Caught between a rock and a hard place, of London’s ever-spiralling private rents and the Tory government’s ruthless reductions in benefits, Croydon Council is to invest an extra £15million into helping people at risk of homelessness to get secure private rented properties.
Since 2013, Croydon Council has already put £30 million into the Real Lettings Fund, a property scheme with charity St Mungo’s that now manages long-term housing for 151 households in the borough who would otherwise be in short-term, emergency accommodation.
The fund works by offering low-income households access to a rental market that they would otherwise struggle to be able to afford.
By funding these properties, ranging from studio flats to three-bedroom homes, the scheme also cuts the amount of money the council needs to spend on emergency bed and breakfasts.
After some success with the first version of the Real Lettings Fund, or RLF1, the council now wants to splash the cash on a second version of the fund, or RLF2. The additional £15million is by no means entirely altruistic: RLF2 is really just an investment fund, devised by the charity and local authorities to get around government policy, in which the council anticipates a 5.2 per cent rate of return on its investment, at a time when its cost of borrowing is 3.85 per cent, “and so therefore RLF2 is deemed a profitable investment”.
The scheme helps to reduce the twin pressures which are squeezing the council budgets.
Tory Government cuts in housing benefits are felt particularly acutely by the local authority, faced with London’s over-heated housing market.
As the report to next week’s cabinet meeting states, “Whilst the existing investment in Real Lettings has increased supply of affordable accommodation, Croydon is under financial pressure, with the freezing of local housing allowance rates (LHA) for 4 years, under welfare reform. Currently in Croydon an average 2 bed property per calendar month (PCM) rent is £1,200 where the LHA is only £900, leaving a £300 difference.”
The council report continues: “We anticipate this gap will only widen over the period of the freeze, creating further pressures.”
And that’s where the pressure comes on the council’s budgets from another direction, because the local authority has statutory responsibilities to providing emergency housing for those who find themselves homeless.
According to a background document submitted ahead of next Monday’s meeting, by the end of March 2016, Croydon Council was accommodating 2,918 households in temporary accommodation. Around 800 of these were in emergency bed and breakfast. The bill for this essential service in 2015-2016 was £4million, more than double what was being spent five years before.
The council’s press announcement today claims that the Real Lettings Fund has so far helped to house 169 people and cut the council’s annual bill for providing emergency accommodation by more than £1million.
Next Monday’s cabinet meeting will rubber-stamp the additional £15million, which will provide a further 47 two-bedroom properties.
The council said today, “The Real Lettings Fund provides the accommodation through the council identifying those needing help and then passing them to St Mungo’s, who find a property to sub-let on a renewable 12-month tenancy. Families remain at these properties for three years on average. St Mungo’s also gives extra support to improve the householders’ job prospects and signposts them to other organisations if needed.”
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