affordable rent product tim bostridge stephen heatley
TRANSCRIPT
Affordable Rent Product
Tim Bostridge
Stephen Heatley
Affordable RentOffered by developing housing associations from agreement of delivery contract, initially on a proportion of empty properties and then new homes in due course Rents of up to 80% of market rents - linked to the delivery of new supply Affordable Rent tenancies are intended to provide an alternative to social rent Tenancies for at least two years, although HAs have option of offering longer or lifetime tenancies Eligible for housing benefit (as long as it lasts!)Will be added to definition of affordable housing (PPS3)
Principles - Less Grant goes further
Increased rents
=
more money to service loan
=
more development for the low level of grant
(150,000 homes over 4 years)
(Grant was £100k/unit, now £20-30k)
2008-11 NAHP £8.5bn
2011-15 £4.5bn of which £2.3bn committed
How do rents compare?Indicative 2 Bedroom Weekly Rent Levels - SE28
£196
£157
£184
£95
£0
£30
£60
£90
£120
£150
£180
£210
Market 80% Market Local HousingAllowance
Target Rent andservice
Service Charge
Extra income to service borrowing
How Do Rents Compare?
SE281 Bed 2 Bed 3 Bed 4 Bed
Market £156 £196 £242 £27780% Market or 80%LHA £125 £157 £194 £22260% Market or 60%LHA £93 £118 £145 £16650% Market or 50%LHA £78 £98 £121 £138LHA Median £156 £190 £230 £30030th percentil LHA £150 £179 £208 £277
Target rent £74 £85 £103 £104Service charge £11 £11 £3 £6Target and service £86 £95 £107 £111
Bedrooms
Current charge
New Charge
Are they affordable?Gross Annual Income
1 Bed 2 Bed 3 Bed 4 Bed80% Market or 80%LHA £23,143 £29,181 £36,000 £41,14360% Market or 60%LHA £17,357 £21,886 £27,000 £30,85750% Market or 50%LHA £14,464 £18,238 £22,500 £25,714
above universal benefit level
Bedrooms
Bedrooms required Bedspaces required
Total benefits claimed
excluding Housing
costs
Remainder of benefits
available for Rent & Service Charge
Suffiient balance
for rent at 50%
Suffiient balance
for rent at 60%
Suffiient balance
for rent at 80%
Suffiient balance
for average
target rent plus s/c
Single under 25 0 1 £51.85 £298.15 yes yes yes yesSingle over 25 1 1 £65.45 £284.55 yes yes yes yesCouple with no dependants 1 2 £102.75 £403.25 yes yes yes yesCouple with 1 child 2 3 £184.11 £321.89 yes yes yes yesCouple with 2 children 2 4 £248.09 £257.91 yes yes yes yesCouple with 3 children 3 5 £312.07 £193.93 yes yes yes yesCouple with 4 children 3 6 £376.05 £129.95 yes no no yesCouple with 5 children 4 7 £440.03 £65.97 no no no noCouple with 6 children 4 8 £504.01 £1.99 no no no noSingle parent with 1 child 2 3 £146.81 £359.19 yes yes yes yesSingle parent with 2 children 2 3 £210.79 £295.21 yes yes yes yesSingle parent with 3 children 3 4 £274.77 £231.23 yes yes yes yesSingle parent with 4 children 3 5 £338.75 £167.25 yes yes no yesSingle parent with 5 children 4 6 £402.73 £103.27 no no no noSingle parent with 6 children 4 7 £466.71 £39.29 no no no noLone parent under 18 1 2 £51.85 £454.15 yes yes yes yesLone parent over 18 1 2 £65.45 £440.55 yes yes yes yes
= residual income insufficient to cover rent
Balance for Rent
What are HAs doing?
Assessing what rents to chargeAssuming higher turnoverIncreasing voids and bad debtsIncreasing void maintenance costsIncreasing discount rate to allow for increased riskAllowing for level of internal subsidyAssuming 20-30k per unit grantAssessing level of void conversion to deliver development programmeDisposals
What happens to the stock profile?
Stock Assuming 6% turnover and 25% conversion
0
2000
4000
6000
8000
10000
12000
14000
2010
2011
2012
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2015
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2030
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2032
Pro
pet
ies
Affordable Rent Properties Target Rent Properties
What happens to the stock profile?Stock Profile at 6% Turnover and 50% conversion to Affordable Rent
0
2000
4000
6000
8000
10000
12000
14000
2010
2011
2012
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2015
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Pro
per
ties
Affordable Rent Properties Target Rent Properties
What happens to the stock profile?
Stock Profile at 6% turnover and 100% conversion to Affordable Rent
0
2000
4000
6000
8000
10000
12000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
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2026
2027
2028
2029
2030
2031
2032
Affordable Rent Properties Target Rent Properties
The Right Balance?
The packageCosts of package (years 1-2 detailed)
(years 3-4 indicative) £xxx
Less Borrowing- new rents on dev’t programme £xxxBorrowing - voids at new rents £xxxIncome from Sales and disposals £xxxRecycled Grant £xxxOther reserves £xxx
LA contribution £xxx£xxx
GAP = HCA Grant Required £ xx
Timescale
Milestone Date
Publication of the Framework inviting offers for the 2011-15 Affordable Homes Programme
w/c 14 February 2011
Providers developing offers March and April 2011
Deadline for submission of offers 3 May 2011 Assessment/negotiation of offers May and June 2011 National aggregation and analysis of programme 20 June – 4 July 2011 HCA London Board (London part of proposed programme) and Ministerial and national HCA Board sign off of aggregate programme (subject to provider contracts)
w/c 4 July 2011
Initial contracts signed July 2011
Implications – Housing Policy
SPoT – Strategic Policy on Tenancies broad objectives to be taken into consideration by individual
social landlords in the area regarding their own policies on the grant and reissue of tenancies
government prescribe who local authorities should consult in preparing the policy
regular reviewed and consistent with the local allocation scheme and homelessness strategy
Rents in larger dwellings – affordability for working households and challenge of Universal Credit
What about people who we want to downsize? Unattractive to move unless protected rents are in place. How to incentivise moves.
Rent is determined by the tenant not the property ? Working households – build in a quota in allocations plans? Need information on households income = difficult to evidence mix
of products required and affordability.
Implications - Planning
Affordable Rent to be added to PPS3 Definition of Affordable HousingRevisit affordable housing requirements and viability assumptions in their local planning documents?Change Affordable Housing SPD and tenure breakdown for S106 AgreementsVary existing S106 if scheme becomes affordable rent? Larger homes far less viable under the new model = likely increase in small-size properties?
Implications – AH Delivery Strong partnership working crucial to ensure we coordinate with
housing providers Estate renewal - difficult to achieve without substantial grant
funding New focus on asset management - Providers to make informed
decisions about the proportion of stock they decide to convert to affordable rent and financial implications
A new level of risk from linking affordable rent to market rents. Rental income could fall because local private rent levels
Have housing associations the financial capacity and will banks fund developments as greater financial risk in the model?.
Accept that schemes with existing allocations for social rent remain or move to affordable rent basis on initial letting?
Assumed borough contribution on sale of LA land Expectation of no grant on S106? Standards - London