Investing in Modernisation - An Agenda for Scotland's Housing :10

Investing in Modernisation - An Agenda for Scotland's Housing

Chapter 3 A New Approach for Public Rented Housing Introduction - The Need for a New Approach 3.1 Although the majority of houses in Scotland are now owned, or being bought, by their occupiers, many Scots continue to look for affordable rented housing to meet their needs. The main source of such accommodation is the public rented sector, together with the important but smaller housing association sector. We need to find ways of reducing the differences that currently exist between the publicly rented sector and owner-occupation. In particular, we need to ensure that public sector tenants have a much greater ability to take control over decisions about their housing. Greater involvement of communities in decisions which affect them is fundamental to our approach for tackling social exclusion.
3.2 There is also an urgent need for repair and modernisation of housing in the public sector. Moreover, in recent years, many public sector houses have been sold under the "Right to Buy" legislation and these houses have often been in estates where there is a relatively high demand from waiting list applicants. Very few new houses have been built by local authorities and, despite their best efforts, many authorities have found it difficult to maintain the existing stock in good repair or to undertake much needed improvements. There is, therefore, a vital need for increased investment. The Government has provided much needed additional resources through the Comprehensive Spending Review. By 2001-02, net public sector expenditure on housing in Scotland will have increased by around 40% as compared to the planned level for 1997-98 inherited by the Government when it took office in May 1997. However, public sector expenditure on its own is not sufficient. Investment in affordable rented housing in Scotland needs also to be supported by private sector funding so that we can maximise the benefits from every Ł of public expenditure.
3.3 This chapter therefore sets out a new way forward for public sector housing in Scotland through the promotion of "community ownership" using resources provided through the New Housing Partnerships initiative. Although examples of community ownership in housing have been successfully developed in Scotland over the past 25 years, a major extension into the local authority sector would be a new departure with benefits for tenants, local authorities and the wider community.

Community Ownership
3.4 Community ownership is a way of empowering tenants, maximising the total resources available for investment in public sector housing and securing additional benefits for the wider community. Community ownership would normally result from the transfer of existing public sector rented housing to alternative community landlords at a price which reflects the value of the stock and under arrangements which ensure that: the housing is owned by a non-profit making body on which there is tenant, local authority and community representation; there is effective tenant involvement in key decisions; housing is available, and continues to be available, to be let at affordable rents to those in housing need, including the homeless and other vulnerable groups; and, there are guarantees for transferring tenants regarding rent increases, tenancy rights, and repairs and improvements to housing stock.
3.5 Since the new community landlords set up to own and manage the housing that transfers from the local authority are not part of the formal public sector, they are not subject to controls over public sector borrowing. This will allow them to seek to borrow from the private sector to finance repair and modernisation works and so to accelerate their investment and improvement programmes. Financial institutions have demonstrated that they are very willing to invest in affordable rented housing where they can be sure that the housing will be well managed and regulated, and where there is likely to be continuing demand for the housing for rent.
3.6 There are a variety of ways in which community ownership can be achieved. It is for each local authority in consultation with tenants, existing community based housing bodies such as housing associations and co-operatives, and Scottish Homes, to decide if they wish to pursue community ownership and, if so, what form it might take in their area. The new community landlord might be an existing or a newly formed housing association or a local housing company or trust, and would be controlled by a Board comprising tenant representatives, local authority representatives or nominees, and other persons with a close involvement in the community or particularly relevant skills and knowledge.
3.7 It is also important to be clear what community ownership does not mean. It most certainly does not involve "privatisation" with the housing being sold into private ownership to companies operating purely on a "for-profit" basis. Instead, following the transfer of housing into community ownership the housing would continue to be available to be let at affordable rents to those in housing need.

The Development of Community Ownership in Scotland
3.8 There has already been a series of successful examples of community ownership in Scotland. In the UK context, Scotland has pioneered the development of community based housing associations and co-operatives and, at present, almost 90% of Scottish housing associations have tenants on their management committees, with around one-half of these having a tenant majority. Community based housing associations, controlled by local residents who put in many hours of voluntary effort in management committees and other ways, played a major part in the regeneration of communities throughout Scotland, in particular in Glasgow since the 1970s. Their achievements include both the extensive housing improvement works that have been undertaken and also the way in which they have successfully involved local residents in this process and in the management of the improved housing stock. They have demonstrated that residents in the local community can successfully take decisions on a wide range of complex issues including allocation policies, selection of contractors, priorities for repairs and maintenance and the employment of staff.
Resident satisfaction with housing management increased with the establishment of locally controlled organisations. Some of these pioneering community based housing associations have also developed a wider role in the local community going beyond their mainstream housing activities.	Castlemilk, Glasgow.

3.9 Other existing examples of community ownership have resulted from transfers of housing stock by Scottish Homes and some local authorities to locally based housing associations. In total, over 50,000 public sector houses previously owned by Scottish Homes or local authorities have been transferred to alternative landlords, mainly housing associations, and the results have been a clear success. These community transfers have received the support of tenants and have unlocked substantial sums of private finance. A study undertaken on behalf of the Scottish Office and Scottish Homes in 1996, involving 1,000 public sector tenants who had gone through the transfer process, found that the experience had been a positive one for all the parties involved. Over 90% of the tenants interviewed were as satisfied or more satisfied with the services they received from their new landlords.

The Extension of Community Ownership through New Housing Partnerships
3.10 Building on this experience, the Government is keen to encourage local authorities to adopt policies for developing community ownership models in their areas. This will be the top priority for the resources of over Ł300 million which has been allocated for developing New Housing Partnerships over the next three years. These partnerships are about councils, tenants and communities coming together with other agencies to provide good quality affordable rented housing, greater community empowerment and more balanced communities. Our intention is that New Housing Partnerships should extend community ownership in Scotland and give residents greater control in the ownership and management of their housing. This is relevant to all types of partnerships - including those linked to housing regeneration schemes and those building new affordable social rented housing to meet local needs. However, it is in the context of transfers of existing council housing to new community landlords that the opportunities for extending community ownership are greatest. These "transfer partnerships" offer:
new opportunities for tenants who transfer; new certainties for tenants who transfer; and, safeguards for the tenants and the wider community.	New Housing Partnerships, Muirhouse, Edinburgh.

New Opportunities for Tenants
3.11 Housing transfer provides an opportunity for tenants to have a real say in the ownership and management of their houses. The aim is that the housing will be owned and managed by a non-profit making community landlord body with tenants represented on the board or management committee.
3.12 The structure of the organisation should provide opportunities for widespread community participation at all levels. The threshold for the maximum size of transfer has been removed and we recognise that some local authorities are actively considering, with tenants, whole stock transfers. However, these local authorities will need to ensure that their proposals allow for strong tenant participation at both the local level and on the governing body, and for decentralisation of decision-taking to the local level.

Greater Certainty for Tenants
3.13 Transfer partnerships provide tenants with more certainty on key issues. The transfer of public sector housing stock to a community landlord is underpinned by a business plan covering a 30 year period. This involves making forecasts about the future levels of income and expenditure of the acquiring landlord. In planning ahead in this way, tenants will be provided with information about anticipated future levels of rent increases and plans for repairs and improvements to the housing stock. In many of the transfers that have already taken place tenants have been given guarantees that rents will not increase by more than a specific figure in the years following transfer, generally a small amount above inflation. This gives much greater certainty than for public sector tenants whose rents are fixed on a year by year basis and which in recent times have generally risen by levels significantly above inflation.
3.14 The great majority of investment in rented housing is borrowed ultimately from the private sector and paid back via rents. But whereas local authorities have to borrow within the limits of public sector net borrowing, a community landlord is able to borrow directly from a financial institution to accelerate investment in the housing stock. It can, therefore, set its own investment targets and hence its own borrowing limits and its own rent levels. This means that, within the context of the business plan, there can be much greater certainty about when repairs and improvements to the housing stock can be carried out. The end result is that a community landlord in a transfer partnership can provide tenants with improvements they have been seeking within rents at affordable levels, and all within an investment plan that is approved by tenants themselves.

Safeguards for Tenants
3.15 Proposals for new transfer partnerships must incorporate strong safeguards for tenants. These safeguards exist in the transfer process itself through the mechanism of: tenant consultation; the tenant ballot; and, the negotiation of a new tenancy agreement.

Tenant Involvement and the Tenant Ballot
3.16 The Government attaches great importance to the views of tenants on a broad spectrum of housing issues, and Chapter 4 sets out the steps we are taking to create a stronger national framework for tenant participation. In particular, tenant involvement in the setting up of transfer partnerships is crucial to their success. Tenant involvement during the development of a transfer proposal paves the way for more effective tenant representation on the governing body (the board or management committee) of the community landlord.
3.17 It is also essential that tenants are involved at every stage in the development of transfer proposals. The Secretary of State will only consent to a transfer if a majority of tenants wish it to proceed and this should be demonstrated by a secret independant ballot. The aim is, therefore, to involve tenants in the development of the proposals, wherever possible, and to ensure that they have the necessary information to make a well-informed choice. In the early days of the development of transfer proposals, both the council and the proposed community landlord should explain their proposals, and the implications of these, to tenants. This will include providing tenants with information about many key issues such as their rights, the community landlord's rental policy, and future levels of management and maintenance. In addition, tenants will also have access to free advice from an independent source. Tenants may also be involved in a forum to liaise with both the local authority and the new community landlord and in this way they can help shape the transfer proposals as they develop.
3.18 Once the transfer proposals have firmed up, and the information given to tenants regarding future policies on rents and repairs is known to be well-founded, there is a further safeguard for tenants in the form of a two-stage statutory consultation. This involves a local authority formally providing all tenants with details of the proposal and the likely consequences of the transfer and explaining to tenants how they can make representations or objections to the transfer proposal. It is at this stage that a secret, independent postal ballot of all tenants involved in the transfer should be held. This is recognised as being the best way of ascertaining the degree of tenants' support for a transfer.
3.19 The aim is to have a process that is fully open and transparent and which ensures that there is adequate time for tenants to become well informed about the options before they are asked to make a decision about their future.

Tenancy Rights
3.20 When tenants transfer from public sector housing to a community landlord, they also change their tenancy status. Council tenants are "secure tenants", but on transfer to a community landlord they become "assured tenants".1 The acquiring landlord is required to offer transferring tenants a new tenancy agreement, which should aim to provide similar rights, within a contractual agreement, to those of a secure tenant. In addition, transferring tenants also have for themselves a statutory "Preserved Right to Buy" which means they still have a right to buy their house at a discount, even though they become assured tenants.
3.21 In practice, it has been found that housing transfer offers the opportunity to improve upon tenancy agreements and can therefore have a positive effect on tenants' rights. Research shows that potential community landlords can place a great deal of importance on drafting the terms of their tenancy agreements to ensure that tenants do not lose their rights when they are transferred from the public sector. Draft tenancy agreements may be scrutinised by independent tenants' advisors and amended following negotiations with tenants themselves. Tenants have the opportunity to negotiate contractual conditions, which ensure that advantages of secure tenancies, for example the more extensive rights of succession, are maintained. A survey of tenants who had experienced a transfer showed that the majority did not perceive the transfer to have significantly affected their tenancy rights.
3.22 Nevertheless, it has been suggested by some organisations such as COSLA and the Chartered Institute of Housing that there should be a single social tenancy for all forms of social housing. This might have the advantage of re-assuring tenants who fear that the loss of "secure tenancy" status implies that "assured tenancies" are, in some way, less secure and therefore inferior. A single social tenancy would also avoid the need for negotiations about the precise terms of the contractual agreement, currently linked to an assured tenancy, each time a transfer takes place. On the other hand, the merits of a single social tenancy would depend very much on the precise nature of what is proposed. Considerable discussion would be required to make sure that the details were acceptable to tenants and did not create difficulties for landlords or lenders. Any changes would not be retrospective.
3.23 Community ownership should provide the opportunity to strengthen tenants' rights through the negotiations linked to the creation of a new contractual tenancy agreement. In the longer term, there may be scope for the introduction of a new single social tenancy although it will inevitably take some time to prepare and agree the necessary detailed legislative changes required.

Views are sought on the case for legislation, in due course, to create a single social tenancy.