DECENT HOMES and STOCK OPTIONS

The government initial commitment was to ensure that all social housing meets set standards by 2010. If councils were unable to meet the standard without the need for additional funding they have been required to consider one of 3 options: Stock Transfer (that is transfer homes to another landlord) , go for a Private Finance Initiative or to set up an Arms Length Management Organisation.

Councils have been required to carry out 'stock options' detailing how they will achieve the governments' decent homes standard.

On 7th May 2004, the Office of the Deputy Prime Minister (ODPM) select committee released its report on Decent Homes. The committee had gathered written evidence (such as that submitted by the LTF) and heard oral evidence. The following is a summary of the report:

In 2000, the Government set itself a Public Service Agreement (PSA) target of bringing all social housing up to the Decent Homes standard by 2010. In 2002 this target was broadened to encompass also 70% of dwellings in the private sector, occupied by vulnerable households. The Committee welcomes and supports this target.

The evidence received in the course of this inquiry has, however, led us to conclude that the target is in danger of not being met, and that the Government needs to address a number of problems of policy formulation and implementation.

• We believe that the Decent Homes Standard is set at a too basic level and that by 2010 it will be seriously out of step with reasonable tenant expectations. As a consequence we recommend that the Government set a more aspirational 'Decent Homes Plus' standard to be achieved at a later date.
• We believe that the target of achieving Decent Homes in the social housing sector is being used as a Trojan Horse by the Government in a dogmatic quest to minimise the proportion of housing stock managed by Local Authorities. The Government must put its money where its mouth is and leave it up to tenants to decide who should own and manage their homes. The Government should provide a level playing field in terms of funding so that tenants and local authorities have real choices.
• In the private sector, the limitation of the Decent Homes Target is just 70% of dwellings occupied by vulnerable households makes little sense. The Government needs to give much higher priority to the achievement of the Decent Homes standard across the private sector. This should be done partly through funding incentives and partly through funding incentives and partly through statutory means.

It is clear that more funding is needed in order to achieve not only the Decent Homes target as currently conceived. We therefore urge both the ODPM and the Treasury to allocate the necessary additional funding in order to ensure that this vital target will be met by 2010, and that the expanded 'Decent Homes Plus' target, recommended in this report, can be achieved.

In June '06 the Government announced that it would 'relax rules on meeting the target for councils in the last round of the programme to transfer their homes or set up ALMOs. And in October they announced that housing associations (RSLs) could apply for an extension to the government's deadline.

What is a 'decent home'?

The government's definition of a decent home is one that meets the 4 following criteria

• It meets the current statutory minimum standard for housing. At present this is the fitness standard.
• It is in a reasonable state of repair. Dwellings failing on this point will be those where one or more key building components are old or need replacing or 2 or more other building components, electric and gas heating are old and need replacing.
• It has reasonably modern facilities and services. Dwellings failing on this point are those that lack 3 or more of the following - a reasonably modern kitchen (20 years old or less); a kitchen with adequate space and layout, a reasonably modern bathroom (30 years or less), an appropriately located bathroom and toilet, adequate noise insulation (where external / neighbourhood noise is a problem), adequate size and layout of common areas for blocks of flats.
• Provides a reasonable degree of thermal comfort. Dwellings are expected to have both effective insulation and effective heating.

Many tenants view the decent homes standard as the 'new kitchens and bathrooms' programme. Many have greater concerns about their homes - particularly issues relating to the security of their homes.

On 16.01.04 Mel Cairns, chair of the Health and Housing Group, which represents environmental health and housing consultants in the private practice, told the ODPM select committee that the 'decent homes standard was so full of holes that it fails the test of being a minimum standard'.

He said 'an overcrowded fire-trap infested with cockroaches, rats, mice and bedbugs could achieve the standard' and that many landlords including councils and housing associations had been able to evade their responsibilities to provide reasonable housing. He said 'We have better standards for kennels and catteries than we do for housing.

Stock Transfer. This is probably the most contentious of the stock options; financial costs aside it also involves changes in tenancy rights, consultation rights and the democratic control of tenants homes.

Large scale voluntary transfer, stock transfer or change of landlord was introduced in 1979. And whilst significant numbers of council homes have been transferred to other landlords, it has also resulted in tenants engaging in campaigning against. Unlike other 'stock option' tenants are entitled to a vote on whether they transfer to another landlord - a Registered Social Landlord (RSL).

Despite apparently being about tenant 'choice' stock transfer is usually suggested as a means of getting funding to repair and improve homes by local authorities. RSLs, unlike council's, are able to borrow money to carry out improvements and indeed to build new homes. The catch is of course that as with all private companies it is more expensive for RSLs to borrow money than it would be for a public body like the council to. And the loans have to be repaid - ultimately through tenants rents.

In the past stock transfer schemes were supported by government money such as 'estate regeneration challenge fund' money. That funding no longer exists and housing associations are more frequently selling off land and properties on ex council estates to make the figures stack up to fund works to ex council homes.

In London and only 3 London boroughs have transferred their entire housing stock to another landlord (Bromley, Bexley and Richmond). Tower Hamlets has engaged in attempting to transfer much of its stock to RSLs - estate by estate rather than collectively. Many London boroughs have transferred some of their homes to RSLs. Tenants who have opted for transfer have generally done so because they have felt there was no alternative.

As tenants campaigning against stock transfer escalated, government came up with 'alternatives' to tenants losing their security of tenure, including PFI and Arms Length Management Organisations (ALMOs)

You will find there is a huge amount of information available on the Internet relating to stock transfer.

Inside Housing Magazine and the Guardian both have numerous articles relating to stock transfer. Links to their websites below.

Inside Housing http://www.insidehousing.co.uk/

Guardian Newspapers' Society Section http://society.guardian.co.uk/communities/

Private Finance Initiative (PFI) PFI is a glorified hire purchase agreement. In some schemes a private contractor is hired to do catch up repairs and take over management of council homes for a period of time, often about 30 years. In others the contractor has taken over just the repairs and left the management to the council. The contractor borrows the money to do the major catch-up repairs. The council pays the contractor an annual fee which covers the cost of the contractor's borrowing as well as repairs and if included in the scheme the management costs. The contractor, of course, also make a profit.

Generally the main argument against PFI is that it is just a lot more expensive than if councils were allowed to borrow and do the work themselves. There are two basic reasons for this:
- The public sector, including councils, can borrow at much cheaper interest rates that private companies. This is economically straightforward - interest rates are higher the more risky it appears to the lender to lend money to a borrower. The state doesn't go bust, and so there is basically no risk of default for the lender. Private companies do go bust and default on loans, and so banks will charge them an extra 'risk premium'. Private companies also make profits, and so this has to be added into the cost of the scheme. Adding up the effects of this over say 30 years could mean PFI costs many times more than if the work was simply carried out by the council. This is likely to mean rent increases and / or an even worse service.

Islington signed London's first PFI deal on 31 March 2003. It signed a second contract in September '06.

Newham's Canning Town PFI was signed in June '05. It's Forest Gate PFI is in the process of development.

Lewisham has 2 PFI schemes in development stages, the contract was due to be signed on one in Autumn '06.

Lambeth has balloted tenants of its Myatt Field North Estate on a proposed PFI. There was a 61% turnout with 55% in favour of the PFI.

Camden signed a contract for a a PFI for its Chalcot Estate in July '06. Camden also balloted tenants at its Maiden Lane Estate regarding a suggested PFI. Tenants voted 81% against. There was a 40% turnout.

There are concerns about the use of PFI throughout the public sector - in relation to the construction of hospitals, prisons, schools.

You can find more information on PFI on the following websites -

The Centre for Public Studies - www.centre.public.org.uk/briefings/

Unison - http://www.unison.org.uk/pfi/

The Guardian newspaper - www.society.guardian.co.uk/privatefinance/

Arms Length Management Organisations (ALMO) The council sets up a company to manage and maintain their homes. The reward for setting up this company, the government allows to borrow money to carry out decent homes works to council homes. Tenants remain council tenants. The government argues a better deal for tenants with a separation between management and strategic roles for councils and their ALMOs.

The biggest contention is why government won't allow councils borrow the money themselves; and are ALMOs being set up as a half way house to full privatisation or stock transfer? ALMOs are set up for a time limited period - so they could just be dissolved at the end of the 5 or 10 year period. But this will not be the only option. Some tenants have had good experiences of being more involved in decision making through their ALMOs and others extremely poor experience.

The London boroughs of Westminster, Hounslow, Hillingdon, Brent, Waltham Forest, Kensington and Chelsea, Islington, Barnet, Hammersmith and Fulham, Ealing have set up ALMOs. Additionally Newham, Hackney and Lambeth have submitted funding bids to the government.

Hammersmith and Fulham tenants campaigned for 3 star boroughs like their own to be given the right to borrow and argued that 'if it ain't broke why fix it'. But government refused to budge.

In Camden, tenants voted against a proposal to set up an ALMO.

• LTF Briefing - November '02
• Research document on ALMOs carried out by Dexter Whitfield, Centre for Public Studies for Unison - January '03