Easy targets

The time of year for determining the council’s rent-setting policy is upon us, and during Thursday’s county council meeting I will again be entering the fray in an attempt to introduce a bit more fairness into the system.

Unfortunately, for reasons that are lost in the mists of time, the council has more than 250 separate rent levels for three-bed properties alone.

Since about 2015, the aim has been to move all similar-sized properties to the same “target rent”.

Sadly, Pembrokeshire County Council has prioritised rent maximisation over fairness – something to which no democratically-elected public body should ever stoop.

During the last five or six years, the council has imposed a fixed percentage on all rents annually and, as I have consistently pointed out, this only serves to increase the gap between the higher and lower rents.

For example the difference between £100 and £70 is £30, and if you add 10% to each they become £110 and £77 while the difference has grown to £33. Indeed, as the mathematicians among you will already have spotted, a more elegant way of doing the calculation is simply to add the percentage increase onto the difference (£30 + 10% = £33).

The extent of the problem can be seen from this extract from the report that went before last week’s Cabinet meeting:

“Currently we have a situation where there is a great deal of inequity within the rents that HRA tenants pay for similar types of property. The highest rent for a 3 bedroom property is currently £114.22 compared to the lowest of £73.87 (over a 48 week period), with 258 variations in between.”

Much of this inequity stems from the council’s policy of charging target rents for new tenancies. Originally this was restricted to new tenants, but in 2020 it was extended to tenants transferring between council houses i.e. new tenancies.

Explaining the reason for extending the target rent regime to existing tenants, the cabinet member told council that applying it to just new tenants led to inequity so including transferring tenants would make it more fair.

The logic of this defeats me because what is being proposed is that extending an unfair system to a greater range of victims somehow makes it fairer.

But more of that later!

Clearly, if the same percentage is added to both the rents cited in the report, the gap between them increases.

I emailed the housing department outlining a method by which the gap could be closed by calculating the annual increase as a fixed percentage of the difference between the highest and those below. So, in the example above, it would be x% of £40.35 while a property with a rent of, say, £90 would have an increase of x% of £24.22.

We needn’t concern ourselves with the maths involved in calculating x, it is the principle that is important.

As can be seen, this method increases the lower rents at a faster rate and, over time, leads to equality.

For some reason the council decided not to adopt my system, but opted instead to put forward a similar method which grouped properties according to the gap between their rent and standard rent (Option 2 below).

As can be seen, this proposal is a bit clunky in that, at category boundaries, it has cliff edges that would be avoided by the method I put forward.

That said, it does have the desired outcome of raising lower rents at a faster rate than those closer to standard rent.

So Cabinet was offered the following two options – though it was clear from the outset that the across-the-board percentage increase was the one favoured by the cabinet member for housing, Cllr Michelle Bateman, and the advantages or otherwise of option 2 were never discussed.

1. 2.95% inflationary increase on all tenancies except for bedsits which would see a smaller increase of 2.5%, OR

2. A sliding scale between 0.6% and 2.5% plus £2 per week for all tenancies, in accordance with the table below:

Sliding Scale of Transition Rents Transition Inflation Factor
Between £15 to £26: 2.50% + £2.00
Between £10 to £15: 2.00% + £2.00
Between £5 to £10: 1.60% + £2.00
Under £5 (if amount is below £2.00 then just the relevant amount to equal Standard Rent) 1.00% + £2.00
At Standard Rent: 0.60%

The only evidence offered in support of option 1 over option 2 was the following document. For clarity, Option 3 is equivalent to 1 above and Option 4 is 2:

What this purports to show is the loss of rental income from adopting the graduated scheme rather than the flat rate increase favoured by Cllr Bateman.

As can be seen, the cumulative loss over 5 years is £389,378, but, as Cllr Bateman told her cabinet colleagues during last week’s extraordinary cabinet meeting, the present Welsh Government rent-setting policy only holds for the next two years so stretching its effects over five years seems to over-lard the bread.

Of course, the reason for that bit of subterfuge is that the shortfall in the first two years is a mere rounding error. Indeed, in the first year it is 0.06% of the total income and in the second year, 0.1%.

Considering that there are several unknown, and unknowable, elements in these calculations – the number of new tenancies moving straight to standard/target rent and the length of the average void time (the interval between one tenant leaving and a new one moving in) to name but two – these numbers are a classic example of false precision, or, as I’ve seen it described: “policy-based evidence making”.

But La Creme de la Kremlin, who prefer not to have their opinions contaminated by inconvenient facts, were ready primed with their patsy questions.

In scenes reminiscent of those stooge backbenchers you see asking the prime minister softball questions in parliament’s PMQs, Cllr John Harvey wanted to know:

“If this increase does not take place, or its at a lower level than you are recommending, essentially a lot of important works won’t be done?”

Despite the fact that you don’t get much by way of “important works” for 17 grand, Cllr Bateman was happy to oblige, saying:

“We’d have to make decisions as to where our priorities lie, because we wouldn’t be able to do everything”.

Looking suitably serious, Cllr Neil Prior opined that we needed the extra money in order “to meet the future housing needs of future generations. It’s really straightforward, so for me there’s clearly only one option and it’s obvious what it is.”

As Charles Darwin observed: “Great certainty is more often founded on great ignorance than great knowledge”.

While we’re on the subject of projections, applying a 3% increase to the two rents above for a five year period increases the gap between them from £40.35 to £46.77, while if you run it for the full thirty years of the HRA business plan referred to by Cllr Bateman, it expands to £97.94.

Old Grumpy would have thought that, given these cabinet members’ statements about improvements in housing provision, they might ask themselves why, after five years in power, not a single new council house has been completed anywhere in the county and, in the case of the former Motorworld building in Milford Haven’s Charles Street, where demolition work started way back when Cllr Jamie Adams was leader, the first brick is still to be laid.

They might also like to explain why the three contracts (Johnston, Tiers Cross and Motorworld) awarded to Llanelli builder WRW Construction Ltd, which has since gone into administration, are now facing cost overruns totalling almost £2 million.

Of particular interest is the performance bond for the £5 million Johnston site which should have insured the council for the first £500,000 (10%) of any loss resulting from the failure of the contractor, but which was rendered worthless when its guarantor turned out to be WRW Developments Ltd – the construction outfit’s parent company which went down the same pan at the same time as its subsidiary.

The council is well aware of the problem of ever-diverging rent levels caused by applying a fixed percentage across the board, so, as I outlined above, it hit upon the wheeze of moving all new tenancies straight to target rent.

The first attempt was back in 2015/16 when an amendment by Labour party group leader Cllr Paul Miller – who is now a cabinet member but was then in opposition – modified the proposal by excluding tenants transferring within the council’s estate from the eye-watering increases involved, leaving new tenants to bear the brunt alone.

However, in 2020 the housing department finally got its way and managed to smuggle through a proposal that all new tenancies, including transfers, should be subject to the accelerated process.

The theory is that this will move all the council’s housing stock to target rent much quicker than any inflation-based system of annual increases.

It also alleviates the problem of diverging rent levels because the gap, however wide, is eliminated at a stroke whenever a new tenancy is created.

Unfortunately, there is one rather large snag: not all houses change hands within the same time frame.

There are tenants in my ward who have lived in the same house for 30 or 40 years and no doubt there are young couples who took up tenancies just before these target rents were introduced who will still be there in 2050, by which time their newly-arrived next-door neighbour could be paying up to £90 a week more than they are (see example above) for an identical property.

Finally, the imposition of target rents on transfers is a seriously retrograde step which militates against everything that a public housing authority should stand for.

Those on housing benefit are not affected because the target rent levels are below the limit of what can be claimed.

The families hardest hit are those just above the housing benefit threshold – the so-called working poor.

For example, a couple in a two bed house (current rent, say, £70 p/w) whose children have reached the age where the family is entitled to an extra bedroom could be faced with a £40 increase if they move. The system as it stands offers the temptation to struggle on in substandard accommodation rather than take the hit to the family budget.

Ditto the tenant who might be considering moving to another town to be closer to their work, and, most bizarre of all, the single occupant of a three bedroom house who the council would like to transfer to an older person’s bungalow in order to free up the property for a young family with children, but who is reluctant to move because of the extra rent they will have to pay.

In my own ward, figures provided to me show that the long-term occupant of a three bed house would face a £16 p/w rent increase if they moved to an older person’s bungalow in the same street. On top of that they would be stung for six or seven pounds of recently de-pooled service charges that wouldn’t apply to their existing accommodation.

And Cllr Neil Prior finds that “straightforward”.

As Abraham Lincoln said: “Nearly everyone can stand adversity, but if you want to test a person’s character, give them power.”