Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Bolton Metropolitan Borough Council (AFH 07)

  Bolton welcomes the opportunity to contribute to the national debate about affordable housing, as the creation of more affordable housing is a key priority of our housing strategy and a major subject of regional and sub-regional collaboration.

  Arriving at an accurate definition of "affordable" is admittedly not easy. "Affordability" is a comparative term that can only be understood within the context of the local housing market. Understanding how these markets operate can be difficult as the core feature, valuation of residential properties, is part science, part art—reliant as much on precedent as it is on prediction or formula. The problem is that housing markets can be affected, directly or indirectly, by so many different factors—from significant national changes (such as the rise or fall of interest rates) to parochial issues (such as the opening or closing of a local source of employment). Therefore it will be a constant challenge to assess at what price a dwelling is deemed to be affordable within a specific locality and to identify which, amongst a bewildering number direct or indirect indicators, will have the greatest influence on market trends.

  Whilst property values greatly affect affordability, the relative purchasing power within a local economy is of equal importance. Therefore affordability is also about understanding the impact of regional/sub-regional differences in average incomes and living costs. For example, the average incomes of people living in Bolton tend to be slightly lower than those in most neighbouring authorities and much lower than certain areas of the country.

  Accepting these constraints exist, a definition of affordability in a housing context involves the correlation of three key elements:

    —  The "price" of either renting or buying a dwelling in comparison with the average market value ascribed to the same type of property as assessed—progressively—through contemporary local, sub-regional, regional and then national house price indicators (applicable for both sale and rental valuations);

    —  the ability to maximise choices of housing that meets the objective needs and reasonable aspirations of the prospective homeowner or tenant. This involves an understanding of the differences in average incomes across the country and how they can inhibit housing choices. Also an appreciation of how housing benefit levels can constrain access to rental choices for some demographic groups, or indeed remove the option of independent living entirely. Finally, a reasoned approach has to be taken to provide options for breaching the "gap" between individual resources and market values, allowing those on limited incomes to enter the housing market; and

    —  ease of access to dwellings that meet modern day standards of occupation—or those that will meet such standards within the reasonable economic means of the owner or tenant.

  Note that this final element challenges the premise that affordable housing can be made decent, as a contradiction in terms. A dwelling cannot possibly be "affordable" if it is not of a decent standard. Only after improvement it may become so. However, the investment required to bring it up to "decent" standards is a factor that could make it ultimately "unaffordable". Housing lacking the basic decency standards may be "cheap" and readily available to those on low incomes but it is not "affordable".

  Affordable housing should not be simply seen as:

    —  sub-standard property that cannot be brought up to decent standards without capital investment so large that it would inflate the improved rental or sale value to levels above what is deemed "affordable";

    —  housing that may be plentiful and available at a low price but has substantially high maintenance costs, a short-term life "expectancy", and/or "hidden" on-costs;

    —  smaller dwelling types (such as flats)—sold at or above market prices—which have been inserted by developers into new build schemes in an attempt to meet PPG3 requirements;

    —  properties that are being simply sold or rented on or below the national average without reference to local, sub-regional and regional market values; and

    —  properties that stand out as being in some way inferior or less desirable than the mainstream stock.

  The failure, at present, to arrive at an incontrovertible definition of affordability leaves Councils open to challenge at Public Inquiry. The Government has therefore to construct a much more robust definition—based upon a consensus of the feedback from the Committee's investigations—which can be applied at a local level but is fully tested by all agencies.

  It would be mistaken to suppose that problems of affordability are concentrated in those areas of the country where demand outstrips supply or even that such housing shortages are largely a southern phenomena. The presence of sufficient supplies of affordable housing evenly distributed across towns or cities, and within rural areas, is a major indicator of a healthy mixed housing market everywhere.

  Within Bolton the rapid development of the suburban fringe, over the last 30 years or so, has created "hotspots" of high priced housing. Localised high demand has created considerable inflatory momentum placing a premium on house prices, effectively restricting access to the suburban housing market. This is a particularly acute problem for local people on limited incomes (or first time buyers) whose wish to stay in their "home" locality is threatened by the lack of affordable housing. Further, as suburban expansion has been matched by inner urban decline, the very different housing markets that are operating across the Borough intensify the risk of long-term social dislocation. The creation of more evenly spread affordable housing is seen as one of the main means of arresting the growing socio-economic dichotomy between urban and suburban areas.

  It is therefore of primary importance that the regeneration of these inner urban areas addressed with full vigour (a substantial investment through the Market Renewal Fund, if sufficiently resourced beyond the pathfinders, would be the answer here) as it will reduce pressure on suburban growth. The Urban White Paper, Urban Task Force Report etc, help towards this end by encouraging higher density development following a more imaginative urban design code.

  Affordability is an issue usually, but not exclusively, associated with home ownership, which makes it particularly important to Bolton, as seven in every ten of our householders own their property. The contradictory perspectives potential and existing owners hold could be seen to threaten the supply of affordable housing. For example, someone wishing to take the first steps on the homeownership ladder would hope for a market with many affordable options, whereas homeowners considering a move look to maximise their profit from any sale. Managing these different aspirations so to create a "win-win" situation is one of the keys to creating a successful affordable housing strategy.

  Adopting a long-term strategy for affordable housing will also benefit people whose housing circumstances may now look rosy. The "boom" in residential sales and rise in house prices set against low employment and increasing incomes would suggest that issues of affordability are disappearing on a national scale. However, it should be remembered that this "boom" is being fuelled by exceptionally low interest rates. Inevitably, over a period, these rates will rise and threaten the stability of some house purchases. In this context, pursuing a comprehensive affordable housing now provides a hedge against a "boom" and "bust" situation in the future.

  As previously mentioned, affordability is not an issue restricted to home-ownership. There are people whose incomes or circumstances are such that they cannot afford some of the rented options that one would reasonably expect them to. Bolton's public sector housing rents are one of the lowest in the region and reflect, in part, the Council's commitment to tackle poverty by reducing housing costs. As these rent levels are somewhat below comparable local RSL rents, they provide a favourable economic option for those on very low incomes. Social housing rent convergence would inevitably lead to rent rises in the public sector and removing the differential element that some people find attractive.

  A further inflationary pressure on public sector housing rents is caused by the need for Councils to meet their obligations to provide decent housing within the Government's timetable. The difficulty is that we have to make good the effects of decades of national under-investment in public sector housing. Therefore the costs of achieving this are vastly higher than would be the case if investment levels had been maintained throughout this period. Our challenge is to secure sufficient resources to carry out this major task without setting off inflationary pressures that would threaten the overall affordability of our stock. The opportunity to become an Arms Length Management Company (ALMO) appears to be the best option available to Bolton that enables us to chart the course between investment in stock and affordability of product.

  At the very bottom of the income scale we need to guard against the situation where a home ceases to be affordable because the tenant (public or private) becomes employed and is no longer in receipt of housing benefit. This "poverty trap" needs to be closed so that every effort is made to ensure that housing costs are not a barrier to full employment.

  The private sector housing market is, inevitably, geared to maximising profit rather than giving priority to producing a mixed housing environment that provides social cohesion. There is no self-regulatory market mechanism that will automatically realise both these outcomes. As there are few incentives for the private sector to volunteer affordable housing as part of a mixed development, the imposition of planning gain is an essential tool in making this happen. Usually affordability issues can be sorted out through negotiation but without the availability of "statutory" planning gain as a last resort, these talks would be somewhat one-sided.

  Current policies and practices, whilst they encourage mixed communities, will not necessarily deliver them. There needs to be a better system of incentive/disincentives aimed at making affordable housing a key element of every new development. Such things worth considering are:

    —  reducing taxation on the construction of dwellings built that meet agreed affordable criteria and/or on brownfield sites whilst increasing it on greenfield sites;

    —  increasing taxation on the construction of dwellings built at market value where there is no attempt to provide a mixed housing environment within the guidelines set down in local planning policies;

    —  taxing greenfield development whilst incentivising brownfield development (a process that can be kick-started by the Government winning the challenge in Europe over the principles of RDA gap funding derelict/difficult urban residential development sites);

    —  ensuring that developers are not able to interpret "affordability" loosely by giving Local Authorities stronger powers to prescribe what are the exact affordable needs in any locality. The Local Authority would have to support this assertion with evidence emerging from an agreed predictive model;

    —  regenerating rural areas where affordability problems reach a critical areas. Areas that may include all or some of the following; few residential development opportunities, high values, significant proportions of second homes, an eroding locally born community, restricted transport infrastructure and an acute or growing lack of affordable housing. To achieve this radical measures are required. Options would include; designating all new sites for affordable housing (giving the Council greater CPO powers where appropriate and extra resources to implement the CPOs); assisting Councils in these areas to build new rented houses without the right to buy, so as to preserve their "affordable" status; developing regional housing targets for affordable housing specific to clearly defined rural zones (grouping villages together within a prescribed locality), it would only be after these targets are met that any other form of residential development could take place; and introduce additional tax constraints on anyone buying a second home in an area with a designated affordable housing shortage;

    —  encouraging the development of market value housing in areas of urban deprivation by providing incentives that reduce costs for both developer and purchaser;

    —  ensuring that each Local Authority produces a definitive explanation of how it will discharge its responsibilities under PPG3, and what will be expected of potential developers;

    —  reducing stamp duty in areas designated as centres of regeneration;

    —  supporting, with revenue, the introduction of community workers whose role is to help integrate the newly created mixed communities by developing community plans following an urban care approach so as to "bed in" these estates; and

    —  encouraging all sub-regions to produce a predictive model of future supply and demand for their area. These would have to be mindful of Regional Planning Policies and of national targets for affordable housing.

  The weakness of shared-ownership as an affordable housing opportunity is that the public subsidy injected is never recovered. There is nothing to prevent people benefiting from this option from selling on at an increased value once they have full ownership. This effectively takes the property out of the affordable category. In order to secure better use of the public sector subsidy it is suggested that more consideration be given to schemes that allow for the recycling of this public subsidy so that it can be used more effectively. For instance, the extension of Homebuy where loans replace subsidy should be considered. Also shared ownership or low cost subsidised schemes could be introduced where either some form of equity is retained on resale, or part of the subsidy is paid back if a dwelling is sold for an amount much in advance of its original value. A variation of this idea would be the development of a whole range of resale covenant options.

  Continuing with Regional Planning Guidance targets for affordability is appropriate as they provide a clear statement of intent to developers. However targets need to emerge from a more robust method of predictive modelling that is sensitive to changes at regional, sub-regional and local housing market levels. Also they could be better explained by adopting a method of "option appraisal" outlining the likely consequences of reducing or increasing existing targets by different factors.

  Whether or not the Government's targets on decent and affordable housing can be met depends on a number of factors:

    —  the Government's willingness to increase investment into housing by significant amounts so as to offset years of under investment;

    —  the Government and its agencies encouraging local authorities to pilot new ideas/new methods of delivery aimed at providing affordable housing and decent homes;

    —  the Government and Local Authorities taking action to pre-empt any likely skill shortages that would occur as capital works programmes increase to meet the targets within timetable. Increased investment of training in construction-related skills is needed now to eradicate future shortages. By targeting these work/training opportunities to the most disadvantaged groups within our community this would also support the neighbourhood agenda for eradicating social exclusion;

    —  local Authorities being given flexibility to tap into other forms of financing if public sector funding is insufficient to meet the targets;

    —  local Authorities (again given sufficient flexibility) maximising the impact of improving stock to decent standards and increasing the numbers of affordable housing by linking these activities to local holistic regeneration programmes. Programmes that emerge from clear housing strategies that are, in turn, part of an over-arching corporate approach to regeneration;

    —  local Authorities working in partnership to agree where and when new affordable housing is created through which can then contribute to a more co-ordinated, inclusive and healthy regional housing market; and

    —  a more constructive engagement with the private sector based upon the premise that incentives would be required to encourage both builders to include affordable housing in schemes as a good business proposition and lenders to provide more flexible arrangements for prospective house buyers of affordable property.

  Now that the number of households has actually exceeded the number of properties in the national stock, even greater pressure is exerted on lifting planning constraints on greenfield sites. Under most circumstances this should be resisted. Efforts need to be concentrated on bringing the 750,000 or so empty properties back into use. Also in providing incentives/encouragement/legislation to support the change in use of surplus commercial, industrial and other brownfield sites or premises.

  With obvious links to the Market Renewal Fund, Bolton collaborating with Rochdale, Manchester, Oldham and our partner RSLs are developing a pilot proposal with the Housing Corporation to test a range of new tools aimed at improving access to low cost home ownership. One of our key objectives is to establish a forum that would include developers and lending institutions and other stakeholders with the remit to provide a basis for the continued advancement, planning and development of affordable housing in the sub-region into the future. It is a means of breaking the different stakeholders out of the confines of their particular "boxes" with a view to providing a much more collaborative approach to dealing with this problem. Replicating this type of forum, probably under the auspices of the RDA, across the country at both regional and sub-regional levels, would be a major advance in bringing together the private and public sectors in a positive way so as to drive forward a deliverable and co-ordinated programme of affordable housing.

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