TUESDAY 22 OCTOBER 2002
Andrew Bennett, in the Chair
Mr Clive Betts
Memorandum submitted by Commission for Architecture and the Build Environment
Examination of Witnesses
MR JON ROUSE, Chief Executive, and MR DICKON ROBINSON, Commissioner, Commission for Architecture and the Build Environment, examined.
(Mr Rouse) I am Jon Rouse, the Chief Executive of CABE.
(Mr Robinson) I am Dickon Robinson; I am CABE Commissioner and Director of Development in the Peabody Trust.
(Mr Rouse) Sir, just a few words of introduction. CABE is on a threshold of working much more closely with the affordable housing sector than we have done in the past. The Housing Corporation have just invited us to enter into a service level agreement with them and provide design advice over the next two years or so and that will include being a Design Advice Challenge Fund, it will involve enabling individual projects around the country on a demonstration basis and it actually involves some work with our European partners as well to swop best practice. We are now in an investigating industry as we find it and that is what we will really be discussing this morning.
(Mr Robinson) I do not think I would agree with that. I think there is some very good social housing and there is also some poor social housing and far too much in the middle. The challenge for us is how to raise the quality of the new social housing that we are building. I think the real issue is that there is not enough emphasis on the quality of social housing and that there is too much emphasis on the cost of social housing and, in that sense, the funding regimes for social housing put a lot of emphasis on keeping the cost as low as possible.
(Mr Robinson) I think the short answer is that most people want to live in neighbourhoods which they would regard as attractive and desirable and, where those neighbourhoods are in, let us say, central areas, here we are in Westminster, for example, people are very happy and quite prepared to tolerate high density living in order to live in Westminster. They would not take the same attitude if they wanted to live in a village in Berkshire, Wiltshire or Devon. The issue regarding density is one of appropriateness. It needs to be appropriate for the part of the town or city in which people are living and, if it is inappropriate, then people are naturally going to reject it.
(Mr Rouse) The starting point for us is that we welcome the programme of investing in affordable housing in the parts of the country that need affordable housing desperately. We have a housing crisis on our hands. We are building at the lowest level since 1924. We can see, in terms of the probable industrial action with firefighters, railways, et cetera, that there is a desperate need for key worker and social housing in the South East of England, so we will have to get on with it. That is the first point I have to make. Clearly we are concerned about quality and we want to see the Government actually inject into the mechanisms they are setting up some safeguards. For example, we would expect new schemes to be evaluated for their design quality, either through the planning system or through the funding system if they are in receipt of public subsidy, and that means you have to have people who understand design issues but also lay people who are going to have to live in those houses involved in that evaluation process.
(Mr Robinson) Registered social landlords have a long-term interest in what they build and create. They are going to be responsible for maintaining it and for managing it for many years. I think it is absolutely crucial that they are responsible for providing that housing. It is one of the real problems with relying on Section 106 deals in which private developers build social housing as part of the planning deal. The social housing organisations are disenfranchised from many key and important decisions which actually make those homes desirable for people to live in and be attractive over time. I think the really important thing is that you have talked about lessons and everything and about the way in which social housing is funded is short term. It is all about meeting annual spend targets. It is all about getting families out of bed and breakfast to cut down on bed and breakfast bills. These are all real and important things, but the reality - and this is particularly true about housing - is that those homes are going to be there for probably at least 100 years. It is crucial that we take a long-term view, that we care and we invest time, trouble and effort in getting them right in the first place because, if we do not, the cost to society over time is huge and enormous, as we have seen.
(Mr Rouse) The first thing is that there has to be a generosity in terms of the funding that is given. The problem at the moment is that right from the top of the tree -
(Mr Rouse) I will not get into that level of detail, but if we just look at the system as it stands at the moment, from the Treasury downwards, they are setting output measures which are based on a benchmark which is not best practice and which is not a high enough quality home in a high enough quality environment. That then gets translated into the total cost indices. The Housing Corporation has just reduced again the flexibility within those TCIs, it is now down to 110 per cent. If you are constantly putting in cost pressures on housing associations, it is very difficult for them to respond in terms of high quality solutions and in terms of innovation and flexibility. We believe at CABE that there is almost a lowest cost residual mentality within the social housing sector. It has not moved on to a best value framework in the same way that certain -
(Mr Rouse) Some of them already successfully operate. For example, the work of Maritime Housing Association in Liverpool who actually step outside the Housing Corporation funding system to allow them to build market housing, actually some quite expensive market housing, within the same scheme as rented affordable housing and use one to cross-subsidise the other. At the current time, as you will find when you ask the Housing Corporation, it is quite difficult to do that within existing Housing Corporation funding rules.
(Mr Rouse) Yes.
(Mr Rouse) Yes, more flexibility and looking at schemes on a more individual level in terms of what they offer over the lifetime of that scheme. So, looking not just at the short-term capital cost, but actually how those homes are going to operate on a socio-economic level across their whole lifetime. What the management and maintenance costs are going to be -
(Mr Rouse) Again, if you take a short-term view, it is possible to argue in a narrow sense that high density schemes can cost more. For example, the very simple fact that if you have to introduce a lift to a building that is going above three or four storeys, then it is clearly going to add cost. However, if you are looking at it in the wider sense, you are reducing the cost of infrastructure that you have to provide because you have more units in the same place and you have increased economic viability because you have a greater critical mass of population using local shops, public transport and so on. So we have to take the broadest possible view.
(Mr Rouse) I am sorry, what elements of the Local Government Bill?
(Mr Rouse) We are talking about the decent home standard?
(Mr Robinson) This is primarily an issue for existing housing stock and setting a benchmark standard to which all owners of social housing, whether they are local authority or housing association, should raise the quality of their stock. Actually, it is quite a low standard and it is certainly significantly lower than, for example, the Housing Corporation current space and design standard.
(Mr Rouse) We already have done, in fact. We published an article in Housing Today just two weeks on this very issue which we can send you.
(Mr Rouse) They are taking it seriously in other sectors. If you look at the way now that schools or hospitals procure - and I am not saying they are perfect by any means - or even courts or defence buildings do so, they are all done on a whole life basis and the Treasury is actually writing its Green Book at the moment on economic appraisal and that again reinforces this message, that it is now about whole life costs and whole life benefits.
(Mr Rouse) It just does not happen in terms of the social housing sector in the same way.
(Mr Robinson) As far as I am concerned, I would certainly expect that all the prefabricated housing that we are building would be there in 100 years. It is built to the same standard as anything else that we build and of course the Peabody Trust has, not far from here, many estates built over 100 years ago which are still popular and we have no difficulty in letting them. They have probably been modernised two or three times during that period. So you do have to return and invest large amounts of money bringing them up to contemporary standards. However, if the basic shell and the basic sense of the environment and quality of the neighbourhood is appreciated by people, then that investment is well worth making and much cheaper. As far as prefabrication is concerned, I think that actually, to some extent, I am rather surprised at the amount of debate and discussion this causes because, as far as the residents are concerned, for example the scheme which we built in Murray Grove in Hackney, most of them do not have a clue as to how it was built and are quite surprised when they are told. I think that we uphold 'missing the point' if we get too hung up on how buildings are built. As long as we have the basic requirement for that longevity, then I think we will be all right.
(Mr Rouse) I would also like to refer the Committee, if it has not been referred to it already, to the Housing Reform Report Homing in on Excellence about offsite fabrication and this was a group that included the council of mortgage lenders and other people whom you might expect have some ambivalence towards system built housing and I will just briefly quote from what they say, "Prefabrication of houses can offer significant potential improvements in both quality and speed of construction compared to so-called traditional site based construction. These include increased speed production, reduced levels of defects and waste, greater efficiency in the production process and improved environmental performance."
(Mr Rouse) That is a good yet complex question. The starting point is first of all that the housing being built at the moment using traditional methods could hardly be called distinctive. We have already seen all those identikit housing estates splattered across our land. The thing with offsite prefabrication is to ensure that 80 per cent of the building is standardised, in other words the core components, because we do not need 55 types of bathroom tap, they can be standardised in a quite significant way and we can achieve cost savings by doing so. What we need to do then is free up the designers to use cladding and other materials to actually achieve the distinctiveness in the 20 per cent which actually contributes to a feeling of neighbourhood, a sense of having a home that is your own and has a distinctiveness about it.
(Mr Robinson) I suspect that it might add quite a lot. I am trying to reflect on the idea of matt flint finished volumetric construction! I think there are two separate issues there. One has to think about distinctiveness which I think is an important thing that we want to try and achieve in the environment anyway. People will need to know that this town looks different from that town and so on and so forth. I am not necessarily convinced that that has necessarily to come from the local sourcing of materials, although I have to say that the scheme in which the Peabody Trust has been involved in Sutton in South London, the "Bed Z scheme(?)", has a target of sourcing the maximum amount of material as possible from within a 30 mile radius and it was amazing how much could actually be sourced. Yes, there were some marginal increases in cost in that but possibly because it was a rather unusual thing to do and I think there is an entirely different kind of argument which suggests that as part of our regeneration strategy, we ought to put a lot more emphasis on local sourcing of materials, if only because of the economic benefits of doing that.
(Mr Rouse) The only point I would like to add to that is that we do not believe that off-site fabrications can be right for everywhere. In terms of rural affordable housing, for example, it is going to have to be a much more sensitive solution.
(Mr Rouse) I am saying that it can be sensitive in particular contexts. In an urban context, it can work extremely well.
(Mr Robinson) I think it is very important to distinguish between a general view of prefabrication and volumetric construction because volumetric construction basically is not something we have seen before in permanent housing and it is not what system building in the 1960s was. Volumetric is trying to complete a large part of the building entirely with internal finishes within a factory and taking it complete to the site. Prefabrication, for example, includes things like Portcullis House where those huge elements of the exterior were brought on great trucks and hoisted into position. That is a prefabrication. These are two very, very different things it seems to me. The point about volumetric construction is actually about the quality of the finishing inside the building and those of us who are engaged in building housing of any sort on a day-to-day basis know that the most difficult is the last 15 per cent. It is when you get the finishing trades coming into the building that time seems to disappear and lots of flaws seem to creep in. If you put that in a factory with a factory controlled environment and hopefully increasing the kind of automation that we take for granted in motor car manufacture, we can get a much higher quality product. That is what we are striving to do in fact, to raise quality all the time.
(Mr Rouse) Yes. We can probably muddle by. There is the opportunity of bringing in internal labour, there are ways of muddling through. However, there is no need to do so. We can actually source the factory production in this country or we can import a certain amount from abroad as well. Across continental Europe, there is factory production of housing in place that we can tap into. So, given that we know that we can get five times less defects by going for factory based production methods, it seems sensible to actually extend our offer there.
(Mr Rouse) Very simply, an urban design plan, as understood already within the planning system and within planning guidance, is a three-dimensional approach to thinking about how uses within an area will be distributed such as density, topography, landscaping and so on. It helps to set a vision for an area to clarify thinking and to get everybody signed up to the same principles and to control what then happens when you release the land to individual developers. So that, rather than people pepper-potting their own development within an area without thinking about the overall context, they have an overall plan within which to work. I want to be clear that we are not talking about slum clearance master planning that we saw in the 1960s. We are not talking about rigid plans from on high. We are talking about plans that are flexible and that can change over time and which have been properly consulted on with local people where there is local ownership of the ideas within them. Why are they so important? Let me just give you one example from an area I visited on Friday which was North Hull. In North Hull, they have to get to grips with a housing market renewal programme, the scale of which is just immense. They have 20,000 void units within the city. On one estate that I visited, 40 per cent of the units are void. The idea that you can just, in an ad hoc way, take out housing within that area is a complete misnomer. It would be disastrous because you would lose densities, you would lose local facilities and you would have isolated communities. That area has to be replanned if it is going to work.
(Mr Rouse) I think we have already seen examples of how it could work well in areas which are already doing this. A very good example is Hulme in Manchester, which was probably replanned in the early 1990s following the felling of the deck access blocks. There is now a very successful neighbourhood with high levels of affordable housing to a very good form of urban design. Where people live on streets, they know their neighbours and they have children's playgrounds with access to local shops, and they have workplace opportunities within the same neighbourhood. Another example is Crown Street in Glasgow which replaced the Gorbals, which again has been done on great urban design principles.
(Mr Rouse) I think it is applicable to all developments except for small in-fill schemes within existing urban and rural areas.
(Mr Rouse) There is already reference to the importance of urban design and planning within PPG1; I think that needs to be strengthened and I think that it probably needs to be written in some form of the planning code.
(Mr Rouse) I think there are a number of areas across the country where it is not working.
(Mr Rouse) A good recent example is the west end of Newcastle where there has now been an abortive attempt to actually rethink the west end of Newcastle where they tried to do it, first of all, on too large a scale and, secondly, tried to move too quickly in terms of trying to get the housing on the ground before they had properly consulted local people and drawn up proper detailed master plans and, because of that, they have had to virtually start again.
(Mr Rouse) I am saying that they did not do a proper urban design plan.
(Mr Robinson) Can I give another example of that because if you go and look at the first phase of the development of Barking Reach in East London, you will find an area that had been built out by the private sector and sold quite successfully, but it is not informed by any particular kind of urban design character which would make people want to stay there. So what you find is that the people who are buying flats there are moving every three years. The turnover in that community is quite phenomenal. I think this is the crucial thing about urban design, that it is actually about trying to make neighbourhoods where people will want to stay.
(Mr Rouse) I think it should be a requirement on all of the new housing expansion areas that the Deputy Prime Minister is pushing forward in the sustainable communities plan. In areas particularly that are going to include greenfield sites, I think it is absolutely essential that we properly plan those areas. Whatever the faults of the new towns, they worked a lot better than many of the unplanned surburbanised areas that grew up at the same time and I think in many ways the better new towns and the garden cities before them are indicative of the importance of urban planning.
(Mr Rouse) There was not the detailed plan that we would normally expect for regeneration of an area as sensitive as the west end of Newcastle particularly as Newcastle is doing some tremendous work and I am almost reluctant to criticise but I think that, in that particular case, they tried to undertake urban design work across too big an area with too little money. If you looked at the brief, the brief was insufficient, the work they were trying to define was not clearly defined and I think that is the reason why they are having to rethink now.
(Mr Rouse) No.
(Mr Rouse) The starting point is that there are not enough people, full stop. Local planning authorities are best at just holding their development control functions together at the current time -
(Mr Rouse) We certainly do, £350 million, but it is absolutely imperative that that money goes into planning authorities and does not leak away into other areas. This is a one-off opportunity and we have to make that money count. The second thing is that existing people working within planning authorities and indeed planning committee members need greater access to training and we propose that the Government should set up a national urban development skills academy or unit that would work with academic providers and other training providers to give planning officers and planning committees access to training. We are trying to put the planning system back on to the positive footing that it was on in the immediate post-war period. To do that, we need strategic planners, we need urban designers and we need economists back working within planning authorities and that is going to take time and it is going to need training resources to achieve it.
(Mr Rouse) The good news is that I think the first regional centre of excellence will be off the ground in April 2003 which is in the West Midlands, so there is some light a the end of the tunnel.
(Mr Rouse) It is and I have to say that it has taken far too long and it is not clear who is actually providing the resources for those centres.
(Mr Rouse) In that case, it is Advantage West Midlands, but under a certain amount of duress in terms of that investment. Clearly, regional centres of excellence have not got off the ground quickly enough and there is no guarantee that they are going to get off the ground quickly enough in all the regions where they are needed. That is why we are saying that if that has not worked, maybe we need a national co-ordination, a national unit -
(Mr Rouse) Yes.
(Mr Rouse) That is all absolutely correct and we need to put less emphasis on the speed of decision-making and more on the quality of decision-making. To do that, we need proper evaluation of local planning authorities' performance on the basis of what they have allowed to be built. We need to strengthen PPG1 so that local planning authorities have more confidence to turn down poor design. The words are not strong enough at the moment to give them confidence to do that and they often get overturned on appeal, which then diminishes their confidence even further. So, all those things need to be addressed.
(Mr Robinson) If you are a developer who is constrained by time, you are well aware that a mediocre proposal will get through the planning process faster than one which might be more ambitious in design terms. So I do think that ensuring that the process is reasonably speedy will be hugely beneficial to good design as well.
(Mr Robinson) I think the issue is less about the tenure of individual relevance and more about mixed neighbourhoods. There are very few large social housing developments going up which are exclusively social rented housing currently. They tend to be mixed with market sales shared ownership. There is a whole growth of intermediate tenures, ideas around housing key workers, intermediate rent levels and so on and so forth. So, I think it is the case that we are very unlikely to see very large social rented estates.
(Mr Robinson) I think the issue about key workers is that the term is being used too loosely to embrace too wide a range of people. If you take key workers, for example bus drivers working in London, they have no hope of buying their own homes. They do not earn enough money and they are not on a career path as a teacher might be where they can see increasing earnings and so on. They need access to social rented housing. That is what they need.
(Mr Robinson) Bus drivers and people who are earning £15,000 per annum. People who are on a career path, key workers in the health service, the fire service or police force, aspire to own their own home and we must find ways, if there are not already ways, of actually taking them into home ownership through shared ownership, through home buying and other products which are increasingly available and provided by housing associations.
(Mr Robinson) It is happening to a greater extent than it used to, but the shared ownership half of the Housing Corporation programme has always been relatively modest compared with social renting and this comes directly, in my view, from the influence of local authorities who are much more preoccupied by the cost of their bed and breakfast bills for homeless families than they are with helping key workers into home ownership
(Mr Rouse) No, I think we are looking at it in a broader sense than that. We are looking at a measurement for the overall benefits and costs of a particular form of development over its lifetime and, taking into account all those costs and benefits in the appraisal of whether the scheme should be funded rather than just having a crude TCI and 110 per cent flexibility limit around it, which tells you virtually nothing about how that home is going to perform over its lifetime.
(Mr Robinson) I think it is. I think it has implications for the initial capital cost basically because you need to design homes which are not going to need elements to be replaced in the short term. You need to think about the durability of windows, for example, and the lift installations themselves, for example. All of these things, if they are carefully designed and designed with that sense that those elements must have a long life, then I think it is OK. It is when you have to start replacing them too soon that it boosts the service charge.
(Mr Robinson) That is expensive but, on the other hand, if you look at the wider economy, having that greater density, making better use of land in central locations, it may well be that in fact people are making more use of public transport rather than owning their own homes and so on and so forth. I do not think it could detach the argument -
(Mr Robinson) Yes, it is.
Chairman: Thank you very much for your evidence.
Memoranda submitted by South East England Development Agency, South East England Regional Assembly and South West Regional Assembly
Examination of Witnesses
MR ANTHONY DUNNETT, Chief Executive, South East England Development Agency; MR PAUL BEVAN, Chief Executive, South East England Regional Assembly; COUNCILLOR CHRIS CLARKE, Vice Chair, and MS BRYONY HOULDEN, Chief Executive, South West Regional Assembly, examined.
(Mr Bevan) I am Paul Bevan, Chief Executive of South East England Regional Assembly.
(Mr Dunnett) I am Anthony Dunnett, the Chief Executive of South East England Development Agency.
(Councillor Clarke) I am Chris Clarke, Vice Chairman, South West Regional Assembly.
(Ms Houlden) I am Bryony Houlden, Chief Executive, South West Regional Assembly.
(Councillor Clarke) Firstly, I would like to say how glad we are to be seen because we feel that our region has been overlooked in all the talk about abandoned houses in the North and the pressure of prices in the South East. What our region is facing is a growing population anyway. There is very high inward migration which comes from several sources: people are relocating for job reasons and for skills needs; they are relocating for social reasons; they are moving into our region to retire; they are buying second homes there. In addition, as a rural region, most housing developments are contentious because of the rural nature of the region and that means we are stuck between very high demand and the problem of trying to keep apace and we have low availability of brownfield land. Some estimates say that, in our region, house prices have increased 40 per cent in the last year and some estimates put the average price now at £140,000. We have a map which we can leave or offer which shows the intensity of some of that in Cornwall and Devon. Salisbury, for example, has a very high price level. What we are finding is that, in some places, the gap between income - we are a low wage region - and what people need to buy a house is £20,000. It is unbridgeable for them. We missed out on our Challenge funding, we missed out on Housing Corporation funding. We need attention for our region to help us deal with these pressures.
(Mr Bevan) I have a simple point on numbers that I really want to open with. In the South-East region, our housing target regional planning guidance is 28,000 dwellings per annum and we are delivering at the moment 22,000, a shortfall of 6,000. Of that in terms of affordable housing, our target is 12,000. The delivery at the moment is at the maximum 6,000, depending on how you count, and net zero because we are losing 6,000 a year to right to buy.
(Councillor Clarke) In the South West?
(Councillor Clarke) We have a gap of around 10,000 of which 6,000 needs to be affordable housing, that is per annum.
(Councillor Clarke) :In the South West, yes.
(Councillor Clarke) Certainly I can give you a personal opinion: I believe that only a proportion of the pressure can be met by the supply side because the gap is so large. I touched, for example, on second homes. We have some wards where 50 per cent of homes are second homes and therefore you have people cashing in their chips from very high pay areas and pushing it way beyond reach. So, I am not sure that the answer to your question is that it is beyond Government means, but I personally believe that it is beyond just planning issues and market forces issues. You also need other fiscal devices. We have places where, even on shared equity, someone on an average income does not have a hope of getting somewhere to live and that is why we have these growing commuter distances.
(Councillor Clarke) Certainly in our case, the Government should first of all recognise the South West as being a place of pressure because that recognition is not presently there. It would be reasonable for us to have a share of the Challenge Fund and a better share of the Corporation Fund. The other thing though is looking at new and different models. I was interested to hear the view expressed that teachers have aspirations to own their own house and bus drivers do not. I am not sure that is true. There is a fundamental right here that many people share: that is people's aspiration to own a home. However, other fiscal devices will be needed and, as you know, the pressure to do that is growing now because of the way pensions are collapsing and people want their equity.
(Councillor Clarke) We would like to see the legislation implemented which is promised on council tax, but that alone will not be sufficient because if you sell a £1 million house in the South East and buy a house for £300,000 or £400,000 house in the South West, £300 or £400 a year on council tax is not there.
(Councillor Clarke) I think new ways of shared equity. I think that in some cases and I have not worked this through -
(Councillor Clarke) No, it will not.
(Councillor Clarke) I am sorry, I misunderstood your question. I do wonder from time to time - and I will probably get shot for saying it - whether there is room to look at that new Schedule A tax because some of this ownership has nothing to do with domestic and residential accommodation. It is a form of investment and capital gains tax.
(Councillor Clarke) That particular opportunity or proposal?
(Councillor Clarke) No, we have not. I am expressing a personal opinion that that gap now is so great that it is not bridgeable by other conventional means.
(Mr Dunnett) I cannot give you at this moment in time a percentage off the top of my head with respect to your question, I am afraid.
(Mr Dunnett) We have a substantial problem.
(Mr Dunnett) I will give you a response to that after this meeting.
(Mr Dunnett) I will give you a note
(Mr Dunnett) I do. We have done a substantial review of homelessness. I have a study about six inches thick in my office, but I am not prepared to give that information to answer that question at this moment.
(Mr Dunnett) It is substantially affecting the South East economy. If I could give you a couple of pieces of information first. We have done substantial research which is trailed in our report. I have a draft report in front of me from Roger Tym and Partners and Three Dragons which looks at the effects of affordability and using the affordability index as a methodology. I understand the capability and availability of an individual buying a terraced property. What we have found is that, in 43 districts -
(Mr Dunnett) The affordability of property is different across the region and it affects the public and the private sector differently. With respect to the private sector, which is the basis of your question, the private sector is experiencing significant difficulties in attracting low paid or low skilled employees in the areas of high housing cost which is to be expected: Surrey, Berkshire, Milton Keynes, Oxfordshire and Buckinghamshire. There is less difficulty from the private sector's perspective in hiring low skilled workers in areas such as Kent and East Sussex which have a completely different economy to the wealthy areas of the region. I would remind the Committee that Kent and East Sussex have a similar GDP and a similar population to the North East of England. As an economy, we have substantial areas in the South East which are deprived and therefore which are suffering significantly with respect to house prices.
(Mr Dunnett) That is true in the health sector and we can provide you with information subsequent to this Select Committee.
(Mr Dunnett) We have a higher incidence of poorer performing health delivery agents in the South East than other regions, yes.
(Mr Dunnett) The evidence we do have is the difficulty that local authorities are having and experiencing in hiring and recruiting -
(Mr Bevan) I think there are two elements, if I may respond to your question. The first is that our regional economic strategy specifically sets out to identify how we can improve the efficiency of economies of the underperforming parts of the South East and if we cannot allow the underperforming parts, which I noted earlier are very similar to some of the worst areas in the United Kingdom - we are a very large area - then it is very difficult to see how we can actually achieve that form of transfer to other parts of the country. There are substantial numbers in the South East who are underperforming. Six hundred thousand adults do not have basic skills. We have the third highest number of poor performing houses. So, our first response is with respect to the economic strategy in the South East to enable the poorer parts of the South East to be able to benefit from the growth as opposed to spurring the success in the successful areas. The second answer - and we do have significant support for this point and evidence to support it - is that the companies who come to the South East are there for specific locational reasons and the vast majority of any companies, were they to move, would not move to other parts in the United Kingdom; they are more likely to move to places in Europe.
(Mr Dunnett) The particular challenge in the South East is the lack of large brownfield sites. The sites which sit on national land use database and show a significant amount in number are predominantly airfield sites which are not as appropriate for future development. The South East England Development Agency has been, over the last two years, working with all the local authorities in the South East and with departmental officials and we hope before Christmas to launch what we are calling the Brownfield Land Assembly Trust. The particular issue in the South East is that there are many thousands and tens of thousands of small sites, one-tenth of an acre in size, which are scars to the urban fabric, if one wants to use that sort of terminology, but also are unsited in local capacity sites. So, what we have been working to is to assemble packages of these two sites into critical mass levels to provide economies of scale and to be able to put them to the private sector who are not taking these sites forward because of their complexity, the amount of working capital required in taking them forward and the difficulty and complexity of the planning system and that the cost of capital is too high over a three to four year period to bring these together. So, we are looking to do that on a programme basis with local authorities to plan them, to remediate them, to assemble them, to service them and to bring forward sites which would otherwise not come forward.
(Mr Dunnett) If I could make one comment and then pass to my Regional Assembly colleague. SEEDA set up in its first regional economic strategy to surpass the Government standards recognised in the South East. We cannot encroach on the green lands, if I can put it that way. It is absolutely essential to meet the demographic requirements of the South East to actually retrofit the required homes, which are required for single person/single parent families in predominance, back into the urban fabric.
(Mr Bevan) We are actually meeting a 60 per cent target at the moment but that is because the overall targets are quite low. If we were meeting the overall regional target, we would still need 1,500 more brownfield dwellings a year. The emphasis on brownfield is problematic. The calls on brownfield sites in terms of infrastructure and other assembly issues make it much more difficult to get affordable housing as part of that development component. In a sense, affordable housing is easier to achieve on greenfield sites and I think it is true to say that the sequential tests for PPG3 is actually slowing down release of greenfield sites and that is one of the reasons why overall figures in the South East are declining.
(Mr Bevan) For example, the announced growth areas in Thames Gateway, Milton Keynes and Ashford are all in the less pressure areas of the region. Those areas where pressure on housing is greatest are not going to benefit from that sort of joined up investment and I think that is really what is required, a more holistic approach. We were talking before in the previous evidence about urban design plan approach to redevelopment. We need that sort of approach too in those pressured areas like Thames Valley and like Hampshire. The tools available to local authorities to do that are very limited. Section 106 agreements are very cumbersome and the skills and resources that local authorities have without those sort of special development vehicles that the Government are talking about are very limited.
(Mr Dunnett) Receiving funding to our bottom line to enable it to happen, being blunt. We are capped as a regional development agency as far as funding is concerned and our principle challenge is attracting funding to get it kick-started.
(Mr Dunnett) I believe that, when it is up and running, it will take three or four years to build up obviously a sufficient bank of housing. It should well be able to deliver 3,000 to 5,000 affordable homes per annum.
(Mr Dunnett) We have debates and discussions in with the department as to how our funding line can be enhanced at the moment. We are looking to use some additional funding we have in Hastings to start this particular approach from a Hastings perspective.
(Mr Dunnett) We do not have a specific commitment in the next six months to handle it. The South East Development Agency is going to have to either cut other parts of its budget or continue its discussions with the department.
(Mr Bevan) At the moment, an overall indicator in the South East is 12,000, but that is not really based on anything but a guess as far as we can tell. A housing needs study needs to be undertaken regionally in order to get a much stronger basis for a target and we are discussing a joint approach to that with the Government Office. So we hope that in the review of regional planning guidance, we will have a tougher, stronger based affordable housing target. It is extremely important to have an affordable housing target.
(Mr Bevan) Over the past year, we have undertaken, as our evidence suggested, a range of work analysis and work with local authorities and RSLs throughout the region to identify the blockages to affordable housing delivery. We came up with 46 action points and 20-odd of them were with Government and I am sure you do not want me to go through them now but it is to do with the speed of local plan making, resources from Central Government, the rules applied to right to buy and all sorts of issues. Within that, affordable housing targets are, I think, important for four reasons. First of all, they set a benchmark for provision and help other agencies involved in affordable housing to plan according to that benchmark such as the Housing Corporation. They require a follow through and development plan, so that is where the real leverage comes in local plans and structure plans. They assist local authorities in negotiating with developers for affordable housing evidence to new housing developments and they provide the basis for subregional targets because it is the subregional targets where a real housing need study can be undertaken that will provide a much stronger basis for affordable housing targets.
(Mr Bevan) I am sorry, what local authorities think ...?
(Mr Bevan) I think we need to address the reasons why the targets cannot be realised. What is the point of a target if you are just going to put as a target what you think you are going to achieve? Targets need to be based on an assessment of what the need is to deliver the sustainable community and the well-being of a population for which local authorities are responsible.
(Mr Bevan) It may be a stretching target, but I think they are based on a sound assessment of what housing need is and therefore it would be foolish simply to abandon them on the basis of what people think they can deliver.
(Councillor Clarke) We would like to pick up the brownfield issue where, because we are not predominantly an industrial region, we have limited availability. We wanted to put forward through our RPG 36 per cent and we were forced up to 50 per cent brownfield against the national average of 60 per cent. In affordable housing, we are back to the kind of market forces I was talking to you about because, when you sit down now with your 106 agreements to get the roads infrastructure and the school places and then you want affordable housing as well and you have this massive price gap because of the two-tiered nature ... I was thinking when you were touching earlier on some of the pressures elsewhere, if you take the example of Cornwall, Cornwall is likely to be the only place in Britain which will continue to have Objective 1 status at the next review. It is a very low wage area, but it is one of those areas which is the most attractive for relocation and second homes. It has been put on the map by the Eden Project: two million visitors a year. You now have a massive gap. You are looking at a number of £300,000 and £400,000 houses which are totally out of the reach of locals. Apart from that, the two-way pressure is (1) the availability but (2) this market gap between all these other costs and what actually makes the price affordable. We have one calculation in here which we can leave with you where, to be affordable in many of our locations, the price needs to be around £70,000 but, when you put all these other components together, you cannot construct a house and make the land available for less than a selling price of £110,000.
Sir Paul Beresford
(Mr Dunnett) There are two halves to that, if I may. The second half I will put to my colleague who is responsible for that. The principal issue about getting greater activity in areas such as the Thames Gateway, Kent and East Sussex is infrastructure to them. Clearly you cannot create communities unless people can commute in and out or actively work within those communities. The number one priority in the regional strategy has been to provide infrastructure, not just physical but virtual with respect to broadband, and also with respect to skills.
(Mr Bevan) In those areas of economic success that we are talking about, it is simply reproduction of the society you have got. We are not talking about a huge expansion of jobs or a huge expansion of populations but we are accommodating the children and grandchildren of existing populations.
(Mr Dunnett) With respect to provision of funding in the South East, I personally feel that the provision of a particular body is less important than the present players working together holistically. Whether or not it has a structural body to me is a bit irrelevant. What is absolutely important is that the Housing Corporation, the Assembly and, for example, English Partnerships and the local authorities work together to come to a holistic solution.
(Mr Dunnett) The biggest issue between London and the region is the region's housing problems are largely the result of wealthy people exiting London and taking up the brownfield sites which are available in the South East, causing additional pressure by taking away the opportunities for housing for people who actually live there. We have a migration out of London problem in the South East.
(Mr Dunnett) The Regional Assembly is already working closely with the LDA to try and tackle some of those issues.
Sir Paul Beresford
(Mr Dunnett) Very much so. Whether or not they are moving out of London, they are moving out of the South East and the biggest problem we have in public sector retention is people from 25 to 35 who cannot afford to have a home. They start off in their first job and they move outside the South East and therefore we are losing all that vibrant early stage skill.
(Mr Dunnett) No, because that age group tends to be starting with a family and they want to have a larger home to build their family.
(Mr Bevan) We do share with London the objective of providing sufficient homes for people who need them.
(Councillor Clarke) I believe it will help, not least because it will assist to integrate housing strategies with other strategies and you need them together. In terms of the tensions, the last RPG was taken through when the pressures we have talked about this morning were beginning to be apparent and they have developed the skills there. I think they will be able to cope with this.
(Ms Houlden) From the South West's perspective, the important thing to remember is the rural nature of the region so Countryside Agency funding is also vital so we have a coherent approach to sustaining rural communities. In terms of the migration point, I think the South West would argue that many people over the age of 45 are moving down to the South West, that is our fastest growing population, and we are losing quite a lot of young people, and that is back to the affordability issue.
(Ms Houlden) From the South West perspective we need a package approach. As Chris Clarke mentioned earlier, one of the problems with shared ownership in the region is that even if you are only paying half the market price and rent the other half, you cannot actually afford it. In Bath, for example, the average house price is about £140,000 which means a shared ownership of £70,000, and for many people a mortgage of £70,000 is out of their reach. A package approach would help in small pockets but we need a mixed ownership approach.
(Mr Bevan) I would concur with that. In part of our findings that I mentioned before was the reintroduction of do-it-yourself shared ownership instead of Homebuy, which has a much more flexible approach to the percentage of equity that you can take. One of the key issues at the end of the day is the flow of such properties into the market where ultimately they are lost for affordable housing.
(Mr Bevan) I think they would like to do more. Talking to our local authority, they would certainly like to do more and they find the change of arrangements frustrating.
(Ms Houlden) One of the other things local authorities would like to see more of is incentive schemes for getting people to downsize from larger houses, which is a particular problem in some of the villages.
(Mr Bevan) A key reason for the frustration of local authorities is right-to-buy receipts. 90 per cent of local authorities in the country are in the South East and the proposal to pool right-to-buy receipts and reallocate them is very worrying to them. Those with debts have to pay 75 per cent back to repay debt and obviously that limits the amount they can put into this sort of work, but if those who are debt-free are going to be at risk of losing their allocations in the areas where affordable housing is probably one of the most pressing issues, that is a key problem.
Mr Clelland: I have a question on right to buy but that is coming up later.
(Councillor Clarke) Yes, it occurs to me that one of the things that may need to be done is for an amount of money to be made available either as an income stream or a capital sum which is detached from the rest of that particular house and whether that would have some kind of reversion to the local authority. I think the other point to make is the pace of this has been absolutely breathtaking. We have got several graphs which show the rate of this. For example, Taunton became the tenth fastest increase in Britain and West Somerset is amongst the very highest population increases revealed by the recent Census figures.
(Mr Dunnett) Yes.
(Mr Dunnett) I clearly recognise the difficulty of opening up a definition to include absolutely everybody who needs a subsidy. What I think should be reviewed is if locally people agree to include additional areas of key services for the public good such as bus drivers, postmen, care workers, leisure centre operators or whatever, that can be subject to local agreement as to the availability of affordable housing and how far it should be done. We should remember that with the amount of contracting out being done in the South East, a substantial number of so-called private sector people are undertaking public sector tasks.
(Mr Dunnett) No, I would not put it that way.
(Mr Dunnett) I do believe there is a role for the public sector to become involved in increasing the supply of housing and increasing the supply of land which is the real issue. It is the affordability and cost of land and making that available for key workers, yes.
(Mr Dunnett) We have a huge issue with respect to the payment of public workers in the South East in the first place with the ACA and the recent statement changes such that there are huge cuts being taken. £800 million has been taken out of local authorities in the South East for next year with regard to movements with respect to the most recent Government statement. So somehow or other people have got to be enabled to take housing forward, whether it is in their salary or whether it is in us looking for alternatives to tackle the land equation which is driving the housing problem.
(Mr Bevan) The definition of key workers is a bit of an academic one. We are so far short of meeting affordable housing targets that adjusting the definition of key workers is pointless. The important thing is to provide more for all who need them.
Sir Paul Beresford
(Mr Dunnett) Absolutely.
(Mr Dunnett) Affordable housing in areas of economic pressure.
(Councillor Clarke) It would be helpful for the Government to look at some of the research we already have. I am glad you have picked up that point because some of that has been overlooked. Yes, I think that new forms of tenure do seriously need to be looked at and I do not think we should overlook this aspiration which has become very well embedded in the British way of life, and in equity terms alone it is an aspiration which ought to be shared. In terms of key workers, my colleague will comment in a moment but, for example, it is only in the last couple of years or so that teacher recruitment has become an issue in many parts of our region because it has been an environmentally attractive region to which people have aspired to move and live and work, but nevertheless now these pressures are such that recruitment for that kind of job is becoming difficult.
(Ms Houlden) In terms of the different forms of tenure, South Hams has already been experimenting with placing covenants on properties being sold so they do remain in the local market.
Chairman: How many?
(Ms Houlden) They have got it in place but they have not delivered any through it.
(Ms Houlden) We will have to wait and see. There is an issue around that of sharing of best practice because I do not think there has been much government concentration on sharing of good practice. Lots of local authorities are having to reinvent the wheel all over the place. I think that is a particular problem. In terms of key workers, we should not get too hung up on the definitions. In South Hams, again they have got a problem with lifeboat personnel and they would not naturally be defined in that group. We do have problems already recruiting occupational therapists in and around Bristol which leads to bed blocking because there is no one to assess when people can leave the beds. It is building up a range of different problems which we need to try to address.
(Mr Bevan) I mentioned earlier that I think the focus on these areas is problematic because that probably where the least pressure is. Longer term of course we are talking about a communities approach, building sustainable communities, and new development or housing that goes in alongside jobs and other community infrastructure and transport is of course important but, equally, that holistic approach needs to be applied in areas of economic pressure in the South East and the tools given to local authority to enable them to do that, along the lines of the urban design plans that were mentioned earlier.
Mr Cummings: Are you saying that it is right for the Government to concentrate in these four areas or are you putting in some caveats?
Sir Paul Beresford
(Mr Dunnett) The four areas cannot be taken forward without the up-front infrastructure of housing, health, and all the community services which are absolutely essential. That must be done up front.
(Mr Bevan) It is right but not enough.
(Mr Bevan) I am agreeing but I do not think it is enough.
(Mr Bevan) Yes.
(Councillor Clarke) In some places.
(Mr Dunnett) In some places.
(Mr Dunnett) For a point of clarity on something I mentioned earlier. I mentioned that we did not have the funding for BLAT. We have the funding for the piloting of BLAT; we do not have the funding for significant roll out. Thank you.
Chairman: On that point, thank you very much for your evidence. Can we have the next set of witnesses please.
Memorandum submitted by National Housing Federation
and Chartered Institute of Housing
Examination of Witnesses
MR JIM COULTER, Chief Executive, National Housing Federation; MR JOHN PERRY, Director of Policy, and MR ROBIN TETLOW, Tetlow King Planning Consultants, Chartered Institute of Housing, examined.
(Mr Coulter) I am Jim Coulter from the National Housing Federation. On my left is my colleague John Perry, who is director of policy at the Chartered Institute of Housing. On my right is Robin Tetlow who is managing director of Tetlow King, who is an advisor to both of our organisations, many housing associations, local authorities and developers and has a lot of planning letters after his name.
(Mr Coulter) In view of time we are happy to proceed with your questions.
(Mr Coulter) Are you talking about the Decent Homes standard?
(Mr Coulter) Could we perhaps divide that into two parts. If I could answer for housing associations and John Perry could pick up the local authority assessment. We have been doing some work with the Housing Corporation and the Corporation recently produced at the beginning of this month a research report which indicated a range of percentages of housing association stock which currently meets or is estimated to meet the Decent Homes standard. On average, the figure is about 22 per of the total of 1.8 million stock which does not meet the standard. At the high end of that spectrum is the most recently transferred stock from the local authority sector which, by definition, must be at the poorer end, that is why it was transferred, and the so-called existing traditional stock is something under 20 per cent. Our view is that over the ten-year period the Decent Homes standard for housing association housing stock would be met if there is an additional resource of around £70 million a year through asset management grants to add to the borrowing capacity.
(Mr Coulter) The resource base for the delivery of new housing, leaving aside the Decent Homes standard, we are not yet clear about. We have the one year approved development programme which the Housing Minister, Lord Rooker, announced at the National Housing Federation's conference and we await years two and three to be announced by the Deputy Prime Minister in the statement some time around the turn of the year. Our best estimate of what the public resources (to which housing associations will add private funding) will produce is a little over 19,000 homes from the so-called mainstream approved development programme. There are about 4,000 from the new Challenge Fund and about 7,000 to 8,000 are produced by the Local Authority Social Housing Grant route, but that may change because of proposals which the Government has made about capital receipts, and then in addition, as the research produced only a few days ago by the Rowntree Foundation produced by Cambridge University and Sheffield University shows there are perhaps 9,000 homes not produced with forms of public subsidy by registered social landlords. So a total of 40,000 or so will be produced out of the resource base that we see available, so the gap is very substantial indeed.
(Mr Coulter) The progress is greater than it was, that is for sure, but we are nowhere near the peak of housing investment.
(Mr Coulter) Indeed, that is absolutely the case.
(Mr Coulter) It will be a step up. It will not meet the target ultimately.
(Mr Perry) Can I deal with the local authority aspect of the ten-year target. I think the Government itself believes there is a risk that about ten per cent of the local authority homes that are below the Decent Homes standard may not meet the target within ten years. Our own estimates are that the Government could meet the target but the target is very heavily dependent on stock transfer and really about half the remaining stock needs to be transferred in order to achieve the target.
(Mr Perry) Because the Government's spending programme provides sufficient for about half the stock to be retained and improved by the public sector and it depends on private finance through housing associations to renovate about half of the remaining stock.
(Mr Perry) The private finance initiative is not expected to be a big generator of contribution to the Decent Homes target in the social housing sector. We have got about 20 potential Pathfinder schemes of which the first is still to get off the ground, and I think the expectation is that the contribution from PFI will be 10,000 or 20,000 units, that kind of order. It is nothing like the contribution directly by either the public sector or housing associations through stock transfer.
(Mr Perry) There are only two routes really. The Government could provide more funds directly or it could encourage stock transfers so that funding comes in through the private sector. It is providing more funds directly and it is encouraging local authorities to set up arm's length management organisations. We are waiting though to see the further rounds of the so-called ALMO (?) initiative which I understand will be announced in January.
(Mr Perry) The Government has produced very interesting proposals in August about giving more freedom to local authorities, which I think are welcome, but in the short term the existing measures - the ALMO route, financing local authorities directly through resource accounting measures and stock transfer - can achieve the target, providing they are all pursued vigorously enough.
(Mr Coulter) We have a one year programme which gives us a certain amount of information. The Housing Corporation approved development programme is being treated in two separate ways in the next financial year. First, the regional cash flow is being uplifted on the existing needs indices distribution basis, and then we have the Challenge Fund which was established which is virtually rule free, in order to generate good ideas for innovative development and maximise output.
(Mr Coulter) You will have to ask the Deputy Prime Minister that in the course of the next week, I guess, because that is where ultimately the decisions will be made. The intention certainly is to uplift, for example, the output of off-site manufacturing and to ensure that adds to the quality of housing stock and does not detract from it. CABE is going to be involved in stamping the quality of those designs and their output. The gaps we have are, firstly, we do not know what the future of the Starter Home initiative is. We have all criticised that in the context that it is a subsidy to purchase but does not produce new housing. That is an important change in the Challenge Fund's approach, for example, to Homebuy. We do not know yet what the Renewal Fund assessment will be in terms of the public resources and, as John said just now, we do not know what will happen to funding for the ALMO as part of upgrading the housing stock so it is rather difficult to make a forecast of what exactly will be produced as a result of perhaps some competing heads of expenditure in what we think we would all say is an inadequate overall resource, admittedly in a resource that is stepped up by £2.5 billion over the next three-year spending period.
(Mr Coulter) Perhaps we could divide that response into two parts, first to deal with that 80/20 split and then maybe talk about what might happen with the Local Authority Social Housing Grant because that is an important potential issue for the Committee as the Government comes to its conclusions. 80/20 is not really a split that responds to any formulaic approach. It is really a matter of judgment which might otherwise be described as guesswork. It is the sum of what happens in regions.
(Mr Coulter) I think the guesswork is subject to quite a number of pressures.
(Mr Coulter) I think it should be regionally tailored and you would find in the context of how the housing market is operating, which this Committee has investigated in the Empty Homes inquiry, there would be a relatively small proportion in the Northern and Midlands regions (with the exception of the changing tenure mix and the regeneration schemes) and a much higher proportion than that in the Southern regions.
(Mr Coulter) It would but you are then talking about competition between limited resources for a wider range of people who need housing. Local authorities are certainly very conservative about supporting a significant increase in home ownership schemes because they are under pressure with their statutory duties.
(Mr Perry) I do not disagree with what has been said on that. The crucial thing is it needs to be decided at regional level.
(Mr Perry) You are going to have local authorities making their own decisions as well, are you not, about how they are deployed?
Chairman: We need to move on.
(Mr Bevan) Both our organisations are very keen on mixed communities and we want to see both rented housing and housing for sale and we want to see low-cost home ownership within most communities as well. The difficulty in the situation where there are such limited resources for new build as opposed to resources for renovating existing stock is that we are forced into making very difficult choices. You are right that there is tremendous pressure, especially in the southern part of the country, from people who want to buy and the difficulties in the southern half of the country are obviously much greater than they are in the Midlands and the North. At the same time pressures on local authorities and associations in the south - homelessness, bed and breakfast and temporary accommodation - are enormous too. We are just trying to get the balance between those two in the southern part of the country and we are finding it very difficult given the restrictive nature of resources.
(Mr Coulter) One should not under-estimate the amount of innovation for which housing associations are responsible. All of the shared ownership programmes really started with innovative projects some 20 years ago. The development of intemediate market purchase, particularly in the housing hotspots, is something which a lot of housing associations are now getting themselves involved in, effectively sitting between social sector and private fully market housing, so there are experiments that organisations are involved in even with the pressures to which John Perry referred.
(Mr Coulter) Blue skies thinking would start a debate about changing the subsidy rules under which we operate, to look at ways in which equity between the private sector and the independent social sector could be used as a way of procuring more housing of the type you are talking about. Whether it is full ownership or part ownership clearly depends on the projects and the availability of personal incomes which must not be forgotten in the creation of that ownership. So we need to push the boundaries and territory out for more innovation and experiment.
(Mr Tetlow) There has been some timely research, as you are probably aware, and the Rowntree Foundation report, issued last week, indicates that about 12,000 units per annum are being delivered by the planning system. It also points out that only 4,000 of those are being delivered without public subsidy, so I think when you look at it in those terms you can see that it is a relatively minor contribution. It is a useful supplement to the main programme but it cannot be seen as any more than that. In terms of the future it does have, I believe, more potential and I do not think that enough has been made of it. The system has been with us for ten years.
(Mr Tetlow) I think that is the case. There are a number of reasons. The most fundamental one is that many local authorities have not got up-to-date local plans with relevant policies in there. That has got to be a fundamental starting point to give them the confidence to negotiate. It also seems to me they are not giving the issue enough priority compared with other issues of planning gain, or perhaps even showing enough determination at negotiations, because certainly some cases I have been involved in would indicate when local authorities have been determined in their negotiations, they have been able to achieve a great deal. For example, there was a case in Gloucester not long ago that I was involved in, a public inquiry called in by the Secretary of State, for 3,000 dwellings on the edge of Gloucester. In the end the Secretary of State has gone back to the developers and said he is not minded to approve the application, principally because not enough affordable housing has been provided. The developers were offering 15 per cent, the council were seeking 40 per cent. I appeared as an independent expert to the inquiry recommending 30 per cent and the Secretary of State has come back and said 30 per cent should be the figure, and that is a significant number of houses.
(Mr Tetlow) You could realistically seek to double it over the next five years but there are two important qualifications. Firstly, in terms of public subsidy there will still be a major demand on public subsidy so I would not want to assume (particularly bearing in mind that many of the sites will be brownfield) that you will be achieving more than the present third figure without subsidy. The other thing is that there need to be proper linkages between these sites that are coming forward via the planning system and the funding mechanisms via the Housing Corporation. I think the third point is that housing associations are increasingly dependent on this source of supply and the reason for that is that it has been increasingly difficult for them to find sites on which to develop 100 per cent affordable housing.
(Mr Tetlow) I do not think they necessarily need more statutory powers. They certainly need better guidance. Circular 6/98 should have been reviewed previously. After all, we had a PPG3 in 2000 and one of the central planks of that was providing more affordable housing. Yet for some odd reason the Government did not issue new guidance to support the new PPG3 and the circular was intended to supplement the superseded PPG. The definitions and the site size threshold are two issues that definitely need to be addressed in the new guidance. It needs to be more practically focused as well. There has been quite a lot of good practice research carried out and that needs to be better distilled into clearer government guidance. I do think, however, that a lot of it is down to the local authorities giving the issue priority and showing determination in their negotiations.
(Mr Perry) The difficulty with the right to buy now as opposed to earlier on is the loss of stock that is involved. It is running at around about 50,000 units per year and, as we have heard, we cannot provide that number in terms of replacing the lost properties. Even though the response will be that the right to buy is exercised by people staying in properties anyway so those houses are not really available, that is not strictly speaking true because people tend to stay there for about ten years, so after ten years the property becomes available. We are looking long term and of course a proportion will leave after the three-year period when they are entitled to leave without paying the discount and so those losses to the stock are fairly immediate. Particularly in London where right to buy is running at around 11,000 a year, we are probably building less than half that in terms of new units, and it is really contributing to a very serious situation in terms of loss of affordable rented housing stock.
(Mr Perry) We cannot quantify that yet. The ODPM is doing research on that at the moment. I think the evidence will be out quite soon. We know the kinds of abuse that are taking place in terms of people being bribed to buy their property when they do not want it, and they sub-let the property for three years until the company that bribed them takes it over, that kind of thing, and also people buying properties in advance of known demolition in order to benefit from compensation. Those are two of the most commonly known abuses but we simply do not know the extent of abuse.
(Mr Perry) The difficulty with the present legislation is that, understandably, in 1980 it was based very much on forcing local authorities to sell come what may and the onus was very much on the prospective purchasers, and the local authority could do very little to prevent a sale. We need more balanced legislation where local authorities can restrict sales in certain circumstances, where they can restrict sales when demolition is due, and where they can restrict sales within terms set by the Secretary of State in very high demand areas.
(Mr Coulter) We need to deconstruct the figures. I personally have not seen the consultation document which was promised to back up that proposal. It would add a relatively small number of housing association tenants to that pool. Of the current 1.8 million housing association tenants, about 650,000 have the preserved right to buy through stock transfer; about another 200,000 plus have the right to acquire which was introduced in the 1996 legislation; so of the balance of roughly one million, about a third already have the right to buy because they are tenants of non-charitable housing associations. So we are talking about a core of 600,000 or so who would be captured by the right to buy from the charitable housing associations, which raises a range of issues about charity law, for one, and secondly at a practical level since approximately two thirds of tenants across the social sector as a whole either have full or partial housing benefit, it raises the question of whether it has any relevance to the sort of issues that are debated in the housing market.
(Mr Coulter) I do not see that it would help particularly.
(Mr Coulter) Not extensively. The specific reason I think is two-fold. Firstly, the point I made about the income levels of those who are housing association tenants, particularly in the period since it was introduced, where those income levels are reducing relatively speaking. Secondly, of course, there is a different structure from the right to buy. It is not a discounted approach, it is an approach which reflect the previous tenant incentive cash schemes. I think the maximum available discount is about £20,000 in the highest cost areas and, of course, there is a growing gap between that available discount and the current market value.
(Mr Coulter) Potentially so.
(Mr Coulter) Perhaps I could split that into two parts. If I could make some general observations and Robin could add some specific planning comments. Certainly the mono-tenure approach would be regarded by everyone as a failure. It has been a product of a range of circumstances, including public policy, which I think is now being redressed in choice based lettings and the rest. Increasingly we are seeing developments and existing schemes looking to mixed tenure. For example, the Greenwich Millennium Village is a mixed tenure proposal. If you look at what the Joseph Rowntree Housing Trust is doing on its largest own estate in New Earswick in York, it is selling every fourth re-let in order to rebalance the economic and social structure of those communities. So there are some practical steps starting and there are some planning approaches which might also help.
(Mr Coulter) Absolutely. The socio-economic composition of the social sector has changed dramatically.
(Mr Coulter) At two levels. Firstly, the planning of new housing (not of the development programme but the planning of new housing) is specifically to be mixed. That is now public policy with the Housing Corporation's programme which will give preference to schemes which provide for tenure mix. Secondly, dealing with existing stock on a re-let basis to ensure that there is more economic balance in communities.
(Mr Coulter) By the Department and the Corporation, yes.
(Mr Coulter) Housing associations are not legally empowered to provide housing directly for sale so schemes which have that component would have to involve a genuinely private sector organisation.
(Mr Coulter) It requires a change in the law to enable housing associations to be direct providers.
(Mr Coulter) It is probably through an unregistered subsidiary and I am not aware of the circumstances.
(Mr Coulter) They can do it through unregistered bodies, which may raise other questions for regulatory authorities.
(Mr Coulter) Yes, we would like to see that.
(Mr Perry) I think they probably are but it is difficult to know what to do about this issue where there is a genuine service provided.
(Mr Perry) The issue is coming up specifically in relation to achieving the Decent Homes targets. Leaseholders in the right to buy blocks of flats often stand in way or have to take part in renovation schemes if the whole block is to be brought up to a decent standard, and that is an issue which is being looked at by the ODPM at the present time, and I suspect some incentives to leaseholders to take part in those schemes will come from that, perhaps in the way of capping of costs.
(Mr Perry) It is being looked at at the moment as part of the PSA plus review of achievement of the Decent Homes standard. I suspect that soon we will get some conclusion.
(Mr Perry) Yes.
(Mr Perry) This area will remain a difficulty for housing benefit because some parts of service charges will not be covered by housing benefit, others will be covered if they are genuine support charges by the new Supporting People arrangements. The difficulty might be charges that fall in the gap between the two.
(Mr Coulter) We are looking forward to it! As you know from your previous inquiry, you received a lot of evidence from us (the Chartered Institute) and others about the importance of tackling the worst extremes of market decay, and we are very keen to ensure there is a balance between the debates about the south of the country and the housing market decline in parts of the North and Midlands. We are very specifically keen to ensure that there is as much freedom as possible for the Pathfinder areas and others - it is not only Pathfinder areas that have the phenomenon of low demand, they represent about half the stock the Department itself estimate - to be able to experiment and to make sure that what they do through the partnership boards being established is connected across the other regeneration schemes for which government is responsible through different routes, whether regional development agencies in the case of single budget or the individual local authorities in th neighbourhood and other renewal schemes.
(Mr Perry) We do want to see a move in that direction. I was interested to hear your previous witnesses because I think we do want to see some control of local government in the South East and more incentives to move to more deprived regions. In housing terms I do not think we are going to crack this problem without bigger economic opportunities in the North West and North East where these low demand areas are concentrated.
Chairman: On that note, thank you very much for your evidence.
Memorandum submitted by Office of the Deputy Prime Minister
Examination of Witnesses
MR MICK GAHAGAN, Director of Housing, and MR HENRY CLEARY, Head of Planning, Housing and Growth, Office of the Deputy Prime Minister.
(Mr Gahagan) I am Mike Gahagan, the Director of Housing in ODPM. My colleague is Henry Cleary and he is head of what used to be the Affordable Housing Unit. I say used to be because since the DPM's statement of 18 July, with the recognition that we needed to look wider than the provision of affordable housing to the provision of housing in general, it is now formally titled the Planning, Housing and Growth Unit, so it is the same thing with a wider remit.
(Mr Gahagan) No, that will do.
(Mr Cleary) We were set up at the end of last year. We were looking at affordable housing supply issues, how the system is working, how it could be improved, and we really focused on three areas: the first is the supply of sites, the land available, and how that comes forward; the second is the planning and negotiation of affordable housing schemes; and the third is new approaches in the areas of construction but also finance and other respects. So in general terms we were looking across the piece along the supply chain. We worked openly with partners. The agenda has now changed, as Mike has said, and we are now working to the DPM's agenda as set out in the statement of 18 July.
(Mr Cleary) There are instruments available, for example those used in rural areas to help keep the housing in use for the local community. Our perception was that that was not a primary obstacle to the supply of affordable housing. It was a useful area to examine but the issue really is up front in how much housing we can provide.
(Mr Gahagan) I think there is an additional element. In schemes like low-cost ownership or Homebuy, when the property is sold, the equity share that the housing association provided reverts back to the housing association so the money is not lost. There is an issue about restricting subsequent sale because the lenders obviously are nervous about that.
(Mr Gahagan) I like the word "reasonable"!
(Mr Gahagan) We are open to any suggestion on this. Ministers do want to. What I would say to you is in these schemes there is always a public subsidy of one form or another, it may be land or it may be money, but the figures do not stack up without that contribution somewhere in that scheme, and there is the issue about recycling, except through section 106 agreements.
(Mr Gahagan) Sorry?
(Mr Cleary) Yes, all the members of the unit live in the South East and, as you will know, there is an element of consolidation there of the cost of living in the South East and London.
(Mr Cleary) I am not aware that it does. I should add that we have a lot of input from our regional colleagues, we have been working across the regions, and I hope that helps to counter it.
(Mr Cleary) If I may, I would like to divide it into three elements. One is the planning policies themselves and particularly the housing need assessments that local authorities carry out. What we found in some cases is that they are very narrow. There are obviously some excellent ones, there are others that just focus in on one particular section of the market, for example those in statutory housing need, not extending to key workers and others across the piece. If you look at the housing policies in the South East, for example, we have had in recent years 40 per cent completions for four-bedroomed executive houses rather than the small units that you might expect. If you look at an authority like Basingstoke which is now requiring a minimum percentage of one and two bedroom units, that is right up front, and that is the first stage. The second stage is how is the negotiation itself carried out and there again your other witnesses alluded to this. We found an enormous spread of practice. We have some research on this which is still on-going and which, like our other research, will report and be published. There is quite a lot you can do to improve the efficiency with which negotiation is carried out. The third area is what you actually require, what is the level of contribution to affordable housing and how much of that is key worker. That third element, the issue of further guidance and further definitions and so on, a lot of things have been said to us on that and that really is now an issue for ministers and they are thinking about that in the context of the DPM's wider agenda.
(Mr Gahagan) Yes.
(Mr Gahagan) That indeed is the research that I was just referring to. What that is designed to show is if you make available special help to a sample selection of authorities how far you speed up the system and improve its content and output. They are working with ten authorities spread across London and the South East on projects which involve 1,000 housing units and that work is about to report and should be completed by the end of this year and we will then obviously feed that into the process.
(Mr Gahagan) It is tending to support the points I made a moment ago, in other words, the spread of good practice, the importance of the housing needs assessment up front being broadened and the policies, and then it has some observations to make about what kind of affordable housing contribution we are seeking.
(Mr Gahagan) Yes. The original objectives to make the system more transparent, more certain, and to speed it up remain core priorities and we do want to take those forward, even though that particular way of doing it is not now being proceeded with.
(Mr Gahagan) Yes, this is something on which we commissioned research and we published that very broad piece of work covering instruments used internationally, so it ranges from encouraging developers at one end through to helping the saver and also encouraging employers, because one of the other areas that we found is that there is quite a lot employers can do. This is all published work and we have fed that into our colleagues in the Treasury who obviously have the lead responsibility on fiscal matters.
(Mr Gahagan) We have been looking at the area of private finance. What we tend to find is that private finance will be sufficient to fund some types of affordable housing but it is extremely difficult to get it to fund social housing. If you are looking at low-cost home ownership or sub-market renting, 20 or 30 per cent below market rent levels, a private sector partner can do that but with the concession of section 106 or (sometimes) free land. When you then go on to the more expensive product of social housing it is quite difficult. There is one group that we are talking to, Asset Trust, who have some proposals in relation to that, but they are quite complex and those discussions are on-going.
(Mr Gahagan) Just to pick up what Henry said earlier. We are looking at Section 106 first to improve the guidance and the way that works, but I think there is only a narrow range of alternatives in broad terms. There is either subsidy through something like the Approved Development Programme or Local Authority Social Housing Grant scheme, or there are the fiscal measures which Henry mentioned earlier, which Cambridge University looked at. They have various problems associated with them, particularly the dead wood costs, but again there are no free lunches on this. There is quite a narrow range of options available given the costs involved.
(Mr Gahagan) There are a number of issues there. Can I just say I would hate to pretend that there was a single housing market in this country. It is very clear there are different ones within regions as well as between regions and therefore different policies are needed in different areas. The Deputy Prime Minister was very clear that he was not cutting back on the sums of money that went to regions like the North East and North West through the Approved Development Programme. There is the issue about the extent to which new social housing is needed and a lot of money needs to go into improving the existing stock as well as providing new stock. In some places - parts of Newcastle for example - there is a surplus of social stock but, again, it is the same problem; there has got to be payoff for the developer, for the investor.
(Mr Gahagan) The Minister there was talking about transfer, which is transferring existing stock rather than provision of new stock, and the arguments around transfer have been well rehearsed this morning as well as in other places. I think the answer is the same as I gave earlier, that I do not think ministers want to rule out anything at the moment around the provision of new stock especially in areas of acute pressure, but at the end of the day ----
(Mr Gahagan) He was saying, as ministers have said before, that the focus is on transfer of private money and also on arms' length management organisations.
(Mr Gahagan) Yes, we were.
(Mr Gahagan) That is an unfair question. You would need to ask my Minister that.
(Mr Gahagan) Is that not the same question in another form?
(Mr Gahagan) We very much hope that it has. I heard John Perry, I think it was, mention earlier the issue around the Supporting People Housing Benefit interface which is, I think, a most difficult one. We very much hope that that has been sorted out now. I do not want to sound complacent because I think this is a very real issue which we need to keep our eye on over the next six months because it is implemented on 1 April.
(Mr Gahagan) It also failed just basic management and maintenance. There is a management and maintenance allowance that is paid through the rent, not through Housing Benefit, and that is pretty key for local authorities in their management of the stock. That was increased in the 2000 Spending Review.
(Mr Cleary) If I may, Chairman, I will come in on this one. The register is part of a new remit to English Partnerships which the DPM announced earlier this summer. It is part of speeding up the supply of land release. What it will hopefully deliver is both a role for the better use of these sites, in other words the way in which they are developed, but also it will encourage people, as you say, to put them on the market and to speed up their release. To strengthen that there is discussion now ongoing within the Department on how public sector land within Government can contribute to that, so we are talking to Treasury and to other government departments about how they actually speed up their processes.
(Mr Cleary) We support that initiative, we think it is a very ----
(Mr Cleary) Our Department probably pays the largest single element in the RDA budgets but, as you know, RDA sponsorship and overall budgetary control is a matter for DTI. We are parties to the discussion but obviously there is also a sense in which the RDA itself needs to establish what its priorities are within the areas that it has freedom. There is an ongoing discussion there about priorities.
(Mr Cleary) I think the thing that impressed me was, first of all, land supply itself is not a problem, there is plenty of site space. If you look at things like the Airspace Project, which shows what you can achieve by building up and over, there is not a problem of physical space. There may be for houses with gardens but not for apartments. The second point is that increasingly partners are coming together recognising what the problems are. Many of the witnesses that you have heard have actually agreed on the process problems that we have got with negotiation of the agreements with developers, how we need to speed those up and how you could improve the way in which people work together. I think the third thing is that people are now adopting new approaches if you look at the interest in modular construction, offsite fabrication, but also a wider range of housing interventions. There is one other thing I would add and that is I think everybody now recognises that you cannot solve affordable housing simply by looking at affordable housing instruments, you have to look at overall housing supply, and that is the central point that the DPM made at the start of his statement.
(Mr Cleary) I think we all recognise that we are way short of where we need to be and it is not something that you can turn around instantly. Developments on average take a period of three years, the very largest take perhaps up to seven years, so it is going to take time.
(Mr Cleary) I think that is something the DPM will want to address in his statement.
Chairman: I am not asking you what the DPM will be addressing, I am asking you for an opinion.
(Mr Cleary) I think we should, yes. I believe we will.
Chairman: On that note, can I thank you very much for your evidence.