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
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 year60 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
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
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.
HOUSING: AVERAGE PER CAPITA EXPENDITURE
|All SIGOMA Authorities||300.76
|Non-SIGOMA Large Towns||201.33
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
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 1980planning
gainlocal 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
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