes the tenants’ wishes which is illogical.

The 2009 guidance states:

Tenants need to understand why the local authority is proposing to transfer their housing (Annex 1, Para.9)

However in RTT cases the council is not proposing the transfer, in fact they are opposed to it. This internal contradiction demonstrates why it makes no sense for the Offer to come from the council.

Just as the housing transfer manual has been re-written to acknowledge the tensions inherent in RTT and transfer some responsibilities from councils to the tenant group, the guidance on tenant consultation similarly needs to be updated.

RTT is a tenant led process, the proposal to transfer is that of the tenants, not the council and so the Offer should be produced by and from the tenant group. To get to offer stage the tenants have already complied with a regulatory framework and the RTT statutory guidance, they can just as well comply with the guidance at consultation stage.

The substance of 2009 guidance is still sound, I don’t think it would take much to update it to include tenant led transfers and make it clear that the offer belongs to and comes from the tenants with the accompanying duty to take proper account of the guidance.

Being a trailblazer means having to work with the existing structures, even if they are no longer quite fit for purpose. Whilst this is not always easy, it does flag up those issues that need to be addressed so that RTT can work properly. So let’s hope that future RTT have a new version of the guidance that empowers tenants.

Ordinary folk; extraordinary meeting

A little piece of history was made on 24 October 2013 – the tenants of Bushbury Hill voted at an extra ordinary general meeting of their EMB, to serve their council landlord with notice that they wish to make use of the Right to Transfer Regulations.  They are one of the first, if not the first, tenant groups in the country to take this step.

Why was this necessary?

All the tenants in Bushbury Hill have ever wanted is the opportunity to explore the potential benefits of tenant led stock transfer.  This is a reasonable request, they have a 20 year history of effective tenant activism and 15 years very successfully managing their own homes.  They are experienced and knowledgable enough to make an informed decision, but sadly the council has refused to co-operate even with this initial investigation.  It has taken 10 years and primary legislation to get to this point.

The Proposal Notice

Whilst the decision to serve a Proposal Notice on the council is just the first step on a long journey, the RTT regulations surrounding it are quite exacting, but for good reason.  They are designed to prevent a small group of people, who might be unrepresentative, proposing a scheme that has no popular support or prospect of success.

To serve a Proposal Notice you must have a properly constituted Tenant Group with at least 20% of tenants as members and a majority must be secure tenants.  The decision to serve the notice must be taken at a general meeting of the group and all tenants, members or not must be notified of what is happening.

For the tenants of Bushbury Hill these requirements were no obstacle, it has excellent local support – over 80% of households have at least one member of the EMB.  It also has the trust and support of the tenants, in a continuation ballot this August there was a 95% vote in favour of keeping the EMB.

Tenant empowerment in action

It is the tenant led nature of the Right to Transfer process that makes it a powerful tool for community empowerment, by definition it comes from the bottom up.  RTT proposals can only be initiated by tenants acting together.  Rather than decisions being taken behind closed doors by the ruling party of local government administrations, they are taken by tenants in an open process.   Well informed tenants are more likely to get decisions about what is good for them and their communities right because they know better than anyone else what the key issues are.

I found it really inspiring to see so many tenants come out on an October evening (fortunately a mild and dry one) to find out more about the Right to Transfer (RTT) and express their view.

Informed decision making

Tenant led stock transfer is a pretty arcane subject, it’s a minority pursuit even in the housing sector.  Last night, people listened carefully to the case for serving the Proposal Notice and asked the pertinent questions including:

“Will my rent go up?”

“What happens if it all goes wrong with the new landlord?”

“What if the council refuses to co-operate?”

“Where does the money for investment come from?”

Those tenants understood the issues, this was no rubber stamp.  Some had arrived with a healthy skepticism about the whole thing but with open minds.  Once they heard the reasons for wanting to pursue RTT and that they were being asked to support serving the Proposal Notice and no more, the tenants voted overwhelmingly in favour.

So the tenants of Bushbury Hill have finally made it to the launch pad, the countdown has begun all they need now is for the RTT regulations to be laid in Parliament and the engines can finally be fired.