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

Memorandum by East of England Development Agency (EEDA) (HOU 06)



  1.1  Investment in housing is an important strategic tool in both economic growth and regeneration. Jobs, housing, commuting and the environment are interrelated. The amount, type, distribution and quality of affordable housing have a critical role within the overall contribution of housing in meeting the challenge of delivering the long term vision of creating sustainable, socially mixed and balanced communities. That is, to ensure that everyone has the opportunity of a decent home and the quality of life that goes with it.

  1.2  Affordable housing is a strategic, quality of life infrastructure priority in the East of England. The Regional Economic Strategy makes clear that an adequate supply of affordable and high quality housing is essential to building sustainable communities in our urban and rural areas, attracting and keeping businesses and skilled individuals.

  1.3  Affordable housing provision has been insufficient to meet need in the East of England. Demand for social rented housing outstrips supply. This has arisen because of inadequate resources and the inability of house builders, developers and housing providers to deliver affordable housing to meet different needs. Growth in the RSL housing stock has not compensated for losses following the Right to Buy scheme, and the overall reductions in finance for new-build Local Authority housing.

  1.4  The issue is how to increase the proportion of housing that is affordable as well as the total, in ways that address the objectives of delivering decent homes, social inclusion and well-being in sustainable communities.

Priority Needs

  1.5  Historically, restricted funds focuses resources on those in priority need. That related to households unable to afford market priced housing who were in unsuitable housing, or sharing a dwelling when they required to move to separate accommodation, or homeless. Priority needs reflect low incomes and key household characteristics. Many are in receipt of state benefits and their housing and related costs, such as energy use and transportation, represent a high share of their income. Historically, priority needs have been met by publicly subsidised, social rented housing.

  1.6  Sustainable economic development, increasing prosperity, promoting social inclusion supported by initiatives to improve skills and deliver regeneration should enable more households to afford to purchase or rent housing on the open market. However, the future, long-term consequences of an ageing population will impact on the demand for affordable housing. The problems are likely to become more acute in the frail elderly and vulnerable groups as their numbers grow. In the absence of sufficient capital, owner-occupation is unlikely to be the primary solution to meet such needs.

Wider Needs—Key workers plus the intermediate market

  1.7  Housing need takes many forms, reflecting the needs of the homeless, the elderly, the ethnic minority groups, key public and private sector workers and lower paid workers in all sectors. In the East of England the need for affordable housing is wider than traditional priority need. Significant additional resources will enable a wider range of needs to be addressed. They are essential to overcome the problems faced by workers who can't afford housing in areas of high prices, particularly for owner-occupation. These cover households eligible for Key Worker housing initiatives. It also includes a growing sector of people in employment that fall between categories of need yet have insufficient income to purchase or rent privately and are not eligible for social housing or help with their housing costs.

Variation across the region

  1.8  The region has a significant affordable housing problem where households are priced out of the market for owner occupation and where there is a lack of suitable alternative affordable housing. The problem is extensive but not uniform across the region. There is considerable diversity regarding supply and relative affordability of housing as well as marked differences in economic and employment opportunities. Understanding affordable housing provision in the context of housing markets' dynamics is essential due to significant variations in the structures of regional and local housing markets. That includes the need to avoid exacerbating problems of sales and lettings in areas of unpopular housing.

  1.9  In the East of England the affordable housing problem is greatest in:

    —  rural and coastal areas where the demand for the lifestyle of "country living" and for second or retirement homes raises house prices. This has an adverse impact on social inclusion where residents of local communities cannot afford the raised prices and are forced to move elsewhere or continue in inappropriate housing. The focus of Government planning policy on urban development is likely to limit the opportunities for rural affordable housing;

    —  economically buoyant areas experiencing in-migration and high housing demand pressure that could jeopardise their competitiveness eg in the south of the region with close links to London and growth areas eg Cambridge.

  1.10  In these economically buoyant areas, pressure on the dwelling stock and housing land supply shows no sign of diminishing. This results in high house prices leading to more people who cannot afford to buy or rent near to where they work needing affordable housing in spite of reasonable wage levels. This applies pressure to the transport network. It is an obstacle to the economic growth of the region through the adverse impact on the labour market by causing difficulties in recruiting and retaining staff, whether skilled workers or key public sector employees. Recent house price inflation of 20 per cent has not been matched by wage increases. It exacerbates the problem by widening the affordability gap. Even major house building in these areas is unlikely to reduce house prices down to a level that becomes "affordable" to low and medium-waged workers.

  1.11  House price reflects supply and demand, including land cost, rather than simply housing quality. House price inflation continues. The East of England has the third highest prices in England. Average house prices in the region rose by 49 per cent from £94,700 in 1999 to £140,800 in the second quarter of 2002, exacerbating the affordable housing problem. CACI Ltd data for 2002 shows mean household income to be £28,200, although the median is only £21,300. There are considerable intra-region variations. The latest average price in Hertfordshire is £192,000 compared to £98,700 in Luton (but still significantly lower than in Greater London where the average is currently £232,800). The southern part of the region (the M11 corridor) has an average house price to average income ratio of 4.5-5.

  1.12  In the Cambridge sub-region for example, long-term house price inflation has been accompanied by shortages of workers across a wide spectrum of industry sectors, notably "key workers". They find even the cheapest homes beyond their reach, unless they commute long distances, despite relatively low interest rates and a stable economy. In addition to police, nurses and teachers (such as those qualifying for the Starter Home Initiative), other public sector workers who deliver essential public services are also key workers.

  1.13  An element of the enhanced resources for affordable housing, should be identified specifically addressing the issue of delivering affordable housing in the intermediate housing market. Low cost home ownership mechanisms enable workers in the intermediate market to afford local housing nearer to where they work. It would widen the choice available for those aspiring to home ownership, acting as a stepping-stone to access the main housing market rather than more social rented housing. Extending the Starter Homes Initiative will address part of the problem. It is essential to widen the category of eligible workers to include key private sector employees critical to the sectoral growth of the buoyant areas.

  1.14  However, the current Starter Home Initiative is modest compared to demand pressure. There is a risk that significant increase in the provision of loans, in a limited area will have the unintended effect of driving up local house prices as workers compete for housing.

  1.15  Concentrating on the supply side subsidies is another solution, where non-profit housing providers are the main vehicles delivering affordable housing and the availability of land at submarket prices is core to provision. However, whilst solutions such as employer-involvement as potential partners for community investment, provide land and develop shared-equity schemes may be an option for the public sector, it is unlikely to be a primary solution eg for high tech employers in the Cambridge area (where there is a high incidence of small companies who are unlikely to have major land holdings).


  2.1  Not all need will be achieved through fiscal policy and public subsidy via the Housing Corporation and Local Authorities. Planning obligations achieved through development values will continue to provide key opportunities delivering high quality affordable housing by securing financial contributions through planning agreements with developers. It is essential that planning powers and best practice guidance are used effectively to deliver affordable housing within new private sector developments.

  2.2  The level of need suggests that all opportunities to deliver affordable housing should be explored. However, care is needed to ensure that housing schemes remain viable.

Use of S106 Agreements

  2.3  On the supply side, these legal agreements available under the Planning Act offer a key opportunity to seek affordable housing as planning obligations from development subject to national and local planning policies on housing need, district and site targets, thresholds, and commutation. The scale of future development in the region offers a key mechanism for significant contributions to delivering affordable housing in sustainable communities in sustainable locations. The use of, and associated difficulties with, Section 106 agreements are well documented.

  2.4  Providing affordable housing is a continuous effort to speed up procedures to overcome delays from: conclusion of planning agreements, impact of Government guidance, problems of infrastructure deficiencies, and plan preparation. Whilst it is essential for development to make appropriate contributions, the benefit of reducing thresholds to broaden the number of contributing schemes could be offset by the cost in time and resources in pursuing relatively modest contributions from a larger number of small schemes. Simplicity and certainty are the key to avoiding undue delay and cost.

"Rural Exceptions"

  2.5  Current Government guidance makes clear that there can be occasions when sites can be released for housing as an exception to normal planning policy, to provide affordable housing. Local Plans can include policy to enable such housing within the local plan strategy for sustainable development. This should only be in rural areas and such sites should be located within or adjoining existing villages. It must meet proven local need, should be secured on a long term base eg through S106 agreements so it remains affordable in perpetuity, and not comprise a mix of high quality and low cost housing.


  3.1  The Government acknowledges that the affordability gap is so large no one solution will bridge it. Furthermore, the people in that gap are not a homogenous group. It is seeking a step change in addressing the delivering affordable housing (including homelessness). Solutions to the shortage of affordable housing are to be sought in much wider ways than simply looking for greater public subsidy. This means exploring many other issues affecting delivery including funding, attracting private finance, the use of public sector stock and land, and encouraging industry and employers to respond to this challenge.

  3.2  The sum announced in CSR2002 is substantial. This will provide additional resources over the next three years for affordable housing and new mechanisms for the strategic delivery of housing. Strong and secure communities are a Key Priority Area. The settlement provides for a substantial increase in investment in affordable housing to rent and own in London and the South East (including parts of the East of England). The ODPM has announced increased provision of affordable key worker housing, including the £200 million "Challenge Fund", to provide new homes for rent and low cost sale in the South East of England.

  3.3  New investment addresses regional housing problems, dealing with the diverse effects of high prices and shortages of suitable housing in areas of strong economic pressure. Three of the four named growth areas, (Thames Gateway, Ashford, Milton Keynes and the London/Stansted/Cambridge corridor) are wholly or partly in this region and will have major impacts on the scale, pattern and rate of growth and the availability of affordable housing.

  3.4  When the DPM announces major housing reform plans later this autumn/winter it will then be possible to assess the impact for the region of bringing together existing funding streams into a single non-ringfenced budget via a strong regional housing body—to better integrate decisions on housing, economic development, planning and transport.

  3.5  Other mechanisms will influence the effectiveness of new funds to help deliver affordable housing as part of an integrated strategy in the region notably :

    —  The new role of English Partnerships as a key delivery agency-centred on: ensuring effective co-ordination of plans for key worker and affordable housing by working closely with the Housing Corporation and other key agencies such as RDAs; and

    —  the new housing and planning involvement for RDAs, strengthening their role as catalysts for regional economic development via work with regional partners.


Density, design and quality

  4.1  The quality of development is a critical component of affordable housing provision if new stock is to be sustainable, attractive and long lasting. More affordable housing can be delivered by making higher density living acceptable and enabling more dwellings to be built from a constrained land supply through making better use of land by: building at higher densities; using good design and quality building (including smaller dwellings, use of airspace, efficient layouts). Reducing land cost per unit also delivers more affordable housing from the providers' available resources.

  4.2  Affordability issues also impact on sustainability. The future cost of living in property is affected by what is built. Long-term affordability is therefore helped by housing being high quality, resource and energy-efficient. They are easier to maintain, need less repairs and are less costly to heat thereby reducing the problems of fuel poverty for lower income occupants. Lessons learnt from the experience of run-down post-war housing estates highlight how important it is to make living in affordable housing more attractive.

  4.3  Sustainable development principles already guide Housing Corporation development. These need to be extended to affordable housing serving the intermediate market. The means to deliver more sustainable, affordable housing should be pursued for example by applying the Construction Task Force's recommendations.

  4.4  Care should be taken in pursuing new construction techniques opportunities to deliver affordable housing more quickly for Housing Corporation-funded or other developments to ensure that greater efficiency, better design and higher quality of development is achieved. It is essential that the implementation of the policy delivers quality affordable housing that avoids storing up problems of poor build quality and design as experienced in previous house-building programmes. Controls through finance, covenants and other agreements with the land owner and housing provider could be used to give greater certainty to the funder, the developer and the occupier.

  4.5  Planning policy and supplementary planning guidance aimed at sustainability issues to raise the quality of design, energy use/efficiency, management of water resources, biodiversity, waste management and healthy environments will provide key tools to encourage developers and occupiers to expect and achieve long-lasting quality.

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Prepared 22 October 2002