Select Committee on Transport, Local Government and the Regions Memoranda

Mermorandum by Shelter (AFH 59)

  Shelter is a national campaigning charity that provides practical support and innovative services to over 100,000 homeless or badly housed people every year. This work gives us first hand experience of the problems caused by the inadequate supply of affordable housing. We have also carried out extensive policy and research work on this subject, including a five year research project commissioned from the Centre for Housing and Planning Research at the University of Cambridge. This work provided the basis for No room to play, our submission to the Government's Spending Review, which highlighted the need for sustained investment in affordable housing to tackle homelessness, particularly among families with children.


  Shelter welcomes the opportunity to submit evidence to the Urban Affairs Select Committee's inquiry into affordable housing. We hope that the inquiry will provide an opportunity to generate consensus around how much affordable housing is needed and the policies required to deliver it. We also hope that it will prompt a rational and informed debate on this issue during the remainder of this Parliament and beyond.

  Our work in this area leads us to believe that affordable housing is now one of Britain's most pressing public policy issues. It is important to place this in the context of regional variations in housing markets. However, in many areas of the country, particularly London and much of the South of England, the shortage of affordable housing has reached crisis point. Historically low levels of new build, coupled with rising house prices have tightened the market to the extent that even those on moderate incomes are often unable to access housing that they can afford.

  Attention has up to now largely focused on so called "key" workers and the potential impact of this on the delivery of public and other essential services. Much less attention has been paid to the impact it is having on those in housing need and, in particular, homless people. The record numbers—nearly 80,000 homless households—who live in temporary accommodation provide overwhelming evidence of the need to address this as a key priority in current and future spending reviews. Government programmes to end child poverty, tackle social exclusion and promote opportunity will not deliver until this need is met.

  Achieving this will not be easy. It will mean challenging the terms of the current debate, being prepared to take difficult political decisions and setting out a clear and consistent approach to policy making. This includes confronting issues about where housing should be built and the entrenched arguments of the NIMBY lobby, and addressing difficult issues about regional housing markets and economic regeneration.

  We believe that significant progress can be made by reforming policy so that the planning system, the private rented sector and the housing benefit system all make a far greater contribution to ensuring that people can access housing that they can afford. We also believe that the time has come to reform the Right to Buy to stop the haemorrhaging of social housing areas of shortage. However, the bottom line is that a significant and sustained increase in public expenditure is needed to increase the supply of affordable and, in particular, socially rented housing.


  There is no single, universally recognised definition of what is "affordable", as it depends on the income and circumstances of individual households and the characteristics of local housing markets. Shelter defines it as housing that is affordable to those on low and moderate incomes who cannot meet the market cost of buying or renting housing from their own resources, ie those whose housing costs have to be subsidised. This subsidy can either be on the supply side (such as capital grants to housing associations) or to the income of households (for example in the form of housing benefit). In practice, "affordable" housing therefore includes social housing let by local authorities and registered social landlords, housing provided through low cost home ownership schemes and private rented sector lettings subsidised by housing benefit.


  Shelter has commissioned exhaustive research work on this subject from the Centre for Housing and Planning Research (CHPR) at the University of Cambridge. This work was presented in a series of reports culminating in Building for the future which we published in 2000. We believe that this work provides a realistic assessment of the need for affordable housing based on reliable estimates of current need and robust forecasting of futue demand. We would be very happy to make this work available to the Committee.

  Based on this research, we estimate that between 83,000 and 99,000 units of affordable housing are required to meet need each year. This is broken down below.

The backlog of current housing need

  Building for the future estimated that 990,000 households are currently inadequately housed. This figure included:

    —  43,800 homeless households in temporary accommodation;[43]

    —  110,000 single homeless people living in hostels, squatting or sleeping rough;

    —  340,000 social tenants whose housing does not meet their needs;

    —  160,000 private rented sector tenants and owner-occupiers in unsuitable housing;

    —  125,000 couples with children and single parents living with other people who would strongly prefer to have a home of their own; and

    —  215,000 households without children who share involuntarily.

  We estimate that the needs of approximately 340,000 of these households could be met from within existing stock if properties and households were better matched. This leaves a backlog of some 50,000 households.

Future housing need

  Based on the Government's latest household growth forecasts, the CHPR research estimates that we need to provide 3.8 million additional homes in the 20-year period between 1996 and 2016. This is equivalent to 191,000 units per year. The majority of these homes will be provided by the market. By looking at past and present household behaviour and incomes, we can estimate that between 67,000 and 73,000 of these homes will need to be affordable.

The private rented sector

  A recent update of the CHPR's work points to evidence of a reduction in the capacity of the private rented sector to accommodate households on low incomes. A conservative estimate of the impact of this on the need for affordable housing is an additional l0,000 homes on the annual affordable housing requirement.

Overall housing need

  For the purposes of estimating how many units are needed each year, we have calculated an annual figure for meeting the backlog of need on the basis of reducing it by 50 per cent over a 20 year period. This equates to 16,000 households per year. The overall position is therefore as follows:
Reducing the current backlog 16,000
Future housing need67,000-73,000
Possible reduction in supply in the private rented sector 10,000
Total annual housing need83,000-99,000


  Regional variations in housing markets are one of the most significant challenges currently facing housing policy makers. It is easy to jump to the simplistic assumption that empty homes in the North of England can be used to ease housing pressure in the South. This ignores economic reality and the very different and complex problems faced by high and low demand areas. On the basis of the CHPR research and the current household projections, we estimate that about 70 per cent of new affordable housing should be provided in the South of England.


  Shelter's experience is that there is an urgent need to improve the quality of much of the social housing stock. We therefore support the Government in its efforts to bring the social sector up to standard by 2010.


  Current spending plans allow for £1.4 billion to be spent on providing new affordable hosuing in 2003-04. This includes reosurces provided throught the Housing Corporation's Approved Development Programme, the Starter Homes Initiative and the Safer Communities Supported Housing Fund. It is estimated that these resources will provide a total output of 25,300 units. When estimates of the number of units that will be provided with grants from local authorities, by registered social landlords without subsidy, and through the planning system are added, this will provide a total output of around 46,000 affordable homes. [44]

  As set out above, we estimate that between 83,000 and 99,000 affordable homes are required each year to meet current and future housing need. This leaves a shortfall of some 37,000-53,000 units. In other words, we believe that current spending plans will meet only around 50 per cent of need. If this shortfall were to be met from public expenditure, we estimate that an additional £1.7 billon of capital investment would be required per year. However, we believe that there are ways of increasing the supply of affordable housing which could help to reduce the level of additional capital expenditure required.

Rejuvenating the private rented sector

  In many areas, the private rented sector is failing to reach its potential to provide an alternative source of accommodation for people on low incomes. As set out above, the CHPR's research indicates that this may currently be adding as many as 10,000 units to the affordable housing requirement. The recently published report of a commission established by Shelter with the support of the Joseph Rowntree Foundation[45] sets out proposals to improve standards and supply in the sector. These include tax incentives to encourage investment, a statutorily approved code of management practice for landlords and reforms to housing benefit (see below). We believe these proposals offer the potential to significantly expand the sector's capacity for meeting housing need.

Housing Benefit

  The housing benefit system is currently a significant barrier to the private rented sector providing decent affordable housing to people in need. Poor administration acts as a disincentive to landlords to let to people on housing benefit. The current system of rent restrictions, which can leave tenants with significant shortfalls between the housing benefit they receive and their rent, is having the same effect. Reforming housing benefit with the aim of ensuring that it meets its central purpose of enabling people on low incomes to pay their rent would relieve pressure on the social sector and significantly increase the contribution the private rented sector makes to meeting housing need.

The Right to Buy

  Shelter recognises that the Right to Buy offers council tenants an affordable way of owning their own home. However, the sale of council properties under the scheme currently far exceeds the number of new homes built. More than 53,000 local authority homes were sold under the Right to Buy in 2000-01, an increase of around 60 per cent since 1996-97. In contrast, only 18,000 new units of affordable housing were completed that year. In London, where the shortage of affordable housing is most acute, more than 11,000 properties were sold in 2000-01 and only 3,000 new affordable homes built.

  Continuing to haemorrhage properties on this scale is dramatically eroding the social housing stock in many areas where there is already a shortage of affordable housing. This also does not make financial sense. Right to Buy sales generate average receipts of £28,000 per home. The average cost of each new unit of social housing is £50,000. This represents a net loss to the Exchequer of over £20,000 per home.

  Reducing the number of properties lost in this way could significantly reduce the need for new affordable housing. We therefore believe that the time has come to reform the Right to Buy by selectively suspending it and reducing the discounts available in specific high demand areas. We also believe that the discount "clawback" period should be extended beyond the current three years and the "cost floor" liability period extended beyond the current ten years in areas where demand is high.


  In addition to the measures outlined above, we believe that the planning system can make a much greater contribution to meeting housing need. We therefore support the Government's proposals to introduce a new "tariff" based approach and believe this could offer an opportunity to significantly increase the amount of affordable housing provided through the planning system. The following illustrative examples show what could be achieved:

    —  In the North and Midlands regions, a 10 per cent affordable housing tariff within new developments could deliver an additional 6,000 affordable dwellings per year without public subsidy.

    —  In the East and South West regions, a 15 per cent affordable housing tariff within new developments could deliver an additional, 4,600 affordable dwellings per year without additional public subsidy.

    These illustratvie examples show the potential for delivering affordable housing through the planning system. Of course, achieving higher levels of affordable housing in new developments (such as the 50 per cent target proposed for London by the Mayor's Housing Commission) would require public subisidy.



  We believe that the most pressing priority is to meet the needs of those currently in the most severe need. This includes homeless families living in bed and breakfast and other forms of temporary accommodation, and those living in overcrowded or otherwise inappropriate housing. We anticipate that the needs of the vast majority of these people are best met by the social sector.

  There is also clearly an increasing number of people on moderate incomes who cannot afford to meet the market cost of their housing, particularly in London and the South East. Whilst it is important that their needs are met, this should not be at the expense of those in the most severe housing need. We therefore support the current balance of resources, which sees in excess of 80 per cent of funding going to social housing for rent.


  Shelter strongly supports the inclusion of targets for providing affordable housing in Regional Planning Guidance. In particular, we support the proposal made by the Mayor's Housing Commission that a minimum of 50 per cent of new properties in London should be affordable. We also support the inclusion of a numerical target in the Spatial Development Strategy.


  The Government currently has two targets in this area: a Public Service Agreement (PSA) to bring all social housing up to a decent standard by 2010; and a Service Level Agreement (SLA) to provide 100,000 new units of affordable housing in the four years up to 2003-04. The CHPR research indicates that the former target is on course to be met, as long as transfers continue at 200,000 per annum. Based on current spending plans and output, we believe that the SLA target on affordable housing will also be reached. Of course the target itself falls some way short of what our research shows the need for affordable housing to be.

  What is curerntly lacking is a long-term target for meeting housing need. We recommend that the Government should set a 10 year PSA target for meeting housing need, along the same lines as the target for improving the social stock. This should incorporate challenging shorter term SLAs to significantly increase the provision of affordable housing. We also believe that, in areas of shortage, local authorities should consider setting specific targets in this area in Local PSAs.


  Housing policy has too often been developed on a tenure specific basis. We therefore welcome the vision for promoting mixed and sustainable communities set out in the Housing Green Paper. Ensuring that new housing developments cater for people on a range of incomes and provide a mix of tenures will support inclusive communities. New affordable homes need to be built on the same sites as housing for sale and preferably as an integral part of such schemes to ensure social housing tenants are not isolated from other households and can become part of strong and sustainable communities.


  Shelter believes that providing an adequate supply of decent housing for all income groups should be the overriding objective of housing policy. However, for too long, this objective has been obscured by the often ill-informed debate about where this housing should be built. We believe it is time for a more rational and informed debate that ensures a sensible balance is achieved between meeting housing need and protecting the environment.

  We support the aim that development should, wherever possible, take place on brownfield land and be consistent with promoting urban regeneration. In many areas of the country, it should be possible to meet the need for affordable housing by using brownfield sites. Where there are suitable brownfield sites that are not coming forward for development, we would support giving local authorities increased powers to facilitate this.

  However, we are concerned that the emphasis at the moment apears to be on developing brownfield land only, without examining the consequences if this policy does not deliver enough additional housing. When seen alongside the long-term decline in investment in affordable housing and the level of need that has been created as a result of this, it seems inevitable that some greenfield sites may have to be used, particularly to accommodate the need that exists in London and the South East.

  This raises some significant questions about the future direction of policy. We believe that the Government must develop a long-term policy for meeting housing need. In areas of growth, we need sustainable development policies that meet the needs of the economy together with those of the environment and the well being of individuals and families. This is a difficult balance to achieve, and is not being achieved at present. The cost of growth and economic success, together with constraint on the supply of affordable housing, is being met by the rising numbers of homeless households living in unsatisfactory temporary accommodation, and the rising number of key workers unable to afford to live in the kind of home that they quite reasonably aspire to, within reach of their jobs.


  Shelter sees at first hand the cost of the under-provision of affordable housing. In our submission to the Spending Review, No room to play, we particularly highlighted the effect on homeless families and their children of living in bed and breakfast and other forms of temporary accommodation. Families and children in these circumstances can suffer extreme effects on their health, education and well-being.

  Health: There is a high prevalence of infectious respiratory and gastrointestinal diseases among those in temporary accommodation or overcrowded housing and the stress of living in such housing can cause strains on family relationships and lead to mental health problems.

  Education: Homelessness and overcrowding can seriously undermine a child's educational and life prospects. The frequent moves experienced by homeless children spending prolonged periods in temporary accommodation often means that they are regularly absent from school. Overcrowding makes it hard for children to read or do their homework, and it can cause developmental and behavioural problems.

  Well being: Homeless families are often placed in accommodation far away from the area where they lost their home. This disrupts their support networks, as well as the education of chidlren. Behavioural problems such as mood swings, hyperactivity, depression and bed wetting are more likely among families and children living in temporary accommodation and overcrowded housing.

  As well as the cost to individuals in terms of homelessness and bad housing, there is now a well documented cost to businesses and the economy, as increasing numbers of people working in the public services and other moderately paid sectors cannot afford to live in some areas.

43   These figures were accurate as at June 1996. The number of homeless households in temporary accommodation had increased to 78,620 by December 2001. Back

44   These estimates account for increased building and land costs (estimated at 3 per cent per annum) and increased grant rates to help achieve the Government's rent restructuring objectives. Back

45   Private renting: a new settlement, Shelter, May 2002. Back

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