London has more than 62,000 households in homeless services—among the starkest victims of the city’s housing crisis. Two years ago a new organisation, known as Capital Letters, was set up to rationalise the way boroughs find and manage housing for this group. Owned jointly by member boroughs, it counts the majority of the capital’s boroughs (currently 21 of the 33 and rising) as participants. The initiative was intended to reduce costs of homeless services for boroughs and, importantly, improve housing conditions and security for homeless families. A new LSE London report has looked at how the project has performed to date.
The creation of Capital Letters reflects the particular pressures of addressing homelessness in the capital. Local authorities have long had a legal duty to find accommodation for homeless families and other vulnerable households. In 2018 this responsibility was expanded, so that households threatened with future homelessness (because, say, they are due to be evicted) could also get help from their local authority. A social tenancy is often the ideal solution: rents are low and tenants have long-term security. Local authorities in many areas outside London can often find social homes to meet this need, but vacancies are rare in the capital. London boroughs therefore have increasingly had to accommodate homeless people in the private rented sector.
Finding suitable housing for homeless families is a major responsibility – and cost – for boroughs. Specialist housing procurement officers scour the rental market, approaching and negotiating with private landlords and their agents. Local authorities generally prefer to find homes within their own boundaries but may have no choice but to rent properties in other boroughs (neighbouring or distant) or indeed outside London altogether. Because of a lack of longer-term rentals, many households are placed in costly and unsatisfactory ‘temporary accommodation’ for weeks, months, or even years.
London’s tight housing market has led to stiff competition between boroughs for suitable properties. The backs of London buses feature adverts promising landlords guaranteed rents and professional management if they contract with boroughs. Boroughs offer landlords up-front ‘incentive payments’ of up to £8000 per annum since monthly rents are effectively capped by welfare rules (rents are paid by tenants, virtually all of whom receive Universal Credit even though the majority are in work).
Boroughs have attempted to stop the bidding war by agreeing limits on incentive payments. Capital Letters represents the next step. The idea was that this new company would consolidate procurement—that is, establish a monopsony (single buyer) in the market for private rented housing for homeless families. If successful the initiative would generate efficiencies of scale, reduce competition between boroughs, lower procurement costs and increase the amount of ‘settled accommodation’ (as opposed to temporary accommodation) available.
Capital Letters’ approach is to procure suitable privately rented accommodation in the form of two year Assured Shorthold Tenancies (ASTs) at rents which a family can afford and, where possible, close to where the family was previously living.
Capital Letters has been in operation for just over two years, so our report is very much a preliminary evaluation. The research has undoubtedly showed some early successes:
- putting in place a more effective agreement between the member boroughs to standardise pan-London incentive payments for PRS landlords. This has significantly reduced inter-borough competition and helped to stabilise rents;
- setting a pan-London property standard which Capital Letters argues ‘has improved the consistency, safety and quality of accommodation offered to homeless families’; and
- establishing a tenancy sustainment service to support both tenants and landlords.
Procurement got off to a slow start, but in the year from March 2020 to February 2021 Capital Letters was able to offer almost 4,000 properties – significantly increasing the numbers of ASTs used to accommodate homeless families in London.
Since then, progress has been rapid. In the six months from March 1st 2021 to August 31st 2021 the number of properties offered was close to the 12-month figure for the preceding year. And to date, 67% of families have been housed in-borough compared to the all-London figure of 41%.
Importantly, operational evidence on tenancy sustainment suggests that there are very few failures and early signs are that tenancies are being renewed. Fewer people are therefore faced with going back into homelessness – a major issue for the public purse.
Although the evidence is clearly positive, with the majority of member authorities increasing their involvement rapidly, there are still challenges. Capital Letters’ rollout has been slower than anticipated, partly because of the Covid pandemic. The anticipated move to a self-financing model now looks to be some time in the future.
More fundamentally, London’s complex governance system, in which legal responsibility for homelessness is split amongst the 33 local authorities, makes joint endeavours like this difficult to implement. The initial model was that boroughs would transfer relevant staff to Capital Letters but most (perhaps hedging their bets) have not done so. Instead they have funded Capital Letters staff but kept some of their own officers in place who then continue to compete for similar properties. Some boroughs have yet to join the system, and others are making less than full use of it. Yet, at a political level but also amongst officers, changes that take decisions away from the boroughs themselves are often resisted–regardless of how rational or efficient they might be.
