Written evidence submitted by Keswick Community Housing Trust Ltd [FSS 075]

Section 1:  The current state of financial resilience of social housing providers

Q5 – Does the cross-subsidy model by which market housing helps pay for social and affordable housing have any continuing viability?

The cross-subsidy model plays a key role in areas such as the Lake District.  The prices of unrestricted property has outstripped the ability of locals to afford them.  A successful example of a cross-subsidy model is the development at Calvert Way in Keswick completed in 2017.  This resulted in 55 local occupancy properties being built of which 10 were “developer-led sales” and the remaining 45 were sold to housing associations, enabling local families to occupy quality properties in Keswick on either an affordable rental or affordable shared ownership basis. 

We are concerned that if the requirement for developers to provide a mix of social / affordable housing is removed for smaller developments or significantly reduced, that this will incentivise the development of housing that while protected by a local occupancy restriction, will still be outside the reach of the majority of the working population in areas such as the Lake District where the demand for holiday / second homes already distorts the market.   

Section 2:  New Challenges to the social housing sector

Q2.  How do social housing providers choose whether to undertake new development or to focus on maintenance and upkeep of existing stock?  Is it currently possible to achieve both objectives?

Keswick Community Housing Trust Limited (KCHT) was formed in 2010 as an Industrial Provident Society for the benefit of the local community, and became a regulated provider of social housing in 2012.  Since formation, KCHT has either built or acquired 40 properties, across 4 developments (25 rental; 15 shared owned) and all are protected by local occupancy clauses.  These properties range in size from 1 bed apartments to 2,3 and 4 bed houses.  They are offered on an affordable rent basis to people / families who meet the local occupancy criteria. 

Due to the relative newness of our developments, all of KCHT’s properties are of good quality and meet the decent homes standard.  KCHT has created a sinking fund so that reserves are built up towards the cost of future planned maintenance.

We are aware of the challenges that long established Housing Associations have with the need to improve aging stock, and we are keen to avoid this situation ourselves.  We consider it vitally important that we maintain a strategy of ongoing development / acquiring new properties at a steady rate, as this contributes to the financial resilience of KCHT.  Rental income from newer stock is unencumbered against any expectation of major maintenance requirements over the first 10 -15 years so has a net positive effect on the sinking fund requirements.  Additionally by continuing to grow the property portfolio, the associated increased rental income and asset base gives us the flexibility to explore further development opportunities. 

Q8.  The Affordable Homes Programme includes a high proportion of shared ownership properties.  To what extent is this form of tenure desirable for potential purchasers and for social housing providers?

We have 15 properties held on a shared ownership basis, and from anecdotal evidence can confirm that there remains a demand for this type of tenure within Keswick due to the lack of supply of affordable local occupancy properties for sale or rent.  When allocating properties, we regularly experience demand outstripping supply by a factor of 5 to 1.  

Being able to offer properties on a shared ownership basis has also been a key factor in enabling KCHT to offer affordable rental properties as the income received from sale of a 50% stake in these properties reduces the outstanding loan once a development is completed and ready to become a mortgage that is serviced from rental income. 

Section 3:  What are the policy and regulatory challenges to the Department and the Regulator?

Q2-  is Homes England being directed appropriately by the Department, and is it achieving its objectives?

KCHT is run by volunteers.  This means that our operating costs are much lower than organisations who outsource the management of their properties or to housing associations.  Based on peer group comparisons through the Value for Money Metrics we estimate that the volunteer driven nature of KCHT reduces the operating costs by up to £2000 per rental property. This means that while our mortgage costs have increased by 35%, we have been able to absorb a lot of this and our recent rent increases were kept to 4% rather than the maximum of 7% permitted by the Regulator.  

The Regulator sets out standards for the ongoing management of properties and expects smaller providers (i.e. less than 1000 units) to self-assess and comply, however doesn’t require smaller providers to provide evidence of compliance and also doesn’t look to audit these smaller providers.

Without sight of the detail, KCHT is concerned that there appears to be no differentiation of expectation made between small community led housing providers and large housing associations in the recent announced requirements for social housing managers to have an appropriate level of housing management qualification regulated by Ofqual equivalent to a Level 4 or 5 Certificate or Diploma in Housing, or a foundation degree from the Chartered Institute of Housing. 

This level of qualification makes sense for large providers, but not for small community led housing providers, who like ourselves have a good track record in looking after our residents, and are very much part of the local community.  This requirement as it currently stands may mean that small community led housing providers like ourselves are no longer able to manage their properties and instead may have to buy in professional property management services with the associated increases in operating costs. This in turn may restrict funding available for further development activity or lead to the need to increase rents.

We would therefore suggest that more onus is placed on local authorities to keep close to small housing providers in their area – and that complaints data from the Housing Ombudsman should act as a trigger for investigations of smaller providers. 

Q4 – is the current range of grant funding available appropriate to address the issues and challenges that the social housing sector faces?

Changes made to the Capital Funding Guide in 2016 currently prevent Keswick Community Housing Trust (KCHT) from accessing grant funding from the affordable homes programme towards the provision of shared ownership properties. 

While Homes England’s ideal is for developments to consist of a blend of rental and shared owned properties, they are no longer permitted to provide any grant funding for shared owned properties if they are protected by a local occupancy restriction.  The only exception is for developments in ‘Rural’ area i.e. having a population of under 3000.  This change was instigated to make it easier for people to secure mortgages for shared owned properties. 

Unfortunately this clashes with the approach taken by the Lake District National Park Authority (LDNPA) who include local occupancy restrictions within the planning conditions for new developments, to ensure that these properties are protected in perpetuity for use as the primary dwelling for people with a link to the locality.

This issue impacts all the communities within the national parks and areas of outstanding natural beauty that aren't classed as rural due to having populations of more than 3000 residents.  Lack of affordable housing is a major issue in these areas, fuelled by the growth in homes being used as holiday lets and 2nd homes. 

KCHT via our MP Trudy Harrison, has requested a small change (shown in red) to point 3.2.2 in the guidelines on Shared Ownership Applicant Priority within the Capital Funding Guide that Homes England are required to follow.  https://www.gov.uk/guidance/capital-funding-guide/1-help-to-buy-shared-ownership
3.2 Applicant Priority

This is currently being considered by Minister Maclean.

June 2023