Supplementary memorandum submitted by
the Chartered Institute of Housing in Northern Ireland
EXTRACT FROM A SUBMISSION TO THE NORTHERN
IRELAND ASSEMBLY, DATED 3 APRIL 2001
Our comments here are a very preliminary look
at some of the options for NIHE. This is against the background
of what is happening elsewhere and the Programme for Government
proposal to finance a programme for improvement linked to the
disposal of remaining public housing stock to social ownership,
managed by housing associations or self-managed community development
trusts. (Programme for Government section (f): Enhancing physical
mobility and the environmental fabric).
OPTION 1
DO NOTHING
In Northern Ireland there is general consensus
among tenants and all shades of political opinion that the Housing
Executive has been a successful framework for delivering housing
services. So, if it is not broken why try to fix it!
However, maintaining the status quo does not
appear a realistic option in the current climate, as funding to
meet increasing needs is unlikely to be forthcoming. We have already
seen the transfer of the new build function to Housing Associations,
not because they had asked for this or, indeed, that it was felt
that this could be delivered more efficiently by associations,
but solely to allow the levering in of private resources. One
consequence of this has been the break down of the current consistent
pattern of rents, as associations have to set rents to service
loans rather than on size, age, and amenity.
It is also clear that with the evolving political
structures for governing Northern Ireland a new framework will
be required within which the Assembly can set its own strategies
and priorities. This will require the harnessing of resources
and expertise and a mix of public and private investment, setting
the implementation of future strategies within the context of
nationally identified needs and priorities. This will require
an evaluation of alternative models of delivery to develop a specific
housing strategy, reflecting the political, social and economic
situation in Northern Ireland.
Consideration of the additional options outlined
below does in no way imply criticism of the NIHE or advocacy of
change. Our comments are provided in consideration of what some
of the options might be to improve service delivery, given developments
elsewhere in the UK.
OPTION 2
PUBLIC CORPORATION
WITH MORE
BORROWING FREEDOM
This option would retain NIHE as a unit (although
it would be linked to other options to devolve management). NIHE
would become a wholly owned public corporation like the Post Office.
It would then be given more borrowing freedom within public sector
borrowing controls based on it maintaining a prudent borrowing
regime. Its relationship with the Government might be based on
a renewable contract, with subsidy related to delivery of services
and targets set out in the contract. The Executive could finance
more investment if it was able to increase rents, but would have
to do so within an agreed business plan with limits on the rate
of rent increases.
There may be ways of giving a reformed Executive
more flexibility to meet its investment needs in other respects,
for example:
— capitalise the benefit of future
rental streams to make new investment now (possibly through securitisation);
— build up surpluses for the same purpose;
— have more freedom to dispose of assets
and re-use the proceeds;
— transfer the NIHE debt to central
government as is happening in England with stock transfer.
This option is the least challenging to the
NIHE current structure, but could be made a challenging option
in terms of its business plan through the contract/subsidy relationship
with Government.
OPTION 3
A BIG HOUSING
ASSOCIATION
This option has already been mooted by members
of the Social Development Committee and would be akin to a whole
stock transfer, with NIHE being reconstituted as a large housing
association, able to receive grants, raise private finance, etc
in the normal way. This option is relatively simple in principle,
but raises a number of major questions and issues:
— In relation to the other associations,
it would be a massive fish in a tiny pond.
— How would it be accountable?
— Would it carry on with it the strategic
functions or would these be left with (say) DSD?
— Would it be able to do new build?
— How would it be regulated?
A variation of this option would be a group
structure, with a big parent body and smaller local ones based
on existing NIHE district offices. This would help solve the accountability
issue, but some of the other questions would remain. Would local
associations derived from the existing NIHE districts offices
feel genuinely independent or would the structure remain monolithic
in practice, if not in appearance?
OPTION 4
SEVERAL HOUSING
ASSOCIATIONS
Under this option the stock would be broken
up between new housing associations set up at district level.
They would be independent of each other and of any central body.
This option, therefore, implies a strong strategic unit within
DSD (or separately) to deal with overall strategy and private
sector issues that are now handled or proposed to be handled by
the Housing Executive. This option could be phased in, with transfer
taking place over a period and the Executive, as currently exists,
being gradually wound down.
The option addresses some of the issues raised
under option 3 but might be just as threatening to existing housing
associations as that option, as there would be a large number
of new bodies competing for grant etc. Also, given the strength
of the Housing Executives strategic role, it would be important
to have a new arrangement in place that retained it and did not
have all the key staff going to local level as new housing association
Chief Executives (a problem occurring in England with stock transfer)
OPTION 5
ARMS LENGTH
COMPANIES
In this option the Housing Executive is retained
centrally but is allowed/encouraged to set up arms length companies
based on its districts. There would have to be performance thresholds
before arms-length could be established and each would require
a business plan (maybe operating in shadow form pre-ALC). The
Housing Executive's existing business planning process should
be robust enough to facilitate this option.
Consideration would need to be given to the
financial arrangements that might accompany these changes. One
possibility would be to introduce resource accounting for the
ALCs, with the stock re-investment indicated in their business
plans financed through a new Major Repairs Allowance, as in England.
This would be public subsidy so would not in itself solve the
problem of where new funds would come from. The ALC could borrow
within prudential guidelines and could undertake PEI deals (though
there may not be any clear advantage in the latter).
This option has the attraction of retaining
a relatively strong central base for the Executive and being less
threatening to existing associations, as they would (at least
initially) still be the main agents for new build. The ALCs could
have local boards and be the basis for greater local devolution
at a later stage. The big disadvantage is that it does not bring
in private finance.
OPTION 6
A MIXED STRATEGY
One way of addressing the weakness of the last
option is to pursue a mixed strategy in which districts which
could be viable within a resource accounting regime (because they
have better quality stock) become ALCs, whilst those with poorer
stock are transferred to benefit from private finance. In many
ways this would give the best of both worlds and would create
more diversity.
OPTION 7
A MIXED STRATEGY—WITH
COMPETITION
Another variation on the previous option would
be to allow existing housing associations to compete to take over
the stock as an alternative to a new association being formed
from the existing district offices. This would be a more open
approach but may be of questionable feasibility given the size
of the majority of existing associations. However, it would have
the advantage that in poor performing districts there would be
an alternative to the present management set up (although staff
would in any case have to move across through TUPE rules).
There, of course, may be more options than those
mentioned, but this provides a basis to discuss the advantages
and disadvantages of different approaches as requested in your
terms of reference. However, fundamental to developing structures
for the future is undoubtedly the issue of over-hanging debt.
TREATMENT OF
NIHE DEBT
Any of the above options could be combined with
the taking over of the NIHE debt to be serviced by central government.
The advantage of this would be to simplify its financial preparatory
to one of the above changes, by bringing current expenditure more
or less in line with revenue from rents and capital receipts.
The precedent is the write-off of debt which takes place in England
with LSVT, where the Treasury bears the costs and effectively
takes the debt onto its own books. Such a move is neutral in terms
of Public Sector Borrowing Rules. (PSBR)
The complication in the case of Northern Ireland
is the same that has occurred in Scotland, that the Treasury may
regard debt repayment as a call on the Northern Ireland block,
so that (unlike England) it could affect current spending. This
would need investigation and may depend on the status of the NIHE
debt and the historic level of debt from the Public Works Loan
Board (PWLB) inherited from the 65 different housing bodies that
were amalgamated in 1971 to form the Northern Ireland Housing
Executive. However, a clear difference between Scotland and Northern
Ireland is that NIHE receives substantial subsidy towards debt
servicing costs direct from Central Government. (In Scotland's
case, direct subsidy has already disappeared for most authorities
and debt is serviced from rent income.) This distinction is undoubtedly
an advantage in the argument for the Treasury to bear the costs
of this overhanging debt.
In the halcyon days of the 1980s, when housing
was declared to be the government's main social priority in Northern
Ireland, it should be noted that some £366 million of NIHE
debt had been written off, together with an accompanying reduction
in loan charge requirements. Without this write off a higher level
of public expenditure would have been required from the Northern
Ireland Block, without any benefit to the physical housing programme.
Similar action now would facilitate the development of an appropriate
model of service delivery with the investment required to maintain
and improve the social sector.
MORE MODEST
REFORM POSSIBILITIES
One further consideration of structures for
delivering housing services could also involve the re-aligning
of existing Housing Executive district office boundaries to become
co-terminus with electoral boundaries, rather than district council
boundaries. As the devolved structure of the Northern Ireland
Assembly is on the basis of six representatives from each constituency,
it is worth considering a move to 18 District Offices, determined
by population and stock size, rather than strict adherence to
council boundaries, which have no relevance to delivery mechanisms.
The current district structure of the NIHE is primarily the same
as created at the establishment of the Housing Executive in 1971
when there were 43 District Offices. A number of Districts have
since amalgamated, within District Council areas, creating the
current 37 District offices. However, at that time the stock levels
numbered 212,000 properties compared to 120,000 currently, as
a result, primarily, of slum clearance and house sales. Existing
constraints have prevented the Housing Executive from doing little
more than "tinker" with this structure, whereas a more
fundamental review could achieve greater efficiencies.
Indeed, one could go further and create, for
example, one office for Belfast, with an increased network of
smaller neighbourhood offices, bringing delivery to the doorstep
of local residents. Economies of scale can be achieved with this
move from the seven existing offices, nearly all with city centre
locations and simplify the administration of tasks duplicated
in each individual outlet.
Such change could take place within current
structures or as part of the introduction of the preferred option
for the future delivery of housing services.
Finally, as the Social Development Committee
is no doubt aware, the Department for Social Development and the
Housing Executive have jointly commissioned research, to be undertaken
by HACAS Chapman Hendy, into the future options for investment
and management of social housing in Northern Ireland. As the terms
of reference of that research project appears to overlap with
this current review and to avoid duplication, it would seem appropriate
for this research document to be incorporated into your report,
as part of the ongoing review. CIH calls on the DSD and NIHE to
publish the consultant's report, to stimulate the wider debate,
which we have called for in this submission.
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