No 9 – WHQS & the options: the

‘No Vote’ Local Authorities

9 – WHQS & the options:

The ‘No Vote’ Local Authorities

Introduction

CIH Cymru / i2i provides support to housing organisations to help them achieve WHQS. This includes working

with all stakeholders – tenants, staff and elected members – to be fully involved as well as maximising the

jobs, training and wider regeneration opportunities that housing investment provides. This briefing paper will

focus on the support required from local authorities who have received a negative ballot to their Housing

Stock Transfer proposals.

The Welsh Government initially required all social landlords in Wales to achieve WHQS by 2012. In some

cases this target has been extended by agreement with Welsh Ministers to 2020. All local authorities in Wales

have now either been through the process of a housing stock transfer ballot of their tenants or have opted to

retain their stock. The five local authorities who have received “no votes” - Caerphilly County Borough

Council, Vale of Glamorgan Council, Flintshire County Council, Wrexham County Borough Council and the City

and County of Swansea – have faced the common challenge of developing viable alternative proposals to

deliver WHQS.

In May 2012 Huw Lewis AM, Minster for Housing, Regeneration and Heritage, announced that a Ministerial

Task Force was being established with an initial focus on working with authorities facing difficulties in

achieving the Standard and helping identify options available to them.

In June 2012 CIH Cymru / i2i organised a Chatham House Capturing Lessons session for all five authorities

involving Heads of Housing & Finance and this Active Response is a reflection of discussions held. It aims to

reflect comments and suggestions as well as identifying a number of recommendations to help the

authorities achieve WHQS.

It is important to stress that tenants in each of the five authorities gave a clear mandate for the retention

of the stock and each promoted good practice and followed all of the relevant guidance in an open and

transparent manner throughout the option appraisal and ballot process.

The comments and themes contained within this report ranged from those having consensus from the

entire group to views expressed by a minority of participants and where appropriate we have made

reference to this.

Rachel Honey Jones

Email: rachel.honey-jones@cih.org

Mobile: 0750 735 1906

CIH Cymru / i2i

October 2012

1. Funding:

Housing Revenue Account Subsidy Review

Opportunities for Borrowing

2. Innovative Options:

Land and Planning

Partial Transfer

An All Wales RSL

ALMOs

Collaboration

3. Other issues

Political commitment

Support required

Wider strategy

1. Funding

By 2012 sixteen of the 22 local authorities in Wales had been through the housing stock transfer ballot

process as the preferred option for fully delivering WHQS investment with 11 having received tenant

consent for a stock transfer. The five “no vote” authorities have inevitably had to review options for

achieving WHQS and in particular look at the financial options available.

Housing Revenue Account (HRA) Subsidy Review:

There was consensus that a swift resolution is required to current negotiations with Treasury to enable

local authorities to factor any changes into their future planning on WHQS works. Some individual

concerns were aired:

There was consensus that Councils with stock should have a seat around the table during negotiations

with WLGA having a key role. There was also a view that the HRA should be able to focus more on

regeneration & development in the future.

Opportunities for Borrowing:

Linked to the HRA subsidy review is the notion of borrowing for local authorities. The majority of

discussion focused around the lack of borrowing headroom (especially since the Prudential Code for

Borrowing 2004), meaning that for some prudential borrowing is not an option.

The Major Repairs Allowance (MRA) currently helps authorities greatly in their achievement of WHQS

work and the fact that Welsh Government is committed to continue to support was welcomed. There is

understandably a concern that with the review pending, there is a risk to any future borrowing.

“The Welsh Government policy is to encourage councils to improve their housing stock to

meet the Welsh Housing Quality Standard by whatever means they consider appropriate.

The transfer of stock to a Registered Social Landlord (housing association) is one of the

available options.”

5 February 2008

“Will redistribution be based on need?”

“Will it adversely affect “no votes”, and if so, what support will be available?”

“We are unsure if Welsh Government truly understand our financial position, there has been talk

of ‘support’ but the support we need is financial”- Head of Housing

“Can the risk be shared?” – Head of Finance

“Could, should, would we allocate borrowing headroom and MRA on the basis of need if it was

possible? If you have a three-way deal between Westminster, Welsh Government and Local

Authorities, then Welsh Government could allocate headroom debt and MRA differently” - Observer

1. Funding cont.

A key ask is whether the Welsh Government would be willing to underwrite any money that was

borrowed. This would be more palatable to local authorities finance departments. Due to the current

borrowing cap and lack of headroom could Welsh Government introduce a policy to slightly loosen

these constraints to allow for greater borrowing in order to achieve the Standard? Is there the

possibility of any grant funding for particular aspects of delivering the Standard, such as the tenant

empowerment grant (TEG) programme administered by CIH Cymru? Are there any options for the

exploration of any other innovative approaches to new financing models?

A key challenge faced is the amount of revenue contribution that is committed to the capital

programme. Improving service delivery is a key requirement of tenants—but with the amount of

revenue support (plus other services and corporate commitments) many have little money to achieve

this. All authorities have already reduced costs significantly to ensure efficiency savings. These have

been ploughed back into the HRA enabling WHQS work to take place; however this has lead to a drop

in service in some areas of housing e.g. closure of area offices, redundancies and restructures. Rents

are at benchmark in the majority of authorities and cannot gather any additional resources to place

within the WHQS budget.

There was also a suggestion that the “no vote” authorities could participate in a business plan

benchmarking exercise with LSVTs and retention authorities. This would ensure that the assumptions

within these business plans match those which have already been through the process, and to ensure

that there is no further uplift in costs once the plans have been agreed by Welsh Government. This

would mean authorities knew exactly what capital was needed to deliver WHQS. One such issue that

has been seen anecdotally with LSVTs is that repair costs have gone up as a result of improvement

works, whereas many business plans assumed these would go down. Comparing experiences will help

challenge these assumptions and ensure any mistakes are not replicated.

Improving service delivery is a key driver for all local authorities, but there is often a lack of corporate

support for diverting funding from other activities that the local authority is responsible for. Does

there need to be support from Welsh Government to ensure the responsibility for the achievement of

WHQS is not just that of the Housing department, but of the local authority as a whole?

Some concerns were expressed around additional funding of £3.8m being made available (as per the

Wales Infrastructure Plan, Annex 1, page 135) to cover costs that had not been agreed up front. It was

felt that in the future any funding for Housing, and in particular WHQS works must be agreed prior to

any projects commencing as to not reward authorities or organisations going over budget.

“We need to manage expectations with Members” – Head of Housing

1. Funding cont.

Summary and Recommendations:

Quick resolution of HRAs / MRA issues and a clear timetable to allow local authorities to

plan delivery of WHQS in a timely manner

Better involvement of “no vote” local authorities in the HRAS review process; WLGA to

also be involved

Need to safeguard “no vote” / retention authorities from any HRAS changes

Open discussion on whether redistribution should be based on need

Exploration of future borrowing headroom

Recognition that reduction of internal costs have allowed efficiency savings which have

enabled some WHQS works to take place but at the cost of service delivery

Clear message from Welsh Government that WHQS is a corporate local authority priority

Exploration of using HRA to fund regeneration & development

Identification of new models of financing including grant funding

Benchmark “no vote” authority business plans with those who have already been

through the improvement programme to ensure assumptions are realistic

2. Innovative Options

Some local authorities will have difficulty in reaching the Standard given the current financial constraints. A

number of innovative ideas were raised by participants:

Land and Planning:

When a local authority is approving planning permission for new builds, under section 106 agreement, could

developers and RSLs be asked to fund the improvement of adjacent properties? Would it be possible to ring-

fence a percentage of the capital gained from selling land for a new build programme within the local

authority?

Partial Transfer:

Where transfer has been rejected by tenants, is it possible that a partial transfer of assets such as those

properties in the greatest need of investment or specific estates / geographical areas could take place?

Historically partial transfer has worked well in areas where there is a strong community identity and there is

genuine partnership between the local authority and an RSL. Could this be via a leasing arrangement with an

existing RSL? If Welsh Government considers this an option then could it be included in the Housing Bill?

There was a concern that where partial transfer is proposed there may need to be a ballot all residents, not

just tenants of the properties

An All Wales RSL

There was a suggestion that one of the possible options that could be explored would be an all-Wales RSL.

This might be set up as community mutual or a cooperative to take on housing stock where there is no viable

plan to achieve the Standard, are hard to treat or there are non-acceptable ‘fails’. More detail will be needed

to carry this suggestion forward as we are unaware of any currently available models.

“If you want an innovative model, it needs to be in the Housing Bill, not discussed after” – Observer

“Rationalising resources by results” – Observer

“If we, tenants and Members know that the only way to bring certain houses up to WHQS was through

a partial transfer, then a Welsh Government vehicle would be more palatable, and would reduce the

average cost per unit significantly, thereby allowing us to upgrade the other homes at a fraction of the

overall cost” – Head of Finance

“£12m will need to be spent across our entire stock to bring the non-traditional housing up to WHQS”

– Head of Housing

“Partnership wasn’t seen as a choice, it was seen as the only way forward” – Head of Housing

Arms Length Management Organisations (ALMOs):

ALMOs have been seen to work well in England but tenants and members may not find it an

acceptable model due to previous ballots against transfer. In addition is a review or exploration of this

and other ‘third options’ even permissible owing to the requirement of capital and incentives to

achieve this? Members need to be given the full facts on the implications of an ALMO versus. This

should include information on the current business plans, conditions of the properties as well as

Welsh Government’s views. i2i could be used to deliver Member briefings and would be happy to

support and facilitate these.

Collaboration:

Local authorities feel that closer specific support is required from Welsh Government to foster a

working relationship, to enable practical discussions on non-acceptable business plans, and what the

options for these are. In order to achieve economies of scale should local authorities be looking at

joint procurement exercises? Wrexham and Flintshire are already pursuing this idea.

A partnership approach with housing associations in the local authority area could also help with the

welfare reforms / under occupancy issues, as seen with Denbighshire County Council & Cartrefi

Conwy, for example, by having a shared housing register. Partnerships such as Gwynedd County

Council & Isle of Anglesey County Council, or City and County of Swansea and NPT Homes should be

seen a way forward as noted in the Homes for Wales: A White Paper for Better Lives and Communities.

Local authorities could have a partnership with transfer and traditional RSLs on new build schemes to

allow for properties in the locality to be upgraded to WHQS as part of the contract.

2. Innovative Options cont.

“We don’t see the ALMO model working due to the lack of capital investment” - Head of Housing

“We have identified tenants who are under-occupying, which amounts

to approximately 2300 properties. We are hoping [political support permitting] to set up

a team of debt advisors to work with these tenants who could be required to contribute

an additional £1.3m per annum to meet their shortfall in benefits" – Head of Housing

“We don’t have the stock numbers to move people who are under-occupying, and foresee

a massive problem of current tenants asking to move. Due to the proposed reforms, we

have also seen a higher percentage of refusals of two bed accommodation from homeless,

single individuals with no children.” – Head of Housing

Summary and Recommendations

Local authorities, developers and RSLs should explore innovative approaches, such as

making land available for new builds ,receiving in return improvement works to local

authority properties in nearby areas

Partial transfer options should be explored either to an existing RSL or by leasing

arrangement to a cooperative model set up by the local authority?

Consideration by Welsh Government to set up an all-Wales housing association to take

on stock which is hard to treat or may never reach WHQS

Exploration of any ‘third options’ and capital incentives

Closer support required for authorities who have unacceptable business plans such as

the Ministerial Task Force

Political sensitivities in regards to any re-balloting tenants on the future of their homes

should be acknowledged

Joint procurement between the local authorities to achieve economies of scale should

be encouraged

Initiatives and guidance for non-traditional housing stock from Welsh Government is

needed

Partnership approaches to the future between traditional RSLs and the local authority

should be explored

2. Innovative Options cont.

Politics

Following the 2012 local elections, all five “no vote” authorities now have a Labour majority or are

Labour-controlled Councils and therefore politically aligned with Welsh Government. An initiative led by

Welsh Government to raise the profile of WHQS with members might be productive.

A key issue for all local authorities is whether the revised 2020 target for the achievement of WHQS will

be waived in the same way that the original 2012 deadline was. Welsh Government should be clear on

what monitoring procedures and sanctions will be in place for all social landlords, as indicated in the

White Paper. There also needs to be an honest debate with councillors and tenants on the self-financing

model if the HRA subsidy review in Wales reflects what has happened in England.

Support required:

The establishment of the Ministerial Task Force is welcomed by the local authorities. It is hoped that this

will lead to tailored, extra support for the three local authorities who have not currently got acceptable

business plans. Each of the local authorities is in a very different position, so it’s important that Welsh

Government is flexible in its approach for the support that is offered. It would be beneficial if this was

detailed to ensure there is no duplication of current support.

Welsh Government must support landlords to achieve the Standard, but also have some form of penalty

if they are not making progress towards it. In England landlords face penalties if not making legitimate

attempts to reach the Decent Homes Standard. To ensure this is taking place WLGA should be involved,

as they are best placed to reinvigorate the relationship between local authorities and Welsh

Government.

Clear guidance by Welsh Government on an asset management strategy would be a good starting point

for support, covering for example non-traditional stock. The regulatory regime should also be looking at

the wider picture of strategies to incorporate WHQS, rather than be led by it.

3. Other Issues

“Our biggest challenge will be political, as we may get to the point of needing to demolish and

rebuild, rather than even attempt to maintain”- Head of Housing

“Make better use of the HRA on the back of self- financing”

“With three unacceptable business plans on the table, we need something new from Welsh

Government” – Head of Finance

“Not only is this an issue of WHQS, but of a long-term strategy that includes new builds, welfare

reform, under-occupancy… we just don’t have the places to put people” – Head of Housing

“Threat of sanction can be more useful than actual sanction”- Head of Housing

Whilst WHQS is an important part of the there must also be a focus on homelessness, new build and

housing management initiatives such as digital and financial inclusion. WHQS as noted by one attendee “is

not the be all and end all of housing - we must look at the wider picture”.

Could ‘payment by results’ for the achievement of WHQS be an incentive that will help local authorities

without acceptable business plans deliver?

There is a lack of advice for authorities on what is being asked for by Welsh Government, and a feeling

that they receive conflicting information on what is most important to Government. The Ministerial Task

Force can make recommendations on how to utilise the support mechanisms available to authorities, to

ensure that those in a limited financial position are aware on what should be made a priority.

Under WHQS guidelines, tenants may refuse improvement works and in some areas refusal rates are high.

Hence a significant percentage of properties are not being brought up to the Standard. Is this acceptable

to Welsh Government?

Wider Strategy:

The central discussion of this Active Response has been around the achievement of WHQS and although

the Standard has been a fundamental aspect of Welsh Government policy, it should not be the all-

encompassing focus of Housing. WHQS should be thought of as part of the wider ‘whole housing system’

strategy which includes housing need, new builds, welfare reform, under-occupancy and the lack of

affordable housing. How these relate to overall asset and housing management strategy is something that

also needs to be explored.

The implications of welfare reform must be made clear to tenants, including the impact of under-

occupation as well as ensuring that landlords themselves factor in likely effects on rental income.

Although some authorities have the funds to achieve the internal aspects of WHQS, there is a clear line of

thought that external regeneration is just as important. WHQS explicitly states the need for tenants to

“feel safe and secure” – if the internals of the property are upgraded but there is still major flaws in the

external environment then WHQS is not being met satisfactorily.

3. Other Issues cont.

“One site with non-traditional housing that was surveyed would required approximately £80,000 of

investment per property to bring them up to WHQS” – Head of Housing

“Freeing up the HRA legislatively will allow for more regeneration work” – Head of Housing

“It has never just been a question of WHQS for us, but the wider implications. We don’t relish the

thought of improving properties without the regeneration of estates but we just don’t have the

money to do so” – Head of Housing

3. Other Issues cont.

Other ways to tap into regeneration resources for these types of improvements should be explored e.g.

ensuring core requirement of grant for planning and regeneration; or making better use of Tenant

Empowerment Grants.

Some authorities who have received a negative ballot on transfer are looking at breaking down the WHQS

elements to see which can be achieved by a 2020 deadline and which will be achieved thereafter (i.e.

internals versus environmental / estate improvements). On a positive note smart procurement by one

authority delivered a 4.5 year guarantee on prices. However cost efficiencies can be at the expense of

other benefits e.g., three out of the four contractors are national, not local. It appears to be a very fine

balancing act to ensure the Standard is delivered cots effectively whilst at the same time creating

opportunities for local contractors.

Another challenge faced by all social landlords, is the stock that will never achieve WHQS, may need to be

demolished and rebuilt. Further, some of the hard to treat stock which could be brought up to the

standard may be hard to maintain in the long run so the choice of demolishing and rebuilding might also

apply.

A key additional success of the WHQS works has been tenant engagement and better profiling. Many

social landlords, whether stock transfers or retention authorities now have tenants at the heart of their

services and included in decision making processes throughout.

Summary and Recommendations

The political alignment of Welsh Government and the five “no vote” authorities could offer opportunities

Clarity is needed on the monitoring and measuring of WHQS against the 2020 date including the use of sanctions and / or incentives

Each local authority is in a very different position and any support needs to be tailored

to suit this

Self financing models– there needs to be an honest and open discussion with tenants

and members on implications

Wider housing management strategies needs to be taken into account

Compliance with WHQS means the regeneration of estates. However due to the

financial position of the authorities this may not be something that will be achieved

within the timescale set. The option of including core requirements in grants for

planning and regeneration to ensure these improvements take place should be

considered

Clarity needed on how high levels of tenant refusals of works can be dealt with by

Welsh Government

Tenant engagement mechanisms have been significantly enhanced as a result of

improvement works

Welsh Government:

Consider the recommendations and issues raised in this Active Response

Continue to reinforce the message that WHQS is a priority for Welsh Government and

that it should be a corporate local authority priority

Support benchmarking of “no vote” authority business plans with those who have

already been through the improvement programme to ensure assumptions are

realistic

Resolve the HRAS / MRA issues and provide a clear timetable for this

Continue to support the exploration of new models of financing

Consider the feasibility of innovative options including an all-Wales housing

association to take on stock

Continue to support the “no vote” local authorities through the Ministerial Task Force

– current political alignment could offer opportunities?

Ensure wider housing management strategies are taken into account when

monitoring compliance of the WHQS works

Develop guidance on dealing with high levels of tenant refusals of works

i2i will:

Continue to support Local Authorities and RSLs in the process of achieving WHQS, and WHQS plus

Provide support for the sector to monitor the wider value of their WHQS investment, and report to Welsh Government on this

Continue to promote good practice within the sector

Continue to provide support to the sector to use the Can Do Toolkits on supply chain development and targeted recruitment and training

Work closely with Community Housing Cymru ,Chartered Institute of Housing Cymru, the Welsh Local Government Association, Registered Social Landlords and Local Authorities to support collaborative working

Liaise with partner organisations including Value Wales to ensure co-ordination

Customise support for individual authorities to progress towards achieving the standard

Local Authorities:

Continue to work with partners to progress towards achieving the standard Liaise with i2i and Welsh Government on support required

Explore options for collaborative approached to delivery

4. Recommendations…

5. Further Information

Acknowledgements

Thanks to the following organisations for their input and time in the production of this briefing:

Caerphilly County Borough Council,

Vale of Glamorgan Council,

Flintshire County Council,

Wrexham County Borough Council

City and County of Swansea

CIH Cymru

Merthyr Valley Homes

Contact Us

For information on the guide or the work of i2i in general please contact:

Rachel Honey-Jones: Rachel.Honey-Jones@cih.org or 07507351906

Rachel Morton: Rachel.Morton@cih.org or 07534 527544

Elen Grantham: Elen.Grantham@cih.org or 07506 562193

Visit the i2i website: www.whq.org.uk/i2i