Lord Kerslake: Rent cut drop would give sector ‘confidence’

In an exclusive interview, Lord Kerslake opens up to 24housing on all things housing – and his hopes for the future.

 

lord kerslake

Lord Kerslake has said dropping the rent reduction for housing providers would give the sector confidence to build again.

He also said the new-found flexibility in the sector from the government is welcome and sets out what he feels housing associations should now do.

Kerslake, who is Peabody chair, is a figure in the housing sector not many do not know about.

His fierce criticism of the Housing and Planning Act won him admirers from all across the sector from tenants to chief executives.

He batted the Bill back to the Commons on numerous occasions, forcing concessions to the now reversed Pay to Stay.

He is also well respected for his time as a civil servant, where he has been chief executive of the Homes and Communities Agency and permanent secretary of DCLG.

In this interview he covers the upcoming Peabody merger with Family Mosaic, the Housing and Planning Act and also what he hopes housing minister Gavin Barwell will be announcing in the White Paper:

 

Start with the merger, what was the thinking behind the move and what benefits will it bring?

We are moving toward a merger because we have very similar missions and values. I think that is critical to any merger. Secondly, and perhaps crucially, we think we can do more together than we can separately.

That means building more homes, improving the way we are run, freeing up resources to deliver back into communities and I think the concentration of coverage means we can be more connected in our neighbourhoods.

If you put the two organisations together, we have a large amount of the community in two boroughs and that means we can have a much better community feel and neighbourhood-based approach.

 

What are your thoughts on housing associations getting bigger? If the housing market was to contract, would these merged organisations be at risk?

I don’t think it makes organisations any more vulnerable. If anything, it makes you stronger. The combined balance sheet of the new organisation will put us in a strong position to deliver big ambitious projects like Thamesmead.

What I think is important is you are clear about the reasons for merger, it is not just about being big but about what you can gain from the merger and how aligned the two organisations are who are coming together.

I think it is worth reinforcing that just because we are becoming bigger, does not mean we are becoming more remote. We are determined to keep that strong community connection and crucially the strong connection between local authorities and London boroughs.

That matters a lot to us and the way both of us work. I don’t think it immediately follows that you lose sight of your purpose and we will make it central to our test to make sure we are more connected.

 

Moving on to the Housing and Planning Act, which you were a heavy critic of in parts, how happy are you with it now, taking into account some of the reversals such as Pay to Stay?

I am much happier now with the direction of government policy. I was very concerned about the Housing and Planning Act for a number of reasons, but mainly because it is a complete emphasis on building for sale, which is wrong and risky.

It would be risky in that it would put all your eggs in one basket and make you more vulnerable to any changes in the economic cycle.

Secondly, I thought it was unfair as a Bill, as starter homes squeezed affordable homes in planning applications and the extension of the Right to Buy was to be funded by the forced sale of houses. So those in a better position to buy could do so at the expense of those who desperately needed these homes.

I think in all those aspects, the government has shifted. We know there is a commitment to mixed tenure, we have a moving back in the dates in the forced higher value sales so that is coming a bit later and possibly moving it back to the point where it doesn’t happen.

I think we do have more testing of the model to do such as Starter Homes in the 30 areas. I think there is a shift in direction from government and moving away from policies such as Pay to Stay is obviously welcome.

We are still awaiting the details, most of which we would have expected to have by now, but I think that is welcome as it shows the government are thinking again about some of these things.

We need to await the detail before we can completely conclude where this is going but in the meantime the sector has got to respond positively and step up to the plate of delivering more homes, particularly more affordable homes.

 

How can the sector build more homes?

I think the sector can have some ambition and not let the inevitable uncertainty around Brexit stop people from moving ahead. There are ways in which you can mitigate the risks by converting properties to rent if you need to.

The second thing is close collaboration with local authorities to get behind their ambitions and look at partnering models to deliver on their public land.

The third thing I would say is to innovate. Not only in methods of construction but also in the build to rent option. All of these things could be done by the sector.

Potentially of course, there could be an opportunity for people to come together as we have with Family Mosaic in order to create better capacity and stronger balance sheets. All of these are things the sector can and should do but the most important is the first one in the sector having ambition.

 

Have you been encouraged by some of the noises from Gavin Barwell about flexibility of tenure?

I think the fact he is willing to entertain a mix of tenures is right in terms of fairness but also right in terms of deliverability. We need to see the detail, we need to see the Housing White Paper but very definitely in the right direction.

 

There is still no regulation date for the sale of higher value council assets. Why do you think this is such a dangerous policy?

This would have taken a vacant property, which otherwise would have gone to a family in need. Because by definition higher value properties are in higher value areas, you effectively denude those areas of social rented stock.

You get a double whammy too as that is usually where Right to Buy exercised. What you are effectively doing is moving the choice of social housing in favour of who, at the very least with the discount, have the resources in which to buy.

It is moving the properties from those who are in need to those who are in not as much need. Also, from all the evidence we had, the numbers didn’t stack up and there was a basic question of deliverability and because of the numbers, there was a sense that the one for one replacements were going to be theoretical and not real and that would see a net reduction in social homes.

I really hope it has been put back and is now in a position where it doesn’t happen at all.

 

Thoughts on changing the HCA and the fees on social housing?

I am not against fees if they are reasonable and the service you get from the regulator is good, I have thought for a while that is a good thing to do and have advocated that for a while. I also don’t have an issue with moving the regulator out.

My point would be we have been in and out a few times now and we need to fix this and settle it. I hope they will continue on sharing support services. I just hope we don’t see another cycle of this that settle on this and move on.

 

Report from NFA that found 86% of those claiming UC are in rent arrears compared to 39% of tenants overall. What impact is welfare reform having?

There are two issues here. The set of reductions in welfare spend which is driving changes around rent levels which is driving changes to the benefit cap and includes things such as the so-called Bedroom Tax.

Then there is the rollout of Universal Credit. Interestingly, the Universal Credit changes and the direct payments issue, which is what they were referring to, is not necessary for Universal Credit and is not saving any money.

It is more of an ideological thing for tenants to receive their benefits and then pay out their rent. The fact there is now evidence that it drives up arrears is to me, a reason why there should be a rethink of the approach by government.

Given it is not delivering any savings, nor is it essential for the delivery of Universal Credit, I would hope there is a willingness to re-examine policy.

 

Do you find it ironic that despite trying to drive down benefits, there is an increase in housing benefit?

That is the risk, isn’t it?

It is paradoxical that government is pressing ahead with a policy when there is evidence to indicate it gives significant risk to arrears, management costs and debt levels.

This could in turn lead to evictions of tenants and then to higher costs. I just think that government should step back and look again at this. The new minister that has taken over from Lord Freud, I would ask them to take a look at this again.

 

Getting councils building again is widely seen in the sector as the best way of getting genuinely affordable homes. What steps can the government take to achieve this?

There is a general point about rents. If government can give some intention of what it wants to do beyond a four year period that would give confidence for both housing associations and local authorities.

I think giving them the power to borrow, some have got headroom and some of them haven’t. There are two options here. One would be the ability to trade headroom if you like, if there is a council with headroom that doesn’t need it, to transfer to another council who desperately need it.

Beyond that I think there is a case for lifting the headroom and allowing councils to borrow more widely. It has always seemed perverse to me that if I was a councillor and wanted to build three more swimming pools, given I can find the revenue, I can. If I want to build three more houses but facing the headroom, I can’t.

Those are the two key things for me: clarity on rents and headroom borrowing. Some housing associations are like, it is our job to do the building but I don’t see that at all. I think there is so much need, we need to tap into every resource we have.

 

What are you hoping for in the Housing White Paper?

I am hoping for a confirmation for these shifts in policy. There is one thing I am really hoping there is in it, and one I really hope isn’t in it.

One thing I am hoping for is that they entertain a new big bold initiative. Something such as the initiative from Phillip Blond and Philip Callan to create a new housing fund, I think that is a very interesting idea. I hope the willingness to explore that as an option because that would really turbocharge the delivery of new homes.

One thing that I really hope is not in there is another tinkering of the planning system -because we never seem to be able to leave it alone.

I’m not saying there aren’t improvements that can be made, but you barely get one set of changes through before you get another set of changes. I think that is unhelpful.

Instead of that what I would like to see is local authorities to raise planning fees, which would be part of a wider devolution package so they have more ability to borrow and more ability to deliver themselves.

 

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