Agenda item

Context

The purpose of the report is to introduce members to the proposal for the introduction of a Council operated social lettings scheme within Monmouthshire. .

Key issues

1. This proposal seeks to build upon the existing practice of the Housing Options Team of engaging with private landlords and using private sector accommodation to meet the Council’s statutory homeless and prevention related duties. The proposal effectively brands and packages the existing service to private landlords whilst introducing new services to further to benefit landlords.

2. The purpose of MLS is to provide a lettings service that seeks to put the community at the centre of its core business of providing long term affordable properties to rent, but with a ‘commercial’ approach. A core emphasis of MLS is to support landlords. The context (See Appendix 1) to developing MLS is:

      i.        Many households are unable to access accommodation through traditional high street letting agents because they are in receipt of benefits, they cannot afford to meet upfront payments and fees nor high market rents, which are in excess of housing benefit levels.

     ii.        There is a shortage of social housing stock and vacancies

    iii.        Accommodating low income households can be perceived as a risk

   iv.        There is a need to manage the on-going demand from households who are homeless or threatened with homelessness.

    v.        There is a need to reduce expenditure or increase income generation.

3. Key elements of the proposed service are to:

      i.        Provide a basis for increasing homeless prevention by hopefully increasing access to private rented accommodation and limiting the use of B & B.

     ii.        Offering landlords a worry free letting service

    iii.        Providing sufficient affordable rented accommodation to households who are unable to access the private rented housing sector.

   iv.        Undertake regular marketing and landlord engagement

    v.        Providing the opportunity for future income generation

4.  MLS will broadly consist of two service strands. A lettings service and a leasing service:

      i.        The lettings service will be similar in design to a high street lettings agency. This will initially include legal advice, ‘find a tenant’ and tenant verification, inventories, sign ups, inspections, rent collection, tenancy agreement drafting and housing support. Initially services will be offered free to landlords to encourage take up. Additional services, such as rent monitoring, have been identified with a view to possibly working up and introducing at a later date.

     ii.        The leasing service will seek to offer landlords a leased option (where needed by the Council), such as the current Shared Housing scheme. (Also, Melin Homes management of the private leasing scheme is due to end in 2018). Leasing availability will be subject to financial viability. Leasing for temporary accommodation currently attracts a subsidy through housing benefit. This is due to end on 1st April 2017 and be replaced by a grant allocation. At the time of writing the level of subsidy level will be reduced. If it is not possible to continue with leasing, the lettings aspect of MLS becomes even more relevant.

5. The aim is for MLS to go live by 1st May 2017. Supported by the Communications Team, it is proposed that MLS will have its own distinct identity which will feature on stationary products, flyers, posters, web page and social media applications. A proposed delivery framework for MLS can be found in Section 2 of Appendix 1. This seeks to provide a clear strategic direction and provide a distinct and unique approach to delivery.

Members Scrutiny

The Officers were thanked for their presentation.  Following this, Members made the following comments:

A Member queried, in the circumstances where a private landlord had a property available for rent that was in need of some refurbishment, if any budget was available to assist.  It was explained that there are two loan products – the home improvement loan scheme and the empty property loan scheme.  These are interest free loans (not grants) and include an administrative set up fee of 8%. The fee can be discounted to 4% if the landlord decided to work with the council.  In response to comments about empty properties in the county, it was explained that if they are updated and made available for rental, they generally attract a high rental value that would be in excess of housing benefit values.

A Member commented that in the worst case scenario, a landlord would be expected to forego in the region of £1000 per annum in rent.  Whilst the landlord would know there are some guarantees and a bond, a tenant could cause damage in excess of the value of the bond and it was questioned if there was any help available. It was clarified that hopefully such a situation would not have developed to that extent as the service would be aware of potential issues.  If such problems materialised, the council would have to make good the damage so some protection should improve a landlord’s confidence to work with the council.  It was added that the team tries to prevent such challenging circumstances occurring and there is an emphasis on matching landlords with clients. The team can also offer inspections, take inventories and is proactive in developing the relationship between the landlord and tenant to reduce risk. 

A Member noted that the scheme encourages landlords to let their properties within Monmouthshire and questioned why the Landlords Housing Forum was not a consultee. It was also questioned how the reduction in availability of private rental properties, due to tax changes and the rise in stamp duty properties on second properties, will be addressed.  It was also questioned why it is not proposed to continue with the existing scheme run with Melin Homes.  In response, it was explained that significant consultation has taken place (not specifically on the Letting Service) with landlords through the Landlord Hub but reference had been omitted from the report.  Surveys have identified the associated risks with housing benefits, rent and perception of the client group as particular issues.   It was acknowledged that the tax changes could be detrimental.  It was added that the proposal poses no risk to the authority, so is worth trying.

It was explained that Melin Homes does not want to continue with the existing scheme and will not be renewing the contract accordingly. The Committee were reminded of the change in subsidy arrangements due to welfare reform. The £60 per week paid to the authority and Melin per occupied property as a management fee has been withdrawn in favour of an annual grant. The value of the management fee is in the region of £350/400,000 per annum but the grant is only £148,000. Both Melin and the authority are concerned about a reduction in finance.  Concern was also expressed that the authority may be in a position of less private leasing stock.

A Member questioned if there had been any work on using private rental properties out of county to accommodate Monmouthshire tenants.  It was confirmed that this has happened and some tenants have been accommodated in Torfaen.  It was pointed out, however, that clients usually want to stay in their local area. 

A Member questioned how much interest has been expressed in MLS.  A response was provided that the proposal was considered by the joint private sector housing team last year and there some interest was expressed.  A comment was made regarding a rent guarantee scheme in Oxfordshire and this suggestion is under consideration as a further incentive to attract landlords’ participation. 

It was queried when MLS would be operational and confirmed that it was hoped to start in May when there would be an introductory offer of free services. A rent guarantee scheme may then be considered as a further incentive. It was added that an amount to provide rent guarantees could be ring fenced in the homelessness reserve to entice private landlords to participate.

A Member drew attention to the Just About Managing (JAM) generation who are working but not eligible for benefits, and struggle with high rents for housing. It was added that encouraging older people to stay in their homes adds to the limited availability of properties. 

A Member commented that a rent guarantee scheme would be attractive for landlords and would only come at a cost if tenants defaulted on rent payments adding that good scrutiny of tenants could avoid costs.  It was queried if there was any research on the default rate in Oxfordshire.  It was accepted that good management was critical to mitigate against costs due to default.  The Officer offered to circulate information on the Oxford scheme to Committee Members. 

In response to a question about how much is spent on Bed and Breakfast accommodation compared with the amount to provide a rent guarantee scheme, it was agreed that the amount (approx. £20,000) could potentially be used in a different way. 

It was queried what the link is between this proposal and the Rent Smart Wales scheme.  It was confirmed that landlords and their properties have to be registered with Rent Smart Wales outside of the MLS scheme.  If they use our scheme, MLS would manage the property on their behalf and would avoid having to be licensed representing a saving.  It was recognised that the package of attractive incentives to provide a more stress free experience is in exchange for lower rents. Clarification was provided that if a landlord asks MLS to find them a tenant but manage the arrangements themselves, they will have to be licensed to do so.

A Member asked if it was possible to know how many ex council houses are on the private rental market.  It was explained that Hometrack may be able to provide this information.

In response to a query, it was confirmed that there are significant numbers of unregistered landlords but it is predicted that these numbers will diminish in future.

Recommendations

      i.        The Committee considered how the Monmouthshire Lettings proposal (See Appendix 1) will support the Council’s statutory duty to prevent homelessness and provide the foundations for a future income generation opportunity and make recommendations as appropriate.

     ii.        The Committee agreed to recommend to Cabinet the adoption of the Monmouthshire Letting Service (MLS).