Arguments against transfer - privatisation of council housing

Councils pushing privatisation always try and make out stock transfer is the best thing since sliced bread. They launch an expensive and glossy PR Campaign - usually only promoting one side of the argument and often break what most people would think are basic democratic procedures to try and prevent or make it hard for anyone to put the case against. Don't be bullied and blackmailed. Make sure that there is a full and balanced debate in your area so that tenants hear both sides of the argument.

We've set out the main arguments against stock transfer below and in our briefing. Also check the factsheets/publications on the left and press articles on stock transfer to the right...

The Case against transfer

Transfer Means Privatisation

Registered Social Landlords (RSLs or housing associations) are private companies in law and borrow directly from the private market.

"Walker (2000) characterises housing associations as behaving increasingly like private sector organisations 'property-driven' and managing stock as an asset to maximise returns" Changing Boards: Emerging Tensions, Liz Cairncross, Oxford Brookes University, Spring 2004 (see also DCH summary).

Transfer means privatisation in law and in practice. RSL board members are often paid, executives are on fat-cat salaries, and banks and lenders are in the driving seat.

Many transfer associations set up group structures to get into private housing - market renting, new development and building luxury houses for sale. Transfer gives them all the land our estates are built on - some of it seen as prime development sites.

Transfer plans often include demolition and higher density rebuilding - including new private luxury homes our children won't be able to afford. RSLs may be technically 'Not for Profit' today but they are lobbying for that to change.

"One fifth of transfer RSLs have had to be placed under supervision by the Housing Corporation. 'Such action, which involves the appointment of external experts to the board of the association, is only triggered by poor performance or serious management irregularities" (One in five transfer landlords needs supervision, Guardian, 25 May 2005).

Higher rents and service charges

RSL rents are still much higher than council rents. Councils in England claim that the new government 'rent convergence' formula means that rents will increase by the same amount whether tenants transfer or not. Thanks to new evidence it's now clear the rent convergence formula is worthless.

Service charges are not covered by the formula. The RSL simply has to describe part of the rent as a service charge, known as 'unpooling'. The small print in the offer document shows service charge rates are only guaranteed for a few years, if at all. Some RSLs demand £20 plus a week in service charges on top of rent.

RSLs can raise the rents of any new tenants immediately to the 'target level', creating a two-tier system and an incentive to get existing tenants out.

RSLs can change the valuation method used to calculate the rent. In the words of TPAS: "changing the valuation method and therefore achieving higher 'Target rents' can [drive] a horse and carriage through the rent policy guidance and guarantee as valuation is not a fixed science...

I have spoken with large Housing Associations on this issue and they clearly understand how the Jan 1999 valuation method is the loophole in the government's rent setting policy. It's the great unspoken… They can comply with the Government guidance parameters but also achieve higher rents, sometimes much higher rents." (Email from Tony Bird, TPAS ITA in Brighton, to Anne Kirkham, Department of Communities and Local Government, 09/08/06. See further extracts).

In Scotland and Wales the old 5- year 'rent guarantees' are still used instead of a convergence formula. But these don't work either. In Scotland, rent rises in transfer RSLs are now running higher [4%] than the Scottish average RSL [3.8%]. Scottish Borders had the highest increase - 5.5%, despite a promise of inflation plus 1%. (figures from Communities Scotland)

And what happens at the end of the 5-year rent guarantee? Research in the DCH pamphlet shows that 16 of the 20 fastest increasing housing association rents between 1997 to 2005 were in housing transfer districts. The rents for Ten-Sixty-Six, the transfer RSL in Hastings, rocketed after the end of the five year period, up 10% in one year (between 2003/2004, Housing Corporation figures)

A report from a Basingstoke councillor illustrates many of these issues.

Less Security

On transfer tenants lose our special 'secure' tenancy and get an 'assured' tenancy.

Secure tenants are "protected by arguably the most generous charter of rights available in the residential sector. That security is lost on transfer." (Large Scale Voluntary Transfer: not all honey and roses', Jan Luba QC, (2000) 4 L.& T. Rev. 6)

There are differences in law between the two types of tenancy. A promise by the new landlord not to use certain powers is not the same as the statutory rights 'secure' tenants have in law.

"If the council wants to evict you, they must prove both the ground for possession (e.g. rent arrears, anti-social behaviour) AND that it would be 'reasonable' to evict you…. A RSL can seek to evict you without the court having to consider 'reasonableness' in 8 out of 17 grounds for possession. For example if you are more than 8 weeks in arrears of rent on the day of the court hearing, the court will have to make a possession order even if the arrears are not your fault. (Ground 8)." (Stock Transfer: Essential Reading Before You Choose, Tower Hamlets Law Centre)

Councils claim that the new landlord will write additional rights into the new assured tenancy contract which will make it the equivalent of a secure tenancy. The Law Centre say: "If an RSL wants to ignore the promises they have made in a tenancy agreement, and rely instead on the weaker rights set out in law, they may be able to do so. In a leading court case a judge found that a housing association were entitled to override the promise they had made to always give notice before issuing proceedings, because this was allowed by statute."

Mergers and Takeovers

We're told transfer will be to a locally-based organisation. But this doesn't last long. There is a high risk the new landlord will get into financial trouble and be taken over, or will expand and diversify into a huge business empire. Smaller associations tend to become part of a group structure. Bigger RSLs pay their senior managers more! The last two years have seen over 100 full scale mergers, with nearly 70 more becoming subsidiaries within a larger group. (Inside Housing, 10 Feb 2006)

"There is a merger mania just now that is being fuelled by the Housing Corporation saying future development cash will be concentrated on fewer and fewer associations." (Talks aim to create joint biggest housing association, Derek Joseph, Managing Director, Tribal HCH consultancy Society Guardian, 9 May 2005)

Tenants don't get a vote on takeovers or mergers. And the take-over RSL is under no legal obligation to keep promises made at the time of transfer:

"The mortgagee exclusion clause… means that if the RSL gets into financial difficulties and as a result the funder takes control and transfers to another RSL, the "new" RSL is not bound by any of the promises made to the tenants." (Housing Today, 21 January 2005)

Wasted Money and Broken Promises

According to the National Audit Office, it costs £1300 per home more to improve homes after transfer than it would cost if councils were given the money to do the work themselves. (Improving Social Housing Through Transfer, 2003 and DCH Synopsis of Report)

Councils, as public bodies, are able to borrow money at a lower rate of interest than housing associations. The 'management costs' of housing associations are also higher - in other words they pay fat-cat salaries to senior executives, and spend a fortune on new office buildings and glossy self-promotion. Someone has to pay for this.

The report by the Council Housing Group of MPs details broken promises. If promises are broken, there is little tenants can do, because offer document promises are a contract between the RSL and the council, not with the individual tenant.

Parliament's Public Accounts Committee found only a 3% increase in tenants satisfied with the condition of their home (81% from 78% before transfer) - even after improvements had taken place (but often before rent guarantees ran out). Only 85% of tenants considered that housing services were at least as good as before transfer; while satisfaction with the quality of repairs went down (63% against 68%). (Improving Social Housing Through Transfer, 2003 and DCH Synopsis of Report)

More Homelessness

Stock transfer means more homeless. Where councils have transferred their houses "homeless applicants spend longer in temporary accommodation, have fewer long term housing options and in some cases are unable to access affordable housing at all." Of 75,000 families looking for homes after transfer 43% were told that there was no home available for them. 'Out of stock: Stock transfer, Homelessness and Access to Housing' Shelter, 2001

"Our own investigations into the position of the homeless in stock transfer areas have revealed that many applicants have found it more difficult to access permanent accommodation since the transfer… 20.1% of allocations by large-scale voluntary

transfer housing associations are to homeless families. This compares favourably to housing associations not involved in stock transfer (9.4%), but it is less than the 34% by local authorities." Housing Today, 29 April 2005

Transfer: less power for tenants

Don't be fooled by the idea of 'community ownership'. A 'Community Gateway' or 'Community Mutual' is just an RSL with a fancy wrapper. The key thing about any RSL is the fact that they borrow money from the banks and are accountable to them.

Wild claims are made that making tenants 'shareholders' will empower us but there's no basis for these. Tenant 'shareholders' in a community mutual or gateway organisation won't even have the right to elect the whole board.

As tenants of a local council we elect our landlord. If we don't like the way they run our housing we can vote them out every four years at the ballot box. This direct democratic relationship is lost after transfer, PFI or ALMO.

Promises of tenants on the board is a con. The role of tenant board members is "primarily symbolic, providing a fig leaf to cover the unpalatable fact that the real power lies elsewhere." Cairncross 2004

Tenants on boards are bound by company law and, even if elected, will not be able to represent the tenants who elected them.

'At the time of transfer, tenants are often led to believe that they will have an explicit role in representing the interest of their fellow tenants on the board. This is not compatible with the accepted principle that dictates that as a board member they have to work for the interest of the organisation.' (Housing: Improving services through resident involvement, Audit Commission, June 2004).

It's outrageous that the government is trying to hijack the ideas of the co-operative movement to support privatisation; as a recent report on Community Mutuals in Wales has shown, transfer RSLs and genuine co-operatives have almost nothing in common.

Scotland and Wales

The situation in Scotland and Wales differs slightly in the details, although the broad principles of opposing privatisation and campaigning for direct investment are the same. For more details, ask for a copy of our new Scotland and Wales broadsheets

Additional info is available here: an older version of the 'Case against transfer' article which contains additional useful references; and an article on mergers and takeovers .

Press Articles

No to more council housing stock transfers

Swindon tenants group

19/08/18

Labour plans motion of regret for deregulation

Inside Housing

06/11/17

Councils to lose voting rights (on stock transfer associations)

Inside Housing

18/09/17

Hammersmith stock transfer plan scrapped

Inside Housing