The Reform of Social Housing

STATES OF JERSEY

THE REFORM OF SOCIAL HOUSING

Lodged au Greffe on 4th March 2013 by the Council of Ministers

STATES GREFFE

2013   Price code: E  P.33

PROPOSITION

THE STATES are asked to decide whether they are of opinion

1. to approve –

1. the  establishment  of  a  new  Strategic  Housing  Unit  in the Chief Minister's Department as set out in sections 3.12 to
   14. of the attached Report of the Council of Ministers dated 4th March 2013;
2. the  proposed  regulation  of  Social  Housing  as  set  out  in sections 4.1 to 4.18 of the attached Report;
3. a rent policy of a return to near market fair rent levels as set out in section 3.12.9 of the attached Report;
4. the  incorporation  of  States  owned  housing  as  a  Company Limited by Guarantee wholly owned by the States of Jersey as set out in sections 3.38 to 3.47 of the attached Report;

2. to request –

1. the Chief Minister to take the necessary action to establish the Strategic  Housing  Unit  and  to further  request  the  Chief Minister to bring forward for approval by the Assembly the necessary legislation to give effect to the proposals in relation to the regulation of Social Housing;
2. the Minister for Social Security to take the necessary action to address the Income Support implications of the revised rent policy to enable its implementation by April 2014;
3. the  Minister  for  Housing  to take  the  necessary  action  to prepare for company status and to bring forward for approval by the Assembly the necessary legislation to give effect to the proposals  with  a  target  date  for  commencement  of  the Company's operation of 1st July 2014;
4. the Minister for Treasury and Resources to take the necessary action  to establish  the  funding  arrangements  as  set  out  in section 3.59 and 3.63 of the attached Report.

COUNCIL OF MINISTERS

REPORT

Executive Summary

This Report and Proposition recommends the introduction of formal regulation of social housing for the first time in Jersey and the establishment of a wholly States- owned Housing Company as part of my coordinated transformation proposals.

A quarter of States homes and a lesser proportion of Housing Trust properties, require improvement to meet basic Decent Homes Standards and this proportion will worsen significantly over the next 5 years unless considerable investment is made. This is particularly pressing for the States housing stock where current arrangements do not provide  sufficient  funding  to  enable  existing  standards  to  be  maintained  going forward.

Four key changes are proposed to achieve the necessary transformation –

1. That a new Strategic Housing Unit be established to coordinate a long-term housing strategy.
2. That a new Social Housing Regulator is established to ensure that tenants best interests are protected and that public investment in social housing delivers optimal value for money.
3. That a new, not-for-profit, wholly States-owned Housing Company is established to improve the States-owned social housing stock and with the financial capacity to develop new social housing when required on a sustainable basis.
4. That social housing rents are returned to near market fair rent levels to ensure that tenants who can afford to do so, pay a fair rent.

Given the significance of the changes proposed, this Report sets out in some detail the strategic context for the proposed regulation and transfer and summarises the relevant elements of the social housing review, which was published as a Green Paper in 2010 and  subsequent  White  Paper  "Achieving  Decent  Homes  –  An  Affordable  Social Housing Framework for the Future" published in April 2012 (R.47/2012).

The Green Paper confirmed that the Jersey social housing regulatory framework "is not strongly developed" and, for the Housing Trusts to play a more significant role, this would have to be based on the same financial and regulatory regime as that put in place  as  a  result  of  restructuring  the  Housing  Department.  The  Green  Paper acknowledged  that  the  current  Housing  Department  staffing  is  "parsimonious" compared to UK equivalents, but being structured as a States Department prevents it from operating to best effect and that an organisation more at arms length needs to be put in place.

This Report goes on to explain how the Housing Transformation Programme was established to fully separate regulatory, policy and service delivery functions and how both the Green Paper and the White Paper consultations suggested strong support for appropriate regulation of the social housing sector.

The Report then sets out the requirement for and purpose of, the proposed legislation, including the current regulatory arrangements and responsibilities for social housing

and explains the current conflicts of interest for the Minister for Housing who must presently act simultaneously as policy maker, regulator and landlord.

The Report summarises the role identified for, and potential regulations arising from, the establishment of the Strategic Housing Unit to oversee the development of housing policy and strategy across all tenures. The roles identified are –

1. Developing a robust cross-tenure Island Housing Strategy.
2. Prioritizing resource allocations within the social housing sector.
3. Championing the Supply of Homes.
4. Managing the Affordable Housing Gateway.
5. Proposing  new  affordable  housing  products  to meet  the  needs identified through the new Affordable Housing Gateway.
6. Proposing and updating a Jersey Social Housing Standard.
7. The development of  housing  policy  within  a  States-wide  strategic policy framework.
8. Carrying out (or commissioning) survey work.
9. Proposing and delivering the social housing rent policy.
10. Proposing the criteria for eligibility for social housing on the Island through the Affordable Housing Gateway.
11. Proposing standards for Tenant engagement and consultation.
12. Setting  performance  and  probity  standards  for  Social  Housing Providers.

This Report then sets out the how the strategic context, business case and consultation outcomes all strongly support the argument for establishing a Housing Company and proposes a robust process founded on established precedent to achieve it.

If approved, this change would result in a significantly improved service for States tenants, who would benefit from an organisation wholly focussed on their needs and one which involves them in improving all aspects of the service they receive. The proposed  Company  would  very  much  remain  a  "social  business"  and  one  that continues to protect and support many of the most vulnerable in our society.

The change would mean better "value for money" for the taxpayer from the initiation of  an  operationally  efficient  and  commercially  agile  company  able  to  deliver continuous improvement for Tenants and to drive optimum value from the States housing assets on a sustainable basis.

The Housing Department is a small, well run organisation. It receives good reports throughout a number of disciplines and is innovative in style and forward thinking; hence the proposals contained in this Report. Staff at the Department are proud of what they do and are dedicated to the people they endeavour to help, many of whom are the most disadvantaged in our society. Much of that help goes unannounced and largely unrecognised. That is regrettable but in an age where we dedicate inordinate amounts of time putting a price on everything, this is certainly one of those instances where we know the cost but pay little regard to the real value it delivers. Regardless of

the lack of recognition, the Department gets on quietly with the very important service it provides. That is commendable.

Notwithstanding the above, the Department has supported me as Minister for Housing in challenging the current way services are provided. It supports my view that it requires  a  different  future  and  as  such  has  been  the  spearhead  for  the  proposals contained in this Report. Over some 2 years, seriously hard work has been undertaken by the Housing Team in order to bring some 90 work-streams to a conclusion; ready for a debate. That hard work is acknowledged here in this Executive Summary. These are proposals that should be the blue-print for change in other States Departments.

The States will exert more effective control of the proposed Company than it does under the current arrangements, through effective use of its sole owner "shareholder" role,  through  setting  the  policy  objectives  for  the  social  housing  sector  via  the Strategic Housing Unit, and through the activity of the Social Housing Regulator ensuring standards are achieved and performance improved.

The financial and human resource implications of establishing the proposed Social Housing Regulator and the proposed return to Fair Rent Levels are considered for both the proposed new Housing Company and the existing Housing Trusts. This is followed by a summary of the many benefits for tenants, Social Housing Providers and the States of the proposed regulation and wider transformation.

Under the Regulations that follow any States approval of an enabling Law, tenants would be guaranteed Decent Homes Standards for the first time in Jersey, the policy and regulatory separation necessary for good governance would be achieved and the States  and  Public  would  be  able  to  ensure  that  Social  Housing  is  provided  in  a sustainable, fair and efficient way in the interests of all social housing tenants.

A related Report and Proposition Victoria and George V Cottage Homes (Repeal of General Principles) will propose incorporating the Victoria and George V Cottage Homes within the standard tenancy arrangements for the proposed new company.

COUNCIL OF MINISTERS

1. Introduction

1. The way Social Housing is provided in Jersey needs to be transformed if the sector is to operate on a sustainable basis and be able to deliver new and improved homes for Jersey residents.
2. A quarter of States homes, and a lesser proportion of Housing Trust homes, require improvement to meet basic Decent Homes Standards and this proportion will worsen significantly over the next 5 years unless considerable investment is made. The current implementation of  rent  policy  and  the  Annual  Returns  arrangement  (whereby £26.7 million will be paid back to the States from rental income in 2013), effectively prevent sufficient investment in the social housing stock. There is currently little regulation of social housing to ensure this situation does not occur again. The States recognized this need for change in approving the Strategic Plan 2012 (P.28/2012) which sets "House our Community" as a corporate priority and in approving P.6/2007 The States of Jersey Property Plan, but since the economic downturn and with waiting lists for social housing rising, a policy solely  based  on  selling  the  States  housing  stock  is no  longer sustainable.
3. Over the last 3 years, a fundamental review of the options for re- structuring social housing has been completed and 4 key changes are now proposed to achieve the necessary transformation, clarify roles and address the current conflicts of interest affecting the Minister for Housing –

1. That  a  new  Strategic  Housing  Unit  is established  to coordinate a long term housing strategy.
2. That a new Social Housing Regulator is established to ensure that  tenants'  best  interests  are  protected  and  that  Public investment  in social  housing  delivers  optimum  value  for money.
3. That  a  new,  not-for-profit,  wholly  States-owned  Housing Company is established to improve the States-owned social housing stock and with the financial capacity to develop new social housing when required on a sustainable basis.
4. That social housing rents are returned to near-market fair rent levels to ensure that tenants who can afford to do so pay a fair rent.

4. The Council of Ministers at its meeting of 13th March 2012 approved the principle of establishing a Strategic Housing Unit. This Report sets out the role that the Strategic Housing Unit will perform, its proposed setting and how itis proposed the Unit develops a long- term, cross-tenure housing strategy.

5. This Report proposes the establishment of a Social Housing Regulator and  the  bringing  forward  of  regulations  that  would  permit  the confirmation of social housing rents at fair rent levels, amongst other matters.  The  Report  proposes  that  the  States  agrees  to the establishment  of  Housing  Company  from  the  current  landlord functions of the Housing Department.
6. Together, the policy proposals set out in this Report and Proposition provide a strong framework for a sustainable and financially viable social housing sector, able to meet the needs of current and future Tenants and the population at large and to address the key social housing challenges presented by Professor Christine Whitehead OBE, (of  the  London  School  of  Economics  and  Cambridge  Centre  for Housing  and  Planning  Research,  Department  of  Land  Economy, University of Cambridge), within her "Review of Social Housing in Jersey" which was published as a Green Paper in March 2010.

2. Strategic Context

1. When the States agreed its Strategic Plan 2006-2011 (P.40/2006), it committed  to "review,  develop  and  implement  strategies  for  the provision of Social Housing in the Island including for the long term management of States rental accommodation" (Section 3.8.4 refers). These  principles  have  been  continued  within  the  current  States' Strategic Plan 2012 (P.28/2012) and the corporate priority "House our Community".

Green Paper – Professor Christine Whitehead's Review of Social Housing

2. The States strategic direction led the then Minister for Housing to commission a fundamental review of social housing provision. The review was led by Professor Christine Whitehead OBE.
3. The Green Paper review encompassed wide Terms of Reference, but Professor Whitehead's key findings were that –

• "...the current governance and financial structures limit the opportunities to make best use of resources...";  

• "Rents in the States sector vary from 90% to as little as 60% of market rental values";

• "the current balance of income and expenditure is only met by running down the condition of the(States housing) stock";  

• the regulatory framework is "not strongly developed" and it is "clearly inappropriate" for Housing Trusts "to be formally regulated by the Housing Department";

• the size of the sector is too small to address "unmet" demand "from those in long term housing need";

• "only a very small minority of those currently housed in the social sector are not in need of that assistance".

4. As  part  of  the  Terms  of  Reference  for  her  review,  Professor Whitehead was specifically asked "to analyse the present regulatory structure,  compare  it  with  regulation  in  other  jurisdictions  and recommend a suitable framework". Professor Whitehead identified that –

"At the present time there is no separate regulatory framework for States housing because it is within a States Department. However there is a complication in that while the Housing Department in principle has the responsibility to regulate Housing Trusts, in practice there are no resources to make this possible. There are also potential conflicts of interest,  if  one  housing  management  organisation  is  required  to regulate another.

Any transfer of ownership and/or management would bring with it the need  to  delineate  the  relationship  between  the  States  and  the independent landlord or manager more carefully". (Green Paper 2010. Section 5.4).

http://www.gov.je/Government/Pages/StatesReports.aspx?ReportID=3 90

5. Professor Christine Whitehead's review of social housing in Jersey identified that the current Housing Department operates within "a very traditional and constrained approach and there are important reasons to re-examine options that can improve efficiency; enable the social landlord to be more responsive to changing tenant needs; and perhaps most immediately can better address the backlog of repairs and improvements required and better adjust the mix of provision for identified future needs."
6. Professor Whitehead found that "The average level of house prices and  its  relation  to  average  incomes  suggest  that  fundamental inflexibilities in the supply of land and new house-building (in Jersey) result in price/income ratios far much higher than in the UK, where it is generally accepted that there are long run supply constraints which adversely affect the competitiveness of the economy as well as the stability of the housing market." Therefore there was likely to be a continuing demand and role for social housing in Jersey.
7. Further,  the  Professor  found  that  States  housing  tenants  were characterised by low incomes, a high proportion of pensioners, single parents and separated and divorced or widowed women and lower levels of economic activity than within other tenures. Consequently the overwhelming majority of States Tenants were likely to be life- long renters.
8. As the Housing Trusts outsource their management and maintenance functions the Professor considered they had limited ability to cope

with  Tenants  who  cannot  manage  their  finances  or  who  exhibit difficult or anti-social behaviour. As a result the Housing Department also tended to function as "the landlord of last resort", which can be evidenced from the higher incidence of Income Support entitlement amongst States Tenants.

9. The Professor  noted  the  political  and  public  desire  expressed  in Housing Needs Surveys for higher levels of home ownership, but concluded that a significant proportion of social households would be very  unlikely  to be  able  to purchase  without  some  significant assistance. The Professor considered the current eligibility criteria for States housing to be highly constrained and that there were likely to be many "hidden households" as a result of this constraint as well as many  eligible  and  qualified  households  housed  within  the  private rented sector.
10. In  considering  the  Housing  Department  resources,  the  Professor concluded that the budget allocated was insufficient to ensure the adequate repair and modernisation of the States housing stock, and that this had resulted in the backlog identified in the Social Housing Property Plan (P.6/2007).
11. The Property Plan (2007-16) was adopted by the States in July 2007. The Plan addressed the issue of how both revenue and capital funds could be made available to ensure adequate standards by setting out a programme of sales to sitting tenants and the wider market of up to 800 States rental homes over a 10 year period. Such a programme was established  to meet  3  distinct  goals:  providing  the  funds  for reinvestment  in the  remaining  stock;  helping  to expand  owner- occupation;  and  changing  the  mix  of  States  housing.  Overall,  the financial constraints in the social rented sector were to be overcome by reducing the size of the sector. The mix of future social provision was to move away from family housing to smaller units for older people  and  a  higher  proportion  of  new  family  homes  were  to be provided as affordable rather than social housing. It should be noted that this also enabled re-alignment of the States stock through the acquisition and construction of 400 homes aimed at addressing the ageing population.
12. Professor Whitehead considered that the Property Plan was a response to the constraints of a situation created by the combination of the policy of only funding investment from revenue, rather than from borrowing, and the requirement for the Housing Department to make a  significant  annual  return  to the  Treasury  which  left  insufficient revenue to address the annual repair needs of the stock.
13. The Professor noted that the Property Plan explicitly left a view on the appropriate size of the social sector to her more fundamental review. In addressing this, the Professor concluded that house prices and the limited supply of affordable homes would mean that Jersey would require a large rented sector for the foreseeable future. In considering the size of the social rented sector, Professor Whitehead concluded that whether the social sector should be enabled to expand depended

on  the  best  way  of  meeting  the  needs  of  slightly  better  off  less vulnerable  households  who  will  almost  certainly  never  be  able to afford to buy. If this is seen as best met by social providers, there would be a strong case for expanding the sector to some degree – although  the  Professor  envisaged  this  would  be  within  a  rather different  policy  framework  and  probably  through  a  different organisational  structure  where  funding  to  support  expansion  and restructuring could be provided.

14. Professor Whitehead considered the management provision within the Housing Department to be parsimonious, compared with a similar sized Housing Provider in the UK employing roughly twice as many staff  as  Jersey  in housing  management  and  maintenance,  in part reflecting a different performance and regulatory regime and in part the much lower available budget.
15. These findings led the Professor to conclude that "an organisation more at arms length needs to be developed."
16. All tenants in States housing were issued a summary of the Green Paper findings in 2010 and asked to indicate whether they felt a social housing regulator was necessary: 264 responses were received and 74% of respondents confirmed they believed a regulator was required. The comments received on the Green Paper indicated that tenants, Housing Trusts and the public were also concerned that any regulator should not duplicate other existing roles and were concerned to ensure that it represented an efficient use of Public money.
17. Of those responding, 40% believed an option separating management to ownership should be followed, with 26% indicating sale to sitting Tenants  should  be  considered,  14%  preferring  a  sale  to a  newly created private sector landlord and 2% preferring sale to a private sector landlord. Only 7% preferred the status quo.

Restructuring States Housing – Options considered in the Whitehead Review

18. Professor Whitehead reviewed the options available for changing the social housing sector, noting that in relation to ownership, the States housing assets were debt free, but that any case for transfer would lie in the greater efficiency and flexibility in operation, and would be unlikely to be driven purely by the achievement of a capital receipt and so any decision must also be grounded in ensuring that more people obtain a better housing outcome.
19. The Professor considered that the States Housing Stock (4,502 units in January 2011) was not significant and so the break up of the States housing  stock  between  landlords  would  create  a  number  of  small organisations  without  generating  any  significant  benefits  of competition and there would be inevitable loss of economies of scale.
20. Therefore,  the  Professor  went  on  to outline  potential  options  that might be worthy of further consideration: these being –

• The status quo

• An Arms Length Management Organisation

• A Hybrid Trading Company

• Sales to sitting Tenants

• Sale to one or more social landlords

• Sale to the private sector

21. In  relation  to the  status  quo,  Professor  Whitehead  concluded  that "while in principle, the status quo might appear to be the cheapest and easiest option it is fundamentally unsustainable, and it is unlikely that the flexibility necessary to generate a modern social sector could be achieved without major changes. Maintaining the status quo would simply lead to an increasingly segregated, inadequate and inefficient sector, and one which is increasingly out of line with the general approach to the provision of public services in Jersey."
22. The Professor considered that "options that involve significant sales to existing tenants; partial sales to a range of landlords, or sale to the private sector do not appear to be viable – in part because of a lack of available experience; in part because of issues of financial viability; in  part  because  of  political  constraints.  They  also  do  not  appear desirable. All would undoubtedly leave large gaps in social provision which  would  require  additional  States  funding if  they  were  to  be filled."
23. This left 3 main options, each of which the Professor considered could have potential net benefits –

• Option 2 – an Arms Length Management Organisation;
• Option 3 – a Trading Company Hybrid, which could reduce the demands on the public purse with respect to improving the existing stock and possibly enable some additions to the stock

– as long as rents are allowed to rise;

• Option 6 – Sale to a Single Independent Landlord – almost certainly in the form of a transfer to a newly created landlord, which would realise the capital value of the stock in the form of a one-off payment to government (possibly with the option of a leasehold arrangement).

24. The Professor  concluded  that  the  current  arrangements  were  not appropriately structured or sustainable if a twenty-first century social housing system  was to be provided. If the status quo were to be maintained,  the  sector  would  become  smaller  and housing  quality would decline. In part this was an outcome of the policy framework which places controls on access to States housing. In part it was the result of the governance and financing structures, which inhibit the adequate  management,  maintenance  and  upgrading  of  the  housing stock.

Establishment and role of the Housing Transformation Programme

25. The former  Minister  for  Housing  established  the  Housing Transformation Programme in October 2010 in response to Strategic Priority 14 ("Adequately House the Population") within the States Strategic Plan 2009 – 2014 (P52/2009). Strategic Priority 14 included directions for the Minister and Housing Department to –

• Support the development of affordable housing.
• Define  a  new  Jersey  standard'  for  social  rented accommodation.
• Continue to upgrade and improve older States homes to meet the new Jersey standard'.
• Implement  proposals  for  the  regulation  of  all  affordable housing  providers  including  common  waiting  lists  and allocation criteria.
• Establish a gateway for all affordable housing to ensure that existing  and  future  stock  is  targeted  to  deliver  maximum benefit.

26. In  November  2010,  the  Political  Steering  Group  established  to oversee the Programme (Chaired by the Minister for Housing and attended  by  the  Chief  Minister,  the  Minister  for  Treasury  and Resources and the Minister for Social Security and their respective Assistant Ministers) determined that the key outcomes for the Housing Transformation  Programme  to be  a  success  were  for  the  current Housing Department to –

1. become a self-sustaining social housing services provider;
2. become a flexible delivery organisation able to adapt to change; but to
3. continue to provide a guaranteed significant income stream; and to
4. fully separate Regulatory, Policy and Service functions.

In achieving these priorities, the Programme should also –

5. establish whether the Housing function should become a fully independent (from States of Jersey) provider of social housing.

In developing the new organisation, the Programme should endeavour to –

6. provide increased "housing for life" accommodation;
7. improve Housing standards for residents;
8. provide better security of tenure for residents;
9. develop a level playing field for social housing providers;
10. encourage higher owner occupation.

To do this, the Programme must determine the appropriate level that will –

11. set fair rents at a sustainable subsidised level.

27. The Housing Transformation Programme appointed experienced and respected advisers to assist in the development of policy proposals, including financial advisers Sector Treasury Services Limited, legal advisers  Trowers  &  Hamlins  LLP  and  governance  and  regulation advisers Cambridge University Technical Services Limited. Professor Christine Whitehead has also been retained to provide assurance for the Programme that the challenges presented within the Green Paper are adequately addressed.
28. Upon  his  appointment  in March  2011,  the  current  Minister  for Housing  commenced  quarterly  meetings  with  the  Chairmen  of Housing Trusts to discuss and inform the developing policy and to prepare the Housing Trusts for proposed regulation.
29. It  is considered  that  the  Housing  Transformation  proposals  now presented for consideration by the States directly address all of the actions  identified  for  the  Minister  for  Housing  within  Strategic Priority 14 of P.52/2009.
30. The Programme had as one of its key critical success factors the requirement  "to  establish  whether  the  Housing  function  should become a fully independent (from States of Jersey) provider of social housing".
31. To inform the financial review of options for changing States housing, a condition survey of the States housing stock was commissioned and undertaken in 2010 by Ridge Property & Construction Consultants. This confirmed that, while 73% of the States stock met the English Decent Homes Standard, the remainder did not and the survey further indicated  that  the  proportion  failing  the  standard  would  increase significantly over the following 5 years.
32. An assessment of market rental levels of the stock was undertaken in 2010 using a quality assured process, validated against Population Office private rental records and a wholesale market rental and capital valuation  of  the  stock  by  Jones  Lang  LaSalle  was  completed  in December 2012. This most recent market valuation indicated that the stock had an Existing Use Value for Social Housing of £582 million and a Market Value – Vacant Possession of £982 million.
33. The market rental assessment indicated that the States stock was being rented out at 70% of market equivalent rates on average – behind the near  market  levels  set  by  the  former  Housing  Committee (P.142/1991).

White Paper – "Achieving Decent Homes"

34. The outcome of the work of the Housing Transformation Programme was  the  White  Paper  "Achieving  Decent  Homes  –  An  Affordable

Housing  Framework  for  the  Future",  published  for  public consultation  and  presented  to  the  States  on  13th  April  2012  as R.47/2012. In the White Paper, proposals to establish a new Strategic Housing Unit, Affordable Housing Regulator, wholly States-owned Housing Company and to revert to the previous States policy of near market  rents  were  set  out,  together  with  the  many  benefits  and financial and resource implications of doing so.

35. A summary of the White Paper was circulated in accessible form to all current Tenants in social housing and copies of the full White Paper document were made available at public places and on-line. A social networking site was set up to engage the increasing number of people using the internet to receive information. Advertising in local press, on  radio  and  on-line  was  taken  out.  Posters  and  banners  were displayed at public places and on States Housing estates and Parish offices.
36. The Housing Trusts and Housing Department staff were consulted in advance about proposals within the White Paper. 29 States Members attended a briefing on the White Paper by the Minister for Housing at the Société Jersiaise on 15th May 2012.
37. Presentations and briefings on the White Paper were made to many key stakeholder groups and representatives during the 12 week public consultation  period,  including  the  Tenant's  Forum,  other  standing Tenants  Panels  and  Residents'  Associations,  the  Citizens'  Advice Bureau,  the  Women's  Institute,  Causeway  Association,  Brighter Futures, Jersey Child Care Trust, the Speech and Language Service, the Youth Service, Midwives, Parenting Support Services, the Youth Action  Team,  Jersey  Women's  Refuge,  the  Mother's  Union,  the Methodist Network, Age Concern, Girls' Brigade and Family Nursing and Home Care.
38. In response to the White Paper consultation 47 written responses were received, 57% of whom were States or Housing Trust tenants. At peak,  the  social  networking  campaign  reached  over  17,000  social network account holders and 369 comments were made on the White Paper web page.
39. Key  findings  from  the  White  Paper  public  consultation  were  in relation to –

• Acceptance that the current system isn't suitable.
• Significant demand for new social and affordable housing.
• Tenant demand for decent homes.
• Concerns about rents and affordability.
• Some challenges to customer service and responsiveness.

40. The Minister for Housing has acknowledged all the comments made and  believes  that  in most  cases  the  dissatisfaction  described  by respondents is a clear support for change. The proposals within this Report and Proposition will certainly address the standard of homes

within the social sector and will establish a more appropriate strategic and financial framework for increasing supply of homes in the future.

41. It  is acknowledged  that  the  proposal  which  has  created  the  most concern  and  comment  amongst  tenants  relates  to  the  proposal  to return to 90% equivalent market rents. Key concerns raised were in relation to –

• Affordability.
• The detrimental effect the proposal could have on those not on  Income  Support  who  may  not  qualify  for  the  phased removal of the subsidy.
• The belief that high numbers of additional tenants will need to claim Income Support.
• The knock on effect of increased Income Support costs.

42. There  was  also  a  clear  acknowledgement  from  Members  of  the Tenants Forum that the proposals were fair overall and that only those who could afford to pay more rent would be asked to do so.
43. The responses of the 4 Housing Trusts that would be regulated under the White Paper proposals differed in tone, but the majority supported the key proposals and all accepted the principle of regulation and the necessity for the independence of the proposed Regulator.
44. The Jersey Homes Trust were broadly supportive of all the proposals, but warned that the White Paper did not adequately address the unmet demand for social housing and that the business case for the proposed Company would be challenging to deliver. The Christian's Together Housing Trust supported the proposals for introducing the Strategic Housing  Unit,  Regulation  and  new  Company,  but  warned  that regulation should not be overbearing and were concerned that the rent policy should be set at an affordable level for their Tenants. The FB Cottages  Trust  expressed  support  for  the  Affordable  Housing Gateway  and  indicated  they  had  no  concerns  with  the  proposals within  the  White  Paper.  Finally,  the  Les  Vaux  Trust  expressed concerns with several aspects within the White Paper. The Minister for Housing welcomed all the responses and undertook to continue consultation with the Housing Trusts to inform the proposals and to assist the Trusts in preparation for regulation.

Role of the Health, Social Services and Housing (HSSH) Scrutiny Panel

45. The HSSH Scrutiny Sub-Panel, assisted by Expert Advisers from the Chartered Institute of Housing, reviewed the White Paper proposals and produced an interim report published on 17th August 2012. This indicated that the Minister had produced strong proposals but also provided  some  useful  guidance  to the  Housing  Transformation Programme on how to improve them.

Subsequent Consultations

46. Since publishing the White Paper the Minister for Housing held a States Member consultation briefing to release the consultation drafts of  his  proposed  enabling  Laws  and  has  undertaken  or  offered consultations with all States Members on an individual basis or in groups.  The Minister  and  Assistant  Minister  consulted  with  the Comité des Connétable s on 15th October 2012.
47. Consultations  have  continued  with  the  Housing  Trusts  on  the proposals in general and specifically on the draft Regulatory Enabling Law. These resulted in several changes to the draft Law and mean that all Housing Trusts have been able to support the requirement for Regulation in principle. Of key importance to the Housing Trusts will be their on-going consultation and involvement in the development of regulations.
48. As a direct result of these consultations and correspondence with the Health, Social Security and Housing Scrutiny Sub Panel, the Minister for Housing revised his White Paper rent policy proposals to increase protection for Tenants and reduced the sanctions proposed within the draft Regulatory Enabling Law.  

3.  Summary of proposed regulatory changes

1. This  Report  and  Proposition  proposes  the  formal  introduction  of regulation of the sector for the first time.  

Requirement for and purpose of Legislation

Current regulatory arrangements and responsibilities for social housing

2. At present there is no formal regulation of social housing provision. The Minister  for  Housing  received  nominal  responsibility  for regulating  the  sector  following  the  transfer  of  functions  from  the Housing Committee (R&O.41/2005 refers) but there are no current formal vires to enable the Minister to do so effectively.
3. The establishment  of  the  Population  Office  resulted  in regulatory responsibilities  for  such  matters  as  housing  qualifications  and residential tenancy, regulation of lodging houses and the non-qualified housing sector being separated from the functions of the Housing Department. Responsibility for rent rebate and rent abatement were transferred  and  incorporated  within  the  unified  Income  Support system under the Minister for Social Security. This essentially meant the role of the Housing Department was subsequently limited to the performance of landlord functions for the circa 4,400 States social housing  properties  from  the  commencement  of  Ministerial Government.

Current conflicts of interest for the Minister for Housing

4. Professor Whitehead drew attention to the unforeseen difficulties and conflicts of interest for the Minister for Housing which became more pronounced as a resulted of Ministerial Government reorganisation.
5. At  present,  the  expectation  of  the  States  is  that  the  Minister  for Housing will be able to propose policy and regulate the social housing sector through the work of the Housing Department. But Professor Whitehead  confirmed  that  it was  "clearly  inappropriate"  for  the Housing Department, as the largest social housing provider to regulate the smaller Housing Trusts. Instead, clear separation of policy and regulatory functions was needed to give policy makers clarity between the setting of policy and its implementation and providers and lenders confidence  that  regulation  will  be  implemented  consistently  and without  political  interference  to  enable  them  to focus  on  service delivery. The Minister for Housing upon his appointment therefore commenced extensive consultation with the Housing Trusts to inform development of his proposals.

Establishment and appropriate setting for the Strategic Housing Unit.

6. As  a  result  of  these  conflicts  of  interest  facing  the  Minister  for Housing, the Council of Ministers at their meeting of 15th March 2012 agreed that a Strategic Housing Unit should be established to separate the policy making function from landlord delivery functions.
7. The "Achieving  Decent  Homes"  White  Paper  concluded  that  the Strategic  Housing  Unit  should  remain  a  Ministerial  responsibility. This is due to the importance of maintaining political control of and accountability for the development of social and wider housing policy making  and  associated  regulations  under  the  draft Social  Housing (Jersey) Law 201-.
8. Professor Whitehead was asked by the Minister for Housing to advise on the most appropriate setting for the Strategic Housing Unit.
9. In her report, Professor Whitehead concluded that the setting of the Strategic Housing Unit should be one clearly within the context of strategic planning, enabling a more holistic approach to issues which affect everyone living in Jersey and impact on a wide range of other policies. The Professor noted that a major objective in setting up the Strategic Housing Unit is to enable its members to concentrate on strategic matters, including a cross tenure housing strategy that can help ensure adequate affordable housing for all. Another isto ensure that  the  housing  strategy  is fully  integrated  into  wider  strategic thinking and that those working on its development have access to the full range of available empirical evidence.
10. Therefore the Professor considered that, the Strategic Housing Unit should not be constrained by the necessary priorities of an individual spending  department  and  the  consequent  operational  conflicts

involved  in  day  to  day  resource  allocation.  Rather  it  should  be thinking in the context of overall priorities and synergies between different policy areas.

11. The Professor  concluded  that  these  objectives  can  most  easily  be achieved in a location separate from any one spending Department and  that  the  Chief  Minister's  Department  was  therefore  the  most appropriate setting.

Role and potential regulation arising from the Strategic Housing Unit

12. The proposed roles of the Strategic Housing Unit are broadly those set out within the "Achieving Decent Homes" White Paper (R.47/2012) namely –

1. Developing a robust cross-tenure Island Housing Strategy;

Developing a long-term, cross-tenure strategy for housing the population of the Island would be a key activity for the Unit. The strategy once developed will –

• Describe  the  prevailing  Housing  market,  including unit  numbers,  tenure,  its  capacity  for  growth, affordability,  unmet  need  and  demographic projections.
• Set out current supply projections across tenure and their ability to meet need.
• Provide opportunities and recommended methods for increasing the level of home ownership and providing other means of increasing affordability or providing housing support.
• Propose housing standards to encourage sustainability across all tenures.

The Cambridge Centre for Housing and Planning Research have been appointed by the Minister for Housing and the Chief  Minister  to  prepare  a  proposed  Housing  Strategy Framework setting out the approach proposed to be adopted for developing the strategy.

2. Prioritizing  resource  allocations  within  the  social  housing sector;

It  is  expected  that  this  will  involve  recommending  the allocation  of  any  States  controlled  land  for  social  and affordable housing development to registered Social Housing Providers, and the distribution of any gains from the planning system.  The  manner  in  which  such  land  is  ultimately developed would remain a function of the planning system. The Strategic Housing Unit would also provide advice to the Treasury  and  Resources  Department  in  considering  the

prioritization of any further public support of Social Housing Providers, for example in increasing social housing provision, but also on disposal of social housing properties.

Approval of a subsequent Regulatory Enabling Law would allow  the  Strategic  Housing  Unit  to  consult  upon  and recommend  appropriate  regulations  for  the  Minister  for Housing to bring forward under the Law setting requirements for  Social  Housing  Providers  to  observe  in  relation  to prioritizing  the  allocation  of  resources  to  the  sector  and disposal of social housing property.

3. Championing the Supply of Homes;

The  Strategic  Housing  Unit  would  play  a  key  role  in identifying the need for new homes, through the evidence generated by the new Affordable Housing Gateway (see 4. below),  Housing  Needs  Surveys  and  other  means.  The Strategic  Housing  Unit  would  also  have  responsibility  for promoting the release of land for new social and affordable homes, albeit that the release of land for development and development control will remain a function for the planning system.

4. Managing the Affordable Housing Gateway;

A key objective of the Housing Transformation Programme was  to  ensure  the  best  use  of  the  available  social  and affordable housing in the Island. The most effective way to achieve this was considered to be to establish a single, unified application  process  (known  as  the  Affordable  Housing Gateway), for affordable housing in Jersey, whether for rent or for purchase. The Affordable Housing Gateway therefore commenced operation in January 2012, and now has the full support  and  involvement  of  all  the  4  Housing  Trusts  that would be regulated under the draft Social Housing (Jersey) Law 201- for their own independent housing schemes.

Approval of a subsequent Regulatory Enabling Law would allow  the  Strategic  Housing  Unit  to  consult  upon  and recommend  appropriate  regulations  for  the  Minister  for Housing to bring forward under the Law to formalise use of the  Affordable  Housing  Gateway  by  Social  Housing Providers  in  identifying  those  in  priority  need  to  allocate available social homes.

5. Proposing new affordable housing products to meet the needs identified through the new Affordable Housing Gateway;

The Affordable Housing Gateway is collating information on a much wider range of housing need than has been the case to date.  The  Gateway  will,  through  its  means-testing  and banding processes, enable the details of the demand for low

cost forms of home ownership to be quantified, together with the levels of financial support necessary to make increasing the level of home ownership achievable. Using that evidence, developing affordable housing policy and affordable housing schemes would be a key activity for the Strategic Housing Unit and is expected to include the sponsoring of legislative changes by regulation.

Some of these functions, including the development of Jersey Homebuy as a specific affordable housing scheme, have been undertaken  by  the  Minister  for  Planning  and  Environment within the Island Plan. Clearly though, the establishment of the  Strategic  Housing  Unit  now  means  the  overall responsibility for this is proposed to become the responsibility of the Chief Minister.

6. Proposing and updating a Jersey Social Housing Standard;

The  English  Decent  Homes  Standard  sets  a  minimum standard of social housing condition and states that homes must –

• be kept in a reasonable state of repair;
• have reasonably modern facilities and services;
• provide a reasonable level of heating comfort.

Currently, approximately 3 quarters of States homes and a higher  proportion  of  Trust  properties  meet  this  standard, however  this  will  inevitably  decrease  without  adequate investment. The Minister for Housing considers this lack of investment to be unacceptable in Jersey.

Approval of a subsequent Enabling Law would enable the Strategic  Housing  Unit  to  consult  upon  and  recommend appropriate regulations for the Minister for Housing to bring forward to require that Social Housing Providers achieve the English Decent Homes Standard for all their social housing stock within 10 years of the enactment of the Law.

A  future  role  for  the  Strategic  Housing  Unit  would  be improving  housing  standards  (in  consultation  with  Social Housing  Providers  and  others)  and  in  particular  bringing forward  any  necessary  changes  to  the  Decent  Homes Standard' to develop an appropriate "Jersey Social Housing Standard".  This  would  be  an  activity  coordinated  through consultation  with  the  Health  Protection  Service  and  the Building  Control  Section  of  the  Environment  Department, having regard to subsequent costs.

7. The development  of  housing  policy  within  a  States-wide strategic policy framework;

Strategies such as the Island Plan have a strong housing tone and  the  Strategic  Housing  Unit  would  play  a  key  role  in assessing and reporting on housing supply and need and in particular social rented and low cost affordable housing.

8. Carrying out (or commissioning) survey work;

The  Strategic  Housing  Unit  would  undertake  the commissioning,  review  and  reporting  of  periodic  housing related survey work, either by specific housing surveys such as the Housing Needs Survey, or within other wider surveys such as the Jersey Annual Social Survey.

9. Proposing and delivering the social housing rent policy;

Rents  across  the  social  housing  sector,  (both  for  States housing  and  for  the  Housing  Trusts),  are  currently  set  in relation to fair rents'. These represent an upper limit for the rent  of  a  social  rented  property  with  a  given  number  of bedrooms. The Fair Rent Levels are also used by the Social Security Department in setting housing component Income Support  limits  for  Tenants  in  both  the  social  and  private rented sectors.

A  fair  rent' is  not  precisely  defined  in legislation,  which states only that fair rents' should follow, but not lead' the market.  The  Housing  Strategy  for  the  1990s  (P.142/1991) made clear that fair rent levels should be set to near market equivalents. In practice this has been taken for many years to mean  that a  fair rent' should  be  set  at  90%  of  the  open market rent for a comparable property.

However, in recent years, fair rents' have not been increased to follow comparable open market rents. Successive political decisions  to  limit  annual  rent  increases  in  fair  rents'  to around 2.5% per annum have created a widening gap between fair rents' and comparable open market rents.

This has led to a situation where the average rent of a home in the States owned social rented stock is now 70% of its market equivalent. Moreover, the range of rents varies considerably.

The subsidies within the current rental structure go against the principle of Income Support provided by the Social Security Department being the sole, unified support system for those unable to support themselves

Finally, because social rent levels are behind market levels, the viability of private development of affordable homes has been depleted to the point that no private sector social housing schemes have been commenced since the economic downturn and only those involving States land or other subsidy are now

possible  (Source:  Planning  and  Environment  Department: Interim Review of Residential Land Availability. 2011).

A reinvigorated, sustainable and enforceable rent policy is therefore needed and responsibility for developing this policy would rest, henceforward, with the Strategic Housing Unit. Approval of this Report and Proposition would enable the Strategic  Housing  Unit  to  propose  a  social  rent  policy regulation to the Minister for Housing and thereafter to the States for consideration.  

The  most  appropriate  level  of  rent  policy  will  be  a  key decision for the States Assembly to take when regulations are brought forward, but in the interim a return to the existing rent policy  of  90%  of  equivalent  market  rents  is  considered essential for the following key reasons –

1. The back-log  maintenance  to achieve  the  Decent Homes  Standards in the States  Housing  stock  was assessed as being approximately £48 million in 2010 by  Ridge  and  Partners  LLP.  The Business  Case proposed  for  the  wholly  States-owned  Housing Company (R.15/2013) makes clear that this backlog cannot be addressed to enable the States owned stock to meet Decent Homes Standards within the 10 years proposed by the Minister for Housing unless a return to the 90% near market rent is achieved. A 90% near market rent policy enables social housing providers to provide homes on a sustainable basis that would track market  prices,  but  not  drive  inflation  in the  wider property market.
2. Outline business models have been developed for the 4 Housing  Trusts  that  it is  proposed  are  regulated under  the  draft  Social  Housing  (Jersey)  Law  201- using data and assumptions provided by the Housing Trusts. These indicate that a return to a 90% near market rent would enable the avoidance of deficits or calls on the  States for  interest rate subsidies. This level  is  also needed  by  the  Housing  Trusts  whose homes  are  understood  not  to meet  Decent  Homes Standards.  The 90%  level  is also  likely  to be necessary to ensure sustainable business models for the  majority  of  Housing  Trusts  when  a  range  of economic  conditions  are  considered  through sensitivity analysis. Not to introduce a consistent rent policy would create inequities in provision between providers  and  would  distort  incentives  for  Tenants accessing  social  housing  through  the  Affordable Housing Gateway. It should be noted that condition surveys have not been carried out by Housing Trusts against  the  Decent  Homes  Standard  at  this  time.

Likewise,  Housing  Trusts  have  yet  to  carry  out independent rent assessments on their properties.

3. Current sub-market rent levels have lead, inevitably, to a situation where the value of the existing portfolio is understated  and  insufficient  rental  income  is generated to maintain the States portfolio whilst also maintaining the annual return.
4. In respect of new developments. The accepted means of  assessing  the  viability  of  social  housing developments  and  the  capital  value  of  the  homes constructed is a calculation primarily arrived at from the potential rental yield, less necessary expenditure, over  a  specified  period.  In  Jersey  the  practice  has been  to repay  borrowing  for  social  housing development over a maximum of 25 years.
5. Even  allowing  for  inflationary  increases,  debt repayment models based on the current sub-market rent  levels  demonstrate  unequivocally  that  there  is insufficient new rental income to develop new social housing without some form of development subsidy being provided.
6. Hitherto the States has addressed this lack of viability through the provision of development subsidies. In the  Housing  Trust  sector in particular, it has  been necessary for the States to support the development of new homes through a combination of the provision of land at nominal value, direct capital subsidy or more commonly  through  the  provision  of  interest  rate subsidy agreements where the States is required to meet the cost of Housing Trust borrowing if interest rates rise above pre-determined levels. This has been greatly  assisted  by  the  provision  of  re-zoned, (previously  green  zone),  land  where  a  significant uplift  in land  value  has  meant  that  homes  can  be acquired from developers at values consistent with sub-market social housing rents.
7. In its approval of the Island Plan 2011, the States has directed, inter alia, that further development of the green  zone  should  be  avoided  and  it is therefore anticipated that new affordable housing will have to come  from  the  development  of  sites  with  existing uses and higher intrinsic values. The additional land cost  will  require  higher  levels  of  capital  subsidy unless  the  yield  from  social  housing  rents  can  be increased  to a  level  which  will  support  both development costs and land acquisition.

As a matter of principle, the Minister for Housing considers it would be unacceptable to ask those Social Housing (current States and Housing Trust) Tenants currently receiving Income Support to meet the cost of returning to near market rents as the primary basis of Income Support is to provide a safety net for those in greatest need.

However, ensuring that all Social Housing Tenants are treated fairly  and  protected  according  to  their  means  is  also considered  vital.  The  Minister  for  Housing  recognised  the concerns  of  fellow  States  Members,  the  Health,  Social Security and Housing Scrutiny Sub-Panel and Housing Trusts about  the  potential  impact  on  low  earning  Tenants.  It  is recognized that, while the impact on low income households may be affordable in the vast majority of cases, even a phased increase may be difficult for these households (particularly pensioners) to plan for in times of austerity.

Therefore, the proposed Fair Rental Level of 90% of market rents  would  only  apply  to  those  Tenants  moving  to  new tenancies enabling them to plan for the increased rent as they do so. This would protect Tenants in receipt of the housing component of Income Support and for Tenants not in receipt of the housing component of Income Support it provides a balance between requiring those who can afford to pay more to  do  so  and  recognising  that  Tenants  have  entered  in  to tenancy agreements and planned their finances on the basis of the prevailing rent levels.

As approximately 7% of tenancies are re-let each year, and the  achievement  of  Decent  Homes  Standards  will  require refurbishment of 578 properties during the 10 year period, the hidden rent subsidy will be progressively removed, but in a way that allows individual Tenants to plan for increases. It is expected that approximately 55% of new tenancies will be to tenants from the waiting list. Therefore, the Income Support paid for these tenancies will replace Income Support currently paid in the private sector.

The  Housing  Department  and  Social  Security  Department have reviewed what the financial, social and economic impact of returning to the 90% equivalent market Fair Rent Level and removing  the  hidden  rent  subsidy  would  be  for  Tenants, Social  Housing  Providers  and  the  States.  The  social  and economic  impact  assessment  follows  and  the  financial implications are set out at the end of this Report.

For the two-thirds of States tenants (and half of Housing Trust tenants) who receive any amount of the housing component of Income Support, rents charged will continue to be at a level that would be covered by the housing component of Income Support.  Therefore,  Tenants  entitled  to  the  full  housing

component of Income Support will continue to have the full amount of their rent paid whilst they remain a Tenant and Tenants  entitled  to  any  lower  amount  of  the  housing component of Income Support will continue to receive the level of Income Support appropriate to their circumstances. In other words, tenants in receipt of any amount of the housing component of Income Support will not be directly financially impacted  by  the  proposed  rent  policy  in  their  current tenancies nor if they transfer to another property within the social  housing  stock  provided  their  circumstances  do  not change. Given that States' tenants in receipt of the housing component of income support will be fully protected from the proposed  rents  policy,  there  is therefore  no  direct  adverse economic or social impact on these tenants. It is recognized, that  following  the  return  to  Fair  Rent  Levels,  Tenant's earnings would need to increase to a greater extent in order for them to no longer require Income Support.

Existing tenants not in receipt of the housing component of Income Support (approximately one third of States tenants and half of Housing Trust tenants) will not be required to pay additional rent as a result of the proposed return to Fair Rent Levels  (other  than  normal  annual  increases)  whilst  they remain  in  their  current  properties.  Should  these  tenants transfer to another property within the social housing stock (thus creating a new tenancy), rent will be charged at 90% of market rent for the new property. Transferring tenants will be made aware of the rental of the new property before deciding whether to sign the tenancy, so will be fully aware of any impact that this may have on their financial circumstance. Tenants transfer for a variety of reasons, but over half of tenants transfer to smaller properties, which would generally command a lower rental than the larger property from which they are moving. Where Tenants are moving to properties that have been refurbished to Decent Homes Standards, there will be compensatory savings in energy costs that will also offset the return to Fair Rent Levels.

Work  undertaken  jointly  between  the  Housing  and  Social Security Departments has looked at the Social and Economic Impact Assessment of the proposed rent policy (as set out within R.15/2013). Given that the proposed Fair Rent Level will only be implemented on new tenancies, the impact is considered  to  be  very  small.  Full  details  of  the  analysis undertaken can be found in R.15/2013.

If  the  States  approve  this  Report  and  Proposition,  it  is proposed  that  this  rent  policy  be  implemented  from  April 2014.  To  enable  this  to  happen  the  Minister  for  Social Security  will  need  to  be  asked  to  take  such  steps  are  as necessary to adjust the rental component of Income Support through Regulations, including setting the appropriate level for  the  rent  component  of  Income  Support  in  the  private

sector.  A  Regulatory  Enabling  Law  and  then  Regulations would be developed during 2013 by the Strategic Housing Unit to enable the Minister for Housing to request that the States agree that rents in the social housing sector should be reset  at  the  Fair  Rent  Level  of  90%  of  the  market  rent, applicable for the equivalent home in the private rented sector from April 2014.

10. Proposing the criteria for eligibility for social housing in the Island through the Affordable Housing Gateway;

A  new  single  application  process  and  waiting  list  (the Affordable Housing Gateway) has now been implemented. Whilst  operating  the  Gateway  is  largely  an  administrative function, overseeing its operating parameters and monitoring underlying  demand  would  be  a  function  of  the  Strategic Housing Unit.

In  her  review  of  Social  Housing  in  Jersey  (Green  Paper. 2010),  Professor  Christine  Whitehead  highlighted  how  the current  eligibility  requirements  for  States  Housing,  which restrict housing to those with housing qualifications of limited financial means with young children, aged over 50 or with disabilities,  are  severely  restricted  and  mean  there  is considerable  unmet  demand  amongst  other  demographic groups for social housing provision.

The Strategic Housing Unit would have the role of reviewing qualifying  criteria  for the  Affordable  Housing  Gateway  as new  supply  becomes  available.  These  criteria  could  be widened to include those who presently do not qualify for social housing such as single people and couples of limited means, under 50 years of age, who do not have children.

To fully answer the challenge presented by the Green Paper, the future housing strategy will need to look closer at the whole market and in particular the relationship between the residentially qualified and non-residentially qualified sectors. The  Strategic  Housing  Unit  once  established  will  need  to consider its role in respect of the related activities presently undertaken  by  the  Population  Office  within  the  Chief Minister's Department, which include –

• Providing information on residential requirements
• Determining the residential status of Island residents
• Consideration of new migration policies
• Registration and regulation of lodging houses

• Collating and providing information on non-qualified accommodation

11. Proposing standards for Tenant engagement and consultation

Currently  there  are  no  requirements  for  Social  Housing Providers to engage their Tenants, either to gather views on the service being provided or to help shape that service into the future. The former Minister for Housing established the Tenant's  Forum  in  2007,  which  has  successfully  provided opportunities  for  Tenant  representatives  from  each  States Residents' and Tenants' Associations to meet, give voice to Tenant's views and to inform the policies of the Housing Department.

The Housing Department, as the largest provider, caters for those tenants with complex social needs, and also operates a Community Liaison Team to address matters of concern to residents  such  as  anti-social  behaviour  and  to  encourage Tenant interest in optimizing the services provided to them. An Independent Living Team assesses Tenant's special needs in partnership with the Supported Housing Group – a cross agency body with responsibility for advocating appropriate care packages for those who need them. Housing Trusts do not provide any of these enhanced services.

Best  practice  elsewhere  indicates  that  Tenants  value  their services more if they are actively engaged in shaping their delivery.  Therefore,  one  of  the  likely  regulations  to  be brought forwards by the Strategic Housing Unit under a future Regulatory  Enabling  Law  if  approved,  are  minimum requirements  for  all  Social  Housing  Providers  to  observe relating to consultation, complaints and appeals relating to their services which can then be considered by the proposed Social Housing Regulator. Any such regulation will need to be proportionate to the needs of Tenants and the scale, scope and purpose of individual Social Housing Providers.

12. Setting performance and probity standards for Social Housing Providers

The consultation response to the "Achieving Decent Homes" White Paper indicated concern amongst Tenants with regards to  certain  areas  of  customer  service  provided  by  current Social Housing Providers.

In the past some States Members have been concerned that Housing Trusts have not been perceived to always be acting in  the  Public  and  Tenant  interests.  This  suggests  that regulation of certain minimum performance standards may be in the interest of Tenants, and that minimum standards of good governance, probity and financial compliance should be

defined under regulation to ensure continuing public support for the integrity of Social Housing Providers.

Approval of this Report and Proposition would enable the Strategic  Housing  Unit  to  consult  upon  and  recommend appropriate regulations for the Minister for Housing to bring forwards setting minimum performance, probity and financial compliance.

Resources for the Strategic Housing Unit

13. The Strategic Housing Unit will be led by the Director of Corporate Policy  within  the  Chief  Minister's  Department.  A  budget  for  the appointment  of  a  Senior  Officer,  to be  responsible  for  the  social housing  elements  of  the  Strategic  Housing  Unit's  role,  has  been funded from the carry forward of the existing budget of the Housing Department  together  with  the  funding  for  developing  a  Housing Strategy Framework.
14. The function and staffing of the Affordable Housing Gateway would be transferred from the Housing Department to the Strategic Housing Unit during 2013. The administration of the Gateway may be best undertaken by the Social Security Department under agency to the Strategic  Housing  Unit,  given  its expertise  in conducting  means testing  and  the  desire  to maintain  separation  between  operational functions and policy making within the Chief Minister's Department.

Implications for existing Housing Trusts

15. The Minister for Housing acknowledges the positive contribution that Housing Trusts have made towards providing those in need with good housing services in the past, supported in many cases by volunteers, and the introduction of regulation should not be taken as criticism of their good work. However, the challenges faced by the social housing sector in terms of demonstrating that best value is being obtained for public investment, the need for improving standards of performance and housing condition, the need for an enhanced social sector and rising expectations of Tenants, together mean that regulation is now essential.
16. Regulation will be limited to those providers of affordable housing who have had the benefit of States subsidy, whether that be in respect of the provision of capital, land or, more commonly, the underwriting by the States of the exposure of the Housing Trust to loan interest rates above defined levels.
17. Initially this will limit the Regulator's activities to the proposed new Housing Company managing States rental homes, and the 4 Housing Trusts who have received public assistance from the States of Jersey. They are –

• the Jersey Homes Trust;
• the Christians Together in Jersey Housing Trust;
• the Les Vaux Housing Trust, and;
• the Florence Boot Cottages Housing Trust.

18. The other significant provider, the Clos du Paradis Housing Trust, has not benefited from States subsidy and will not therefore be regulated. One other provider the Scott Gibaut Homes Trust has only 7 units catering  for  a  very  specific  client  group  and  will  fall  below  the minimum threshold considered appropriate in order to keep regulation proportionate.
19. The approach to regulation proposed is designed to be proportionate to the reasonable expectation of Tenants from their individual Social Housing Provider. That is, what will be expected in terms of Tenant engagement or compliance reporting will be in proportion to the size of the Social Housing Provider concerned and the amount of risk it represents in the view of the independent regulator.
20. However, all Providers would be required to comply with the adopted rents policy, employ the Affordable Housing Gateway when making allocations and achieve Decent Homes Standards as well as satisfying minimum  standards  of  performance,  probity  and  compliance.  A culture of continuous improvement will be encouraged for all Social Housing Providers to ensure that the public can be assured that the sector is providing value for money with its public investment.
21. This will mean a change in approach for all existing Housing Trusts, mainly in the requirement to formally report on their business plans, but  not  one  that  need  materially  affect  their  independence, constitutional role, governance or their resources significantly. The positive  response  to the  principle  of  regulation  from  the  Housing Trusts confirms that they see the advantages of regulation in terms of public perception of their services.
22. Consultation  responses  to the  "Achieving  Decent  Homes"  White Paper from the Housing Trusts suggested a desire to ensure that any proposed regulator was distinctly independent from the policy making and landlord functions of the States and this desire has been respected in the form of regulation proposed.

Development of a Business Case for transformation

23. A Full Business Case explaining the assessment process undertaken to assess the best delivery organisation for the required transformation has been published as R.15/2013.
24. Sector Treasury Services Limited were appointed as financial advisers to the  Housing  Transformation  Programme  and  to  assist  in the

development and assurance of a business case to consider the options for change. Sector Treasury Services recommended the use of the UK HM  Treasury  5  Case  Model  for  Public  Sector  Business  Cases  to evaluate the options for change and this was adopted by the Housing Transformation Programme.

Key  assumptions  within  the  proposed  new  Housing  Company  Business  Case (R.15/2013)

25. Following significant financial modelling and sensitivity analysis, a preferred set of business modelling assumptions was agreed by the Political Steering Group for the Housing Transformation Programme as being –

• The English Decent Homes Standard achieved in 10 years and maintained for the duration of the Business Case (30 years).
• The  annual  return to  the Treasury  of  the  States  of  Jersey maintained in real terms (from 1 January 2016 after delivering the  returns  set  out  in  the  Medium  Term  Financial  Plan including Comprehensive Spending Review savings in 2013).
• Refurbishment and new build plans with a net gain of 434 households  (as  more  fully  set  out  in  Appendix  B  of R.15/2013).  The  Housing  Trusts  will  also  develop  an additional 203 new properties.
• Continued sales of 300 properties (15 per annum) to enable re-alignment of the stock and encourage home ownership and affordable housing solution development.  
• £40 million  internal  borrowing  facility  (as  set  out  in R.15/2013  and  below)  to  support  the  refurbishment  of  all stock to the Decent Homes Standard within 10 years.
• An external borrowing facility to fund new stock development and to provide cash flow balances (as set out in R.15/2013 and below).
• Return to the States Rent Policy of 90% of market equivalent levels, to remove rent subsidy from those who can afford to pay a Fair Rent Level and to track but not inflate market rents in the private sector.
• Protection of those in receipt of Income Support from the cost of rent subsidy removal.
• A return to 90% of equivalent near market Fair Rent Levels as envisaged within R.15/2013 for new tenancies.
• Retention  of  current  Cottage  Homes  residents  under  their existing  arrangements,  but  incorporation  of  new  Cottage

Homes  tenants  within  the  standard  Company  tenancy arrangements.

• Additional  Income  Support  costs  (resulting  from  the protection of all existing recipients of Income Support from the cost of rent subsidy removal and the small number of new claimants) to be met by an additional budget allocation by the Treasury to the Social Security Department.
• The use of the States of Jersey Statistics Unit central scenario Retail Price Index projections and average earnings inflation of 0.75% in excess of Retail Price Index (which represents half of the long term expectation).
• Market  rent  inflation  at  Retail   Price  Index  plus  average earnings inflation.
• These assumptions are dependent upon the approval of an appropriate  Social  Housing  Regulator  and  will  need  to  be reflected in the rent policy and in the housing component of Income Support in associated regulations. Therefore, if these assumptions are accepted by the States, the Rent Policy and Income Support regulations brought to the States will reflect this position.

The Strategic Business Case for Change

26. The first of the 5 cases is the Strategic Business Case for change. R.15/2013  sets  out  the  strategic  context  for  the  decision  making process. Of key importance here is the alignment of the proposed transformation with the States' Strategic Plan 2012 (P.28/2012) and the corporate priority "House our Community".
27. The proposed business case enables resolution of the following key actions with the "House our Community" priority –

• Continue work on existing homes to meet the Decent Homes Standard.

• Address the funding of the maintenance and reinvestment of the States owned social housing stock.

• Complete the Housing Transformation Programme to allow more flexibility in tackling housing issues.

28. The proposed rent policy level (of 90% of equivalent market rates) would also enable the following actions to be met –

• Put in place schemes to generate affordable housing for social rental and purchase.

• Bring forward schemes to support those who may qualify for assistance to purchase their own home.

The Economic Business Case for Change

29. The second case for change is the Economic Business Case, which consists of an option appraisal process to identify the best delivery vehicle for the landlord services of the current Housing Department.
30. The Housing  Transformation  Programme  Political  Steering  Group considered  the  3  viable  options  for  States  housing  suggested  by Professor Whitehead and agreed that these and 4 others should be subject  to further  evaluation.  The options  considered  within  the business case options appraisal undertaken were therefore –

1. The status  quo  –  A  States  Department  with  no  access  to borrowing
2. A States Department, but with access to internal borrowing
3. An Arms Length Management Organisation
4. A Trading Operation (as defined within the Public Finance Law)
5. A Hybrid Trading Company
6. A Wholly States-owned Housing Company
7. Freehold (or leasehold) sale to a new social housing landlord

31. The 7 options were each developed within a financial business model that expressed all of their balance sheet implications over a 30 year time period and allowed the consideration of a range of sensitivity analyses.
32. The 7 options were then assessed against 4 financial critical success factors for the Housing Transformation Programme, namely –

1. For the housing service to become a self-sustaining social housing services provider;
2. For the service to become a flexible delivery organisation able to adapt to change;
3. For the housing service to continue to provide a significant income stream to the States of Jersey; and
4. To fully separate Regulatory, Policy and Service functions. Included in this appraisal is a review of the extent to which the  delivery  vehicle  options  would  be  governed independently.

33. Option 6 – transfer to a Wholly States-Owned Housing Company – ranked highest against 3 out of 4 of the critical success factors and ranked second on critical success factor 4. Option 6 resulted in the second highest Net Present Value and also was assessed as having the lowest risk. Option 6 allowed stock development plans to be delivered whilst ensuring the expected level of annual return to the States of Jersey. The separation of landlord functions and the availability of finance provide the required independence and autonomy sought by the Critical Success Factors. Option 6 – transfer to a Wholly States- Owned Housing Company – is therefore the preferred option from the Full Business Case assessment.

The Commercial Business Case for Change

34. The third  case  for  change  is  the  Commercial  Business  Case,  the purpose of which is to summarise the commercial, partnering and personnel arrangements that will deliver the identified benefits and the key  success  factors  for  the  Programme.  It  therefore  considers  the services to be transferred and how expected costs and benefits can be controlled through contractual arrangements.
35. The Commercial  Business  Case  proposes  that  the  contractual arrangement between the States of Jersey as whole owner and the proposed Housing Company would be through means of a formal Transfer  Agreement,  incorporating  a  funding  agreement  and  a memorandum  of  understanding  between  the  2  organisations,  in a similar way to previous precedents with other Strategic Investments. The draft Heads of Terms for the Transfer Agreement are set out within R.15/2013. These would be worked up into a formal agreement for approval by the States Assembly following any approval of this Enabling Law.
36. The proposed commercial risk allocation between the States of Jersey and  the  proposed  Company  is set  out  within  Appendix  F  to R.15/2013. This reflects the management of risk by the party best able to do so in accordance with established public procurement principles.
37. Other sections of the Commercial Business Case (R.15/2013) go on to consider  the  contractual,  governance,  organisational  and  funding elements of the proposed transfer. Some of these matters are set out below.

Company form and States control of ownership of the new Company

38. Following a review of alternative company forms for the proposed Housing  Company,  supported  by  Trowers  and  Hamlins  LLP  (a leading legal adviser on housing matters), it is proposed to proceed by way of Company Limited by Guarantee. This underlines the fact that there  is no  intent  to sell  or  trade  the  ownership  of  the  proposed Housing Company, whilst preserving flexibility for the Company.

39. The annual return currently made by the Housing Department would be replaced by a covenanted payment made by the Housing Company to the States of Jersey (as sole Member and guarantor) acting through the Minister for Treasury and Resources, rather than for example by way of share dividend. The role of the Member would be set out within the draft Articles of Association for the Housing Company which  will  be  lodged  for  approval  by  the  States,  and  within  the proposed Transfer Agreement.