Scottish Government

Modernising Scotland's Social Housing: Consultation Report: Summary of Responses to Consultation Paper

SECTION 4: INNOVATIVE APPROACHES TO HOUSING FINANCE AND MANAGEMENT

56. Scottish Ministers' policy intention has been to encourage local authorities to separate their strategic housing role from their housing management function. The consultation paper invited consultees to consider whether there were radical and innovative approaches that could be developed for application in the Scottish context. Any alternative models for housing finance and management would need to demonstrate that they could promote improved tenant involvement, deliver the necessary investment and support effective and transparent management. Table 5 below shows the distribution of responses.

Table 5-Distribution of responses on innovative approaches

Housing Management

57. The majority of responses in this section related to housing management. 14 respondents (7 LAs) came forward with suggestions for the creation of Arms Length Organisations (ALMOs) or Local Housing Companies as an alternative to Community Ownership. (ALMOs are a type of LA company in England set up specifically to manage and improve all or part of the LA housing stock; they are seen as an alternative to transfer). Two respondents felt that the introduction of ALMOs would trigger additional investment in housing and one of them took the view that ALMOs supported effective and transparent management. One suggested that a funding package similar to that available for transfers should be available to councils who wish to set up Arms Length Management Organisations (ALMOs). One council suggested that ALMOs could operate off public sector balance sheet with debt write-off for some or all affected stock.

58. Scottish Executive response: An ALMO is not a Scottish legal concept. There is no specific statutory authority allowing Scottish local authorities to form companies but they do have general powers to do with the discharge of their functions. It is for councils to decide whether they have the statutory powers to set up a company. They do not need Ministerial consent to do so. However they cannot transfer houses to any body without the consent of Scottish Ministers. The Executive does not propose to provide financial support to local authorities for any such companies or management organisations. Our priority for funding is to ensure that councils with the worst stock can achieve transfer and, given the benefit of debt write-off, to help free up resources. HM Treasury funding only offers debt relief to those local authorities involved in whole or partial stock transfers.

59. There was one single suggestion for Urban Regeneration Companies (URCs), which already exist in England, to be set up. Scottish Executive response: following the Cities Review published in January 2003 (which concluded that URCs have the potential to boost regeneration efforts in Scotland's cities and beyond) the Scottish Executive launched its Urban Regeneration Companies Consultation Paper "Challenging Practice, Testing Innovation" in August 2003. The consultation was designed to assess support for innovative delivery vehicles like URCs to improve the delivery of regeneration in Scotland. The consultation period ended on 14 November 2003 and the analysis of responses is ongoing.

60. We received three suggestions for Tenant Management Co-operatives (TMC), also known as Tenant Management Organisations, to be introduced where, for example, tenants could take on responsibilities for the development of rent setting to fund local projects. Scottish Executive response : tenants already have the right, under Sections 55 and 56 of the Housing (Scotland) Act 2001, and subject to Ministerial approval, to form a Tenant Management Cooperative and enter into an agreement with a landlord to exercise the landlord's housing functions.

61. There was also a single request for Estate Management Boards (EMBs), as introduced in England and Wales, to develop capacity of local people and local accountability. It was proposed that EMBs would have devolved budgets and could create a local lettings initiative with local teams which would landscape during the summer and maintain the properties and deal with local graffiti. Scottish Executive response there is no direct parallel with EMBs in Scotland, with our policy focus being on Tenant Management Co-operatives

62. A couple of respondents made reference to Public Private Partnerships (PPPs), previously known as Private Finance Initiatives (PFI) as part of a funding pool for regeneration. Scottish Executive response: PPPs are already a key element of the Scottish Executive's policy priority to deliver effective public services on a larger scale and more efficiently than would be possible under conventional procurement, but to date, have focused on non-housing projects. It is not clear from PPP models how tenants can be at the heart of investment decisions and move from managing their homes and deciding the shape of future investment to ultimately owning them. It may be some time before the Scottish Executive comes to a firm view on the capacity of PPPs for developing social housing.

Housing Finance

63. Relatively few (10) respondents came forward with proposals for innovative approaches to housing finance The Chartered Institute of Public Finance and Accountancy (CIPFA) suggested that local authorities should account for asset depreciation on their HRA; this proposal has already arisen in the context of Section 12 of the Local Government in Scotland Act 2003, which introduces a statutory duty on local authorities to adhere to proper accounting practices. Scottish Executive response: we understand that CIPFA have been involved in discussions with the Office of the Deputy Prime Minister on this proposal. There are still many issues to be resolved. The Scottish Executive has no immediate plans to adopt CIPFA's proposal on depreciation for local authorities' Housing Revenue Accounts.

64. A few respondents felt that the Executive's policy on debt write-off should be changed to take account of programmed demolition by local authorities. Scottish Executive response: HM Treasury provides resources for debt write-off linked with community ownership and that provision has now been extended to partial stock transfers. The Scottish Executive does not have the resources necessary to write-off debt associated with authorities' programmed demolitions.

65. One RSL suggested that consideration should be given to the restoration of the Tenants Incentive Scheme, or to provide a similar Portable Discount Scheme where tenants are given their discount in cash to spend on their own home in the private sector. Scottish Executive response: the Scottish Executive has no plans to re-introduce the Tenants Incentive Scheme. Following a review in 1998/99 Ministers decided to reprioritise TIS resources for Community Care.

66. One respondent representing the construction industry supported the development of shared equity for tenants. They held the view that this would increase the opportunity to gain access to the property ladder and release funding for the authority. Scottish Executive response: Communities Scotland already operates the Housing Association Grant for Low Cost Home Ownership (LCHO) which allows registered social landlords' tenants to own part of their home and pay an occupancy payment on the other part, which is owned by the housing association. A similar facility is not currently available to local authority tenants. However, councils do operate Cash Incentive Schemes which in certain circumstances can offer grant of up to 10,000 to tenants wishing to own homes in the private sector.

Other Suggestions

67. Two councils took the opportunity presented by this open-ended part of the consultation paper to register their belief that local authorities should not separate their landlord and strategic roles. Other respondents made comments on issues surrounding housing finance and management.

68. A couple of respondents suggested that local authorities should consider the option of reviewing their rent structures as part of the refinancing of housing. Scottish Executive response: councils and registered social landlords should review their rent structures on a regular basis. Research commissioned by the Scottish Executive "Determined Differences: Rent Structures in Scottish Social Housing: Alison More et al, Glasgow University 2003" noted that, whilst a significant proportion of landlords claimed to have a review underway, or under consideration, the evidence suggested that in some cases there remained considerable inertia. The Single Regulatory Framework introduced in 2002, provides a mechanism for Communities Scotland to inspect both LAs and RSLs in relation to the setting of rents.

69. Two respondents made a general point that options were constrained by the Public Sector Borrowing Requirement. There was also a single suggestion that we should move to General Government Funded Deficit although the respondent accepted that HM Treasury would have a role there too. Scottish Executive response: we operate within the framework announced in the UK Government's Economic and Fiscal Strategy Report in 1998, and Public Sector National Borrowing is measured as part of that framework. It is the UK Government that determines economic policy and it is not within the Executive's power to change it.

70. There were a couple of proposals for changes to the policy on Right to Buy(RTB): one suggested that RTB sales should be revoked to allow local authority to build new houses; while another felt that in order to stabilise communities, councils should have the right to buy back former RTB properties. Scottish Executive response: it is for local authorities to determine housing need/demand in their area and allocate resources accordingly. The Housing (Scotland) Act 2001 significantly amended the RTB policy by introducing Pressured Area Status which allows local authorities to apply to suspend the Right to Buy for tenants who are eligible for the modernised RTB. On the right to buy back proposal, Section 64(4) of the Housing (Scotland) Act 1987 prohibits the placing of pre-emption when property is sold under the RTB. However, there is limited exception under S64 (6) of this Act for some sales in rural areas, mainly where an unreasonable proportion of houses are being resold and not used as primary residences.