Thursday 12 February 2015

South Kilburn residents face barely affordable rents hike - (if our sums are right)

South Kilburn resident Pete Firmin has been giving himself a headache trying to work out what Brent Council's 'affordable rent' policy really means. In this Guest Blog, after studying Council documents, he give it his best shot. We would be happy to hear from anyone who can show the conclusion is wrong (with workings!).

At the Council Cabinet meeting on 26th January, a report from the “Report from the Strategic Director of Regeneration and Growth” headed “South Kilburn regeneration Programme” was adopted. This concerned the approvals needed for the the next stages of redevelopment and regeneration. LINK

One of the recommendations in the document is:

“2.1. That the Cabinet agree to set rent levels for the affordable homes at Gloucester House and Durham Court once complete, at a rent equivalent to the Homes and Communities Agency Target Rent levels.”

The Gloucester House and Durham Court redevelopment involves:

“3.1 The redevelopment of Gloucester House and Durham Court site involves: a. the demolition of Gloucester and Durham and the development of 236 new homes for a mix of market sale (134 new homes) and affordable social rented (102 new homes) accommodation;”

On the rents:

“Target Rents

3.5 On 18 July 2011 the Executive agreed to adopt a rent equivalent to the HCA Target Rent levels for affordable developments in South Kilburn until Borough wide rent levels were reviewed. The 18 July 2011 Executive report set out the background to the rent level change and concluded that setting HCA Target Rent levels on phases 2 and 3 and subsequent phases is the only realistic way of affording the South Kilburn regeneration
programme and avoiding the requirement for large amounts of grant that would not in themselves be certain of being awarded and, if awarded, would require rents to be increased to the new 'affordable rent' levels.
3.6 The Target Rent regime controls rent levels in the social sector. Target Rents are calculated by a formula, the basis of which is set out below. Increases in Target Rent levels are also pegged to inflation and subject to an overall cap.

• 30% of a property’s Target Rent is based on relative property values compared to the national average

• 70% of a property’s Target Rent is based on relative local earnings compared to the national average

• A bedroom factor is then applied so that, other things being equal, smaller properties have lower rents”

“3.7 Between 2010/11 and 2014/15 increases in Target Rent levels and caps have been linked to RPI as set out in the tables below:”

[for tables on caps you will need to refer to the document via above link]

“Last year Government introduced a new rent policy, and for the ten years 2015/16 – 2024/25, increases in rents in the social sector will be limited to CPI +1% and increases in rent caps will be limited to CPI + 1.5%.”


“3.8 It should be noted that new social rented properties being developed in South Kilburn have a higher capital value than existing Council properties and therefore will attract a higher Target Rent under the formula outlined. Inflationary rent increases on these newproperties, whilst governed by the same rent policy and same CPI +1% limit, will therefore also be higher in monetary terms (i.e. in pounds sterling). This is because 1) inflation will be applied to a higher base Target Rent and 2) the Council will sometimes (and more commonly than the Registered Providers managing the new properties in South Kilburn) not apply a full inflationary increase to rents across its own housing stock.

3.9 In line with the Council's commitment to maintaining current HCA Target Rent levels in regeneration areas it is recommended that the Cabinet agree to set the rent levels for the affordable units at Gloucester House and Durham Court and the Post Office Plus Site once complete, at rents equivalent to the HCA Target Rent levels.”

Problem is, of course, that this is fairly impenetrable for those who want to know what this actually means in terms of real rent levels for the “affordable” new flats.

A Councillor helpfully enquired what this actually means and got this response from a Council officer:

Your enquiry regarding affordable rents has been forwarded to me for reply. I have provided a brief explanation of the position below but please let me know if you would like any additional information or technical detail.

Target rent levels relate to Social Rented Housing, whether owned by a Council or by a Housing Association. These are based on a national formula that takes account of the capital value of the property and a factor for regional (London) earnings. They do not directly reference private rented sector rents. Target rents therefore vary across properties and boroughs. In Brent, as in many authorities current rents are below target rents but have been gradually moved towards them recent years under the government’s rent restructuring formula.

Current average rents for Brent’s council properties (which for larger properties are below target rents) are:

Bedsit - £93.91 / week

1 bed - £107.07

2 bed - £119.43

3 bed - £130.80

4 bed - £141.63

New affordable housing development is typically at Affordable Rents. These are directly based on market rents and are the lower of the maximum Local Housing Allowance (Housing Benefit) rate and 80% of the market rent (including service charge). Brent Council has a published Tenancy Strategy, that housing associations are required to have regard to, which provides guidance on maximum Affordable Rents. These set lower limits in order to support affordability, particularly for households who may be affected by the Overall Benefit Cap. The guideline limits are as follows:

1 bed – 70% market rent

2 bed – 60% market rent

3 and 4 beds – 50% of market rent”

Still with me? So what are local market rents?

This is where an internet search comes in.

To be as fair as possible (?) to Brent Council I’ve restricted myself to flats actually in South Kilburn, i.e. not even Kilburn High Road, Camden Kilburn or Brent Kilburn North of the Watford line and definitely not Queens Park.

Some results:

1 bed flat, Malvern Road (described by Estate Agents as Queens Park, but then they do that all the time) £260 pw

2 bed flat, Cambridge avenue, £425 pw

2 bed flat, Malvern Road, £385 pw

2 bed flat, Cambridge Gardens, £425 pw,

2 bed flat, Cambridge Avenue, £400 pw

3 bed, Chichester Road, £475 pw

2 bed flat, Canterbury Road, £375 pw,

1 bed flat, Malvern Road, £295pw,

enough, my brain hurts.

Anyway it should be clear from this search of just a small part of one estate agents website what the range of “market rents” is in the area.

Even taking the lowest market rent for each size of flat. this would give the following

1 bed flat Target rent (70% of market) £182pw. current average Brent council rent £107.07

2 bed flat Target rent (60% of market) £225pw, current average Brent Council rent £119.43

3 bed flat Target rent (50% of market rent) £237.50 pw, current average Brent Council rent £130.80

So, it appears that Brent Council aims to charge new tenants double or nearly double current rents. As well as new tenants, these will also apply to those previously in Council accommodation moved in to new properties.

Brent Council has always denied that regeneration amounts to social cleansing, but surely this proves the opposite.:

In addition to the fact that well over half of the new properties are for market sale (and a new 3 bed flat in South Kilburn was recently on sale for £850,000!) this amounts to a massive hike barely affordable for those currently living here.


Anonymous said...

Oh let them eat cake!

From Iceland.

Anonymous said...

Why so surprised about the sale price? South Kilburn is surrounded by Westminster on three sides and Westminster has an average of about £900 - £1000 per square foot sale cost. Question - how long are these target rates enforceable on HAs? Will HAs in the long run be able to switch to the 80% threshold definition. as right to buy (in a new form) will follow assured tenants - are there any estimates of uptake and if so what does that do to the housing mix?

Anonymous said...

'The new intermediate (affordable rent) tenure allows associations to charge up to 80% of market rents.' This is a quote from a property agent who will help housing associations work out how much to charge.
And this is what a lot of tenants in social housing fear. We do not earn 80& of market rents in most cases.

Alison Hopkins said...

It isn't just housing associations, BHP are also moving to an "affordable rent". All this whilst their quality of service has gone rapidly down the pan over the past year or so. Plus, they're penalising leaseholders for their own ineptitude. Mind you, some HAs do that, too.

On that subject: I urgently need to get in touch with any council leaseholders who've challenged major works bills, or with associated groups who can help. If anyone has any contacts or ideas, that would be great.

Unknown said...

Sorry Wembley Matters but I think you have got your figures wrong. In the response from the officer to the councillor's enquiry, he stated that Brent will be using 'Target Rents' for the South Kilburn developments. He goes on the say that most new social housing development is set at the ludicrously mis-named 'Affordable Rents'. These are up to 80% of market rents, though there's a cap at the Local Housing Allowance level. In Brent most market rents are way above the Local Housing Allowance (the maximum payable for Housing Benefit) so private renters relying on HB are left with a huge shortfall (one of the reasons that homelessness is escalating in this area). But the point is that Brent has decided that it will NOT USE 'Affordable Rents' in South Kilburn but it will stick to 'Target Rents' I'm no housing finance expert but I believe that, if Brent were to try to set rents at anything less than target rents a huge financial penalty would be imposed by the Government.

Martin Francis said...

Thanks for the clarification Jacky.

Pete Firmin said...

Jacky, I'm not sure what you are saying here. Are you disputing that the Council is intending to charge double current rents for the next round of new builds in SK, or are you arguing - which seems to be the case - that they will be charging even more than that?
In addition, my understanding is that government targets are a recommendation and not binding on Councils, rather than mandatory and getting a financial penalty if not done.

Unknown said...

Yes I was just going to say the same thing as Jacky. I work in this kind of thing (not in Brent though) so know a bit about it. The higher 'Affordable Rents' don't apply to South Kilburn fortunately. The normal social rents using the Target Rent model will apply.

Peter, the policy you quoted regarding South Kilburn rents says that the rents will be set using the system of 'Target Rents' which is basically the normal traditional social housing rent system. The newer much more expensive so-called 'Affordable Rents' which the current Government introduced when they came to power will not apply to the South Kilburn estate assuming that the policy you quoted is correct. The 'Target Rent' system is much lower and is what you want. You do not want your rents to move to the 'Affordable Rent' system.

So in summary the rents will be much more like the average rents for Brent Council Properties that the Councillor quoted, ie a one bed will be roughly £107 as its target rent. People wont be paying 80% of market rents from what I can see which is a damn good thing.

Pete Firmin said...

Getting more and more confused as comments go on. Richard, are you clear that I was writing about the Council rents for new properties, not existing ones? I wasn't suggesting they intend to double rents for existing properties (even though the annual increases have been more than inflation). However, the document I was referring to is about new flats. and my reading of that is that they will move to the higher rents I spoke of. I'm (more than) happy to be proved wrong, but want to be sure that is the case.
Significantly (?) there has been no comment here or privately, from anyone on the Council who might be able to tell us the real story.

Alison Hopkins said...

Pete, I can assure you that BHP policy is for increases to bring rents in line with "affordable".

Anonymous said...

The problem is with you Mr Firmin. It's quite simple really: tenants in new social housing properties in the South Kilburn regeneration are being charged RSL target rents and not affordable rents (that are up to 80% of market rents.
So tenants moving to a new home will expect to pay a £30 to £40 uplift on current rents and service charges and the higher council tax band.
It is completely wrong to claim that BHP are moving towards charging sub-market (affordable rents.