Social Housing

Thoughts on Grenfell

The tragedy of Grenfell Tower really struck a blow to me for both professional and personal reasons. I used to manage the Lancaster West Estate, where Grenfell Tower is situated, back in the 1990’s. In fact Grenfell Tower was my teams office for the 6 years I was there so I knew the estate well. At the time of my appointment in 1993 the residents were setting up an Estate Management Board (EMB), a form of Tenant Management Organisation (TMO) as a direct result of receiving £6m of investment through the Estate Action programme. The investment saw huge improvements to the estate with the partitioning of the ‘finger blocks’, door entry systems, CCTV and improved lighting and flooring.

In Grenfell Tower itself as well as the door entry system and flooring to the entrance and lift lobbies we introduced a concierge service based on the model that had been successful at Trellick Tower over in Kensal Rise.

Apart from being my first real step up into a managerial role this was the first TMO in the borough and certainly the first time I had worked directly to a board of residents. Although I was seconded from the council rather than directly employed, I still reported directly to the Chair of the EMB and, in terms of my professional career, it was a turning point.

My experience on Lancaster West convinced me that tenant management was the best way to deliver a housing management service.

Of course just three years later the whole borough became a TMO, the first and, so far, only, borough to put its entire housing stock under the direct control of a board of residents.

There has been a lot written about the set-up in Kensington & Chelsea and how the stock was managed and maintained and much is incorrect. As someone who was there the main driver for change was the introduction of Compulsory Competitive Tendering (CCT) a process whereby all housing departments under local authority control were required to put the service out to tender in order to get a better financial deal for the local authority. Of course, no-one bothered to ask the people who received the service (the tenants) what they wanted and there was no evidence that doing this would deliver the stated objectives of better services for less money! I think that to its credit Kensington & Chelsea council did listen to its tenants and looked at how they could preserve the service that existed and the development of the borough-wide TMO was the result.

I’ve read comments in the aftermath of Grenfell Tower calling for tenants to have a greater say in the way in which their homes are managed but, in theory at least, what’s better than owning the company that provides the service. KCTMO as it’s known has a board of 15 directors and 8 of those are residents (tenants & Leaseholders) who live in the homes managed.

In 2002 the organisation took another turn when the government introduced the ‘Decent Homes Standard’, a standard of good repair where bathrooms and kitchens were not meant to be older than a stated age and the homes were basically wind and weather tight. It was in all honesty a fairly basic standard that shouldn’t have been too hard to achieve. However, consistent lack of investment meant that many councils couldn’t achieve it. So, the government made funding available – I say funding but in fact it was permission to borrow more, not a grant. And the permission came with strings. No Council was entitled to borrow they either had to transfer the stock to a housing association or set up an Arms-Length Management Organisation (ALMO). This was a company wholly owned by the council but a separate legal entity which was expected to have a board of up to 15 (5 council nominees, 5 residents and 5 independents).

In order to bid for the additional borrowing councils had to survey their stock against the decency standards, decide how much investment was required and then consult tenants on the ‘stock options’. Often this amounted to ‘if we want the money to bring the homes up to decency we need to set up an ALMO or transfer the stock.’

There were different approaches. Wandsworth decided their homes were already decent and didn’t need the money. Camden held a ballot with the residents saying they didn’t want an ALMO or a stock transfer – and, despite appeals to government, as a result they weren’t able to borrow any money to invest in their homes. Some councils struck an unofficial deal with tenants – ‘we’ll set up an ALMO, borrow the money and then, in 5 years, disband the ALMO and go back to council management.’

Whatever the case governments of both councils had refused to allow councils to borrow money to invest in their stock – even if there was a strong business case to do so.

In the case of Kensington & Chelsea their TMO became an ALMO in order to access additional funding. In doing so they became a mix of different organisations none of which were directly controlled by the council.

The most recent twist to all of this was the change to the way in which council housing is funded. People have made careers on trying to work their way through this but this is how I understand it!

Since 1990 every stock owning council has to keep 2 separate financial accounts, the General Fund (GF) and the Housing Revenue Account (HRA). The GF is where your council tax goes and funds most council services (waste, adult services, libraries etc.) and the HRA funds the management and maintenance of council owned homes. The basic rule is that there should be no cross funding, as used to happen years ago, so that housing rents can’t subsidise general services and the council tax can’t subsidise rents. So far, so good….

The complexities arise because then the government becomes involved. Across the country the majority of councils operated their HRA at a surplus. This wasn’t just a surplus in terms of income exceeding expenditure but a surplus because the government deemed that their income was in excess of what it needed to maintain its stock (bear in mind that the government had for years determined what the council needed to raise through rents – the notional rent – and what it needed to maintain the stock. Over a number of years these notional rents had diverged markedly from the actual rents charged). It also takes into account debt repayments – but 75% of councils had paid off their housing debt. So, what happens to the ‘surplus’? It goes back to government!

So what about those councils who hadn’t paid their debt off? They received additional grants from government to meet the interest charges on the debt.

Still with me?

About 2010, nationally, the HRA was roughly in balance with the surplus paid in by 75% of councils covering the interest payments of the remaining 25% so government decided to abolish the national HRA, redistribute the overall debt between all stock holding councils and say to them ‘now you’re on your own’.

Most people in housing were hugely in favour of this as everyone benefited. It was an obvious benefit for a council who saw their housing debt reduced from £700 to £500m but even those councils who took on debt (I know of one who took on £300m+) as they worked out this was beneficial to them over the long-term.

As part of the deal government struck a 10-year deal on rent increases. Every council could increase the rents annually by an agreed figure. As a result, business plans were put together predicated on the expected income and the investment in both new and existing stock could be planned with a fair degree of certainty.

Then, just over 4 years into the agreed period the government tore up the agreement and told every council that they would have to reduce their rents by 1% each year for the next 4 years. This blew a huge financial hole into everyone’s plans for investment.

So, how does this relate to what happened at Grenfell Tower?

Well successive governments from all parties have been more concerned about public sector debt than they have been about maintaining the homes in which people live. Right to Buy, VFM, Best Value, CCT, ALMOs have all been about relegating the role councils play in providing low cost social housing. Councils have for decades been unable to invest the money that’s needed into maintaining the homes they own – even where they could easily have done so from the rents paid.

The phrase ‘residualisation of social housing’ has been quoted often in the sector as council housing is increasingly seen as that of the last resort and TV ‘reality’ shows portray those living in council housing as feckless skivers.

But, when things finally go wrong who gets the blame? More often than not it’s those who work in the sector who are, more often than not, those who care most about what the sector has tried to do. Yes, the systems are not usually tenant friendly, yes the leadership in the sector has not been the best but the driver of ‘bigger is best’, centralisation of services and chronic under-investment have done huge damage.

Take the repairs service as an example. Here we have the attraction of large companies offering to price the repairs at low cost based on the volume of work they intend to get – something along the lines of ‘pile ‘em high, sell ’em cheap’ only that approach doesn’t work in this setting. It presumes you have choice to look for the same item elsewhere and that competitive nature keeps the seller honest. In housing we now have the situation where there are very few companies who can provide the workforce to undertake the volume of work generated through managing 30 – 40,000 homes. So in effect we’re getting a monopoly. If a monopoly was perceived to be bad in the public sector why is it good in the private sector? In driving down costs we’ve also seen the disappearance of the housing workers who carried out checks on the quality of works and the contractor becomes both poacher and gamekeeper.

Who suffers? The tenants whose complaints about the service provided (and there are always many complaints) don’t fall on deaf ears but on ears who are unable to do anything to fix a broken system.

So what happens now? We have to get back to what social housing was and can be again. A thing to be proud of and something that the state invests in to ensure that everyone has access to good quality housing at a rent that is truly affordable for those on low income. The research is out there to show what a positive impact social housing has on the economy. Let’s make sure it has a positive impact on people’s lives as well.