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How councils in London are trying to get a hold on the housing crisis

Author: Opinion: Benjamin Irvine, RSA, Research Intern, Economy, Enterprise and Manufacturing

To deal with rising numbers in temporary accommodation, councils have clubbed together to coordinate their actions, set out to shift practice in the private rented sector as well as using rapid and flexible modern construction methods. These efforts are on a relatively small scale but point to how a step change is possible.

PLACE/Ladywell, Lewisham
PLACE/Ladywell, Lewisham. A modular building of 24 self contained apartments for homeless families being assembled on a temporarily unused site in Lewisham. The building will be moved to another site in four years.

The number of households in temporary accommodation in London has been growing at an average rate of 8 per cent every quarter since 2012. Whilst the latest numbers show the rate of growth slowing to 6 per cent between April and June 2016, that is still 3000 more families that were in expensive, inadequate and insecure housing this summer than at the start of the year.

In a previous post I described how temporary accommodation in London is a system in crisis. Funding for temporary accommodation has been capped since 2010 whilst rents have rocketed. Landlords – seeing opportunities for higher returns – are ending tenancies and households are unable to find or access new ones.

Similarly councils have seen existing lease agreement on properties for temporary accommodation not renewed as landlords seek out more profitable uses. This has resulted in more households going to councils for support whilst simultaneously it has become more difficult for housing options teams to source temporary and permanent housing, as property owners have withdrawn from the temporary accommodation and housing benefit sub-markets.

In this post I will detail some of the ways in which boroughs have coordinated their actions to stem the crisis and responded creatively to carve out access to properties to fulfil their housing duties in the absence of sufficient social housing and with a private rented sector (PRS) that is increasingly unwilling to house benefit claimants. The successes have been modest and threatened by the fundamental challenge of housing affordability but they offer ways in to thinking about how a step change might be possible.

One of the factors behind the increase in the costs of providing temporary accommodation was a provider shift towards more expensive emergency accommodation at nightly rates, which presented more frequent opportunities to exploit competition between boroughs. A University of York Centre for Housing Policy report for London Councils described specialist agencies actively provoking competition between council housing teams. Since 2014 London boroughs have united to share information on rates for properties and set a maximum price which was successful in halting the rise in costs. This example demonstrates London boroughs are able to exert market power when they act in concert. The planned next step is to negotiate longer leases.

Another example of coordinated action is the pan London inter borough placements agreement through which data on placements is monitored and councils commit not to out-bid one another. Under the agreement social landlords leasing properties for providing temporary accommodation agree to make these available to the borough in which it is located first. The data on placements is not currently made openly available but Shelter analysis of Freedom of Information request data from 24 London boroughs revealed instances of ‘chaotic swapping’, where some councils had placed the same number of households in another borough as they had received from that same borough. Monitoring of inter-borough placements could be used to identify and minimise the (small but rising) number of long distance moves through cooperation. Similarly, the data reveals out of area placements having a domino effect, where boroughs receiving lots of households are then forced to make placements out of area as their own stock of temporary accommodation is full. This suggests a greater responsibility on the part of net placing boroughs to contribute to supply or resources in the areas they are moving households into.

In response to the difficulties of getting access to properties a series of tactics have been employed including councils effectively setting up the landlords and lettings agents they would like to see in the PRS.

A number of boroughs have been operating social lettings agencies in recent years to mediate access to properties for homelessness prevention, temporary accommodation or discharging of a homelessness duty, often by offering landlords guaranteed rent and property management. Social lettings agencies may also aim to shift standards and practices in the broader PRS by ensuring decent property standards, longer tenancies and below average market fees. Mayor Sadiq Khan’s manifesto pledged to set up a London-wide not-for-profit lettings agency. This could use fee discounts to encourage landlords to offer longer tenancies in the absence of legislation. It could also potentially act to unify all procurement of PRS properties by London boroughs and statutory agencies.

It’s not just lettings agents’ that councils are setting up but small mission-led directly-owned private landlords. Sixteen housing companies have been set up by London boroughs since 2014 to build or acquire affordable properties, that the authority can access for people in housing need to reduce temporary accommodation costs. These are effectively private companies wholly owned by councils and funded through public borrowing. They are buying up existing properties but also delivering new build, setting rents at the local housing allowance level.

The goal of some housing companies is simply to purchase properties to replace nightly paid temporary accommodation. For others, such as Croydon’s Brick by Brick, they are developing affordable new builds on small sites of council land, acknowledging that the lack of affordable housing is a driver of homelessness. Croydon plans to develop 1,000 homes by 2018; by building on its own sites it benefits from uplifts in land values in a way it doesn’t through disposing of them. Some developments are mixed tenure “build to rent”, where properties at market rent are cross-subsidising sub-market rents.

This building activity is on a small scale but it represents a somewhat ironic situation where councils are building to meet housing duties but not explicitly as social housing. The government has warned councils that whilst it supports the use of housing companies as part of homelessness prevention and relief it does not support their use as a strategy to deliver social housing to avoid the Right to Buy. Borrowing from the Public Works Loans Board, as many housing companies are doing, also creates a tension with central government’s (recently relaxed) desire to limit public borrowing.

In a way, a precursor to the above examples was the Settled Homes Initiative in 2006 which provided a capital grant of £30m to schemes across London to buy properties to let to homeless households and converted them over time to settled accommodation at sub-market rates. This redirected temporary accommodation spending to buy 900 properties as settled social housing. Based on this rationale, the New Local Government Network proposed in 2011 that it would be cheaper to use housing benefit spent on temporary accommodation to build new social housing for those households. It calculated savings of £56m per year for building 9,500 homes.

The recent news that homelessness continued to rise amongst 25 local authorities with the highest numbers of households in temporary accommodation despite a £5m fund to tackle it suggests there is a need for a much more ambitious scheme that acts on the fundamentals of affordable housing supply.

PLACE/Ladywell, Lewisham
PLACE/Ladywell, Lewisham

One of the smartest and most inspiring responses is the PLACE/Ladywell development by Lewisham council of 24 modular apartments for homeless families on a council owned site, which was constructed offsite and assembled in six months. The ground floor contains a workspace, small business retail space, community cinema and café. The building will remain in place for four years, after which it will be moved to another vacant site in the borough. In eight years it will have paid for itself. The building method is similar to the Y-Cube development in Mitcham, by the same architects, Roger Stirk Harbour and Partners, and commissioned by YMCA South West London. By making use of idle periods when sites would be sat empty awaiting regeneration plans, this solution operates on a time cycle which doesn’t compete with or crowd out other types of development.

The frozen rate of local housing allowance over the next four years will make it incredibly difficult for London councils to deal with homelessness. This should be reassessed and these examples point to how spending on temporary accommodation could be turned into affordable housing supply. They also reveal that councils have more power than they think to instigate the development of affordable homes in their areas as well as suggesting the types of changes in the PRS that we need to see if it is to house low income households.

The RSA and the Cabinet Office’s Policy Lab recently held a workshop, supported by Trust for London, to design solutions to London’s temporary accommodation system. This convened the Department for Communities and Local Government with stakeholders from across the housing sector and social enterprise. The outcomes will be published shortly.

This post is based on a briefing paper that was prepared in advance.