Ad Hoc Addendum to the Report on the Inquiry into Housing in Northern Ireland (Number 2/01R)
Due to an administrative oversight 3 of the written submissions, received from the Housing Executive during the Inquiry earlier this year, were omitted from Volume 2 of the Committee's report.
The 3 submissions headings are:
Home Renovation Grants
Houses in Multiple Occupation (HMOs) and Regulation of the Private Rented Sector (PRS)
Large Scale Voluntary Transfer (LSVT)
To be inserted following 'WRITTEN SUBMISSION BY: NORTHERN IRELAND HOUSING EXECUTIVE' page 22 and before 'WRITTEN SUBMISSION BY: THE NORTHERN IRELAND FEDERATION OF HOUSING ASSOCIATIONS' page 23.
Written Submission By:
Northern Ireland Housing Executive
2 April 2001
Thank you for inviting the NIHE to make a submission to the Social Development Statutory Committee on Private Sector Renewal --Home Renovation Grants.
This summary sets out the NIHE's views on the proposal to move from "Mandatory to a Discretionary system of Home Renovation Grants". I have set out in the main document the current provision and type of grants and I have also included Chapter 9 of a DETR Consultation Paper entitled "Private Sector Housing Renewal" issued in March 2001. This outlines the GB proposal for a major reform of the system.
The Importance of Home Renovation Grants
Successive House Condition Surveys have confirmed that Home Renovation Grants have played a major role in reducing unfitness. The 1996 House Condition Survey confirmed that, of the 24,000 dwellings that had moved from unfit to fitness in the previous five years, about 40% had done so with grant aid.
Whilst unfitness has been substantially reduced more needs to be done especially in rural areas and it should be noted that 4000 dwellings become unfit annually.
The NIHE therefore sees the continued need for financial assistance to help deal with repair and improvement.
What is the Difference between a Mandatory and Discretionary Grants System?
Essentially with a mandatory system, provided an applicant satisfied the Test of Resources and the property meets the unfitness criteria, a grant approval must be issued and the organisation essentially enters into a financial commitment which must, at some stage, be honoured. In the past this has led to queuing and rationing of approvals to match the available finance.
With a Discretionary Grants system the local Authority decides, within the legislative framework, what its priorities will be in terms of properties, area or individuals and targets grant aid on that basis. Grant aid is still, however, subject to test of resources.
In Northern Ireland the system is mainly mandatory, although a Discretionary Renovation Grant also exists to tackle dwellings in disrepair (but not unfit) in Housing Action Areas and to complement the Disabled Facilities Grant. The Discretionary Renovation Grant could be extended to other categories of dwellings in disrepair but it has not been done for reasons of budget availability and the need to target unfit dwellings.
In GB a Discretionary Grant system replaced the Mandatory system in 1996. Since its introduction Grants expenditure has fallen significantly, it has tended to be concentrated at area renewal and the predominant grant type used is the smaller Home Repair approval as opposed to full Renovation Grant.
What is Proposed in Great Britain?
The Consultation Paper issued in March 2001 and referred to earlier, proposes to replace the existing statutory grants system with a broad general power for local authorities to give financial assistance for home repair improvements and adaptations. Thus local authorities would have the power to design their own strategic approach to housing renewal. Assistance could be given in the form of grant, loan, loan guarantees and indemnity, provision of materials or labour, carrying out the work or providing relocation grants.
Options for Northern Ireland
The NIHE has identified four possible courses of action that could be taken in Northern Ireland.
Option 1 - Status Quo - Retain the Current Mainly Mandatory System
The present system has done much to reduce unfitness and is targeted at the worst properties and the poorest people. It also guarantees grant aid to those who qualify. The disadvantage is that, because of the available funding, it is not possible to target properties which are fit but in disrepair. The Mandatory system does not readily facilitate the targeting of areas of particular households.
Option 2 - Extend Strategic Targeting within the Existing Mandatory Grants System
This would permit the introduction of some targeting of the resources by extending the current Discretionary framework within the legislation whilst maintaining the Mandatory system. Thus we could target fit dwellings in disrepair and prevent them from falling into unfitness. Group Repair Schemes could be extended and particular groups, such as the Private Rented Sector or elderly, could be targeted. A pointing system which assessed applications by condition, age and financial circumstances could be devised to ensure resources were targeted at worst cases.
It needs to be recognised that, as long as resources remain at current levels, adopting this option would result in less money being available to tackle unfitness through Mandatory Grants, in order to fund dwellings which are in disrepair through Discretionary Grants.
Option 3 - Introduce a Discretionary Grants Scheme (Current GB Position)
This would remove all mandatory entitlement to grant aid except perhaps for Disabled Facilities Grant and Repairs Grants subject to the serving of certain Statutory notices. It would be for the NIHE, in conjunction with the Department, to establish a strategic framework within which it would invest to improve house conditions.
The framework would need to decide the balance between particular tenures, particular vulnerable groups, locations (rural/urban) area renewal and so forth.
Option 4 - Securing the Best Grants Scheme for Northern Ireland
The proposals for GB represent a very radical shift away from the statutory framework of the past towards a system where each local authority would have a general power to tailor its own approach to tackling poor housing conditions in it's own area. This, along with proposals to replace the current unfitness standard with much broader Housing, Health and Safety Rating standard, changes the approach of many decades.
The proposed switch from Mandatory Grants to a Discretionary system stemmed from the Housing Policy Review 1996. At that time the proposal was intended to reflect the change to be introduced in GB. In Northern Ireland the case for switching from Mandatory to Discretionary had been made more compelling by the high surge in demand following the introduction of our own Mandatory Grants system in 1992. This had led to long queues and the build-up of a large financial commitment.
That said, it is important to recognise the very different Grants climate that exists today in Northern Ireland, where we have a robust Grants budget (£45m 2001/02) and an absence of lengthy queues. In view of this, the NIHE believes that the same dynamic for change does not exist today in the way it did when the proposal was first made 5 years ago.
It is the NIHE's view that it does not make sense to make the switch now and that a better Grants system could be tailored for Northern Ireland - a Grants system that
- Meets the strategic housing needs of our local community
- Harnesses the best from the GB experience and
- Reflects the changes in unfitness standards
The NIHE believes there is compelling evidence to support this view.
- The financial backlog has been cleared in Northern Ireland and the current level of funding means that grants are dealt with in a reasonable period of time.
- GB is now proposing to move away from the current Discretionary system and to replace it with a system giving local authorities more power to design their own Housing Renewal Strategies and Policies.
- The timescales involved within the Housing Bill means that, at best, it will not be enacted until Autumn of 2002.
To conclude, NIHE believes it would be more appropriate to develop a robust Grants system, tailored to meeting the housing needs of the Northern Ireland community. In the meantime, some minor change to grant regulations could be made which would give more discretion in dealing with Disabled Facilities Grants and Repair Grants for over 60s.
I am happy to meet the Committee to present the issues on Private Sector Renewal, or respond to any question that MLAs may have.
In the meantime I remain,
Written Submission By:
Northern Ireland Housing Executive
2 April 2001
Thank you for inviting the NIHE to make a submission to the Social Development Statutory Committee on Houses in Multiple Occupation (HMOs) and Regulation of the Private Rented Sector (PRS), within the terms of reference that you have set down:
'To (1) examine current NI law and policy in relation to the above, conduct comparisons with the United Kingdom and the Republic of Ireland, summarise existing NI practice in relation to HMOs and the PRS; and (2) identify benefits/disbenefits of new proposals and produce a report.'
Section 1 - HMOs
The NIHE published its HMO Strategy in June 2000 and a copy is included as a major part of this submission. In the NIHE's view this HMO Strategy:
- Gives a clear statement of the scale, distribution, condition and potential for growth within Northern Ireland's HMO market.
- Examines the current legal framework here and elsewhere.
- Identifies problems with the definition of a HMO.
- Describes the progress that is needed in this sector of the market.
- Details a series of strategic proposals to achieve our objectives.
The Housing Executive, as the Strategic Housing Authority for Northern Ireland, believes there are certain key issues that must be addressed in relation to this sector of the housing market. While I have included a summary of these below I would commend you to the details that are contained within the documents accompanying this submission.
What Principles should guide policy on HMOs?
The NIHE's approach to HMOs is underscored by:
- the need to secure a diverse and well-managed private rented sector;
- the need to secure that HMOs are safe and provide acceptable basic living conditions/management standards; and
- the need to protect the most vulnerable sections of the community from exploitation by unscrupulous or uncaring landlords.
Is the current definition of a HMO adequate?
Within the Housing (NI) Order 1992 a HMO is defined as a "house, which is occupied by persons who do not form a single household".
In England it is intended to introduce legislation to clarify the definition. This is because in case law, over the years, the definition of what constitutes a House in Multiple Occupation has been examined. The net effect of this has been to create a level of ambiguity about the types of household/shared housing covered by the definition.
Publication of the Housing Executive's HMO Strategy in June 2000 was preceded by widespread consultation. The response to the consultation confirmed the need for a clearer definition of HMOs particularly to ensure that student-type shared lettings are included.
In this context the NIHE wishes to see the early introduction of more substantive legal powers through a broader legal definition of HMO that will provide legislative clarification of specific properties and tenancies currently excluded from HMO action.
This issue is dealt with in detail within the body of the NIHE's HMO Strategy.
Is the HMO sector in decline or growth?
HMOs represent an important element of the private rented market.
The NIHE estimates there are some 9,712 HMO properties, let by up to 2,000 landlords and housing nearly 30,000 people in Northern Ireland. These, in the main, are located in Belfast (particularly North Belfast and around the University Area), Londonderry and Portrush/Portstewart and are linked to the student housing market. Increasingly, however, there is a perceptible growth trend in the HMO market in district towns.
HMOs provide quick access to accommodation for groups such as single young persons, mobile workers, students and those who cannot or choose not to access home ownership. HMOs are also recognised as a key source of housing for people seeking long-term accommodation who are economically disadvantaged.
In Northern Ireland housing demand from single persons remains high and is projected to grow. Given that trend and changes in lifestyle patterns, the HMO sector is likely to grow while continuing to have an important role in meeting housing need, most commonly in the private rented sector over the next ten years.
What is the physical condition of HMOs?
The 1996 House Condition Survey indicates that HMOs are generally older, more unfit properties, with an unfitness rate of nearly 10% compared to the 7.3% unfitness overall. Of the 10% unfitness level almost half (45.7%) were self-contained flats. Over flat of all HMO units are in buildings built before 1919 and less than one-third were built after 1945. NIHE data shows that 1 in 3 HMO properties inspected fail to meet the specific fire safety and amenity standards that the NIHE has stipulated in relation to the number of occupants. On this basis it is estimated that about 2,200 properties currently operating as HMOs may require statutory action to enforce standards.
NIHE is concerned about:
- the physical standard of accommodation in the HMOs sector particularly in relation to fire safety and lack of amenities; and
- the management standards particularly in relation to overcrowding.
For the above reasons HMOs represent a comparatively low volume but high-risk sector of Northern Ireland's housing market.
How can HMO conditions be improved?
The NIHE uses Grants legislation as the main tool to tackle HMOs. An initial 10-year timetable has been established to action all HMOs. This will be subject to annual review based on the availability of finance.
The HMO Grants scheme directs mandatory grant aid at individual substandard properties. Increasingly however, given the concentration and expansion of HMOs, grant aid and enforcement activity will be adapted to a form of Area-based action. In effect HMO activity could become an effective form of strategic Area Action thereby limiting the prospect of urban renewal. The NIHE is developing an Area-based component within its HMO Strategy.
How can the management standards be improved?
Although most landlords in the HMOs sector are acting responsibly there exists a fringe of less reputable landlords who neglect maintenance or who set out to exploit tenants. Licensing schemes are regarded as a means to ensure that only fit properties enter the housing market, thus preserving the health and safety of those occupying the sector. The introduction of such a scheme to Northern Ireland could assist with the objective of promoting better standards in the sector.
Voluntary/Statutory Licensing of HMOs?
The DETR is currently evaluating the results of consultation on the introduction of a mandatory licensing scheme for HMOs in England. In Scotland a compulsory licensing scheme was introduced in mid 2000 and is being phased in.
In January 2001 the NIHE issued for consultation Proposals for the Introduction of a Voluntary Licensing Scheme for HMOs in Northern Ireland. The Voluntary Licensing Scheme would familiarise landlords, tenants and other key players with the concept of licensing in anticipation of a legislative licensing requirement within a future Northern Ireland Housing Bill.
While some landlords/agents have suggested that a Voluntary Licensing Scheme could deliver the same results as a Mandatory scheme would deliver the Housing Executive remains unconvinced. Proposals for the Introduction of a Voluntary Licensing Scheme are included with this submission and consultation ends in April 2001.
Can Housing Benefit Play a Role in Improving HMO Standards?
At present Housing Benefit is paid to a tenant if the eligibility criteria is met regardless of the condition of the property. Private Sector Housing Benefit is mainly paid directly to the landlord. In Great Britain the Government's policy aim is to
". develop Housing Benefit measures linked to our proposals for Mandatory HMO Licensing and selective licensing of private landlords. We believe that restricting Housing Benefit, or its direct payment to landlords, will prove an effective way to underpin a licensing regime in low demand areas and target the worst landlords."
How can HMOs that are brought up to standard remain so?
A programme of 200 annual management inspections is underway to ensure that properties, which have been made fit through grants, are being maintained to the NIHE's satisfaction.
The NIHE has also developed systems to effectively monitor the impact of its HMO Strategy.
How can 'best practice' among Landlords/Agents be harnessed?
The NIHE wants to build on the strengths of the sector, particularly its flexibility and ease of access, and continue to progressively tackle its weaknesses, particularly conditions and management.
The NIHE is currently seeking to raise awareness of the respective roles and responsibilities of the NIHE and landlords/agents by developing a close working relationship with them. This process will not only help the NIHE to improve its HMO services, but will also assist those well-intentioned landlords who have neither the time nor the knowledge to provide an adequate service.
How much will it cost to deliver a coherent HMO strategy?
Since 1995/96 up to the end of March 2001, a total of £13m had been spent on HMOs. A further £4.14m will be spent next year, while the HMO Strategy sets out the need for an annual commitment of £3m to fund its 10-year Strategy. Advancing this programme would require either an increase in funding or the skewing of the Grants budget in favour of HMOs at the expense of addressing unfitness.
One of the real challenges that will need to be addressed is how a Mandatory Licensing Scheme, which may require grant aid by the landlord, can be phased in over time and in line with available resources.
In summary, the NIHE would seek legislation to:
- clarify the definition of a HMO;
- introduce Mandatory Licensing;
- link Housing Benefit payments to standards.
Section 2 - regulation of the private rented sector
The Minister had indicated his intention to bring forward proposals to transfer the regulation of the Private Rented Sector from the Department to the Housing Executive. This proposal is welcome and is consistent with the Housing Executive's role as the Strategic Housing Authority in Northern Ireland. The proposal will enable the Executive to take a more focused approach to promoting a diverse and well-managed private rented sector.
What Powers will Transfer to the Housing Executive?
The powers transferring to the Housing Executive flow from the Rent (NI) Order 1978 which applies to older properties at the lower end of the private rented sector. These powers are intended to ensure that rents reflect housing conditions and that tenants have a considerable degree of security of tenure. The Department currently has a statutory duty to maintain a register of rents payable under registered and restricted tenancies, and to make the register available for inspection. It is understood some 6,500 properties are on this register.
Are the Current Powers Adequate to Regulate the Sector?
The current legislation is the Rent (NI) Order 1978. It has been recognised that this legislation requires review and the Minister has set up a Review Group chaired by a Departmental Official. The terms of reference for the Review are included with this submission. The Housing Executive is represented on the Review Group.
What is the nature of the Private Rented Sector?
The 90's has seen a growth of the private rented sector from 20,000 to an estimated 30,500 dwellings. It is not a homogenous sector and consists of regulated and restricted tenancies (lower end of the market); uncontrolled furnished tenancies (including Houses in Multiple Occupation), the apartment/high cost market and new dwellings built/or let/resold NIHE dwellings (which is a recently emerging market).
In the main the sector comprises pre 1919 dwellings with high levels of unfitness (16.4%) and disrepair and occupied by poorer households. Whilst a small number of landlords hold large property portfolios, generally, the average landlord owns 5/6 properties.
What role does Housing Benefit play in the Private Rented Sector?
Since March 1998 there has been a significant growth in the number of private rented sector tenants receiving Housing Benefit (34,000 to an estimated 43,000 by March 2003). Currently £132m per annum is paid by way of Private Sector Housing Benefit (note that this includes Housing Association tenants). In Great Britain there is a debate on-going which would link Housing Benefit to condition and good management (see Section 1 on HMOs).
What issues are currently being addressed in the Private Rented Sector?
- The NIHE has commissioned research into the Private Rented Sector which will pinpoint the precise demand and supply factors which influence the growth of the PRS. There are a range of factors that need to be taken into consideration including new household formation, investment strategies of key players from financial institutions to landlords, fiscal policies relating to all tenures, interest rates, deregulation of rents, decrease in the supply of public housing and shifts in single person occupancy, to shared housing, particularly for young people, and the growth and geographical spread of third level educational institutions.
- There are indications that the availability of housing benefit in the PRS has also played a part in the upturn in the sector, and the structure of the scheme gives tenants no incentive to negotiate or shop around in relation to their housing expenditure. As a result rents have largely been paid at higher levels than in the public sector, thus possibly attracting an increase in investment. Landlords can also have rent paid direct, which has reduced the risk of collecting rents traditionally associated with the sector. However, the overall impact of Housing Benefit in the housing market, in general, and in the private rented sector, in particular, is not fully understood. The law is extremely complex and the role of rent officers in determining key definitions such as 'size criteria' 'exceptionally high' 'local reference rents' and 'locality' is central to the level of rents paid in a particular area. Similarly, the quality of service provided by the Housing Executive, in for example, the provision of information, meeting assessment and payment deadlines, has an impact on both tenants and landlords decisions.
- A related issue is the problem of voids in Housing Executive dwellings. These are on the increase. Again the explanation for this phenomenon is complex. There are both push and pull factors operating. Push factors may include poor quality of the housing, the high levels of rents, or the perceptions of anti-social behaviour on the estate. Pull factors may include the quality of housing, whether or not it is furnished, environmental factors, the low levels of rents, or better transport facilities for work and shopping.
The NIHE research will focus on four key areas.
What economic factors are driving the market? Which of the following are important?
- the changing job market;
- lending policies of financial institutions particularly new policies on buy to let;
- the role housing subsidies have played particularly at the lower end of the market, through housing benefit, and recent changes to the legislation;
- the role the house sales policy has on both the re-emergence of sold dwellings into the rented sector and declining availability in the public sector;
- the incentives and disincentives for investors and landlords to enter and to remain in this sector.
What socio-demographic factors are affecting the market? Which of the following are important?
- the changing attitudes and lifestyles of younger people;
- the rules and policies which prevent people obtaining other rented accommodation;
- the inaccessibility to other types of tenure.
What lessons are to be learned from other housing markets which have expanded and how these may or may not be applicable to Northern Ireland? In addition are there lessons to be learned from different and similar legislative frameworks and professional practices?
What role does housing benefit play in sustaining the market, particularly at the lower end? In addition, what impact has the introduction of the scheme in 1983, and the legislative changes made since, had on the private rented sector?
The central focus of the PRS research will be to provide information on factors accounting for the recent growth of the private rented sector as well as assessing the potential for further growth. Relatively little research has been carried out on this subject in the province and it will be the intention of this research to evaluate the role of the sector within the overall housing market. The overall aim of the research is to conduct a study of the private rented sector in Northern Ireland. There are six objectives.
1. To provide a doctrinal analysis of the law relating to the private rented sector in Northern Ireland.
2. To provide a comprehensive profile of the private rented sector in Northern Ireland based on a secondary analysis of selected databases and to provide an analysis of the changing form of the sector over the last decade.
3. To help to identify the economic, social and demographic factors which are driving the sector.
4. To identify the forces which stimulate and retard growth in the various component parts of the sector.
5. To assess the role of Housing Benefit in the demand and supply side of the private rented sector.
6. To determine the role of the private rented sector within the total housing market in Northern Ireland.
7. To assess the potential for growth in the sector and the forces which might drive this.
In summary therefore the Housing Executive's view is:
- The transfer of the regulation function to the Housing Executive represents a necessary first step in the approach to the Private Rented Sector.
- The Review of the Rent Order (NI) 1978 is welcomed.
- This together with the research commissioned by the Housing Executive and the views obtained by the Committees work will provide the basis for developing an overall strategy for the Private Rented Sector.
I am happy to meet the Committee to present the issues on Houses in Multiple Occupation and the Private Rented Sector or respond to any questions that MLAs may have.
Written Submission By:
Northern Ireland Housing Executive
20th April 2001
Large Scale Voluntary Transfer (LSVT)
1. Thank you for inviting the Housing Executive to submit evidence to the Committee which is undertaking an inquiry into Large Scale Voluntary Transfer.
2. It is our understanding that the powers that the Department intend to take in respect of large Scale Voluntary Transfer are permissive. It is also our view that they are based on the Housing Policy review carried out in 1995. Circumstances have moved a long way from then both in terms of Northern Ireland (not least of which is the existence of a devolved administration) and in terms of England where in particular the Labour administration is making significant additional resources available for public investment in housing and is also willing to consider options other than Large Scale Voluntary Transfer. The different solutions being adopted by devolved administrations in Scotland and Wales may be of interest to the Committee.
3. There is a considerable amount of published material on Large Scale Voluntary Transfer (and alternatives). It is not the intention to cover all of these in this submission. I have included at Appendix 1 the Government's views on the social rented stock as set out in the Green Paper on Housing published in the Summer of 2000 and its response to consultation published in December 2000 (Appendix 2). I have also included a bibliography of key papers on LSVT and other models (Appendix 3).
4. The Committee is aware that the Committee for Finance and Personnel is carrying out an inquiry into Public/Private partnerships for the provision of various Public Services. The Housing Executive has responded to this and I believe this to be relevant to the Committee's deliberations on LSVT. A copy of the submission is included (Appendix 4).
5. This letter covers the key issues associated with Large Scale Voluntary Transfer.
6. What is LSVT?
"Large Scale Voluntary Transfer" is the disposal of local authority housing stock to an existing or new Registered Social Landlord - in effort to a landlord who will be subject to regulation.
7. What is proposed in the forthcoming Housing Bill in relation to LSVT?
Current legislation already permits the transfer of social housing stock in Northern Ireland subject to the agreement of all tenants affected by the transfer. The Department of Social Development proposes to legislate to remove a single tenant veto and instead make provision for any transfer to be subject to the agreement of the majority of tenants. This will bring Northern Ireland into line with the rest of the United Kingdom.
8. What is the background context to LSVT?
LSVT was initially introduced in Great Britain as a means to attract private investment to address a £22bn housing repairs backlog. This form of private investment does not impact on government borrowing.
More recently Government has set LSVT in the context of:-
- the need for local authorities to concentrate on their strategic role by withdrawing from their operational role
- offering greater opportunities for tenant involvement and
- creating a more diverse range of providers.
9. What criteria govern LSVT?
Government has created a funding pool to finance the LSVT programme. This was essential because some local authority stock has a negative value (the loan debt is greater than the value of the stock).
To be admitted to the transfer programme key selection criteria have been set by Government. These cover:-
- evidence of support amongst tenants for the proposed transfer
- whether the proposal is a coherent part of the local authority housing strategy
- whether the transfer provides value for money and
- whether it will deliver better services for tenants and greater participation by tenants.
10. What rules govern LSVT?
In order to submit an LSVT proposal for inclusion in the programme a local authority must provide:-
- rationale for disposal
- calculation of public expenditure costs
- details of repair/improvement costs over 30 years
- existing debt and redemption premia
- transfer price
- confirmation rents will conform to government proposals for the future direction of social housing rents
- proposed transfer structure (limiting each new landlord to 12,000 units maximum).
Where an overhanging debt would remain the local authority would seek Government funding through a one-off grant.
Where the receipt from a disposal is greater than the outstanding loan debt a levy (20%) is payable to Treasury by the local authority.
11. What level of LSVT has taken place?
Some 400,000 properties have been transferred under LSVT since 1988. The annual transfer programme has been set at 200,000 units against a total local authority stock of over 3 million.
12. What other approaches are available?
Government has acknowledged that "even at an enhanced rate of stock transfer the amount of housing remaining in local authority ownership will be significant for many years".
The housing policy statement within the Green Paper "Quality and Choice: A decent home for all" points to a range of options apart from transfer which local authorities may use for future investment in their stock:-
- continued direct management by the authority using additional resources (capital investment in housing has doubled since 1998).
- the Private Finance Initiative to bring in private resources to improve particular sections of stock.
- arms length arrangements under which an authority separates its function as a housing landlord from its strategic role.
In addition some local authorities are investigating the prospect of borrowing against their rental stream (securitisation model) but this has not received DETR approval.
13. What are the main features of arms length arrangements?
An arms length arrangement means setting up a company (limited by guarantee) controlled by the local authority, to perform its landlord function. In effect the stock remains in the ownership of the local authority, tenants remain secure tenants of the Local Authority and retain the right to buy their property. Provided the company receives a "very good" rating by the Housing inspectorate it may submit a bid for additional resources.
Government has set up a special fund for such companies which would provide an average £500 per dwelling which could support borrowing of some £5,000 per dwelling. The borrowing counts for capital control purposes. In addition capital receipts from disposals would be available to it.
While it is a matter for authorities to determine which functions to delegate to the company Government guidelines suggest local authorities should retain responsibility for homelessness, housing benefit and some other services considered strategic.
14. What do other Regional Assemblies propose?
The Welsh Assembly has approved "A Framework for a National Housing Strategy for Wales". The framework does not promote a specific option to deal with the £1bn backlog in repairs. Instead it states
'all methods of securing additional investment in local authority housing from private finance sources consistent with current Public Sector Borrowing Requirement rules are being considered'.
In Scotland between 1997 and 2001 net public sector expenditure on housing increased by 40%. At the same time the Assembly's Housing Green Paper has promoted "community ownership". Community ownership would normally result from the transfer of existing public sector rented housing to alternative community landlords under arrangements, which ensure that:-
- housing is owned by a non-profit making body on which there is tenant, local authority and community representation
- effective tenant involvement in key decisions
- housing is let at affordable rents and
- there are guarantees for transferring tenants.
Around 50,000 properties have been transferred and some local authorities, Glasgow in particular, are currently pursuing the "community ownership" model.
15. What are the key issues for Northern Ireland?
The "tests" for various options including the status quo relate to:-
Separation of the strategic from the operational role
Since social housing stock is managed by the Housing Executive as opposed to each Council the requirement for this separation could be questioned, particularly given the relative scale of Northern Ireland. In addition it could be argued that the mixed strategic/operational role in Northern Ireland has been successful.
Greater tenant empowerment/involvement
The Board of the Housing Executive provides various forms of representation although it is acknowledged there is no statutory form of tenant representation. In addition the tenant involvement framework and compacts provide for direct involvement at operational and policy level by tenants (and indeed other residents). Such involvement and participation is also extensive in urban renewal areas and in those neighbourhoods which are subject to an estate strategy.
Tenant willingness to transfer to other Landlords
The limited research carried out by the Housing Executive suggests that tenants are satisfied with the Executive as landlord and it may be difficult to secure agreement to transfer.
Better services for tenants
Existing benchmarks against other housing authorities have shown the Housing Executive to offer highly cost effective services although with room for improvement. Whether or not alternative structures would provide better services must be seriously questioned particularly since the statutory responsibility for some services would remain with the Housing Executive under each of the options.
Smaller scale Landlords
While a case can be made for landlords with limited housing stock (say 12,000) this must be set against the resultant fragmentation of services, complications and confusion in seeking to 'join up' services and higher overhead costs. In addition it is noteworthy that amalgamations among smaller Housing Association landlords in England is becoming more common in order to effect economies of scale. The "purchasing power" of larger authorities would therefore be lost under a fragmented arrangement.
Securing additional finance
There is no doubt this is a key driver for those local authorities with massive improvement and repair backlogs. While backlogs exist in Northern Ireland continued investment has maintained them at a lower level. Indeed it could be argued that backlogs exist because significant housing funds have been diverted into other strategic non0landlord priorities, not least 'urban renewal' and 'care in the community'. In its broadest sense therefore existing investment is contributing to a wider agenda in Northern Ireland. Nevertheless the requirement to seek additional finance from whatever source remains.
16. Current Position
The Department for Social Development and Housing Executive have jointly commissioned a preliminary investigation into the various options.
"To carry out a preliminary evaluation in legal, service delivery and financial terms of existing and emerging models for the ownership and management of social housing stock in Northern Ireland."
Scope of Study
The specific models to be evaluated are:-
- Existing structure (with facility to borrow privately)
- Arms length arrangement(s)
- Stock transfer and
- Any other models emerging in other Regions.
The evaluation should consider:-
The extent to which the model requires legislative change and the nature of that change, and the implications for tenants rights and opportunities to participate.
The financial implications in terms of:-
- Disposal value
- Breakage costs
- Capacity to borrow
- Funding requirements
- Implications for loan charges
- Implications for NI block
- Likely reaction of private finance market.
This should be undertaken using methodologies set by DETR (although stock condition, investment requirements and valuations should be based on information which is readily available) and presented in the form of a financial model.
The general implications in terms of the cost, distribution and standards of service delivery under each model; and the consequences for employees.
17. Impact of LSVT on the role of the Executive
It is our view that the future role of the Executive will be influenced by a variety of factors other than LSVT. these include:-
- The best way of funding investment needs
- The proposed review of public administration
- The emergence of a political view about is future role
18. However it is clear that there are key functions/activities which are required to be delivered within the Housing system in Northern Ireland. These are:-
- Housing Research
- Housing Standards
- Lettings Scheme
- Housing Plans
- Area/Local Strategies
- Home Energy Conservation
- Housing Regeneration Strategy
- Housing Benefit system
- Supporting People Strategy
- Investment Planning (inc Newbuild)
- Setting Investment Priorities
- Programme Plans and Management (inc Newbuild)
- Private Rented
- Housing Association
- Social Renting
- Performance Standards
- Performance Reporting
- Landlord role
- Programme delivery
19. In conclusion therefore LSVT is one model amongst others which have emerged since 1995 in Great Britain. It is clear that in both England and in the devolved administration in Wales and Scotland other models are being pursued. The conditions which exist in Great Britain in terms of substantial investment backlogs do not exist in Northern Ireland where the social rented stock is in relatively good condition. However there is a backlog but more importantly there is a need for continued reinvestment in the stock. Whether or not this can be funded from within public sector resources will be a key determinant of the best model.
The existence of a strong single strategic housing authority for the Province brings many strengths, economies of scale and accountability, which could be easily lost in the fragmented structure which LSVT would produce. It is also becoming apparent that the challenge of tackling urban regeneration and neighbourhood renewal and the mix of public and private investment required would be difficult to achieve in the type of fragmented structure which might arise from LSVT. Finally the Executive jointly with the Department is reviewing the investment needs and the implications of various models. We believe this will be an important input to the debate.