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

Memorandum by The Chartered Institute of Housing (HOU 32)

  The Chartered Institute of Housing (CIH) is pleased to make this submission on Affordable Housing to the Select Committee. This evidence should be seen to add to, rather than replace, the evidence that we have already submitted for the Transport, Local Government and the Region's Select Committee inquiry into affordable housing in May.

  Regarding the role that planning obligations in providing affordable housing, CIH has made a separate submission, jointly with the Local Government Association, the National Housing Federation, Royal Town Planning Institute and Shelter.


  The PSA target for 2010 relates to achieving the decent homes standard (DHS) in the social housing sector; it will still leave a considerable deficit in the private sector. The question can be posed separately in relation to local authority (LA) and housing association (HA) homes.

Local authority housing:

  There are four main ways in which LAs can aim to meet the PSA target:

    —  retain their housing stock and use credit approvals, major repairs allowance and other available resources;

    —  retain their stock and bid for extra resources by setting up an ALMO (Arms Length Management Organisation);

    —  retain their stock and raise funds through the PFI;

    —  transfer their stock to another social landlord which can raise funds from outside the public sector.

  In practice PFI seems unlikely to have a significant impact due to the small scale of the schemes in the pipeline. Consideration therefore focuses on the other three options.

  CIH (with Graham Moody Associates) carried out an assessment of the likelihood of the 10-year target being achieved in LA housing, prior to the SR 2002. The conclusion was that, given reduced expectations for stock transfer, with the possibility of a maximum of 1.1 million homes being transferred, some 1.8 million homes would be left in the LA sector by 2011. This would require the funding levels for the LA sector, totalling about £1.7 billion in 2003-04 (in the previous SR 2000) to be maintained for several more years.

  Detailed allocations for LA housing following SR 2002 have not yet been announced. The Treasury would have expected to be able to reduce these allocations, and levels of the major repairs allowance, in step with falling LA stock levels. To meet its target, the Government will have to maintain a higher level of resources. Our calculation was that it would cost the Exchequer some £1.9 billion more in the period up to 2010.

  To achieve the 10-year target, more resources may well be required, unless stock transfer can be made more attractive. CIH has made proposals to Government about increasing the attractiveness of partial transfers and making transfer more clearly centred on empowering tenants. They will be considered in the current "PSA Plus" review.

  It should be noted that there are several difficulties in reaching a firm conclusion about the likelihood of achieving the target:

    —  the "baseline" figure of homes failing to meet the DHS is uncertain: forthcoming figures from the English House Condition Survey will improve the estimates;

    —  initial LA business plans for their housing showed considerable shortfalls against the target—later rounds of business plans should show an improvement;

    —  there is uncertainty about the extent to which initiatives like transfer will help to meet the target—a proportion of transferred properties will already meet the standard;

    —  if the Government increases funding for an initiative such as ALMOs (however desirable), it may need to raise the total amount available for LA housing (because ALMO funding is more generous than normal funding).

  There is no doubt that there is considerable uncertainty as to whether the 10-year target can be achieved in LA housing. The uncertainty is particularly acute in large urban areas (Birmingham, Manchester, Sheffield) where full stock transfer is not "on the agenda".

Housing Associations

  The initial estimate of the shortfall in the HA sector was 500,000 homes. There has been uncertainty about this figure, however, due to be clarified shortly through returns being made by individual HAs. Several HAs are likely to have difficulties in meeting the 10-year target, particularly those with large numbers of pre-1919 properties acquired during earlier urban renewal programmes, which now require reinvestment. The problems are exacerbated by the effects of rent restructuring, which will reduce rental income for many associations, and hence their ability to fund major investment in their existing stock from their own resources.


  A range of housing options are needed for those who, whilst not normally qualifying for social housing, are unable to buy on the open market. The type of housing provided to meet these needs should not be limited to home ownership, but should include housing for rent at less than market levels.

  The reason why housing is unaffordable to those on moderate incomes in some parts of the country is that demand far outweighs supply in these areas, pushing prices up. Any public funding that is made available for intermediate housing should, therefore be used to build new housing, adding to the overall supply of housing in the area. Loans or grants that enable the purchase of existing properties on the open market only serve to increase competition for housing, increasing prices further.

  The relative needs for social housing compared with low cost and shared ownership options will vary considerably between areas. Because of this we believe that techniques to analyse housing markets need to be employed at local/sub-regional level and interpreted in such as way as to determine the projected need for the different types of market and sub-market housing. Local authorities then need to be able to have access to ear-marked funds that enable them to provide reasonably for the range of needs for sub-market housing.

  In some areas it may be appropriate to develop an "intermediate housing market" of significant size to meet the needs not only of key-workers, but of working people on incomes that prohibit them from renting or purchasing suitable accommodation at a price they can realistically afford in that area.

  Planning mechanisms are also needed so that local authorities are able to specify the type of housing they require on sites, differentiating between housing that is affordable to those on low incomes and "intermediate" priced housing. For this reason we suggest that two separate definitions of affordable housing are now required, and this is covered in our separate response relating to planning obligations jointly with other organisations that have a concern for delivering housing through the planning system.


  The CIH has made a separate submission on planning obligations jointly with the Local Government Association, National Housing Federation, Royal Town Planning Institute and Shelter.


  At the time of writing, a total of £25 million has been made available for some early work on the housing market renewal pathfinders. In its Spending Review 2002, the Government made it clear that substantially more money will be available, but the level of funding has not yet been decided. In the submission to the 2002 Spending Review, the Chartered Institute of Housing, together with the National Housing Federation and the Local Government Association calculated that, to address the range of problems in these areas, funding should be phased in from £100 million in 2003-04 to £200 million in 2004-05, and up to £500 million in 2005-06, and sustained at this level for a period of 10 years.

  Housing markets have become dysfunctional in a range of types of areas. The problem is more often associated with urban areas, but it also exists in some rural settings. Former coalfield villages are a good example of rural housing market failure where restructuring of the stock is necessary.

  Early work on the pathfinders has already raised some important issues relating to the range of activities involved in market renewal, and the funding requirements.

  Some demolition will be inevitable and the question of how to provide suitable housing for those displaced from their current homes is an important one, since a substantial part of the current problem is the current mismatch between people's needs and aspirations and the types and quality of housing in the area. There will be a need for a variety of types of new high quality housing, including both market and affordable housing, to meet needs and aspirations of displaced households. Types of new housing include, for example;

    —  bungalows and level access housing for elderly people and people with long term illnesses (of which there are relatively high proportions in many market renewal areas);

    —  family housing to retain families that would otherwise leave the area;

    —  larger housing for large BME households and for better off working people, depending on how economic strategies are expected to affect particular neighbourhoods.

  It will, therefore, be important to ensure that sufficient capital funding for new affordable housing is made available. The timing is also crucial, so that sites where demolition has taken place are quickly reused and are not left for long periods of time as an eyesore. Funds through the Approved Development Programme (ADP) need to be well co-ordinated so that this kind of scenario is avoided.

  It is essential that people living in these neighbourhoods are involved in the process of deciding what happens to their communities. Market renewal will only be successful if local people are encouraged to remain and settle in the area that is undergoing change, and this will only happen if they feel their concerns are being dealt with adequately. Part of the market renewal process, therefore, must be to find out the aspirations of people living there and go at least some of the way towards meeting them. An example of this working in practice is the Homeswap scheme pioneered by the Seedley and Langworthy partnership which was worked up and shaped by residents to meet their needs. Community consultation, engagement and involvement will be very important activities and need to be adequately funded.

  It must also be recognised that many people living in these areas are in need of various types of support to enable them to live independently. Homelessness in these areas is not due to the lack of supply, as it can often be in high demand areas, but is a consequence of lifestyles that are often chaotic resulting in an inability to access housing and sustain tenancies or ownership of that housing. There are also high levels of drug problems and infirmity in these areas, often related to industrial disease. Many of these people need support to either to help them settle in permanent accommodation, or to enable them to continue living independently, which requires revenue rather than capital investment. It will be important to co-ordinate the market renewal programme with the Supporting People strategy, so that the true nature and levels of these needs are known and catered for.

  It is anticipated that a wide range of activities will be necessary and require funding, not limited to those above. These will include, for example:

    —  renovation and environmental improvement;

    —  stock swaps where sustaining housing is not possible;

    —  loans/grants for improvement, de-conversions, affordable warmth, minor works etc;

    —  clearance and demolition leading to a reduction in the numbers of empty homes;

    —  enhanced neighbourhood management services;

    —  social support for elderly and vulnerable residents.

  Given the range of activities required to achieve market renewal, the Market Renewal Fund must be a flexible fund that can be spent on a range of revenue and capital activities. Co-ordinating it with other mainstream funding streams is very important, but it is also important that proceedings are not held up because of a lack of resources forthcoming through other budgets. In some instances it will be appropriate to use the fund as a substitute for other sources of funding, at least in the short term.

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