I’m sorry I haven’t a clue

Shapps and Johnson make up housng policy.
Photo BBC website, with apologies

Starring Boris Johnson on the  kazoo and Grant Shapps on the  swanee whistle

The ‘affordable rent’ scheme is up and running but FOI requests show that the Housing Minister and the Mayor of London appear to know little about what it means for rents.

The Government’s ‘affordable rent’ programme allows landlords to charge rents at up to 80% of the market rate.  They say that the homes will be let to the same people who previously would have been offered homes for social rent, and that they will receive full housing benefit if entitled (robbing Peter (CLG grant towards new homes) to pay Paul (increased HB cost on substantially higher rents)).

The ‘affordable rent’ scheme is costing hundreds of millions of pounds and an untold amount of additional housing benefit.  It is a dramatic shift in policy as Government subsidy for social rented housing has virtually ended.  Rent levels are a crucial factor in the scheme.  You would therefore be forgiven for thinking that there would be some careful monitoring of the rents being charged by providers.

In the run up to the election the Mayor of London tried to take the sting out of the housing debate by claiming that most ‘affordable rent’ rents would be similar to the old social rent levels and that the average across the programme as a whole in London would be 65% of market rates.  He made great play of his efforts to keep rents reasonable.

Last week’s National Audit Office report on the ‘affordable rent’ scheme didn’t pay much attention to the implications for tenants, but it did note that the annual average rent would be £6,552 compared to £4,698 under the previous National Affordable Housing Programme, that the average rent across the whole programme would be 75% of market rents, and it confirmed that ‘in London providers typically planned for rent levels at approximately 65 per cent’.  I have taken ‘typically’ to mean average.  It strikes me as a statistical oddity that London, which will get more than a quarter of the programme’s homes, will charge 65% of market rent but the national average, including London, is 75%.  What does that imply for rents outside London?

The NAO also confirmed that there was little monitoring of rents for homes of different sizes – one of the key pieces of information demonstrating affordability for different types of household.  They say: Our analysis of the high-level information held by the [Homes and Communities] Agency shows that average weekly rent will range from around £100 a week in the North East, Yorkshire and the Humber to £182 a week in London. However, it does not have information on rent levels charged across homes of different sizes. As a result, we could not compare actual rent charged under the model and rent levels under previous programmes.

A month ago I put in a Freedom of Information request to the Mayor of London seeking information about a) how the 65% average figure was calculated, b) the average for each bedroom size category, and c) how many homes were being ‘converted’ from social rent to ‘affordable rent’ to help pay for the scheme.

In his response, the Mayor says:

The 65% affordable rent to market rent figure is based on an overall programme average across the 60 partner programmes approved during the allocation round for the 2011-15 Affordable Homes Programme. Partners provided an overall view of the affordable rent level against market rent that would be achieved across their programme covering indicative programmes where firm schemes were not identified. As an overall programme average based on a partially indicative programme it is not possible to provide a breakdown by unit or bedroom however we will be publishing details on rents annually.

This is, how should I put it, disingenuous.  I have sought further details, arguing:

Thank you for your email. I regret to say it does not answer my question nor on the face of it does it appear to comply with the requirements of the Freedom of Information Act, specifically my request for papers and emails. I believe I am entitled to see these unless a reason for non-release is provided. Of course I would be happy for any commercially confidential material to be redacted on the usual basis. I am also happy to receive information in electronic form.

The Mayor and the Deputy Mayor for Housing have both made statements over the past few months that the average rent for ‘affordable rent’ properties will be ‘65%’. I wish to see information showing in some detail how this figure has been calculated, as their statements are, as far as I can see, the only public information available on rents within the new programme. Given that the level of rent is a critical factor is assessing the worth of the programme, the requirements of scrutiny suggest this information should be available. Given that this is the Mayor’s primary housing programme, and now fully his responsibility, I suggest that there must be monitoring information showing the position on all contracts and a document or documents showing the calculations that lead to such definitive statements that the outcome rent is ‘65%’…..

Frankly I find it extraordinary that there is no information on rents for different size units, given that achieving a good share of family units was one of the Mayor’s stated objectives and a requirement of the bidding process. I believe that there must be, within the GLA, a document or documents showing the estimated bedroom size breakdown of the programme and their expected rents. I wish to have these documents released to me. The fact that it is indicative is neither here nor there as the information must have been sufficiently robust to enable the Mayor to approve contracts worth millions of pounds.

I therefore look forward to receiving the information originally requested.

It is extraordinary that such a significant shift in policy, using large amounts of public money and private borrowing, and involving a huge increase in rents, should be accompanied by such flimsy monitoring.  It demonstrates little interest in the actual output of the scheme, who it houses and how it might meet needs, apart from a simple numbers count of the number of homes produced.  As a minimum Government should know what bedroom size mix is being achieved and at what rents; it should know the pattern of cross-subsidy if rents of some homes are held down whilst others are pushed up; and it should be able to estimate the overall impact on the housing benefit bill.

The ‘affordable homes’ programme has been badly managed from the outset, as the NAO report makes clear, and contains major risks.  But even more risks arise from not having a clue what is happening, and that is what Grant Shapps and Boris Johnson stand accused of.

Find out more about the real ‘I’m sorry I haven’t a clue’

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3 Responses to I’m sorry I haven’t a clue

  1. Joe thanks for your fascinating comment. I’d recommend readers to follow Joe’s blog or twitter feed for his detailed analyses of housing finance and benefits.
    And Tom, thanks for this information. If the information isn’t being monitored I ‘m not sure how it can be published! But notice that Johnson says the information will be published annually for completions – ie after the event when it is too late. He should be managing the programme to get the best outcomes, which involves monitoring the proposals from the providers and seeing whether they add up to the right mix of bedroom sizes and at the rents he wants to see. Then we can all judge the worth of the programme. I suspect Joe is right – there is a lot to hide.

  2. Tom Chance says:

    Darren Johnson AM has been asking the Mayor of London what the monitoring arrangements will be. These are this replies:

    Affordable housing monitoring
    Question number 1811/2012
    Darren Johnson
    As the strategic housing authority for London, will you monitor and publish data on the rent levels, relative to market rents, of Affordable Rent homes being delivered in London with grants you disburse?
    Answer by Boris Johnson
    Yes.

    Affordable housing monitoring
    Question No: 1919 / 2012
    Darren Johnson
    Thank you for your answer to question 1811/2012. Will you publish this data broken down by year, borough and by the number of rooms so that, for example, a resident of Croydon could find out the average rent level for a two bed Affordable Rent flat built in their borough?
    Written response from the Mayor
    We will publish this data for completed schemes by borough, on an annual basis.

  3. In the last 2 weeks we have seen the NAO report into Affordable(sic) Rent, the latest HB statistics and the English Housing Survey.

    1) The EHS stating national average social rent was £79pw and national average private rent was £160pw.
    2) The official HB statistics showing that £77 or so is the national average paid in HB for a social rent (about 98% of social rent is therefore covered by housing benefit.)
    3) The HB statistics and £108 or so per week paid as a national average in LHA for private rent (about 68% of private rent is therefore covered by housing benefit.)

    SO – payment of HB for AR units at a national average of 75% means an average HB payment of £120pw which is: -
    (a) 56% more being paid out in HB to an AR unit than a social rent, and significantly
    (b) 11% MORE BEING PAID IN HB TO AN AFFORDABLE RENT PROPERTY THAN A PRIVATE PROPERTY.

    If we pay out more in revenue subsidy (HB) to an affordable (sic) rent property than we do to a private rented property then obviously the HB bill will rocket. Further, what is the economic rationale for affordable rent (reduced capital subsidy) if it costs more to the public purse in revenue subsidy (HB) than the non capital subsidised private rent? Moreover, what is the likelihood of AR units all meaning the overall benefit cap is breached with these rent levels and so the impact on arrears for the tenant and the landlord developing AR units is massive.

    On that final point I did a quick calculation last week and AR transfers an additional £5bn+ of arrears risk (due to the cap) from the HB bill which has ‘always taken the strain’ directly to social landlords. The AR scheme which is based on lower grant offset by higher revenue through higher rent can only work if that higher rent is paid. Yet because HB wont take the strain and because HB is the ONLY bnefit to be cut in the overall benefit cap then that model is a huge risk too far. We can say that even though the disingenuous comments of ‘national average’ are only given.

    The release of this information above which Steve correctly says is needed and is disingenuous for being withheld will prove the points above and in my view is WHY it hasnt been released

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