Temporary Accommodation; challenges, partnerships and collaboration

Samantha Grix and Leo Stevens provide an analysis of common hurdles to provision of more housing, including lack of supply and resources.

Provision and quality of temporary accommodation (TA) is and will remain in focus for as long as demand outweighs supply, and this is not something that is going to change in the short term. Local Authorities (LAs) are having to think creatively, draw on partnerships and instigate collaborations to deliver more TA which throws up hurdles but also highlights the adaptability of the sector.

So, what are the common hurdles to provision of more housing? Lack of supply and resource are the obvious reasons and the ultimate cause of these is lack of funds. Another issue we come across fairly regularly is regulatory limitations that apply to existing social housing stock which make conversion to temporary social housing unviable. This often comes up when a Registered Provider of Social Housing (RP) partner is looking to work with LAs and use existing stock for TA but realise that they are restricted in the level of rent they can charge. For example, social rent units should retain that status for their lifespan/whilst a RP remains the landlord which means that rent setting even when the proposed client group changes, is limited to formula rent pursuant to the Rent Standard. This can be a prohibitor and make conversion to TA unviable. However, this is where creativity comes into play and LAs and RPs need to identify if there is scope to take the stock out the social housing perimeter, if the cost of provision can be recovered via service charges, or satellite service agreements with a LA.

What is clear is that it is not necessarily straightforward to use existing social housing stock as TA and consideration of all of the relevant regulatory and financial will have to be in sharp focus. Consultation on the new rent settlement will be forthcoming in the new year and changes to the definition of TA and conversion to TA would be very welcomed.

Partnerships

In recent years we have seen a rise in partnerships between LAs, RPs and private companies in relation to the supply of TA through schemes for large scale purchase of street properties, the conversion of houses into HMOs and conversion of offices to residential units. Private and institutional capital is being invested into this sub-sector of the market to try and address the overwhelming shortage of TA, particularly in London, where homelessness has reached record level, and families are routinely being placed as far afield as the Midlands, Kent and Essex.

Recent examples of partnership include Beehive Homes acquiring street properties from Hyde Housing Association and then renting them to the LB Bromley, and Meadowship Homes, (a joint venture partnership between Pinnacle Group and the LB Bromley which acquires street properties in Bromley and the surrounding areas for use as temporary accommodation.

These models tend to involve the purchase of street properties (often ex LA stock or properties requiring refurbishment or sale by buy to let landlords who want to avoid increased regulation) within or in the vicinity of the relevant borough using institutional capital such as pension or investment funds. These are then refurbished before being leased LA or RP (sometimes with an option to purchase at the end of the term).

These arrangements are generally cheaper than short term lets of hotels or hostels by LA for TA and the properties are often more suitable for homeless families with support needs where there is a big gap in provision. Certainly in the short and medium term, these type of partnerships between institutional investors and housing providers are only likely to increase and, whilst there are a number of different models used, the ultimate aim of all of them is to try and decrease homelessness and give all households the chance to live in safe and good quality accommodation and continues to give them access to the same networks and support they previously had access to.

However, it is not to say that these arrangements are not without risk to both parties. Investors require a return on their investment but this must be balanced against the rent that can be charged to the leaseholder and ultimate the tenant.

In addition, there are an increasing number of LAs imposing a moratorium or restriction on the conversion of houses to HMOs which will further restrict the supply of TA and the forthcoming Renters Rights Act may also contain provisions that could inadvertently cause problems to this model of funding.

The introduction of minimum EPC ratings of ‘C’ or above by 2030 is also looming and a lot of the street properties may require significant works to bring them up to this standard which have not currently been budgeted for.

All food for thought on this perennial problem and time will tell as to whether the issue can be alleviated with any other new ideas.

Samantha Grix and Leo Stevens are partners at Devonshires.