Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by National Housing Federation (AFH 53)

  The National Housing Federation represents nearly 1,400 independent, not for profit social housing providers in England. The Federation's members include housing associations, co-ops, trusts and stock transfer organisations, and they own and/or manage more than 1.8 million homes provided for affordable rent, supported housing and low cost home ownership, and deliver an increasingly diverse range of community and regeneration services. The large majority of the Federation's members are registered with the Housing Corporation. The Federation welcomes the opportunity to give evidence to the Sub-committee's Affordable Housing Inquiry.


  The Government needs to improve tax incentives to use brownfield land to avoid undue pressure on Greenfield sites. Their use should only be permitted when better and more sustainable use of existing land and resources are first fully researched and exhausted. The lack of fiscal incentives and disincentives for brownfield and green field development respectively, represents a major gap in the Government's fiscal approach to urban regeneration and a continuing missed opportunity. In this scenario, the Federation believes that 83,000 new affordable housing units are required annually up to 2016 in order to meet future housing need.

  Resources available for the affordable housing needed (and acknowledged by respective Regional Planning Guidance) are well below that being delivered. Inconsistent administration of the S106 planning obligation process is failing to maximise affordable housing through the planning system. We are also concerned that the proposed tariff regime may dilute local planning authorities' commitment to affordable housing through this increasingly vital route in high demand areas.

  There needs to be greater co-ordination and integration between local, regional and national agencies to generate mutually agreed outcomes. The recently published Regions White Paper may be the stepping-stone to improving co-ordination and integration, providing adequate resources are part of the equation.

  Current approaches to definitions of affordability are crude, and rely on sub-market (renting) costs as a proxy of affordability, but this does not necessarily lead to an increase in the supply of affordable housing. The test of housing affordability must consider more than a crude rent to income ration. Other factors such as household income; regional earnings; and the supply costs of housing regardless of tenure should be considered.

  The Federation supports the Government's plan to make all social housing decent by 2010, with an interim target of a third achieved in the most deprived wards by 2004. However, issue of interim and final Decent Homes Standard Guidance was a year and 18 months respectively after the original Spending Review Target was announced, making it difficult for social landlords—local authority and housing association—to resource and undertake the works required in the most deprived areas by March 2004.


  Working from the most recent household projections Alan Holmans in Housing Demand and Need in England 1996-2016 concluded that over the 20 year period to 2016, there is an annual requirement for some 82,500 new affordable dwellings to meet the housing need of households unable to secure unassisted accommodation in the private sector. Of that figure, he concluded that some 50,000 dwellings are required each year in the southern regions.

CategoryTotal Need
All Housing
Effective Demand
Owner Occupation and
Market Rent
Net Need
Affordable Housing
Net increase in households3,547 2,904643
Increase in secondary residences100 1000
Net increase in vacant dwellings165 12441
Adjustment for sales to sitting tenants 0-785785
Net increase in housing stock3,812 2,3431,469
New provision to offset demolitions and   other losses 740540200
New provision demanded and needed4,552 2,8831,669
Annual average new provision demanded   and needed 22814483

  Source: Calculation from Housing demand and need in England 1996-16, A Holmans, National Housing Federation, and Town and Country Planning Association. Table reproduced from Housing Finance Review 2001-02, S Wilcox, Chartered Institute of Housing and Council of Mortgage Lenders.

  Whilst demand for housing is highest in the south, there is still strong housing demand across all nine regions.

Rented Non-HB
Affordable Housing/
Private Rented HB
North East2,5005,000
North West14,0007,500
Yorkshire and Humber11,000 7,000
West Midlands10,000 7,500
East Midlands12,000 6,000
South East32,00012,500
South West18,5008,500

  Whilst such demographic modelling—projecting forward current household and housing market relationships—cannot provide a guide to the year on year cyclical fluctuations in homelessness and housing need, these robust conclusions are a reminder that current policies are insufficient to cope with housing needs over the medium term, and thus inherently prone to crisis in the peak years of housing market cycles.

  The DTLR's Housing Statistics Postcard January 2002, new house building completions for 2000-01 totalled 135,000. Of this figure, 17,000 were completed by housing associations. This represents 59 per cent of the total annual amount estimated by Holmans. Less than 25 per cent of the amount estimated by Holmans was for affordable housing. Since the postcard, the Joseph Rowntree Foundation recently published a report Britain's Housing in 2022—More shortages and homelessness? (March 2002) which estimated a housing shortage of one million homes by 2022 if remedial action was not taken.

  Measuring future demand for housing is innately a complex task and there are other factors that make it difficult to estimate on a crude demographic basis. Trends such as international and domestic migration; an ageing population; smaller household formation; council and large scale voluntary transfer right to buys, second home ownership are predictable to different degrees, and the plethora of statistics and opinions reflect this uncertainty.

  The Federation supports the Government's target of 60 per cent of new housing development on brownfield sites by 2008. However, there needs to be greater recognition that this should be an aggregated target, given some regions—London and the North West for example—will (and should) be able to exceed this target, whilst others may fall short of it.

  As a general point, the Federation does not believe that there is enough integration between Regional Housing Statements, Regional Planning Guidance, and Regional Economic Strategies. There needs to be better use of Urban Capacity Studies, the National Land Use Database, empty homes generally, and more effective administration of the planning system to deliver more affordable housing. The Federation has previously called for Government Regional Offices to be given specific power and responsibility to ensure that regional economic, housing and planning strategies are fully co-ordinated and linked to the neighbourhood renewal strategies of local strategic partnerships. There is still a need for this change to take place.


  The existing supply of affordable and private housing is not currently adequate and resources for affordable housing through the Housing Corporation's Approved Development Programme need to be increased substantially. The Federation in its Spending Review 2002 Submission called for £2.35 billion of resources to help deliver an extra 20,000 general needs units (in addition to that planned) plus support for temporary social housing and intermediate housing programmes. Government estimates that 56,000 homes for general needs for rent and 8,700 for low cost home ownership will be delivered over the 2001-04 Spending Review Period. This averages 21,500 units per annum through the ADP process. In addition, a possible 7,500 units can be expected through the Local Authority Social Housing Grant programme (on the basis of outputs achieved in 2000-01 and 2001-02), but this will depend on resource availability which may be affected by the changes proposed by the Local Government White Paper.

  On the broader issues of resource allocation, the Federation as part of its Spending Review 2002 submission proposed a set of radical changes to the process. These were designed to deal with some of the problems associated with the use of Housing Needs (HNI) and General Needs Indices (GNI) in the allocation process. The current problems include:

    —  a lack of transparency in how HNI and GNI operate;

    —  a difficulty in balancing the allocation of resources between widely differing housing needs using a single set of indices; and

    —  stemming from the above, that invariably the "empirical" outputs of the HNI/GNI calculations are subject to administrative adjustment in order to get the "right" result.

  Our proposal is that resources available are placed into three "pots", each with a clear and different function, and based on priorities, identified by Ministers. The amount and balance of how much went into each pot would be a political decision, based on the Government's assessment of the relative importance of each policy area. Once agreed, the funds would be distributed on a regional (at least) basis, using specific indicators and measures associated with the separate pots. This approach would solve all three problems noted above: there would be a clear and obvious relationship between identified needs and resources; the balance of resource allocation between needs would become a political decision, not a statistical side-effect; and post facto adjustments would become unnecessary, as the prioritisation process would have been overt from the start.

  The pots and their measuring indices are:

    —  a new supply housing fund: geared towards the provision of new affordable housing, for rent (including supported housing), for low-cost home ownership, and for other intermediate market initiatives;

    —  a social housing stock condition fund: geared towards the capital elements for major repairs (excluding those elements covered by the Major Repairs Allowance) and improvements to social housing stock; and

    —  a regeneration fund: geared towards bringing housing resources (in tandem with other resources) to bear on the problems of low demand, abandonment and neighbourhood regeneration in deprived areas, using demolition, clearance, private sector improvement and area-based renewal among other tools.

  Whilst a sustained new housebuilding and conversion of existing buildings programme is going to be the major remedy to the current housing shortage, it is important the government pay heed to the problem of empty homes, particularly in the private sector. The Government's response to the Select Committee's Empty Homes Inquiry indicated that they were respective to the principle of compulsory leasing and the Federation hopes this develops into a proposal.

  Whilst the Federation recognises that there is increased pressure on planning bodies to release Greenfield land for housing development (as Britain's housing in 2022 suggests), it is not clear that enough effort has been put into facilitating the urban renaissance vision set out in the Government's Urban White Paper, and the Urban Task Force Report that preceded it. One single recommendation that the Task Force made—harmonisation of VAT on new build and refurbishment/conversion costs—has yet to be implemented. Due to lack of Government action on this issue, a national policy exists to prefer redeveloping existing buildings on brownfield sites, with a fiscal policy that offers a strong financial incentive to do precisely the opposite.

  The Federation is also concerned that pressure to build on Greenfield sites will pay insufficient attention to other factors that will contribute to the scheme's sustainability, such as provision of health, transport, leisure, educational services. This will have an obvious knock-on cost to the taxpayer that needs to be allowed for when considering the overall cost of any proposed development.

  New affordable housing facilitated by S106 Agreements (1990 Town and Country Planning Act) has become a vital source of affordable housing supplied through the planning system. Developers are required to provide affordable housing on schemes over 25 units (15 in inner London) and the "rule of thumb" affordable proportion is 25 per cent of the development. This will vary according to housing need and the existence (and regular updating) of a robust housing needs assessment. The current system provides the basis for ensuring new developments have a wider benefit for the locality. Whilst the Federation welcomed the proposed tariff based system set out in the Government's Planning Obligations consultation paper, we also expressed that the affordable housing element of new schemes may be diluted in favour of other, albeit worthy, community benefits. It remains important that any affordable housing requirement sought is underpinned by a robust and regularly updated housing needs assessment from the local authority, and a consistent and transparent approach to the negotiation process itself. As recent research commissioned by the DTLR has shown Delivering Affordable Housing through Planning Policy (2002), this is plainly not the case. The Federation supports the Government's view that the planning system is not used effectively enough to secure affordable housing. But we are concerned that any good practice that may emerge from this report will be subsumed within a changeover to the planning tariff regime that may be less housing-orientated than the current one. The Federation is also concerned that housing shortages that are impacting on "key workers" are blurring local definitions of affordable housing. We accept that accommodating health, education and police key workers will be increasingly vital for local public service delivery. However, we are concerned that developers may take a view that key worker accommodation can be the affordable housing required through S106 schemes.

  The Federation believes that that general needs rented, low cost home ownership and key worker accommodation is required (depending on such need evidenced by a housing needs assessment), but the distinction between the three should not be blurred. As a model example, the Federation supports the Mayor of London's strategy to achieve 35 per cent general needs housing and 15 per cent for intermediate housing, eg sub-market rented and low cost home ownership housing, for key workers and other workers unable or unwilling to buy or rent in the private sector.

  The advent of key worker accommodation and the longer established low cost home ownership schemes run by housing associations provide the ingredients—along with private sector housing—to develop mixed, balanced sustainable communities. This is a core theme of PPG3 and is reflected in recently updated RPGs.

  Developing housing associations are also facing a critical problem with regard to rising land values, which are affecting the financial viability of schemes in high value areas. The benchmark limits set by the Housing Corporation—Total Cost Indicators (TCIs)—do not generally allow for public subsidy to be paid on schemes that exceed 110 per cent of the respective TCIs. This is creating an incentive to deliver in lower land value areas, which may not be in the places where demand for social housing is most acute.


  The eight Regional Planning Guidance (RPGs) documents are at various stages of currency. For example, the North East RPG is currently under review since it was published in 1993, as is the North West's, last published in 1996. The housing elements of the more recent RPGs do offer a measured understanding of the need for affordable housing with some recognition of the need for mixed, balanced sustainable communities as required by PPG3. However, it is unclear how these sound principles are being translated into practice, and how implementation will be monitored. Of more concern, it is unclear how the affordable housing targets are likely to be met given the resources available, and the processes being followed.

  The amount of housing required annually in each of the RPGs is as follows:

RegionRPG Total Target Affordable Housing
Target (including with
in RPG Total)
ADP 2002-03
Anticipated Outturn
Towards the London Plan Initial   Proposals* 23,00011,5005,194
Draft RPG1—North East5,000-6,000 Not specified628
RPG6—East (Anglia)9,900 Not specified1,751
RPG8—East Midlands13,700 3,4001,276
RPG9—South East39,000 18,000-19,0002,952
RPG10-South West20,200 6,000-10,0002,998
Draft RPG11—West MidlandsTo be determined To be determined2,248
RPG12—Yorkshire and Humber14,765 4,0001,600
Draft RPG13—North West**14,300 4,3003,152

  *  Based on 50 per cent private housing; 35 per cent for social renting; 15 per cent for intermediate housing for people on moderate income (subject to an economic impact assessment.

  **   Draft RPG Target of 357,000 during 1996-21, 30 per cent of which should be affordable.

  In nearly all the regions, there is a major shortfall in the amount of affordable housing being supplied with Housing Corporation resources. The amount of housing is likely to be increased marginally through schemes funded with Local Authority Social Housing Grant—circa 7,000 nationally—and in regions where owner occupation and private renting is affordable. As land and house prices rise faster than earnings nationally, more people will be excluded from the housing market.


  The housing affordability debate has traditionally focused on accommodation in the social rented sector, and not enough on all tenures in the housing market. House price rises (and falls) has brought this issue into sharp focus. Recent public policy has focused on the affordability of social housing, most recently concluding with the Government's policy statements in the Housing Green Paper (April 2000) and the subsequent paper The Way Forward for Housing (December 2000). The Federation has sought to persuade the Government of the need for a clear definition of affordability since the introduction of the (then) new financial regime following the 1988 Housing Act. The need for a clearer definition of housing affordability has now become time-critical.

  On the affordability of buying a home in the private sector, the Federation published a report in August 2001 showing that in over half of all English counties outside of London, an income of over £30,000 a year is needed to buy an average priced home. The regional figures show that whilst London and the South East have some of the most expensive housing, the problem is not confined solely to those areas: to buy an average priced home in Herefordshire an income of nearly £37,000 is needed. In the East Riding of Yorkshire, an income of over £24,000 was needed. In 18 English counties, to buy a home with a 95 per cent mortgage (borrowing three times annual income), a household needed to earn over £40,000.

  The report highlighted that spiralling house prices were taking many homes out of the reach of first time buyers, and that it was not just a southern phenomenon: many areas in the midlands and the north are facing the same problem. The recent CURS report on Yorkshire and Humberside: Changing Housing Markets and Urban Regeneration highlighted high land and house prices in former North Yorkshire, Harrogate, York, North Leeds and Western Sheffield, East Riding of Yorkshire despite low demand problems elsewhere in the region.

  A written answer to a parliamentary question from the Minister for Housing highlighted the ambiguities between the social and planning definitions of affordability:

    Social housing normally refers to subsidised housing provided by local authorities of registered social landlords for rent. For the purposes of securing affordable housing through the planning system, affordable housing encompasses low-cost market and subsidised housing, whether for rent for shared ownership, that will be available to people who cannot afford to rent or buy houses generally available on the market. Local authorities are expected to define in their local plans what they consider to be affordable in the plan areas, in terms of the relationship between local income levels and house prices or rents for different type of households.

  Sally Keeble MP, Parliamentary under Secretary of State, 10 May 2002.

  The rising cost of purchasing a home in the private sector is increasing pressure for more affordable homes for social and intermediate rent and low cost home ownership, and it is therefore crucial that affordable housing delivered through the planning system is maximised. The Government, as highlighted above, regards affordability in two scenarios—subsidised (with social housing grant) and non-subsidised housing (through the planning system). Housing associations are usually the delivery agents in both scenarios, despite the confusion involved with differing definitions of affordability.

  The Federation with the Chartered Institute of Housing and the Local Government Association published Evaluating housing affordability (1999), a paper commissioned to consider the rent setting options for the social housing sector that were being considered by the Government for the Housing Green Paper. Written by Freeman, Holmans and Whitehead, the research made the following recommendations:

    —  allowing for the Working Families Tax Credit regime, housing costs have to be treated separately if tenants are to have an adequate standard of living overall;

    —  it would be inappropriate to base the assessment of affordability on a single measure, especially one, which takes no direct account of income levels of household type. The rent to income ratio, in particular, is too simplistic without additional information; and

    —  the residual income method is too interlinked with the wider social security system to give interpretable results, except for those who are free of housing benefit. This means that under the present regime, although not under one where tenants pay part of the rent, the most appropriate approach is to evaluate residual income at the point where zero benefit is achieved.

  If a new system of benefits is to be introduced, the most effective way forward will be to monitor all three measures that reflect different aspects of affordability:

    —  rent to income ratios;

    —  residual incomes; and

    —  the income at which the household becomes free of benefit consistently.

  In attempting to measure affordability at a local level, the following measures are the most important:

    —  the rents which leave the employed household free of housing benefit;

    —  the residual income at that point for relevant household types and property sizes; and

    —  the rent to income ratios at that point for relevant household types and property sizes.

  One of the underlying tenets of the Governent's approach to restructuring social housing rents charged by housing associations is that they are, on average, currently affordable, being 30 per cent to 40 per cent lower than private sector rents. The role of rent restructuring, originally proposed in the Government's Housing Green Paper was not to lower or raise the overall rent role, but to re-distribute different rents accordingly to more rational criteria than the historical factors that currently determined rent levels. The Federation was concerned that this rather broad understanding of affordability should not be allowed to lead to anomalies whereby excessively high (and low) rents were generated. This would have been the case had relative capital values played a large role in determining rent levels.


  One measure of the quality of affordable housing is the recently finalised DTLR Decent Homes Standard (DHS). It relies on four elements. A house is decent if it:

    —  meets the current statutory minimum standard for housing;

    —  is in a reasonable state of repair;

    —  has reaonably modern facilities and services; and

    —  provides a reasonable degree of thermal comfort.

  The DTLR estimate that 1.7 million homes—1.1 million in the local authority sector, and 600,000 homes in the housing association sector—are of a non-decent standard. These estimates are drawn from the 1996 English House Condition Survey (EHCS), which is due to be superseded by the 2001 EHCS due for publication later this year.

  On the statutory minimum standard element (as defined by S604 of the Housing Act, amended by the 1989 Local Government and Housing Act) of the DHS, the housing association sector had the lowest proportion of unfit homes at 3.8 per cent. This compares favourably with 6.8 per cent for local authority stock, 5.4 per cent for owner occupied dwellings, and 17.9 per cent for private rented accommodation. The remaining criteria all rely on definitions that rely on "reasonable" interpretations of the quality of various elements (or characteristics) of the homes in question. The sample of all 20.4 million homes in England was 28,500—0.012 per cent—and the sample of social housing was proportionately smaller than that of the owner-occupied sector. Appreciating that a larger sample might be financially prohibitive, the Federation is not confident that the 1.7 million non-decent homes estimates reflects the whole picture. But the Federation anticipates better information from 2001 EHCS and at the annual surveys that are to follow, compared to the previous five-yearly approach.

  The Government has a target of raising all social housing to the Decent Homes Standard (DHS) by 2010, with a third achieved in the most deprived wards by March 2004. This formed one of the Public Service Agreements in the Spending Review 2000. The Federation does not believe that the 2004 target is achievable for practical and financial reasons, and achieving the 2010 target will be dependent on a clearer policy position from the Government on the process and funding mechanism(s) to be adopted to achieve the DHS.

  There was some further consultation on the thermal comfort element of the standard, which delayed the final definition and guidance for implementation being published in March 2002. Whilst this delay has not prevented local authorities and housing associations preparing for DHS implementation, it certainly has not helped the process either.

  Regarding the 2010 target, a clearer position from the Government would be helpful on how the DHS is to be funded and delivered. Whilst the Government set out its support for a stock transfer programme of 200,000 units per year in the Housing Green Paper (April 2000), the Government have since announced proposals for greater financial flexibility for local authorities to borrow for repair and improvement purposes, if the Housing Revenue Account can service the debt repayments. The Local Government White Paper Strong Local Leadership—Quality Public Services anticipates a new financial regime in place by April 2004, legislation permitting. The Federation supports greater for choice for local authorities and its residents on future housing options, but this new proposal may delay investment that will achieve the DHS as local authorities await details of the new regime. In retrospect, it would appear that the Government announced the DHS Implementation Plan without a robust delivery strategy to support it.

  The Federation in its Spending Review 2002 submission (with the Chartered Institute of Housing and Local Government Association) called for an asset management fund for housing associations to be created of £70 million per annum to help housing association stock reach the DHS standard. This estimate may need to be revised in due course due to the Government's increased estimate of non-decent homes in the sector from 280,000 to 600,000 units. The submission also recommended a new funding stream of up to £250 million a year to resource stock transfers, particularly in urban areas where stock often has substantial outstanding debt and breakage costs. Such housing often accommodates socially excluded people, many of whom will be from black and minority ethnic communities. For the success of the DHS to be fully maximised and sustained, a comprehensive community regeneration programme should be considered in tandem with the housing investment approach. Urban stock transfer organisations are proving themselves succsssful in meeting commuity needs in a responsive and effective fashion.


  The impact of the continuing shortfall of affordable housing across all tenures is now well documented. It is not an issue that is confined to London and the South East and should be recognised as a national probelm. The focus in the media has been on key workers, but the impact of the shortfall will be felt by all sectors of the economy. Government action taken to date may address some of the most severe symptoms, but major action is required across the board to address the problem in a strategic and sustained way. The Federation's Spending Review 2002 submission (with the Local Government Association and the Chartered Institute of Housing) offers the means to achieving that.

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