East Riding of Yorkshire Council recently scored a notable first: it took ownership of what we believe to be the largest portfolio of tenanted homes ever to be transferred from a housing association to a local authority.
Over the past three decades, it has been much more common for properties to move in the other direction as part of large-scale voluntary transfer programmes that have seen hundreds of thousands of former council homes sold to housing associations.
What is behind the deal we worked on that saw 145 homes transferred from Your Housing Group to East Riding of Yorkshire Council? What are the lessons from this for other councils keen to explore a similar approach to helping deliver their affordable housing commitments?
It is not uncommon for local authorities to bid on housing portfolio sales. Where they are successful tends to be on small concentrations of homes. But never anything approaching 145 homes. What has changed?
Local housing market
The growing housing crisis in the past decade has been reflected in the strategic aims of local authorities. Many town halls are taking steps to directly intervene in local housing markets to increase the provision of affordable homes. Often this has taken the form of direct development through the Housing Revenue Account (HRA), or, where this is no longer an option, housing companies have been established – more than 160 according to a recent estimate by the Greater London Authority.
This more bullish attitude has in part been made possible by changes to the HRA in recent years which, among other things, removed the debt cap and allowed councils much greater financial freedoms to invest in their communities. The decision by East Riding of Yorkshire Council to purchase the 145 homes from Your Housing Group is the latest example of what these freedoms can look like in practice.
Although deals of this nature may not be right for all local authorities, this approach could make sense for some. What are the key considerations and lessons from the East Riding experience?
Existing registered housing provider
East Riding of Yorkshire Council already owns and manages 11,500 homes – it is therefore already registered with the Regulator of Social Housing. This removed many of the governance hurdles that Your Housing Group may otherwise have faced in selling the properties. It was able to proceed, safe in the knowledge that its tenants were going to another experienced, regulated social landlord. Rents would also be levied and increased in the same way.
Improved tenancy terms
From a tenant perspective, the transfer to East Riding enhanced their tenancy terms and conditions in this instance. Tenants not only became secure tenants with extra succession rights, they also gained the Right to Buy, with their time as Your Housing Group tenants counting towards their discount entitlement.
As a local landlord, East Riding can benefit from operational efficiency gains by using existing resources to manage and maintain the homes.
In addition, tenants benefit from a good local landlord service with co-ordination across housing, Universal Credit, estate management and other services.
So, while the floodgates may not be about to open on a raft of other such deals just yet, the East Riding transfer proves that stock purchases can work for local authorities under the correct circumstances.
As housing associations continue to look to rationalise their stock footprints in order to operate more efficiently, opportunities for councils to purchase tenanted homes will continue to arise.
In addition to their increased financial clout, they bring much else to the table that is very attractive to housing associations keen to do right by their tenants. The East Riding of Yorkshire deal may have been the first large stock transfer to a council from a housing association, but it will not be the last.
Chris Newman is associate at Savills Affordable Housing Consultancy and Louise Robinson is partner at Trowers & Hamlins