Examination of Witnesses (Questions 120-139)
9 DECEMBER 2003
ANNE KIRKHAM,
MR NEIL
MCDONALD
AND MR
JEFF HOLLINGWORTH
Q120 Chairman: You do not have the vulnerable
people in your properties—do you?—and then you are
okay. You keep them out.
Mr Hollingworth: That is a possibility
but this is a market system. If people are in the private rented
sector, they will be wanting to let their properties.
Q121 Christine Russell: Can you see why
we are asking the questions? Vulnerable people could perhaps be
marginalised because private sector landlords will just not want
to let their properties to tenants who may attract an interest
from the local authority.
Mr Hollingworth: We have to strike
a balance between providing accommodation, in a viable private
rented sector, which is important, and protecting the most vulnerable
tenants. That is the balance we have to strike, with an enforcement
procedure which is valid but flexible and also, through the system
of assistance from local authorities which can be provided to
encourage standards, policies to improve standards. We have given
local authorities wide-ranging new powers to provide assistance
in any form they see fit, in terms of grants or loans. So it is
an option for local authorities, according to their local priorities,
to provide financial assistance through grants and loans to support
a private rented sector at the same time as enforcing the minimum
standards. We do not have enforcement in the private sector to
deliver decent homes. We have enforcement powers through the rating
system to deal with hazards, and, at the moment, with unfitness.
The whole of the Decent Homes agenda in the private sector is
a matter of taking it forward through agreement with owners.
Q122 Christine Russell: Do you think
there should be more enforcement powers? Only three of the four
criteria are eligible for enforcement.
Mr Hollingworth: Yes. Well, again
it is a balance to be struck. If we go for overzealous enforcement,
we will lose the sector, and we have to get a balance between
providing a sector and dealing with the worst hazards. The Housing
Health and Safety Rating system is a step forward. It is a step
forward because it goes beyond the current unfitness standard
and it is dealing with some of the other issues such as unsafe
layout of houses and energy efficiency. It is a very big step
forward and will help to enforce standards. Also in the housing
bill we will be bringing in licensing of high risk housing in
multiple occupation. That, again, will be a new way of enforcing
standards.
Q123 Chairman: You are bringing in licensing
for multiple occupation and you are also going to license in areas
of market weakness, are you not?
Mr Hollingworth: Yes.
Q124 Chairman: In those areas of market
weakness, a condition of the licence could be that it needs to
be of Decent Homes Standard.
Mr Hollingworth: That is not really
what is envisaged at the moment. The enforcement of standards
through the private rented sector will be through the Housing
Health and Safety Rating System. The idea of selective licensing
in low demand areas is to deal with undesirable landlords or social
problems.
Q125 Chairman: Surely a landlord who
will not bring their property up to decent standards is not exactly
desirable, is he?
Mr Hollingworth: I think it would
be desirable if they brought it up to decent standards, yes.
Q126 Chairman: Yes. I am saying to you
that you would not give a licence to a landlord who failed to
bring their properties up to the Decent Homes Standard.
Mr Hollingworth: Under the current
bill, as drafted, the licence conditions will not relate to housing
standards—
Q127 Chairman: Why should they not be?
Mr Hollingworth: Because that
will be enforced through the Housing Health and Rating System.
The licence will be given as a condition that the landlord is
a fit and proper person and, in particular, of HMOs, that the
HMO is fit for the number of occupants. The local licensing authority
must have regard to the housing health and rating system which
will be the enforcement standard for all private rented properties.
Q128 Mr Sanders: If I want to start a
car hire firm, if I have a car that has failed its MOT I cannot
rent it out. Why do we not apply the same principle to private
sector housing and link the licence to the Decent Homes Standard?
Mr McDonald: The equivalent in
this case is the Fitness Standard, which will be replaced by the
Housing Health and Safety Rating System not the higher standard
of Decent Homes.
Q129 Chairman: So you are saying that
you will not be able to enforce the Decent Homes Standard but
the local authority would be able to enforce—
Mr McDonald: The lower standard.
Q130 Chairman: The lower standard. Right.
Is this 70% target a national target or is each local authority
going to have to make sure that within its area the 70% is reached
or aimed for?
Mr Hollingworth: It is a national
target which we will monitor nationally through the English House
Condition survey. The guidance that Anne mentioned, which we will
issue very shortly, will go into more detail about what we expect
individual local authorities to do, but we are not minded to set
individual local authorities a specific target. We want local
authorities, given their new powers under the Regulatory Reform
Order, to have an effective private sector renewal policy; that
is, a policy offering forms of grant assistance loans and advice
commensurate with the problem they have. We will monitor this
through government offices. We will expect local authorities to
make a contribution. We have said in guidance (circular 05/2003)
that we issued last year, that we expect local authorities to
make a contribution to the Decent Homes Standard in their private
sector renewal policies. We would expect them to aim to achieve
the 70% by 2010. We would expect them to get there. Part of the
target is that there is a gradual improvement in this figure.
We would expect local authorities which have already got to 70%
to carry on steadily improving.
Q131 Mr Betts: You spoke to us earlier
about the limited number of resources and how then choices have
to be made about the setting of the standard. On the other hand,
you have certainly been supportive of stock transfers and taking
them away from local authorities and putting them into the RSL
sector. The National Audit Office did a survey which showed that
a refurbishment programme through the transfer mechanism was likely
to cost more than 40% additional to a similar refurbishment programme
with the local authorities. Is that really good value for money?
Is it a sensible policy to be pursued?
Mr McDonald: The conclusion of
the work that we did applying the most recent Treasury appraisal
guidance, suggested that there was a considerable range of values
depending on the assessment put in for risk, and it is vital under
the new Treasury guidance that one puts in a proper assessment
for risk. You can have a situation in which it would cost less
or more depending on the amount of—
Q132 Mr Betts: But on average the National
Audit Office found that refurbishment by the stock transfer route
was more expensive.
Mr McDonald: Only if you exclude
the risk element do you reach that conclusion. The conclusion
that ministers have reached is that, even in cases where, just
on the basis of applying the appraisal mechanism, you get a figure
that suggests it would have been cheaper to make the stock decent
by retaining it within the local authority, there are other benefits
that are not taken into account in the calculations that more
than justify the extra cost.
Q133 Mr Betts: Could you explain that,
because you have lost me completely.
Mr McDonald: Only certain factors
get taken into account in the transfer calculation. For example,
the benefit of greater tenant participation, benefits in terms
of greater investment than might occur later. Those are not taken
into account in the transfer calculation.
Q134 Mr Betts: The idea that suddenly
you get greater tenant participation from having a stock transfer
I think is a complete piece of nonsense. There is no objective
evidence of that whatsoever. It is a fig leaf to try to cover
an additional cost of more than 40%, is it not?
Mr McDonald: No. I am afraid I
cannot accept that.
Chairman: Explain it, then.
Q135 Mr Betts: Where is the evidence,
then? Tell me the evidence that there is a better consultation
in RSLs than there is in most local authorities. There is actually
a statutory requirement in local authorities, is there not, which
there is not in RSLs?
Mr McDonald: We have conducted
research comparing the post-transfer situation with the pre-transfer
situation and that demonstrates that there are higher levels of
tenant satisfaction post transfer than pre transfer.
Q136 Mr Betts: But that is not the comparison,
is it? The tenants presumably would have been a lot happier as
well if they had had their homes refurbished by the local authorities.
You are doing a comparison of tenants who have non-refurbished
homes and refurbished homes after the transfer. That is true,
is it not?
Mr McDonald: Yes.
Q137 Mr Betts: That is like asking: Are
children happier before Christmas or after Christmas?
Mr McDonald: We could also compare
the generality of post-transfer cases with local authority retained
stock.
Q138 Mr Betts: But that is within the
refurbishment. The National Audit Office did the comparison of
the benefits of a refurbishment programme under local-authority-owned
stock and transfer stock and concluded that for the same sort
of refurbishments the local authorities could do them a lot cheaper.
It was slightly above 40% more under the transfer proposals. Then
you go on and justify that by saying, "Actually tenants are
a lot happier because they have got better consultation."
In fact that is not generally true in terms of local authority
comparisons. If you can produce a paper for the Committee showing
that general local authorities are worse at consulting their tenants
overall than RSLs are . . .
Mr McDonald: Perhaps we need to
provide to the Committee the note that we provided to the Public
Accounts Committee, setting out the—
Q139 Mr Betts: They did not accept it,
though, did they?
Mr McDonald: As far as I am aware,
there was no problem with the—
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