Monday, 22 June 2015

Living Rent - only half an answer

There is much to commend the work that Savills, the National Housing Federation and JRF have put into devising a better rent model than the hotchpotch nonsense we have now of Affordable Rent (AR) and Social Rent (SR). 

Without doubt, any rent regime that relates to the market value of property (as both AR and SR do in their different ways) when the intended occupant, by definition, is somebody unable to compete in the market, is bound to be flawed. So the reliance on a proportion of income alone as the key influencer of rent charged is a logical and progressive move.
Whether it is also an ambitious one is more questionable.  Its title promises the assumption challenging approach of the “Living Wage” campaign, but it feels more like a shift along the existing approach rather than a new approach entirely.  With the new circumstances that austerity, lack of funds for new supply and welfare reform seem to demand, I wonder if it goes far enough.

Firstly, while expressly stated as not being obligatory, it gives housing associations an "undemanding" methodology to establish their own rent levels.  By default, I suspect many will choose to use it.  But in so doing they are abrogating to others the essential task of ensuring that the price point they charge is specific to the product they provide to their customer. Despite the heavy-handed years of "one best way" type regulation, not all housing associations provide the same quality product or the same quality service. Differentiation across the sector on these things is set to increase further in the absence of the audit commission enforcement and with consumer regulation predicated only on a no “serious detriment” test. Suggesting a standard methodology across whole geographies runs counter to the direction the sector is taking and will inhibit its ability to demonstrate real value to customers.

Secondly, it relies on a continuation of the notion of a "rent envelope", enshrining yet again a legitimacy for Government to control rent; something that no longer exists now rent levels and benefit levels have been decoupled for many customers. Government's interest is in controlling benefits, and that is exactly how the local housing allowance system works in the private sector. PRS landlords are free to charge whatever rent they choose and make a series of calculations in order to determine what that should be. The time has come for housing associations to be treated in the same way - for maximum benefit levels to somehow be prescribed by government - but for freedom over actual rent levels to rest with Boards of what are after all independent organisations.
We are a living wage employer logo

The "Living Wage" works - and at THT we are fully signed up members of the campaign, even paying it to staff within our domiciliary care business -  by setting a floor, below which nobody's pay falls. Mature employers then decide their own pay and reward structures around that baseline.

The Living Rent will operate differently, becoming a target not a starting point. Are housing associations so immature that we need our hands to be held in this way?  Or is the fear that free to charge rents at levels of their choice, some would forget their values and tighten the screw further on the already poor. Either way, it's poor governance at the root of the problem. Organisations with good governance, based on a sound set of anti-poverty values, must have the freedom to set their own rents and be held to account for the rent choices they make