ROOF Magazine Jan/Feb 2001
FIGHTING FOR A FAIR DEAL FOR COUNCIL TENANTS

One beneficial effect of the debate around council housing stock transfer is that housing is now much higher up the political agenda. The stepping up of activity on council estates by opponents of the scheme, has caused a noticeable change in official Labour Party briefings to MPs. On 13 December, to coincide with the publication of the national housing policy statement, Labour MPs received a briefing which contained no specific section on council housing and highlighted the promotion of diversity of ownership and private finance.

By the time of the lobby of Parliament on 24 January organised by the Defend Council Housing campaign, the emphasis was on "significant" increased spending on council housing and its long-term future .Stock transfer was portrayed as only one means of improving the quality of social housing. After a successful lobby, Labour MPs were not only told that tenants who chose to remain with the council will benefit from increased funding for repairs and improvements but we were also promised an end to the "Daylight Robbery" involving council rents paying for housing benefit.

This shift in favour of council housing comes with the growing realisation that stock transfer is not too popular with tenants. As the latest British Social Attitudes Survey shows, even though they are dissatisfied with council estates, 78% of council tenants prefer to rent from the local authority whereas only 63% of housing association tenants have the same loyalty to their landlord (46% agreed they would like to live in council housing if they could get it). With the Government committing itself to bringing all council housing up to a decent standard by 2010, and a third by 2004, why should tenants support the waste of valuable resources on consultants’ fees preparing for transfer and on penalties for early redemption of debt.

Meanwhile, in Birmingham, the biggest landlord, Labour councillors are seriously split on the issue. Despite the Government promise, some remain unconvinced that future capital allocations will be sufficient to bring City-owned housing up to a decent standard by 2010. The results of a stock condition survey suggest that 1.6 billion needs to be spent over the next 10 years and this does not include the cost of replacing the 12,000 homes recommended for demolition. They argue that the Government’s 650 million offer to write off debt to permit stock transfer is worth taking, given the uncertainty of future provision. Thus far, their pessimism is well-founded as local authority capital allocations under Labour for the five years from 1997 are virtually unchanged from the average spending under John Major. This view is reinforced in a 30,000 report from consultants KPMG which dismisses the other "alternatives" of PFI, arms length management companies and securitisation. Unfortunately, the report is flawed because KPMG were not actually asked to examine the implications of stock transfer per se. Interestingly, they did see securitisation as first requiring a stock transfer. Thus there is every reason to suppose that some of the disadvantages they point to would similarly apply to the more "straightforward" version. These include the high costs of organising the transfer (estimated at 38 million, a whole year’s major repairs allowance) and future tax liabilities, for example VAT, as well as the step-in rights of funders. Should any difficulties arise with loan repayments, the consortium of funders would effectively control the management of the housing stock. Rather than being accountable to tenants, directors of the new housing companies will be subject to rules regarding confidentiality and will be bound to act in the interest of the company.

Had they been asked to properly assess stock transfer, KPMG would also have had to point out that the Council would be left to bear 200 million in early redemption penalties. The Government made it clear in the December policy statement that any one-off Government payment would not cover this cost. Unless the stock valuation is unexpectedly high or the Council can do some fancy accounting to inflate the outstanding debt to 850 million, this effectively kills the transfer stone dead. Perhaps then councillors will concentrate on convincing the Government that housing investment really has to be substantially higher than that allowed during the years that the maintenance backlog accrued. If the Government is serious about its improvement target for 2004, it will have to start listening.