Agenda item

RESOLVED: That the Committee noted the evidence given as part of its review, and thanked both witnesses for attending.    

4.1      Neil McCall (Group Operations Director, Affinity Sutton) gave an overview of Affinity Sutton’s research and rent setting policy to the meeting. The key points to note were:

·         In Lewisham, Affinity Sutton has 593 properties, which are in the Orchard Gardens and Leybridge & Newstead estates, which were both stock transfers from the Council.

·         In light of the research into affordability undertaken in 2011, Affinity Sutton chose to limit the rent charged on larger units to 65% as these were judged to be unaffordable at 80% to larger households with higher outgoings.

·         With the reduction in capital grant rates for new housing supply reduced and other housing policy changes since 2010 like the Affordable Rent Policy, Affinity Sutton felt that some research needed to be conducted to consider what the principles of setting a rent policy should be and what Affinity Sutton’s new Affordable Rent policy might look like.

·         Affinity decided that it would work alongside Cambridge Centre for Housing and Planning Research (CCHPR), as they had already worked alongside them for a research paper in 2014 called ‘Housing Costs, Affordability and Rent Setting’.

·         As the impact of Affordable Rents and other changes - notably those to the welfare regime – have become more obvious, Affinity Sutton felt that it was an appropriate time to assess what has happened since the policy was introduced; to review the principles and evidence on the impact of different rent structures; and set out possible future approaches to rent determination.

·         The research paper looked to focus on relaying rents with income and devising a more realistic formula to affordable rents in their properties.

·         The report was published in May 2015, entitled ‘Affordability: A Step Forward’: Establishing principles for rent setting’.

·         The work in the report may need to be reviewed in light of the Government proposals since the elections, such as the 1% year-on-year reduction in social rent. Affinity Sutton has estimated that this could have the potential to cost them around £340m over the next 10 years.

4.2       In response to questions from the Committee, the following was noted:

·         Affinity Sutton refers to Social Rent as the ‘Target Rent’ in its report.

·         Affinity Sutton would like to move more of its residents off Housing Benefit, as this benefits both the rent payer and the taxpayer in the long run.

·         The rent-setting policy is deliberately linked to the London Living Wage to make the rental link to earnings more prevalent.

·         Neil McCall estimated that approximately 55-60% of Affinity Sutton residents would be in receipt of Housing Benefit.

·         Even though many Housing Association run at a surplus, most of the finances are already earmarked for property improvements and new builds. They also need to borrow from financial institutions to deliver on their developments. This has to be balanced with setting rent levels that are ‘affordable’ for their residents.

·         The Committee applauded the aim of reducing the amount of Affinity Sutton residents that are in receipt of Housing Benefit.

·         Housing Associations and housing providers like Affinity Sutton needed to be open to new arrangements – such as considering temporary accommodation – to tackle the housing crisis in London. Affinity Sutton does have some hostels in the London Borough of Bromley.

·         Affinity Sutton’s rent policy is linked to the National Minimum Wage and London Living Wage, and will take into account the Government’s new National Living Wage, which will replace the Minimum Wage (which at the present rates will be lower).

·         Affinity Sutton pays its staff the London Living Wage.

4.3       Steve Moseley (Assistant Director, Strategy & Operations, L&Q) gave an overview of L&A’s rent setting policy, and its review in light of the recent Government announcements on housing, to the meeting. The key points to note were:

·         L&Q manages over 7,000 properties in Lewisham. Their property portfolio in the borough mainly consists of properties the Council has transferred to them in the Grove Park, Catford, Rushey Green, Forest Hill and Sydenham areas.

·         300 properties within Lewisham are of ‘Affordable Rent’

·         L&Q devised its Affordable Rents policy in 2011. The objectives of the policy were:

o   Affordability

o   Simple and easy to explain

o   Meet the relevant guidance and legislation

·         Like Affinity Sutton, the reduction in capital grant rates for new housing supply reduced and other housing policy changes since 2010, meant that L&Q felt it needed to review the rents policy, to try to ensure that they were affordable, but still allow enough revenue to improve existing properties and create new developments.

·         L&Q decided that their rents policy would not have any properties at ‘80% of the market value’. Most of their properties are between 55-70% of the market rent.

·         L&Q’s rent policy will have to be reviewed again at the end of 2015-2016 in light of the new Government’s housing policy proposals that have been announced since the General Election.

·         The Government’s plans for a 1% year-on-year cut in social rent could lead to L&Q building 18,000 fewer homes up to 2020 due to loss of revenue. L&Q has chosen to bridge this gap through efficiencies and increasing income to maintain its development pipeline.

·         The proposed new the Benefits Cap of £23,000 inside London and £20,000,  is estimated to cause average shortfall of £65 per week on those affected by it in L&Q properties. Larger households on low incomes could be affected by as much as a £110 per week shortfall.

·         L&Q has always taken a more conservative approach to rent setting, which is why no affordable rents are charged at 80% of the market rate – they have never seen that as ‘affordable’ rent.

·         As housing associations housing providers do not have any control over welfare and tax policy, any efforts to make rents more affordable could be offset by Government policy. This might mean there is no reduction in the percentage residents pay on rent in relation to their household income.

·         L&Q need to look further into the implications of the Governments latest welfare and housing policy changes to understand their implications on L&Q’s rent setting policy.

4.4       In response to questions from the Committee, the following was noted:

·         L&Q has an L&Q Foundation, which was established in 2011, that helps residents with a number of community investments and initiatives. It has funding of approximately £4.5m a year does a number of things such as run ‘job-ready’ work and training programmes to providing discretionary housing payments for qualifying residents. These are measures that can help alleviate the benefits cap and other welfare changes that have been enacted since 2010.

·         L&Q recognise that there are some anomalies in respect of rent charges. Some of these have been caused by the move to affordable rents policy and they will be willing to look into any problems this caused to residents.

·         The Government’s ‘pay-to-stay’ policy may also cause a situation where people who live in similar properties, but pay different levels of rent.

·         L&Q believe that the average rent for Lewisham is approximately 65% of market rents, which is in line with similar Housing Associations and properties across London.

·         L&Q pays its staff the London Living Wage.

·         Members will receive additional information on L&Q’s rent levels in Lewisham.

4.5       RESOLVED: That the Committee noted the evidence given as part of its review, and thanked both witnesses for attending.