HOW CAN WE ENSURE SOCIAL HOUSING REMAINS AFFORDABLE? AN INTRODUCTION TO LIVING RENT

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)

Threat of LHA and possible effect on affordability 4,120 homes Over 700 different rents WHY DOES THE AREA WITH ONE OF THE LOWEST RENTS IN WALES NEED LIVING RENT? >2,000 3 bed houses Income levels vs rent inflation Statistics vs reality

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 1 st 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? What impact will our rents have on effects of austerity? stepping stone out of poverty/ ensure tenants are incapable of escaping the benefit trap? Will our development schemes be viable?

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?