Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Surrey Local Government Association (SLGA) (AFH 12)

  This memorandum is submitted by the Surrey Local Government Association which represents the County Council and all 11 boroughs and districts in Surrey.


  The provision of affordable housing and housing for key workers has become a major concern in Surrey. The county is subject to considerable development pressures arising from a position of sound economic success—it is a major economic engine and a disproportionate contributor to the GDP. Land values are very high with the highest property prices of any county outside London (with some average house prices over 38 per cent higher than the regional average). This is leading now to significant difficulties in recruiting and retaining key staff. Despite being generally relatively affluent, the county has pockets of acute deprivation and social exclusion; and there are enormous development pressures because of proximity to London and Europe. Yet one of the main reasons why businesses and people want to locate in Surrey is the attractiveness of the physical environment.

  Surrey, like many other areas of the Home Counties, has been significantly affected by the rapid increase in house prices. In the South-East they have risen by 54 per cent over the past three years—13.1 per cent in the last twelve months and 292 per cent since the commencement of Halifax Index in January 1983. This substantially outstrips the figures for the National Index, which stand at 244 per cent for the same period.


  Against this background the 12 authorities in Surrey came together to undertake some detailed work on tackling affordable housing. The Committee may be interested in our report which was published in the Autumn of last year under the heading "Housing to Underpin Economic Success". It identified some 60 actions required not only of local authorities, but other stakeholders and Government. This was further complemented by a practice document produced by Housing & Planning Practitioners in Surrey under the title "Making Affordable Housing Happen". Copies are being sent to the Clerk for members of the committee.

  Amongst the key recommendations were the following:

    —  the need for unambiguous planning policies;

    —  complementary land disposal policies of public agencies;

    —  new planning Use Class for affordable housing;

    —  phased release of Right to Buy receipts to underpin new push on shared ownership initiatives and achieving the Decent Homes Standard;

    —  procuring affordability in perpetuity;

    —  a more credible financial framework; and

    —  substantially lower thresholds for affordable housing obligations.

  A key difficulty has been how to secure "affordability" in perpetuity rather than simply creating a large capital gain for the first purchaser which so often happens in high value areas such as Surrey. We have stressed to Government the need urgently to consider a separate Use Class for affordable housing, which we believe would achieve this.


  Turning now to the specific issues raised by the Select Committee, we would offer the following comments:

3.1  The Definition of "Affordable"

  The Government defines affordable housing as encompassing both low cost market and subsidised housing (irrespective of tenure, ownership—whether exclusive or shared—or financial arrangements) that will be available to people who cannot afford to occupy homes generally available on the open market.

  About 18 months ago the Government published guidance on housing needs assessment. This set out a method of calculating the type of housing that would be affordable within an area. It took account of local incomes and accommodation costs. Most Housing Authorities use this method in undertaking their housing needs surveys. Securing a national definition of affordable housing almost certainly would not work, as it would have little regard to the existing housing stock and tenure, and the differing socio-economic structures that will vary from area to area.

3.2  The scale and location of the Demand for Affordable Housing

  The Regional Planning Guidance for the South East (RPG9) sets out a provisional figure for affordable housing in the region of 18,000-19,000 homes per year, 46-49 per cent of the total annual housing requirement. However, the sub-regional variations are significant. The latest Halifax House Price Index (First Quarter 2002) identifies average semi-detached house prices in the South East at £153,992. However, this masks significant variations and, for example, in Surrey the figure is some 38.6 per cent higher than the regional average at £213,450. Inevitably therefore, the scale and location of demand is concentrated in those areas of high economic activity and house price inflation that exceeds earnings growth. In this connection, London and the Home Counties experience particular pressures.

3.3  The Quality of Affordable Housing

  A requirement for Housing Authorities to undertake stock condition assessments is highlighting any shortfall in the standards of affordable homes, particularly in the rented sector. The Government's proposals to demand a new "decent homes standard" is to be commended, but resources will need to be made available in the public and private rented sectors to secure the new standard in a reasonable time scale.

3.4  The Adequacy of the Existing Supply and the Amount of Resources Available

  In many parts of the South-East residential land value exceeds £1.5 million—£2 million per acre. Affordable provision is therefore either very difficult or impossible to secure. Despite all the major residential developers claiming typical consented land banks of between three and a half and four and a half years supply, the changes in society (eg divorce, single people living longer and the reluctance of home owners to trade down as their needs change), all conspire to generate substantial demand.

  In Surrey, currently only 16 per cent of all new housing is affordable. Even if the small numbers of houses purchased from within the existing stock are added, the provision of affordable housing in Surrey is nowhere near meeting actual need. Very significant increases in resources to local authorities and Registered Social Landlords would be required to enable them to compete effectively with the private house builders for the land required to increase the supply of affordable housing.

3.5  Capital Funding for New Provision

  Both via local authorities and the Housing Corporation funding is inadequate and significantly constrains the availability of Social Housing Grant (SHG) necessary to make most rented schemes affordable.

  Consideration should be given to the phased release of capital receipts to fund new provision.

3.6  The extent to which Planning Gain can fund the level of affordable housing required

  Stronger and less ambiguous Government Guidance on the provision of affordable housing through the planning system is required. The present thresholds (one hectare or more than 25 units) allows the vast majority of sites in urban areas to escape from making an affordable housing provision. Whilst Regional Planning Guidance 9 suggests that local authorities can adopt a lower threshold of 15 dwellings or half a hectare, a significant local justification is required. This provides an opportunity for conflict and challenge. If the obligation were put beyond doubt it would influence the whole supply chain, and particularly the crucial matter of determining land values and the purchase price for land. For example, the urban capacity study undertaken in Surrey suggests that up to 35 per cent of new housing will come from sites of less than 10 units or 0.4 hectares. Where the 25 or 15 unit thresholds are set, there is already evidence that developers manipulate numbers and site development proposals in order to get in under these figures and avoid any affordable housing obligations. It will therefore be necessary to reduce site thresholds, increase the percentage of affordable housing on all sites and lessen the uncertainty that protracted negotiation and legal challenge presently cause.

  Relying upon the planning system will not deliver the Government objective for the provision of a decent home for all, without substantial changes in planning legislation, accompanied by significant increases in public resources devoted to affordable housing provision.

3.7  How resources should be balanced between Social Housing and Options for Owner Occupation for those who cannot afford to buy (including Shared Ownership) and whether any additional tMechanisms are required to bring forward Share Ownership type schemes

  Ensuring there is a mix of tenure options is crucially important, both for balanced communities and social cohesion in the future. Credible options provide applicants with an appropriate housing solution and relieves some of the pressure on the social rented sector. The Government have, in the past, said that the shared ownership scheme (Do It Yourself Shared Ownership) is to be withdrawn. This should be avoided, as it provides a very effective mechanism, particularly in higher cost areas for securing that all important first step on the home ownership ladder. Shared ownership and particularly DIYSO should be commended as it brings private units into the affordable housing stock and provides better social balance. It is more affordable than the Government's "Homebuy" scheme and bridges the gap between outright ownership and social rented dwellings. Perhaps most importantly, it provides applicants with an informed choice that can have regard to their personal circumstances and avoids automatic reliance upon traditional social housing. In summary therefore, shared ownership should play a much more significant part in Government and Housing Corporation Policy.

3.8  Whether targets in Regional Planning Guidance are appropriate

  RPG9 contains an indicative requirement for affordable housing—the proposed target of 40 per cent was struck out at the public examination stage. However, a regional target would give a very clear signal of the overall level of need and provide a firm policy base for Structure and Local Plans, which could then set local targets reflecting more local circumstances. House builders have shown themselves very skilled at lessening or removing affordable housing obligations, either through commuted payments or through carving sites up, so that the units produced come below any threshold figure. An absolute obligation to provide affordable housing on all sites would put beyond doubt the obligations and expectations of all those operating in the housing sector, and particularly vendors of developable land.

3.9  Whether targets on decent and affordable housing will be met by central and local Government

  Each local housing authority is required in its housing strategy to set out how the targets for affordable housing will be achieved. Unfortunately, there is no linkage between this evidence based work of local housing authorities and the capital allocations from DTLR/Government Offices and the Housing Corporation. Unless policy and resourcing change, Central Government and most of Local Government will fail to meet the targets on affordable and decent homes.

3.10  Whether current policies and practices are leading to the creation of mixed communities

  It has to be recognised that mixed tenure schemes are unattractive to the traditional home owner. Increasingly house builders are selling not just a home, but a lifestyle. Many schemes, even relatively modest priced ones, now exist in secure, gated environments, providing both isolation and exclusivity, and often with a range of leisure and related support facilities for that residential community alone. Whilst often attractive in marketing terms, these are divisive and lead to a polarisation in communities, not only as between tenures, but also in relative perceptions as to what services are required within the community as a whole. The house builders argue that the provision of affordable housing adversely affects sale prices on new homes and, where affordable housing is provided, it is increasingly physically separated from any market housing on the site.

  Many public agencies who are owners of land and premises surplus to requirements, will typically sell the highest value sites for home ownership, whilst the more moderately priced area is, by its very nature, already likely to have mixed community and social and tenure terms. This results in further polarisation in terms of tenure. Only unambiguous affordable housing obligations on developers will lessen this trend.

3.11  Whether more Green Field development is needed to meet housing need

  There are no suggestions that a major release of Green Belt lands will result in a substantial easing of supply/reduction in prices. An analysis of the major house builders' company reports will demonstrate that most boast between three and a half and four and a half years consented supply and many hold strategic sites (owned or under option) stretching over five to 10 years.

3.12  The cost to individuals, businesses and the economy, resulting from any shortfall in the provision of decent affordable housing

  The demand for labour in Surrey and the Thames Valley is high and with particular professions this has created skilled shortages. This, however, results not only from high labour demand, but also from high housing costs. Access to suitable housing to rent or buy has become an obstacle to those who want to locate or remain in the area to work. The impact of this is that those who wish to work in the area but are unable to find suitable accommodation need to commute into the sub-region. This adds to the road congestion that is already exacerbated by those travelling through the area on the main arterial roads (M25, M3, M4 and the "A" roads), or within the area. It also has a damaging effect on the maintenance of a reasonable social and family life, with travel to work times amongst the longest in Western Europe.

  There is some suggestion from the business community, evidenced in our own area, that new investment decisions and company expansion plans are constrained by recruitment difficulties and the very tight labour market (0.8 per cent unemployment) resulting from high house prices for those seeking to move into the area.

  The skill shortage has a marked effect in several areas, but combined skill shortage and lack of affordable housing has had particularly significant impact in the public sector.


  This issue is of crucial importance in the development of our county, which in its turn acts as an economic driver for the region and the country as a whole. We have done considerable work here on what is required to tackle it.

  We would be happy to provide any further information for the Committee and to give evidence to any of your meetings about our work if that would be helpful.

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