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1) More Haste Less Value The case for delay
a) House prices locally are still rising. Interest rates nationally are still falling. Delay improves the deal.
b) An authority which has convinced itself that it has no alternative is going to get a worse deal, weakens its negotiating position and gets worse terms on sale price, on competition between purchasers, on best value, on guarantees to tenants and on write off by government of its overhanging debt. Desperation is no negotiating position.
c) Government is being compelled by its failure to reach its own privatisation targets to help councils more. It has already introduced Major Repairs Allowance and pathfinder provisions for selected authorities to repair and renovate, plus the ability (under the Local Government Act) for councils to borrow. NELC will not be able to use this if it gives away its stock and the rents and service charges it produces.
d) Most councils introducing LSVTs have been rural. Urban authorities have mostly not yet decided. So why rush? Government’s increasing inability to achieve its Decent Homes Target by 2010 through privatisation will force it to provide finance to local authorities to achieve the target.
e) John Prescott has now conceded that his Department will help those areas where tenants reject LSVTs and is now offering more help to Arms Length Management Organisations which it didn`t even want four years ago.
2) NELC is embarking on an uncertain process at considerable cost The proposal will be opposed. An alternative case will be put to tenants, most of whom want to stay with the council because it`s democratically accountable and has served them well. An increasing proportion have been rejecting LSVTs in ballots elsewhere, recently in Birmingham, Dudley, Stockport, Merton and other places. If NELC tenants reject it and prefer to stay with the council the costs of consultancies, legal fees, information, loan arrangements, surveys and all the preparatory work, which are estimated by the National Audit Office as £436 pounds per council house, fall on the Council. Hundreds of thousands of pounds which could have been used for repairs and renovation will have been wasted.
It is essential to be certain about the finances of the Housing Associations involved. Increasing numbers of RSLs are failing the fiscal health tests imposed by the Housing Corporation, and 45% of Registered Social Landlords have been reclassified from “satisfactory” status to “cause for concern” or even “cause for serious concern”. Will the Housing Association, whether an outsider coming in or a local one put together by the council, be financially sound and able to fulfil its promises? There have been a number of cases of lenders refusing to accept the terms agreed by the Housing Association in which case the local authority has no alternative but to give them an even better deal so they can raise the money.
3) Transfer of council housing to a private Housing Association does not serve the purposes of social housing or tenants.
a) Existing tenants are protected but new tenants are not. Housing Associations are more likely to raise rents and end tenancies. Their tenants pay 17% higher rents and higher service charges and have no right of representation. Evictions by Housing Associations are up 36% and they increasingly use “Ground B” under which they get automatic possession orders, even of assured tenancies, for thirteen weeks rent arrears, even if these are caused by housing benefit delays.
b) Promises held out about improved repairs, better kitchens and bathrooms, renovation to Decent Housing Standards etc., are not always fulfilled. Council tenants have no sanctions if this happens. Councils have severe problems enforcing any promises made.
c) Increasingly, Housing Associations are merging, growing in scale, paying top people big salaries, and becoming bigger, more impersonal business organisations. This gives both tenants and councils less influence on them. They are increasingly opting for clearance and replacement of social housing by private development, and for selling off land purchased cheaply from the council. There are no restrictions on doing this provided 51% of the business is social housing.
d) Housing Associations get benefits not available to councils but keep the profits rather than sharing them with tenants or councils. The Housing Benefit of tenants is transferred to Social Security. They are free to refinance loans used for purchase. Most do so at substantial profit to themselves. Once the deal is concluded and the borrowing paid off income is pure profit. Housing Associations are under pressure from lenders to become “cash positive” in twenty years. Which most will, producing a cash bonanza which isn`t shared with the council or its tenants. This is even better if, for example, the life of the properties is forty years rather than thirty years. Already H.A. profits exceed their income projections within the first five years, a small indication of the bonanza to come.
e) The National Audit Office study (March 2003) shows that councils run social housing more cheaply and efficiently than Housing Associations. H.A. management costs are 39% higher than the local authorities.
f) HAs have benefited from an increase in right to buy sales after they take over and kept the proceeds of these for themselves when they should be shared with the council.
4) LSVTs are wrong in principle and Bad Value for the Tax payer and Council. The extra cost of privatisation has been estimated by the Deputy Prime Minister’s department as £4,200 per house over thirty years, and £1,300 more than the costs of renovating the stock under local authority ownership.
Council housing has been built up over the years to provide social housing for local people. Why should an asset that belongs to all be handed over, at knock down prices, to a private organisation not subject to the same democratic controls and not as accountable to tenants, so it can make big profits? The Council will say that it cannot afford to do repairs and renovations. Yet government can’t starve councils of money to pressure council tenants to vote for privatisation. With a little ingenuity, an effort of will, and the extra help which is now forthcoming, councils can, if they try (rather than giving up the ghost as NEL has), keep their housing stock and improve it for local people as always they have and should continue to do. |
