APPENDIX 2
Reply from the Department for Transport, Local
Government and the Regions to the Clerk of the Committee
Proposal for the Regulatory Reform (Housing Assistance)
(England and Wales) Order 2002
In response to the Deregulation and Regulatory Reform
Committee's letter of 15 January, we can advise as follows:
1. Park Homes and Houseboats
The reforms will extend the eligibility for mandatory
Disabled Facilities Grant (DFGs) to those living in park homes
and houseboats. Local authorities will be obliged to offer DFGs
to park home and houseboat occupants, in the same way that they
do with DFG applicants living in more permanent housing. The current
legislation requires local authorities to assess the person's
needs and to consider the age and condition of the property to
which the works are proposed - this will apply to whatever type
of accommodation is in question. I have sent you an extract from
the existing guidance (Circular 17/96 on Private Sector Housing
Renewal) which gives guidance to local authorities on this aspect
of DFGs. Authorities would need to consider this for each individual
case and would not be able to adopt a wholesale policy of not
giving DFGs to park home or houseboat occupants. Alternatively,
local authorities will have the power, under the Order, to help
a disabled occupant to move to more suitable accommodation where
the existing accommodation could not be adapted to suit their
needs.
The changes to mandatory DFGs will be covered in
both the housing renewal guidance and the new guidance on disabled
adaptations, which this Department is producing in conjunction
with the Department of Health.
2. Requirement to produce a published
policy
The committee is correct in that the draft Order
makes no requirement for a local authority to have a published
policy. Without a policy an authority would not be able to give
assistance under its article 4 power, although they could of course
adopt a policy of offering no financial assistance for housing
renewal. In some authorities this might be an appropriate course
to follow if the authority feels it does not have a serious problem
with private sector conditions and feels that it should focus
on advice and preventive measures. However we expect such cases
to be very few indeed and would expect the Housing Inspectorate
to take a dim view of any local authority that did not address
actively its housing renewal needs. Further, local authorities'
Housing Investment Programme allocations are partly determined
by the existence and quality of their housing policy. On balance,
however, and furthering the objective of giving local authorities
maximum discretion to determine their own policies and priorities,
we think that the proposal in the order linking the requirement
to publish a policy to the use the power is the best way forward.
3. Status of the guidance
The problem here seems to be the way we have explained
this in the Explanatory Document, rather than the conclusion we
have arrived at. We have further corresponded with Philip Bovey,
the lawyer who has advised on the status of our guidance. He confirms
that he did not advise that we could not require local authorities
to have regard to guidance. He did however have concerns which
related to the intended effect of the guidance.
He said that if the intention was simply that the
guidance should consist of information, advice and exhortation
then it did not accord with the Guidance on Codes to take a power
to issue it. If, on the other hand, it was intended to have some
legal effect then, to avoid sub-delegation, it would be better
to set it out in a schedule as subordinate provision. He suggests
that there is no reason why "have regard to" type considerations
cannot be included in that way. This is the approach we have adopted.
Further to a discussion between Philip Bovey and
our Housing Minister, Lord Falconer, it was decided that it would
be better for the guidance to be administrative. Subsequent to
Philip Bovey's advice, we have gone through the whole of the existing
legislation, and have identified only a few additional provisions
(as set out in Chapter Five of the Explanatory Document) that
we think we need to include in the Order as procedural safeguards
which we require the authority to follow. We propose that everything
else is best left to non-statutory guidance, rather than to subordinate
provisions. The guidance itself will focus mainly on setting strategic
priorities (which do not lend themselves to legislation), on principles
already set out in other legislation (such as the duty to obtain
Best Value), and on principles already enshrined in administrative
law (such as the need to act reasonably and fairly), or on procedural
issues (such as steps to minimise the risk of fraud).
4. Financial advice
Local authorities already have the power (and previously,
the duty in the case of Right to Buy) to give loans and
mortgages under the Housing Act 1985, so giving financial advice
is not a new role for authorities. The reforms to their loan-giving
powers (for the purposes of housing renewal only), at their simplest,
mean that they can determine the rate of interest that will apply,
rather than adhering to a market rate.
Although local authorities will be exempt from the
Financial Services Authority (FSA) mortgage regulation, authorities
will be answerable to the Local Government Ombudsman (LGO). The
Department is currently looking at how the LGO and Financial Services
Ombudsman can work together in the future. In due course the guidance
will incorporate guidance from the FSA on giving financial advice
and administering loans (unfortunately we hoped to include this
advice in the guidance now; however we understand that Treasury
are making further changes to the regulation of mortgages and
financial advice and therefore the FSA guidance will not be published
until 2003).
The guidance will cover the following issues:
- Key principles - e.g. transparency, fairness.
- Information e.g. about terms and conditions at
key stages of the process
- Use of standard formats, e.g. APR
- Repayment conditions
- Loan administration, with reference to the PIU
report on Modernising Government Loans. use of a common assessment
procedure for all loans administered by the same body
- Dealing with complaints and redress procedures
- Using a third party loan provider - guidance
on referrals and duty of care issues
- Provision of proper financial advice - who qualified
to give; what standard to expect; duty of care issues
- Training of staff - e.g. IFA qualifications
We hope to be able to supply the committees with
a first draft of the guidance in early March.
The draft Order would also enable authorities to
offer help and advice through third parties, which could be Independent
Financial Advisors, Home Improvement Agencies or specialist not-for-profit
organisations, such as the Home Improvement Trust (HIT) or Aston
Reinvestment Trust (ART), who run equity release and small loan
schemes. There are already examples of partnership working of
this kind - the HouseProud scheme in Birmingham involves a partnership
between the City Council and HIT and ART to deliver a range of
financial assistance for housing renewal, including equity release
loans. We can provide the committee with more details of how this
scheme works if they are interested.
5. Land charges
We agree with the Committee's interpretation of the
existing legislation in section 138(2) of the Housing Grants,
Construction and Regeneration Act 1996. It does appear to allow
authorities to place a land charge immediately after a mortgage,
and higher than any other secondary charges on the property, e.g.
personal loan. The Order would enable local authorities to place
a charge on the property and the option of deferring their own
charge - which could help where the authorities are working with
a lender to provide help in connection with a move. It does not,
however, give them the power to place it higher than any other
existing charge - we are possibly reducing a necessary protection
for authorities in ensuring they can recover any assistance secured
by a land charge. We will consider, in consultation with our lawyers,
whether this is a protection that we need to retain in the Order.
6. Authorship of report informing declaration
of renewal areas
The Committee is correct in saying that the requirement
to ensure that the report is from an approved source is not contained
on the face of the Order. The proposal to remove from existing
legislation (section 89(3), 1989 Act) the requirement that the
report is prepared "by a person appearing to the authority
to be suitably qualified" is a matter of streamlining the
legislation and removing over-prescriptive provisions. We believe
that this provision does not offer any substantive protective
value as it is at the discretion of the local authority as to
who is a "suitably qualified". We would expect the authority
to ensure, in declaring a renewal area, that the report is prepared
by someone who is appropriately qualified. The housing renewal
guidance will include advice on this as necessary. As a final
protection the revised 1989 Act will contain a power to allow
the Secretary of State to issue separate statutory guidance on
the declaration or extension of renewal areas, including who prepares
the report, should the need arise.
7. Guidance in Wales
We hope to be able to provide the Committees with
a fuller version of the guidance in early February. Separate guidance
will be issued in Wales, but will be largely based on the English
guidance. The main differences will reflect different funding
mechanisms in Wales and the National Assembly's National Housing
Strategy for Wales. There will be appropriate cross references
with other housing issues in the Strategy which will interface
with the new arrangements and links with other related areas of
activity which fall within the Assembly's responsibilities e.g.
Social Services, Health economic/environmental issues.
We are liaising with Brendon Hilbourne at the National
Assembly for Wales on this matter. He is responsible for amending
the guidance to reflect Welsh procedures such as the different
financial arrangements in Wales. Brendon is also on the steering
group advising on the content of the guidance. We will ensure
that both the Parliamentary Committees and the NAW see both versions
of the guidance before the Committees make their final decision
on the proposal.
8. Start-up costs to local authorities
The costs will very much depend on what changes the
local authority chooses to make to its existing housing renewal
policy. Some may choose to continue their current policy of offering
grants. The production of a published policy may entail some additional
costs, although authorities should already have a housing renewal
policy in place. Other local authorities may choose to significantly
change the way they give assistance, for example through setting
up a loan scheme to replace or supplement the existing grant regime.
The costs will again vary depending on the size and existing resources
of the authority, as well as the scale and nature of the proposed
scheme. Authorities are likely to introduce new initiatives incrementally
to respond to issues as and when they arise and as new forms of
assistance develop, and so the costs of implementing the reforms
could be spread out over several years. It may be possible for
authorities to reduce the costs of administering grants, for example
in replacing the means-test with a fixed-rate contribution.
Sandwell and Dudley MBC estimate that start-up costs
could be in the region of £55,000, which includes a housing
needs survey, consultant fees, publicity and consultation. It
has cost Birmingham City Council (working with the Home Improvement
Trusts) £250,000 to set up the HouseProud scheme, which offers
a range of equity release loans for housing renewal. As the largest
authority in England, this is not representative of the costs
likely to be incurred by most authorities adopting this or a similar
scheme; where authorities choose to work together to offer schemes
on a sub-regional basis, costs could be significantly reduced.
The Government does not intend to allocate a separate
fund for local authorities for this purpose. We hope that local
authorities will take advantage of the flexibilities offered by
the single capital pot to be introduced in April 2002, and commit
the necessary resources to fund such a scheme, if they believe
it to be worthwhile. Further, we envisage that loan recycling
will enable some authorities to make better use of their resources
in the medium to long term.
9. Ability of local authorities to exercise
discretion
Local authority discretion on its housing renewal
policy is underlined by the introduction of the single capital
pot from April. Once the new powers are available they will have
wide discretion on the choice of policy to be adopted and the
amount of resources allocated within overall budgetary limits.
The Government has no plans to restrict this discretion although
we will of course continue to monitor local authority policies
and have regard to local authorities Housing Investment Programmes
and reports from the Housing Inspectorate on their performance.
10. Level of support for local authorities
There are no plans to recoup the savings made by
local authorities from loan schemes - the intention is that any
receipts received through a loan fund can be recycled into local
authorities programmes to help additional people who need support.
The Government has no plans to change the level of resources available
to private sector renewal but is fully aware of the scale of the
problem of poor condition stock in the private sector and the
linked problem of decay and obsolescence in certain areas. These
issues and the resources available for tackling it are the subject
of consideration in the current Comprehensive Spending Review
2002 currently underway and to be published in June 2002.
Article 8, to which the Committee refers, is a reserve
power carried over from the existing legislation which allows
for the repayment of grant in cases where there has been fraud
or misuses of the grant power. The draft order would allow the
Secretary of State to pay and recover contributions towards' local
authorities' expenditure in relation to the new power including
amounts defrayed for mandatory DFGs in similar circumstances as
for the existing grant regime.
11. Changes to the discretionary DFG regime
We can confirm that there are no similar funding
implications for DFGs in Wales. The funding mechanism for DFGs
in Wales is different from England. The resources for DFGs (and
renovation grants generally) are not ring fenced or hypothecated
in Wales but are included within the General Capital Funding that
the National Assembly makes available to authorities. It is for
local authorities to determine the amount of those resources they
wish to use to support DFGs in the light of their local priorities.
The changes resulting from the Regulatory Reform Order will not
affect these arrangements.
12. Report on consultation responses
We are finalising this report and it should be available
in early February. We will send it to Committees as soon as we
can.
29 January 2002
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