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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