On the home front

The housing provisions of the Localism Act are among the most far-reaching parts of the Government’s reforms. Tina George outlines the major changes.

The clue is in the title. The idea is to de-centralise regulation, and give power back to ‘local’ authorities. Now that the long-awaited Bill has become law, we can look at the mechanics of the legislation and consider whether the Localism Act will do what it says on the tin. In this article we will focus specifically on Part 7 and the housing provisions.

Homelessness

The Housing Act 1996 obliges local authorities to arrange accommodation for people who are homeless through no fault of their own. A local authority could offer private rented accommodation to homeless applicants, but could not compel them to accept it. This means that applicants could effectively refuse suitable private accommodation, and demand to be placed in expensive temporary accommodation. It also means that, in some circumstances, people in acute but short-term housing need acquired a social home for life, while others who needed a longer-term social home were left waiting.

When the relevant provisions of the Localism Act 2011 come into force, the duty to the homeless will remain intact. However, the situation regarding private rented accommodation will change. The Act recognises that while people who face homelessness need suitable accommodation, they do not necessarily need social housing. It therefore lets local authorities meet their homelessness duty by offering suitable accommodation in the private rented sector, provided that the tenancy is for a fixed term of at least 12 months. If the applicant refuses such an offer, the authority’s duties will cease.

The intent is that this will enable local authorities to make better use of the private rented sector, help to reduce the number of people in need of housing and free up social homes for people in real need.

It is important to note that if an applicant becomes unintentionally homeless and re-applies for accommodation within two years, the local authority still has a duty irrespective of whether the applicant still has a priority need.

Regulation of Social Housing

The Act abolishes the Tenant Services Authority (TSA), introduced by the Labour Government in 2008 as the regulator of social housing in England.

From 1 April 2012, the regulatory functions of the TSA will transfer to a new Regulation Committee of the Homes and Communities Agency. The Committee will have two fundamental objectives: the economic regulation objective (ensuring financial viability of providers and value for money); and the consumer regulation objective (making sure the provision of housing is well-managed and of appropriate quality, tenants are given an appropriate degree of choice and protection and are suitably involved in the management issues).

There are provisions requiring the Committee to use its monitoring and enforcement powers, but only if it has reasonable grounds to believe that there has been a failure which has resulted in serious detriment to the tenants or if there is a significant risk that there will be such a failure without its intervention.

While it is hoped that the reforms will provide social tenants with greater power to hold their landlords to account, it remains to be seen how effective these good intentions will be in practical terms. The TSA has launched a consultation with landlords, tenants and other stakeholders on the reforms to the current framework of regulation and the directions which the Government has issued, or intends to issue, to the Committee and we watch the outcome of that with interest.

The Act also provides for the creation of a unified service for investigating complaints about social landlords. Under the present system, complaints by tenants of a local housing authority are made to the Local Government Ombudsman and those brought by tenants of private providers of social housing are made to the Independent Housing Ombudsman. When the provisions come into effect, the Housing Ombudsman will handle all complaints about social landlords.

Allocations

This chapter has been drafted to provide councils with greater powers and independence to manage their social housing stock. However, it also ensures that councils in turn provide local people with more information about how the social housing stock is allocated within their local authority.

The provisions on allocation begin by amending and adding to the definitions of ‘allocation of housing accommodation’ and ‘eligible and qualifying persons’. They prevent local authorities allocating housing to anyone who is already a secure, introductory or assured tenant of either private sector accommodation or of any RSL. The new provisions enable a local authority to decide what classes of persons are, or are not, ‘qualifying persons’, for the purpose of allocations. Interestingly, however, this freedom is then immediately reined in by the ensuing provisions which provide the Secretary of State with powers to regulate which classes of persons are, or are not, to be treated as such and prescribe criteria that may not be used by local authorities in deciding who may not qualify.

It will be interesting to see the regional variations that emerge and whether the limited flexibility will, in reality, be a useful tool. Councils will have to be careful to strike the right balance in defining who qualifies, or one can envisage challenges being made.

The concept of allocation schemes is introduced. Every local housing authority must set out its priorities and procedures for allocating housing. Some degree of freedom is given so that schemes can be tailored to fit the housing needs of the locality and limit who can apply for social housing within their areas. The scheme must have regard to the current homelessness strategy, current tenancy strategy and (if in London) the London Housing Strategy. The Act sets out certain parameters, including reference to the ability to take behaviour into account when making an allocation (of both the proposed tenant and members of their household).

The obvious concern is that this will inevitably involve a subjective test, and councils must be careful to set clear guidelines and then to carefully follow them and document the decisions they make. Above all the scheme must be transparent. A person who applies for housing to be allocated to them must be able to assess how his application is likely to be treated (whether he fits into a preferential category of people) and whether there is housing available that is suitable to his needs.

It is not clear when these particular provisions will come into force.

Tenure reform and tenancy strategies

There will be an obligation to publish a tenancy strategy within a year of the provisions coming into force which, on the current anticipated timetable, would be April 2013. The London Borough of Barnet has already published its draft strategy, upon which it is currently consulting, and it probably won’t be long before more authorities follow suit.

Flexible tenancies have been much talked about, but will in principle be the same as a secure tenancy but for a fixed term (with a minimum duration of two years). This removes the concept of a tenancy for life, although how far authorities will want to go in offering shorter terms will remain to be seen. It is thought the average is likely to be a term of five years. The tenancy strategy of the authority will, of course, have to set out the detail.

In light of the recent decisions in Pinnock, Powell and other related cases, the new provisions highlight further the importance for authorities to set procedures, follow them and document decisions made.

The rules on who will be entitled to succeed to a secure tenancy are also revised, limiting the right to a spouse or civil partner who satisfy the residency criteria. This is no surprise given the intention to free up housing. Although there is an option for authorities to widen the eligibility criteria for tenancies within their area, it is anticipated that many will not want to do so in categoric terms, but may instead give themselves discretion to do so in certain circumstances. It is important to note that this change is not retrospective and consequently only applies to new tenancies.

The Housing Revenue Account

One of the most significant changes that the Act introduces is the abolition of the Housing Revenue Account (HRA). The provisions in Part 6 of the Act will repeal the existing subsidy system and replace it with power for the Secretary of State to introduce self financing from April 2012. Until the new system is implemented, the existing HRA subsidy system will remain in place. The response to the Government’s consultation on these measures received overwhelming support, with 87% of local authorities who responded, being in general agreement with the proposal.

The subsidy system will end with the result that councils will be able to keep all of the rental income and use it to support their own housing stock. The framework for calculating the value of the particular authority’s housing service is set out and this will be used to arrive at the settlement payment, ie, the payment that the Government will make or receive on changeover.

The level of debt to be taken on by local authorities remains a key issue, and we await the finer details of how the settlement payments will be calculated, and which we are told will be forthcoming in regulations.

One of the key priorities for authorities will be to ensure that the settlement calculations are correct, and the Act allows the Secretary of State to issue a further determination if there has been a change in any matter that was taken into account when the settlement payment was calculated. There are also provisions which give the Secretary of State power to set a maximum amount of housing debt that can be held by each local housing authority.

There are further provisions that amend the Local Government Act 2003, enabling the Secretary of State to exempt certain housing stock from the requirement that a proportion of the net receipt be paid back to central government on sale under the right to buy provisions.

It will be really interesting to see how these changes play out. The obvious concern is to how those authorities with poor collection rates will fare, but what has become clear is that there is likely to be very limited grant funding for new social housing development up to 2015. It is perhaps inevitable, therefore, that any additional expenditure released through self-financing will be focused on maintaining and improving the existing housing stock.

Conclusion

There can be no doubt that the Localism Act signifies a radical change in direction, removing power from Whitehall and putting it into the hands of local communities. Despite its good intentions, however, there is some concern about how the Act will operate in practice, and whether the loosening of constraints might result in some unintended consequences. Like every Act, however, its merit cannot be accurately assessed at such an early stage, and we await the outcome with interest.

Tina George is a partner and Head of Housing at DMH Stallard. She can be contacted on 01293 605193 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..