Examination of Witnesses (Questions 1-19)
MR KIERAN
WALSH, MR
TONY RUDDY
AND MR
JOHN PERRY
24 MARCH 2004
Q1 Chairman: Gentlemen, you are very
welcome. We have a number of questions. Obviously we are delighted
that you have been able to join us to talk through your views
on Northern Ireland's housing needs. This is the first formal
evidence session that we have taken. For the record, on the first
occasion you speak, would you give your name. I will begin by
asking some general questions. At the moment, Northern Ireland
uses the net stock model for looking at the demands for social
housing. How robust do you think that net stock model is?
Mr Walsh: My name is Kieran Walsh
and I am the Director of the Chartered Institute of Housing in
Northern Ireland. John Perry is a policy adviser with the Institute
and Tony Ruddy is the Chair of the Northern Ireland Board and
Policy Board but is also Director of ARK housing association and
that is the delegation before you this morning. The net stock
model is a model that was developed by the University of Ulster
in 1994. It is really a projection of household formation against
population size and produces an over-arching figure of the number
of social housing properties that are required. The net stock
model has been re-evaluated quite recently by a team from the
University of Ulster, the Queen's University Belfast and the University
of Cambridge, and assessed against the most frequently used model
here in England and indeed Wales which is the headship tenure
model which is based on average age quartiles against population
projection as well. Those two models actually show that there
was a great degree of consistency and the figures came out at
around 1,400/1,500. There are a number of people who would suggest
that the net stock model is not a correct and useful model bearing
in mind that, three years ago, the application of the same model
suggested that, in Northern Ireland, we needed 2,100 units and
the population has in fact increased from then. So, there are
a number of assumptions that have to be made. The recommendations
from the report recently suggested that it needs to be reviewed
every two years and I think that is a way of keeping on top of
how relevant the over-arching figure is. The most important thing
is the bottom-up approach to local housing need is and how it
dovetails with the over-arching figure and both of those elements
would in fact lead to a robust assessment of what the actual figure
should be. We are suggesting that there is a need for about 1,750
to 2,000 new social housing units per year over the next ten years.
Q2 Chairman: You are correct in saying
that, if you look at the original model and even that that was
reassessed, the difference in housing need changes from, say,
1,500 to 2,000, but you also may be perhaps not surprised that,
when you asked tenants bodies and community groups, there is a
feeling that that is an under-estimate and that the net stock
model does not recognising housing stress and does not recognise
the true level of need and does not recognise overcrowding and
the need for particularly young families to move into their own
accommodation. Do you think that the recent re-examination took
some of those issues into account or do you think there continues
to be a difference of opinion between the net stock model's count
and the expectation of the community?
Mr Walsh: I think the real issue
here is the short-term needs that there are within individual
communities against what the net stock model is trying to do,
a long-term projection of what the need would be and whether it
is achievable over a period of time. If you look at the actual
waiting list for accommodation, it is 28,000 of which over half
are deemed to be in housing stress, then it is very easily argued
that the actual short-term need is to find accommodation for 16,000
people or families who are now assessed or families that are assessed
to be in need. But how that is going to be achieved over a period
of time to meet continued need based on the population projections
is the responsibility of both the department and the Housing Executive.
I would support some of the reservations that many of the voluntary
groups and tenant groups would have because there are a number
of assumptions that have to be made in the application of the
model because it is not an exact science. As I say, the application
is both the top-down approach through the model approach, both
the headship tenure model that is used in England with the net
stock model plus the bottom-up local community needs which I think
is in fact hitting a balance. When the various community groups
and others were invited to contribute to the research because
there was a semi-structured interview process as part of the university's
research, some people raised criticism of the model. Very few
people actually came up with any alternatives that would in fact
give a better application of what in fact would be the projected
need over a period of time and, in the absence of something much
more robust, I would have thought that the decision to both apply
the net stock model and the headship tenure model on the top-down
approach with the bottom-up local community is the best we have
thus far.
Q3 Chairman: Even taking into account
that very short discrepancy between 1,500 and 2,000, what we do
know is that, whatever the need is, the repeated failures year
on year to meet social housing building targets is putting a lot
of stress on the waiting lists. What is your view about that repeated
failure? Who is at fault?
Mr Walsh: A decision was taken
back in 1997 that the new-build providers of new social housing
in Northern Ireland would be the housing association movement
and the point we have made in our written submission is that the
reasoning behind that was not because the association movement
had asked for that or that anybody believed that the associations
could deliver that programme better than the Housing Executive
was the reasoning behind that. It was solely because the housing
association movement, because of the structures and organisation
and how they were able to access private moneys but with the way
in which the Housing Executive is structured, any private funding
it would have to raise would reflect in the public sector borrowing
requirement. Therefore, this was purely to enable the public sector
allocation of capital moneys for new build to be stretched further
because the associations have been able to bring in private finance.
Last year, for example, the new-build programme was £60 million.
The associations were able to levy in a further £35 million.
The department would not have had the £95 million to allocate
to the Housing Executive to enable the required level of build
to happen. It would require a change in the structure and the
make-up of the Housing Executive to enable them to borrow outside
the PSBR. That is a piece of work that we have been looking at
in the past and my colleague, John Perry, had in fact presented
to the Social Development Committee in Northern Ireland a number
of delivery options that looked at how the new-build programme
could be delivered outside of that narrow confine or whether it
should be either the Housing Executive or housing associations.
Mr Perry: I am John Perry from
CIH. Before coming on to that, I just want to make a point about
housing investment levels generally. It is interesting to compare
the trends in Northern Ireland with the trends in England. Until
the last three years or so in England, the trend level of public
investment in housing has been going down very sharply, right
from the mid-1970s to the end of the last century, if you like.
Whereas, in Northern Ireland, housing investment kept up at high
levels throughout the 1980s and it was only then that it started
to decline. That is why the Executive was able to build a lot
of houses and meet the housing need during that period and, to
some extent, why the capacity has fallen off since then, the investment
levels have not been high enough to sustain the programmes that
are required.
Q4 Reverend Smyth: You did say that it
was to free up the Housing Executive because they were not in
a position to borrow, but how far was it also to try to do away
with the combining of some of the smaller housing associations
which would not have been in a position to do that?
Mr Walsh: I do not think that
that in fact has happened because we still have 38 housing associations
plus Co-ownership Housing Associations operating within Northern
Ireland. These associations have not in fact amalgamated to any
great extent. There have been a number of mergers but they tend
to have been local community based where there has been an ongoing
relationship and where economies of scale have been able to be
achieved. This was not part of an agenda to try and drive down
the number of associations to 10 or 12 or whatever. We still have
38 associations but each of the associations had to decide whether
or not they want to play the new development game by the new rules
and many of the associations decided that they no longer wished
to compete in the private sector new build to take on board that
development role. Others actually decided that they would remain
with the special needs niche, for example a number of the homeless
housing associations, but we have a situation where around 20
or so associations did in fact then decide that they wanted to
be part of the development programme and they wanted to be in
a position to bid for new-build schemes and those new-build schemes
were, for many of the associations, outside of their normal geographical
area of operation. So, if there was some unwritten policy directive
that this would lead to an amalgamation or group structures being
formed by associations, that in fact has not been the experience
and we still have 39 housing associations operating in Northern
Ireland.
Q5 Reverend Smyth: Some of them have
grown.
Mr Walsh: Yes because a number
of them have actually shown that they have been able to participate
in a new-build programme with gusto and have developed those skills
to enable them to do that. If you look at the scale, we are talking
about in total, the 38 housing associations have a stock level
of less than 25,000, so the average amount of stock is less than
600. There are only six associations that have more than 1,000
units and more than 60% of the stock is held within the five largest
associations. So, they would have the knowledge, skills and wherewithal
to be involved in much more of the development process than many
of the smaller locally based ones who would not necessarily have
the skills.
Q6 Reverend Smyth: Have any of them been
using the DSD and others, encouraging the private sector through
the PFI to build substantially new housing?
Mr Walsh: Any of the individual
associations?
Q7 Reverend Smyth: Yes.
Mr Walsh: PFI is one of the options
that associations have.
Q8 Reverend Smyth: What I am getting
at is, is that being done through the Government or through the
Housing Executive which is not supposed to be involved in that
sort of building or is it the housing associations? It is usually
PFI and I am thinking of that particularly in South Belfast.
Mr Walsh: The new-build programme
is led out by the Housing Executive deciding what that programme
of need would be because of the net stock model, what the local
demand would be and setting out a programme. One of the deficiencies
of how this was done in the past is that it was a three-year programme
and that three-year programme meant that, when there were difficulties
with land acquisition, availability and cost, the lead-in times
to actually start on the site meant that there were slippages
outside of that programme which has recently led to a reduction
in the number of starts in any particular year. The Housing Executive
then determined what was required but it was up to the department
to then agree that programme and they then allocate schemes to
individual associations. There have, as the Chairman has rightly
said, been a number of difficulties in relation to achieving the
target, particularly since 2000 where the number of completions
have dropped significantly from the early years because the associations
delivering the programme have until recently very much achieved
the annual target. However, I have to say that the problem is
not simply because of a single issue in relation to the associations
not being up to it. The department, the Housing Executive and
the housing associations have got together as a tripartite group
to identify the difficulties and one of the solutions is to extend
the rolling programme to five years to allow slippages and to
allow advances within a programme because the short three-year
timeframe was in fact causing a difficulty.
Q9 Mr Pound: My question follows on from
what you were just saying. I think it was back in 1996 that I
was part of the policy review that decided to step back from new
build and vested that responsibility with RSLs, housing associations.
I appreciate the point you have just made particularly with regard
to perceptions that they may or may not be up to it, but are you
absolutely confident on the record that housing associations,
RSLs, can actually meet the demand for just under 2,000 units
per annum in the future?
Mr Walsh: Yes but as a professional
housing body where our membership base is individuals within Northern
Ireland, it is not for us to suggest that the Housing Executive
is a better model for delivering the new build target than the
associations. The most important thing for us is that the number
of properties required are delivered in the most cost-effective
way providing value for money and at a time that meets the needs
of the community. So, I am not here to argue that the housing
association is a better delivery model. But what we have done,
which is why I was bringing John in, is that we have suggested
to the department that there are ways and options of changing
the structures of the Housing Executive that would allow it to
borrow and would allow it to actually have access to private moneys
without unduly sacrificing, what is widely believed in Northern
Ireland to have been one of our successes within the last 30 years
of the troubles within our own community because of the responsibilities
vested in the Executive as a strategic housing authority. This
has very largely depoliticised housing as an issue, but the existing
rules do not allow the Executive to have access to the private
funding without impacting on the overall borrowing requirement.
Q10 Mr Pound: I appreciate that and it
very much parallels the situation in the rest of GB where it was
felt in many cases that local authority housing providers were
not so cost effective, there were cost overruns, you know the
story, and that RSLs were better at commissioning and better at
keeping to timetables. I think we have moved a way from then and
you are in a unique position from where the three of you are sitting.
Are you able to say in your opinion whether you feel that social
housing provision should, at least in part, revert to the Northern
Ireland Housing Executive? I appreciate that is a political rather
than a professional question.
Mr Perry: I think when we tried
to open up the discussion about the future of the Executive about
three years ago, what we had in mind was more of a mixed economy
for housing investments in the Province because it seems to make
sense to make use of the expertise in the Executive as well as
the expertise that resides in these associations rather than to
have either one or the other and, as Kieran was explaining, one
of the difficulties with the associations is that only a handful
really have the capacity to undertake new development. So, given
that you have quite a sizeable job on your hands and limited capacity,
it would seem to us that it would make sense to try to use all
of the mechanisms that are available rather than just one.
Q11 Mr Pound: Who has responsibility
for strategy oversight and Province-wide policy formulation at
the moment? Does anyone?
Mr Walsh: Policy formulation rests
with the department, but the Housing Executive have an overall
strategic responsibility and in tackling housing need. So, they
have to bring forward a programme that the department then agree
and then allocate and issue and monitor with the associations.
Each of the associations is actually going to the private market
to borrow to supplement the actual capital grant, but they are
actually going with limited appeal to lenders because their stock
levels are quite small. If the Housing Executive with a stock
base of just less than 100,000 was actually going to the market
to be able to borrow to complement an overall development strategy
for Northern Ireland, I think more attractive rates of interest
would be forthcoming. That would allow the development to happen
and even the allocation of the building programme could in fact
continue with both an amalgam of the associations with their local
community involvement and the Housing Executive, but where has
been a central pot actually established on the basis of the collective
asset that would allow borrowing to be much more attractive rather
than individual associations competing for individual schemes.
Q12 Mr Pound: I think you mentioned 38
associations.
Mr Walsh: Thirty-eight associations,
yes.
Q13 Mr Pound: Is there an approximate
average for the number of units in management and ownership in
each of those or do they vary massively and dramatically?
Mr Walsh: The largest five account
for 60% of the housing assoications 25,000 units.
Mr Perry: May I just add something
to your question about the strategic role because, as somebody
based in England rather than in Northern Ireland, it does seem
to be an interesting issue for the Committee to investigate. The
Executive has built up a strong knowledge base, probably stronger
than its equivalent bodies in England, Scotland and Wales. So,
I do think there is an issue about where the strategic responsibility
lies in practice. It seems to be determined quite strongly by
the Executive because of the research work and policy work that
they do.
Q14 Mr Pound: Is the Institute drawn
into this process? As the practitioners and professionals, are
you involved in consultation on policy formulation?
Mr Walsh: Yes, we are and, in
the past, we have given evidence to the Social Development Committee
as well as working on particular projects for the department and
others on specific policy matters. But we are an honest broker
in that process in that we are not in one particular camp or another
but the important thing is the well being of our community and
that is the overriding mission that drives the individual members
of the Institute. The CIH is an individual professional body,
it is not organisational, so while we receive support from the
Department, the Housing Executive and associations, it is not
as if the Housing Executive or individual associations join the
Institute, members of those organisations join and that is the
strength of the Institute.
Q15 Chairman: Mr Perry, it was mentioned
that you made a number of recommendations to the department. Of
course, the department is not in a position to respond to those
at the moment but could we ask for those to be repeated to us
in order that we can put those to ministers as part of our inquiry.
Mr Perry: What would probably
be helpful is if we arrange to send you a copy of the paper that
we produced at that time[1].
What we were really trying to do was to open up the discussion
about the future of the Executive because it was known that, at
that time, the Executive itself had commissioned studies looking
at options, which I do not think were ever made public. So, we
were trying to draw them out, as it were, and have a debate about
the future of the Executive really looking at it in relation to
the sorts of models that were being examined not just in England
but in Scotland as well and seeing whether any of those models
might be appropriate in the Northern Ireland context.
Chairman: That would be very helpful.
Q16 Mr Beggs: Are there any short-term
measures that could be taken to address the need for social housing?
Mr Walsh: I have to say that the
Housing Executive, the Department and the associations coming
together have endeavoured to address the shortfall in supply by
introducing a number of short-term measures. One of those has
been the introduction of the Existing Satisfactory Housing Scheme
which has allowed the associations to go into particular areas
of high demand to acquire properties which has been able to tackle
local need to supplement the shortfall in the new build. In our
paper, we have suggested that that has been useful and welcome
but we view this only as a short-term solution because it could
have long-term impact for issues of affordability and indeed mixed
tenure in certain areas. I have to say that the department, the
Executive and the associations coming together have very clearly
identified what the shortcomings have been in relation to land
cost, land availability and long lead-in times that have led to
the current crisis in the number of completions in past few years.
Action has been taken across a wide range of areas. For example,
the Housing Executive's role in land assembly, the longer lead-in
time and the roll-on programme etc which I think will ensure that,
over the short term, the associations will get back on track in
delivering the number of properties that the programme and the
funding is there for.
Q17 Mr Beggs: In April 2001, the Institute
urged the Northern Ireland Housing Executive and DSD to publish
the consultant's report of a jointly commissioned research project
examining the future options for investment and management of
social housing in Northern Ireland. Almost three years later,
are you concerned that a report, that was the HACAS Chapman Hendy
report, looking at this vital area has still not been published?
Mr Perry: Yes. That is what I
was referring to earlier. We tried to draw them out with the paper
that we produced and published. We suggested that there were five
or six different options for the future of the Executive, not
that necessarily any of them was a particularly better option
than retaining the status quo, but we felt that they were worth
examining to see if there were pros and cons about heading in
different directions. I think we regret the fact that there was
not a debate about it, that this consultancy report was done but
that there was not a subsequent discussion.
Q18 Chairman: Did they give you reasons
why they were not willing to put it in the public domain?
Mr Walsh: No.
Q19 Reverend Smyth: You have already
outlined the reason for changes from the Housing Executive funding
in the past, but I want to press you. Is a traditional model of
direct public intervention more likely than the current mixed
funding regime? Is that more likely to ensure that social housing
new-build programme targets are hit?
Mr Perry: In a sense, yes, but
only if you assume that there are no constraints on public expenditure
and this is the difficulty, is it not? In the English context
where housing associations have engaged in quite serious volume
in new build and are building far more than they were prior to
the introduction of private finance in the late 1980s, they have
now drawn in over £30 billion worth of private finance to
supplement the public finance that they can get. You can have
an argument about whether the division between public and private
finance is right but, given the framework that applies across
the UK, there is no doubt that more houses are being built with
the available money through that model than would have been the
case otherwise and the same applies in Northern Ireland.
Mr Walsh: Could I add that we
are also in a situation where, because of the robustness of the
house sale scheme that the Housing Executive operated for some
years, they were able to ring-fence that money to be redirected
into their own budget but, over the last number of years, that
has not been the case. So, it is interesting, for example, that
the Housing Executive this year returned £35 million back
into the Northern Ireland public expenditure purse for allocation
across other departments and that is the same level of private
finance that the associations have had to pull down this year.
That money has in fact been lost to housing per se. It
is still being used in other departments, in hospitals, in schools
and there is still an issue there, but that clawback is still
equivalent to the level of private finance required to supplement
the capital budget. Unless you are in a situation that we were
able to say that the public funding was going to be there to offset
the total resources that are needed for new-build capital improvements
and other expenditures, then, unless there is some sort of supplementary
private finance coming in, I do not think that we would see a
return to those days that the public purse on its own could support
the social housing new build provision.
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