Do Housing Associations take a cut somewhere?

by Readers Question

8:24 AM, 10th August 2020
About 3 months ago

Do Housing Associations take a cut somewhere?

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Do Housing Associations take a cut somewhere?

Does anyone know if and where a HA/Charity take a cut from payments when it comes to providing emergency/temporary accommodation?

We have a 5-year deal with a HA & Charity for the whole house. Currently, it is split into 6 beds – all sharing bathroom and kitchen facilities. We get a set figure rent.

If each room is let to a single person, does that mean that they are getting the LHA shared room rate accordingly for each tenant, or do they get more than this for each person by definition as they have provided the Council with emergency accommodation so the rate is increased?

I am only asking as I have another building that is split into four separate units all with their own private facilities and kitchenettes. These are under the LHA classification as one-bed flats and so incur a higher LHA rate. Is it just a case of asking for a total rent of 4 x this category from the HA knowing they get paid more for each unit they supply to the Council?

We would be happy with this 4 x total, but at the same time just curious as to how the process with HA’s and Council’s work on this basis. Seems shrouded in mystery to me especially as you ring up the Council, and they say they don’t have a preferred HA supplier list, they seem to go with any HA that can provide accommodation….

Can anyone enlighten me please?

Reluctant Landlord


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Comments

Joe Robertson

14:25 PM, 10th August 2020
About 3 months ago

Hi reluctant,

It depends on what type of contract arrangement you have. I have one where the 'tenant' is the company and they then fill the house with the councils queue of people. They make a profit on the management of he property and also for arranging repairs and maintenance just like any letting agent would.

WP

18:26 PM, 11th August 2020
About 3 months ago

Reply to the comment left by Joe Robertson at 10/08/2020 - 14:25
sounds similar to mine. I just wondered if the company/HA get over and above the LHA rate for housing a single person in a room for instance, purely by the fact they are placed here due to 'emergency/temporary' status.
I need to suggest a figure to the company/HA that I want each month for the 5 year use of the property. Do I state exactly 4 x single bed rates in total as per LHA fixed rate or can I ask for more knowing they are being paid by the LA more in the first place?

Robert Mellors

14:38 PM, 12th August 2020
About 3 months ago

Housing Associations and charities are "not-for-profit" organisations, and this is laid down in their organisations company documents (most charities are a "company limited by guarantee").
Housing associations are regulated by the "Regulator of Social Housing".
Charities are regulated by the "Charity Commission".
If they are a "company limited by guarantee" then they are ALSO regulated (in a different way) under company law by Companies House (and of course also by HMRC).

While such not-for-profit organisations can add a "mark up" (or "taking a cut" as you put it), this has to be justified and reasonable and genuinely relate to any additional costs that they may incur. This would include, for example, their own running costs, additional costs relating to the property (e.g. additional maintenance, improvements, repairs, adaptations), additional costs relating to the management of their particular tenant types, etc. They may also have costs relating to the provision of personal support to residents, which may be entirely separate to the property or tenancy management costs.

None of the additional costs are set amounts, it will vary from one organisation to another, and from one tenant type to another. This is why councils and other organisations cannot give you a definite answer (figure), which you are interpreting as being "shrouded in mystery". The amount is likely to be above the LHA level, but how much above depends on what the additional costs actually work out at.

However, none of those additional costs are anything at all to do with the rent you charge for leasing the property to a HA/charity, so in terms of what it is reasonable for you to charge the HA/charity, you just decide what rent you are willing to lease the property to them for, and agreed that. If you cannot agree a reasonable figure then you take your chances and resume finding your own tenants at your own risk.

WP

14:43 PM, 12th August 2020
About 3 months ago

Reply to the comment left by Robert Mellors at 12/08/2020 - 14:38
thanks for clarity Robert. I shall approach the HA on that basis. I just wondered if there was a set figure most HA's would charge the LC. Plus I wanted to understand more of how that relationship works.

Robert Mellors

15:00 PM, 12th August 2020
About 3 months ago

Reply to the comment left by WP at 12/08/2020 - 14:43
I run a not-for-profit organisation that leases properties in Sheffield from private landlords and sublets them as supported accommodation, (on a room by room basis), to homeless people with support needs. The categories of support needs may include, for example: drug/alcohol dependency, offending histories, domestic violence victims, learning difficulties, mental health problems, multiple debts, etc.

We receive more than the LHA rate, but we have to submit hundreds of budget code expense costings (and evidence this with copies of all invoices) to the council, to justify the amount of Housing Benefit we receive. The expenditure is scrutinised on a line by line basis to check that every expenditure is reasonable needed and reasonably priced. Our rents are based on the true cost (or best estimate if the cost is budgeted for but not yet incurred), of providing the accommodation, and only a fraction of that is the rent we pay to the owner of the property.

There is no profit. If for some reason an amount budgeted for is not spent, then this could create a "surplus" for that year's accounts, BUT it is still not profit, as it cannot be extracted, it has to be spent on the services that the organisation offers for the benefit of the residents.

WP

15:06 PM, 12th August 2020
About 3 months ago

Reply to the comment left by Robert Mellors at 12/08/2020 - 15:00
so a such an organisation you would be more than happy if I charged you 4 x the exact LHA figure I would be receiving? (if I were to let direct to a tenant)
Do you take on properties elsewhere in the country?

Robert Mellors

15:20 PM, 12th August 2020
About 3 months ago

Reply to the comment left by WP at 12/08/2020 - 15:06
No, and no. However, each organisation will have their own ways of doing things, so for some the answer may be yes and yes.

For us, we take on whole properties at the whole house LHA rate, e.g. we may agree to lease a 3 bed semi-detached house at the 3 bedroom rate of LHA (so the amount the owner could expect if they let direct to a tenant family), BUT with agreement to convert to HMO shared accommodation to let to our client group (single homeless people). We lease for 6 years.

We then organise and pay for the conversion to HMO and to bring it up to our standards to suit our needs. This generally adds around £20k to the property's capital value (so this is in effect a £20k boost to the owner's asset), and of course the owner receives the monthly rent in advance throughout this process and for the remaining term of the lease.

At the end of the 6 year lease period, both ourselves and the property owner would decide whether we wish to renew the lease, or whether the owner wants the property handed back. If renewing then a new rent is negotiated. If handing back then residents are moved out and the property is returned to the owner with vacant possession.

It can be a nightmare trying to deal with councils, as they all behave differently, so for the foreseeable future we are only leasing properties in Sheffield and are not taking on properties in other areas.

WP

17:03 PM, 12th August 2020
About 3 months ago

Reply to the comment left by Robert Mellors at 12/08/2020 - 15:20
thanks, That's a shame, I have a whole lot of houses in Birmingham I would happily hand to you!

Robert Mellors

18:00 PM, 12th August 2020
About 3 months ago

Reply to the comment left by WP at 12/08/2020 - 17:03Thank you, that's much appreciated, but unfortunately I'm not wanting any properties in Birmingham. I do know there's a lot of supported housing operators in Birmingham, but I cannot vouch for any of them, as I have not had any dealings with any of them.
As with everything, some will be good, and some not so good,
There's also a big clamp down on rogue operators in Birmingham, and some operators (including housing associations) have been told to cease activities. I believe at least one housing association who was operating rent 2 rent in Birmingham has been de-listed by the Regulator of Social Housing.

Able Services

11:42 AM, 15th August 2020
About 3 months ago

We were thinking of doing this. When we had our first meeting with this company, they informed us as to the rent we would get for the property. When the house was ready all decorated, new carpets and floorings. We were also informed as to what to put in the property as it would be let fully furnished. We got in touch and the company had changed what they expected from the properties. Some of the people who would rent, wanted it furnished others wanted it empty. So we would have to have a storage space to either put furniture in or take it out. They did not say anything about rent increases only the for the 5 year period we would get this amount. So yes I should imagine they put the rent up once a year and keep the increase. We sold the property.

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