CHAPTER 1 INTRODUCTION
1.1 Background
Scotland has traditionally given social landlords, both local authority and Registered Social Landlords ( RSLs) considerable discretion in setting rents. A research report commissioned by the Scottish Government from Glasgow University concluded that rent structures and levels in Scottish social housing in 2001 varied considerably from landlord to landlord, both in the same area and across Scotland, and indicated scope for greater consistency. 1
As well as inconsistencies and arbitrary differences between rents for similar properties there are also problems of voids in some low demand areas, where rents do not necessarily reflect demand. Subsequent developments, with new RSLs receiving stock through large scale stock transfers and all social sector landlords re-examining their rental policies in order to meet the requirements the Scottish Housing Quality Standard ( SHQS), were also thought likely to be adding to the existing assortment of rent systems and structures.
Much of the variability in rent levels, particularly between local authorities, can be attributed to disparities in management costs and debt servicing, with some high-debt, high-rent local authorities pursuing or considering the stock transfer. However, delivering the SHQS was also expected to be an increasingly important factor.
Social landlords in Scotland are required to set rents that take account of affordability. However, no guidance is offered by the Scottish Government (or Communities Scotland) on what constitutes an affordable rent. As a consequence, it was not felt that all landlords were robustly taking account of affordability issues. In some cases it was feared that rents might be approaching (or even exceeding) acceptable upper limits of affordability. Of particular concern were the potential impacts of high rents as a disincentive to work.
The Scottish Government had also noted that England had recently introduced a new 'rent restructuring' policy aimed at creating more consistency in the levels of the rents charged by individual social sector landlords. In addition, the Department of Work and Pensions was planning to introduce a new form of 'local housing allowances' 2 for tenants in the private rented sector, and was considering the possibility of extending that approach to tenants in the social rented sector.
Taking account of all these factors, it was considered that it was an appropriate time to look at the question of whether a change to the approach to setting social rents in Scotland might be needed. To that end, the research on which this report is based was commissioned by the Scottish Government in December 2005. The Government also set up Collaborative Forum on Social Rents to consider these issues with key stakeholders, and a smaller Steering Group to oversee the progress of the commissioned research.
1.2 Scope of Research
The parameters set for the research were to examine rent policy options for social rented sector landlords and tenants that would be considered to be fair, consistent and transparent while staying affordable for those on low incomes, particularly those in work. It was also considered that rents should ideally reflect the size, quality and location of individual properties.
In this context the detailed brief for the research included:
- Data collection and analysis of current social sector rent levels and policies in Scotland, updating the earlier Glasgow University research, together with further data collection and analysis of relevant contextual data, including levels of earnings and house prices.
- A more detailed examination of the rent policies of a number of 'case study' individual local authorities and housing associations.
- The development, exemplification and evaluation of a range of rent policy options for both local authorities and housing associations across all 32 local authority areas in Scotland.
The research also required an analysis of the issues connected with the possible development of an index of operating costs for local authority landlords. The work on this topic is published separately. 3
1.3 Structure of the report
Chapter 2 reports on the 2005/06 rent levels and rent setting systems for all local authorities in Scotland. It compares these to the rent levels for housing association dwellings let in each local authority area. It also examines the available evidence on levels of local authority and housing association service charges. It then compares the variability and distribution of social sector rent levels across Scotland with the distribution of earnings and house prices in Scotland.
Chapter 3 sets out the findings from the detailed, but anonymised, case studies of seven individual local authority and housing association landlords.
Chapter 4 sets out the evaluation of a range of alternative options for the future development of rent policies in Scotland for both the local authority and housing association sectors.