Examination of Witnesses (Questions 140-159)
MR DAVID
CROTHERS, MR
BILLY GRAHAM
AND MR
JEROME BURNS
30 MARCH 2004
Q140 Chairman: One of the other reasons
for our anxiety is that some of the questions that were asked
at commissioning stage related to issues such as whether or not
the Housing Executive could borrow or seek finance from the private
sector and we as a committee would be in a position to understand
what the thoughts of the Department are in respect of that and
other issues before we publish our report in September. Do you
think we will be in a position very soon to receive a final copy
of the report so that we can have a greater understanding of the
future priorities and policies?
Mr Crothers: I can assure you,
Chairman, that we will press for a response from our economists,
which we have already done, but as to when the Department of Finance
and Personnel, which is our Treasury Department, would be in a
position to join us in coming to a decision about the way forward
I could not put a date on. The Housing Executive is bound by the
Treasury rules and as likely as not any move to transfer stock
out will need to be carefully managed if it is decided to go down
that route from the point of view of how that is treated in government
accounting terms.
Q141 Mr Bailey: Can we turn to issues
of Housing finance now? First of all, what impact will budget
pressures on the provision of new social Housing have upon the
ability to supply it? What impact would the ring fencing of all
funds generated by social Housing have on the Department's ability
to meet its targets?
Mr Crothers: The budgetary pressures
have very considerable impact on the supply of new dwellings,
as Billy has already mentioned. In the incoming year, 2004-05,
we have had to reduce our target to 1,300 based on the money that
is available to us. Needless to say, we will be bidding for additional
funds to try and uplift that to at least 1,500 and, depending
on the outworking of the review of the Net Stock Model, perhaps
even further. The impact of that has very dramatic bearing on
our ability to deliver the programme. As to the value in ring-fencing
some of the funding, I guess that is a double-edged sword from
the point of view of rental income, for example. With a buoyant
house sales policy the Housing Executive's rental income is reducing
and as often as not in the year bids have been put in to compensate
the Housing Executive for loss of rental income. On the other
side of that the house sales then generate considerable capital
receipts. The Housing Executive is allowed to retain those receipts
up to its planning figure but anything over and above that is
then returned to Treasury but, having been returned, it is still
within the gift of the Housing Executive to bid against that money.
Given that there are other competing demands from health, from
education, from transport, from other services, the government
has taken the view that anything over and above the planning figure
should be returned to the centre.
Q142 Mr Bailey: Can I seek further explanation?
On the basis of what you have said I presume that the capital
receipts from sales are in excess of the Housing planning figure.
Is that correct?
Mr Graham: Often considerably
in excess.
Q143 Mr Bailey: When did the Department
initiate the detailed review of the cost of the new provision
of social Housing that was recommended by the 2002 Needs &
Effectiveness evaluation?
Mr Graham: We review our social
Housing costs twice a year. That was probably reflected in that
report, that we were mentioning that we were trying to make those
reviews more accurate, and we have managed to do that. We have
had two reviews since that report was produced. Just to give you
an indication, our allowances to Associations will be rising by
8% from 1 April. That is to reflect the rising costs that have
been hitting us in terms of land and labour costs, so we are getting
an uplift in costs of 8% as against the uplift by the Treasury.
That is coming back to your original point about how the programme
is being squeezed by the costs. Yes, we are initiating the reviews.
We are doing them twice a year.
Mr Crothers: There were in addition
two separate reviews carried out following the DTZ Pieda report.
The local government auditor carried out the specific review of
costs which effectively gave us a clean bill of health. Unit costs
were also reviewed and again it was concluded that the unit costs,
when analysed and compared with comparable English costs, can
be justified and still seem to be offering reasonable value for
money.
Q144 Mr Bailey: I believe so. There is
still an issue around, shall we say, the lower building and labour
costs in Northern Ireland. Is that reflected in the evaluation?
Mr Crothers: Yes, that was reflected
in the evaluation. As I indicated, the conclusion that they came
to was that when like with like was compared, including the impact
of fixed costs, there was no major cause for concern.
Q145 Mr Bailey: What opportunities exist
for private finance to contribute to addressing the need for social
housing?
Mr Crothers: Housing Associations
lever in private finance. We need to be careful to ensure that
the level of grant we provide does not push up Housing Association
rents. That is something that we have been particularly mindful
of. The position in Northern Ireland is that there is not a great
deal of difference between Housing Executive rents and Housing
Associations rents, and that has been a deliberate policy. As
you will be aware, there has been a problem in England which they
are now trying to resolve. We wanted to avoid that situation so,
that said, the opportunity for levering in more private finance
to the social Housing programme would be limited. The one area
that we have not explored in too much detail, although it is one
that we are looking at now, is supported housing. It receives
grant aid to different levels and it may well be that there is
an opportunity there to look at levering in more private finance.
Having said that, we have been singularly successful with our
Housing Associations on the programme so far with £228 million
of private finance and, say, 4,000 homes built at no cost to the
public purse.
Q146 Mr Bailey: Has the Department approached
the Strategic Investment Board for advice or assistance in relation
to investment in social housing?
Mr Crothers: The Department has
met with the Strategic Investment Board and discussed various
options but the conclusion we came to was that we have got it
about right.
Q147 Mr Hepburn: Do you have any concerns
about the house sales scheme?
Mr Burns: There are two schools
of thought about the house sales scheme. The first is that it
gives people an opportunity to purchase their homes which they
would not normally be able to do. It helps to create sustainable
communities by having mixed tenure on Housing estates and indeed
it has made a major contribution in this regard. The sale of ex-Housing
Executive houses offers a stock of affordable Housing to facilitate
first time buyers to become home owners as well, so there are
added benefits on that side. On the opposite side people would
argue that it depletes the stock of social Housing and therefore
makes it difficult to meet demand for housing. There are concerns
expressed by some that discount levels here are higher than those
which operate in other parts of Great Britain and there are some
concerns expressed that some social houses upon resale are ending
up in the private rented sector, so there are pluses and minuses.
We are aware that there is perhaps a need to modernise the scheme
to take account of these issues and ensure that it continues to
meet its major objectives of enabling people to become home owners
and contributing to sustainable communities.
Q148 Mr Hepburn: What would be the implications
for the Housing Executive if house sales continue, particularly
in its role in community development and dealing with anti-social
behaviour?
Mr Burns: The Housing Executive
is a major player as regards community development and whilst
many of its homes have been sold it continues to encourage the
establishment of community groups through its own tenants' participation
groups, so we do not think it would be in any way diminished by
the continuation of the house sales scheme.
Mr Crothers: It still has a very
significant role to play and as it loses one side of its organisation
it seems to take on others. For example, in recent times it has
taken on the Home Energy Conservation Authority role in Northern
Ireland. It has a major role to play in Supporting People. It
has a major research capacity which it provides for the Department
and others on the Housing scene. It is still responsible for administering
Housing benefit and paying grants to various organisations and
to individuals and, as Jerome has mentioned, community development
as well as urban regeneration. We do not see any diminution in
the role of the Housing Executive.
Q149 Chairman: Yesterday we had a very
impressive set of witnesses looking at Co-ownership of housing.
You have recently undertaken to research projects commissioned
by the Department in relation to the Co-ownership scheme. What
conclusions have you reached from those two research projects?
Mr Crothers: The overall conclusion
is that the Co-ownership scheme represents very good value for
money. It provides an important niche in the Housing market and
we as a Department are anxious to see it continue and, indeed,
even its role enhanced subject to the availability of funding.
Q150 Chairman: It is very difficult to
measure how those who take advantage of the Co-ownership scheme
impact on the social Housing sector and on waiting lists. What
would the Department's view be in this whole area of confusion
as to who participates in Co-ownership Housing schemes? Are they
people who would normally buy? Are they people who are unable
to buy? Are they people on the waiting list?
Mr Burns: The average income of
Co-ownership participants is about £13,500 per annum, so
with that type of income it would not enable you to purchase a
house through any other means except through Co-ownership. Whilst
there is no evidence at this stage to determine where people would
go if the Co-ownership scheme was not there, it is clear that
with average incomes at that level conventional home ownership
would not be an option. They would have to go on to the social
Housing waiting lists or enter the private rented sector. That
is not an issue of concern for us but it is an issue we would
like a bit more information on and to that extent we have now
commissioned the Housing Executive to carry out another piece
of research on Co-ownership and that research will look at Co-ownership
participants themselves, interview them and ask them, "What
would have happened if you had not got a home through Co-ownership?
Where would you have gone?", so that will give us more of
an evidence base to determine what impact it is having on waiting
lists. The last thing we would want would be to encourage people
on to the social Housing waiting lists just to support the Co-ownership
scheme. We would not want to do anything which would cause a skewing
of the waiting lists.
Q151 Chairman: Those that want to take
advantage of Co-ownership and those involved in Co-ownership schemes
would welcome the Department's bid to effectively double the base
line funding for Co-ownership but that bid will have to be based
on something other than a general view that Co-ownership is a
good idea. There is a concern that the research that is being
undertaken at the moment, which may give us the answers, may come
after the time when the bid has been submitted. Do you have any
comments on that?
Mr Burns: The two research reports
that have already been carried out demonstrate that Co-ownership
does offer good value for money. We have forwarded them to the
Department of Finance and Personnel to support bids for additional
funding for Co-ownership. The Department of Finance and Personnel's
economists have had a look at the reports and have asked some
additional questions which we have just responded to and they
are now considering these. We would anticipate that these reports,
plus the additional information that the Housing Executive is
going to prepare for us, will assist us in our bids for funding
for Co-ownership.
Q152 Chairman: Overall home ownership
is now around 70% in Northern Ireland. Is there an ideal figure?
Is there a figure beyond which you would accept that there is
not a need for schemes such as Co-ownership?
Mr Burns: No, I do not think it
would be right to determine that this is the figure we want to
achieve and then once this has been achieved we sit back. It is
in everybody's interest to try and encourage home ownership because
it gives people a stake in the local community and it gives them
an amount of social capital that they would not necessarily have
had otherwise. Within our mission statement we want everybody
to have a home in the tenure of their choice, so we certainly
would not want to limit home ownership just because we had set
aside a certain target for it.
Q153 Reverend Smyth: Are any of the options
put forward by the Low Cost Home Ownership Task Force likely to
have an impact in Northern Ireland or to be useful in dealing
with the problems in Northern Ireland?
Mr Burns: The Home Ownership Task
Force has made a number of recommendations. Some of those complement
the Barker report and are aimed at streamlining the planning system
to enable the delivery of more affordable Housing and we would
certainly welcome that. Interestingly enough, the Home Ownership
Task Force report also recommended a simplifying of the various
options available for low cost home ownership and indeed that
very much backs up the view we have here, that we have one mechanism
for low cost home ownership. That is the Co-ownership scheme.
It is a well respected scheme. Lenders are very aware of it and
the Council of Mortgage Lenders would argue that it is the fact
that there is just the one scheme in Northern Ireland that has
helped it to be such a success.
Q154 Reverend Smyth: Is there anything
in the Barker report which was published earlier this month that
would strengthen or challenge that?
Mr Burns: The Barker report is
based more on the English situation and is making recommendations
to try and deal with the boom/bust scenario that exists as regards
house prices in England. It is basically recommending that there
should be an immediate increase in the supply of homes throughout
England and particularly in the south east of England. We are
obviously quite interested in that but in many respects the issue
of Housing supply and what figures there should be is outside
our hands. It is a matter for the Department for Regional Development
and its regional strategic framework.
Q155 Reverend Smyth: Is there a place
for trying to pull them together? Speaking on behalf of south
Belfast for over 20 years, we have been waiting for the development
of the blackstaff area which has seen numbers go down from 5,000
to about 1,500 and a lot of dereliction around the place.
Mr Burns: The Department for Regional
Development, as I said earlier, is responsible for the issue of
meeting Housing demand right across Northern Ireland. We are working
quite closely with them, as is the Housing Executive, to try and
determine how much social Housing and affordable Housing should
be provided in each specific area. That issue will probably be
one that will be considered as part of the Belfast metropolitan
area plan which is currently being prepared.
Q156 Reverend Smyth: We live in hope.
Mr Burns: We do.
Q157 Mr Bailey: Earlier you said that
you had addressed some of the issues that had obstructed the number
of Housing starts over the previous few years. What problems did
you have in identifying those elements of the planning process
which have impeded delivery and what potential solutions do you
think exist for dealing with the problem of escalating land prices?
Mr Crothers: As far as the planning
is concerned one of the issues was certainly the delay in securing
planning permission. That was addressed by setting up a formalised
structure whereby we met with and meet with on a regular basis
our colleagues in the Planning Service. That has been responsible
for a considerable improvement in the understanding of the problems
which fall both to Housing Associations and indeed to the Planning
Service itself. It has helped speed up the process. It has also
enabled us to ensure that staff within Housing Associations are
properly trained and understand the planning process and what
is required of them, and indeed once they apply for planning permission
all the relevant information is presented at the appropriate time.
On your second point, escalating land prices, that is certainly
a difficulty, particularly in and around Belfast where most of
our Housing need is. We are not building on greenfield sites;
we are building on brownfield sites. Our record there has been
quite impressive. Over 65% overall is on brownfield sites, but
it does mean that it is extremely difficult to acquire sites in
hot spots, particularly in north and west Belfast. When we do
go in as often as not we may be competing with the private sector.
That raises a question about vesting but the decision there is
that we will not vest if the developer is proposing to put Housing
on the site regardless of whether it is social Housing or private
housing.
Q158 Mr Bailey: On that issue do you
think more use could be made of your land vesting powers?
Mr Crothers: Except that we will
not vest land if it is going to be used for housing. If a developer
comes along and says, "You are proposing to vest my land.
I am proposing to build Housing on it", the legal view would
be that you cannot then vest that land.
Q159 Mr Bailey: So it is a legal issue,
you think?
Mr Crothers: Essentially a legal
issue.
Mr Burns: And a human rights issue
because the land owner has a human right to try and get the best
price that he can for his asset. Remember that vesting is a very
draconian measure and more times than not when we attempt to vest
land we end up in public inquiries. Originally public inquiries
into vesting were small localised affairs. They are now big affairs
with barristers on both sides and it is almost a courtroom drama
every time you carry out a public inquiry into a proposed vesting
order. The issue of escalating land prices, and particularly land
prices for social housing, is one that is being addressed by the
Department for Regional Development in its deliberations into
the planning policy statement PPS 12. Both ourselves and the Housing
Executive are working very closely with the Department for Regional
Development and the Department for the Environment who will have
responsibility for identifying sites for social Housing as and
when PPS 12 rolls out.
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