Tag Archives: stock transfer

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.

 

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.

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.

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.

Introducing the Right to Transfer

The Right to Transfer (RTT) for council tenants is brand new, never been used and as such is unknown territory.  This blog will chart its progress from theory to practice and hopefully be useful and informative to those with an interest in tenant empowerment generally.

Why do we need a Right to Transfer?

Imagine that you are part of a tenant group; perhaps you’ve been involved in running the estate as a volunteer.  You know the local issues inside out, the people personally, the stock intimately, the investment it needs, and your neighbours’ aspirations for their homes.  Perhaps you’ve spent a lot of time and money investigating all the options and concluded that tenant-led stock transfer is the best option for your community and this has been backed repeatedly by your fellow tenants.

In these circumstances, how would you feel if your local authority flatly refused to countenance the possibility and to not even give tenants a vote on the matter?

This is the problem that the Right to Transfer is meant to solve.  It empowers tenants to pursue their hopes and dreams, in spite of local authority indifference or intransigence.

How does it work?

For those that don’t know, RTT allows council tenants to initiate a stock transfer to another landlord (who must be a Registered Provider).

RTT is possible thanks to section 296 of the Housing & Regeneration Act 2008 which gives the Secretary of State (or Welsh Ministers) the power to make regulations which require local authorities to co-operate with tenant groups who wish to pursue tenant led stock transfer.

When does it start?

For England the Right to Transfer Regulations and accompanying Statutory Guidance have been published and are due to be laid before Parliament in October 2013.

Why it has taken 5 years for this important new community right to be enacted is another story (fodder for another blog post) but all indications are that we are nearly there.  Assuming this happens without further delay, this will fire the starting pistol for those tenant groups who have been waiting, in some cases for nearly 10 years.