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

Memorandum by East of England Local Government Conference (EELGC) (HOU 38)


How spending of the new resources should be balanced between social housing and options for owner occupation for those who cannot afford to buy (including shared ownership) and the mechanisms to be used for their distribution;

Joined up policy

  1.  Although investment in affordable housing is vital to both economic growth and regeneration, it should not be seen or addressed in isolation. EELGC is preparing Regional Planning Guidance for the East of England (RPG14) to deliver an integrated spatial strategy in which employment, housing, transport, and environmental priorities will be delivered and co-ordinated. The aim will be to create sustainable, socially mixed and balanced communities. Provision of the correct amounts, type, distribution and quality of affordable housing will have a critical role within the overall contribution of housing in meeting this challenge. An undue focus on housing alone will not give everyone the opportunity of a decent home and a good quality of life.

  2.  EELGC, jointly with the East of England Development Agency (EEDA) and the Housing Corporation, is commissioning research to assess the scale of the region's long-term affordable housing need, and will include policies aimed at its delivery in RPG14.

  3.  Provision of affordable housing provision has lagged significantly behind need in the East of England for a considerable period. The reasons for this fall into three broad areas:

    (a)  Demand for social rented housing consistently exceeds supply, for reasons detailed later in this note, broadly due to the inadequate resources available for its provision, particularly through reductions in finance for new-build Local Authority housing;

    (b)  House builders, developers and housing providers are unable to deliver sufficient affordable housing to meet different needs;

    (c)  Growth in the RSL housing stock has consistently been out-weighed by loss of stock through the Right to Buy scheme.


  4.  Affordable housing needs in the East of England fall into three categories:

    (a)  "Traditional" priority need, ie for households unable to afford market priced housing; in unsuitable housing, sharing dwellings, or homeless. Such households usually suffer low incomes and adverse 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. Although the East of England is an otherwise prosperous region, significant pockets of deprivation persist in many parts of the region, usually tightly concentrated inner city or rural wards. Examples include the region's Priority Areas of Economic Regeneration such as Luton, Great Yarmouth and Lowestoft, Harwich/Clacton, and many parts of the Thames Gateway. The needs of such groups can usually only be met by "traditional" publicly subsidised social rented housing.

    (b)  The aging population raises new needs, which will become more acute in the future. Whether they originate from owner-occupied or social rented sectors, the needs of the region's aging population will become more acute as the numbers of frail elderly and vulnerable groups grow. Owner-occupation is unlikely to be the primary solution to meet such needs.

    (c)  The needs of key workers are a major and growing feature of housing needs in the East of England. While many households are able to secure housing either by owner occupation or renting, there is a growing gap confronting workers who cannot afford housing in areas of high prices, particularly for owner-occupation. While this mostly covers households eligible for Key Worker housing initiatives, there is a growing segment of the population in employment that falls between categories of need, yet has insufficient income to buy or rent privately and are not eligible for social housing or help with their housing costs.

  5.  These problems occur to varying degrees throughout the region, but are most acute in two types of area:

    (a)  rural and coastal areas where the highest quality environments attract demand for second or retirement homes, thereby raising house prices. Conversely, such areas are generally those where employment opportunities and earning capacity for indigenous populations are lowest. This has an adverse impact on social inclusion, as local residents cannot afford the raised prices and are forced to move elsewhere or to live in sub-standard housing. The focus of Government planning policy on urban development limits the opportunities for rural affordable housing;

    (b)  economically buoyant areas experiencing in-migration and high housing demand pressure, eg southern parts of the region with close links to London and growth areas eg Cambridge.

  6.  In these economically buoyant areas, pressure on the dwelling stock and housing land supply results in high house prices. This has several impacts:

    (a)  People who cannot afford to buy or rent near to where they work need affordable housing, even in cases where they receive reasonable wage levels;

    (b)  This applies pressure to the transport network, as workers have to live further from their workplace and commute over longer distances;

    (c)  It inhibits economic growth through the adverse impact on the labour market, causing difficulties with recruitment and retention, whether of skilled workers or key public sector employees.

  7.  Recent house price inflation of around 20 per cent has not been matched by wage increases, which widens the affordability gap.

  8.  Even major house building in the pressurised areas is unlikely to reduce house prices down to a level that becomes "affordable" to low and medium-waged workers. The scale of development required to achieve this would be technically difficult to deliver and politically unacceptable in most areas.

  9.  The East of England has the 3rd 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 2nd 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.

  10.  It is no longer strictly correct to define this problem as affecting only "key workers". The problem now affects:

    (a)  Well-recognised groups, such as police, nurses and teachers (many of whom would qualify for the Starter Home Initiative);

    (b)  Other public sector workers who deliver essential public services, eg health service, fire service, local authority staff, etc.

    (c)  Many workers in the private sector, particularly clerical and retail staff, service industry workers, etc.;

    (d)  All but the highest paid young people, whether graduates or unqualified.

  11.  These phenomena have been demonstrated in the Cambridge sub-region, where, long-term house price inflation has been accompanied by shortages of workers across a wide spectrum of industry sectors. Many people find even the cheapest homes beyond their reach, unless they commute long distances, despite relatively low interest rates and a stable economy.

  12.  Resources should be targeted on the issue of delivering affordable housing in the intermediate housing market, ie low cost home ownership mechanisms to enable workers in the intermediate market to afford housing nearer to where they work. This 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, but the definitions of those eligible for assistance needs to be widened to include key private sector employees critical to the sectoral growth of the buoyant areas.

  13.  Great care is needed to ensure that this process does not simply increase competition for house purchase, thereby further increasing local house prices. Hence no solution will be effective unless there is a significant and long-term increase in resources for the delivery of publicly subsidised affordable housing. Acquisition of land sub-market prices will be essential to achieve this.

  14.  Employer provision of housing could also make a contribution in some areas, but is unlikely to be effective in the East of England, where the employment market is increasingly characterised by SMEs with limited ability to finance such activity, or where some parts of the workforce are too mobile to benefit from it.


  15.  Planning obligations can and will continue to provide key opportunities to secure financial contributions for affordable housing from developers via planning agreements (S.106 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.

  16.  However, there are limitations to the application of this method:

    (a)  While the level of need suggests that all opportunities to deliver affordable housing should be explored, the ability of developers to make such contributions varies across the region. In areas with weaker economies (such as the PAERs) the scope for such provision is limited by the lower viability of housing development and consequent lower returns. Even in economically buoyant areas, care is needed to ensure that housing schemes remain viable, otherwise all provision—open market as well as affordable housing—will be frustrated;

    (b)  The guidelines set by DETR Circular 6/98 set thresholds to limit the pursuit of planning agreements. The thresholds are set too high to enable many areas to apply them. This is commonly the case in areas of strong planning (especially Green Belt) constraint, and areas heavily reliant upon development on previously-used land for housing supply. In such areas, the bulk of supply for all housing sectors comes from small sites, below the threshold sizes. Large sites capable of making affordable housing contributions are the exception, and so the degree to which planning agreements can provide affordable housing is limited;

    (c)  Lower thresholds are set for use in London boroughs, but this ignores the fact that many areas outside London share similar characteristics, either of physical form, or of market conditions. Many examples can be found in those parts of Hertfordshire and Essex in close proximity to London. This creates sharp divergences across arbitrary administrative boundaries.

  17.  "Rural Exceptions" policy, as set down in PPG3 and Circular 6/98 enables rural sites to be released for housing as exceptions to normal planning policy, to provide affordable housing. Local Plans can include policies to enable such housing within the local plan strategy for sustainable development in rural areas within or adjoining existing villages. They must meet proven local need and 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. Such sites can make a contribution, but they are prone to "NIMBY" objections from existing residents, and can be slow and difficult to secure. They also rely heavily on the goodwill of land owners to make land available. In the most pressurised areas of the East of England, hope value for unrestricted market housing development frequently frustrates attempts to secure housing by this means.


  18.  The DPM's July 2002 statement on Sustainable Communities highlighted the role of for potential growth areas in delivering increased housing supply. Three of these areas—Thames Gateway, London-Stansted-Cambridge, and the Milton Keynes/South Midlands area—lie mostly or partly within the East of England.

  19.  EELGC is working with partners to assess the scope of future development and include suitable proposals in RPG14 for these areas. However, EELGC is concerned that there is a tendency in Government policy to assume that if total housing supply is increased, affordable housing will be produced in some form of proportional relationship. While this clearly has some general validity, we consider it simplistic, as it overlooks the processes needed to produce affordable housing, and the limitations of relying only on total housing supply.

  20.  We consider that three considerations should be recognised:

    (a)  increasing total housing supply will have some pro rata impact on increasing affordable housing supply via use of planning obligations, but this by itself will not bring forward enough affordable housing, as this paper will show;

    (b)  affordable housing supply (from all sources) needs to be targeted as a key policy output, to ensure that affordable housing is provided in the correct locations and quantities. Different approaches will be needed in different areas, eg in areas of strong market demand, greater reliance is possible on planning obligations and tariff solutions. In areas of weak market demand, or where the suitable sites are not coming forward, this method will not provide sufficient affordable housing, and other methods may be needed;

    (c)  increasing total housing supply may not increase affordability by reducing either the cost of housing or the rate of increase in cost. The former Dept of Environment's research ("The Relationship Between Housing Supply and Land Cost" early 1990's) showed that only a very dramatic—and by present approaches arguably unsustainable—increase in housing land supply in the South-east could significantly reduce the cost of land and housing.


  21.  EELGC acknowledges that 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. 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.

  22.  EELGC considers that the DPM's announcement on housing reform plans later this autumn/winter will enable an assess of the impact for the region of bringing together existing funding streams into a single non-ring-fenced budget via a strong regional housing body—to better integrate decisions on housing, economic development, planning and transport. EELGC is keen to take part in forming and operation the regional housing body to deliver joined-up working with other partners in the region. It is important that this new body should work with other partners on strategy and implementation. An over-focus on housing alone will not deliver housing in association with employment opportunities and either physical infrastructure (rail, road, etc) or social infrastructure. The infrastructure deficit has time and again been shown to be the biggest single barrier to development and economic growth in the region, and provision of housing alone will not address this problem.

  23.  In the potential growth areas the new role of English Partnerships as a key delivery agency could be vital to deliver effective co-ordination of plans for key worker and affordable housing. EP will need to work closely with the Housing Corporation and other key agencies such as EELGC, EEDA, and infrastructure providers such as SRA and Highways Agency.


Density, design and quality

  24.  EELGC is keen to deliver higher quality development in all sectors, including affordable housing, to ensure that new stock is be sustainable, attractive and efficient. RPG14 will need to include policies to deliver the Urban Renaissance by making urban areas safer and more attractive places to live. Both market and affordable housing in urban areas will be pursued by trying to make higher density living not only more acceptable but positively desirable.

  25.  Better use of land needs to be made by building at higher densities; using good design and quality building (including smaller dwellings, use of airspace, efficient layouts).

  26.  Sustainability is also vital. RPG14 will need to seek provision of high quality, resource and energy-efficient housing.

  27.  Renewal of existing housing will be as important as new building. RPG14 will need to address issues of regeneration throughout the region, both in PAERs and generally within the housing stock.

  28.  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.

  29.  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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