The costs of housing benefit for families in B&Bs and other temporary accommodation is so high that it in some parts of the capital it would be cheaper to build new social housing for them. As councils pay for private rents at market level, the rent for each household in social housing would be much cheaper.

As ministers prepare to cap the amount of housing benefit families can receive – potentially leaving 64,000 people who currently reside in London unable to afford to continue living there – NLGN calls for the government to examine new house building as a partial alternative.

The report argues that this will be less disruptive to peoples’ lives while also meeting the government’s aim of building more properties and providing a short term fillip for the capital’s economy. This new housing could be built using a combination of housing benefit set at social rent and block grant from the Department for Work and Pensions to repay the development costs. Alongside the cashable long term savings, the capital’s housing supply would be increased by 9500 units.

Simon Parker, Director of the New Local Government Network, stated:

“We recognise the need to contain housing benefit costs, but the idea of building new homes represents a win-win solution for the government, councils and families. Our analysis suggests that 10 boroughs might be able to save money while providing more properties.

With a predicted shortfall of 750,000 homes in London by 2025, there has never been a more vital time to pursue this approach.”

• Social housing accounts for disproportionate growth in fuel poverty
  
• Government urged to use energy company obligations to support fuel poor households
  
• Tenants need right to demand green deal improvements

The New Local Government Network has published a report suggesting that the government’s flagship ‘Green Deal’ programme will be in danger of failing to reach the households most in need of more energy efficient homes across the social housing sector.

The Green Deal allows households to install home energy efficiency improvements with a value of up to £6,500 at no upfront cost, with the cost paid back by the householder over a period of 25 years. But for many of the 1.4 million social homes classified as ‘hard to treat’, the efficiency measures would cost more than would be saved in reduced energy bills.

Our research, supported by British Gas, also raises concerns about whether those in fuel poverty would be helped by the scheme. A household is considered to be in fuel poverty if they need to spend more than 10per cent of their income on energy costs in order to achieve an adequate level of warmth. The most recent available figures from 2008 recorded 628,000 social homes in fuel poverty, an increase of 134,000 on the previous year. This accounts for 26 per cent of the growth in fuel poverty across England, despite the fact that social housing only makes up 18 per cent of the housing stock.

The report also finds that the current schemes sometimes fail to reach those people most in need of assistance because of a narrow focus on particular areas and demographics. NLGN argues that this funding should be directed specifically at alleviating fuel poverty and supporting those homes which the Green Deal will pass over.

Further measures are also required to ensure take up of the Green Deal. The report argues for a prominent role for social landlords in co-ordinating Green Deal measures across their estates on an area wide basis, with pilots suggesting that costs can be reduced by as much as 20 per cent per home when whole streets are improved collectively. Around 300,000 social homes have an Energy Efficiency Rating of F or G for the least efficient properties, however NLGN’s report identifies challenges in convincing tenants to sign up for the Green Deal. To encourage local authorities and RSLs to promote the scheme across their communities, the report recommends that:

• Local Authorities and RSLs should form partnerships with energy suppliers to deliver the Green Deal to both social homes and to those in the private sector
  
• Tenants in the private and social sectors should have the right to demand energy efficiency improvements from their landlord, funded by a Green Deal arrangement
  
• The proposed £6,500 limit on the Green Deal should be lifted, in order to allow the scheme to cover more expensive measures that will also deliver long-term savings on energy bills
  
• Discounts and incentives should be offered to neighbourhoods when they take up the Green Deal offer as whole streets
  
• The scope of the Green Deal be expanded to encompass microgeneration of renewable energy, enabling social homes to benefit from the Feed-in Tariff and Renewable Heat Incentive

Gearoid Lane, Managing Director of Communities and New Energy at British Gas:

“British Gas is committed to the Green Deal, which promises to be a transformational policy in improving the energy efficiency of Britain’s housing stock. But this report shows that the Green Deal is not a panacea – especially for the most vulnerable in our society including many in social housing for whom simple energy efficiency measures can permanently improve quality of life and help eradicate fuel poverty. We would support a revised and more flexible system of supplier obligations post-2012 that helps us to quickly and effectively target those households in partnership with local authorities and housing associations.”

The report also states that:

“The growth of fuel poverty in the social sector is outpacing that in private housing. Recent housing policy changes have the potential to exacerbate the situation, thereby heightening an already disproportionate increase in the number of fuel poor social homes. Pre-emptive action to prevent this is vital”.

• Abusing social housing should change from a civil to a criminal offence
  
• 50,000 properties estimated to be unlawfully sub-let
  
• Call backed by the Chartered Institute of Housing
  
• Savings of £750m could be made by recovering all unlawfully sub-let properties

Social housing tenants who sub-let their properties should be prosecuted for fraud according to a new NLGN report. Under current rules, sub-letting social housing is a civil offence but the New Local Government Network (NLGN) is calling for it to be treated the same as benefit fraud in the eyes of the law. The think-tank’s report claims that at least 50,000 people are fraudulently living in social housing costing councils thousands of pounds and depriving those in real need of housing.

Unlawful subletting refers to situations in which a tenant in social housing violates the conditions of their tenancy by renting their property out to individuals not permitted to live there by the conditions of tenancy. It is estimated that 80% of people living in fraudulently rented social housing would not themselves qualify for council help.

In November 2009 the Government announced a ‘National Crackdown’ on fraudulent sub-letting, offering £500 rewards to members of the public who provide information that helps to catch cheating landlords. However the NLGN argues that the problem won’t be sufficiently tackled unless it is treated as seriously as other kinds of fraud, such as benefit fraud. It is calling for an addition to be made to the Housing Act so that the 2006 Fraud Act can be used to prosecute individuals subletting social housing. The call has been backed by the Chartered Institute of Housing.

According to estimates from the Audit Commission, each unlawfully sub-let property costs local councils an average of £75,000 over three years. It also restricts the ability of local authorities to accommodate the 1.76million households on the social housing waiting list. According to the NLGN research, there is strong support from housing professionals to make the offence illegal with 92% of those surveyed agreeing that the measure would help to tackle unlawful sub-letting.

Report author Tom Symons said:

“The costs associated with unlawful subletting demand action that goes beyond a quick one-off crackdown and instead seeks to effect legal change as well as a major shift in societal attitudes towards tenancy fraud.

It is imperative that central government now makes the changes that will enable local authorities to galvanise their anti-tenancy fraud efforts and minimise the high social and financial costs of unlawful subletting.”

Joanne Kent-Smith, Senior Policy and Practice Officer, Chartered Institute of Housing

“At a time when demand for existing social housing significantly outstrips supply, tackling unauthorised subletting and occupancy is an important challenge for social landlords, and one which can be both complex and resource intensive. The government has recently provided funding to support the sector increase activity in this area and improve working practices. The CIH welcomes this report which reviews the surrounding policy and legislative framework, and argues for changes that would assist social landlords overcome obstacles.”

Unlawful Sub-letting – in numbers

Average cost per year of housing a family in temporary accommodation – £11,000
No. of families in temporary accommodation – 64,000
Estimated % of social housing in London that is unlawfully sub-let – between 2.5% – 5%
Estimated number of unlawfully sub-let properties nationally – 50,000
No. of families on the social housing waiting list – 1.76 million
Estimated cost of a sublet property over 3 years – £75,000
Income per year of a sub-let property in London – £12-20,000
Estimated minimum cost of recovering an unlawfully sub-let property – £4,000
Cost of building a new socially rented house – £67,000-100,000+
Estimated asset value of all unlawfully sub-let properties – £2bn

This NLGN paper comes on the same day as the National Association of Estate Agents has revealed just how vulnerable many homeowners are to the threat of negative equity and repossession with more than one in five homes now on the market because their owners cannot afford their mortgage payments. It also coincides with a severe warning from the Council of Mortgage Lenders that repossessions are set to soar to at least 45,000 by the end of the year.
The research sets out how repossessions involve immense stress to all family members, can lead to long-term poverty, poor health and well-being, and can impact on the emotional state of children and their schooling. Financial costs are estimated at £6,000, much of which falls directly or indirectly on local authorities.

In many instances, the report goes on to argue, it would be in the financial interest of the council to step in, averting as it would potential expenditure on alternative housing provisions and other social and economic costs. This could be done through loans, or ‘shared ownership’, ‘shared equity’ or ‘sale and rent back’.

Local authorities are already positioning themselves to respond proactively to the challenges brought by the credit crunch, it finds. Councils are already setting up credit crunch task forces addressing worklessness, housing, child poverty and debt.

There have also been increasing calls for outdated restrictions to be lifted on local authorities as mortgage providers to offer loans and mortgages to help their local housing market.
The NLGN recommends that lenders should be required to speak to their local council and give them the opportunity to intervene with help before any claims are taken to court. It suggests that revisions should be made to the Civil Justice Council’s ‘Pre-court Protocol for Possessions’ to ensure that this happens.

James Hulme, Head of Communications for NLGN, said:

“Rising mortgage rates are putting renewed stress on homeowners, and the latest figures make stark reading. The impact of repossessions on the lives of a family can be very real indeed.”

“This could be a real opportunity for local government to step and help prevent social and economic dislocation in their areas by providing loans or taking a share of the equity of some of these homes.”

“In many cases, this will be a win-win situation – with councils saving money and at the same time helping people stay in their homes. I hope that the Ministry of Justice can pick this theme up as a matter of urgency.”

The paper, written by Ian Keys, External Affairs Director for Pinnacle and one of those heavily involved in the lobbying over the Act, looks at the role of the new Tenant Services Authority (TSA) and offers recommendations on how it can bring together landlords, housing managers and tenants, ensuring that both receive fair treatment and value for money.

The report cautions the TSA to focus on local factors rather than central targets, arguing:

“It is essential that regulation does not pervert service focus. Such difficulties may arise if the TSA concentrates too closely on centrally imposed targets which do not resonate with local conditions. Proper attention must naturally be paid to central targets but regulators, in particular, should consult and engage with staff, service users and other local stakeholders to ensure that there is proper understanding of their requirements and preferences, as well as of local circumstances”.

The paper also sets out a number of suggested inclusions into the forthcoming TSA code of practice and key inputs and outputs, including:

• engagement with tenants, staff and other interested stakeholders;
  tenant access to all partners involved in the provision of their homes and the services that support them;
  
• transparency of performance;
  
• access for tenants to trigger landlord or Regulator action where there is a prime facie cause to believe that are probity or performance issues;
  
• landlords and their registered providers playing a full part in the delivery of local community well-being;
  
• self-regulation by landlords and the encouragement for them to grow the capacity to undertake it;
  
• the balancing of resource investment by landlords and their housing managers with the resulting community and personal outcomes.

All NLGN media enquiries to James Hulme – James Hulme/ 020 7357 0116/ 07970721434.

Notes to Editors:

1. The New Local Government Network (NLGN) is an independent think tank, seeking to transform public services, revitalise local political leadership and empower local communities. www.nlgn.org.uk.

2. Pinnacle is a leading provider of public service solutions, delivering housing and facilities management and consultancy services to public sector organisations across the UK. It is committed to delivering a thriving business which is focussed on improving public service organisations, excellent performance, satisfied customers and motivated staff.

Local authorities have a history of providing mortgages and would routinely lend to local residents up until the early-1980s. With repossession levels at their highest since the early 1990s and many households struggling with mortgage payments, NLGN argues that councils are in an ideal position to help stabilise the housing market. Such schemes are already commonplace in the United States and is a key part of Barack Obama’s strategy for reviving the flagging US housing market.

Under the scheme, councils would be able to borrow money under prudential borrowing rules and offer support to a select group of people, such as first time buyers or people involved in mortgage difficulties, particularly when numbers of mortgage defaults might impact disproportionately on social housing demand in the area. According to the report’s author, Anthony Brand:

“Prudential borrowing would support lower-interest debt than the markets can support. With mortgage defaults up 17% this year, and likely to top 100,000, supporting those areas hit hardest could be vital to sustaining communities. Government should set £2bn of its £50bn intervention package aside for supporting these measures, and allowing the hardest hit councils to apply for funding. This could help up to 15,000 people out of difficulty and even provide a long-term profit to the Treasury”.

In the report NLGN also says that local councils should be given powers to restrict the amount of Right-to-Buy properties in areas of high housing demand to maintain levels of social housing. The report calculates that since its inception in the 1980s, Right-to-Buy has lead to the sale of over 2 million public sector houses and that this has in part led to a shortage of social housing, leaving 1.6 million households on the housing waiting list. It also argues that the current £26,000 discount of Right-to-Buy properties should be removed as it offers an unfair advantage to buying property below the market price.

The report also calls for local authorities to be given greater freedoms to build and invest in new properties. In 2005 only 239 houses were built by local authorities compared to 173,000 in 1970. To help free up new dwelling, councils should be given powers to borrow money to invest in social housing and be able to take over dormant buildings where they have been empty for five years and turn them into social housing. In areas where the ownership of second homes is affecting the local property marker, councils should also have the option to levy additional council tax on the second property.

The report also found that a substantial number of people in social housing earned enough money to rent property in the private sector. 261,000 households in social housing earned over £2,000 a month after tax, including 57% of who pay less than £300.00 a month in rent. For these households rent represents less than 11% of their disposable income, compared to the 20% average paid by people on an equivalent salary in the private rental market. The report also found that 38,000 households in social housing earn over £50,000 a year, significantly above the average household income for England and Wales of £27,500.

The report advocates an asset-based framework for creating new housing spaces. Its framework argues for structures and policies that allow more local and more creative solutions develop innovative housing needs. It proposes:

• Using existing physical assets – land and existing housing – with care by maximising the use of renovation, including “recycling and reusing” brown field sites for new houses;
• New roles for local authorities as strategic bodies that both understand and shape their residents’ aspirations in order to create new assets. It argues that local authorities are in a unique position to co-ordinate residents and private sector developers and improve understanding of resident’s requirements; and
• Improved management of social housing as 68% of large sites are managed by companies without expertise in housing development.

Whilst the pamphlet recognises that the Government has made significant strides in the number of new houses being built, it raises concerns that it will not meet its target of building 200,000 new homes per year by 2016. The pamphlet also highlights concerns over the process of the Sustainable Communities Plan, including:

• Lower income populations being priced out of the housing market due to high demand;
• Lack of integration of new properties into already established social housing communities; and
• A lack of information and minimal financial incentives has meant that schemes to allow low income groups to buy property have been largely unsuccessful.

Where should housing policy go next? An asset-based framework by Liz Richardson, Institute for Political and Economic Governance, University of Manchester is available to download for free.