Background paper on proposed approach to establishment of HCHP.

Recommendations for the establishment of the Headleasing Program for Community Housing Program (HCHP).

Summary
The attached paper sets out the background to the establishment of the HCHP in the ACT. Following extensive one on one consultations with community housing providers and others with headleased properties from Housing and Community Services, draft program guidelines have been developed for the HCHP.

It is proposed to have the HCHP operating from July 1 2004-05 with between 6-8 providers funded under the program. The scope of the program would be limited to providers managing properties that are headleased from Housing and Community Services and are used for medium and longer term accommodation. Generally the HCHP would provide funding to providers whose main focus is community housing or who run a separate arm of their business for community housing.

The program would provide funding for tenancy management, property management and office costs for these providers, to the extent that tenants’ rents do not fully cover these costs. Funding would be accompanied by 3 year funding agreements and 3 year leases on the properties with an option to renew the leases for a further 3 years.

All providers would eventually have a minimum of 30 properties with some providers picking up properties transferred from other non-funded providers over time. Properties would be allocated annually to providers on a needs basis, although in the first few years, allocations may be made to build the viability of individual providers. The HCHP would also aim to encourage partnerships between housing providers and other community based organisations to better meet the needs of tenants with complex problems.

In assessing existing providers to be funded the Department would look at the number of properties currently managed by providers; their access to other sources of funding; the target needs being addressed by the provider and the capacity of the provider to meet the eligibility requirements of the program. Providers will be regulated according to the level of risk that their activities pose with a focus on quality improvement and application of the National Community Housing Standards as appropriate.

The 209 CHC properties with title to be transferred to CHC may be brought into line with HCHP funding and leasing arrangements over time to ensure greater consistency among headleased properties and to assist in clarifying the role of CHC going forward.

Transition arrangements will need to be put in place to allow for the transfer of properties among providers and to allow for new funding arrangements to be put in place without disrupting providers’ capacity to meet tenants needs.

The program will be underpinned by program guidelines, funding agreements and standard leases with a suitable legislative framework to be developed over the next 12 months. In the first year, the program may operate according to its program guidelines. The Department will provide support and administration of the program within the Housing Policy Unit.

Further discussions will be held with providers over the coming months to negotiate the new arrangements to be applied to each provider.

Background Paper on Proposed policy and funding arrangements for the Headleasing Program for Community Housing (HCHP).

Background
The Department is seeking to develop a policy and funding framework for a new community housing headleasing program. The program will commence at the start of 2003-04 and will provide opportunities for community housing to expand through headleasing of Housing and Community Services properties to community housing providers.

This new program – Headleasing for Community Housing Program (HCHP) has been developed in close consultation with existing community housing and support providers and others with an interest in the development of community housing in the ACT.

2. Policy Context
Currently, there is a range of mechanisms through which Housing and Community Services properties are headleased to community housing. These mechanisms include the Community Organisations Rental Housing Assistance Program (CORHAP) and arrangements that have been negotiated directly between community housing providers and the Department over many years.

The Review of CORHAP completed in May 1999 recommended that CORHAP ‘or an equivalent headleasing program be retained to provide housing assistance to people who cannot currently be accommodated through other options.’ It also recommended that long term community housing should not be provided through CORHAP.

It also recommended a number of changes to provide greater clarity, transparency and certainty regarding the funding and policy arrangements for any such program. The establishment of a new headleasing program for community housing provides an opportunity to respond to the recommendations of the CORHAP review.

More recently, the ACT Government released the ‘Community Housing in the ACT Future Directions Policy Framework’ which provides the policy context within which the headleasing program is being developed. Other factors, such as directions for the 2003 Commonwealth-State Housing Agreement, have also been taken into account in the development of the headleasing program.

3. Consultation process
One on one consultations have been conducted with:
Community housing providers
SAAP services
CCHOACT
CHC
ACT Tenants Union and
ACTCOSS.

The purpose of these consultations was to:
· to ensure that the Department had accurate and up to date information on existing headleasing arrangements for community housing; and
· to discuss issues regarding the development of a policy and funding framework for the headleasing program.

Other States’ headleasing programs, such as NSW and Qld, were also examined to find out what has worked well and what could be improved. In looking at these States, it was recognised that these larger States’ programs may not be easily transferred to the ACT where resources are more limited and the capacity of the community to contribute is stretched.

The outcomes of these consultations has informed the development of the draft program guidelines. A summary of the major issues raised in consultations is included at Attachment A. Further details on next steps in consultations are outlined at the end of this paper.

4. Framework for the HCHP
The proposed framework for the HCHP is outlined below and includes:

· Draft program guidelines that will provide greater detail regarding the policies and operation of the program
· A standard 3 year commercial lease to be used for all properties headleased from Housing and Community Services to HCHP providers – with options for variations in clauses
· A standard 3 year funding agreement to be used to for all funding provided by the Department to HCHP providers – with variations to suit particular funding arrangements.

These are the key documents that will underpin the operation of the HCHP to ensure a consistent and transparent approach is achieved.

5. Scope of program
The HCHP is being established to provide a consistent, transparent and sustainable policy and funding framework for headleasing Housing and Community Services properties to community housing providers.

The scope of the program should be limited to focusing on those providers whose main business is community housing or those organisations that have a significant and discrete community housing section within their overall business.

The program should generally not fund providers whose main business is provision of support services unless there is a clear and discrete community housing section within the support business and a separation of roles within the business.

The program is focusing on accommodation that is not for crisis purposes. It may include transitional or medium term housing on the basis that the tenants in such accommodation have full tenancy rights and are paying rents to the providers.

The program would be relatively small with up to 8 providers initially funded. These providers would form the basis of the community housing sector in the ACT – (see later regarding new providers). Therefore, funding and other program arrangements should be relatively simple while also allowing for greater transparency and consistency than currently exists.

6. Funding arrangements
Providers should be funded for their community housing activities including:
· tenancy management
· property management and
· office related costs.

The Department should ensure that all eligible providers are funded for at least one full time tenancy manager ie do not fund providers to employ a half worker only.

Funding for tenancy management may be related to total numbers of properties under management but should not be adjusted solely according to number of properties managed. It should also recognize the intensive tenancy management role required to meet the needs of tenants with complex and special needs and other activities undertaken by tenancy managers.

Where providers are funded for one full time tenancy manager and they have capacity to take on other duties beyond the management of current properties, additional roles should be negotiated with the Department as part of the funding agreement. These roles would need to be approved by the Department and would generally only be performed for an interim period until the provider was allocated sufficient additional properties to engage the tenancy manager full time.

Additional funding for tenancy management beyond one full time worker could be expressed as half a position etc.

Property management costs such as repairs and maintenance, vacancies and arrears allowances should be calculated on a per property basis reflecting current social housing standards.

Office infrastructure costs should not be based solely on the number of properties under management. It should reflect the overall size of the organisation; its range of activities and any support provided from other sources.

HCHP funding to providers should take account of existing funding already granted to organisations from other sources such as SAAP, CHC or disability services.

There should be some flexibility to bring existing providers up to a viable level of operation through provision of additional properties although they may not be eligible for such properties according to needs based criteria. A provider may be considered to have reached a viable level once they have at least 30 properties under management.

Co-operatives would not be funded for tenancy management or office costs on the basis that these costs are not borne within a co-operative structure. However, some funding may be provided for incidental costs related to running the co-operative eg preparation of audited statements etc.

7. Other funding
Within HCHP, funding would also be made available for specific purposes such as establishment costs for new providers or feasibility studies for new providers. However, any such funding would only be provided to organisations that could demonstrate an unmet need that could not be addressed by an existing provider. New providers would generally not be able to submit expressions of interest for properties until their viability had been assessed. They would also have to demonstrate that they were aiming to meet an unmet need that could not be met by an existing provider.

Funding outside HCHP may also be made available to an intermediary body and a support body both of which would assist HCHP providers in undertaking their community housing activities.

8. Annual allocations of additional properties
Additional properties (beyond existing CORHAP properties already managed by existing providers) would be allocated each year based on an assessment of needs in the community. The needs assessment would involve consultation between the Department, HCHP providers and other organisations. Existing providers would submit expressions of interest to address identified needs. This process should be kept simple and transparent.

9. Leasing arrangements
A standard commercial lease would be used for leasing arrangements between Housing and Community Services and the providers. The commercial lease would be covered under the Leases (Commercial and Retail) Act 2001 and should be for a period of 3 years.

The standard commercial lease would include an option to renew for a further 3 year period subject to the provider securing ongoing funding.

Cyclical maintenance would be the responsibility of Housing and Community Services. Providers would make payments to Housing and Community Services to cover cyclical maintenance costs and rates, estimated to be on average around $1300 per property per year for cyclical maintenance and on average around $1200 for rates, water etc (for multi unit dwellings) and $1500 for rates (for single dwellings). CHC could also offer to undertake cyclical maintenance on a fee for service basis.

Providers would be responsible for all day to day maintenance and repairs and allowed up to $800 per property per year for these costs.

Providers would enter into RTA compliant tenancy agreements with all tenants.

Any special conditions to be included in tenancy agreements would be subject to RTT endorsement.

Security of tenure would apply in HCHP tenants on the same basis as in public housing unless special conditions stated otherwise ie if tenancy is based on ongoing status as a student etc. Security of tenure would ensure that tenants continue to be offered assistance through community housing or public housing.

10. Partnerships
Partnerships across community and government organisations should be a key feature of the HCHP.

Tenancy managers would be expected to work with other community based organisations to address the complex needs of tenants. The National Community Housing Standards provide useful guidance on partnerships and working within communities.

11. Regulation
Providers within HCHP would be regulated according to the level of risk that their activities posed. Therefore a tiered approach to regulation would be adopted within the HCHP.

Regulation would be achieved through a number of regulatory tools including:
· Standard eligibility requirements for funding
· Mandatory reporting and other varying requirements in the funding agreements including compliance with standards
· Varying degrees of compliance with The National Community Housing Standards to also achieve varying levels of registration.

Smaller organisations (managing say less than 50 properties) would be required to meet the minimum level eligibility requirements for the program ie being incorporated, financially sound, business plans etc. They may also be required to work towards complying with the National Community Housing Standards which could form the basis of them being registered over time.

Larger organisations (over 50 properties) would be required to meet eligibility requirements and to move towards a higher level of registration by more comprehensively meeting the National Community Housing Standards over time.

12. Operational policies
The Department will need to work with providers within HCHP to develop a consistent set of operational policies on matters such as rent setting, allocations of properties to tenants, tenant eligibility and use of reserves. The broad approach to each of these operational matters is covered in the draft program guidelines.

Rent setting
Rent setting is probably the most significant operational policy as it affects provider viability and affordability outcomes for tenants. The rent setting policy for HCHP should reflect the current public housing rent setting policy and should include a consistent approach to rent setting within shared housing.

In addition, tenants who are eligible for rent assistance should be encouraged to receive it on the basis that it will be reflected in their rent calculations.

Further work should be done on modeling alternative rent setting policies to maximize rent assistance and to move away from complex income related rent calculations. Some providers are already doing their own work on reform of income related rents and others have considered approaches to maximize receipt of rent assistance. Others are primarily concerned that tenants’ affordability outcomes do not deteriorate.

Any moves away from income related rents should be considered as part of broader discussions on rent setting and workforce disincentives within public housing.

13. Funding implications for providers
As outlined earlier, providers would be funded to meet tenancy management, property management and office related costs – each component being calculated as laid out in the funding agreements.

Given the relatively small size of the ACT and its limited revenue base, the Department should direct resources to a limited number of providers to ensure a sustainable and professional community housing sector is built up. The alternative approach of providing often very small levels of funds to a larger number of providers would not lead to a sustainable sector in the longer term.

In assessing existing providers to be funded the Department should take account of:

· The number of properties currently being managed by a provider – generally providers with fewer than 10 properties will not receive HCHP funding unless they are addressing a particular high need target group and may therefore be assisted to reach a ‘viable’ number of properties. The Department considers that providers will have reached a ‘viable’ level at about 30 properties. Viability for the provider assumes that the organisation has sufficient revenue from tenants rents and HCHP funding to operate a community housing service on a professional basis, offering tenants quality tenancy and property management, building partnerships with support and other community services and complying with all funding and regulatory requirements.

· Access to other sources of funding or support services by a provider – generally providers that have the capacity to utilize other funding sources and to form partnerships with organisations for support services may receive HCHP funding on the basis that they will be able to grow and address the needs of tenants with complex problems.

· The groups being targeted for assistance by a provider – the Department will aim to fund a mix of providers who together are meeting the broad range of needs in the community. Smaller providers may be funded on the basis that they are targeting a very high needs group in the community.

· The provider’s capacity to meet the eligibility requirements for the HCHP in the short to medium term – generally funding will be directed to providers that have the greatest capacity to meet the eligibility requirements over a reasonable time period.

· The provider’s expressed interest in providing community housing services as part of the organisation’s core business- generally funding will be provided to those organisations that have the provision of community housing as part of their core business. This should not exclude support service organisations from being funded, if they have a strong identified capacity to provide community housing services.

The Department expects to fund about 6-8 existing providers as a result of this assessment process.

· Existing providers with CORHAP properties that are not to be funded under HCHP would transfer their properties to one of the funded providers over time.

14. Impacts on providers under other programs with/without CORHAP properties
Organisations with properties acquired through discontinued programs would continue to manage those properties under existing arrangements and would not have access to HCHP funding. However, some of these organisations also have CORHAP properties and would be required to transfer their CORHAP properties to one of the HCHP providers.

15. Impacts on SAAP services with CORHAP properties
The arrangements for the 18 SAAP services with existing CORHAP properties also need to be reviewed. Once the HCHP implementation process is underway, the Department will need to engage in consultations with the SAAP services that have CORHAP properties to discuss proposals for those properties in relation to both tenancy management (where relevant) and property management.

Tenancy management
SAAP clients are generally not considered to be tenants and do not sign tenancy agreements or pay rents while in crisis services. Therefore, SAAP workers are generally not performing the role of tenancy manager. However, clients in medium term services may be gradually brought into tenancy arrangements, offered tenancy agreements and required to pay rents to prepare them for longer term housing options. SAAP services offering medium term housing may be outside the scope of providers to be funded as outlined earlier. However, SAAP services may wish to form partnerships with these funded providers to ensure that their tenants have access to professional tenancy management services.

Property management
SAAP services with CORHAP properties currently pay a historic percentage of market rent to Housing and Community Services for these properties and have a standard leasing document referred to as a tenancy agreement. The period of this tenancy agreement is generally one year. It would be preferable to transfer all properties headleased by Housing and Community Services to community organisations including SAAP services on to a standard commercial lease with appropriate terms and conditions.

The length of the lease could be negotiable to allow for shorter leases for crisis services. Rents paid to Housing and Community Services for these properties would be calculated on a similar basis to HCHP. That is, rents would reflect the costs of cyclical maintenance and rates rather than being based on a historic percentage of market rents. Day to day repairs and maintenance could be done by either Housing and Community Services, CHC or one of the HCHP providers on a fee for service basis.

16. Impacts on housing providers with CHC properties
A number of potential providers that may be funded under HCHP, may also have CHC properties. There is a separate review process underway examining the structure, funding and other arrangements for CHC. Any options for the longer term funding arrangements for providers with both CHC and HCHP properties should aim to achieve the following objectives:
· To provide greater consistency between headleased properties across CHC and HCHP
· To ensure clarity of CHC’s role within the social housing sector and
· To minimize duplication of funding and administrative arrangements across programs and properties.

17. Transition arrangements
Transfers of properties from existing providers may need to occur in a staged process. However, policy decisions regarding these transfers should be made at the commencement of the HCHP so that non-funded providers are able to plan for their amalgamation/changed role.

Further work needs to be done to ensure greater consistency is achieved across HCHP, SAPP and CHC funding arrangements. The longer term aim should be for tenancy management, property management and office costs to be funded consistently across the programs.

18. Departmental arrangements
The Department needs to determine appropriate program administration arrangements for HCHP. While the properties are owned by Housing and Community Services, asset management, policy guidance and funding arrangements may be managed elsewhere in the Department. Ideally, providers should have one point of contact or a ‘relationship manager’ within the Department for matters relating to HCHP properties. Alternatively, there should be clear articulation of roles and responsibilities within the Department for managing the HCHP and liaising with providers.

19. Legislative framework
In the first instance, it is proposed that the program commence its operations under a set of program guidelines. Once the HCHP has been in place for 12 months a disallowable instrument would then be tabled in the ACT Legislative Assembly setting out the program’s broad objectives, funding arrangements and key criteria for eligibility of providers under the program. This disallowable instrument would be reinforced though the various program documents including the program guidelines, leasing and funding documents. The interim 12 months would allow a reasonable period of time to develop the most appropriate legislative framework to suit the HCHP and to take account of the overall community housing program in the ACT.

20. Next steps – consultation
The next stages of consultation will include:

Email comments on this background paper to be forwarded to the Department.

Letters to providers that are not to be funded under HCHP to seek a meeting with them to discuss transition arrangements for the properties currently under their management. For CORHAP properties, transition arrangements will have to be negotiated until the transfer of the properties to alternative providers to be funded under HCHP.

Letters to providers that are to be funded under HCHP will include a copy of the draft program guidelines, funding agreement and commercial lease for their consideration. Providers will be invited to a meeting to discuss these documents. Individual meetings will then be held with each provider to negotiate their new funding and leasing arrangements to commence from the start of 2004-05 and requirements that they must meet in their first year of funding. For example, those providers to be funded in 2004-05 would be required to provide business plans within the first year and to meet other requirements laid out in their funding agreements.

21. Departmental Contact
Departmental Contact Officer is;
Ms Tanya Manning
Senior Policy Officer
Community Services
Telephone (02) 6205 0193
Fax (02) 6205 0476
Email tanya.manning@act.gov.au