Introduction to Private Sector Leasing David Hunter Head of Operations- East Region 5th February 2014 PSL- What is it?  Properties leased from private landlords on 2-3 year leases.  Properties are made available to tenants from local authority nominations- “homeless applications”  Property is let out and the RP manages the tenancy and property throughout the duration of the lease  At lease end, landlord is offered a lease renewal, property is returned to owner if renewal offer is refused. Why offer it? Why would a local authority be interested?       Provides secure accommodation to vulnerable households, who would otherwise have to stay in the private sector until an assured or secure tenancy property comes available Houses those people who may not have a priority for social housing but are still in need of assistance Can be a temporary solution whilst long term housing sourced (decant/ regeneration) Provides tenants with the security of a reputable landlord Profitable business- feeds money into the rest of the organisation assisting development or service improvements to current residents Builds LA working relationship with local providers where they may not have any general needs or sheltered stock Why are private landlords interested?        A guaranteed rental amount for the duration of their lease- direct to their account Rent paid during void periods (subject to any landlord repair works required) Regular visits to properties to manage tenancies and identify repair issues No fees No costs of moving tenants on or applying to court Not having to deal with tenants directly, no rent chasing Rent paid in advance Landlord(s) Obligations    Lease and Tenancy Agreement RP has lease with private landlord RP has tenancy with occupant  Full repair obligation lease- Landlord is subcontractor for (some) repairs otherwise we carry out works and recharge Deductions from rental Lease terms  CP12 collection retained by providers   Can it be profitable?         For example Tenant pays £950 pcm Landlord paid £800 pcm £150 covers costs of voids, arrears, management and staffing costs Different models depending on how costs are to be covered- LHA Rents or TA subsidy formula rents or by agreement with LA TA Subsidy Rents Housing benefit (for now) pays this higher amount by way of management fee to RP’s- private sector landlord could not charge this rent and expect HB to pay for it Rents are calculated in line with Housing Benefit Subsidy Circular S1/2011 Housing Benefit Subsidy Circular S1/2011 Housing Benefit subsidy for all temporary accommodation cases will continue to be based on the current arrangements. That is, in most cases, 90 per cent of the appropriate January 2011 LHA rate for the property (not the household size), that the local authority places the claimant into; plus £40 (for London Authorities or £60 for non-London Authorities) per week Example 1 Hillingdon- West London Jan 2011 LHA Tenant Rent Tenant Monthly Rent Shared Rate 1-Bed 2-Bed 3-Bed 4-Bed £85.96 £173.08 £207.69 £253.85 £300.00 £117.36 £195.77 £226.92 £268.47 £310.00 £508.58 £848.35 £983.32 £1,163.35 £1,343.33 5-Bed £334.62 £341.16 £1,478.35 Example 2 Birmingham 1-Bed Jan 2011 Tenant LHA Tenant Rent Monthly Rent £ 60.00 £ 114.00 £ 494.00 £ 103.85 £ 153.47 £ 665.02 2-Bed £ 126.92 £ 174.23 £ 754.99 3-Bed £ 137.31 £ 183.58 £ 795.51 4-Bed £ 184.62 £ 226.16 £ 980.02 5-Bed £ 219.23 £ 257.31 £ 1,115.00 Shared rate Example 3 Greater Liverpool Jan 2011 Tenant LHA Tenant Rent Monthly Rent Shared rate £ 57.00 £ 111.30 £ 482.30 1-Bed £ 98.08 £ 148.27 £ 642.51 2-Bed £ 115.38 £ 163.84 £ 709.98 3-Bed 4-Bed 5-Bed £ 126.92 £ 160.38 £ 196.15 £ 174.23 £ 204.34 £ 236.54 £ 754.99 £ 885.48 £ 1,024.99 Points to note Private Sector LHA rent caps  £250 for a one bedroom property  £290 for a two bedroom property  £340 for a three bedroom property  £400 for a four bedroom property Not applicable to these schemes… yet Benefit Cap and Universal Credit  Couples and lone parents - £500 pw HB  Single persons without children - £350 pw HB Applicable now   Joint claimants and single claimants with children - £2167 pm UC Single claimants without children - £1517 pm UC What is happening?        Property numbers down but profit up from two years ago. Major efficiencies in 2011-12 undone by losing too many properties in 2012/13 Work to be done on new property procurement. Numbers represent new properties being procured, those being returned and crucially those being renewed. Standing still takes a lot of hard work. 2012-13 included 100 lease renewals. 2013-14 similar story Completely starting again with repairs and property managementre-writing the rulebook- feedback from landlords? Marketing strategies- how do you sell the product to the marketcompetitors in private sector Barriers to growth      Rents chargeable to tenants have been reduced. HB Caps/ UC coming in. Profitable units have become unprofitable Attempts to renegotiate rents (down) with landlords have been unsuccessful Some properties are just past their sell by date- repairs too costly, landlords not completing works, tenant complaints. A lot of these properties were returned because you just wont want them Shelf life of leased properties What is the future like?        Welfare reform- currently excluded from bedroom tax consideration (TA) B&B usage increasing- no other options for households Discretionary Housing Payment- applications case by case Where are the families going to go? Migration out of urban centres Future schemes- new SLA’s with local authorities Invoicing of fees- not wrapped into HB Shared Renting- homes with multiple bedrooms either leased or developed Discussion  This a valuable scheme offering a housing option with a reputable landlord that would otherwise be unattainable via a social housing waiting list  The rents including management fee make this difficult scheme for tenants to leave and lock you into claiming benefits  If you choose to charge LHA rents only could it be a viable alternative option for decants for regeneration? Questions David Hunter Head of Operations – Paradigm Housing Group [email protected] 01628 811 960