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Abstract
This paper empirically evaluates the market and welfare impacts of rent restructuring policy in the housing association (RSL) sector. The focus is on the financial viability of housing associations in the north of England, the affordability problems of tenants in the south, and the changes of turnover rates of RSL tenancies that have resulted. Using data from the Regulatory and Statistical Returns and the CORE (COntinuous REcording) from 2001/02 to 2005/06, the analysis shows that the ‘market’ component of the rent formula plays a more substantial role in affecting the RSL rent levels despite the ‘welfare’ measures in the policy—the greater emphasis on local earnings, the restriction of annual rent increase and the imposition of rent ceilings. Given that social housing in England is essentially a residual mode of provision, it is argued that a more flexible approach in balancing these two conflicting principles in rent setting is needed.
Acknowledgements
The earlier draft of this paper was written while the author was a researcher at the Centre for Housing Research, University of St Andrews. The assistance of Joe Doherty and Sheena Macdonald is gratefully acknowledged. Thanks are also due to the Editor and three anonymous reviewers for their helpful and constructive suggestions.
Notes
1 Not all social housing in Europe is provided by public sector or non-for-profit organisations and is let at below-market rent. In Germany, for example, some social housing is provided through private sector landlords and charged at market rent (Stephens et al., Citation2003).
2 The category of RSL was introduced in 1996. Since most housing associations are RSLs, the terms ‘housing association’ and ‘RSL’ are used interchangeably throughout this paper.
3 In addition to providing housing to low-income households, social landlords have recently been assigned by the central government to perform additional social tasks such as to combat social exclusion through the promotion of mixed communities (see Cole et al., Citation2001) and to promote urban regeneration.
4 Under the terms of the devolution settlement, England, Wales and Scotland have their own social housing policies. So far, the rent restructuring policy is implemented in England only.
5 However, there is no official definition of what an affordable rent actually is, either in the form of an upper limit on the monetary sum or proportion of income, which tenants in social housing should pay.
6 This medium-term objective was to be pursued in conjunction with the long-term goals to eliminate an impediment to implementing a policy of choice based lettings and reforming HB in favour of a local housing allowance, and to making a move towards a system that ultimately integrated private and social rents (Solomou et al., Citation2005, p. 3; Walker & Marsh, Citation2003, p. 2027; Walker, Citation2004, p. 456).
7 Because of their small size and relatively young organisations, some BME housing associations had not benefited from equity growth. Indeed, their properties were acquired during a period of relatively low grant rates, thus being heavily reliant on high levels of private finance often at interest rates higher than average for the sector (HC, Citation2002). It was anticipated that these associations would face significant financial difficulties in meeting the 2012 rent restructuring targets, as they required an average reduction of 22 per cent in their average rents partly because their stock was over-represented in areas with low property values (HACAS, Citation2002). Thus, in September 2004, £15 million funding over three years from 2003/04 was awarded by ODPM to 10 BME housing associations, all based in northern England (Housing Today, 10 September 2004).
8 GN tenancies are either assured or secured tenancies. Assured tenancies are tenancies started after 15 January 1989 and tenants pay market rents, which are fixed once a year. Secured tenancies are tenancies started before 15 January 1989 and tenants pay fair rent, which is fixed by the local rent officer once every two years.
9 To increase the rent differentiation between properties of larger size, the bed size weighting for three and four bed properties was increased, and an additional weighting for five and six + bed properties was introduced from April 2006 (ODPM, Citation2004, pp. 51–52; see also Appendix 1).
10 The size of individual RSL was defined by calculating the total individual RSL asset base from Parts A and B of RSR (Kiddle, with Spenceley, Citation2005). Around 6 per cent of CORE GN entries were new lettings made by housing associations owning less than 250 units.
11 The author is grateful to one of the anonymous reviewers who pointed out the difference of individual rental patterns as opposed to regional average.
12 Currently, RPI issued by the Office for National Statistics (ONS) is only available at national level. Since April 2003, because of the request from the Chancellor of the Exchequer to meet the needs for regional price data, the ONS started to calculate the relative regional consumer price levels. In 2004, average prices in Yorkshire and the Humber were 4.1 per cent lower compared with the UK average when based on RPI data. The corresponding figure for London was 7.1 per cent higher (Wingfield et al., Citation2005, Table 2). Although this study did not take this disparity into account, one could argue that while the national RPI might over-exaggerate the degree of real rent reduction in Yorkshire, it might also moderate the extent of real rent increase in London.
13 RSRs did not collect information on incomes of existing RSL tenants. This study used the LQ earnings as a proxy for the income level of existing tenancies (see also Dataspring, Citation2006). LQ earnings were extracted from the Annual Survey of Hours and Earnings, which replaced the New Earnings Survey since 2004. Because of the inconsistency in the presentation of the results in the distribution of weekly earnings, and at the time of writing (September 2006), the results of the 2006 annual survey were not available; the rent/income ratio analyses employed in this study were therefore limited to the years of 2003/04 and 2004/05.
14 These were self-reported figures, which needed to be treated with some cautions. The extent of the dependence upon HB to pay all or part of the rent might be higher because some tenants were unaware of their entitlement to HB, and some had no knowledge that their rents were covered by HB which were given directly to the landlords.
15 Choice-based lettings, based on the Delft model (Kullberg, Citation2002), were introduced to provide applicants for social housing a wider choice of properties, with more transparent ‘market’ style information. Twenty-seven schemes were piloted between 2001 and 2003 (see Cole et al., Citation2001, ch. 3), and the government has set a target of adoption of the choice-based lettings in 25 per cent of local authority areas by 2005 and 100 per cent by 2010.
16 Local Housing Allowance, introduced in October 2002, was intended to replace the current HB system. Unlike HB, Local Housing Allowance is paid directly to the tenant who will then pay the landlord. The amount of the allowance is not related to the tenant's own rent but to average rents in the locality, i.e. a standard amount is paid to households of similar size irrespective of their rent. This means that recipients incur all of the cost of any rent increase and gain all of the savings resulting from any decrease. It was piloted in 18 local authority areas for private tenants in 2003 and planned to be implemented nationally by March 2008.