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DCLG issue further clarification on sale of high value voids and rent reduction 08/02/2016

The Department of Communities and Local Government has issued further information on the Government's proposals for the sale of high value vacant council housing and the reduction of social rents.

 

Read the latest update from the DCLG below:

 

REQUIRING COUNCILS TO SELL HIGH VALUE VACANT HOUSING AND REDUCTION OF SOCIAL RENTS BY 1% PER ANNUM FOR FOUR YEARS: UPDATE

 

This note provides a brief update on Government's commitments in respect of the sale of high value council housing and reducing social rents by 1% for four years from 2016. It also signposts where further information is available.

 

HIGH VALUE SOCIAL HOUSING

 

In line with its manifesto commitment, Government wants to see local authorities sell their high value housing as it falls vacant, with the receipt used to build new homes that meet housing need and fund the discount for extending the Right to Buy to housing association tenants. Further information is set out in the policy factsheet.

 

The Housing and Planning Bill sets out the framework to deliver this policy. In particular, clauses 67 to 77 require all local authorities with a Housing Revenue Account to make an annual payment in respect of their high value council housing that is expected to become vacant each year. The payment, to be calculated using a formula, will be set out in a determination. The advantages of a formula approach are that it would allow local authorities flexibility about which vacant properties are sold and provide certainty about the payment required. Additionally, the Bill enables councils to enter into an agreement with the Secretary of State to retain a portion of the receipts in order to build additional homes to meet housing need. Further information about the legislation is contained in the explanatory notes to the Bill.

 

Following consideration by the House of Commons, the Bill has been amended so that:

 

  • agreements between the Secretary of State and London local authorities for the provision of additional homes must specify that at least two new additional affordable homes are built for every dwelling that is expected to be sold - recognising the housing pressures in the capital; and
  •  the provisions may be commenced as soon as possible after Royal Assent.

 

Additionally, it was confirmed that housing only becomes vacant once it has been occupied and a tenancy comes to an end. Brand new vacant housing (i.e. that has not yet been occupied) would not fall within the definition of vacant housing for the purposes of this policy.

 

In terms of next steps, the Bill will be considered by the House of Lords shortly.

 

We are currently in the process of updating data that will be used to help set the high value threshold, which will be a key element of the high value definition. We are also starting to consider the data that local authorities have supplied about their housing stock. We are grateful to councils for providing this data, which will help to inform key aspects of policy, including how 'vacant' is defined and whether certain property types should be exempt from the definition of high value.

 

We will consult local authorities on a draft of the determination. This will set out the formula for calculating payments in respect of councils' high value vacant housing, and will also identify the payment to be made. Timing for the determination will depend on a number of factors including passage of the Bill through Parliament and the date of Royal Assent.

 

Meantime, we will continue to engage with local authorities on this policy, including working with our local authority technical working group, to ensure effective delivery for Government and local authorities.

 

REDUCTION OF SOCIAL RENT

 

Turning to the social rent changes you will be aware that the Government made a commitment in the Summer 2015 Budget to reduce social rents by 1% a year for four years from April 2016 to help reduce the Housing Benefit bill and cut the deficit. The necessary statutory provisions to give effect to that commitment for both local authorities and private registered providers of social housing in England are contained in the Welfare Reform and Work Bill currently before Parliament.

 

The Welfare Reform and Work Bill was introduced in the House of Commons on 9 July 2015, has been through all stages in that House and is currently before the House of Lords.  Most recently it was discussed at Lords Report on 27 January. A number of amendments have been made to the Bill, in both the House of Commons and the House of Lords. This note does not set out all of those amendments but highlights a few of the main changes such as:

 

  • the ability for registered providers with rent levels below "formula" to increase rent to the social rent rate when re-letting a property;
  • providing the Secretary of State with powers, by Regulations, to allow rent setting for new tenancies in supported housing at up to 10% above the rate for general needs housing;
  • a new "implied terms" clause to help providers comply more easily with the requirements of the legislation by overriding any provision of individual tenancy agreements that may prevent providers from varying the tenancy agreement to reduce rents on the most appropriate annual timescales; and
  • an amendment to Schedule 2 which would give the Secretary of State the additional option, when granting an exemption from the rent reduction, of directing that the social rent rate be uplifted by a specified percentage.  This could apply if an exemption had been grated due to serious financial difficulties.

 

The Bill is timetabled for Lords Third Reading Report later this month and subject to the passage of the Bill's final stages, we anticipate that it will receive Royal Assent in the Spring ahead of the new financial year.  Please note that the Bill requires savings of 1% over the first relevant year (which commences 1 April this year for local authority providers). Therefore, a local authority provider which did not implement a 1% reduction on 1 April would need to make a deeper reduction later in the year in order to comply. 

 

However, you may be aware that Government has recently announced that it will put in place aone year exception for all supported accommodationwhilst the review into Supported Accommodation is being carried out.  Our intention is that all supported housing as currently set out in the rent standard guidance will benefit from the one year exception.  The exact definition will be defined in regulations but for the purposes of clarity we intend that the exception will include, though not necessarily be limited to:

 

  • domestic violence refuges and other specialist accommodation based support for domestic violence victims,
  • hostels and other accommodation for the homeless,
  • sheltered accommodation for older people,
  • supported accommodation for young people,
  • extra care housing,
  • accommodation for people with mental health or drug/alcohol problems,
  • accommodation for people with disabilities,
  • accommodation for ex-offenders and people at risk of offending.

 

Government has confirmed that alms houses, cooperative housing associations and community land trusts will also benefit from the year-long exception.

 

As we draft the regulations we will be reviewing the definition in the rent standard, together with other definitions to ensure that the regulations provide comprehensive coverage and are clear about what is included. For sheltered and extra care housing, we would look to refer to the definitions contained in the Housing our Ageing Population: Panel for Innovation report.

 

Our expectation therefore is that accommodation subject to the exception will increase rents by no more than CPI +1%. This is in addition to an exception for specialised supported housing, also covered in the rent standard guidance which will be excepted from the rent reductions completely and for the entire 4 year period.

 

As mentioned above Government has announced that providers of supported housing would be able to set rents at 10% above the social rent rate (i.e. formula less the appropriate reduction). During the exception period the intention is that providers will be able to set new rents at 10% above the 2015/16 formula rate uprated by CPI+1%. 

 

We are of course aware that providers have raised concerns about bringing housing benefit for social tenants into line with housing benefit for people in private housing which will start to take effect from April 2018. We will put in place the appropriate protections for those in supported housing. As we work towards implementation, DWP and DCLG will be working closely together with the sector to make sure the right protections are in place.

 

Finally, as usual, the Department will inform you of limit rents for 2016/17 later this month.

 

FURTHER INFORMATION

 

If you have any queries about this note, the high value assets policy more generally or would like to add/remove addresses from this distribution list, please email: highvaluevacanthousing@communities.gsi.gov.uk.

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