We summarise the outcome of the High Court case ruling against Kingston-upon-Thames RBC and which landlords may need to take action and when, regarding compensation for overcharging water bills.
Key points to note are:
- The Bill contains reference to reducing regulatory control over private registered providers of social housing (“HAs”) and their affairs (although it only delegates such powers to the SoS to make regulations to effect such a change in regulation).
- The Bill puts the SoS in the driving seat in terms of setting criteria which will oblige HAs to support tenants into home ownership. The Government “envisages” that the criteria will “initially be set with reference to the voluntary right to buy deal”; however, there is no promise that this will be the case or that the criteria will not change in the future. Compliance with the “criteria” will be monitored by the Regulator; therefore there is likely to be regulatory enforcement of the “VRTB”.
- The Bill lacks the comfort hoped for in relation to compensation arrangements for HAs, simply stating that the SoS “may make grants to [HAs] in respect of right to buy discounts” and that these grants “may be made on any terms and conditions that the SoS considers appropriate” (suggesting that conditions may well be attached beyond those already suggested). If a move is made away from the full compensation offer agreed, this could raise concerns for charitable HAs (which now comprise the majority of the sector) as it would be a disposal of charitable assets at less than best value. It should also be noted that the use of the term ”grant”, rather than referring to reimbursement of the VRTB discount denotes a lack of connection between sale of properties and resulting compensation.
- There will be a new General Consent to permit disposals under the VRTB, but the Bill is silent on other RP consent requirements including funders and LSVT obligations.
Vacant high value local authority housing
- The Bill places a duty on local housing authorities (i.e. those who are required to keep a Housing Revenue Account) to consider selling “vacant high value housing”. It also enables the SoS to require such authorities to make a payment to the SoS, calculated by reference to the market value of such “high value” housing owned by the authority which is likely to become vacant during a year. The meaning of “becomes vacant” is defined and follows a common sense approach (although there is scope for the SoS to make exclusions); however, the definition of “high value” is to be set out in further secondary legislation.
- Separate determinations are to be made for each authority, following a specified consultation route. Some flexibility may be permitted through agreements between individual authorities and the SoS to reduce the amount of the payment on condition that the money is spent to facilitate the provision of housing; however as such payments are likely to form the pot out of which VRTB grant payments are to be made to HAs, we anticipate that authorities may have an uphill struggle to negotiate themselves out of the payment.
- It is interesting to note that there is no scope for local authorities to avoid this provision by pursuing a housing stock transfer as the authority will still be treated as having that housing for the purposes of the payment.
- The Bill imposes a new legal duty on local authorities to promote the supply of Starter Homes when carry out their planning functions, together with an obligation to prepare public reports on how it is meeting that duty. Starter Homes are defined as new dwellings which must be sold to first time buyers under the age of 40 at a discount of at least 20% of the market value with a price cap of £250,000 outside Greater London and £450,000 in Greater London (although the price cap may be amended through regulations made by the SoS).
- Further detail is awaited on the “starter homes requirement”; however, where a local authority fails to carry out its obligations in relation to Starter Homes, a compliance direction may be made by the SoS essentially to override local plans to ensure the starter homes requirement will be met. This is likely to form the basis for the replacement of the requirement to provide social rented homes under s106 obligations.
- The Bill also contains provisions designed to speed up planning applications, which is a key factor in releasing land for the development of social housing.
Pay to Stay - High Income Social Tenants (“HISTs”)
- The Bill empowers the SoS to make regulations that specify the rent HAs and local authorities must charge HISTs (the “Rent Regulations”). The Rent Regulations will outline the detail of the policy, and will be published following the conclusion of the consultation process currently being undertaken. Provisions relating to HISTs will be enforced by the Regulator.
- The Rent Regulations will specify the income thresholds and rent levels. The explanatory note to the Bill indicates (as expected) that the thresholds will be set initially at £30,000 outside London and £40,000 in London, although there will be flexibility for these and the rent levels to be amended in the future to take into account other factors (such as geography).
- Unfortunately, the Bill itself does not require tenants to provide income information to their landlord; the Rent Regulations will empower HAs and local authorities to require this instead. HMRC is also given a new power to disclose information to the SoS, HAs and local authorities to assist them to determine whether a tenant falls within the remit of the Rent Regulations (although the explanatory notes suggest this will only be limited to verification of information provided). Where tenants fail to provide information, HAs/local authorities may be empowered to simply charge such tenants market rent (but this is to be clarified under further regulations).
- The Rent Regulations may require local authorities to pass on any resulting estimated increase in income to the SoS, and may set out how such ‘estimated income’ will be calculated and what assumptions will apply, “whether or not those assumptions are, or are likely to be, borne out by events.”
Rogue landlords and letting agents
- Many HAs have raised concerns regarding the practices of rogue private landlords and letting agents within local communities. Provisions within the Bill aim to tackle these concerns by introducing ‘banning order offences’, ‘banning orders’ and ‘rent repayment orders’. These new offences and orders should enable local housing authorities and tenants (in certain circumstances) to take action against rogue landlords and lettings agents.
Much of the detail underpinning the key provisions within the Bill is yet to be determined, and there are concerning points to note in relation to the VRTB and the lack of statutory requirement for compensation to be paid to HAs. HAs should use their connections and networks to influence key aspects of the Bill before they become statute as, by that point, it will be too late to safeguard the sector against dramatic changes to the high-level commitments the Government has previously given in this area.
For more information
Contact Gemma Bell.
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