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A research report by Family Mosaic that examines the proposed move towards market rents for social housing tenants

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  • February 2011

    Mirror, signal, manoeuvre: our drive to provide more social housing

  • Family Mosaic: an introduction

    Were one of the largest housing associations

    in London and Essex. We provide affordable

    homes to rent, and buy, as well as services

    to people who may need extra support.

    We have over 23,000 homes for rent. We serve

    over 45,000 residents. And we support over

    4,000 people with additional services to help

    them live independently.

    Were driven by our customers. We want to

    offer them more control and choice. We can

    do this because we are financially strong,

    and because its part of the way we work.

    This means we can reinvest our surplus into

    our existing housing stock. It means we can

    finance the construction of new homes. It

    means we can help people get the most out

    of their local community.

    It means making them feel valued in

    everything we do for them.

    Contents

    Summary 3

    1 Why Family Mosaic believes this 4 research is important

    2 The impact on rents 5

    3 The impact on our tenants 9

    4 The impact on the public purse 13

    5 The risks for Family Mosaic 15

    6 How do we go forward? 17

    Appendix one 19

    www.familymosaic.co.uk

  • In October 2010, the Government announced a new approach to the development of social housing: housing associations are to be encouraged to charge all new tenants an Affordable Rent. This was defined as being linked to a percentage of market rents up to a maximum of 80%.

    As one of the leading developers in London and

    Essex, Family Mosaic wanted to understand how

    this new model would impact on our existing client

    groups, as well as on our development programme.

    Family Mosaic knows it needs to continue building

    desperately needed new homes and make them

    available to those in greatest need.

    As we move into a new way of working, we see

    this report as part of a Mirror, Signal, Manoeuvre

    exercise. The report examines what this new model

    will mean to our residents. Its conclusions signal

    a possible new direction of travel for us, enabling

    us to move forward with our social purpose and

    providing good quality, new homes for those in

    greatest need.

    This research is based on an evaluation of how an

    increase in rent to 80% and 60% of market rent

    would impact on 50 new tenants. The research

    sample included a range of our properties,

    including different types, sizes, location and

    tenant circumstance. The research was carried

    out by Mark Lupton, a leading independent

    policy analyst, in December 2010.

    The research demonstrates that:

    setting rents at 80% of market rent would increase our clients requirement

    for housing benefit by 151%;

    even at 60% of market rent, there would be significant increases in rent levels,

    leaving a large proportion of tenants

    unable to retain enough income to

    pay their rent and live according to

    government standards of affordability;

    the impact on our tenants will vary by location, with those living in inner London the

    hardest hit: for most of those in Essex, social

    rents are already at 60-80% market rates;

    for those tenants receiving benefits, the proposed new affordable housing model creates, or worsens, the poverty trap, acting as an additional disincentive to gain employment.

    We know there is no new money available. We are

    convinced that the future new supply of affordable

    housing at reasonable rent levels will depend on

    housing associations and local authorities working

    even more closely together, maximising our efforts

    for the good of local communities.

    summary Mirror, signal, manoeuvre

    Mirror, signal, manoeuvre: our drive to provide more social housing | 3

  • When the Government announced in October 2010 that capital grants were going to be cut, it came as no surprise. The cuts were deeper than many anticipated, but we had been expecting fundamental change. The question, for us, is whether the new model is purely a development solution, or one that helps us achieve our social objectives.

    After all, that is the core of our work: the provision

    of affordable housing for those in greatest need.

    Were proud of being a social landlord. We welcome

    the new model, as it provides us with the freedom

    to determine our own rents. This new model might

    also result in a greater diversification within those

    who make up the social housing sector, which

    could be a good thing for housing. Our way isnt

    the only way.

    Our primary concern with the new model, however,

    was with the 80% figure: instinctively, it felt that

    this would be too high for the people we want to

    house in London. We believed that we might be able

    to make the new model work at 60% of market rent.

    Over the past five years, weve developed over 4,000

    new homes. We now serve over 45,000 residents,

    and support over 4,000 with additional services to

    help them live independently.

    Our surpluses are growing because of efficiencies

    were making and we want to invest these in our

    homes and communities. Our intention was to

    develop over 1,000 new homes, while continuing

    to provide all our customers more involvement and

    greater choice. And we know that our land

    buying, procurement and partnership skills will

    have to adjust to the new model and create

    even greater value.

    The new model announced by the Government,

    however, challenges these plans. Would we

    continue to be able to provide social housing to

    those in most need? Or would we be forced to

    let homes to a new client group? Would the new

    model, as some suggested, spell the death of social

    housing? Whatever, the need for 90% private

    finance limits our capacity and our new programme

    will be much smaller.

    While others within the sector debated the potential

    impact of the changes, we commissioned Mark

    Lupton, a leading independent housing specialist, to

    conduct research. His findings, which form the basis

    of this report, are based on a sample set of people

    who became Family Mosaic tenants in November

    and December 2010. This enables us to determine

    the real impact of the new model, and to propose

    strategies to enable us to continue developing

    affordable housing for those in greatest need. The

    research methodology is set out in appendix one.

    1 Why Family Mosaic believe this research is important

    4 | Family Mosaic

  • 2 The impact on rents

    Open market rents

    The first task was to consider the difference

    moving from the current rent to a rent of 60%

    of market rent (60% MR) and 80% of market rent

    (80% MR). To achieve this we determined a market

    rent for each property using the methodology

    outlined in appendix one.

    As might be expected the higher open market

    rents were mainly for houses. They were also,

    however, determined by location:

    the highest open market rents were for a three bed house in Islington

    (576 per week) and a four bed house in

    Lambeth (532 per week);

    of the twelve properties with weekly rents above 300 per week, just two were flats:

    one located in the City of Westminster (458

    per week), the other in Islington (310

    per week);

    all five properties with open market rents of less than 120 per week were flats in either

    Braintree, Basildon or Colchester.

    The rise in rents at 80%

    At 80% MR the breakdown of properties by rent

    increase is:

    150 increase per week 16 properties: 13 in Essex, two in outer London,

    one in Inner London;

    51100 increase per week 15 properties: 11 of which are flats in less

    expensive parts of London, as well as houses in

    Waltham Forest, Lewisham and Haringey;

    101150 increase per week 10 properties, including five houses and five

    flats, in Islington, Barnet, Lambeth, Southwark,

    Lewisham and Hackney;

    151200 increase per week one house in Islington;

    over 200 a week increase seven properties: six houses in London and one

    flat in the City of Westminster.

    See graph 1 on page 6 for full details

    At 80% of market rent, all properties had significant increases of rent. In seven inner London properties, these increases were over 200 a week. Outside London, however, these increases were less than 50 per week. At 60% of market rent, all properties in London would have increases in rent. For five of these in inner London, these increases would be over 150 per week.

    Mirror, signal, manoeuvre: our drive to provide more social housing | 5

  • 50

    100

    150

    200

    250

    300

    -50

    50

    100

    150

    200

    250

    300

    The rise in rents at 80%

    Essex Outer London Inner London

    Essex Outer London Inner London

    Graph 1 Rise in weekly rent at 80% market rent

    Graph 2 Rise in weekly rent at 60% market rent

    The rise, and fall, in rents at 60%

    Moving to 60% MR produced a significant

    change for the properties outside London

    (see graph 2 below). The rents on the

    properties in Braintree, Basildon and

    Colchester would reduce although the

    reductions are minimal.

    For properties in London there would still

    be significant increases at 60% MR:

    150 increase per week: 17 properties 51100 increase per week: 10 properties 101150 increase per week: 3 properties Over 150 increase per week: 5 properties

    6 | Family Mosaic

  • Rent changes by location

    When we look at the average weekly rent by

    location, we can see how tenants living in inner

    London, in particular, will be affected by increases

    to both 60% and 80% of market rent. For those

    in outer London, the impact of a shift to 80% in

    market rent is marked, while for those in Essex,

    many will have a slightly lower rent if set at 60%

    of market rent.

    99.01

    123.65

    92.74

    180.98

    101.57

    135.74

    253.67

    190.25

    106.18Current

    60% MR

    80% MR

    Outer LondonEssex Inner London

    Graph 3 Average weekly rent at current rate, 60%MR and 80%MR in Essex, Outer London and Inner London

    Mirror, signal, manoeuvre: our drive to provide more social housing | 7

  • Mark lives in a one-bed flat in Basildon, Essex. He is employed, taking home a weekly wage of

    230.76 per week. His current social rent is 89.36.

    A 60% MR would result in a rent of 69, a fall of

    20.36 or 23% less than his current rent.

    A 80% MR would result in a rent of 92, a rise of

    just 2.64, or 3% more than his current rent.

    Diane lives in a one-bed flat in East Ham, London Borough of Newham. She is employed and takes home 191.42 a week.

    Her current social rent is 79.06.

    A 60% MR would result in a rent of 101, a rise

    of 21.94, or 28% more than her current rent.

    A 80% MR would result in a rent of 135, a rise

    of 55.94, or 70% more than her current rent.

    Florence lives in a one-bed flat near Clissold Park, London Borough of Hackney. She is employed, taking home 346.27 a week.

    Her current social rent is 103.27 a week.

    A 60% MR would result in a rent of 138, a rise

    of 34.73, or 34% more than her current rent.

    A 80% MR would result in a rent of 184, a rise

    of 80.73, or 78% more than her current rent.

    89.36

    69

    92

    79.06

    101

    135

    103.27

    138

    184

    case study 1

    Three single people, the real costs

    Current 60% MR 80% MR

    8 | Family Mosaic

  • 3 The impact on our tenants

    The affordability issue

    To determine the affordability of these rents for the

    same tenants we first looked at how many of them

    would have to use more than 30% of their income

    to pay the new rent level.

    This figure was chosen because it is typically

    used as an affordable proportion of income to be

    paid as rent when assessing housing need. While

    Communities and Local Government guidance

    suggests 25%,1 the last definition of social housing

    need based on income in the London Plan states:

    Rent and service charges together should not

    exceed 30% of net household income for a

    household with an income of less than 18,100.2

    With most of the properties in this study situated in

    London, this confirmed our use of the 30% figure.

    We also used an adapted Department for Work and

    Pensions Tax Benefit model calculator to estimate

    how much each tenant would have left to live on in

    different income and rent scenarios. 3

    Tenants and affordability

    So what happens when we increase weekly rent

    to 80% MR? Of the 49 tenants in the sample, just

    three all of whom lived in Basildon and were in

    work could afford the higher rent, and still have

    70% or more of their income to live on.

    Of the other seven tenants whose income was

    above 18,100 per annum (as set out in the

    London Plan), none would be able to afford the

    higher rent, and still have 70% or more of their

    income to live on.

    The two graphs on the following page show the

    affordability gap the amount of extra income a

    tenant would need to pay the rent at 80% MR

    and 60% MR.

    Only three tenants all living in Essex would be able to afford to pay rents at 80% MR, and still have 70% of their income to live on. At 80% MR, 57% of tenants would be on full housing benefit. The remaining 43% would have to meet the increased rent at least in part from their own resources. At either 60% or 80% MR, tenants would become more dependant on housing benefit, reducing incentives to work.

    1 Strategic Housing Market Assessments Practice Guidance (CLG 2007)

    2 London Plan annual monitoring report, 05/02/09

    3 http://research.dwp.gov.uk/asd/index.php?page=tbmt: These scenarios were based on information supplied by Family Mosaic from financial assessments conducted at the point of letting. Where necessary, estimates have been used to supplement this information.

    Mirror, signal, manoeuvre: our drive to provide more social housing | 9

  • -100

    100

    200

    300

    400

    -100

    100

    200

    300

    400

    At 80% MR, eight tenants would need to find over

    200 in order to pay the new rent. Over 50% of the

    tenants in this sample would need to find an extra

    100 or more per week to pay the rent. One of these

    tenants lives in Essex: the others live in London.

    At 60% MR, five tenants would be able to pay the

    increase in rent, and still have 70% or more of their

    income to live on (the affordability test). Just under

    a third of the tenants in this sample would still have

    to find an extra 100 or more a week to pay the rent.

    All of these tenants live in London.

    Graph 5 The affordability gap: the amount of extra income tenants would have to find to pay weekly rent at 80% MR.

    Graph 6 The affordability gap: the amount of extra income tenants would have to find to pay weekly rent at 60% MR.

    Essex Outer London Inner London

    Essex Outer London Inner London

    10 | Family Mosaic

  • The result of the rise in rent to 80% MR would lead

    to over 50% of the tenants in this sample being on

    full housing benefit. The remaining 21 would have

    to meet the increased rent at least in part from

    their own resources.

    Consequently, at 80% MR those tenants whose rent

    is not fully covered by HB are paying significantly

    more rent than they would on social rents.

    These 21 tenants would be left with the following

    amount of income to live on:

    s per week

    Number of tenants

    Household size

    100199 6 5 single,

    1 couple

    200299 9 1 single,

    1 couple,

    6 households

    with children

    299400 6 6 households

    with children

    Notably, at 60% MR only six of these 21 tenants

    would have significantly more money to live on

    every week than if their rent was set at 80% MR.

    These six are on higher incomes and medium rents.

    For the other 15 tenants there is no change on

    what they have to live on despite the decrease

    in rent. If you have low income or high rent you are, in effect, stuck.

    Increased dependency

    The inevitable result of an increase in rent to

    these levels would be an increase in applications

    for, and payments of, housing benefit. The next

    section of this report explains how the increases

    to 60% and 80% would increase housing benefit

    payments to these tenants.

    One result would be that increased dependency on housing benefit would have a negative effect on work incentives. It is outside the scope of this analysis to quantify this but work conducted by

    the Department for Work and Pensions shows how

    much extra a particular family would need to earn

    to increase their take home income by much more

    than its current level.

    As an example, for gross pay of 300 per week,

    their left to live on amount would be 311.01,

    but for gross pay of 400 per week their left to live

    on amount would be just 315.51. Earning 100

    more per week, then, results in just 4.50 more

    to live on.

    Moreover, on 300 gross per week, the rent they

    pay needs to be below 65 a week for it to make

    any difference to their left to live on amount, as

    any rent higher than this is covered by housing

    benefit. On the other hand, a rent of 200 per

    week extends their poverty trap up to a gross

    income of some 700 plus a week.

    Our concern is that raising rents to 80% MR and

    thereby increasing the affordability gap will

    result in greater dependency on housing benefits,

    and impact negatively on work incentives. We

    know welfare reform will change this position.

    This is discussed later in the report.

    Mirror, signal, manoeuvre: our drive to provide more social housing | 11

  • Nadine lives in a four bed house in Lambeth,

    with her daughter Win, and three grandchildren,

    Marcus, Malcolm and Kai. Nadine lives on an

    occupational pension and is not currently in

    receipt of housing benefit.

    Her income is 580.95 a week, of which 133.31

    is currently spent on rent (23% of income). This

    leaves her with 447.64 a week.

    If her rent was increased to 60% of market rate,

    it would rise by 185.84 to 319 per week.

    At this level, she would be left with

    261.95 a week to live off.

    If her rent was increased to 80% of market rate,

    it would rise by 292.69 to 426 per week.

    At this level, she would be left with

    just 154.95 a week to live off.

    At 80% MR, she would have to apply for housing

    benefit. This would be paid at a rate of 301 per

    week. After other housing costs, she would be left

    with 394 per week to live off.

    At 60% MR, she would also have to apply for

    housing benefit. This would be paid at a rate of

    193.81 a week. After other housing costs, she

    would still be left with 394 per week to live off.

    Her current annual housing benefit bill is nil.

    At 60% MR, the annual cost to the taxpayer of

    housing benefit payments would be 10,271.93.

    At 80% MR, the annual cost to the taxpayer of

    housing benefit payments would be 15,652.

    0 5,000 10,000 15,000

    Social rent

    Rent at 60%MR

    Rent at 80%MR

    Annual housing benefit cost

    case study 2

    Granny, daughter and two grandchildren in inner London

    Current rent is 23%

    of income

    At 60% MR, rent is

    55% of income

    At 80% MR, rent is

    73% of income

    12 | Family Mosaic

  • 4 The impact on the public purse

    Based on this research, at 80% MR the weekly housing benefit bill for these tenants would rise from 3,155 to 7,911, an increase of 151%.

    Based on this research, at 60% MR the weekly housing benefit bill for these tenants would rise from 3,155 to 5,286, an increase of 68%.

    Based on this research, at 80% MR, the yearly housing benefit bill just from these 50 properties would increase from 164,060 to 411,372.

    Rents at 60% market rate

    Rents at 80% market rate

    9,939

    Social rents

    5,159

    Social rents164,060

    Rents at 80% market rate

    411,372

    7,454

    Rents at 60% market rate

    274,872

    Graph 7 As the rent on these properties increases, so the proportion paid by housing benefit rises: at current social rents, housing benefit covers 61% of total rents; at 60% MR,

    this increases to 71%; at 80% MR, housing benefit covers 80% of rent.

    Granny, daughter and two grandchildren in inner London

    Graph 8 Accordingly, the annual cost to the taxpayer of housing benefit from these properties also increases.

    Mirror, signal, manoeuvre: our drive to provide more social housing | 13

  • Gemma and her three children Maya, Bobby and

    Alfie live in a three-bed house in Holloway, London

    Borough of Islington. She is currently out of work,

    living on a combination of Income Support, Child

    Tax Credit, Child Benefit and Housing Benefit. The

    first three amount to 162.56 a week, while the

    latter 120.29 covers the cost of her rent.

    If her rent was increased to 60% MR, it would

    almost triple, to 346 per week. As a consequence,

    her housing benefit bill would also increase: we estimate to 346 per week or 17,992 a year.

    To cover the cost of her annual rent at 60% MR

    17,992 and have at least 200 a week for her

    family to live on, she would need to find a job that

    paid 28,392 a year. This is above the median annual

    pay for fulltime employees in the UK (23,348).

    If her new rent represented 30% of her income the

    affordability income she would need to find a job

    that paid just below 60,000 a year (net). Even if

    her rent represented 50% of her income, she would

    still need to find a job paying 35,984 a year (net).

    If her rent was increased to 80% MR, it would

    rise by almost 400% to 461 per week. As a

    consequence, her housing benefit bill would also increase: we estimate to 23,972 per year.

    To cover the cost of their annual rent at 80% 23,972

    and have at least 200 a week for her family to live on,

    she would need to find a job that paid 34,392 a year.

    If her new rent represented 30% of her income the

    affordability income she would need to find a job

    that paid her just under 80,000 a year (net). Even

    if her rent represented 50% of her income, she would

    still need to find a job paying 47,944 a year.

    case study 3

    6,255

    17,992

    23,972

    Annual housing benefit bill at current rent

    Annual housing benefit bill at 60% MR

    Annual housing benefit bill at 80% MR

    Mother and her three children

    14 | Family Mosaic

  • 5 The risks for Family Mosaic

    At 80% of market rent, Family Mosaic would collect an additional 4,780 in rent every week just from these properties. At 60% market rent, the additional income would be 2,295 per week. Increasing rents to 60% or 80% MR will increase our dependency on housing benefit.

    Income generated from these 50 properties

    for Family Mosaic:

    The current rental income: 5,159

    Additional income generated

    by moving to 60% of MR: 2,295

    Additional income generated

    by moving to 80% of MR: 4,744

    The move to the new rent would

    therefore generate 92% extra rental

    income for the association at 80% MR

    and 44% at 60% MR.

    While the organisation would clearly

    benefit, the two losers would be those

    new tenants and the taxpayer. Housing

    benefit would be needed to cover the

    majority of this increase if let to our

    current client groups (see last section).

    5,159

    9,939

    7,454

    Additional weekly rental income

    Graph 9 Weekly rental income at current, 60% MR and 80% MR

    Mirror, signal, manoeuvre: our drive to provide more social housing | 15

  • The risks of housing benefit

    If rents are raised to 80% MR, Family Mosaic will

    become increasingly financially dependent on

    housing benefit. Simultaneously, a number of

    the changes to the benefit system that are being

    introduced will make it more challenging for Family

    Mosaic to collect rents from its current profile of

    tenants. This raises identifiable risks and numerous

    uncertainties to our business and all those we serve.

    There are four changes the Government is proposing

    to housing benefit rules that may make it difficult

    for some tenants to continue to recoup the extra

    rent costs, and therefore pay their rent to us.

    The overall benefit capThe move to limiting total benefits is clearly a

    potential difficulty for some tenants given the

    high rents in London. The proposed benefit

    caps are:

    250 for a one-bed property; 290 for a two-bed property; 340 for a three-bed property 400 for four-bed and larger properties.

    Using an early version of a spreadsheet the

    Chartered Institute of Housing is developing,

    we calculate that an increase to 80% MR would

    result in eight of the cases in this research being

    affected by the benefits cap. All are located in

    inner London.

    If rents were raised to 60% MR, then only two of

    the tenants in the sample would be affected.

    The 10% reduction in JSAFamily Mosaic has attempted to quantify the

    potential consequences to tenants when this is

    introduced both in terms of rent loss and the need

    to give support and advice. The proposed change

    will affect those who have been in receipt of

    Job Seekers Allowance (JSA) for over a year.

    Family Mosaic visited a proportion of its tenants

    on full housing benefit to identify those who were

    also receiving JSA. This suggested that about 15%

    of people on full housing benefit are also of working

    age and on JSA.

    Six of the tenants in this survey were claiming JSA.

    The increase in non-dependent deductions Family Mosaic estimates that 542 of its tenants may

    be affected by this measure. They estimate that this

    could lead to a potential rent loss of 478,000 per

    year, with a high risk of about 306,000 bad debt.

    Two tenants in this study had non dependants.

    Limiting housing benefit to property sizeAnother proposed change is that housing benefit

    is to be limited for working age claimants so that

    it only covers the property size deemed needed for

    the household.

    The tenants in this study were all new lettings where

    the size of property is more likely to meet household

    requirements at time of letting. This may, however,

    change in the future. We do not therefore have

    sufficient information from the sample to take an

    informed view on this.

    Family Mosaic has, however, estimated that

    over 1,000 of its tenants may be effected by this

    provision with a potential rent loss of over 1m.

    16 | Family Mosaic

  • Changing the tenant profile

    This exercise has focussed on continuing to house

    the same client group. The alternative is to move

    to a different tenant group who are less dependent

    on housing benefit to afford the rents. Whilst

    the Government has said it is looking for housing

    associations to house the same sort of client group

    as at present, there have been suggestions of a

    degree of flexibility in relation to this.

    In London, the high housing costs mean that in

    most boroughs it is hard for people on salaries

    of less than 40,000 to find a property they can

    afford. This leaves a wider gap of income ranges

    unable to gain affordable housing.

    There is also an issue about what proportion

    of income households can afford to spend on

    housing costs. In this research we have used

    30% of income. There is, however, the view that

    it is not the percentage which is important but

    the amount the tenant has left to live on.

    That people are spending a higher percentage of

    their incomes on housing costs can be seen from

    research conducted by Savills. This considers the

    4 - research prepared by Savills Residential Research

    5 http://www.resolutionfoundation.org/us/current-work/squeezed-britain-low-middle-earners-audit/

    percentage of households in London against

    the income bands for particular tenures. The

    research indicates that many households,

    particularly those in the 15,00040,000 income

    bands, are paying significantly more income to live

    in private rented or owned property. 4

    So whilst the poorest are unlikely to be able

    to pay more than 30% of their income on rent,

    higher income groups may be able to pay more.

    Letting to these slightly higher income groups

    might lead to less risk of them being affected by

    the housing benefit changes. However the effect

    of other benefit changes on these groups in

    particular low-income workers may also hamper

    affordability. These can be seen in the Resolution

    Foundation finding that major changes to tax

    credits that by 2012 will hit working families hard

    and the concerns expressed in their recent report

    Squeezed Britain. 5

    6 How do we go forward?

    To mitigate this risk we could change the profile of our tenant group, and not let new properties to those most in need: this, however, goes against our core principles. Our preferred option is to work even more closely with local authorities to ensure a continued supply of housing for those in greatest need.

    Mirror, signal, manoeuvre: our drive to provide more social housing | 17

  • Better advice and support

    One consequence of higher rents and greater

    financial risk is that associations will have to think

    about how they can be more active in helping

    reduce poverty amongst their tenants at a time of

    rising rents and reduced benefit payments.

    Family Mosaic is already changing how it targets

    its advice and support services more effectively,

    regardless of what the final impact of benefit

    changes may be particularly in relation to:

    welfare rights advice to help tenants cope with rent payments;

    employment advice and support to help them to come off benefits.

    Given the need to maintain sustainable tenancies

    in this changed environment associations might

    need to be more pro-active in helping tenants

    keep their costs down. This might include, for

    example, spending increased rent income on

    retrofitting to help lower tenants fuel bills and

    thus reduce financial pressures. Or it could mean

    supplying micro-loans to tenants to help them

    reduce dependence on doorstep lenders.

    The new world presents many challenges for those

    on low incomes and housing associations trying to

    meet those needs.

    Working together

    So is the new affordability model proposed by the

    Government an opportunity or a threat? We want to

    continue to develop desperately needed new homes.

    Family Mosaic CEO Brendan Sarsfield says,

    We are determined to deliver more homes, but

    this look in the mirror tells us that the new model

    creates problems for our residents.

    Market rents per se are not the problem we have

    used them in temporary housing for many years.

    The challenge now is can we make higher rents work

    as a long-term solution during welfare reform and

    public spending constraints.

    This report does not provide all the answers: that,

    after all, was not our objective. Looking at the

    impact of the new model through the eyes of

    our residents, however, will inform how we

    manoeuvre towards providing affordable social

    housing in the future.

    The challenge now is can we make higher rents work as a long-term solution during welfare reform and public spending constraints

    18 | Family Mosaic

  • This research was based on an analysis of the impact of how the rent paid by 50 new Family Mosaic tenants would change as a result of setting the rents at 80% and 60% of market rates. The sample of tenancies was based on a cross section of our properties with different types and location of properties, as well as of tenant circumstance.

    Setting market rates was a key element of the

    research methodology. Indeed, if landlords are to

    adopt a pricing policy based on a percentage of

    market rent then they will need to consider how

    they gain information. Some associations have

    considered setting the percentage against average

    market values. Yet if associations are to manage

    their assets effectively they should be setting rents

    for each property on the basis of its open market

    rental value for that particular type of property in

    that location.

    It is important that associations do not just look

    at regional or local authority figures but consider

    localised housing submarkets. Associations need to

    be able to ensure they know their local markets and

    can conduct robust analysis on a localised basis.

    Getting robust information on market rents is

    not easy. This is principally because most private

    landlords are small scale and localised. Housing

    associations as major landlords working across

    a range of markets and sub-markets need more

    detailed information.

    It is possible to get local authority wide

    information. This does not, however, reflect the

    markets which operate within and across local

    authority boundaries.

    The Housing Minister has announced that the

    calculation of market rent will need to be based on

    a residential lettings estimate compatible with RICS

    recognised methods of valuation. Methods to do this

    are currently being developed.

    For this report we have used the Find a Property

    website, which gives localised private sector asking

    rents, using a geography of rental submarkets. It is

    based on extensive data, and uses a sophisticated

    methodology devised by Calnea Analytics. 6

    Asking prices are not necessarily realised, however,

    and rent levels may be affected by variations in

    the quality of properties coming on to the market.

    Markets are also dynamic and therefore subject

    to change. Rental prices using an RICS approved

    methodology may be different to these free market

    asking rents.

    appendix one Research methodology

    6 http://www.findaproperty.com/rental-index.aspx

    Mirror, signal, manoeuvre: our drive to provide more social housing | 19

  • Credits

    Original research by Mark Lupton and Bob Line

    Edited by Matthew Grenier

    Designed by Andrew Kingham

    For further information contact Joanna Coyle:

    T 020 7089 1046

    M 07960 821 007

    E [email protected]