industry news Compulsory ‘Pay to Stay’ policy dropped I


n a major policy U-turn the Government has dropped its plans to force councils to charge higher rents to tens of thousands of ‘better


off’ tenants. However, the Housing Minister Gavin Barwell


confirmed he is proceeding with ending ‘lifetime’ tenancies and the introduction of compulsory fixed-term tenancies for periods of up to five years. This will require tenancies to be periodically


reviewed "to ensure tenants still need a socially rented home" with councils told to prioritise lower-income households. Barwell added that the Government was exploring other ways to ensure higher-earning tenants "make a greater contribution to costs". Originally councils were being told to charge


private market rents to households with incomes of more than £31,000, or £40,000 in London. The policy was hotly contested during passage of the Housing & Planning Act 2016 and


“The policy was hotly contested during passage of the Housing & Planning Act 2016”


in the autumn, local authorities understandably complained the implementation date of April 2017 was unworkable due to its proximity and a lack of details.


Opposition


The Government had expected councils to implement the policy while paying any additional rental income received over to the Treasury. In the face of stiff opposition, the Government decided to drop its mandatory requirement on councils. More than 70,000 households were set to be


affected by the changes, that would have pushed tenants' annual rent payments up by more than £1,000 a year on average. Affected tenants faced a choice of paying a higher rent, buying their home or moving to the private sector. Councils argued the process of determining


tenants’ incomes would be costly and time- consuming. Gary Porter, chair of the Local Government Association, said: “Councils would have needed to invest millions in new IT systems, hire new staff and write to over a million social housing tenants to try and understand household income.” In the Autumn Statement, the Chancellor of


the Exchequer claimed scrapping the policy will cost £600 million in income from higher rents.


Voluntary


The Government reminded social landlords that they could voluntarily impose the policy on their higher-income tenants. Under the current rules, social landlords can charge tenants with an income of over £60,000 market or near- market rent. Councils are expected to periodically review


the circumstances of individual tenants to check whether they were still eligible for a social housing tenancy. The review could result in tenancies being ended, transfers to smaller homes being required or higher rents being charged. Conservative councils across London and


the south east were among those to quickly reject this offer, saying they would not introduce the controversial higher rents policy on a voluntary basis. These include Guildford, Rugby, Kensington


and Chelsea, Warwick, Dacorum, Canterbury, Epping Forest, Waverley and Sedgemoor District Councils, with Labour councils including Hackney and Camden also ruling out the policy.


Mega-merger deals completed


Three major merger deals have finally completed after many months of detailed discussions, with exciting plans to deliver up to 200,000 new homes over the next decade. The new housing groups could become


serious rivals to the existing volume house builders and put pressure on other housing associations if they can deliver the impressive operating cost efficiencies on which their new business plans are based. They appear to have broken the mould of


the traditional housing association as a social business with their size and many of the figures relating to their turnover and asset value dwarf those of other social landlords. All three are based in southern and south-east England and it remains to be seen if this merger model will work in the rest of the country. They could be joined in 2017 by a new


London based HA with 55,000 homes as a result of Peabody and Family Mosaic merging under the chairmanship of Lord Kerslake, while Amicus Horizon and Viridian Housing also expect to complete their amalgamation into a 44,000 home landlord under the leadership of Sir Peter Dixon.


Largest landlord


Affinity Sutton and Circle Housing Group have completed their merger to become the Clarion Housing Group, the country’s largest housing association with plans to build 50,000 new


homes in the next ten years. Operating in more than half of the country’s


local authority areas, the new organisation will own and manage 125,000 homes, with assets worth £20bn and a combined annual turnover of £827m. Keith Exford, formerly the chief executive


of Affinity Sutton, becomes group chief executive of Clarion, with Circle Housing chief Mark Rogers taking on the deputy chief executive position. Mr Exford said “We have created Clarion


Housing Group in response to the acute need to deliver more affordable housing. We are significantly increasing our capacity to deliver the homes our country so desperately needs as well as our ability to transform lives.”


Completed


L&Q and East Thames also completed their planned merger, while at the same time agreeing a £4.6bn refinancing of their loan portfolio, as they plan to build 100,000 new homes over the next ten years. The new landlord organisation will own and


manage 90,000 homes worth £22bn. They are setting up a distinct supported housing outfit with 6,600 properties and a target annual turnover of £47m. Chief Executive David Montague said support


for new housing from the Chancellor of the Exchequer and the London Mayor had given their ambitious development programme an


10 | HMM January 2017 | www.housingmmonline.co.uk


added impetus. Half of the new homes are expected to be affordable, but all tenure types are to be catered for including social rent and market sale.


Sovereign


Meanwhile, a new housing association has been formed with 55,000 homes by bringing together Spectrum Housing Group and Sovereign Housing Association. Talks about swapping and selling stock began


in 2015, but quickly developed into formal merger discussions. The new business has ambitious house building plans across southern England, while also improving services to existing residents. Former chairs Richard Organ and John


Simpson have stood down at end of their terms and a new independent chair, Katherine Innes Ker, has been appointed to take the new business forward. Ann Santry, Sovereign’s former chief executive, will lead the new organisation and Richard Hill, Spectrum’s former chief executive, becomes deputy chief executive. Ann Santry said “It’s a new beginning, but


those long-standing commitments to supporting our communities and building homes hasn’t changed. Together, we’ll have the strength, influence and great people to make even more of a difference for the growing numbers of people who need our support.”


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