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HOW CAN WE ENSURE
SOCIAL HOUSING
REMAINS AFFORDABLE? AN INTRODUCTION TO LIVING RENT
IS AFFORDABILITY
IMPORTANT?
YES!!!
KEY ISSUES IN OUR
AREA
• Poverty levels
• 0 hour contracts
• Low paid jobs market
• Austerity effects
• Hard to access PRS
• Hard to make new
build viable
YOUNG PEOPLE WITH
NO HOUSING OPTION
Meet Jack….
Jack is 21 years of age.
Universal credit: 164.59
Weekly outgoings: 199.40
Money leftover: -34.81
JRF VALLEYS REPORT
Social housing providers, the Welsh Government,
landlords and key stakeholders need to:
• Carry out more effective and targeted use of existing grants
and other finance.
• Create changes to Local Housing Allowance (LHA)
alongside developing measures to improve the supply of
properties at LHA rates and improve quality.
• Improve support for people to reduce housing costs and
access employment.
• Link social rents to local earnings to address affordability
issues.
• Develop vehicles to deliver both locally tailored responses
and strategic action at a wider scale.
AFFORDABLE RENT
MAKES SENSE
The business case:
- Better property conditions
- Heightened wellbeing
- Lower poverty levels
- Better relationships with tenants
- Lower tenancy turnover
- Lower support costs
- Lower rent arrears
MAKING OUR MUTUAL
MEANINGFUL
INTRODUCTION TO
LIVING RENT
“A sustainable model
that responds to the
changed labour
market.”(Brian Robson JRF)
WHY DOES THE AREA WITH
ONE OF THE LOWEST
RENTS IN WALES NEED
LIVING RENT?
Threat of LHA
and possible
effect on
affordability
4,120 homes–
Over 700
different rents
Statistics vs
reality
>2,000
3 bed
houses Income levels
vs rent inflation
HISTORICAL RENT
• Over 1,300 different rents on transfer
• Welsh Government Rent Policy from 2014
• Target rents set at the high end banding of recommended
rents to replace benchmark rents
• New tenants straight to target rent.
• Majority of older tenants’ rents were between £10 and £20
per week less than target rent
• Smaller property rents were high due to supply & demand
• Unable to converge quickly because of the cap of £2 per
week (up and down)
WHY WG RENT POLICY
NO LONGER WORKS FOR
US…
• Initially gave us more certainty and included other
factors e.g. earnings; market rent and SAP
• The redistributive nature of the policy has led to our
disadvantage
• Hard to explain to tenants
• Presumes rents are already close to target, capping
convergence to £2 per week
• Places an increasing burden on new tenants over ex-
Council tenants
HOUSING FOR YOUNG
PEOPLE:
Rent shown as percentage of income:
We measured our 2017/18 rents against the
recommended 28% affordability target and found:
1. Bedsit rents were 32.24% of assumed earnings
(based on a 30 hour week at National Living Wage)
2. A single person under 25 earning £140 per week
escapes benefits so a bedsit rent would have been
49.74% of earnings
LIVING RENT
We took a collegiate approach – involving neighbouring
associations and Welsh Government in a joint presentation
from CIH and Joseph Rowntree Foundation.
AVERAGE EARNINGS
FIGURE???
There was a lot of discussion around average
earnings and the figures we should use…
• Assumed working hours?
• National Living wage?
• Average earnings statistics for Merthyr Tydfil?
•ASHE lower quartile earnings √
CHALLENGES….
• Limited empirical evidence on average
household per property type
• Lack of knowledge around households =
lack of knowledge around average earnings
• Service charges
• Affordability for smaller households
2018/19…
• Weekly residence earnings = £334 (2014-2016 ASHE
Lower Quartile earnings)
• 28% of £334 = £93.52 – our 3 bed house rent = our
average property type
• Flexed £93.52 by a % for each bedroom and property
type e.g. 1 bed flat is 75% of a 3 bed house rent
• Flat rents set to accomodate service charges
• Convergence factor of £0.60 per week or up to £2 per
week (up or down)
• Move to 52 rent weeks
2018/19
Rents
YEAR ON YEAR
COMPARISONS
POST IMPLEMENTATION
Q. Were we any better off?
A. No
Q. How did our tenants react?
A. Very few queries
Q. Were we able to increase rents by the 4.5%
guideline rent?
A.Yes
FURTHER Q’S
Q. Did it affect our valuation?
A. No
Q. Have all rents converged with target rent?
A. No
Q. Can it be improved?
A. Of Course…
2019/20 RENT POLICY
REVIEW – WHAT'S NEXT..
• Pre tenancy data shows average actual weekly earnings
since April 2018 = £356
• Pre-tenancy information shows that only 25% of households
interviewed since 1st April have been couples
• Average actual household income for a single parent family
with 2+ children is £402.71 per week
• Analysing arrears information – 996 tenancies with more
than 1 week’s arrears
• Review of service charges
• Tenancy audit to identify the occupants in our households.
FUTURE-PROOFING OUR
LIVING RENT POLICY
What if average
earnings
fall/stagnate?
Can our
business plan
cope with this? stepping stone
out of poverty/
ensure tenants
are incapable of
escaping the
benefit trap?
Will our
development
schemes be
viable?
What impact
will our rents
have on
effects of
austerity?
OPTIONS FOR YOUNG
PEOPLE
MVH are trialling modular homes at a
rent of £48 a week
CONCLUSION..
• More work to be done
• Everyone’s operating environment is different
• We are organisations who are best placed to determine
what rent to charge, it has to work for your community
• We need to balance affordability with collectability
Any Questions?