Examination of Witnesses (Questions 40-59)
LORD BEST
WEDNESDAY 12 JUNE 2002
40. Does that mean that you are opposed to initiatives to provide housing for identified groups?
(Lord Best) No. We absolutely must keep our eye on the fact that of the bigger total we need a lot more that is affordable and we need the measures to make sure that happens. I am very much about a managed process but I think it is the overall supply that comes first and often gets forgotten. Special interest groups will argue for a little bit more of this; give our people something special. But if all our people do is buy out, move out other people, it is just shuffling the pack and somebody else will suffer. If we stop having bed and breakfast hotels (which is obviously a thoroughly commendable aim) and we get people into private renting through leasing arrangements—which is what is currently happening—but if we do not increase the overall supply, what happens to the people who were in the private rented sector before, for whom the place has now been taken by the homeless family? We have to get the overall supply up.
41. Your Foundation's report said that there is a need for 225,000 new homes a year in England. Can those actually be provided while maintaining reasonable design and standards?
(Lord Best) That report said 225, I have another one in my bag that says 210.
Chairman
42. How far can you come down then?
(Lord Best) I do not think we can drop below the 210, which is against, as you know, a five year average at the moment of about 150. So there is a huge gap between the demand and the supply. Can we do it without dropping standards? I am afraid it is going to take time to get up to those numbers. On the way we have to make sure we do not drop our quality, our standards. There is no reason why we should.
Mr Cummings
43. The Land for Housing Report states that, and I will quote here "The political debate has narrowed around the brownfield/greenfield issue, based on the implicit assumption that greenfield development is undesirable and brownfield development should be encouraged." Do you agree with this, Lord Best? If so, in what cases do you believe greenfield development can be justified?
(Lord Best) We have spent far too much time worrying about this. This distinction is much more artificial than people in the outside world believe. They see greenfield as the rolling countryside of rural England and brownfield as derelict sites in the middle of some desolate urban area. This is not the reality on the ground. We are developing on the side of York, in partnership with the City council, 50 acres of greenfield land. On the side of York, does this not sound a terrible thing to do? This is a scruffy piece of land, of little use to anybody, with huge pylons cris-crossing it, which makes it impossible to live underneath.
Chairman
44. This is how developers always describe greenfield land, is it not?
(Lord Best) Sometimes they are quite right. The distinction is not as simple as it should be. It is certainly true that if we broadly divide the total that we need into 60 per cent required on brownfield and 40 per cent required on greenfield, we are probably getting a higher proportion of the greenfield developed than the brownfield. I would certainly argue that the emphasis and the focus—if we are to increase supply overall—should be more on the brownfield than the greenfield, simply because we are doing better on greenfield in terms of the volume. But that does not mean that there will not be so-called greenfield sites that are not entirely suitably for development.
Mr Cummings
45. Do you have in mind any prescribed types of location which would accommodate greenfield development? Do you work to a particular formula?
(Lord Best) I think that this concept of the urban extension that you were discussing earlier is a very promising approach. You are not putting homes in the middle of nowhere where there are two cars per household all going in different directions. You are packing in against the side of an existing town or city. For development, the one I was just describing in York, right up against the side of York (which has already got housing on three sides), you put extra housing there and the bus route can come straight in. It is an environmentally friendly approach. You tap into all the amenities and facilities of the existing town. So if you are going on greenfield sites, go for urban extensions, particularly of some scale. If we are having this kind of trench warfare between house builders and planners and local opposition for every six homes dotted around, this really does not work for us. If you can get a decent site on the side of a town you can get some real planning gains. You can do some master planning. You can have your mix. We are having 35 per cent affordable housing, 65 per cent for ownership pepper potted around; you can get a proper mix from an urban extension: so-called greenfield, but nonetheless an entirely suitable site on the side of a town. I think you get a much bigger bang for your bucks through that.
Chris Grayling
46. There are two points I want to raise with you on this subject, Lord Best. One relates to what you have just said. I would dispute what you are saying about the edge of town from very practical experience in my own constituency. Is the danger not that if you simply bolt on estates to an existing town often what you are doing is creating quite substantial areas where there is no local community focus. I have seen this on the edge of Epsom where there has been a substantial re-development. You have had housing estates built up on very much the same principle you are advocating, but there is no local community focus. We are now starting to see genuine discomfort in the community which has moved in there about the absence of that focus. Do you not think that is a risk?
(Lord Best) It is definitely a risk. If I can introduce another theme, it is part of our over-dependency on private house builders to supply all our needs. There is not much in it for private house builders to create a long-lasting community on the side of a town, to put in community buildings, to have common space, open areas. This is all cutting into your profit if you are not careful. If the whole system of housing supply depends entirely on the private sector house builders, we are not going to get well-planned communities. In contrast, if I can put it like that, if you can have an intermediary body, a partnership with a local authority, you can plan your urban extension. The council has agreed to put in £600,000, we are putting in £600,000 for community amenities. We have open space. We are planning to look after this for a hundred years. This is going to last. The house building industry does not operate on this basis. We are going to use the house building industry for our purposes. Sixty-five per cent of the homes are for sale. We do not know about selling things. The house building industry can price a house within £5 of the actual cost of building it. We are hopeless at doing these kind of things. Use the industry to do what they can do but let us not be dependent on them and be dictated to by the private house building industry. If we want a planned community it is not going to happen. We need to intervene and have a plan for our urban extension which, as you rightly say, builds in community facilities, the knitting-in with the town and has people behind it who want to stay with it.
47. The other area I wanted to raise with you was that you made the point about the 225,000 new homes a year, but if you look across the United Kingdom as a whole the mismatch between supply and demand is much smaller. The reality is that our economy has shifted and is very condensed into individual parts of the country. There are limitations on either the desirability or the ability of the Government taking steps to relocate the economy. What assessment have you made about the economic implications of what you are recommending and the feasibility of actually delivering real solutions, given the fact that many of those 225,000 new homes would need to be condensed into a very small part of the country where there is not a great deal of green space available.
(Lord Best) About 50 per cent of supply is outside of London and the South, but 67 per cent of the demand is in London and the South. So we have a mismatch, as you rightly say. We are not always building where the demand is greatest, where supply is most needed. This leads to: Can we move the people from the south-east to the emptier areas, particularly the areas where there has been an over supply of house building as there has been in the north-west and elsewhere? Can we move them north? I think only to a limited extent. Certainly there are some regional efforts which will help revive the economy. Around us, Leeds is now beginning to prosper and you get the back office for Leeds in Bradford; things begin to spread out. York is a boom town, really, and is doing extremely well. You can build on growth; we must and we should. But I think we would be exaggerating the impact of this if we thought it was going to make a huge difference. As Will Hutton was saying, the south-east is a phenomena; it has gained tremendously from globalisation and it has paid for an awful lot of things in the rest of the country as a result. Nobody wants to shoot that golden goose. But if we do not want to shoot it, we have to provide the accommodation and find the places for the people who need to be in that economy.
Christine Russell
48. Carrying on a similar theme, in your Land for Housing Report you recommended that these older, poorer quality houses, the terraces in the north-west and the north-east, should actually be demolished. Will that then not make the situation worse because it will remove affordable homes in those areas. What is your view on that?
(Lord Best) Each place is going to be different and the solution for each place will be a different solution, but this problem of low demand and now abandonment of whole streets that are empty is now going right out of the political agenda and is certainly interesting Rowntree very much indeed. Our analysis is that the problem can differ fundamentally even if the outcome on the ground looks exactly the same. We used to say for ages that if you could only get economic activity into the area then these houses would get done up and the place would revive. What we have discovered is that there is a direct correlation between falls in male unemployment—so more people in work—and abandonment of areas. Exactly the opposite of what we have hoped. When we see the economy grow—places like Liverpool and Manchester are experiencing this at the moment—we see people using their new wealth, their new incomes to leave and get out. So what I think you have to do then, when you look at the area they have left, is to say: "How can we make this into the kind of place that people with current day aspirations, with money in their pockets, want to actually go back to or stay in". Then you get a series of techniques of which demolition undoubtedly is one if this product is no longer something anybody wants to buy. The worse thing probably is putting in little bits of money that just get lost; a little bit of an improvement grant, a little bit of help to build four houses over there. We have to have solutions that are big enough to change how fashionable the area is and make it a place that people think it really is a place they want to spend their own money.
49. In your view what do you think is the main constraint to the provision of affordable homes? Is it the inadequacy of the land supply because of planning constraints? Or is it land values?
(Lord Best) When we come to the areas where the supply is inadequate and we need more of it, clearly the two key players are the planners who release the land and the people who acquire it. We have had a lot of focus on how wicked the planners are and certainly you can understand all the pressures on planners to say no; councillors, members of Parliament, everyone is under pressure to say no. In our case we are building 550 homes. Who wants 550 extra homes? I do not blame anybody for standing up for that issue. But there has to be some leadership at the planning authority level because it is no good just saying no. These homes are required. I think that the other side of the equation which you touched on in your earlier discussions is about the role of the house-builder in not releasing the sites. This has to be taken into account—and taken very seriously—
50. What can you do about it in practical terms?
(Lord Best) Really to underline what the problem is. Share values of those companies that have land banks are higher than those house-builders that do not. Profitability has increased for the house-building industry along with a decline in output. It clearly makes financial sense to sit on sites for a period of time. It only makes financial sense, I have to say, for a few years because eventually when you do run out of land you have cut off your nose to spite your face. There is no more supply of land for you to work on. But people tend to have a relatively short-term horizon and over that short-term undoubtedly it is profitable not to build everywhere where you possibly could. Back to my theme number two, that means we do not want to be just dependent on the house builders. The house-builders are not actually producing a fantastically different amount of housing each year than they used to. We assume that because the total figures are so low now—back to 1924 or 1927, whatever it is—it is because the house-builders are building so much less. In fact they are fairly constant. They are a bit down it is true. But the real reason why there is so much less housing is that we have knocked out the alternative supply. There used to be councils, housing association, even—way back—people building for rent (not the Buy to Rent which has come piggy-backing on what is already there). We have to get back to having an alternative source of supply than just the house builders. It is ridiculous to rely on these people, particularly if there is profit in not doing things as well as in doing things.
Mrs Ellman
51. Do you feel there should be more housing investment and choice in the areas of the country that you are saying people want to leave? Or are you content to leave things as they are with investment in the south-east which you describe as the "golden goose"?
(Lord Best) Investment, yes; choice, yes. Those two must go together and if I can take the opportunity to talk about the mix of development, I think that Rowntree feels very strongly indeed that isolating and separating affordable housing—which means isolating and separating poor people, people who have disadvantages of different kinds—from everybody else is, in itself, ruining the life chances of those people. I think that some people would argue that if it comes to a little rural scheme you could have just your social housing on the edge of the village, your six or eight houses, and that is hardly a ghetto it is so small. We have done rural schemes in north Yorkshire and we would argue that even with just six or eight houses you should get some mix of income. Often that can mean mix of tenure, but not necessarily a mix of tenure. A mix of incomes, so that the people who live there are not labelled and stigmatised as the poor people on the edge of the village; "this is where all the unmarried mothers live", out there on the side of the village. That is not going to help the children of those households to be integrated in the village. If there is also some housing for sale or shared ownership—which is what we do—then you have a little community (even eight houses) where the children go to the schools and everybody else can be much more likely to be part of that community. We would outlaw the Housing Corporation funding any developments—even if it gets the £1.7 billion funding—of exclusive blocks that are just for poor households. This is going to mess people up in the longer term. It is not fair. You need to be in a setting in which there is a mix. That is true north and south.
Ms King
52. Returning to the fall in volume of social house-building that you have mentioned. Why is it that funding since 1997 has gone up markedly? The Housing Corporation has seen its funding doubled; local authorities have had a 250 per cent increase if we look at next year's budget. Why are we not getting extra houses?
(Lord Best) The local authorities spend their money principally on improving and modernising what they have already got. There are three and a half million council houses out there, quite a lot of which do need serious attention. So you have local authority money mostly going to what is already there and not creating anything new. You have cut out the whole of council house building. The housing associations used to build quite cheaply in the north. The Housing Corporation is directing more funding to the south. You may only get one house in the south for two that you have in the north, so you get less. Even in the south you do not get one house today for the same price as you would have got it before. So you need more money just to stand still. It becomes much more expensive, not least as the land values roll ahead of you and housing associations have to pay. Even with help from planning gains they are still having to pay an awful lot for the sites.
53. In addition to the loss that you have just outlined we are almost haemorrhaging in some respects through Right to Buy. Do you think Right to Buy needs reform?
(Lord Best) I think Right to Buy—if one replaces the stock that one loses, if one can replace it quite readily—can achieve some mix on estates. We have one big estate in York of a thousand homes. Because we are a charity we did not have Right to Buy. The Government has now come along very properly and said "We will give your charitable tenants an equivalent of the Right to Buy", but what we do is use the resources to buy replacement properties somewhere else. We are quite happy for people to buy the home that they live in because we get 100 per cent of the cost of that particular property. We can always borrow a bit more to go alongside the capital receipt. We do not actually lose any housing as a result of the Right to Buy. But where you get Right to Buy in council housing, receipts cannot be applied and extra borrowing cannot be found to replace those homes, you do actually have a net loss; you cannot afford to replace it. So in those areas where it is crucial that we have more affordable housing, we must keep what is left. I think we have to look at it again. I came across a village in Dorset recently that had 19 council houses and with great celebrations the last one was sold. There are no council houses now, no social housing in this little village; that is the end of that. To have ring-fenced a proportion within the 19 in an area in which there is a desperate need for affordable housing, we may need to be looking again that.
54. Finally, what role do you think the private rented sector should be playing to increase the supply of affordable housing? Shelter and the Association of London Government have put forward proposals to increase the role of the private rented sector.
(Lord Best) We are great fans of the idea of a new look, modern private rented sector. This is not entirely like the Buy to Let lot who are buying houses here and there which does not actually add to the stock. None of those people have actually gone through the process of building anything new; they have just piggy-backed on what is already there. Because their management and maintenance costs are going to be very high—only one property in the middle of nowhere, or three or four—it is not a terribly economic proposition. What we would like to see is the investment institutions, the pension funds, the insurance companies, buying whole blocks, creating developments of whole apartment blocks, just as you have on the Continent, just as you have right across America; everyone else has another stream of supply. This where I am saying that depending on the house-builders is not good enough. Everybody else has a stream of supply of rental apartments coming through from the big institutions. Indeed, some of the English institutions are investing in apartment blocks being built overseas. That has been resisted here. We have built a couple of these ourselves to see whether it can really work, one in downtown Birmingham, one in the middle of Leeds. Apartment blocks, with no public money at all. We have selected a site, bought it on the open market. Can we, with high density—because that is the secret, getting so many people on the site because we still paid through the nose for the land—get a return on our capital? The answer is that we can. We are getting a decent return; we get six and a bit per cent, that is roughly what we get, (just over seven in Birmingham at the moment because we are not getting any voids). So we are getting an adequate return on our capital. If six to seven per cent does not sound very much, you must also remember that the value of the buildings that we have constructed has increased tremendously just at the time when our stock market portfolio has plummeted. Although we thought we were doing something rather experimental, a little bit iffy, in fact our two privately rented apartment blocks have produced the best returns for us of any investments that Rowntree has at the moment. The message that we are sending out to the pension funds, the insurance companies, is to stop doing it for offices—just building blocks of offices, but think of it like offices it is just the same—and do it for apartments, particularly, of course, for single people. Single people can live in the densities that we are talking about.
Chairman
55. There are a lot of people doing just that in the centre of Manchester, are there not? Aimed particularly at students.
(Lord Best) Yes, there is the student market and there is the market for sale, too; people are selling apartments in Manchester and elsewhere and there are people doing the Buy to Let. There is a market yet to be filled—and I think it is an enormous one—and it can work right across the country; it can help regenerate Manchester and, in our case, the bit of Birmingham has benefited from having a really exciting architecturally interesting block of 50 apartments in situ. It helps the re-generation process as well.
Mr Cummings
56. Evidence which has been presented to the Committee suggests that new dwellings are being built at a much lower density than the Government would like. How do you believe these densities can be increased in new developments?
(Lord Best) In all these things you need to look at the individual place. In that Birmingham scheme I was mentioning—we call them CASPAR schemes, City Centre Apartments for Single People at Affordable Rents—we have a density of 220 flats to the hectare. This is really packing them in. As Will Hutton was saying, sound insulation becomes a most important issue, but it is an issue that with modern technology we can crack.
57. Is that not going to the other extreme?
(Lord Best) That is going to an extreme, but it is for single people.
58. Yes, but how do we accomplish reasonable higher densities?
(Lord Best) When it comes to the edge of town stuff—and we are back to families and the kind of aspirations people have—we have found it quite difficult to push up densities. The bottom end of the PPG3 is that you should try to do better than 30 houses to the hectare. Our 550 houses are going to be at about the 30. We have found it more difficult than I expected. I gaily said, "Come on, we want to get some higher density here". It is not as easy as it sounds. You have traffic considerations; how do you get that many entrances to the site with that many people coming and going off the site; highways people get in your way. Obviously the neighbours, if you say we are going to have 750 homes, get more agitated than if you say we are going to have 550 homes, which is bad enough. You find quite a lot of pressures if you are going to push up your densities in an area of suburban housing.
59. What are the solutions, Lord Best, in your opinion?
(Lord Best) It is worth the struggle to try to get densities up. In the old days we used to do about 20 houses to the hectare (as it now is). Now we do about 30 so we are getting more onto the site. But there are sites where you can only push it so far. The general principle is not a bad one. With single people, pack them in, basically.
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