Written evidence submitted by The Almshouse Association [RTB 075]

Communities and Local Government Committee inquiry into the Right to Buy

Executive Summary


Introduction

  1. The Almshouse Association is the working name of The National Association of Almshouses, registered charity number 245668. The Association is a membership charity. Our members, to whom we provide advice and support, constitute around 1650 independent almshouse charities. The Association is an official partner of the Charity Commission, meaning there is a formal relationship whereby the Charity Commission recognises the Association as a source of expertise in almshouse matters, and the Commission’s own internal guidance advises its caseworkers to refer to the Association for an expert opinion in certain matters.

 

  1. The Association’s membership comprises about 95% of all almshouse charities in the UK, collectively housing around 35,000 residents, usually elderly although some charities are for other particular groups such as ex-armed forces personnel. Almshouse charities are the oldest form of social housing in the country and some have been providing accommodation to those in need for centuries. They are usually run by local volunteer trustees with minimal paid staff, and represent the finest tradition of local people helping their neighbours in need. The almshouse movement is the only part of the social housing sector where wardens are still common, with the related well-documented benefits of wardens in reducing social isolation.

 

  1. 80% of almshouse charities have no more than 20 dwellings. Nearly 35% of almshouse charities provide accommodation in Listed buildings. Over 300 almshouse charities are also Registered Providers of social housing in England, because at some point (possibly decades ago) they were required to apply for that status as a condition of receiving social housing grant.

 

 

  1. The Association is submitting this evidence to request that:

 

  1. We explain below the likely impact of the Right to Buy and the ‘rent’ cut on the almshouse movement if these requests are not met.


Right to Buy – Housing Bill

  1. Existing Right to Buy legislation exempts certain categories of housing. A few almshouse charities might fall into these categories, but most would not. Hence simply reproducing the existing categories in the Housing Bill will not address the almshouse movement generally.

 

  1. In accordance with the original donor’s intention, charity law requires an almshouse charity’s assets to be held in perpetuity to further the charity’s constitutional purposes. Although the precise beneficiary class varies between charities, all almshouse charities are legally obliged to provide accommodation only to those who are in need. Usually this has to be financial need. Accordingly, most almshouse residents are elderly and in financial need. Almshouse charities usually have a distinctive community ethos, often fostered by the arrangement of the dwellings in relation to each other.

 

  1. The extension of the Right to Buy to almshouse charities would violate key principles of charity law. First, the starting point of all charity law is that the original benefactor’s intentions should be respected. Second, almshouse charities usually stand on specie land, otherwise known as functional permanent endowment land (‘FPE land’). Charity law requires that a site of FPE land be used in perpetuity only for the purposes of providing almshouse accommodation. Third, charity trustees are required to maximise the value of the charity’s assets for the benefit of the charity. Clearly that would be impossible if they were forced to sell dwellings at a discount.

 

  1. If the Right to Buy were implemented for almshouse residents, we anticipate that family members would be likely to help finance the purchase, seeing it as an investment for the future. Given the elderly profile of residents, it would not be many years before former almshouse accommodation became private property in the hands of their younger relatives, radically altering the chemistry of the almshouse community and permanently overriding the original donor’s charitable wishes against the spirit of charity law. We think that almshouse properties are likely to be particularly attractive targets for family-backed Right to Buy purchases as investments in the family’s future, given that:

 

 

  1. If a dwelling were purchased under the Right to Buy, the resident would cease to be a beneficiary of the charity. However, the cost of communal resources provided for the beneficiaries would not drop – for example, a warden’s salary. Hence the cost of these resources would have to be spread across fewer beneficiaries, or the resources would have to be scaled back or abolished.

 

  1. The charity would have to enter into legal agreements with Right to Buy occupants as to maintenance of the almshouse community buildings as a whole, of which the bought property would form part. Most almshouse charities do not have financial resources to bear the cost of the related legal fees.

 

  1. It should not be argued that almshouse charities could simply build or buy replacement accommodation elsewhere with the proceeds of sale. For reasons explained in the next section, most almshouse charities are run on slender finances with reserves which will cover maintenance of the existing buildings but little else. Given that Right to Buy sales purchasers will receive a sizeable discount, the proceeds of sale will not enable the charity to provide replacement accommodation. Moreover, as mentioned above, almshouse charities tend to be on sites in the centre of existing towns and villages, so they have no ability to build replacement housing on site. Hence the purchase of replacement dwellings, even if it were affordable, would mean the fragmentation of the charity into different sites with the loss of its distinctive communal ethos.

 

  1. Almshouse charities should not be viewed as logistically and financially akin to housing associations, which generally have much greater flexibility and financial independence. As explained above, most almshouse charities are run almost entirely by volunteer trustees, sometimes with the paid assistance of a part-time clerk and a warden. Over the last few years, almshouse trustees have made clear to us that they feel increasingly burdened by regulations intended for other organisations but which accidentally catch almshouse charities. Our contention is that almshouse trustees would regard having to administer the Right to Buy as the straw which breaks the camel’s back. We are deeply concerned that unless almshouse charities are exempted from the Right to Buy, trustees will simply resign en masse, throwing the movement into chaos.

 

  1. Turning to the legal status of almshouse charities, we are concerned that the existing definition of ‘housing association’ in the Housing Associations Act 1985 as amended could be interpreted to include almshouse charities, although we contend that that was neither the intention of nor even a possibility considered by Parliament[1].

 

  1. With regard to the status of almshouse residents, in Gray v Taylor the Court of Appeal ruled that for a variety of charity law reasons almshouse residents are not tenants, and occupy purely as beneficiaries of the charity. However, until now there has not been an opportune moment for this principle to be put on a statutory footing.

 

  1. Against that background, our contention is that a Housing Bill extending the Right to Buy to ‘tenants of housing associations’ will inevitably cause confusion in the almshouse context. It is surely preferable for the Housing Bill to confirm the position for the avoidance of doubt.

 

 

 

  1. Recommendation: We recommend that the Housing Bill contains an express exemption to the effect that:

 

  1. The Association would be pleased to provide the Committee upon request with suggested wording suitable for inclusion as a clause in the Housing Bill.

 

  1. Recommendation: the Housing Bill and the Welfare Reform and Work Bill should use new statutory definitions of ‘almshouse charity’ and ‘almshouse’ to be provided by the Association in conjunction with the Charity Commission. The definitions which have historically been used in legislation are ambiguous and/or circular, and their re-use will cause confusion in the minds of regulators and the public. This is particularly important in the case of the Housing Bill, given that some existing legislation assumes, wrongly, that it is possible for an organisation to be both a housing association and a provider of almshouse accommodation[2].

 

 

  1. The Association has prepared a detailed analysis of the deficiencies in the existing definitions, and would be pleased to make it available to the Committee upon request.

July 2015 Budget and Welfare Reform and Work Bill

  1. The Association’s concern is about the impact of clauses 19ff on the hundreds of almshouse charities which are also Registered Providers of social housing in England. These oblige Registered Providers to cut ‘rent’ for ‘tenants’ by 1% every year for four years, and cutting from the level of ‘rent’ as at 8 July 2015. ‘Tenant’ is defined so as to include almshouse residents, and ‘rent’ is defined to include the modest contribution towards maintenance of the almshouses which residents are asked to make (‘Weekly Maintenance Contribution’ or ‘WMC’).

 

  1. As Registered Providers, almshouse charities have to apply the HCA’s Rent Standard Guidance by analogy since it is written for a landlord/tenant scenario which is not applicable in the almshouse context. Accordingly such charities ensure that the WMC does not exceed Formula/Target Rent levels, and increases by no more than CPI + 1% each year.

 

 

  1. In the Budget the measures in clause 19ff of the Bill were misleadingly portrayed as a 1% cut. In reality it is a far bigger cut, since over those four years charities would otherwise have been entitled actually to increase their WMC by CPI + 1% every year. Evidence from our members indicates, for example, that one charity with 144 dwellings stands to lose £370,000 in broad terms over the four years, once foregone increases in WMC are taken into account.

 

  1. We contend that these measures were formulated without realising that they would catch many almshouse charities. Hence the assumption was that they would affect only housing associations, whose large scale and relative wealth would give them room to make efficiencies.

 

 

  1. This assumption does not hold true in the case of almshouse charities. Even the largest is tiny by comparison to a housing association and therefore has little scope for achieving economies of scale. They have minimal paid staff so there is little scope for economies through staff redundancies. If redundancies were to be made, it would typically be the precious resource of the warden, now a rarity in housing associations.

 

  1. Many almshouse charities have negligible investment income. Their only significant source of income is WMC from residents, which clause 19ff now requires to be cut. They cannot raise funds by selling accommodation. However, they are obliged by charity law to make financial provision for future maintenance as well as meeting ongoing needs. Often almshouse accommodation needs more expenditure than housing association stock, because it tends to be older and therefore designed for an age when people died and expected to be widowed at a younger age. For example, many charities still have bedsit accommodation. Hence it needs greater adaptation than housing association stock to bring it up to a modern standard suitable for enabling elderly residents to live independently for longer, and possibly with a spouse or partner. This problem is even more acute for the large percentage of our members who have Listed buildings.

 

  1. Recommendation: we recommend that almshouse charities which are Registered Providers should be expressly exempted from the ‘rent’ cutting obligations in clause 19ff of the Welfare Reform and Work Bill.

 

 

  1. Recommendation: in any event, the following two subsets of almshouse charities which are Registered Providers should be expressly exempted from those obligations:

 

    1. Any such charity whose current level of WMC is below Formula/Target Rent. It is evident that a significant number of our members have not achieved Formula/Target Rent for a variety of reasons in relation to some or all of their dwellings. For the rent cut to be applied to this group would place those charities under severe financial strain which could make them insolvent. This is particularly true of almshouse charities using Listed buildings. In addition, it is important that where an almshouse dwelling becomes vacant and is upgraded, the charity should retain the current flexibility to move to Formula/Target Rent for the dwelling.

 

 

    1. Any almshouse Registered Provider which is now in or joins the 2015-18 round of Affordable Homes funding from the HCA. To assess whether they should bid for such funding, almshouse charities in this position will have done detailed financial projections on the assumption that they would be able to charge Affordable Rent levels for the relevant properties on completion of work. The exemption should not only cover almshouse Registered Providers in this position. For the avoidance of doubt it should also extend to almshouse charities in the 2015-18 round which are not Registered Providers, in the event that there is anything in their Framework Development Agreement with the HCA which would have the effect of contractually obliging them to act as if they were bound by clauses 19ff of the Bill, or by any future amendment to the Rent Standard Guidance mirroring the effect of those clauses. Again, it is important that the almshouse charities in this group should have the flexibility to increase WMC, whether on appointment of a new resident or otherwise, which they assumed they would have when bidding for funding.

General recommendation

Almshouse charities feel burdened by the increasing number of examples where housing legislation and associated regulation conflict with charity law, making it impossible for trustees to achieve full compliance, and preventing the HCA from making exceptions for almshouse charities when these situations arise. If the Committee would like specific examples to illustrate these points, the Association would be pleased to supply them. Generally charity trustees should not be put in a position where complying with their charity law duties requires them to contravene other legislation.

Recommendation: there should be an express statutory clarification that charity law should prevail where it appears to conflict with other legislation.

 

 

August 2015

[1] The relevant text from Housing Associations Act 1985 section 1(1), as amended, is: ‘In this Act, “housing association” means a…body of trustees or company – (a)….amongst whose objects…are included those of providing….housing accommodation…”

[2] E.g. Regulation 12(1)(h) of the Housing Benefit Regulations 1996 as amended, which refers to ‘an almshouse provided by a housing association’.