Written evidence submitted by Welwyn Hatfield Borough Council (WHBC) [RTB 053]

• The intention to extend the right to buy to housing association tenants requiring all registered providers, including local authorities to reduce their rents by 1% per annum for the next four years.

• Welfare reform changes including reducing the household benefit cap to £20,000 outside of London, reduction in tax credits that the new “living wage” will not keep pace with and withdrawing housing benefit entitlement to 18-21 year olds with tenancies

• Although the CLG enquiry focuses on housing associations, local authorities like WHBC play a vital role in enabling the sustainability and viability of housing associations.

• In addition we believe the Committee needs to consider that recent government announcements have just as much, if not more, impact for the continued viability and sustainability of local authority-owned social rented provision.

• As housing association properties are sold under the proposed Right to Buy, this will be a loss to the social rented stock available.  This will be in addition to a depleting local authority housing stock and overall will mean a reduction in available properties to meet local housing need.

• The Council has a long and successful working relationship with housing associations as part of our enabling role. This relationship will be adversely affected by the proposals, as the most likely impact will be a reduction in the delivery of new housing, should housing associations stop or reduce their delivery programs and at the same time the council has to revise and reduce its own affordable housing programme.

Context

1. Welwyn Hatfield borough is located  within Hertfordshire with central London just 15 miles to the south of the borough boundary. In 2011, Welwyn Hatfield had a total population of 110,535, an increase of 7.7% from 2001. Between 2001 and 2011, the borough experienced an 11.9% increase in the number of dwellings.
2. There are two main towns in the borough:  Welwyn Garden City with a population of over 48,000 and Hatfield with a population of over 37,000. These two towns provide the majority of the borough’s housing, jobs, leisure facilities and key services.  The borough also contains a number of large and small villages providing further resources of housing, employment, local shops and services. With the University of Hertfordshire, located in Hatfield and the Royal Veterinary College, the borough has a large student population. This is reflected in the borough’s relatively young population, the mean age in 2011 being 38 years compared to the national average of 39.3 years.

3. According to the Index of Multiple Deprivation (2010) the majority of the borough is in the 40% least deprived areas nationally. However, there is an area, located in Hatfield, which is in the 20% most deprived areas nationally. Despite the borough as a whole having a relatively low crime rate, this small area also has a relatively high crime rate (although it includes Hatfield Town Centre, and therefore the type of crime may not be a risk to residents). Similarly unemployment is higher in this area compared to the national average.

4. The table below shows unemployment rate in the Welwyn Hatfield area has been falling over the last 5 years.  Much of this change may be explained by welfare reforms over the same period such as the introduction of the household benefit cap which has stimulated an increase in the number of people seeking employment.  Additionally the improvement in the economic landscape is likely to have played a part.

Source:  ONS, Regional Labour Market Statistics: M01 Model based estimates of unemployment

5. Rates of homelessness are increasing in Welwyn Hatfield and apart from 2012/13 have been consistently higher than the average for Hertfordshire and England:

Source:  CLG, Table 784, LA actions under homelessness legislation

6. The table below shows that over the last 5 years, the main reasons households become homeless in Welwyn Hatfield are through relationship breakdown, loss of a private rented home and those living with friends or family being asked to leave. 

Source:  WHCHT reports to WHBC

7. At 31 March 2015, Welwyn Hatfield had 69 households in temporary accommodation (TA) because they were homeless.  Of these households 62 were families with 113 children between them.  The number of households in TA demonstrates a shortage locally of social/affordable rented housing and of suitable, affordable private rented homes.

The housing market in Welwyn Hatfield

8. Evidence from the council’s Strategic Housing Market Assessment of August 2015, with data provided by DCLG and land registry on median house prices, shows that houses prices in Welwyn Hatfield have followed a similar trend to other authorities in the market area with prices being notably higher than the average for England. Prices have risen higher than the national average and impact on under supply relative to demand. The evidence from residential transactions from August 2012 – October 2013 shows the Mean house price for Welwyn Hatfield is £324,689 and the Median price being £248,000.

9. For 1st time buyers and those needing to move to more suitable accommodation they face a more challenging position. Both a reduction in suitable properties and numbers of properties available on the market and the ability to fund repayments and the deposits required from lenders mean accessing the market is extremely difficult.

10. The data provided by DCLG quantifies the relative affordability of Welwyn Hatfield, household income for Welwyn Hatfield lower quartile being £19,227 and the average £40,448. This suggests that residents on the lower quartile income require at least 10 times their income to access housing  which is far in excess of the DCLG SHMA guidance which considers 3.5 times gross income being affordable for single persons and 2.9 times income for household to purchase a home

11. This information highlights and supports the need for more affordable homes to be delivered and planned for. Other local pressures include a relatively high number of older people under occupying existing social housing stock, but a lack of suitable alternative accommodation to transfer; a high number of families locally subject to the spare bedroom subsidy without sufficient alternative accommodation to transfer to; an increasing number of older people and a growing population in general.

12. The social / affordable rented sector in Welwyn Hatfield comprises 26.9%[1] of all homes in the area.                This sector is made up of:

•     Approximately 9,000 council-owned rented homes and 1,200 leaseholders, the latter sold through the right to buy.

• Just over 3,500 homes owned by 34 housing associations in the area covered by WHBC.  Of these homes around 2,500 are general needs homes which would, under government proposals, attract the right to buy[2].  

13. As at 2011, private rented homes comprised 12.7% of the local housing market.

14. 2014/15 median local market rents in the area are set out in the table below together with the range of local housing allowance rates applicable to the area.  Welwyn Hatfield is covered by 4 Broad Market Rental Areas (BRMAs) which are used to fix local housing allowances.  One of the BRMAs is Outer London and covers a tiny area of Welwyn Hatfield.

Source:  Valuation Office Agency

15. Where only one BRMA area is shown as affordable (for 3 and 4 bedroom homes), this relates to the Outer London area.  The choice for households needing a three or four bedroom home in Welwyn Hatfield will be very limited if they need to keep within local housing allowance levels.

16. Inside Housing research has found that almost 40% of council homes sold through right to buy are now in the private rented market.  The council has no reason to believe that Welwyn Hatfield is any different.  In fact we do know that 45% of ex local authority stock, currently owned under leasehold are rented out privately.

17. Owner occupation, including shared ownership, comprises 58.2% of the borough’s housing stock which is low compared with the rate of owner occupation in England which was 64.2% at the 2011 census.

Demand and supply for social/affordable rented homes

18. The SHMA findings demonstrate the need for affordable housing, both at social rent levels and the Affordable rent product (up to 80% of open market value). The Council currently provides both of these products and intermediate tenure such as shared ownership.

19. The SHMA goes into detail and, through the CLG stepped process for calculating need, not only current need but future need on grounds of affordability. It concluded that the authority has a need for 10,407 affordable homes from 2013/14 – 2030/31.The calculated need is for 810 affordable homes per annum, seeking to address the back log in five years. Should this be achieved the newly arising need would be 489 affordable homes in each of the following 13 years.

20. Any changes to both the council’s and Registered Provider’s asset base, rental income, borrowing capabilities will impact on the task of addressing this need and providing new affordable homes

21. The Housing register only gives a partial picture of need today. The government’s proposal could have long term consequences on our ability to maintain stock in the face of a significant need for affordable housing.

22. Welwyn Hatfield’s has 1,722 applicants on its housing register.  The vast majority of these households (1236 / 72%) requires a one bedroom home.  The rest require a mixture of 2, 3 and 4 bedroom homes.  Around 27% of households have a reasonable preference under the homelessness legislation which means they are given a higher priority than others on the housing register. 

23. Over the last five years on average around 500[3] council homes became available for letting and a further 172[4] housing association owned homes became available for the council to nominate housing register applicants to.  The total number of social/affordable rented homes becoming available is equivalent to the council being able to house up to 4 out of every 10 applicants on the housing register.  However it should be noted that a large proportion of these homes were used to house existing social housing tenants seeking a transfer, so less than 50% of the total were in reality allocated to Housing Register applicants.

Developing new homes to meet housing need

24. Data on development of new homes in Welwyn Hatfield over the last 5/6[5] years is set out in the table below.  Welwyn Hatfield’s total housing target for the period 2011 to 2031 has not been agreed but the current objectively assessed need is for over 12,000 homes plus additional care bed spaces. This is subject to review at present but gives some indication of the overall need. 

25. As can be seen from the data, WH has not been able to meet its housing target throughout the period covered in the table.

Incomes in Welwyn Hatfield

26. Gross median incomes in Welwyn Hatfield fell markedly in 2011 from their 2010 level.  They have not yet recovered their 2010 levels when they matched Hertfordshire median gross pay levels.  Throughout the period median gross pay has been higher than that for England. 

27. The above data shows that Welwyn Hatfield, whilst it has affluent pockets, also faces levels of need for affordable housing which cannot currently be met. 

The impact of government proposals

Extending the right to buy to housing association tenants

28. The government requires local authorities to sell any homes that become available for letting which are above a particular threshold which for Welwyn Hatfield are the following:

29. Using its latest stock valuation, the table below sets out the number of homes the council estimates are valued above the government thresholds:

30. Not all of these homes will become available over the course of a year.  The council estimates that around 115 council-owned homes will have to be sold in the first year of the scheme.

31. If sheltered homes are removed from the equation, 44 homes would have to be sold, the majority of which will be family sized homes which are in short supply. 

32. How many housing association homes could be lost through right to buy is very difficult to estimate.  Past CORE[6] data indicates that around two thirds of housing association tenants claim full or partial housing benefit because they have insufficient income to pay.  Applying this level of HB claim to the 2,500 general needs housing association tenants in the Welwyn Hatfield area indicates over 1600 tenants would be unlikely to be in a position to exercise the right to buy unless they had the help of family.  Of those not claiming housing benefit to pay their rent, perhaps a sizeable number may be in a position to exercise the right to buy.

33. Currently WH is able to nominate to around 172 housing association homes per annum.  A considerable loss would be felt if even 10 of these homes were sold through right to buy a year and were therefore no longer available to be nominated to.  The loss would be felt in households waiting longer in temporary accommodation and on the Housing Register.  At the moment the council is fortunate in being able to almost fully cover the costs of temporary accommodation but this situation is not guaranteed to continue.  There are pressures on the costs of temporary accommodation much of which is secured through the private rented sector.  As is well documented in the media, private rented sector rents are increasing and this is the same for the Welwyn Hatfield area.

Replacement of homes sold through RTB

34. Welwyn Hatfield’s record at replacing homes sold through RTB has been much better than the national average[7] but it has not been able to replace them one for one at the current time.  Of 272 homes sold since September 2012, the council has replaced or will be replacing a total of 159 or 58% of the total sold (40 homes completed, 17 are on site and 101 are planned).  The work involved in producing these units is enormous and not easy. A range of new projects are being considered to expand the programme and deliver a higher number of affordable homes in a longer term strategy.  This strategy was largely reliant on the ability of the council’s own Housing Revenue Account (HRA) to support the 70% investment requirement needed to provide replacement homes.  With the government policy to limit the rent charged to social housing tenants, the HRA may not be able to sustain the planned level of development.
35. Some of our housing association partners have indicated that they may be able to replace the homes they sell through RTB.

Conclusion and outcomes

The outcomes of the selling social and affordable rented homes through RTB include:

• As we have shown it is very difficult to replace the homes sold through RTB one for one.  This may mean that affordable housing development does not keep pace with the number of homes sold through RTB and the overall number of social and affordable homes with sub-market rents depletes.
• The current proposals mean that the council will be required to sell off ‘high value’ stock, but it won’t then be allowed to retain the proceeds of these sales, therefore there is no means to replace stock which is already in high demand.
• Evidence is increasing that homes sold through RTB do not stay in owner occupation[8] but move instead into the private rented sector with rents charged at far higher rates than when they were social rented home. 
• As a council we have much experience of tenants who have exercised their RTB in the past but have not fully appreciated what it entails.  For example, being unable to cope with increased mortgage rates, or unable to pay for the upkeep of their homes including the replacement of important amenities such as boilers. 
• As a council we also have experience of relatives assisting especially older tenants to exercise the RTB but after a period of time have then made that the former tenant homeless.  Because the former tenant is an older person, they are a priority to the council under the homelessness legislation and the council will be required to house them.  We predict the same will happen with housing association tenants who exercise their RTB.
• Having taken the necessary time to set up a range of initiatives and methods to deliver new affordable homes as part of the government’s ‘One for One’ initiative, the current government proposals have created a significant amount of uncertainty which impacts on our ability to proceed with this programme with the same degree of confidence.  The impact of reduced rental income within the HRA and the possible introduction of the Right to Buy for Housing Associations put at risk the resources the council and housing associations were relying on to fund their development programmes.
• The significant risk is that delivery of new affordable homes will stall and the expectation and opportunity to provide more housing will be lost. In addition the implications for the Local Authority on the loss of more affordable housing in the Borough via the RTB with Housing Associations has significant concerns on the councils statutory responsibilities and resources

August 2015