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)

WHY DOES THE AREA WITH

ONE OF THE LOWEST

RENTS IN WALES NEED

LIVING RENT?

Threat of LHA

and possible

effect on

affordability

4,120 homes–

Over 700

different rents

Statistics vs

reality

>2,000

3 bed

houses Income levels

vs rent inflation

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 1st 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? stepping stone

out of poverty/

ensure tenants

are incapable of

escaping the

benefit trap?

Will our

development

schemes be

viable?

What impact

will our rents

have on

effects of

austerity?

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?