Lifetime tenancies with rolling discounts, means and community tested, and the option to accrue equity stake through self managed repairs.
Description: In his paper Keith Jenkins proposes granting tenants lifetime tenancies, the rent levels for which would be set every five years. At each review the market rate would be established and then a discount (perhaps between 30% and 90% of market rent) would be established using a range of criteria set by residents, potential residents and other key stakeholders. Criteria might be set to take into account income, disability social contribution (positive or negative). Every review tenants would apply for the discount, otherwise rents would revert to market rates. Tenants would have the right to carry out their own repairs, the value of which would be treated as a part purchase in the ownership of their home.
Improvement: Security of tenure provided therefore mitigating a driver for right to buy. Discounted rent levels provided to those in need and regularly reviewed. Community / social contribution taken into account in rental discount equation. Ability for tenants to accrue sweat equity in property.
Keith Jenkins’ Contribution to Rental Matters
Rent: the past tense of ‘to rend’
So here is a proposal for Trafford Housing Trust:
- Grant lifetime tenancies at market rent with annual review (up and down).
- Actual rent charged is at a discounted figure, ranging from a social rent at say a nominal 30% of market, all the way up to 90% (there is no sense in a discount of less than 10% – it disappears in the errors in determination).
- Initial allocation will be on the same basis as at present for social housing and therefore at full discount for a period of five years. The discount is for a period of five years at a time (no-one can manage their lives if key determinants yo-yo around).
- If the tenant wants a discount at the end of the five years they have to apply. If they don’t it moves to a market rent. Any new discount is for another five years. Getting the discount is wholly at the option of the tenant; privacy in this day and age has a price, and anyway you bared your soul when you got taken on.
- Discount is established by a defined series of criteria such as disposable income, disability, social contribution (positive or negative).
- Criteria are crowd set by residents, potential residents (i.e. not just those who got lucky in the past); Oh and you might let the regulator/secretary of state have a say to the extent it’s valuable (weight it for their performance in delivering housing against known national need perhaps?)
- Give everyone paying more than social level rent (target rent in current jargon) the right to carry out their own repairs and have the balance treated as the purchase of a share in their home (In other words if £50 a week = £80,000 mortgage over twenty five years then the tenant has the option to call for that payment to be treated as payments to buy (80k/open market value of the property at that date) this over twenty five years. Helps keep the estate interested in rising values, and keeps economically active residents on site (over 70% of all jobs are found through personal links with people in work).
- The five year period might be three.
- Criteria might include social engineering elements – for instance if you want to move a residential market up get artists to live there ( Montmartre, Chelsea, Shoreditch).
- Discount could be either a percentage of market (so might fluctuate year by year depending on the market), or a figure less than the market rent when the discount is fixed (which could be level or track inflation, the actual annual rainfall in Trafford, the FT500 or something else to make it more interesting for everyone).
I have had great difficulty in constructing this as an essay; there is no truth towards which an argument can inexorably build. It seemed to me better to put forward a series of observations about the factors that occur to me which have to be taken into account.
I suppose my general proposition is that the rent of a dwelling is the result of a series of choices, by the landlord and the tenant, and those who influence and regulate them, about different factors. The choice in relation to each factor has its own consequences. This produces a nuanced framework contingent on time, location, purpose and need.
This sits ill with the emotional knowledge we all have, by the time we are four, learnt at the pantomime, that we are expected to boo when the wicked landlord comes on.
Markets actually deal with how people behave. Efficient is probably the wrong way to describe them, but they allow me to use my cowrie shells for an extra bedroom instead of a Sky subscription, or walk to work instead of commuting, so they are good at allocating, where each of us values different components of what is on offer, differently.
Rationally it may make sense to buy second hand clothes; emotionally I choose to spend my money differently. I would therefore much rather I chose my wardrobe than let you do so on a rational basis (but we think letting Town Hall apparatchiks, moderated by politicos, run allocation, is OK).
The market under consideration in relation to rents is residential use of property for a defined period of time. Wealth, relative income, need (an extended family, medical condition), warfare in my homeland, supply, are not strictly anything at all to do with rents, although they will all impact on how many grams of gold I think it appropriate to hand over, or demand.
You can control the market in property as a proxy for managing many of these things. Like most rationing, over time, it distorts. If you keep rent down people stop providing houses. If you give tax breaks on ownership, people who should sensibly rent will buy. If you issue limited numbers of building permits (planning permission) it lets NIMBYs limit their neighbours. If you provide housing benefit it turns part of the population into dependant scroungers.
So if you are really worried about affordability, get wages up and stop subsidising Starbucks’ baristas so Starbucks can make more profit on which they don’t pay tax.
You don’t have to use axe heads to create a market. Choice based lettings has shown that potential occupiers have a much more varied view of what is desirable than the Town Hall apparatchiks thought (although of course few Town Halls actually take this into account in planning supply because decision makers always know best).
As an aside, in considering the hegemonic position, its noticeable how many otherwise quite nice people think it’s essential that the poor pay the bourgeoisie (housing managers, directors and apparatchiks) to manage the process of living somewhere, which doesn’t seem to be necessary in the case of that bourgeoisie itself. How much cheaper would rents be without these freeloaders?
Markets are also quite good (as long as they are not rigged or otherwise fraudulent) in demonstrating fairness. I might however think it unfair if you, largely by chance, got a large well-maintained flat in the centre of town and I have a small run down flat buried in the outer suburbs. Especially if I am told that my taxes have to go up to pay for more improvements to your home. I might not vote for my traditional party.
This illustrates an important, often overlooked, fact that decisions about allocation and subsidy need to be fair not only at the point they are made, but also thereafter. If I flee Syria and get a council tenancy in London, in effect I have been given at least £250,000 for the rest of my life. At the time I get it, it’s absolutely right that I should. When I’m secretary general of the amalgamated union on four times your income, is it still fair?
Distorting the market by subsidy encourages behaviour that others will see as dishonest. If I have a lifetime tenancy why can’t I sub-let it? Is it obvious in all cases that its better to keep a flat infrequently occupied by its lawful tenant, who uses it while driving his cab for a fortnight a month, spending the rest of the time in the family home in Spain, rather than to sub-let it to someone who wants to live there all the time? Of course we have the same degree of outrage in each case, but one is legal and the other is poorly policed.
Housing is just the same as meridiem nutrition; there is no such thing as a free lunch.
Even if you give the stuff away, if it is to stay habitable, there are on-going costs (repairs and maintenance of all the cyclical, capital, responsive etc. etc. types, not to mention the opportunity cost of use as a residence when it might be an office or factory or shop). Someone has to meet these costs, and if section 11 says it’s the landlord there is a problem if the rent doesn’t cover the cost.
Right to Buy was born out of the observation that it cost more to collect rent in Lambeth than was collected. What a triumph for the control of rents.
Giving the stuff away does of course work, but then there isn’t a rent, and the donee does the repairs. The late lamented GLC did this with property they couldn’t get tenants for (charmingly they called it homesteading) and it reversed the decline of London. I can see this might make northern cities (even more) delightful. But I don’t think changing owner has anything to do with rent.
About Keith Jenkins
Keith has worked for local authorities, banks, house builders, private landlords and housing associations in the provision of housing solutions for over 35 years – since the discovery of fire, but well before the invention of the wheel!
Keith says that he trained in the days before lawyers specialised in one area of law and, while he tends to avoid litigation, he brings with him a wealth of knowledge on scheme structure, funding, vires and even employment and pensions issues.
In terms of arrangements with local authorities, he is used to advising on the scope of local authority powers and capacity and helping them understand the ways in which they can achieve what they want within the statutory framework. He also understands the different ways in which valuation and pricing in these circumstances are constructs of the way any particular question is addressed, which can be used to the parties’ advantage.
You can contact Keith at email@example.com.
 A small prizes will be given to the first reader to correctly guess all the quondam cabinet ministers used in illustration in this essay