Research Seminar

The Affordable Rent Model in London: Affordability, Deliverability 9 April 2013

Jo Wilson Director, Future of London

Research Seminar

The Affordable Rent Model in London: Affordability, Deliverability

Agenda

1.30 Arrivals and refreshments

1.45 Welcome – Jo Wilson

1.55 Emerging findings – Andrew Hewyood

2.10 Responses: • Mairéad Carroll • Kevin Williamson • Ken Jones

2.30 Questions

2.45 Discussion

3.15 Chair’s summing up 3.30 Close

Agenda • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

Our research project The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• Supported by the Oak Foundation

• Research project from January to June 2013

Project focus:

• Who is building ARM in London and why

• How much ARM is being built and where

• The extent to which ARM is viable in the short term and after 2015/16

• Whether ARM is consistent with housing strategy and housing need in London

• What part ARM should play after 2015/16

Our research project The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

What we are doing:

• Review of existing literature; completed,

• Interviews with HAs, LAs, and other stakeholders, completed

• Analysis of the data on ARM in London, in progress,

• Case studies highlighting aspects or effects of ARM development, in progress, and;

• A final report.

Our research project The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

Andrew Heywood Research Lead

The Affordable Rent Model in London

Emerging Questions

Housing, Mortgage markets, Regulation, Governance, Europe • Housing: finance, policy, low-cost homeownership. • Mortgage markets: trends, opportunities, threats. • Regulation: policy, practice, lenders, housing providers. • Governance: effective decision making, strategy, audit. • Europe: housing and mortgage markets, regulation. Andrew Heywood is an independent consultant specialising in the above areas and an

associate of leading consultants Campbell Tickell. A visiting fellow of the Land Economy Unit of Cambridge University and of the Smith Institute, Andrew has written and spoken extensively on housing and lending issues. He is Editor of the journal Housing Finance International (www.housingfinance.org). Andrew was formerly Deputy Head of Policy at the Council of Mortgage Lenders. He has been at the centre of housing, housing finance and mortgage market developments for many years and has unrivalled contacts amongst policy makers, housing providers and lenders.

Andrew Heywood Consulting: a.heywood53@btinternet.com 01440 730218/07929512057

Andrew Heywood Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

– Currently 58 organisations contracted to the AHP programme in London (GLA)

– In addition, two organisations have dropped out of the programme.

– This is roughly the 60 expected by the HCA/GLA. In the RLHS.

– They are contracted for 22,268 homes including affordable rent and affordable home ownership.

– Overall average affordable rent as percentage of market rent is 64.7% but average varies between providers from 36%-81% (GLA)

Who is building ARM in London? Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

Region/Tenancy Weekly income (net)

London ARM 228 London General Needs (LA/HA) 202/224 England ARM 254 England General Needs 198/219

Region/Tenancy Average Age person 1 in

household

London ARM 35 London General Needs (LA/HA) 38/38 England ARM 35 England General Needs (LA/HA) 38/37

Region/Tenancy Male Female

London ARM 40% 60% England ARM 36% 64% London General Needs (LA/HA) 43%/42% 57%/58%

Who are being housed in ARM homes? Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

Region/Tenancy Working FT % Working PT

London ARM 21.5% 14.4% England ARM 22.8% 14.6% England General Needs 21% 13%

Region/Tenancy Eligible (No) Eligible (%)

London ARM 442 72.0% England ARM 3073 66.6% London HA general needs 11837 67.0% England HA general needs 97483 63.7%

Who are being housed in ARM homes? Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• It appears not to be working households- though is this product more suitable for them?

• Will ARM attract interest in the light of higher rents?

Region/tenancy Average times property was previously offered (days)

ARM London 1.22 ARM England 0.64 HA social lettings London 0.95 HA social lettings England 0.75

Region/tenancy Number LA

referrals All sources of referrals

Percentage LA referrals

London ARM 514 614 83.7% England ARM 2896 4614 62.8% London HA Gen needs 12615 17680 71.4% England HA Gen needs 81698 152923 53.4%

Who are being housed in ARM homes? Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• Will RPs achieve the rate of conversions they require and at sufficient uplift?

• To what extent are lower than anticipated conversions being subsidised by RCGF or other sources?

• How is the development of ARM progressing?

First lets and conversions (re-lets) Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• ARM First lets and conversions 2011-12 (CORE):

• According to the GLA 55 first lets and 2,370 conversions

were achieved in 2012-13 (Qs1-3) compared to 131 and 535 in 2011-12 (some discrepancy with CORE)

• Why were less ARM homes completed pro-rata in 2012-13 than in 2011-12?

Region First lets (No)

First Lets (%)

Conversions (No)

Conversions (%)

Total lets (No)

Total lets (%)

London ARM 252 41.0%% 363 59.0% 615 100% England ARM 1592 34.5% 3021 65.5% 4613 100%

First lets and conversions (re-lets) Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• Welfare reform is key; particularly the cap but also downsizing and direct payment,

Percentage of lettings offered via Choice –based letting, Common Housing

Register, Common Allocations Policy (Categories are not mutually exclusive)

Source CORE 2011-12

0

10

20

30

40

50

60

70

80

90

London ARM England ARM London HA GenNeeds

England HAGen Needs

Choice-based lettings

Common Housing Register

Common Allocations Policy

Affordability Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• Will the Treasury necessarily save money with HB reform/ARM combination?

Numbers of ARM head of household in London working F/time

(1) and P/time (2) eligible for Housing Benefit

0

10

20

30

40

50

60

70

80

90

100

Working full-time Working part-time

Eligible not eligible

Numbers of London HA social rent tenants working full or part-

time eligible for Housing Benefit

Source: CORE 2011-12

0

500

1000

1500

2000

2500

3000

Working FT working PT

Eligible Ineligible

Affordability Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• To what extent will lower rent levels mean lower numbers completed?

• What about larger homes and the Mayor’s target for family-sized homes (36%)?

• Where are these homes being built?

Emerging questions Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• How much riskier does the higher borrowing and market risk (market-linked rents, LCHO etc.) make ARM?

• What about housing benefit risk?

• Will RP financial capacity be eroded?

• Will HAs continue to undertake ARM rather than LCHO or market renting post 2015?

Emerging questions: risk and sustainability

Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

• What additional risks are incurred by cross subsidy from LCHO or market renting?

• Will London find ARM more or less difficult than elsewhere?

• Overall, will ARM meet GLA targets (16,614 ARM homes 2011-15 plus size and space requirements)

• What place does ARM have in a post-2015/16 affordable housing strategy?

Emerging questions Emerging Questions • The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013

Mairéad Carroll Head of Policy and External Affairs, East Thames Group

Research Seminar

The Affordable Rent Model in London: Affordability, Deliverability

Kevin Williamson Assistant Director for London, South East and East, National Housing Federation

Research Seminar

The Affordable Rent Model in London: Affordability, Deliverability

Ken Jones Divisional Director of Housing Strategy, London Borough of Barking & Dagenham

Research Seminar

The Affordable Rent Model in London: Affordability, Deliverability

Consider:

• Can ARM deliver affordable housing in the current financial environment?

• Thinking ahead to the next CSR, what should a delivery model for affordable housing in London look like?

Discussion The Affordable Rent Model in London: Affordability, Deliverability • 9 April 2013