Tag Archives: Transfer Regulations

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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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.

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.

Proposal Accepted, an early Christmas present

Bushbury Hill EMB received an early Christmas present from the Council last week.  Having received the Right to Transfer (RTT) Proposal Notice they have responded commendably promptly.

The really good news is that they have accepted the Notice as valid.  We were pretty confident we’d got it right, but as this is unexplored territory we couldn’t be sure.

To be clear, the Council still do not agree with stock transfer as a matter of principle, so their acceptance simply confirms that the Proposal Notice complies with the RTT Regulations.

However this is still great news for Bushbury Hill EMB as it means we can move to the Feasibility Stage and finally do the work that will determine if transfer is both possible and can deliver the tenants’ aspirations.

One thing is certain, January 2014 is going to be a busy one, with stock options appraisal and landlord selection high on the agenda.

Merry Christmas and come back in the New Year for the latest on the Right to Transfer.

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.

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.