Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Minutes of Evidence


Examination of Witnesses (Questions 180-199)

16 DECEMBER 2003

MR ROY IRWIN, MR ROGER JARMAN, DR NORMAN PERRY AND MRS CLARE MILLER

  Q180 Chairman: Could you let us have that list?

  Dr Perry: We would prefer not to, Chairman, because, if you like, the regulatory engagement between a regulator and associations has a degree of confidentiality in it. I am happy to go back and take some further advice on that, and, if we can send it to you, then we will.

  Chairman: All right.

  Q181 Mr Sanders: The number of non decent homes according to ODPM in the social sector as a whole has declined by about half a million between 2001 and 2004. Do you know what the breakdown is of the 500,000 properties between local authorities and RSLs?

  Dr Perry: Yes, we do.

  Mrs Miller: We know that the number of housing association homes failing at March 2003 is around 350,000. That is split between over 2,000 different landlords. If you look at the failure rate for traditional associations versus the newer LSVTs (which have come across with more of a problem in terms of achieving decent homes), then the failure rate for traditional associations is running at about 19% of their stock and for LSVTs it is running at about 40%.

  Q182 Mr Sanders: Could you give me that figure again.

  Mrs Miller: Yes, 350,000 homes in the sector at March 2003.

  Dr Perry: Chairman, that was in the ODPM written evidence. If you strip out the transfer associations, which by definition have a higher proportion of non decent homes, it is coming down in the traditional housing association sector by about 10% a year.

  Q183 Chris Mole: Mr Irwin, the Audit Commission, through your inspectorate, have been inspecting local authorities and ALMOs, and, since April, housing associations as well. What is your overall impression of the relative performance so far of the different bodies in meeting the standard?

  Mr Irwin: Our experience in dealing with local authorities is more substantial because we have been inspecting them for a longer period of time—in practice, we started in July 2000. Our observation about their performance, in the context of landlords to start with, has been disappointing. Their performance as landlords has been not particularly strong on repairs and maintenance because of value for money or procurement issues, and they have not been making the right kind of strategic decisions around how to invest in their own stock. That has been captured in terms of the overall performance of upper tier authorities in last year's comprehensive performance assessment, which was done for all counties and single tier authorities. That showed, across all the key services (education, social services, the environment, housing, benefits) that housing was probably as weak as any of the other services in that context. That is to be re-announced, in terms of changes since last year, on Thursday this week, and I cannot tell you what the position is in that sense. In terms of district councils, we have not done as much work as we have on upper tier authorities, although the comprehensive performance assessments now are working through district councils, as you are probably aware. The first results from looking at decent homes where authorities have not transferred stock have been quite positive. The preparations the district councils have been making, having learned from watching how other authorities have or have not done their jobs properly, have been quite encouraging. The number of authorities who are getting positive scores out of CPA for their housing work for districts is actually higher than I would have anticipated. That is a good sign. We are actually witnessing some learning across local government about how to do things better, which is really what is important. In terms of Arm's Length Management Organisations, when the initiative first started back in 2001 and when people put their names forward, to an extent I think there was a degree of self-selection: by the organisations putting their names forward, they must have thought they had a fighting chance of actually achieving what, when the programme started, was a three-star rating. As the programme has progressed, we have seen authorities which, for whatever reason, have chosen to go down that route where their performance is more mixed and therefore actually they will find some of the achievement issues in terms of standards will be difficult in the short time that they have. It is encouraging that those organisations, both as local authorities and ALMOs, actually now recognise their housing responsibilities and performance as really important. I think that is a significant shift. In terms of housing associations, we have only been inspecting for, in effect, seven months, although we benefited from seeing the inspection that the Corporation did beforehand. The picture is mixed. I do not think we have a clear view of exactly how performance compares, but we have just announced a consultation paper that will give us some comparative data, comparative judgments, from 1 April next year. That will allow not only the Committee but everybody else to take a view about performance on service standards across all three sectors.

  Q184 Chris Mole: Having carried out inspections in the local authorities which have the majority of council houses in the country, you seem to be saying that you do not think they are going to meet the Decent Homes Standard.

  Mr Irwin: I think it would be unlikely that every authority would meet the Decent Homes Standard by 2010. I think there will be acceleration, both in terms of performance and the speed at which they achieve it, and the fact that people do programmes of individual bits of work rather than actually treating each house as a unique piece of real estate to get up to standard, but I think it would be unlikely by 2010.

  Q185 Chris Mole: What do you think is the main reason for that failure? Is it lack of funds, poor management and planning, a mixture or something else?

  Mr Irwin: I think it will be a mixture of all. I think by the end of 2010 it will be a lack of funds applied at that time, but I think there will be waste in the system in the intervening time. So performance will be better at that point but I do not think it will be good enough actually to recover from what will be lost time because we are already entering into year four.

  Q186 Mr Sanders: You mentioned about CPAs and district councils and their housing functions. Am I to take it from what you are saying that the performance of district councils is on the whole better than larger authorities?

  Mr Irwin: In terms of the initial results from, I think, five or six counties out of 33, the judgments around the housing diagnostic around decent homes shows that district councils are preparing to hit their Decent Homes Standard in a more effective way than upper tier authorities.

  Q187 Mr Sanders: Why do you think that is?

  Mr Irwin: It is probably a product of a number of things. One is scale. One is not using non traditional housing construction methods as much as urban authorities did. It may also be a product of having less deprivation to tackle. Therefore, they have a better product, with probably a more sustainable market place, which is more traditional to repair and therefore is less costly to repair, and therefore resources are more cost-effective.

  Q188 Chris Mole: We have spoken about local authorities. From your experience so far, are housing associations more or less likely to meet the target?

  Mr Irwin: I think they have a better chance to hit the target. First of all, they have the opportunity to be unfettered by PSBR requirements in terms of how they are borrowing. Secondly, the average age of a housing association property is probably 30 years younger than the average age of a local authority's property—because most housing associations, certainly in traditional associations, will have been building new property over the last 25 years, where local authorities have not been adding new stock, they have just had to manage their old stock. Thirdly, housing associations (far less than local authorities) were into non traditional forms of construction when it was untried and untested. I think those three different dimensions give them a far better opportunity to hit the standard by 2010. I think it would be unlikely that they would fail.

  Q189 Chris Mole: Should further options be available than the current four for local authorities in pursuit of the Decent Homes Standard in their stock?

  Mr Irwin: I think the answer to that must be yes. If you are asking what are the other options, then it is difficult to see at this stage but, if you go back four or five years, PFIs and ALMOs would not have been an option If you go back 15 years, transfer would not have been an option. So I think that new ideas will come into the frame over the next five years.

  Q190 Chris Mole: What do you think those options might be?

  Mr Irwin: There are discussions within the local authority sector around freedoms and flexibilities around performance, and the prospect of what is seen as prudential borrowing. But I do not think that is extended in the first phase to housing revenue account held properties. No doubt one would want to see how authorities respond to a prudential borrowing regime at a broader level. You could see that if that was successful, it may be extended, but there would have to be a trial period of two or three years before they actually extend it. Clearly, the nearer we get to 2010, the more dramatic something would have to happen to make an impact by 2010.

  Q191 Chairman: Do you think it is a good idea to separate out the strategic housing role of local authorities from the management role?

  Mr Irwin: I know this has been a view that ODPM and its predecessor bodies have had. I do not think there is any evidence to say that good landlords are good or bad at the strategic role and vice-versa. If you look at the performance of authorities and if you look at the last classification of housing strategy by Government Offices, which was last year, 2002, there is no indication that the 90 authorities who had sold their stock were better at strategic work than the ones who had not.

  Q192 Chairman: Tactfully: the Government has got it wrong.

  Mr Irwin: There is no evidence to support any particular view that connections between the two are automatic. There is a view that could be held, that, if you understand how the market place is as a landlord and you use that intelligence wisely, you can play your strategic role very well. But there is also evidence that, when people only focus on the landlord role, they do ignore the strategic role. Our research, which the Commission published earlier this year, in January, sadly showed that in lots of authorities who had sold their stock, the view of the authority at large was that they did not do housing any more. So there is every possible shade of opinion but I do not think there is any evidence to support the fact that splitting the roles guarantees better performance.

  Q193 Chairman: One of the comments earlier was on the relationship between education and housing, and the fact that if the schooling is good then the housing will tend to stand up pretty well. That does mean, in a sense, that the management of the housing is linked back to the other local authority functions.

  Mr Irwin: It certainly should be linked to all the public services that support the community, whether they are local authority functions or anybody else's functions, but you cannot see housing in isolation. People choose their neighbourhoods first and their house second; not the other way round.

  Q194 Christine Russell: The National Audit Office report on stock transfer claimed that stock transfer brings qualitative benefits, but it is quite costly. ODPM seems to support that point of view. What is your view on the qualitative benefits versus the cost of stock transfer?

  Mr Irwin: You are looking at the difference between what has happened for residents following stock transfer against a hypothesis of what might have happened if they had not transferred. That is going to be a different calculation in every setting, because it depends what would have happened next if stock transfer had not happened. I do not think the National Audit Office work was tailored to individual circumstances. I do not think I could be in a position to comment on what those circumstances would be. I would venture the view that in some places stock transfer would have brought forward real positive benefits for a whole community, a whole series of tenants, that would not have happened for perhaps ten or 15 years in another setting; there will be other occasions where it will be a lot closer call about whether those benefits are discernible and immediate. But I think you have to look at it on a case by case basis.

  Q195 Christine Russell: You cannot say overall.

  Mr Irwin: In order to get to a sensible position about overall what the benefits were, you would probably need to take 15 cases and look at how that worked out in practice and then you would have a view about what the overall position would be.

  Dr Perry: Could I be a little more positive than Mr Irwin on that, because I think there is very clear evidence of the benefits of transfer in the aggregate as you have mentioned. For example—and we are here talking about decent homes—in every case where there has been stock transfer, the repairs promised to tenants have been delivered. Indeed, on behalf of the Public Accounts Committee we are currently doing a study to check that all the other promises have been delivered as well—and we will report back to the PAC on that. But, again, all the tenant satisfaction surveys show a clear, statistically significant improvement in tenant satisfaction on the whole across transfer organisations compared to local authority landlords. So we would say that there are very strong and demonstrable benefits to tenants from transfer, in addition to financial benefits for the transferring local authority of getting its stock repaired.

  Q196 Christine Russell: What about ALMOs, or do you think it is too early to comment? Do you feel the standard of the improvements that they are carrying out is perhaps lower than the standard of improvement that is being carried out by many of the landlords where the stock has been transferred?

  Dr Perry: The Audit Commission inspects ALMOs, so would be better placed to say that. I would say from our point of view that the main distinction between ALMOs and stock transfers is that with ALMOs all the money for repairs has to come from the Treasury and stays on the public sector balance sheet, whereas with stock transfer the money is fully funded by debt raised on the financial markets and paid back from the revenue stream. So from the macro-economic, national accounts point of view, there is a very clear difference between the two.

  Q197 Christine Russell: Mr Irwin, do you have any comments?

  Mr Irwin: I would say two things. First of all, it is a bit early in terms of elapsed time, because some of them have only been operating for about 15 months maximum. It would be easy to fall into either praise or criticism, but 15 months is not that long, in that sense. Over time we will be clearer about that, as we inspect those organisations. The second thing is the performance element, which means there is some confidence around that they will use whatever resources they have as wisely as possible to try to make a real impact on their community. So, yes, the resources might not be as much or they may have more difficult stock to deal with than some of the other stock transfers, but that is not entirely the case, and I think that in two years from now you will have a clearer picture to compare and contrast with housing associations, because the four-year programme that most ALMOs are working on—slightly different but not massively different from the housing associations—would give us a picture of a before and after, and then you could compare it with stock transfer.

  Q198 Christine Russell: Do either of your organisations have a view on this idea of the replacement dowry? Do you think there should be a replacement for the Estates Challenge Fund to regenerate the wider area?

  Dr Perry: The Housing Corporation always thought that the Estates Renewal Challenge Fund was a very good instrument. We were sorry when it was wound up. If any government were to decide to bring it back, it would be a very good idea.

  Q199 Christine Russell: What about the specific dowry fund?

  Dr Perry: I am not sure I understand the precise concept, but, in general, yes. The idea that there should be some provision for replacing the stock at the time of redeveloping the estate is clearly a right one, because you cannot just say you will repair the existing stock and nothing else has to happen. For example, Sunderland, which was a very big stock transfer only two and a half years ago, has already reviewed part of what it is doing to allow it to redevelop some of the estates. Specifically, it is putting mixed tenure into areas which have been completely mono-tenure in the past, and early indications are that that is proving very, very popular with the people in Sunderland.


 
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