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

Memorandum by Special Interest Group of Municipal Authorities (Outside London) (SIGOMA) (HOU 16)

  1.  SIGOMA is a special interest group of 48 Municipal authorities outside London and is registered as special interest group within the LGA. Its membership comprises all 36 metropolitan districts and 12 major unitary authorities which meet its membership criteria. The combined population of SIGOMA authorities amounts to over a quarter of the population of England. Its member authorities account for over 25 per cent of English local government expenditure. SIGOMA members comprise most of the largest housing authorities in England with an average of 30,000 council houses in each, nearly 1.5 million in total.

  2.  SIGOMA is pleased to have the opportunity to respond to the ODPM Housing, Planning, Local Government and the Regions Select Committee's request for evidence on the availability of Affordable Housing. This response is the result of consultation with its housing members and aims to address the key questions raised in the document from the perspective of SIGOMA Authorities and the particular issues they face. Each question posed by the Committee is considered in turn.

  3.  In summary SIGOMA has the following view on the means to ensure affordable housing.

    —  Extra housing resources introduced into CSR2002 will make the attainment of the decent homes standard by 2010 highly unlikely.

    —  The number of Authorities which are heading for long-term HRA deficits will produce unacceptable pressures on Authority repairs funds.

    —  A separate housing resource fund could subsidise developers to buy land at less than market price.

    —  The market renewal fund should be directly linked to other sources of regeneration funding like the NRF.

    —  Housing Developments should as far as possible take account of future changes in tastes and fashions like new technology, leisure and building materials

Whether the funds in CSR 2002 will be adequate to achieve the government's target of a decent home by 2002 and how spending should be balanced between social housing and options for owner occupation.

  4.  The initial figures for budgeted housing expenditure presented in CSR 2002 seem impressive in that the annual average real growth over the period will be around 4.2 per cent however the growth in annual real housing resources is not as much as it was in the last spending round. When this growth is matched against the future commitments of the housing agenda then it does not seem enough to fund the radical step change in housing policy that the Government needs. The money in CSR 2002 is meant to cover three principal housing priorities; additional affordable housing in the South East to cover the increasing needs of key workers, new funding to turn round areas of abandonment and low housing demand and the commitment to ensure that the social housing stock provides decent homes for tenants by 2010.

  5.  None of the above commitments were properly funded from existing resources.

Work by Professor Christine Whitehead of the LSE and Alan Holmans of Cambridge University on behalf of Shelter argued that a doubling of housing funding would be nearer the mark. Their estimate took account of:

    —  The projected requirement for additional housing ( 85,000 dwellings a year—60 per cent of which need to be in the South of England).

    —  The cost of unmet needs, housing repairs and major regeneration.

  6.  Work by the Joseph Roundtree Foundation entitled "Land for Housing" has made it clear that the majority of the housing shortfall is concentrated in affordable housing which requires additional subsidy to make it accessible to those on low incomes. At even £35,000 subsidy per unit (the absolute minimum for the South East) 10,000 additional affordable homes will use up more than a third of the total available for this initiative.

  7.  The MRA is destined to fall by some 16 per cent in cash terms between 2002-03 and 2005-06. This cash reduction is set to fund estate transfers and offer more help for low value full transfers. However the MRA is used by Councils to keep their existing stock of housing at an acceptable level of repair. Any such reductions should be cause for some concern. More resources will be required to improve the retained housing stock Authorities.

  8.  In terms of capital resources for housing around 80 per cent of the increase in basic credit approvals goes into private sector renewal and the balance goes into the public sector. For the 2002-03 capital budget for housing the Government is only adding some £332 million to this figure, the rest is from set aside capital receipts.

  9.  It is unclear as to whether there are adequate resources to extend the existing housing PSA's (to bring all social housing into decent condition by 2010) to include "increasing the proportion of private housing in decent condition occupied by vulnerable groups". Such a move would require strengthening the strategic housing role of Authorities that would increase the responsibilities over both housing sectors this might require an increase in non HRA EPCS resources to cover the funding.

  10.  A further pressure on Authorities reaching the decent homes standard is the number of Authorities who are heading for HRA deficits. This is a direct result of rent reform measures and right to buy eroding subsidy. It is illegal for councils to let HRA's go into deficit so spending must be cut. In many cases the guideline rents that have been used in the subsidy calculations are actually lower than the Councils receive. Problems stem from the fact that councils are required to project HRA income and expenditure between 5 and 10 years ahead whilst only one year's HRA subsidy income is guaranteed. The easiest area in which councils can make significant cuts is in their housing repairs budgets. Reducing the latter will hamper the ability of Local Authorities to reach the decent homes standard. Such HRA positions may also put pressure on Authorities to undertake stock transfers.

  11.  In very broad terms the South East will receive an emergency cash infusion to build homes for the lower paid and the North will get a slower escalation of resources to kick start market renewal. There is however a need to balance demand over the whole country not just parts of it. Research done for SIGOMA on the Geography of Public Expenditure examined the destination of housing resources. It used data mainly from 1999-2000 to identify per capita resources on the HRA, Housing Corporation and HIPS. The results are given in the table below.

Table 1


Housing Revenue
Total Income
Met. Counties
All SIGOMA Authorities
Non-SIGOMA Large Towns
Other non-SIGOMA

  12.  Table 1 above shows the pattern for the housing-related expenditure. Given the pressures on the housing market in London, the high levels of per capita funding for London may cause few surprises. However, the low relative levels of Housing Corporation funding for all of the SIGOMA authorities is certainly unexpected. In contrast, HRA income and HIPs funding are somewhat higher for SIGOMA authorities than for England as a whole. This is underpinned by the allocation of the latest £200 million challenge fund monies (part of the Housing Corporation's ADP) exclusively to London, the South East and the East.

  13.  The Housing Corporation could have a key role to play here with perhaps greater transparency of its regional allocations. Specific themed pots of money could focus on; new build, renewal and regeneration. The surging housing market promotes the view that the Right to Buy in certain areas might need to be suspended as tenants strive to buy their houses at a discount with the possibility of making a profit by selling them on. Such moves might cause significant damage to affordable housing in an area. Housing Associations and Local Authorities should work together for in year bidding to the Housing Corporation as opposed to an annual bid round. In year bidding would be far more flexible and would increase the throughput of housing resources.

  14.  Councils outside the South East have argued that the Starter Home initiative should be extended to themselves. This is particularly true of the Harrogate, York and the East Leeds area where prices for terraced houses have reached £125,000. It still remains unclear as to the consequences to Authorities if they were not to meet the decent homes standard.

The role of planning obligations in the provision of affordable housing

  15.  In terms of affordable housing on new developments much depends on the strength to make the case on a site by site basis. The affordable element of a section 106 planning agreement is linked to the total number of sale units on the development. Under section 106 of the Town and Country Planning Act 1980—planning gain—local Authorities can negotiate with developers for a significant proportion of affordable housing in new developments in exchange for obtaining planning permission. In order to include housing at below market rates developers must buy land at below market price. The risk is that landowners will refuse to sell land for housing and sell it for more profitable uses instead. Schemes are in danger of collapsing whilst planners and developers argue about planning gain. It seems tempting to put the onus on the developer to build affordable homes however they will not do so if their profits are too adversely affected.

  16.  Alternative proposals contained in last December's DTLR planning Green Paper revolve around the concept of tariffs. A developer would give a financial amount per property built instead of giving a commitment to build a specific number of houses. This would have the probable advantage of being more transparent but would still involve a developer paying monies up front in an agreement. An advantage of this type of arrangement over the 106 mechanism is that it could apply in a more standard way and over a larger number of sites. In terms of the 106 mechanism it needs to be negotiated every time a new agreement is undertaken.

  17.  There are also concerns about the tariff approach and it is not very popular. Social Landlords worry that because these new tariff payments would not be ring fenced to housing then they could be used elsewhere to fund non housing Local Authority expenditure. Some solutions to speeding up the planning process would include more joint working between Local Authorities with a combined approach to Developers perhaps covering several Authorities in a local area. These approaches would have to address the needs of the developers realistically and could include a common approach. Such an approach would need additional funding from non HRA Environmental and Protective services SSA (EPCS) resources.

  18.  From the Developer's perspective if land is worth £1 million and he is required to build ten houses costing £10,000 each then the developer may only wish to pay £900,000 for the Land the gap funding would need to be found from somewhere. Presently it would be included in the total value of the scheme. It may be possible for separately identified public sector resources to fund this acquisition gap. This might help simplify the negotiations on the number of affordable houses that a developer would be able to put up. It must also be recognised that it is easier to achieve significant developer contributions in areas of buoyant housing demand.

The effectiveness of the housing market renewal fund in tackling housing needs in areas with low demand

  19.  This fund has always been viewed as an excellent idea for a low housing demand area but it is still too soon to tell how successful the fund will be. The methodology to be used will cover acquisition and demolition. Each area will need to be examined in turn to see how best the local housing market can be stimulated. A more worrying possibility is that funding might be withdrawn if certain regeneration targets are not met. It is important that these low demand areas are given adequate time to regenerate. Housing organisations need to evolve and develop the tools to analyse local and sub regional housing markets.

  20.  Land could be acquired by Community Land Trusts involving partnerships of Local Authorities and Developers. These partnerships could assemble strategic sites and work with local communities. Indicators for success should include the sustainability of the private sector markets over the long term. If a site is demolished it will make it more attractive for developers. They will move in and improve it thus improving the quality of sites, which are around it. Accurate demand planning is critical. Will an area need 400 one-bedroom flats or 200 three-bedroom houses?

  21.  The Market Renewal Fund cannot operate in isolation from other renewal and regeneration initiatives. There must be a close link to these other initiatives. Research commissioned by SIGOMA from the University of Manchester on the Geography of Public Expenditure identified a number of key factors for regeneration.

  22.  Greater powers and resources should be channelled to English regions. This could most valuably be done on the basis of a variable regional geometry. Greater powers would increase the likelihood of disadvantaged regions being able to develop strategies to enhance their competitiveness through economic clusters. The urban renaissance agenda is a vital lever in helping large northern cities to turn around their economic prospects and it is important that government gives this high priority. Many of the targeted regeneration programmes can have critical spillover benefits within the broader urban areas.

  23.  Government and public agencies need to develop a greater sensitivity to the geographical implications of their expenditure decisions. If it is accepted that regional disparities work against the interests of the economy overall, there is a compelling case for public bodies to assess whether their expenditures reinforce or counter such disparity. Currently, this seems not to be done systematically across all spending programmes.

  24.  Part of the sensitivity to the geography of public expenditure should be a national consideration of existing allocation mechanisms such as the Barnett "formula" and Area Cost Adjustment (there is a requirement for a national needs based allocation formula for government spending resources). It is important that the fund achieves a long-term impact and cannot be allowed to provide a temporary cash fix, which, when exhausted, will make an area revert to decline. The evidence of some Housing Action areas from the 1980s and before should not be repeated. The focus of the market renewal fund should eventually be widened to include more low demand areas.

How the quality of new affordable housing can be ensured and the poor design of previous house building programmes avoided?

  25.  There is a now more of a push for prefabricated constructions as a possible solution to the housing shortage. The emphasis is on off site modular construction and on site assembly. Homes can be built more quickly and with fewer defects, higher energy efficiency and better noise insulation and as proved by at least some manufacturers, increased design flair. There are also pressures developing for more ecologically friendly homes and the Government could reduce stamp duty and the VAT rate on new homes which meet the Eco homes standard, which grades homes on energy and water use and proximity to public transport.

  26.  In the 1960 s single tenure monolithic developments were poorly built and resulted in problems for their tenants. If developments were not backed by Local Authority Social Housing grant and did not adhere to scheme development standards then the risks of poor construction were high. Existing scheme development standards would need to be preserved but building for current demands will not suffice. Requirements of the future should be built into new housing developments like for example computer terminal access, solar heating cells and high levels of insulation against heat loss. In terms of more modern prefabricated factory built houses these are far easier to configure to the demands of the modern world than houses, which have been built using traditional methods.

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