Memorandum by London Borough of Tower
Hamlets (AFH 22)
1. INTRODUCTION
1.1 The London Borough of Tower Hamlets
has submitted this written evidence. It was prepared by the Housing
Directorate who have responsibility for strategic housing initiatives
including the development and funding of affordable housing for
general needs, home ownership and supported housing.
1.2 Paragraphs 2.1 to 11.2 detail responses
to the points raised in the Press Notice and paragraphs 12.1 to
12.3 summarises the key points of this submission.
2. THE DEFINITION
OF "AFFORDABLE"
2.1 There is no uniform definition of affordability,
however a common definition is that housing costs should be no
more than 25 per cent of net income. In terms of affordable housing
via planning legislation, paragraph 15 of PPG3 (Planning Policy
Guidance) confirms that policies for affordable housing should:
". . . define what the authority considers
to be affordable in the local plan area in terms of the relationship
between local income levels and house prices or rents for different
types of households."
2.2 The ability of residents in Tower Hamlets
to meet the cost of their housing needs is extremely limited.
Two-thirds of all tenants—Council, RSL (Registered Social
Landlord) and private (including those on full housing benefit)—pay
more than 25 per cent of their net income on rent, which is widely
regarded as being above the threshold of affordability. Average
income in Tower Hamlets is £12,000 against an average house
price of £180,000; which renders home ownership impossible
for the majority of income earners. The rising rents of both RSL
and local authority accommodation effectively increase the number
of families caught in the "poverty trap".
3. THE SCALE
AND LOCATION
OF THE
DEMAND FOR
AFFORDABLE HOUSING
3.1 The Housing Needs Survey (HNS), in 1998,
estimated that a net additional figure of 7,560 affordable housing
units would be required between 2001 and 2016. This prediction
did not take into account the unexpected increases in demand over
the past four years, eg homeless acceptances risen by 25 per cent
in one year to 1,870. Predictions based on the HNS confirm that
additional housing for 2001-2004 amounts to 1,357, minus predicted
losses of 588 results in provision of only 782 additional units.
Using these figures to predict supply further to 2016 it is likely
that 3,910 units will be built, demonstrating a predicted shortfall
of 3,650. This predicted shortfall does not take account of the
unexpected increases in demand. The Mayor's London Plan, currently
at the consultation stage, suggests that the borough will need
some 18,000 units by 2020. The statistics highlighted below support
this assumption.
3.2 Tower Hamlets is characterised by the
following factors:
— rapid population growth, with household
size larger than the average household size for Greater London;
— acute overcrowding, the worst in
the country, 13 per cent of households are overcrowded, with the
highest level of overcrowding, some 42 per cent, amongst the Bangladeshi
community, this is double the rate of estimates for London;
— homelessness remains a significant
problem in the borough. The number of homeless households is 1,870;
— currently there are 7,566 applicants
in housing need on the single housing register, with an estimated
10,000 concealed households;
— levels of unemployment that continue
to be well above the inner London average, currently at 12.1 per
cent, with a disproportionate per capita effect of unemployment
on ethnic minority communities that continues to prevail; and
— poor health, culminating in the highest
mortality rate in London of 197.6 per 100,000 of the population,
compared to the average of 155.6. In addition, infant mortality
remains the second highest in inner London.
3.3 The levels of severe deprivation in
the borough have been confirmed by the DETR's Index of Multiple
Deprivation. This found that 17 of the 19 wards in Tower Hamlets
fall within the most deprived wards in the country, rendering
Tower Hamlets the most deprived local authority area in the country.
As well as being a poor borough generally, the Council is characterised
by large pockets of multiple and concentrated deprivation. Despite
this the majority of residents wish to remain in the borough.
3.4 The Council's housing need information
confirms that the borough is witnessing a growing population and
that most households are relatively poor. Many are overcrowded
and suffer above average levels of poor health. There is a diverse
range of ethnicity and need and an increasing frail elderly population.
Some members of the community exhibit complex special needs. There
is a predicted shortfall of affordable housing to meet anticipated
need: existing and proposed residential developments will not
meet this need.
4. THE ADEQUACY
OF EXISTING
SUPPLY AND
RESOURCES AVAILABLE
4.1 Adequacy of existing supply
Newly constructed units arise predominantly
from regeneration initiatives, Social Housing Grant (SHG) from
the Housing Corporation Approved Development Programme ("ADP"),
investing money received from the HIP bid, affordable housing
units that were secured under section 106 agreements entered into
with developers and through the use of empty homes initiatives.
By far the largest proportion of new affordable housing comes
from regeneration initiatives whilst the smallest proportion is
from the planning system.
4.2 Other initiatives which assist a small
number of income earners to purchase a home are schemes such as:
(a) the "Cash Incentive Scheme"
which involves cash payments to tenants to enable them to move
out of the affordable housing sector altogether;
(b) Voluntary Purchase Grant (VPG) that allows
RSL tenants to purchase their existing home at a discount (maximum
grant of £16,000 against average values of £180,000);
(c) the "Homebuy" scheme, in which
the RSL purchases a 25 per cent share in a property using Social
Housing Grant ("SHG") provided by the Housing Corporation,
and the tenant purchases the remaining 75 per cent share.
It should be noted that the majority of residents
assisted by these schemes can only afford to purchase properties
out of the borough, hence the Council loses those residents who
are economically active.
4.3 It can be evidenced that the supply
of affordable housing funded from both private and public resources
is not sufficient to meet identified housing needs.
4.4 Resources
The Council's HIP (Housing Investment Programme)
is primarily diverted towards the maintenance of existing stock,
although about 15 per cent of the Council's current approved bid
is for grant aid to RSLs for use in new build schemes and 3 per
cent of the approved bid is used to improve private sector housing.
There is an extreme need for repairs to existing stock: the Council's
Stock Condition Survey showed that over £400 million needs
to be spent to arrest disrepair. Consequently, the Council has
undertaken a programme of transferring its housing stock onto
RSLs, as it cannot afford to refurbish or replace existing sub-standard
stock.
4.5 The Three Dragons research shows that
50 per cent affordable housing is possible in all London boroughs
but in Tower Hamlets it is only possible with a public resources
contribution. If Tower Hamlets were forced to contribute public
resources into affordable housing schemes the overall level of
social housing would reduce substantially. Currently the majority
of all public resources are directed towards large regeneration
schemes and there are still a large number of unmet needs. An
additional strain on the public purse will serve to delay much
needed regeneration and improvement to the quality of life of
many residents.
5. THE EXTENT
TO WHICH
PLANNING GAIN
CAN FUND
THE LEVEL
OF AFFORDABLE
HOUSING REQUIRED
5.1 Planning gain and affordable housing
provided via section 106 arrangements assist in providing additional
affordable housing, although much welcomed it has a minimal effect
due to the high level of demand. As planning gain can only fund
the development of units in "a local area" inner London
authorities, with high levels of deprivation, high demand and
low land availability cannot gain the assistance via planning
gain that outer London authorities can. Outer London authorities
have a much greater land supply but do not have the high levels
of housing need evidenced in inner London authorities and neither
do they have such high land values.
5.2 A number of boroughs have developed
sub-regional partnerships to address social housing needs. Cross
authority/sub-regional work on affordable housing provided through
the planning process is limited due to current legislation but
Tower Hamlets would support such initiatives, this could include
the Thames Gateway, and would assist those residents who naturally
migrate eastwards to outer London boroughs. Tower Hamlets would
support partnership working with other London boroughs, the Association
of London Government, the London Government Association and the
Mayor.
5.3 The Planning Green paper included the
theory of introducing a tariff for planning obligations and this
might also include a tariff for affordable housing contributions.
Tower Hamlets did not support the inclusion of affordable housing
within the tariff system as it cannot be demonstrated that the
borough's current requirements to build 25 per cent affordable
housing "on-site" will be maintained.
6. 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 MECHANISMS
ARE REQUIRED
TO BRING
FORWARD SHARED
OWNERSHIP TYPE
SCHEMES
6.1 In determining how resources between
social housing and home ownership options should be balanced,
account must be taken on a local assessment of needs and current
provision in both the public and private sectors, with a primary
focus on affordability. Tower Hamlets in both its affordable housing
policy and the use of public resources strives to achieve a tenure
balance of 80 per cent rented and 20 per cent home ownership;
this was based on the evidence found in its Housing Needs Survey
which also included residents aspirations. Providing affordable
home ownership in an area of high values is extremely difficult.
Greater consideration should be given to an Intermediate Housing
Market (IHM), which includes all tenure types that are not full
market rent/sale or rented social housing. Initiatives that would
increase the supply of properties within the IHM would be:
— identification of sites for affordable
housing purposes only, therefore reducing land values;
— greater use of shared equity schemes,
with the equity purchased remaining static at 65/70 per cent,
to allow for affordable home ownership in perpetuity, this could
be achieved by the use of Community Land Trusts;
— flexible tenure options, such as
rent to mortgage;
— increasing awareness and development
of self-build schemes which utilise "sweat equity" and
reduces purchase prices by at least 25 per cent both on new build
and refurbishment schemes;
— decreasing the amount of rents payable
in traditional shared ownership schemes;
— increasing the maximum grant payable
for Cash Incentive schemes in areas of high value, to release
much needed rented accommodation;
— changing attitudes of mortgage lenders
to assist purchase of properties that are not traditionally built;
and
— removing the burden of Value Added
Tax on refurbishment projects.
7. WHETHER TARGETS
IN REGIONAL
PLANNING GUIDANCE
ARE APPROPRIATE
7.1 Regional Planning Guidance confirms
that a range of dwelling types and sizes should be provided to
meet the need of all sectors and that affordable housing should
be provided to meet locally assessed need. The Mayor's Spatial
Development Strategy concerning regional planning guidance sets
a target of 41,000 units over the next 10-15 years, subject to
Council policy, with 25 per cent of those units for affordable
housing. Regional targets can be appropriate but account must
be taken of the overall development capacity.
8. WHETHER TARGETS
ON DECENT
AND AFFORDABLE
HOUSING WILL
BE MET
BY CENTRAL
GOVERNMENT
8.1 Central Government targets for decent
homes and affordable housing are ambitious targets and targets
that all Local Authorities will strive to achieve. It is widely
known that there are some concerns as to whether all Local Authorities
will be able to meet these targets if sufficient resources are
not made available.
8.2 Tower Hamlets is currently reviewing
its Unitary Development Plan (UDP) and its Affordable Housing
SPG (supplementary planning guidance), part of this exercise will
consider whether the target of 25 per cent affordable housing
on private residential developments should be increased to provide
a greater percentage of affordable housing provision. An option
currently being considered is a total provision on 35 per cent
affordable housing in a tenure split of 20 per cent social rented,
5 per cent traditional shared ownership and 10 per cent for other
IHM initiatives. Consultation on various options will commence
in July 2002.
9. WHETHER CURRENT
POLICIES ARE
LEADING TO
THE CREATION
OF MIXED
AND BALANCED
COMMUNITIES
9.1 Current policies have achieved some
successes in providing mixed and balanced communities on residential
development sites. However, this has tended to lead to an element
of separation within buildings/developments by tenure. Pepper-potting
is promoted as a means to achieve socially inclusive communities,
but in actuality this has been more difficult to achieve.
9.2 Tower Hamlets agrees with the principle
of pepper-potting affordable housing units throughout any scheme,
and seeks to ensure that affordable housing is not segregated
from the private sector units. The harsh reality is that both
developers and their RSL partners prefer an element of separation,
usually for reasons of cost and management. With an element of
separation, RSL's can effect a reduction in the level of service
charges to ensure greater affordability and developers would argue
that mixing the tenures would ultimately reduce the sales value
on the private units. These issues need to be resolved to ensure
that communities are fully integrated and not divided by tenure.
10. WHETHER MORE
GREEN FIELD
DEVELOPMENT IS
NEEDED TO
MEET HOUSING
NEED
10.1 Within Tower Hamlets the issue of green
field development is not a major debate but it is recognised that
such a debate should be at a Londonwide or Regional level.
11. THE COST
TO ANY
INDIVIDUAL, BUSINESSES
AND THE
ECONOMY RESULTING
FROM ANY
SHORTFALL IN
THE PROVISION
OF DECENT,
AFFORDABLE HOUSING
11.1 The shortfall in the provision of decent
affordable housing has a number of undesirable effects. Recruitment
of skilled workers in London is made extremely difficult resulting
in key local services being under-resourced. The economically
active within the population purchase properties in outer London
areas, as they are unable to meet the high cost of housing in
inner London. This in turn affects the local economy in terms
of where the economically active spend on household goods and
services. Many local businesses fail, leaving shop units empty
and in disrepair, thereby reducing the number of local employment
opportunities.
11.2 Additional problems caused by the lack
of affordable housing are the breakdown of local family networks
with economically active sons and daughters moving away. This
can increase the costs to local social services departments in
that they must directly provide care and support for those people
who would normally be cared for within the wider family network.
12. SUMMARY
12.1 Good quality affordable housing is
a significant contribution to the well being of individuals and
families. Whilst it is unlikely that a change in the current housing
market will take place in the near future, greater emphasis needs
to be placed on retaining the economically active in inner urban
areas.
12.2 To achieve the objective of mixed and
sustainable communities a significant increase in the number of
IHM schemes is required. The suggestions detailed in paragraphs
6.1 and 8.2 would assist this objective.
12.3 Land values are of key importance when
considering how to meet affordable housing need. Tower Hamlets
is an area which has undergone huge change over the last two decades
in terms of land values, with a marked increase in the past two
years. Each significant private residential development tends
to raise the market values of existing accommodation and raise
the value of land in the vicinity of the new development. With
every new private development, the more "gentrified"
character of the locality is affirmed and accentuated, making
it even more difficult for local residents to buy or rent accommodation
on the open market at prices they can afford. All mechanisms to
reduce this trend must be investigated.
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