Assistance to improve/repair private sector

housing
Standard Note:

SN/SP/1617

Last updated:

4 April 2011

Author:

Wendy Wilson

Section

Social Policy Section

This note describes the type of assistance available from local authorities under The
Regulatory Reform (Housing Assistance)(England and Wales) Order 2002). This Order came
into force on 18 July 2002. Authorities statutory powers to provide renovation grants and
home repair assistance were revoked on 18 July 2003 and replaced with a system under
which authorities are enabled to provide a wide variety of assistance to residents/owners in
private sector housing.
The Government discontinued funding for the private sector renewal programme from
March 2011.

Contents
1

Background to the policy and legislative framework

1.1 Problems with the old system

1.2 A new approach to private sector renewal

The Regulatory Reform Order 2002

Grants and loans

Purchasing an alternative property

Disabled facilities grants (DFGs)

Renewal areas

Guidance and evaluation

Funding for private sector renewal work

This information is provided to Members of Parliament in support of their parliamentary duties

and is not intended to address the specific circumstances of any particular individual. It
should not be relied upon as being up to date; the law or policies may have changed since it
was last updated; and it should not be relied upon as legal or professional advice or as a
substitute for it. A suitably qualified professional should be consulted if specific advice or
information is required.
This information is provided subject to our general terms and conditions which are available
online or may be provided on request in hard copy. Authors are available to discuss the
content of this briefing with Members and their staff, but not with the general public.

Background to the policy and legislative framework

It has long been accepted that poor quality housing has an impact on the health of occupants
and on the quality of life in the area. Responsibility for maintaining privately owned homes
rests first and foremost with their owners but some targeted assistance may be available
from local authorities and agencies, such as home improvement agencies, for the elderly and
less well off, to pay or contribute to carrying out essential maintenance/improvement work.
Up until July 2003 local authorities had a range of powers at their disposal to give grants or
loans, or provide labour and materials to help homeowners, private sector landlords and
tenants to repair or renovate their homes. The main grant giving powers for home
improvement were contained in the 1996 Housing Grants, Construction and Regeneration
Act. This Act also governs mandatory disabled facilities grants which were not affected by
the Labour Government's reforms. Authorities powers to provide renovation grants and
home repair assistance under this Act were revoked 12 months after The Regulatory Reform
(Housing Assistance)(England and Wales) Order 2002 came into force, i.e. on 18 July 2003.
Part I of the 1996 Act provided for authorities to issue discretionary grants (subject to a test
of resources) for specific purposes. 1 Renovation grants were designed to help homeowners
and tenants to make their homes fit for habitation, 2 put them in reasonable repair, or carry
out other specific improvements. Common parts grants and Houses in Multiple Occupation
(HMO) grants served a similar purpose but were targeted on the shared parts of buildings
and on HMOs. Discretionary disabled facilities grants could be given for adaptations to make
homes suitable for the accommodation, welfare or employment of a disabled person, or to
pay for adaptations above the limit of the mandatory grant. These grants are subject to a
number of detailed conditions.
As well as their grant giving powers under the 1996 Act, authorities had powers under two
other Acts to give financial assistance for home improvements. Under Part VII of the
1989 Local Government and Housing Act they could declare and carry out renovation activity
in renewal areas. They also had powers under Part XIV of the 1985 Housing Act to make
loans and to provide help towards the cost of obtaining a mortgage. Authorities powers
under the 1985 Act were not confined to helping to improve peoples existing homes; they
could also be used to give assistance towards the purchase of housing. The 1985 Act
powers also applied to local authorities without housing responsibilities. 3
Part I of the 1996 Act enabled authorities to carry out repairs to several adjoining properties
at once. This was known as 'group repair' and was limited to external or structural repairs.
Home repair assistance (also under Part I of the 1996 Act) allowed authorities to provide
assistance for smaller repairs and improvements without having to follow the more detailed
procedures required for other grants. These grants were targeted at the elderly, disabled and
those in receipt of income-related benefits.
Relocation grants (under Part IV of the 1996 Act) were designed to help people affected by
slum clearance to re-establish themselves in a nearby area. The grants were intended to
bridge the affordability gap between the value of the property being cleared and the cost of
buying a new home. The grants were subject to similar conditions (including a test of
1
2

More information on the Act and the regime that it replaced is contained in Library Research Paper 96/58.
The housing fitness standard contained in section 604 of the 1985 Housing Act has been replaced with the
Housing, Health and Safety Rating system.
ie authorities that have transferred all their housing stock

resources) to those that applied to the main grants, and contained the additional requirement
that the authority had to make public whether it intended to pay relocation grants before
declaring a clearance area.
Authorities have powers (under Part VII of the 1989 Act) to declare and carry out works in
renewal areas. As well as providing a broad power to give financial assistance within the
renewal area, the 1989 Act gave authorities a range of other powers, including the power to
acquire land by compulsion. Renewal areas are subject to a number of controls, some of
which have been relaxed. These controls included restrictions on the size, composition and
characteristics of the area, and a requirement for them to last ten years. In addition,
authorities must follow certain procedures, including consultation, which were introduced to
safeguard the interests of local residents.
Local authorities powers to give loans for home improvement and for a number of other
housing-related purposes were set out in Part XIV of the 1985 Act. The legislation governing
loans was less closely prescribed than that for grants. The loan had to be secured by a
mortgage, the terms of which had to be set out in the mortgage deed. The authority was also
required to charge a set rate of interest, which had to be repaid at regular instalments. (This
provision was introduced as part of the Right to Buy legislation to regulate the provision of
local authority mortgages, which were then a statutory entitlement.) In addition, the authority
had to ensure that the property was fit for habitation once the works were complete.
Authorities also have the power to give mortgage indemnities and to give financial assistance
towards the cost of obtaining a mortgage, which are subject to fewer restrictions.
1.1

Problems with the old system

In March 2001 the Department of Environment, Transport and the Regions (DETR) 4
published a consultation paper, Private sector housing renewal: reform of the Housing
Construction and Regeneration Act 1996, Local Government and Housing Act 1989 and
Housing Act 1985, chapter 5 of which set out perceived problems with the private sector
renewal system.
Grants
The very detailed controls that governed local authorities' powers to give grants under
the 1996 Act were viewed as inconsistent with the discretionary regime and the
legislation governing loans, which contained far fewer restrictions. The controls, the
aim of which was to ensure the effective targeting of public resources, were identified
as a factor that actually inhibited authorities' ability to address local needs.
The paper also suggested that the widespread use of grants as part of area based
renewal work might actually discourage homeowners with resources from carrying out
the work themselves.
Loans
The restrictions on the use of home improvement loans were far fewer, but
nonetheless, it was thought that they prevented authorities from being able to use them
effectively. As the rate and terms of interest under which loans were given were linked
to those for commercial loans, authorities could not offer preferential loans for home
repair, except in very limited circumstances.

Housing matters are now the responsibility of Communities and Local Government (CLG).

The regime had prevented authorities from helping to develop equity release
schemes, in which capital in the home, rather than income, is used to repay a loan.
Equity release loans avoid the need for the borrower to make repayments from income
and can provide access to capital without reducing peoples living standards.
Purchasing an alternative property
Under the legislation local authorities had few opportunities to give financial help with
the purchase of another property where this was a better option than improving or
adapting someones existing home. Although authorities were able to give loans for
house purchase, they were tied, as with home improvement loans, to charging
commercial rates of interest. Authorities could give relocation grants to help people
whose homes were subject to a compulsory purchase order to move out of slum
clearance areas; however, they were unable to help homeowners whose homes were
purchased outside slum clearance areas, or to offer disabled people help with buying
another property where their existing home could not be adapted. Where they gave
relocation grants, they had no discretion over how much grant to give. This was
identified as a problem in some cases, for example where there was negative equity in
the property.
Partly as a result of these constraints, and partly because of the high cost of the
grants, authorities had made only limited use of their powers to give relocation grants.
They were often forced down the route of investing repeatedly in the repair of obsolete
or unwanted housing where a selected clearance strategy, involving a mixture of
voluntary and compulsory purchase, would have made more sense in the longer term.
Renewal areas
It was felt that certain rules, such as the criteria for declaring a renewal area, ensured
that authorities targeted their powers to deal with renewal areas on the most deprived
areas and on those large enough to benefit from an area-based approach. The
Government believed that the criteria, which prevented authorities from using their own
judgement to decide what a deprived community is, could often be counter-productive.
In particular it was thought that they could prevent authorities from tackling equally
pressing problems in smaller communities, such as former mining villages, and from
taking early action to prevent an area showing early symptoms of decline from
deteriorating rapidly.

1.2

A new approach to private sector renewal

In April 2000 the Labour Government published Quality and Choice: a decent home for all in
which it proposed a new approach to private sector renewal. In place of detailed regulation
the then Government set out proposals to use a combination of guidance, local public service
agreements and Best Value to set key principles and targets, monitor activity and reward
good performance.
On 13 December 2001 the Government laid before Parliament a proposal for a draft
Regulatory Reform Order under the Regulatory Reform Act 2001. This Order proposed a
number of changes to the detailed provisions that prescribed how authorities could offer
assistance to home-owners and others for the renovation of their properties (see below). The
Order was subject to detailed simultaneous scrutiny by the Deregulation and Regulatory
Reform Committee in the Commons and the Delegated Powers and Regulatory Reform
Committee in the Lords.

The Regulatory Reform Order 2002

The Regulatory Reform (Housing Assistance)(England and Wales) Order 2002, which was
made under the Regulatory Reform Act 2001 came into force on 18 July 2002. Authorities
powers to provide renovation grants and home repair assistance were revoked on
18 July 2003 and replaced with a system under which authorities are enabled to provide a
wide variety of assistance to home owners.
Grants and loans
Authorities now have a general power to give financial assistance for home repair,
improvement and adaptation. This power is not restricted aside from the fact that authorities
must have regard to guidance which sets out overarching principles such as the need to be
fair and to:
-

give priority to the most vulnerable households;

ensure that applicants for loans are properly advised; and

take realistic account of peoples ability to contribute, including to equity release loans.

Authorities are required to give assistance under these powers in accordance with a
published policy (on which they are expected to consult service users).
Assistance can take the form of grants, loans, loan guarantees or indemnities, provision of
materials or labour or by incurring expenditure in other ways, eg by paying the contractor to
carry out the work. It could be provided directly by an authority or through another agency.
To ensure that the assistance given is targeted effectively, authorities have the power to
carry out means testing and to charge for any labour or materials they provide, should they
wish to do so. They have the power to set the conditions under which any financial
assistance should be repaid and the period over which those conditions should apply. Where
they chose to give a loan or to attach conditions to a grant or loan, authorities have the
power to waive any requirement to repay it or to reduce the amount they require to be repaid.
Purchasing an alternative property
In place of the limited powers available through relocation grants, authorities now have a
power to help people to buy another property in two broadly defined sets of circumstances.
The first is in cases where the authority and owner agree that moving house makes more
sense than improving or adapting someones existing home, or where they wish to offer the
applicant a choice. The second is where they make a compulsory or voluntary purchase of
someones home, for example as part of a renewal or clearance strategy. (In the latter case,
assistance given under the proposed power would be on top of any other compensation they
are required to pay.) The power does not affect any existing entitlement, for example to a
disabled facilities grant or to compensation available under the compulsory purchase rules.
Disabled facilities grants (DFGs)
Mandatory disabled facilities grants remain unaffected 5 but authorities now have a power to
offer alternatives to disabled people, such as a loan that does not involve a means test or
help towards buying a more suitable property. They can offer a loan to top up a mandatory
grant; this can help applicants who face difficulty in meeting the cost of their contribution. The

For more information see Library Note SN/SP/3011

power to issue discretionary DFGs was revoked 12 months after the Order came into force
on 18 July 2002.
Renewal areas
The statutory criteria laid down in relation to the declaration of a renewal area and the
number of unfit dwellings which it should contain was abolished. The changes to the renewal
area provisions came into force on 18 July 2002 except for the special grant making powers
specific to renewal areas which remained in force for a further 12 months.

Guidance and evaluation

Guidance on housing renewal under the new system was published in the form of a
Departmental Circular, Housing Renewal, on 17 June 2003 (Circular 05/2003). This Circular
can be found on the CLG website.
Mortgage Sales Guidance was issued in November 2005 to set out procedures that both
Registered Social Landlords and local authorities must follow when providing mortgage
finance under their Regulatory Reform Order powers.
In December 2005 the Joseph Rowntree Foundation published research into the impact of
the new private sector housing renewal regime, Implementing new powers for private sector
housing renewal. The key findings from this research were:

The initial response of local housing authorities to the RRO was generally favourable.
However, there is currently a major contrast between the expectations of the policy
reforms of central government and the capacity of local authorities to deliver these
programmes.

In England, 80 per cent of the housing stock is in private ownership yet over half (54 per
cent) of all local housing authorities employed fewer than five full-time members of staff
on private sector housing renewal activity and 26 per cent of authorities had less than
three people undertaking such work.

The initial policy changes made by local housing authorities were characterised by the
introduction of a variety of new types of grant aid which more effectively address local
housing problems.

Engaging with private lenders to attract private finance and develop a portfolio of
affordable loan products has been extremely difficult to achieve. Unless private finance
can be more effectively levered in to private sector renewal programmes it is difficult to
see how local housing authorities can meet their obligations under the RRO and the
Housing Act 2004.

As a result of the focus of Government attention on vulnerable households living in non

decent homes, area-based activity appears to be giving way to client-orientated
programmes based on the needs of household types, except perhaps in the Market
Renewal Pathfinder (HMRA) programme.

The major thrust in private sector housing renewal has been in the area of energyefficiency, which is supported by a grant regime available from Defra.

In terms of implications for future policy development the researchers suggested:

A firmer commitment from central Government to private sector housing renewal in

order to meet its commitments under PSA 7 to improve the housing conditions of
vulnerable households in non-decent homes in the private sector and to prevent
the further deterioration of the older private sector housing stock more generally,

A need to mobilise private finance and ensure the availability of a range of low-cost
loan products underpinned by grant-aid in the most needy circumstances.

More encouragement and assistance to support the development of not for profit
intermediary lending agencies and extend coverage across England and Wales.

A need to explore ways of delivering more effective private sector home

improvement programmes. Larger local authorities and the Housing Market
Renewal Pathfinders need to take a lead in this process. Existing options could be
more effectively evaluated and lessons disseminated.

A need to recognise the potential strategic significance of a programme of

preventive care for the older housing stock in those authorities without major
remedial problems.

More effective engagement between the private rented sector and both local and
central government and a concerted effort to improve the quality of management
practice and the maintenance and repair of the private rented stock.

There are demonstrable advantages arising from efforts to achieve greater coordination between energy-efficiency/fuel poverty programmes and housing
renewal programmes. Energy-efficiency and fuel poverty programmes also need to
be more effectively targeted on vulnerable households than they have in the past.

In April 2007 CLG published research into the suitability and potential take-up of loan and
equity release packages developed by local authorities to support vulnerable private sector
households maintain and improve their homes. The full report, Loan Finance to Improve
housing conditions for vulnerable owner occupiers, can be accessed on the CLG website.

Funding for private sector renewal work

The Government has ended funding for private sector renewal work with effect from
March 2011:
Andrew Stunell: The Government have made clear that our most urgent priority is to
tackle the UK's record deficit in order to restore confidence in our economy and
support the recovery. In order to tackle the budget deficit all Government Departments
have been required to work within a very tight fiscal settlement. Failure to tackle the
deficit would have pushed up mortgage rates and made housing less affordable.
The decision to discontinue funding the Private Sector Renewal programme, which
received funding of 308 million in 2010-11, reduced by the previous administration
from 376 million, is a direct result of these constraints.
Where Private Sector Renewal activities are a local priority, local authorities may
chose to direct other funding to provide support packages for vulnerable private sector
households. Neither Bolton at Home nor other ALMO would have been direct
beneficiaries of funding from this programme.

DCLG has undertaken an equality impact assessment into the end of funding for the
Private Sector Renewal programme, in line with our equalities duties, and will be
publishing the assessment shortly.
In the spending review we announced almost 4.5 billion investment in new affordable
housing to deliver up to 150,000 affordable homes and a further 2 billion investment
in Decent Homes. We are also giving housing associations much more flexibility on
rents and use of assets. Our aspiration is to deliver even more homes through our
investment and reforms. We will publish details of how these proposals will work
shortly. 6

The Equality Impact Assessment referred to in this Parliamentary Answer was published in
December 2010. This assessment notes that the funding for private sector renewal was unringfenced and had, in practice, been used for a very wide range of purposes. The paper states
that owner occupiers are primarily responsible for the upkeep of their own properties but goes
on to say:
...the increased freedoms and flexibilities being given to local authorities as part of the Spending
Review mean that discontinuing this funding stream will not necessarily result in less money being
spent on repairs to the private sector. Local authorities will have greater freedom to prioritise and
allocate budgets to support public services in ways which meet the needs of local people and
communities. Some areas may decide to provide assistance to vulnerable private sector
households, while others may prioritise other activity. 7

6
7

HC Deb 17 November 2010 c804W

CLG, Equality Impact Assessment on funding for private sector renewal, December 2010