Tag Archives: DCLG

Pouring money down the drain

Fans of the Right to Transfer may have wondered where I’ve been these last many months, well the truth is that there hasn’t been much I could say.  The Right to Transfer (RTT) process at Bushbury Hill EMB has been in a holding pattern, hopefully I’ll have some more interesting news in the near future.

In the meantime there has been one useful clarification over the Right to Transfer process which I can give an update on.  The Department for Communities and Local Government have made it clear that any RTT application must fully cover the cost of not only the HRA debt attributable to the stock to be transferred, but the cost of any redemption premia if that debt is repaid early.

Attributable debt

Under HRA self financing all stock owning authorities in England have HRA debt.  For a partial stock transfer such as an RTT proposal, the a portion of this debt is attributed to the homes being transferred – this should be a fair proportion based on the condition, type and rents of the stock.  The purchase price paid by the landlord buying the stock has to be enough to cover repayment of this attributable debt.

Debt Repayment Premia

However, if the local authority intends to use the transfer proceeds to pay off the attributable debt then it will incur debt repayment premia – they have to pay for the loss of interest that would have been due if the debt was not repaid early.  For a tenant group to have a business plan approved by the HCA it will have to demonstrate that the price paid to the local authority will be enough to cover the attributable debt plus any premia.  There is no Government funding available to assist with any shortfall.

Money down the drain – why pay interest twice on the same capital?

It is safe to say that stock owning councils have HRA business plans which involve borrowing money in order to invest in their homes or build new ones.  You may be wondering why any local authority would therefore want to send any capital receipt from transfer and send it to the Treasury instead of putting it to good use in their community. Doing this means that they end up paying two lots of interest on the same amount of capital – the debt repayment premia on the attributable debt and then interest on new borrowing for the same amount to support their HRA business plan.  It creates an unnecessary transfer of  money from the local authority to the Treasury . This money is no longer available to invest by the council, which is effectively pouring its tenants’ money down the drain.

Can’t you think of anything better to do with the money?

Small

The real reason for a local authority to say that it wants to repay the attributable debt is to drive up the cost of the transfer in an attempt to stop tenants exercising their statutory Right to Transfer.  However in light of the housing crisis, building some new homes would be a better use for the money.

Clarity is a good thing

It would be better if DCLG required local authorities seeking to repay attributable debt to demonstrate they had no borrowing in their HRA business plan and therefore no use for the capital receipt.  On the plus side, at least tenants now have a clear position form which to work, in order to make an RTT proposal fly they will have to ensure that they can come up with a business plan which will cover the attributable debt and debt repayment premia.  It is the fate of Bushbury Hill EMB as the pioneer of the Right to Transfer to iron out all the wrinkles in the process and hopefully make things clearer, if not easier, for other tenant groups in future.

 

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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.

Housing transfer manual 2015/16

100 million) for the next transfer programme and the publication of the stock transfer manual for 2015/16.  Their press release takes an interesting angle, promoting it as an opportunity for tenant empowerment through the Right to Transfer (RTT).  The first Para reads:

Council tenants wanting more influence and control over their homes will have access to a share of £100 million.

Council tenants wanting more influence and control over their homes will have access to a share of £100 million to do just that, Housing Minister Kris Hopkins announced today (14 July 2014).

Mr Hopkins said the fund will help unlock further investment in maintaining and building social homes across the country.

Since November 2013, tenants living in council housing have had a right to request that the management of their homes be transferred to a housing association – and that the council cooperate in that process.

From today, tenant groups wanting to exercise this Right to Transfer will be able to bid for a share of this £100 million fund to help that process, with the money becoming available from next year.

The £100 million fund is also available for councils wishing to transfer their stock, with proposals that provide good value for money and have the support of residents.

In my view it is a good thing that the RTT is being promoted in this way and crucially that the stock transfer programme remains open for business with funding available to support it.  I led a workshop on RTT at the recent National Federation of TMOs (NFTMO) and it was full, so there is definitely the appetite for RTT within the TMO world.

Whilst I welcome the push behind RTT there is no prospect of TMOs making much of a dent in £100 million, even if debt relief is needed.  So I can only assume that the Government also expects some local authorities to be making applications for this round.

Speaking of applications, the 2015/16 transfer manual now includes two versions of the application for transfer (Annex A) to be submitted to HCA as referred to in my previous post.  This recognises that it makes no sense for applications for tenant led transfers to come from the local authority.

Could housing associations proactively use the Right to Transfer?

The push for the creation of a statutory Right to Transfer (RTT) undoubtedly came from tenant management organisations (TMOs) stymied by uncooperative local authorities.  It is no surprise therefore that it is TMOs in the vanguard of the first wave of RTTs. However there is nothing in the RTT regulations that requires tenants to be part of a TMO, all council tenants in England have the right.

What do you need to get started?

All you need is a “Tenant Group” with a written constitution and a membership of 20% of the tenants in the area concerned.  The area in question must be “geographically coherent” (no pepper potting allowed) and contain at least 100 secure tenancies.  This is hardly an onerous starting position, particularly as many areas will have a tenants & residents association that may already meet the requirements or be able to do so with a bit of a membership drive.  So there are hundreds of tenant groups who could potentially avail themselves of the RTT.

Fine in theory, but it’s going to cost you

Having the RTT is great, but in practice it requires quite a lot of money to go through the process.  If there are hundreds of homes involved then something as simple as a mail-out to every tenant will cost hundreds of pounds. If professional advice is taken – and it is almost certainly needed then this will cost thousands.  Tenants may be able to obtain Tenant Empowerment Programme funding from DCLG and which is very helpful, but is won’t cover all of the costs.

In Bushbury Hill, being a well established TMO we have a lot more resources in terms of staff, equipment, access to information, office space, and money than a  tenant & residents group would have.  We are in a position to commission a stock condition survey and structural survey, which would be impossible for other tenant groups.  It is very unlikely that a council that is not keen to transfer its stock is going to start paying for anything it is not required to.

So who else will pay?

Who has both the operational expertise and financial clout to be able to help tenants make their vision a reality?  This seems an ideal opportunity for enterprising housing associations to get in on the ground floor and help tenants drive RTT proposals.  There is nothing in the regulations to stop a tenant group making its proposed new landlord choice up front and then using the resources of that landlord to get through the RTT process.  The housing association would be operating at risk, but then that is always the case with stock transfers and the sums involved, whilst out of the question for tenants, are not huge for a housing association.  There are clearly advantages to both tenants and the new landlord in going through the process together – it allows for the building of relationships and trust prior to the all important transfer ballot.

Have we been here before?

Those with long memories will note the similarities with “Tenants Choice” brought in by the Housing Act 1988 which allowed tenants to pick a landlord.  At the time this created a lot of fear amongst local authorities that housing associations were going to cherry pick their best stock.  In reality very few transfers ever took place in the seven years it was active – in England & Wales it amounted to five transfers involving only 1470 homes (Derrick Tulloch, 2000).  However it did indirectly lead to a massive increase in  whole stock voluntary transfers, as well as an increase in tenant activism and the Right to Manage.  The threat of losing their stock to other landlords also acted as an stimulus for some council’s to raise their game and engage with tenants seriously.

Opportunities for enterprising housing associations

Unfortunately, 18 years after Tenants Choice was killed, there are still council landlords who provide rotten service and allow tenants’ homes to remain non-Decent (a scandal in itself).  Not only does this give tenants every reason to look for a better landlord, but surely provides opportunities for enterprising housing associations to offer to partner with tenants to use the Right to Transfer to deliver proper investment in their homes and a high performance housing management service.

No doubt there are housing associations out there with a good reputation with tenants, operating in localities where council tenants are putting up with a third rate service from their council.  RTT opens the way for them to approach tenants direct and proactively make a pitch.  The housing association could offer to support a tenant group to build up membership, campaign for support from their community and support tenants through the RTT process.

The tenants may have everything to gain and the housing association can achieve growth with relatively little risk.  Local authorities may still view it as cherry picking, but they’ve had a couple of decades to get their own house in order, if some have failed tenants in this time then shame on them.

PS this blog is written from a personal perspective and is entirely unofficial, albeit that I work for an organisation that is currently going through the RTT process.  What I write is opinion and I make no apology for having a pro-tenant slant, working directly for tenants will do that. I do however aim to be factually accurate, so if you do come across any mistakes in my posts, please let me know and I’ll check and update as necessary.  All comments and feedback and are welcome.

Right to Transfer Regulations go live & get used immediately

Thursday 5th December 2013 is a red letter day for the Right to Transfer as The Housing (Right to Transfer from a Local Authority Landlord) (England) Regulations 2013 came into force as Statutory Instrument 2013 No. 2898.

This finally gives tenants the power to use the statutory Right to Transfer granted by Parliament in 2008.  The wait was frustrating but now it is here tenants cannot hang about to use it, there is only a small window to get a stock transfer through in the current round.

The tenants in Bushbury Hill (where I work) have certainly not let the grass grow under their feet.  The regulations came into force 5th December and Bushbury Hill EMB served a Proposal Notice under the Right to Transfer on 6th December.  There are not huge numbers of tenant groups considering this route at present and we’re not aware of any others that have acted yet so I’m going to say that Bushbury Hill EMB is the first to take this step.

How we got here

Bushbury Hill EMB made good use of the time it’s taken for the Regulations to come into force.  In October members voted at an extra ordinary general meeting (EGM) in favour of serving the Proposal Notice. In November we notified all tenants of the decision and consulted them about this.  As this consultation was supportive of the decision of the EGM, the Proposal Notice could be served as soon as the Regulations came into force.

 Getting the RTT Proposal Notice together

As no-one has ever served an RTT Proposal Notice we are really having to blaze a trail on this.  This has meant drafting a notice taking account of the Regulations, the Statutory Guidance and seeking a legal opinion.

As well as wording the Proposal Notice we had to gather supporting evidence that demonstrated that the tenant group, the houses, the area covered and the decision making process all meet the regulatory requirements. We have access to the Council’s housing management system and our internal record keeping is pretty good, but there were still omissions and anomalies that had to be found and corrected.  We think we’ve crossed every “t” but as it’s never been done before, we’ll have to wait and see.

Now it is up to the Council

Now that the Proposal Notice has been served, the Council has 28 days to either accept it, reject it giving reasons or advise that it will go to the Secretary of State for a determination within 21 days.  Council officers are also in the position of being the first to have to work with the RTT regulations.  We have done our best to make the Proposal Notice compliant but how this will be assessed is uncertain as there is no precedent to call on.

We don’t know what can and cannot make a Proposal Notice invalid.  For example the regulatory thresholds for a tenant group to be able to use the RTT are 20% of tenants as members and 20% of Secure tenants as members.  Bushbury Hill EMB has membership levels at 77% & 76% respectively so we’re pretty confident that this should not be an issue.  However, if for example there was a mistake in our count of +/- 1 tenant or member would this make the whole notice fail?  The threshold would still be exceeded by over three times, so does the principle of de minimis apply?

The 28 days will be up on 2nd January so we should know as soon as we’re back at work in the New Year.  It seems likely that 2014 will be a very interesting one for the Right to Transfer.

The right to transfer is here, but there’s not much time to use it

The transfer window is open

On 12th November 2013 the Department of Communities and Local Government (DCLG) published the final version of the Statutory Guidance to the Right to Transfer Regulations.  On the same date they published the new Housing Transfer Manual and the responses to the consultation on the manual.  On 14th November 2014  The housing (right to transfer from a local authority landlord) (England) regulations 2013 were laid before Parliament. These should come into force on 5th December 2013.  Taken together, these documents provide council tenants a window of opportunity to exercise their Right to Transfer.

But it’s not a very big window

The title “Housing Transfer Manual period to 31 March 2015” says it all, the Government is emphatic that any transfer requiring debt write-off must be completed by this date. With a fixed term Parliament this is clearly tied to the expected date of the next General Election.  There’s so little slack in the timetable it’s hard to predict what would happen to transfers in progress if the Coalition fell apart and there was a snap election.  That leaves only a little over 16 months to put together a transfer proposal, conduct a tenant ballot and if tenants’ want it, set up a stock transfer landlord and complete the transfer.  As Pete Apps said in Inside Housing “Councils hoping to use a debt write-off scheme to complete stock transfers face an ‘unrealistic’ race against time to tie up the deals.”

An uphill race

So if councils with all the resources of a local authority at their disposal face a struggle to complete a stock transfer in time, where doe this leave tenant groups hoping to use the Right to Transfer (RTT)?  Almost by definition tenants only need to use the RTT process where their landlord is not willing to support their desire to explore stock transfer, so from the start these tenant groups are at a disadvantage.  Whilst the RTT regulations require local authorities to co-operate, there are still myriad ways an unscrupulous council could slow down and seek to derail the process.  Given the incredibly tight timescales there is little scope for slippage in any stock transfer plan, so delay introduced by a council could prove fatal.  There is also a complete mismatch of resources, even the largest and best run tenant management organisation doesn’t have the resources in manpower and finances to match their landlord.

It may appear that forcing a local authority to transfer stock against its will is an unwinnable fight, and so it may prove.  However tenant activists have been successfully overcoming bureaucratic indifference and political opposition for decades; sometimes David does beat Goliath.

Who do you trust?

Tenant groups do also have some factors in their favour, the trust and support of their local community is a huge benefit and may help overcome one of the big hurdles as outlined again by Pete Apps in his article:

Jonathan Hulley, a partner at law firm Clarke Willmott, said: ‘The timescale is unrealistic given the critical issue of consultation. As lawyers we would never say it’s impossible, but it is certainly unlikely.’

A tenant group that genuinely represents the local community has a built in advantage over any council when it comes to understanding the needs and desires of tenants and what is important to them when considering stock transfer.  There is also the issue of trust, an effective ad accountable tenant group should be able to persuade tenants more easily that its intentions are bona fide than even the most honourable local authority.  It is natural that people are more likely to believe what they are told by people they know and live amongst.

When a local authority undertakes Large Scale Voluntary Transfer (LSVT) it is most unlikely that the key decision makers will be directly affected.  The odd local councillor may be a tenant, but the overwhelming majority of members and senior officers won’t be.  In contrast, tenant activists are subject to the outcome of the transfer, as are their family and friends, so they have a critical personal interest in ensuring that the proposal brings immediate and long term benefits to their community.  This gives their message credibility – it is a lot easier to believe when someone tells you stock transfer is a good idea if you know they are going to go through it themselves.

Size matters

Being small can work to the advantage of tenants pursuing RTT.  With timescales being so tight, speed of thought, decision making and implementation will be of critical importance.  Most tenant groups are small cohesive organisations with the ability to take decisions quickly.  If they employ staff then they will typically have a close working relationship between tenants and officers and very flat management structure.  This can help to get staff buy in to the process, make it quicker to get decisions acted on and make it is easier to be flexible in how to get tasks done.

By contrast local authorities are large, unwieldy organisations with fairly rigid decision making  processes and timetables that will tend to introduce delays to any project.  They also tend to have party politics as well as pork barrel issues to contend with and far more external stakeholders to work with and satisfy.

Big Politics

Whilst the local political landscape may be unhelpful, tenants do at least have some friends in high places.  The Right to Transfer came about through Central Government support tenant groups thwarted at local level.  Although we have been through umpteen Housing Ministers and a change in government since it was enacted, RTT has always had general support at departmental and ministerial level as part of the tenant empowerment and localism agendas.  In the Ministerial Foreword to the new Housing Transfer Manual, Kris Hopkins says:

We want to encourage not only stock-holding local authorities, but also tenants and existing private registered providers to consider the opportunities which stock transfer may provide.  Alongside this manual we are laying before Parliament the Right to Transfer Regulations which will for the first time give local authority tenants a statutory right to initiate a transfer process and require the local authority to co-operate as tenants explore the options.

That RTT gets such a prominent mention in this critical document suggests that tenant groups with a strong business case for transfer will get a fair hearing from the Government.

How did the Right to Transfer come about?

If as Gottfried Leibnitz postulated, we lived in the “best of all possible worlds” there would be no need for the Right to Transfer (RTT).  In this ideal world, the reasonable hopes and ambitions of tenants would be nurtured by enlightened local authority councillors and officers.

In some cases this happens for the mutual benefit of all partners and a number of tenant led stock (TLST) transfers, for example WATMOS in both Walsall and Lambeth, Beechwood Ballantyne in the Wirral and North Bransholme in Hull have proceeded with the support of the local authority.  Admittedly this has happened with varying degrees of enthusiasm, but it shows that TLST is perfectly viable.

Council non-cooperation

Sadly, not all local authorities believe in tenant empowerment, some tolerate tenant management only because the Right to Manage forces them to.  Some local authority administrations have an ideological objection to stock transfer in any form, often a dogmatic position that refuses to see any nuance.

Dogmatix

There are councils are politically opposed because they consider stock transfer as privatisation, without understanding that not all stock transfers are the same.  In some cases the analysis is even less sophisticated than this and it is nothing more than paternalism, the attitude that “they are our houses and we know best”.

Tenant Led Stock Options Appraisals

2004 Government initiated Tenant Led Stock Options appraisals, five Tenant Management Organisations (TMOs) were grant funded by DCLG to carry this out.  The local authorities in the pilot areas all gave their support for the TMOs to do this work.  However after the tenants had spent a great deal of volunteer time and public money, some of the local authorities, Birmingham and Wolverhampton being examples, decided they didn’t like the outcome and rejected the findings of the options appraisal.

Understandably this was extraordinarily frustrating for tenants (and DCLG) as the co-operation of the councils with the options appraisals process had created a reasonable expectation that they would take forward the best option.

We won’t take no for an answer

Tenant activists were not going to take this injustice lying down, they lobbied DCLG to do something about this and this received a sympathetic hearing.  The then Labour Government were in favour of tenant empowerment, they were not in favour of local authorities blocking tenants on political grounds, and they did not like public money to be wasted on Tenant Led Stock Options appraisals that were ignored.  This resulted in the Right to Transfer being included as s296 of the Housing and Regeneration Act 2008.

Because of the previous attitude of certain local authorities, the RTT Statutory Guidance makes it explicit (para. 70) that objection to RTT proposals on political grounds will not be entertained.

So here we are, the current Coalition Government are still in favour of tenant empowerment which fits well with their localism agenda.  Intransigent local authorities are still not amenable so the support is still there for RTT and tenants still need it to achieve the objectives of their communities.