The Housing and Planning Act – What does the future hold for the sector?

lucy_worrallOn the 12th May the Housing and Planning Act received royal assent. So now it’s in place, what does the future hold for the sector in England under this new legislation?

Well, in many respects, there remain many ‘known unknowns’, much of the detail is yet to be published in regulations which are expected to be drip-fed over the coming months. But from what we do know, there are a number of significant impacts on housing associations (HAs), local authorities and ALMOs flowing out from the Act. Depending on your perspective, these present challenges, opportunities or threats to individual housing associations and the sector in England, as a whole.

Affordable housing, the voluntary right to buy and starter homes

In relation to the supply of new homes, the Act focusses on supporting the Government’s manifesto commitment of increasing affordable homeownership, through the delivery of 200,000 starter homes by 2020. Councils will have a duty to promote the supply of Starter Homes which will be sold at a discount of at least 20 per cent of market value to first time buyers between 23 and 40 years old.

The introduction of voluntary right to buy (VRTB) for HA tenants is also a key item under the Act. The Government is currently running a VRTB pilot scheme with 5 associations across the country.

There will be a two-home replacement requirement for every one sold in London, and one-for-one outside of London. The definition of replacement homes is likely to be broad e.g. to include shared ownership and Starter Homes. To fund the discount, there will be a levy on councils who will be required to sell their higher-value empty stock, although the thresholds are yet to be announced. Government and mayoral funding may also be available for the purpose of funding the discounts to be applied.

Both of these provisions look set to result in the reduction in the delivery of traditional forms of affordable housing, but may also present opportunities for those looking to expand their commercial development programmes and or to offer a wider range of tenures including homeownership.

The successful implementation of the VRTB will depend on associations developing their VRTB policy. They will also need to consider their marketing, processes and internal capacity to deliver the scheme. Organising how HAs deliver VRTB replacements is also likely to present greater challenges to those not developing independently, as there is likely to be a need to ether enter consortia or partnership arrangements to meet replacement requirements.

Pay to stay and secure tenancies for council tenants

Under pay to stay (P2S) Local Authorities will now be required to charge a higher rent to those earning over £31,000 outside London and £40,000 in London. There will be some exemptions to this, for example anyone on housing benefit will not be affected, although the Government is unlikely to exempt pension age people from the scheme. The policy is voluntary for HAs.

The duty will be on the tenant to disclose their household’s income and increases will be tapered at 15% (down from the proposed 20%).  Thresholds will also be up-lifted annually in line with CPI.

Lifetime tenancies are also being phased out as Councils will be required to offer fixed-term tenancies (FTTs) of between two and 10 years for most new tenants.

For those implementing P2S, there will be challenges around how to verify tenants’ incomes, and having to apply different levels of rents each year. For councils implementing FTTs, there will be an increased administrative burden and increased capacity requirements associated with the need to carry out intermittent tenancy reviews.

Deregulation and the regulatory regime

As a result of deregulatory measures, there will be a reduction in government consent powers over asset disposals, and the restructuring and winding up of housing associations. We understand that ministers will also be given powers to appoint managers and officers to landlords in distress through a special administration regime.

These measures provide associations with greater freedoms to proactively manage their asset base. It is also likely to lead to more fluidity of assets in and out of the regulated sector (whether they are tenanted or not). It will increase the expectations on boards and executives to be in control of their businesses.

Following the announcements of deregulation, in a recent article by social housing, it was announced that the regulator has now changed its ‘tagline’ from ‘protecting social housing assets’ to ‘promoting a viable, efficient, well-governed sector able to deliver homes that meet a range of needs’.

The regulator has also stated that it is likely its existing methodology will remain in place as part of the new regulatory landscape. However, in the absence of the traditional consents regime, in depth assessments (IDAs) are likely to be more intensive.

On the 8th June the HCA also emphasised in a letter to the Chairs of 360 of the largest landlords that compliance with the VfM standard will form an integral part of the HCA’s programme of IDAs going forward.

Overall, therefore, whilst we still have many known unknowns, the themes of recent years continue:- an emphasis on homeownership; raised expectations on HA governance; and a strong interest in value for money. All will impact on how the sector delivers its objectives and how it is viewed.

Lucy Worrall is a Consultant at Altair, responsible for carrying out market research, data analysis and policy research as part of Altair’s Organisational Excellence team. She can be contacted on lucy.worrall@nullaltairltd.co.uk | 07880 327 205