Scottish Government

8. Approaches to Working with Landlords to House Homeless Households

The use of the private rented sector to assist in preventing or addressing homelessness is not new. For some time now, a number of local authorities have looked to the sector to augment their supply of temporary accommodation and an albeit small number of statutorily homeless households have accessed an assured tenancy within the private rented sector ¹⁹. Additionally, many households experiencing homelessness have found their own housing solution from within the private rented sector. In most areas non-priority homeless applicants will already receive advice about accessing a private tenancy, while a proportion of priority need applicants may also find their own private rented sector solution to their homelessness. The private rented sector may be able to offer people a greater degree of choice, in terms of both property type and location, than is available through the social rented sector and can be an attractive option for some as a result.

The Scottish Government has recently highlighted the potential role of the private rented sector in tackling homelessness; as part of a broader package of preventative work and more specifically in terms of providing a range of accommodation options, including settled accommodation for homeless households. This area of policy and practice has been thrown into sharper focus recently for two main reasons:

• The increasing number of homeless presentations, together with the enhanced obligations arising from recent homelessness legislation, has placed considerable pressure on the social rented sector. The social rented sector has reduced in size over recent years, and many local authorities are reporting falling turnover rates. Taken together, this results in a limited and potentially insufficient supply of social rented tenancies to meets the needs of households experiencing homelessness. By 2012 all unintentionally homeless households will be entitled to settled accommodation and the pressure on the social rented stock looks likely to increase as a result; and

• In many parts of Scotland, the private rented sector has expanded considerably over the last decade and in many local authority areas, such as Edinburgh, it is providing a substantial proportion of the available housing supply.

Most local authorities looking to meet their obligations to households experiencing homelessness cannot ignore the possible potential role of the private rented sector. However, this can require a different way of thinking about the sector since historically the private rented sector has often been seen as part of the problem as well as potentially contributing towards any solution. In 2006/07, the loss of a private sector tenancy was given as the single most important reason for their homelessness by 8% of all households presenting across Scotland ²⁰. This does mean that when looking to the sector, local authorities need to consider not only how they can assist households experiencing or at risk of homelessness to access a tenancy, but also how they can help support tenancies being sustained.

This section looks at some of the approaches that local authorities and their partners could consider adopting to make best use of the private rented sector to tackle homelessness in their area. It focuses on work relating to accessing supply through a range of leasing or letting models, to provide temporary or settled accommodation. However, when considering their options, local authorities should also be aware that there are a wide range of related activities, such as preparing people to take on a private rented sector tenancy, that can be considered as part of a broader package of activity in this area.

Local authorities should also be aware that this is an area in which there appears to be considerable activity and interest across the UK and the Scottish Government has allocated £100,000 to support partnerships between voluntary organisations, landlords and local authorities in exploring innovative ways to facilitate access to the private rented sector for homeless households. Many of the case study organisations have already had numerous enquiries about their projects from other areas interested in developing new projects. With much new activity being considered, at the same time as some of the longer established schemes are reviewing their future direction, the range of possible models is likely to expand or evolve rapidly.

Defining 'Temporary' and 'Settled' Accommodation

Local authorities have approached the use of the private rented sector using a spectrum of mechanisms, which can broadly be divided into provision of either 'temporary' or 'settled' accommodation.

Temporary Accommodation

A local authority is likely to use temporary accommodation for one of the following 3 reasons:

• To accommodate a household while their homelessness application is being assessed;
• To discharge their current duty to provide temporary accommodation to households who are homeless but not in priority need or who are in priority need but intentionally homeless; and
• To accommodate unintentionally homeless, priority need households until an offer of suitable settled accommodation can be made.

Temporary accommodation is primarily intended to provide short-term accommodation while the household experiencing homelessness finds a more permanent housing solution and has the following characteristics:

• The household living within temporary accommodation has a contractual relationship with the local authority (the precise nature of that contractual relationship may vary). The local authority may be leasing the property from a third party; in some cases this may be a housing association, but increasingly it is a private landlord;

• Temporary accommodation is generally more expensive to provide and rents are considerably higher than for those in permanent social rented sector tenancies, and often higher than those in the private housing market locally. There is a specific housing benefit rate for temporary accommodation which reflects these costs;

• Management of temporary accommodation lies with the local authority, not the property owner (where a property is owned by a third party), although the local authority may contract the management function out to a separate organisation;

• The provision of temporary accommodation does not constitute a discharge of duty. In some circumstances where accommodation is made available for a lengthy period (see further below under private leasing) the household's homeless application may effectively be 'frozen'. Under most social rented sector allocation schemes this will effectively mean that the household experiencing homelessness will be less likely to receive an offer of a social rented tenancy during this period;

• Temporary accommodation cannot necessarily be defined as lasting for a short period of time only. Households are remaining in some private leasing scheme properties for as long as three or four years.

Settled Accommodation

Settled accommodation is either permanent accommodation with a Scottish Secure Tenancy or an Assured Tenancy (as defined by the Housing (Scotland) Act 1988) or is non-permanent accommodation provided under section 32A of the Housing (Scotland) Act 1987.

To be 'settled' accommodation must allow that:

• The household can no longer be regarded as homeless under legislation and the local authority has no further obligation towards them. Under current Scottish law, a household which has been accepted as 'homeless' and as being in 'priority need' (i.e. all homeless households from 2012) cannot be required to accept a private sector tenancy as a discharge of the local authority's duty unless an Assured Tenancy is being offered ²¹. However, if the household accepts a private tenancy instead of awaiting an offer of permanent accommodation from the local authority, then that household is no longer considered homeless ²²;

Settled accommodation has the following characteristics:

• The tenancy contract is between the formerly homeless household and the landlord. As we will see below, the local authority can become involved in accessing and sustaining such a tenancy in a number of ways, but the local authority is not a party to the lease;

• There is no minimum length of tenancy. Most tenancies, at least initially, are offered as 'short assured tenancies' generally for six months. In practice many private tenancies are extended well beyond that initial period.

• Rent will be as set by the landlord according to local market conditions. If the tenant is entitled to housing benefit that will be paid at the level of the Local Housing Allowance ( LHA);

• Responsibility for managing the property lies with the private landlord, who may choose to contract with an agent to carry out the day-to-day management. As will be seen below, that agent may be a 'social lettings agency', which could in fact be a local authority itself. However, the ultimate responsibility remains with the landlord.

In the autumn of 2008, the Scottish Government consulted on introducing new Regulations under section 32A of the Housing (Scotland) Act 1987 to allow a discharge of duty to unintentionally homeless households in priority need by securing a short assured tenancy in the private rented sector, provided certain conditions are met.

Use of the Private Rented Sector Accommodation as 'Temporary Accommodation'

Leasing properties from private landlords can allow local authorities to expand their provision of temporary homeless accommodation and can be achieved in a number of ways. Generally, however, local authorities will be using one or more of the following routes to access private rented housing:

• Ad-hoc leasing by councils from private landlords to extend supply of temporary homeless accommodation;

• Ad-hoc leasing by RSLs from private landlords, which then make the properties available to the council as temporary accommodation;

• Council run 'in house' Private Sector Leasing Schemes;

• Voluntary sector run 'not-for-profit' Private Sector Leasing Schemes; and

• Commercially run Private Sector Leasing Schemes.

In a formal Private Sector Leasing ( PSL) scheme tenants have the advantage of relatively high levels of stability and high management standards, which may not be available in an informally sourced private let. This resource pack will focus on the formal schemes and provide case examples from both Scotland and elsewhere in the UK.

Overview of Private Sector Leasing Schemes

Although they have been used extensively in England for many years, PSL schemes are a relatively recent introduction into Scotland. Leasing schemes are likely to appeal to landlords who are looking for:

• A minimal role in the day to day management of their property;

• Medium to long-term letting; they are not seeking possession of their property in the near future;

• Guaranteed rent; void periods, if any, do not affect the landlord's income nor do they need to be involved with any issues arising from the assessment or non payment of housing benefit at temporary accommodation rates; and

• The re-instatement of their property to the standard at which it was taken on by the scheme (apart from 'normal' wear and tear).

In some cases schemes operate as providers of 'temporary' accommodation and effectively perform the same function as council or RSL owned temporary accommodation. A priority need applicant can remain until an offer of permanent housing within the social rented sector is made. If a reasonable permanent offer is refused, the council's duty can be discharged and the applicant will no longer be entitled to temporary accommodation.

However, other schemes encourage households experiencing homelessness to consider a PSL property precisely because there may be an opportunity of a longer stay. While such schemes do not currently meet the definition of 'permanent' accommodation (as set out in section 31 of the Housing (Scotland) Act 1987), what they are offering is arguably stretching the usual definition of 'temporary' accommodation, not least because homeless applicants accepting such accommodation are normally no longer 'live' in the council's list of homeless households seeking permanent accommodation.

Nevertheless, the formal tenancy is still a short one (the precise legal form and length differs) but such schemes often have capacity to extend the tenancy if all has gone well. As a result households may remain in such accommodation for 2 years or more. As the landlord has entered into a long lease, how the property is used does not affect them. Continued occupation by a tenant who has met their tenancy conditions is in the interests of the property manager (the council, commercial company or not-for-profit organisation) because rent loss due to void periods is reduced. The Edinburgh Private Sector Leasing Scheme operates in this way with over 2,000 tenancies let to date.

Types of Private Sector Leasing Scheme

Commercially Run Private Sector Leasing Schemes

The City of Edinburgh Council chose to set up its scheme with a private sector partner, Orchard & Shipman, which manages the properties. The management fee is covered by the rents received, and there is no additional cost to the council in operating the scheme in this way. The original target of 1,500 properties under management was achieved in 2008 and in January 2009 the Council announced that it was planning to expand the scheme. Edinburgh has the largest private rented sector in Scotland (17% of all the properties in the city in 2006) and the 1,500 properties within the leasing scheme account for around 4% of the sector ²³.

It appears that a few landlords bought additional properties to put into the private sector leasing scheme, and this may have further increased the size of the sector in the city (unless they bought from another landlord taking part in the scheme). Expansion of the private rented sector in this way to meet such need does raise the issue of 'displacement'; any further expansion of the private rented sector may be at the expense of would-be buyers at the lower end of the market, since landlords are likely to be attracted to buy cheaper properties yielding a better income to capital ratio. However, the drying-up of buy-to-let mortgages may restrict further expansion ²⁴.

Midlothian, East Lothian and Scottish Borders Councils have also jointly entered into a contract with Orchard & Shipman for a PSL scheme. All have a smaller private rented sector than Edinburgh and the number of properties involved will reflect that. In the Scottish Borders, 49 properties had been procured by September 2008, representing around 0.7% of private rented sector properties in the local authority area. However, the scheme only began at the end of 2007, so it is too early to make comparisons with the scheme in Edinburgh.

RSL or Not for Profit Organisation Managed Schemes

There are other models of private leasing which do not involve partnership with a private sector management firm. In Bournemouth, the PSL scheme is run by Bournemouth Churches Housing Association. The characteristics of the scheme are the same as those seen in the Orchard and Shipman scheme.

Local Authority 'In-House' Run Private Sector Leasing Schemes

Some local authorities operate a private sector leasing scheme directly, with council staff carrying out the management. One example is Perth and Kinross Council.

The Perth & Kinross scheme is intended to supplement the stock of temporary accommodation, and these properties are not seen as providing medium or longer term accommodation. The aim is to find people permanent accommodation as soon as practicable, and, unlike the situation in Edinburgh for example, homeless households actively retain their priority need homeless status throughout their stay in this accommodation. That said council and housing association tenancies are in short supply in Perth & Kinross and up to January 2009, although a number of households had moved on from PSL properties, none had been rehoused into a social rented tenancy.

Perth & Kinross are finding that they are receiving a higher proportion of homelessness applications from people in employment, and the relatively high levels of charges for the PSL properties can be an issue for them. Where possible they try to offer such households their own temporary dispersed accommodation (where the rent level is lower, although there is still a service charge).

The Council has not yet taken a decision as to whether it will further expand the PSL scheme after the end of the first year. This is not because there is a lack of supply, but in part because there are still concerns about the impact of any DWP changes to housing benefit rules for temporary accommodation. A major consideration was the risk of the DWP housing benefit rules being substantially altered, which could leave the council with problems early in their contracts with landlords. It was also felt that although partnering with an outside body would have spread the financial risks, the advantages of flexibility rather than committing to a fixed number and size of properties outweighed the risks, which in any event were low given the high levels of demand for temporary accommodation.

Here we summarise the key attractions of a PSL scheme for both landlords and local authorities, along with some of the possible drawbacks.

The attractions of leasing for landlords include:

• Guaranteed year-round rent;

• Reinstatement of property (other than normal wear and tear) at the end of the leasing period;

• No need to be involved in any of the day-to-day management of the property; and

• No management fees (although this is usually taken into account in negotiating rents which are usually set below local market rents).

The attractions of leasing for local authorities include:

• It expands the pool of temporary accommodation;

• It reduces reliance on council or housing association properties as temporary accommodation and thus maintains the level of available permanent lets;

• It is almost entirely self-financing (under current housing benefit regulations) and financially more attractive to councils than using B&Bs;

• It does seem to be popular with some households and consequently can be a positive way of reducing pressure on the limited social rented sector stock and on other forms of temporary accommodation; and

• It allows applicants time to resolve their housing problems on a more settled basis (in Edinburgh, 40% of those moving on from the PSL scheme move on into a standard private sector rental).

Possible drawbacks of leasing which should be considered are:

• The cost to the public purse can be high as the housing benefit paid to eligible tenants is at the higher temporary accommodation level and in some cases this may continue for two or three years;

• Although this cost is not currently borne by local authorities but by central government, the Department for Work and Pensions housing benefit rules could change. This has been discussed but no date for any changes or definite proposals have yet been brought forward. Changes could, for example, lead to cap being placed on payments which effectively make it difficult to continue current management arrangements. Alternatively some of the management costs could be transferred onto local authorities;

• The high level of rent payable creates affordability issues for tenants and may act a disincentive to taking up employment or educational opportunities. That said, in Edinburgh 40% of PSL tenants are in employment, which is higher than some commentators feared would be the case at the outset; and

• The obligation to offer permanent housing may be suspended during the period of residence in a PSL property, but it is not discharged, and will be reinstated if the PSL ends or when the tenant wants to move on. Arguably PSL schemes may be 'storing up' a considerable unmet need for affordable settled accommodation (whether rented council or housing association tenancies or tenancies within the PRS).

It is worth noting that some English local authorities were considering reducing their use of PSL schemes, in part in anticipation of future changes to housing benefit regulations but more directly because the Department of Communities and Local Government has set English local authorities the target of reducing all forms of temporary accommodation by 50% in 2010. One example was Poole Borough Council, which stated as part of its 2008-11 Homelessness Strategy that it was looking at ways of continuing to lease properties but letting them as 'permanent accommodation' at market rents. The Council would, presumably have to cover management costs through another means - in other words not through the higher rents chargeable for temporary accommodation. It was not clear at this stage whether they were proposing to cover management costs from council funding or charge a management fee to landlords. If the latter, the scheme would be much closer to the 'social lettings agency' approach, which is discussed in greater detail below.

Using Private Rented Sector Accommodation as Settled Accommodation

There is a considerable range of activity that falls under the banner of assisting low income or vulnerable households to access settled accommodation within the private rented sector. At its most basic, the council, or other advice giving agencies, can signpost households to where they can source a private tenancy, for example by distributing contact information for lettings agents or suggesting where private rented sector tenancies are advertised. At the other end of the spectrum, local authorities might wish to offer a formal package of tenancy management services that could encourage landlords to make tenancies available to households at risk of, or experiencing, a housing crisis.

This section focuses on ways in which local authorities and their partners can assist households to access 'settled' accommodation within the private rented sector; this may be in response to an existing incidence of homelessness or may be a settled housing solution for a household which is threatened with homelessness.

The examples set out here include those developed and delivered by local authorities themselves as well as projects where other organisations, such as RSLs or voluntary sector agencies, have been involved in the development and/or delivery of a project. The resource pack concentrates on three main approaches - rent deposit schemes, accommodation finder services and social letting (or management) services. It also gives examples of the kinds of incentives that local authorities could consider offering to landlords to make tenancies available.

Examples within this section are primarily taken from England and in some cases from London. On a note of caution, the organisations that we talked to in developing this resource pack reported that levels of LHA have been set in excess of the existing market rent in many of the areas of central London that were consulted in developing this resource pack. This has meant that Council schemes have become very attractive to some landlords, who may currently be able to achieve a higher rental return by letting to a household in receipt of LHA than they would be letting their property through the open market.

Unsurprisingly, this suggests that the proportion of existing private rented sector supply that can be opened up to lower income households will be sensitive to levels of LHA. While we spoke to organisations where there were relatively high levels of LHA which appeared to be facilitating the expansion of these schemes, that is not the case for all local authorities, and in some areas LHA rates can be equal to or below market rent levels. Some Scottish local authorities may find themselves in this position at the point of trying to develop schemes and should be aware of the extra challenges this will present. Where possible this resource pack has tried to draw on the learning and experience of English authorities before the introduction of LHA (when some of the case study areas were finding it more difficult to attract interest from private sector landlords).

Rent Deposit Schemes

The Rent Deposit Scheme is probably the best known and most well established model for assisting low income households to access a private rented sector tenancy. While there is a considerable variation in the package of services that schemes may provide, at their core schemes will all offer private sector landlords some type of financial security against the non payment of rent and damage to or theft from their rental properties.

A 2008 report by Crisis on Rent Deposit Guarantee Schemes in Scotland identified 28 operational schemes in 32 local authority areas. The report identified the key selling points of rent deposit guarantee schemes as including:

• Offering a free service that gives landlords:

• Access to prospective tenants without incurring advertising costs;
• Guidance and information on landlords' rights and responsibilities;
• Access to mediation type services between landlord and tenant that can help avoid a breakdown in the tenancy; and
• Completion/vetting of housing benefit claims by trained staff, thus minimising delays in payment of benefit.

• Supporting low income or households at risk of homelessness by:
• • Helping them to take control of their own housing circumstances by accessing good quality affordable accommodation in an area of their choice;
  • Providing advice on the rights and responsibilities that come with being a private rented sector tenant;
  • Offering expert advice and assistance in claiming housing benefit; and
  • Offering support in settling in to their new home and maintain the tenancy in the longer term.

Crisis published a Good Practice Guide for Deposit Schemes in February 2008. The guidance is available from their website and covers both the setting up and running of a scheme and also presents a range of model documents (including tenancy and bond documents appropriate for use in Scotland).

While deposit guarantee schemes of some kind effectively operate across Scotland, the overall contribution they make has been identified as relatively 'modest' in the 2007 Evaluation of Homelessness Prevention Activities in Scotland. However, there are some notable exceptions and some schemes succeed in helping a significant number of clients access and then sustain a tenancy in the private rented sector. In terms of sustaining the tenancy a sufficient and tailored package of support to both tenant and landlords is likely to be key.

The 2006 Homelessness Prevention: A Guide to Good Practice from the Department for Communities and Local Government suggests that to realise their full potential, the organisations that operate rent deposit schemes can usefully offer a package of 'add-on services' which can be directed at both landlords and tenants. Many of the add-on services suggested are 'incentives' of the type that are discussed further below. These might, for example, include offering a 'finders fee' or special access arrangements to housing benefit assessment.

In areas where work in accessing supply in the private rented sector has been relatively limited to date but is proposed in the future, assessing the strengths, weaknesses and crucially the potential of any existing deposit guarantee scheme would be a sensible starting point. Assuming the scheme is successful, there should be an existing pool of landlords who would have already shown themselves to be willing to accommodate households on low incomes and in receipt of benefits. Any existing goodwill these landlords bring (and hopefully share with other landlords) could be a strong foundation on which to build future activity and potentially reduce the time it will take for a broader service to 'take off'.

Equally, should the local authority choose to consider a different route, and in particular to develop other services that would operate in parallel to an existing deposit scheme, it should consider the likely impact of this activity on the existing scheme.

Accommodation Finder Services

Accommodation finder schemes are many and varied in their makeup but at their core focus on bringing landlords who are willing to rent their properties to people on a low income or on housing benefit, together with households that are looking for a private rented sector let. As a general rule, the 'tenant finder' element of the service will be supported by a range of other services, all of which are designed to create and then sustain a tenancy. The Dundee Homefinder service is an example of a recently established scheme of this type.

Of course, housing markets are not necessarily neatly confined within local authority boundaries and local authorities may wish to consider how their private rented sector market relates to that of its neighbouring authorities. Both landlords and tenants may appreciate being able to access this wider market through a single scheme. The First Lets scheme is a joint venture between 3 Borough Councils in the Nottinghamshire area.

Another variation on an accommodation finder service has been developed by the Cyrenians and brings together young people to share properties within the private rented sector.

Social Letting or Property Management Agency

A rent guarantee scheme or accommodation service can address some of the obstacles people experiencing homelessness or at risk of homelessness may face in accessing settled accommodation in the private rented sector. However, local authorities may wish to consider going further by offering a property management or social letting service, either under their own auspices or by contracting a third party. Such a service offers something practical to landlords i.e. a good quality, reasonably priced management service and possibly a range of incentives. From a local authority's perspective, a property management service (whether operated in house or through another management or funding arrangement) could offer some or all of the following benefits:

• An identified group of landlords willing to house households that are already experiencing or at risk of experiencing homelessness is built up. Through these landlords a pool of properties will also be built up;
• The service can establish its own standards, relating to both physical quality and management of the tenancy, and ensure these are adhered to;
• Any issues or problems can be addressed quickly e.g. the service can ensure that repairs are undertaken quickly or offer assistance if rent payments are not reaching the landlord. This should increase the likelihood of both parties wanting the tenancy to continue;
• If all goes well, i.e. the tenancy agreement is not breached, tenants will often be able to stay longer than the initial lease period (usually 6 or 12 months). Managers of existing services point out that landlords like continuity and will not seek a change unless they have a reason to do so. Local authorities can also offer incentives to landlords to offer longer tenancies;
• Problems prospective tenants often encounter, such as needing a deposit or having to pay rent in advance, can be avoided e.g. the management contract can stipulate that rent will not be paid in advance if the tenant is going to be on housing benefit. If landlords do not want to agree to this stipulation they will not join the scheme;
• Schemes can nevertheless offer deposit guarantees, either directly or possibly through an existing deposit guarantee scheme. Guarantees have a cost but only a proportion needs to be called on so outlay is limited;
• There will be a cost saving to the council if the need to provide temporary homeless accommodation is reduced or eliminated. Given that an 'at risk of homelessness' presentation can be made up to 2 months before homelessness may occur, a lettings scheme could use that time to access alternative accommodation, preventing homelessness from occurring;
• Rent levels should be lower than can be achieved through a leasing scheme making it a more attractive option for households looking to work, study or train; and
• Landlords will be attracted by a competitive management fee.

However, when considering establishing a scheme of this type the local authority will need to give careful consideration to why a landlord would choose to sign up to the scheme, particularly when other options, such as a leasing scheme, are available. Leasing can offer a particularly attractive deal to landlords (with guaranteed rents, no void periods and the property reinstated to the condition in which it was handed over to the leasing scheme). It may be that the lettings option is more viable when no leasing alternative is on offer (albeit very limited evidence from the case studies suggests that when both a leasing and letting option are available the majority of landlords will choose to go down the leasing route).

While some areas may see advantages in 'out sourcing' any social lettings work others have opted to develop an 'in house' model. The Exeter Council ExtraLet scheme offers just such a model.

Considerations when Setting Up a Lettings Agency

Councils that have gone down this route stressed the need to be clear about what kind of scheme was wanted and to consider what type of organisation is best placed to deliver it. An organisation with a good reputation and existing working relationships with landlords may bring advantages - irrespective of whether that organisation is the council or another body. Poole & Bournemouth had an existing charitable organisation able to take the new scheme under its umbrella. In Exeter working direct through the council was quicker as no existing external organisation wanted to take the role on.

The service offered is 'property management' and therefore a professional service has to be offered. Homes4Let deliberately employed a manager with experience as a letting agent in the private sector. Councils do, however, have extensive housing management experience but have to be aware of the differences involved in offering a commercial service.

Homes4Let offers fewer 'additional' incentives to landlords other than offering a good management service at a competitive fee, and having a ready source of tenants. Rent deposits can be secured for tenants through other local agencies. The ExtraLet model offers a number of additional incentives including a rent and damage guarantee of up to 6 months, and grants for improvements. This is not a consequence of it being an 'in house' provision, but because it was felt that due to the particular circumstances of Exeter these would be needed to attract landlords. In Exeter there is a large student population and many landlords can secure a high rental income through multi-occupancy. It was felt it would be difficult to compete in this market without offering considerable, and potentially expensive, incentives.

However, both Homes4Let and ExtraLet emphasised that there were landlords with a 'social conscience' and that it was worth making this part of the 'selling point'. This was something mentioned by a number of other organisations although even landlords with a 'social conscience' expect to be offered an efficient service!

Costs depend very much on the range of services and incentives offered. After over 4 years of operation, Homes4Let was being funded only by the fees paid by landlords, but such 'self-sufficiency' may be more difficult to achieve if additional incentives are offered. From a council's perspective the overall cost may be greater than the cost of running the management service itself. Thus in Exeter funding for grants came from another source within the Council (Private Sector Renewal Fund) and a scheme recently started in Plymouth, along the lines of Homes4Let, has decided to build in support for all tenants using Supporting People Funding.

Councils getting involved in such schemes point out that the cost has to be measured against the savings achieved if people do not have to go into temporary accommodation (or can spend less time in temporary accommodation).

Multiple Approaches

Local authorities are not limited to just one of the approaches described above. The work being undertaken by Bournemouth Council provides a good example of an area in which many different types of supply and related activity are being successfully undertaken in the same area, in this case using a range of different models and delivered by a range of different organisations.

Assessing the Options

The Discharge of Duty Issue

There has been a considerable amount of discussion in Scotland about whether and under what circumstances settled accommodation in the private rented sector could discharge a local authority's obligation towards a priority need homeless household. The Scottish Government's consultation proposals were referred to above.

We found that this was less of an issue in many of the case study authorities in England where they were operating social lettings agencies or rent deposit guarantee schemes. This appeared to be because the wider UK examples largely operate within local areas that, in common with many English local authorities, have adopted a housing options approach. Within this approach, households likely to be homeless and in priority need go through a two stage process, which initially considers options and prevention. This requires households to take part in an initial housing options interview which, depending on the applicant's circumstances, either reviews their existing housing situation or looks at a range of possible alternatives to secure accommodation. It is only once this initial housing options interview has been completed that the local authority will decide whether to undertake a formal homelessness assessment. By emphasising the 'prevention' element, it is hoped that the disruption of a spell in temporary accommodation can be avoided, offering clear benefits for households experiencing housing crisis while also allowing local authorities to direct available resources towards securing settled housing outcomes for their clients.

The Evaluation of Homelessness Prevention Activities ²⁵ in Scotland 2007 noted that this approach is not commonly adopted in Scotland. Instead, while housing options style advice is generally given, it forms part of the formal statutory homeless assessment which is undertaken for all households that present as homeless to a local authority.

In terms of the case examples presented here, the English approaches tend to focus on assisting households that, within a housing options system, have not been designated as statutorily homeless. As a result they do not necessarily assume a need to be able to discharge duty around the securing of settled accommodation. However, many of these models do appear to assist households that, within a Scottish context, would be likely to be found to be statutorily homeless and possibly also within priority need. Many also appear to be successful at allowing households that are potentially vulnerable to homelessness to avoid having to go down the route of having to make a homeless presentation to their local authority.

There are, however, some English authorities which have sought to 'discharge duty' through the private rented sector. The terminology used is the making of a 'qualifying offer' which, if refused would end the local authority's obligation towards that homeless households. Islington Council for example, operates a 'Private Sector Opportunities Scheme' under which the landlord must offer a one year Assured Shorthold Tenancy (rather than the more common 6 months) in return for which the landlord receives an incentive equivalent to nine weeks rent (eight if the property is not in Islington). This is an incentive not a deposit or a deposit guarantee. This will be a 'qualifying offer' for the homeless applicant. The tenancy is between the landlord and tenant and the landlord continues to manage his property in the normal way. Islington is offering the financial incentive to achieve the one-year tenancy.

It is advisable that local authorities look carefully at any future national guidance issued in relation to the discharge of statutory duty into the private rented sector and obtain their own legal advice if in any doubt as to whether options being considered would allow them to discharge statutory homeless duty and under what circumstances.

Weighing Up Your Options and Considering Costs

The decision as to which type of option (or suite of options) is right for your local authority area will be driven to a large extent by the nature and role of the local private rented sector market, other housing options available and the volume of homelessness presentations in your area. All models will incur costs although where the costs fall will vary and local authorities will need to consider how this may impact on both the take up and the sustainability of any scheme they are considering.

As well as considering the broader context, local authorities also need to give more specific consideration to what types of services will be most attractive to landlords operating in their area and then the cost implications of offering such services. For example, would landlords want to continue managing their properties themselves or through an existing commercial letting agency? If so, a rent deposit guarantee scheme or accommodation finder scheme may be the most appropriate model. The 'costs' associated with providing guarantees and/or support will effectively need to be borne by the local authority.

However, if many landlords want to have minimal involvement in the management of their properties, and would be prepared to effectively 'sign over' their properties for a number of years, a leasing model may be worth considering. Nevertheless, local authorities should bear in mind that leasing schemes are expensive from the tenant's perspective (in terms of rent levels which may make it difficult to enter employment), expensive to the benefit system (and the DWP may act to change its rules in the future) and are by definition 'temporary' accommodation, even when the tenant stays for a relatively long period of time.

Under most private leasing arrangements, the management costs are met through the enhanced housing benefit payments available because the lets are categorised as providing temporary accommodation. The landlord receives a near-market rent (this may be negotiated down from market rent to take account of the fact that rent payments are guaranteed and there is no management fee payable by the landlord). The council will normally only incur costs if it cannot provide tenants for any period. However, the possibility that the DWP may change funding arrangements in future should be considered.

It may be worth considering what it is about leasing that makes it attractive to landlords (such as rent guaranteed for 52 weeks a year and the property reinstated at the end of the lease period) and consider whether these elements can be delivered through other mechanisms. For example, property management schemes/ social lettings agencies may be attractive to a landlord who is prepared to carry out the day-to-day management of their property and is prepared to pay a fee for a good service, but without having to commit to a scheme for several years.

In social letting management arrangements, all or part of the costs of the management of the property fall to the landlord i.e. funding is sourced through their payment of a management fee. The landlord will also bear the loss of income resulting from void periods or the costs of repairs, unless the local authority has agreed to bear some of this cost in return for the landlord accepting homeless or potentially homeless households. Understanding local market rates and demand for letting services will be important in developing a model.

With commercial lettings agencies, the landlord bears the cost of rent loss during void periods and of damage (except in so far as this may be covered by the tenant's deposit). A social letting agency can operate in this way, or can choose to offer greater levels of guarantee against rent loss/damage or voids in order to attract landlords to accept tenants who may be perceived as more 'risky'. Linking with existing rent deposit guarantee schemes in this respect may be helpful.

The main point to note with all of these examples is that there is no cost-free option. However, there may be significant benefits to be gained if the alternative for households is likely to be spending a lengthy period in temporary accommodation - which also has high revenue costs, especially when B&B accommodation has to be used. Equally, the use of social housing properties reduces the availability of permanent lets.

Private lets are attractive to many households because of the type of accommodation or the location. If such lets can be made more sustainable through good quality management provided by a social lettings agency (or possibly also by an accredited landlord managing his/her own property), then there may be other longer term cost savings to the local authority as the risk of 're-presentation' is reduced.

Creating Sustainable Tenancies

After the upheaval of homelessness, tenants want to know that whatever accommodation they find or are offered is going to last for a reasonable length of time. Local authorities want to ensure that those who come to them for assistance are going to find a sustainable accommodation solution, and will not re-present as homeless in the near future. Concerns are expressed by some commentators that increasing the use of the private rented sector as a 'solution' for homelessness, does not give the required degree of sustainability because of the inherently short-term nature of the sector.

The Rugg/Rhodes report on the English private rented sector published in October 2008 ²⁶ suggests that some of these concerns may be overstated, but accepted that it is a worry for tenants:

The Scottish Government review of the sector (of which this resource pack forms a part) has also found that the vast majority of tenancies are ended by tenants rather than landlords and that many tenants who want to stay in the sector for a longer period of time are able to do so. The evidence found that repairs, management practices, rent arrears and antisocial behaviour were the main concerns of both tenants and landlords, rather than the length of tenancies.

In all of our case studies where local authorities were looking to make greater use of the private rented sector to assist homeless households, it was clear that local authorities expected and encouraged tenancies to continue beyond the usual 6 month initial period. Many felt that this was in line with what most landlords themselves wanted, provided that there were no problems, and local authority support and interventions were generally directed towards trying to ensure that problems did not occur. This was true not just of social lettings agency models (where the local authority could ensure either directly or through its agent that high quality management was in place which could tackle problems early) but also of Rent Deposit Guarantee and Accommodation Finder schemes.

Providing the additional support that can help sustain tenancies is likely to incur additional costs but this may be money well-spent if it is seen in the context of preventing future homelessness.

Affordability

Irrespective of the approach taken, local authorities will need to give careful consideration to the issue of affordability when establishing an scheme or initiative that is designed to assist low income households to access a private rented sector tenancy. This will be of even greater importance if it is anticipated that the sector will be offering a settled housing solution i.e. that the household will want to stay in their private rented tenancy for as long as it continues to meet their needs and requirements. Creating a sustainable tenancy should not be at the expense of allowing people to access employment or training opportunities in the future.

The issue of affordability of rental payments for those in low paid employment or further education or training is not unique to the private rented sector but rents in the private rented sector do tend to be higher than those in the social rented sector. While the issues of deposits and rent in advance can be tackled relatively easily the issue of higher rental charges remains a challenge for households whose work or training circumstances mean that they are not eligible for the full local housing allowance, though claimants may still be eligible for some level of support through housing benefit when they return to work. Local authorities should be clear about options for tenants and provide advice and support, signposting to money advice services ands other agencies as required.

When setting up a scheme it will also be worth considering whether there are certain sectors of the market or certain models through which it may be possible to access properties at below market rent. For example, landlords may be willing to accept a lower rental charge if they will not be exposed to void rent loss.

Suitability for those Needing Support or who are Vulnerable

The 2008 Crisis report Private Access, Public Gain looked at the use of private rented sector access schemes to house single homeless people. This report focuses on developing models that would be appropriate for assisting people who are currently resident in hostels or supported housing and there is an assumption, therefore, that many people will be vulnerable and/or have extensive support needs. While this may not be the client group that many Scottish local authorities would consider assisting to access the sector the report nevertheless provides useful information for any local authority that may be considering going down this route. Key points to consider are:

• While some landlords may have concerns about letting their properties to people who are vulnerable and with support needs, these concerns can be allayed (to some extent) if the landlord is offered support if a problem does arise;
• Landlords will be reassured if they are confident that the tenant's readiness to live successfully in an independent tenancy has been carefully assessed before referral; and
• By enabling people to access tenancies other than within the social rented sector people can be offered a choice of being housed away from areas that may increase their likelihood of having difficulties in sustaining a tenancy. This is seen as particularly valuable for offenders or those with substance misuse problems e.g. it may allow them to be housed away from former associates or victims.

Attracting Landlords to your Scheme

The examples of accommodation finder and social lettings agencies have already identified many of the features of schemes that will be appealing to landlords and may encourage them to make private rented sector tenancies available. There are many ways that schemes can be made attractive to landlords; some may involve offering some form of financial incentive but providing an efficient and effective service that meets the needs of landlords is likely to be equally, if not more, important. Many of the case studies, including some that offer financial incentives themselves, have stressed that these are often not the most important deciding factor for landlords that join their scheme. Yet again, it is very often the fast and efficient processing of housing benefit that is singled out as most crucial. Nevertheless, local authorities may wish to consider whether offering 'other incentives' may be appropriate to their market context.

Overall, however, the message is proceed with caution and do not assume that straight financial incentives will be the most effective. Local authorities will also need to give careful consideration to how offering financial incentives will affect their local private rented sector market, and potentially that of neighbouring authorities. If, for example, a scheme is prepared to accept landlords from neighbouring authorities offering straight financial incentives, this may be seen as 'buying' tenancies that could otherwise be available to applicants from the home local authority. There may also be an issue of 'incentive inflation' whereby local authorities compete to provide more and more public money to attract landlords - when this may not be necessary.

Developing a Private Rented Sector Access Scheme

If the local authority and its partners decide they wish to undertake work around securing additional supply they will need to appraise the various options that are available to them. As noted earlier, this section of the resource pack sets out some of the approaches that have already been adopted and which may offer local authorities a starting point in developing a scheme that suits their own objectives and market context. Once an outline approach has been agreed the set up phase can begin. A recent publication on setting up tenant accreditation schemes summarised the key steps to setting up a scheme. Although these relate to accreditation they can be used generically for other initiatives and are set out below.

Source: Adapted from How to Develop a Tenant Accreditation Scheme (2006) DASH

Those experienced in developing projects focussing on securing additional supply for households that are experiencing or at risk of experiencing homelessness, have suggested that others considering similar work should be aware of the following:

• It is likely to take a long time to get a project from inception phase to being a 'successful' scheme. Many suggested that around 3-5 years was a reasonable estimate;
• Setting up a scheme can be very resource intensive, especially in terms of staff time. A significant amount of senior staff time may be required in the early stages, especially if the scheme needs to be 'sold' to key partners;
• Developing a scheme aiming to secure additional supply is probably not the best starting point for working with landlords if your council does not already have links established. Where these schemes have taken off relatively quickly there has tended to be a history of successful engagement between the local authority and private rented sector landlords;
• If you are considering different strands of work, for example, temporary and settled accommodation think carefully about how they will impact on each other, particularly if they may effectively be 'competing' to work with the same relatively limited pool of landlords.