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Waverley Borough Council Committee System - Committee Document

Meeting of the Community Overview and Scrutiny Committee held on 21/05/2002
Homelessness and Private Sector Leasing Scheme



This report describes the Private Sector Leasing scheme and explains the reduction in the number of properties leased by the Council from private sector owners for letting to statutory homeless people. It recommends action to encourage landlords to lease empty homes to the Council and prevent a further reduction in the number of properties available.

The resource, environmental and “Opportunities for All” implications relate to the Council's statutory obligation to meet local housing needs, provide cost-effective temporary accommodation for priority homeless people and encourage the letting of empty homes.
APPENDIX J

WAVERLEY BOROUGH COUNCIL

COMMUNITY OVERVIEW AND SCRUTINY COMMITTEE – 21ST MAY 2002

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Title:
HOMELESSNESS AND PRIVATE SECTOR LEASING SCHEME

[Wards Affected: All]

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Summary and Purpose

This report describes the Private Sector Leasing scheme and explains the reduction in the number of properties leased by the Council from private sector owners for letting to statutory homeless people. It recommends action to encourage landlords to lease empty homes to the Council and prevent a further reduction in the number of properties available.

The resource, environmental and “Opportunities for All” implications relate to the Council's statutory obligation to meet local housing needs, provide cost-effective temporary accommodation for priority homeless people and encourage the letting of empty homes.

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Introduction

1. The Private Sector Leasing Scheme is well established and has played a valuable, cost effective, role in providing temporary housing for priority homeless people. The scheme operates on the basis that the Council leases property from private owners and the Council then sub-lets, manages and maintains the properties for the duration of the lease. Rent paid by the Council is determined in accordance with local reference rents as defined by the Rent Officer Service.

2. The rent so determined is discounted by some 20% to reflect the Council's guarantee that landlords will suffer no revenue loss due to:-

3. The Lease is for a minimum of two years and the Council further guarantees vacant possession at the end of the notice period, which is three months by either party.

4. Local reference rents are below market rents, but the scheme proved attractive to owners because of the Council's professional services and the fact that it is sufficiently resourced to deliver all its guarantees every time.

Market Changes

5. There has been a sharp decline in the number of properties leased by the Council since 1996 and the outcome is a loss of 50% over the period.
6. This decline has coincided with the return of confidence to the housing market as the economy accelerated away from the recession of the early 1990’s and owners chose to sell when demand surged and prices escalated. It partly explains the number of properties handed back at the end of the lease period when some owners decided that market conditions made sale more attractive than renewal of the lease.

7. Over the same period the number of households resident in temporary accommodation at the year end fell until 31st December 1998 but has remained stable since that date. Over the last three years the Council has increasingly relied on its own hostel accommodation and creating temporary licences in its ordinary HRA stock. Very little use has been made of bed and breakfast accommodation, with no households resident in bed and breakfast on 31st December 2001. Many comparable authorities in the South-East region, including some in Surrey, have had to make substantially greater use of bed and breakfast in the period.
8. Many owners will stay in the rental market if they obtain a satisfactory return. ‘Buying to let’ has also become an established business, made more attractive by the introduction of assured shorthold tenancies in 1989, which allowed market rents to prevail and made it easier for landlords to recover possession at the end of the shorthold period.

9. In light of changed market conditions, the Council's sub-market valuations have made the scheme less financially attractive to some owners than the alternatives of letting and managing by themselves or through commercial agents. The low rental return offered by the Council has been one of the main reasons why some lessors have given notice of termination or not renewed leases at the end of the period despite the risks associated with commercial letting.

Resource Implications

10. The Council could restore the attraction of the scheme by offering market rents instead of lower local reference rents. Rents should still be discounted to reflect the value of the services described in paragraph 2(a) to (f) above. Such a change could also restore confidence to existing lessors and mitigate against further loss of properties.

11. Market rents can be determined by market analysis, consultation with the Rent Officer and Housing Benefit records. The financial implications are that rents paid by the Council would rise by approximately 20% from the date of implementation and would apply to all existing leases.

12. The current level of expenditure for leased property rents in 2001/02 is 320,000 and the budget for 2002/03 is 340,000. The costs arising from this report can be contained within the budget for 2002/03. If the recommendations of this report are accepted the effect on expenditure will be carefully monitored and reviewed.

13. The alternative cost of using more bed and breakfast accommodation is much greater. The current charge for only one three person family is on average 420 per week, equivalent to 21,840 per annum. This option combines the least value for money with the most severe effect on family life and your officers only use it as a last resort. The availability of bed and breakfast is becoming scarce and is more difficult to secure within or even near the Borough because other local authorities tend to use the same establishments. Many authorities are having to place people progressively further afield in the South East region and away from employment, schools and other local services.

Conclusion

14. While some lessors have already terminated leases, others have indicated that they will review their position if the Council increases its rental valuations. Your officers therefore consider that the only certain way to test the market is to offer market rents with appropriate advertising and promotion.

15. The people to whom the Council lets leased properties are not secure tenants, but non-secure tenants or licensees because occupation of properties which it manages on a short-term basis, but does not own, is excluded from security of tenure. Licensees rents could rise, but would continue to be set within Housing Benefit limits and Central Government subsidy would cover 95% of the benefit cost.

16. Your officers also consider that to take no action is an unwise option in light of the recent and continuing loss of leased properties and the new duties introduced by the Homelessness Act 2002 which strengthens the rights of homeless people and potentially increases the number of households to whom the Council will owe a duty.

17. The government is now seeking a reduction in the use of bed and breakfast accommodation for families with children and has adopted a target of eliminating its use by March 2004, except in emergencies.

Recommendation

It is recommended that the Overview and Scrutiny Committee makes observations to the Executive on the proposal that:

1. the Director of Housing be authorised to offer market rents to encourage owners to lease or continue to lease empty homes to the Council for letting to priority homeless people; and

2. the effect of market rents be monitored and reviewed annually with a report back to the Executive one year from the date of implementation.

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Background Papers (DoH)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.

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CONTACT OFFICER:

Name: Mr L Priebe Telephone: 01483 523013
Email: lpriebe@waverley.gov.uk
comms/o&s2/2002/03/007 28299