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.
| 
