Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Minutes of Evidence

Examination of Witnesses(Questions 420-436)



Chris Mole

  420. We have been told by other witnesses particularly from housing associations and local authorities that your funding regime maximises the number of units and leads to skimping on quality. Do you agree and, if so, what changes might there be?
  (Mr Hadden) No, we do not agree. We think our scheme development standards set minimum standards which associations are expected to meet or beat and, if you talked to house builders, they would tell everybody that our standards are too high. So, it depends to whom you talk.
  (Dr Perry) We do have a debate with the house builders who quite often say, "Why is it that housing associations do not just buy our standard products? That way they could get them cheaper and we could actually produce more of them." Part of the reason is that social rented housing is not the subject of home improvements—people do not move in and add a conservatory. Also, the occupancy rate in social housing is often quite high because, for reasons you will understand, housing associations do not like to see under- occupation for social housing whereas, in the owner occupied sector, there is quite often technical under occupation.

  421. How do you make sure that lifetime costs of homes are taken into account in your funding regime?
  (Mr Hadden) We do not at the moment. At the moment, our regime is based on upfront capital cost subsidies. It is something we are conscious of and we are due to have discussions with some researchers and other bodies looking at this area. It is a complicated area. We do not know where this is going to lead us but it is on our agenda.
  (Dr Perry) We are very keen to do it especially for people on lower incomes because the actual costs of living in a home, the utility costs and heating, lighting and whatever, are quite important to them and are a big proportion of their income, so we think we have a vested interest in trying to minimise the costs of occupation of our homes. So, we are very keen on lifetime costs.

  422. Mr Clelland was just pursuing the question of high density homes. They often require higher management costs. How are these reflected in the funding allocations to associations?
  (Mr Hadden) First of all, I am not sure whether the premise is right, whether it does increase costs. I think associations have standards that we expect them to meet in terms of managing housing association properties and they can spread their costs over the whole stock.


  423. Surely if you go for a high density, you have to put in lifts and things like that.
  (Mr Hadden) It depends what clients you are selling to.

  424. Once you put the lifts in, keeping them clean and sweet is quite a cost, is it not?
  (Dr Perry) For lifts, our grant system has extra in it for height. So, if you build a multi-storey building that needs lifts, then the costs do allow for that.

  425. That is not quite the question that Chris Mole was asking you. The question he was asking you was about management and service costs of those once they are in place.
  (Dr Perry) That must be for the association to determine. We do not give grants for management. They are an independent social business; they work out what their costs need to be. In a high density scheme, they will have done their calculations of what their management costs will be per unit and built those into their long-term arrangement.

  426. But you are the regulator, so you have to work out whether they are having reasonable service charges or whether those service charges are excessive and whether those service charges are actually being spent on making facilities much better for the tenants or whether in fact they are just high management costs.
  (Dr Perry) I am not clear, Chairman. Social tenants do not pay service charges, they pay a rent.

  427. A proportion of that rent is for those services, is it not?
  (Dr Perry) Yes, it is.

Chris Mole

  428. Just to finish off, a number of the submissions to the Committee have complained that TCIs do not take account of the true development costs in their area particularly where land values are high. How can you make total cost indicators more sensitive?
  (Mr Hadden) Total cost indicators are an amalgam of build costs and land values and inevitably for any particular local authority area are an average and therefore there are high cost parts of local authorities and low cost parts of local authorities and trying to accommodate that is very difficult. We start with an average, there is some flexibility. We can approve up to 130 per cent of TCI and we review the TCI levels every year in conjunction with the Department and other bodies.

Alistair Burt

  429. The National Housing Federation and others have suggested that housing associations do not have the resources to meet the decent homes standard because of a lack of funds. Is this right and is it a matter of worry for you?
  (Dr Perry) No. I am surprised they said that because we are monitoring the situation very closely and, at present, we have no reason to think that the housing association sector will not meet the decent homes standard by 2010. A lot of the stock is newer than conventional council stock and standards of maintenance have traditionally been higher. So we think that is not going to be a problem.
  (Mr Hadden) There may be an issue that, through the approved development programme, we only have a very small amount of money available to fund major repairs and that may be what they are getting at. The reason why we only have a very small amount to fund major repairs is because we are trying to meet the targets set for us by Government in terms of the new homes scheme provided.

  430. So, if you wanted to improve that amount spent on maintenance—and the figures we have are about one per cent of the fund, about £50 million spent on that . . . ?
  (Mr Hadden) That is correct.

  431. Would you now be pressing, in view of what you have just said, for this amount to be increased?
  (Mr Hadden) Not necessarily because, as Dr Perry said, most associations are on target to meet the decent homes standard.

  432. So you are content that that is sufficient for maintenance?
  (Dr Perry) It would be nice to have more resources. Essentially—and this goes back to Mr Mole's question about TCIs—we are in a rationing situation. We have the resources which the Government make available, we have the targets which the Government set for us and basically we try and balance the resources against the targets and TCIs are part of that rationing mechanism rather than some completely objective measure of how much it really costs to build a house.


  433. So you are not prepared to go to the Government and say that you have this rationing system which just does not meet the need?
  (Mr Hadden) As part of our submission for the spending review, we did say that we could spend more money on major repairs because there is a demand there, but we have to balance up the different needs in terms of the need for producing new homes as well as providing—

Alistair Burt

  434. That is true but do you exercise your own judgment on the relative priority in that, if you came to the conclusion that it was a priority to spend more money on maintenance, would you go to the Government and say so and therefore ask for more money?
  (Dr Perry) Yes, we certainly would. The "decent homes" standard is a very high priority for the Government. If we felt that the sector that we regulate did not meet that target, yes, we would go to the Government and tell them.


  435. When the Select Committee looked at the new towns inquiry, we went to Telford and we were lobbied very hard by a stock transfer company, but they were very short of resources to bring most of the transferred stock up to the "decent homes" standard. Now you would be able to let them have a lot more money.
  (Dr Perry) No. In Telford, having received new town housing stock with some unconventional building methods in the past, they have a particular problem that we recognise and we are working with them to try to do something about it.

  436. Telford is one example. When we went round almost all the new towns we found that they all have that problem.
  (Dr Perry) It is something that relates to new towns, but for the majority of housing associations around the country, we do not think, on the evidence that we have, that that is an issue at the moment.

  Chairman: On that note I thank you for your evidence.

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