Examination of Witnesses (Questions 148-159)
MR TIM WILLIAMS, MR ROB SCOTT AND MR CARL POWELL
TUESDAY 25 JUNE 2002
Chairman
148. Welcome to the Committee. Would you introduce yourselves for the record, please.
(Mr Scott) I am Rob Scott, Director of Environment at Dartford Borough Council in the Thames Gateway.
(Mr Williams) I am Tim Williams, Chief Executive of Runnymede Borough Council in North-West Surrey on behalf of the SLGA.
(Mr Powell) I am Carl Powell, Director of Planning & Transportation with Westminster City Council.
149. Do any of you want to say anything by way of introduction or are you happy for us to go straight to the questions?
(Mr Powell) Perhaps if we could make a brief comment. Westminster believes it has pioneered many of the aspects of affordable housing that your subcommittee are looking at today. The evidence that we presented attempts to address the questions that you have raised, but there are six important arguments that I would like to focus your attention on which are of significant concern to Westminster City Council. First, affordable housing as a matter of planning policy not planning gain. The distinction is absolutely crucial in terms of the work that the Government are doing at the moment. The tariff system that treats affordable housing as planning gain we believe is fundamentally flawed and that distinction needs to be given serious consideration. Secondly, the Government are placing too much reliance on the planning system to solve the affordable housing crisis. Affordable housing has a part to play through the planning system but, at the same time, there should be more direct funding of RSLs to build more affordable housing, probably via the housing corporation. Thirdly, we need more market housing as well as more affordable housing and that equation should not be distorted to the disadvantage of society as a whole. The urban renaissance that we have seen taking place in the UK over the last ten years needs to be underpinned by complementary development in both areas, not development at the expense of either area. Central London boroughs cannot solve their own housing problems without external assistance. In particular, the restrictions that currently apply over not being able to spend capital receipts generated under affordable housing outside of Central London should be lifted in order that an economic equation can be delivered for dealing with affordable housing. Fourthly, developers do seek to avoid and reduce affordable housing through slipping under the 14 unit threshold which is Government policy. This is an area that needs to be given very serious consideration. We are one of the few authorities that regularly publish details of our negotiations and the achievements of affordable housing. We believe all local authorities should be compelled to produce annual reports of their achievements and set out their policies and how they actually plan to achieve that. Those are six important arguments but there is an overriding issue from evidence which your Committee has previously considered that we would wish to comment on, which is the debate of 30 per cent versus 50 per cent. I say 30 per cent because that is the Westminster policy in terms of affordable housing. We happen to believe that the plan being put forward by the Mayor to seek to achieve a 50 per cent target is seriously flawed for Central London. It may be feasible in the outer areas of London but certainly not in Central London, for the simple reason that the 50 per cent target is a flexible target; it is akin to a flexible credit card where you end up with a never-never situation, that is you negotiate down from the 50 per cent. The policy that Westminster have followed is to adopt a very hard and without apologies approach to the affordable housing target by saying that what we intend to achieve, we do not negotiate down on that. We apply a gold standard which actually results in the product being delivered and we think that is an important distinction which needs to be picked up as well as the definition as to exactly what affordable housing is because there is a lot of smoke and mirrors going on in the industry at the moment as to exactly what affordable housing is. With the greatest of respect to your previous witnesses, Imperial Wharf was being cited as an example where 50 per cent has been achieved. A great deal of that 50 per cent is still in private ownership; it is let to students; it is not what I would classify as affordable housing. Affordable housing is what we as a planning authority make the developer reach into his pocket and deliver as part of the planning gain system. It is not taxation; it is part of maintaining a balanced and healthy economy for the populus as a whole.
Mrs Ellman
150. What new powers do local authorities need to enable more housing in general and affordable housing in particular to be provided?
(Mr Williams) As far as urban renewal is concerned, with Government wishing to see 60 per cent of new housing provided on brownfield sites, I think ensuring that there is sufficient certainty in the CPO or land acquisition, land assembly process, is important particularly where you are seeking to redevelop inter war or early post-war residential developments by improving housing density and therefore housing gain. At the moment, it is at best uncertain and at worst discourages local authorities or other partners from embarking upon that process. So, greater clarity and certainty in relation to the CPO process, particularly where former local authority or existing local authority estates are heavily pepper-potted by leasehold or right to buy sales.
151. Are there any other comments on that?
(Mr Williams) Non-legislative—greater clarity in relation to planning guidance. There is a fair amount of ambiguity which is frankly exploited and causes confusion currently in relation to the negotations that would be had with would-be developers. That allows for mischief. There should be a level playing field for all developers in order that they understand the obligations that are going to be placed upon them and that will inform properly and accurately the residual land value associated with a particular site.
152. Is there any shortage of development sites?
(Mr Williams) That is a difficult question to answer because again, if one looks at brownfield sites which is where much of the emphasis lies for most of us in order to meet the planning guidance, the sites will come forward for a range of reasons and you have heard from previous witnesses this morning in that regard. The big difficulty is, what are the financial implications of bringing particular sites forward? It is not just the land value, it is the whole range of issues including any affordable housing obligation, decontamination, utility diversion costs which can be huge in established urban areas and so on. All these are very significant constraints in terms of bringing particular sites forward. However, existing use value in many locations is very often above, if you like, the purchase prices that are necessary to bring them forward. So, it is a question of ensuring that the sites can be brought forward economically and burdening them in an unacceptable way with a whole range of obligations over and above, say, affordable housing obligations do make them non-viable and leave them, frankly, undeveloped and that has been a characteristic over many years. Generally, we believe that the potential is there.
153. What is the potential for more affordable houses in Dartford?
(Mr Scott) Can I first make a point that relates to what the last speaker says because I agree with the general comments that were made but I think that, with the Thames Gateway, those problems are to a greater extent magnified because atypically the development sites in Dartford are very large indeed and therefore have exceptionally long lead-in times. So, all the problems and uncertainties that one would find generally with brownfield sites are magnified because the lead-in times are so long. What we therefore find is that we are negotiating planning obligations opposite developers who are necessarily having to take very long term and therefore very conservative view of their risks. So, almost inevitably, the outturn profits for development are much better than the conservative estimates that the house builders have made and yet there is no opportunity for those profits to be accessed because the negotiations have to be conducted on the predicted profit rather than the outturn. So, in the Gateway, if, to come to your question, we want to increase the affordable housing effort, we have to find a way either of significantly reducing the risk that the land owner and the developer sees —
Chairman
154. Given the overall shortage of housing in the South-East, is there really a risk with the Gateway?
(Mr Scott) There is possibly more of a risk than you think.
155. Convince me!
(Mr Scott) About two-thirds of the land that we are trying to develop, although on any commonsense view it is brownfield because it is old mineral workings and so on, in the strict application of the PPG policy tests, it is not and therefore you are at risk as to whether you will get a planning permission at the end of this very long process. You are at risk of call-in by the Secretary of State. There is no reliable way of getting —
156. That is the risk of the process. If the houses are actually delivered, they are going to be sold or let, are they not?
(Mr Scott) Yes, they are but you have to find a developer or investor who is willing to get into the game for that long a period of time and there has certainly been at least one major investor in Dartford who has been recently deterred and has said, "I have had enough. I have done my due diligence and I do not think this is significantly risk adverse for me to proceed." That has not prevented development from occurring at all, but what it has done is caused developers to take a much more conservative view of their likely profit margin than would be the case if they could get quick answers on some of these things. That there would be flexibility, for example, in the local interpretations of PPG3 and other important policy guidance. As things currently stand, there is no mechanism by which you can get a reasonable indication from Government, for example, that the call-in on particular grounds will not be likely and I know that that has caused great difficulties for developers in the Gateway.
(Mr Powell) May I offer a complementary view. I think there is something that local authorities can do themselves; it is not simply Government that we are looking to to solve our problems. We are the local planning authority; it is within our gift. First of all, at Westminster, housing is our number one priority in our UDP. We make no apologies for that; we put housing above everything else. Local authorities up and down the country do not always follow the same policy and that is a clear `in your own back garden' solution that needs to be followed. Secondly, density—and several questions have been asked about density earlier—is an issue that needs to be looked at. Maximising densities but within the constraints of Section 106 making sure that, if we bump up those densities, we get a real 106 affordable housing feedback from that into society. Making the land available. Thinking creatively about how we actually use land at the moment. Confronting some of those issues from a planning standpoint at the local level is obviously within our gift and we cannot blame Central Government for that. Lastly, having a clarity on the affordable housing policy to make sure that we know exactly where we are going and that we do negotiate firmly but fairly to give clarity to the development industry that will cut down on the timetable and some of the delays that we are talking about.
Christine Russell
157. Could you perhaps tell the Committee, in all three cases and fairly briefly, what exactly is the level of the shortfall in your local authorities and what is the greatest need. Is it family homes? Is it homes for the elderly? Is it one or two bedroom apartments?
(Mr Scott) We have just recently completed a housing needs assessment that said we could justify 43 per cent of all housing being built in our part of the world being affordable housing of some sort or another.
158. What is it at the moment?
(Mr Scott) Currently, we seek 20 per cent. In terms of what type of housing that needs to be, primarily one and two bedroom homes and, to give you a benchmark of affordability, the cheapest home that you can buy on the open market in Dartford is £78,000 for a two bedroom house. That needs an income of about £25,000 and 55 per cent of our population are on incomes lower than that including 15 per cent who have no income at all aside from benefit. So, that is the sort of gap that we are trying to close. That is the cheapest two bedroom house. The cheapest two bedroom house in a new development of course is 40 per cent more expensive than that and it makes you wonder whether subsidising the cost of new housing is the most cost-effective way of meeting that need. Certainly in terms of shared ownership or any form of owned housing, it probably is not.
(Mr Williams) If I can move to our area and give a quick pencil sketch but it is material that has already been given to the Committee Clerk. Average house prices, Halifax index, £235,000. The smallest property circa £125,000. Whilst average earnings in Surrey are £35,000, there are many, including those in the public sector, who earn substantially below that. So, you are talking about earnings multiples of six, seven and eight times in order to get even the most modest property. That is the nature and scale of the problem. Again, we have completed a housing needs survey using external consultants and that has identified 750 additional units of accommodation over the next five years, but that does not deal with some of the issues relating to private sector needs which are disguised because of difficulties of accessing some of the data. That 750 units is very significant in my own patch of Runnymede. That is not across the county as a whole, but the gap is, as I say, very significant and it will not be bridged.
159. Did you identify what units in particular?
(Mr Williams) They are one, two and three-bedroom units, but what most local authorities or registered social landlords can do.
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