HSM/05/2005 KENNET DISTRICT COUNCIL COMMUNITY DEVELOPMENT EXECUTIVE COMMITTEE –18 JANUARY 2005 PREVENTION OF HOMELESSNESS – NEW INITIATIVES A Report by the Housing Services Manager 1.0 PURPOSE OF REPORT 1.1 To propose the introduction of Let Plan Landlords Insurance through the Rent Deposit Guarantee Scheme and other improved benefits in order to cover some of the risks associated with letting property and to encourage the release of more accommodation through the private rented sector for homeless applicants. To offer professional mediation services. 2.0 FINANCIAL AND STAFFING IMPLICATIONS 2.1 If successful the Let Plan Scheme would help to increase the number of landlords and subsequently properties let through the Rent Deposit Guarantee Scheme for homeless households. This will increase the workload on staff within Housing Services. The impact of this will be monitored through the quarterly performance reports. 2.2 An increase in the number of Rent Deposit Guarantee lettings would help to further reduce the reliance on bed and breakfast and the use of temporary accommodation which would result in savings in the cost of providing bed and breakfast. The average weekly cost of bed and breakfast is between £175 (single) and £350 (family). 2.3 If approved the Let Plan Scheme would be run for a one year pilot in order to monitor interest. The cost over the next financial year is estimated as a maximum of £4,800. This cost will be met from a budget of £44,000 allocated by government to the Council for measures aimed at preventing homelessness. 2.4 It is also proposed to enhance the benefits offered to landlords accepting the nomination of a homeless household where the Council has a rehousing duty. It is estimated that this may result in an additional cost of around £1,000 per annum on the Rent Deposit Scheme budget. This will be met from the Homelessness specific grant. 2.4 The Council also proposes to meet the cost of a professional mediation service where this may serve to avoid homelessness. Each case will cost a minimum of £500. A budget of £3,000 will be set aside from the Homelessness specific grant. 2.5 It is proposed that staff within Housing Services will oversee the running of the scheme which will be operated direct by Let Plan which is part of Hanover Park Services Plc. An insurance helpline is available through Let Plan to deal with any questions and issues arising. 3.0 INTRODUCTION 3.1 The Rent Deposit Guarantee Scheme helps customers on the Kennet Housing Register gain access to the private rented sector by issuing the landlord with a written guarantee in place of a cash deposit. The guarantee, which is the equivalent to one month’s rent, can be used against damage to the property or rent arrears at the end of the tenancy. 3.2 Tenants are often required to pay the landlord a deposit, rent in advance and fees to cover administration costs. Many people find it difficult to raise this amount of money all in one go. The scheme makes it more affordable to those on a lower income, by issuing the landlord with a written guarantee instead of a cash deposit from the tenant. 3.3 Landlords often voice their concerns through the Private Landlords and Letting Agents Forum about letting to tenants on housing benefit. Issues such as delays over the payment of housing benefit and damage to the property are common concerns. 3.4 There are currently around 60 properties let through the Rent Deposit Guarantee Scheme and it is anticipated that providing landlords with rent guarantee cover will encourage additional properties onto the scheme. 3.5 The table bellow shows the number of Rent Deposit Guarantee’s issued over the last 3 years. Best Value Performance Indicator H020 2001/02 2002/03 2003/04 Private Sector lets 13 16 21 to those in need 4.0 BACKGROUND 4.1 Let plan 4.2 It is an objective of the Kennet Corporate Strategy to reduce and if possible eliminate the use of bed and breakfast and to maximise the use of accommodation within the private rented sector. 4.3 The Council is proposing to link up with Let Plan in order to launch a new initiative for private landlords who are willing to let their properties to homeless applicants. 4.4 The Private Property Plan is a proposal designed for private and professional landlords to cover some of the risks associated with letting property and to encourage the release of more rental housing to households in need. 4.5 If approved Kennet would be able to offer the ‘Let Plan’ scheme free to landlords letting their properties through the Rent Deposit Guarantee Scheme for the first year which would protect rental income. 4.6 Under the scheme landlords would be offered free rent guarantee and legal expenses in the event that a tenant failed to pay the rent. Let Plan would therefore pay the rent the landlord would be expecting for the property for up to 12 months excluding the first months lost rent. Additionally, the insurance company will pay 50% of the rent for up to three months after vacant possession has been obtained, whilst a new tenant is found. Full legal expenses are also included. 4.7 The Let Plan insurance is designed for properties let on an Assured Shorthold Tenancy and assuming there is no adverse credit or tenancy history applicants will be accepted who are in receipt of housing benefit or other state benefits. The tenant acceptance criteria must be met which includes details of the applicant including name, date of birth, current address, current or previous landlords reference and an investigation into their financial circumstances where possible. 4.8 A number of private landlords were canvassed during the Landlords and Letting Agents Forum about the possible introduction of the Let Plan Scheme. The response was extremely favourable particularly given the benefits and the fact that the scheme is free for the first year. 4.9 Other benefit enhancements 4.10 In addition for statutory homeless cases, it is proposed to enhance the Rent Deposit Guarantee Scheme to meet administration fees up to £100 and by allowing the Deposit Guarantee to increase to 1.5 times the rent. The standard agreement covers one months rent only. 4.11 Mediation 4.12 The use of mediation offers a further well established opportunity to help prevent homelessness. Through mediation, disputes, which could lead to homelessness, can be addressed in a safe, confidential, conflict-free, and non-judgemental manner. For example, the resolution of a problem, through mediation, that allows a teenage child to remain living in the family home, rather than being asked to leave, can prevent homelessness. 4.13 Mediation (Salisbury and District) is a locally based organisation that provides just such a service using impartial, professional mediators. The organisation is nationally accredited through Mediation U.K., and operates to recognised quality standards, using trained staff. The Council, therefore, proposes to use this organisation for the provision of a mediation service, in appropriate cases. 5.0 THE LET PLAN SCHEME 5.1 The cost of running the scheme will comprise an annual premium based on 3% of the annual rental income for the Rent Guarantee and Legal Expenses cover. Based on an average rental of £550 per property the annual cost to the Council would equate to £160 per property per annum. This takes into account a 20% reduction in the premium for local authorities. It is anticipated that up to 25 properties would be taken on under the scheme during the pilot year which would equate to £4,000. 5.2 In addition, an up-front payment in the sum of £800 is required from Kennet for the artwork creation and a contribution towards the printing costs of leaflets. This payment is refunded once the Council have produced and paid for 50 policies. 5.3 There is no legal requirement for Kennet to have this type of Let Plan insurance cover. As an alternative, Kennet could self insure these risks. Under this option, significant funds would need to be set aside in order to meet any potential liabilities, representing a considerable financial risk. In addition, Kennet would not have the specialist legal or insurance expertise to deal with the resulting claims. 5.4 A copy of the Let Plan Service Guidelines has been forwarded to Democratic and Legal Services for their consideration. 5.5 In the past, the Council’s insurance policies have always been arranged by Marsh UK Ltd. Insurance cover has been procured, following a prescribed tender process, due to the high values of insurance involved. As the cost of the Let Plan Scheme insurance is much lower and the housing field is fairly specialised, Marsh UK Ltd are happy for the Council to go ahead and implement the Let Plan Scheme without them being involved. 5.6 In addition, Marsh UK Ltd carried out some research and reported that the Let Plan Scheme appeared to represent good value for money. 5.7 Marsh UK Ltd have also have advised that the Let Plan Scheme is backed by reputable insurers. They have recommended that Kennet officers seek references from other Council’s involved with the scheme to ensure that the company offers a good service when it comes to defending or settling claims. 5.8 A number of local authorities are operating the Let Plan Scheme and references are being sought from Bristol City Council and Westminster City Council. 6.0 CONCLUSIONS 6.1 The Let Plan initiative will provide an additional incentive for private landlords to let their properties through the Rent Deposit Guarantee Scheme to households in need. 7.0 RECOMMENDATIONS 7.1 The Committee approves: i) The introduction of the Let Plan Scheme to be run in conjunction with the Rent Deposit Guarantee Scheme and to establishing a reserve fund of £5,600 from the ODPM homelessness grant to fund a one year pilot. ii) The improved benefits for the Rent Deposit Guarantee scheme as set out in paragraph 4.9. iii) The introduction of a Mediation scheme aimed at preventing homelessness. 8.0 BACKGROUND PAPERS 8.1 Homelet Referencing Service Guidelines.
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