A devastating blow to social housing in England
Liz Davies and Justine Compton explore the social housing provisions in the Housing and Planning Act 2016 and assess their likely impact.
The Housing and Planning Act 2016 (HPA) received royal assent on 12 May 2016, having had a rough ride in the House of Lords. Eventually, the House of Commons’ Conservative majority prevailed, although the mauling in the Lords led to some government concessions. Most provisions of the HPA, including those discussed here, apply to England only. They were voted on only by English and Welsh MPs, in the first use of ‘English votes for English laws’.
This Act potentially ends social housing – particularly council housing – as it has been understood since the Housing Act (HA) 1919 first required councils to provide public sector homes. Successive governments have seen the role of council housing as providing homes, not simply emergency relief. Getting a council house is often seen as a final destination, providing security from the insecure world of the private rented sector. The HPA undermines the concept of council housing as a home by diminishing the stock available and ending what the government calls ‘lifetime tenancies’.
This article considers both the depletion of supply and the ending of the lifetime tenancy. There are other provisions in the HPA, beyond the scope of this article, that will interest lawyers, including action against rogue landlords and property agents, and various changes to the planning system. The provisions discussed below only apply to England.
Diminution of the available social housing stock
It is well known that right to buy (RTB), introduced in 1980, led to a dramatic reduction in the number of properties owned by local housing authorities and available to be let out by them under secure tenancies. The single most contentious aspect of RTB has been the failure to replace the sold stock.
In England, the balance between owner-occupied and socially rented accommodation has significantly altered. Between 1 October 1980 and 31 March 2013, 1,869,898 properties were sold under RTB.1http://england.shelter.org.uk/campaigns/why_we_campaign/housing_facts_and_figures/subsection/?section=housing_supply
By 2015, only 1,643,000 remained in local housing authority ownership (Department for Communities and Local Government (DCLG) statistics, Live tables on dwelling stock, Table 104: Dwelling stock: by tenure, England (historical series)
). More than a third of properties sold under RTB have since been sold on, by the original purchasers, to private landlords (Pete Apps, ‘Revealed: 40% of ex-council flats now rented privately’, Inside Housing
, 14 August 2015). This pattern is likely to continue and escalate.
Housing associations (now known as private registered providers) were not subject to RTB, and only to a very limited ‘right to acquire’ (HA 1996 ss16–17). The combination of that, plus stock transfers and housing association building programmes, has resulted in housing association stock increasing (in England, from around 857,000 properties in 1995 to nearly 2.4m in 2015) (DCLG statistics, Table 104, see above). That stock is now set to fall.
Three measures will impact on stock levels: housing associations’ voluntary agreement to RTB; mandatory sales of empty ‘higher value’ council homes; and the implementation of ‘pay to stay’ (means-tested rents for higher-income council tenants).
Housing associations’ voluntary agreement to RTB
In October 2015, faced with the threat of legislation to impose RTB, 323 housing associations volunteered to give their tenants the RTB their properties at a discount. The absence of a legislative framework means the details remain unclear. The government has committed to funding the discount paid to the tenant and the deal envisages replacement of at least one new home for each home sold (or two for one in London), so that each sale should be stock-neutral. However, the government had made the same commitment in 2012, when it increased the discount available for council tenants’ RTB. A total of 38,479 properties were sold between April 2012 and December 2015 (DCLG, Right to buy sales: October to December 2015, England, 24 March 2016), with only 3,644 new starts and acquisitions made to replace them (‘Right to buy creates nearly 40,000 new homeowners’, DCLG press release, 17 September 2015). The commitment is only to build houses to be let on ‘affordable’ rents, ie 80 per cent of market rents, rather than at social housing rents, so replacements would not truly be like-for-like. So-called ‘affordable’ housing is in fact unaffordable for many, particularly those with benefit restrictions and/or low wages.
It is estimated that around 1,450,000 housing association tenants will be eligible for the voluntary RTB, and around 10 per cent of those will buy their homes over the first five years (John Perry, Steve Wilcox and Peter Williams, Selling off the stock, Chartered Institute of Housing, October 2015).
Sale of empty ‘higher value local authority housing’
The discounts are to be paid from sales of ‘higher value local authority housing’. The term ‘higher value’ has replaced the original ‘high value’ phrase, so that the value can take account of different house prices in different areas of the country (the value of a property in Newcastle might be high and the same value in London not high at all) and will be defined by regulations. HPA s69 permits the Secretary of State for Communities and Local Government to make determinations requiring local housing authorities in England to pay the market value of any sales to the government less costs specified in the determination, which will use those receipts to fund housing association RTB. Local housing authorities will be required to ‘consider’ selling any empty higher value properties, rather than re-letting them to families on the waiting list. It is not entirely clear whether regulations will make this duty to ‘consider’ selling a mandatory duty to sell when a property becomes vacant. What is clear is that councils will not benefit: the money from the sales goes directly to fund housing association RTB discounts.
Pay to stay
The introduction of ‘pay to stay’ means-tested rents was one of the most hotly contested issues between the House of Lords and the House of Commons. Most of the detail will be in regulations, which have not yet been published. The government insisted that ‘high income local authority tenants’ – who would be charged the increased rent – should be defined as those households earning £31,000 outside London or £40,000 for tenants in London. The resistance from the Lords had the effect of the government agreeing to a taper, so that the rent increase will be phased at 15p rent per week for every £1 received in taxable income above the threshold, rather than in one large rent hike, and has also exempted households receiving housing benefit from the means test. The scheme is likely to be implemented from April 2017 and appears to be mandatory on local housing authorities.
Regulations made under the HPA may ‘require the rent’ to be raised to the whole, or part of, local market rents. Powers may be given to local housing authorities to require tenants to disclose details of their income and to ask HMRC for the same information. If a tenant refuses, and the information cannot be obtained from HMRC, the local housing authority might be required to charge the maximum rent. A tenant who refuses to pay will accrue rent arrears and face possession proceedings. It remains to be seen how regulations can have the effect of, essentially, inserting a new clause into existing tenancy agreements, requiring tenants to disclose their finances.
Besides the effect on individual households suddenly faced with rents that they cannot afford, the policy concern is that these ‘higher income’ households will find it cheaper to buy their properties, under RTB, and fund a mortgage than to pay market, or close to market, rents, and so further stock is lost from social housing.
An end to lifetime tenancies
The most radical assault on the long-held belief that a council house is for life was unexpected and introduced by the government right at the end of the initial consideration by the House of Commons. In December 2015, on the final day of consideration of the Housing and Planning Bill in the Public Bill Committee, the government tabled amendments requiring local housing authorities only to offer fixed-term tenancies for a maximum period of five years. In other words, periodic tenancies, which continue on a weekly or monthly basis, will be abolished for all new grants of council tenancies.
Security of tenure for council tenants is found at HA 1985 ss82–85 and Sch 2. The tenancy does not come to an end, and security is retained, until a warrant is executed. Orders for possession can only be made on proof of one of the grounds for possession in Sch 2 and only where the court considers that it is reasonable to make an order for possession.
Some council tenancies do not confer security of tenure. While a court order is required, usually the court has no discretion except to make an order. Those types of tenancies are introductory tenancies, demoted tenancies and – an innovation in the Localism Act (LA) 2011 – so-called flexible tenancies. The use of the word ‘flexible’ is anomalous, since these are fixed-term tenancies, granted for a minimum period of two years. When those tenancies come to an end, the local housing authority has a choice whether or not to renew. If it decides not to renew, and has complied with the appropriate notice and other procedural requirements, then the local housing authority has a right to a possession order (HA 1985 ss107A–107E, inserted by LA 2011 s154). Flexibility is given to the landlord, but not to the tenant. However, very few local housing authorities opted for flexible tenancies, preferring the existing system of introductory tenancies followed by secure periodic tenancies.
The HPA will now make it mandatory for local housing authorities to grant fixed-term tenancies. The scheme is not retrospective – existing secure tenants retain their security – but all new tenancies granted by local housing authorities in England on or after the date of implementation (as yet unknown) can only be fixed-term tenancies. There is no discretion: any tenancy granted by a local housing authority in England that looks like a periodic tenancy will (subject to exceptions to be contained in regulations) automatically become a fixed-term tenancy for five years (HA 1985 s81A(4), inserted by HPA Sch 7).
The House of Lords got its teeth into these provisions, with Lord Kerslake leading the charge. He said: ‘There is a fundamental issue here which I think has been lost sight of … This is a person’s home. They need to be able to put down roots and start a family, or if they have got a family put their family into school’ (Martin Hilditch, ‘The battle of the Lords’, Inside Housing, 31 March 2016). The Lords wanted much longer periods for fixed-term tenancies and the government compromised by extending the maximum period to 10 years. In addition, if the new tenancy is granted to a tenant whose household includes a child aged under nine, the maximum term could be until the child’s 19th birthday, so that schooling should not be disrupted.
These are welcome concessions. A home for 10 years is much more of a secure home than a home for two years. But of course, the detail will be in regulations and in the practice. It seems inevitable that different local housing authorities will adopt different policies. When the first fixed-term tenancies are granted, there may be challenges to the regulations themselves and to decisions as to the length of the term; and once those tenancies start to be terminated, and the local housing authorities bring possession proceedings, defences under European Convention on Human Rights art 8 may well raise a family’s imminent homelessness, and a local housing authority’s decision not to renew the tenancy, for the court to consider.
The ideology underpinning this is that the market should provide for the nation’s housing needs, either through owner-occupation or through the private rented sector, with the welfare state providing short-term relief (in the form of fixed-term tenancies) until the council tenant manages to fend for him or herself and buy or rent property privately. Other provisions in the HPA emphasise the role of the market: ‘starter’ homes, subsidised by a discount of 20 per cent of a maximum cost of £250,000 outside Greater London and £450,000 inside; and more brownfield sites for housing development. As both house prices and private rents continue to rise above inflation, taking an increasingly large proportion of people’s incomes, and as the largest single cause of people becoming homeless is the loss of private rented accommodation, this faith in the market seems misplaced. ■