Agenda item

(The Director of Housing) To consider the attached report (CHB-001-2013/14).

(1)        That the Cabinet’s previous decision to charge “affordable rents” for Council properties built under the Council’s Housebuilding Programme be re-affirmed;           

(2)        That when such properties are (re)let, the Council’s affordable rents be set at a level equivalent to the lowest of:

(a)        80% of market rents for the locality in which the property is situated, as assessed by the Council’s Estates and Valuations Division;

(b)        the Local Housing Allowance level for the Broad Market Rental Area (BMRA) in which the property is situated; and

(c)        a rent cap of £180 per week, irrespective of the size of the property.

(3)        That affordable rents be increased annually by the Retail Price Index (as at the preceding September) + 0.5% (or any other maximum increase determined by the Government), until the tenant vacates, when the affordable rent will be re-based in accordance with the Homes and Communities Agency’s (HCA’s) Affordable Rent Model and the policy at (2) above;

(4)        That the Council’s rent cap level be reviewed annually by the Council Housebuilding Cabinet Committee; and

(5)        That the Director of Housing be authorised to enter into Short Form Agreements with the Homes and Communities Agency for all developments, to enable affordable rents to be charged for the properties built under the Housebuilding Programme, and that the “Provider Representative” named in the Agreements be a senior figure at East Thames Group.

The Director of Housing presented a report regarding the Affordable Rents Policy for properties built as part of the Council’s Housebuilding Programme.

The Cabinet Committee had previously agreed that “affordable rents” should be charged for the properties built under the Council’s Housebuilding Programme, which would be higher than the “social rents” charged for the Council’s existing properties.

It was necessary for the Council to adopt a policy, explaining its approach to how affordable rent levels would be set within the HCA’s Affordable Rent Model. The maximum affordable rent was 80% of the market rent for the same type of property in the same locality, including service charges.

The report explained that councils and housing associations generally charged “social rents” for their properties. These were set in accordance with a Government formula, based on:

·                Property value;

·                Average earnings for the county; and

·                Property size.

The Government’s Rent Convergence Policy (which had been adopted by the Council), sought to ensure that (within a 5% tolerance) similar rents were charged for the same type of property in the same location, irrespective of whether the landlord was a council or a housing association.

Members noted that the Government’s target date for convergence to be achieved across the country was April 2015.  However, the Council’s target was to achieve rent convergence by April 2017 – although it was noted that many of the Council’s properties would not reach their target rent by April 2017, because to do so would breach the Government’s maximum annual rent increase for individual properties, which was currently RPI + 0.5% + £2 per week.  As part of the Government’s Comprehensive Spending Review (CSR) announced on 26 June 2013, the Government stated that social rents could be increased by the Consumer Prices Index (CPI) + 1% per annum from April 2015 for at least the following 10 years.

The Director of Housing explained that if an affordable rent was charged at a level that was higher than the “Local Housing Allowance” (LHA) for the “Broad Market Rental Area” (BMRA) in which the property was situated, the difference between the rent and the LHA could not be met from housing benefit. Therefore, a tenant in receipt of housing benefit would have to pay the difference between the LHA and the affordable rent.

The Rent Cap adopted by most housing associations that have one, generally took account of the Government’s new Benefits Cap level (£500 per week for couples and single people with children and £350 per week for single people without children) and tenants’ estimated living costs. Rent caps adopted by the Council’s Preferred Housing Association Partners varied between £180 and £225 per week.  It was the officers’ view that, for the Epping Forest District, a Rent Cap of £180 per week would be appropriate, bearing in mind that an affordable rent at this level would be significantly higher than the social rents charged by the Council for their existing properties.

The Cabinet Committee noted that, for the proposed developments within Package 1 of the Council Housebuilding Programme, the proposed Affordable Rent Policy had been applied and that, as a result, it had been necessary for the rents of all the 3-bedroomed houses (10 properties on two sites) to be set at the proposed Rent Cap of £180 per week.

Decision:

(1)        That the Cabinet’s previous decision to charge “affordable rents” for Council properties built under the Council’s Housebuilding Programme be re-affirmed;           

(2)        That when such properties are (re)let, the Council’s affordable rents be set at a level equivalent to the lowest of:

(a)        80% of market rents for the locality in which the property is situated, as assessed by the Council’s Estates and Valuations Division;

(b)        the Local Housing Allowance level for the Broad Market Rental Area (BMRA) in which the property is situated; and

(c)        a Rent Cap of £180 per week, irrespective of the size of the property.

(3)        That affordable rents be increased annually by the Retail Price Index (as at the preceding September) + 0.5% (or any other maximum increase determined by the Government), until the tenant vacates, when the affordable rent will be re-based in accordance with the Homes and Communities Agency’s (HCA’s) Affordable Rent Model and the policy at (2) above;

(4)        That the Council’s Rent Cap level be reviewed annually by the Council Housebuilding Cabinet Committee; and

(5)        That the Director of Housing be authorised to enter into Short Form Agreements with the Homes and Communities Agency for all developments, to enable affordable rents to be charged for the properties built under the Housebuilding Programme, and that the “Provider Representative” named in the Agreements be a senior figure at East Thames Group.

Reasons for Decision:

It was necessary for the Council to adopt a policy, explaining its approach as to how affordable rent levels would be set, within the HCA’s Affordable Rent Model.

Other Options Considered and Rejected:

The other main options were:

(a)        The Council could set rents at a lower level than 80% of market rents – but this would have implications for the viability of new developments.

(b)        No reference could be made to the LHA level – but this could result in rents not being covered in full for tenants in receipt of housing benefit.

(c)        No Rent Cap being imposed, or a lower or higher Rent Cap could be adopted.  However, if a higher Rent Cap was adopted, it could have implications for tenants in receipt of housing benefit when Benefit Caps were introduced under the welfare reforms. If a lower Rent Cap was adopted, it could affect the financial viability of developments.