The cost of reaching the target
The Social Housing Sector
112. When ODPM officials came before the Committee,
they confirmed the assertion of some witnesses that social housing
providers often bring their 'least bad' stock into compliance
with the Decent Homes target first, leaving more problematic stock
till later. Ms Kirkham said:
"
there is some evidence that landlords
would have looked for some of the easier and cheaper areas of
work to tackle in the first instance, moving on later to the more
difficult and the more expensive"[109]
113. The ODPM Director of Housing, Neil McDonald,
subsequently confirmed that:
"One would expect the cost per unit to change
over the time, yes."[110]
114. In light of data supplied to us by the ODPM,
these assertions are a potential cause of some concern. The data
from memorandum DEC01(b) suggest that the cost per unit across
both Local Authorities and Registered Social Landlords declined
from the 1997-2001 period to the 2001-2003 period, as is illustrated
in table Table 2 below. If the data provided in memorandum DEC01(c)
are used instead, the unit cost for Local Authorities alone turn
out much lower, namely at £15,000 per home in the 1997-2001
period, and £16,000 during the entire 2001-2005 period, a
modest increase of less than 7% across an 8 year period.
115. If the assertion that the worst stock may be
left till last, and that the true unit cost is expected to increase
over time, it would appear likely that there will be a significant
funding shortfall given current estimates of expenditure.Table
2: Approximate unit cost per decent home in the social sector
1997-2003
Period
| Capital spend by LAs and RSLs (£ billion 2003 prices)
| Estimated reduction in number of non-decent homes
| Average capital spend per 'new' decent home
(£ 2003 prices)
|
| Total
| Average per year
| Total
| Average per year
| |
1997-2001
(4 years to March 2001)
| 10.0
| 2.5
| 410,000
| 102,500
| 24,390
|
2001-2003
(2 years to March 2003)
| 5.6
| 2.8
| 260,000
| 130,000
| 21,538
|
NOTE: The figures in the final column assume all
capital spending is aimed at reducing the number of non-decent
homes if the proportion of capital spending on non-decent homes
has changed over these periods then the ratio of these two
figures will also have changed.
SOURCE: DEC01(b)
116. The discrepancies in the ODPM data makes
it virtually impossible to assess whether the currently projected
funding provisions are likely to be adequate for keeping the social
housing sector on track to meeting the Decent Homes target. The
Committee is concerned that sufficient funding may not be being
planned for, especially given the ODPM's own admission that the
cost of bringing each home up to the Decent Homes target is likely
to increase in real terms over time, as Social Landlords come
to deal with the more difficult stock. We recommend that the Government
address this issue with urgency.
The private housing sector
117. The ODPM told the Committee that bringing all
5.4 million non-Decent Homes in the private sector up to the Decent
Homes standard is estimated to cost more than £44bn. For
the privately rented sector alone, it is estimated that it would
cost £10.6 billion to bring the 1.1 million non-Decent Homes
up to the standard.[111]
This would appear to be a rather conservative estimate given that
it works out at approximately £9,600 per home, far less than
the estimated unit costs in the social sector (see Table 2 and
discussion above). Based on these figures, the unit cost across
the whole of the private sector would be some £8,200 per
home.
118. Given that the vast majority of homes in the
private sector are not covered by the Decent Homes standard, this
level of expenditure clearly will not be incurred. However, in
2001, there were 1.16 million vulnerable households living in
the private sector (rented and owner-occupied). On the basis of
the ODPMs projected (low) unit cost of bringing all private sector
homes up to the Decent Homes standard (£8,200), it would
cost in the region of £6.7bn to achieve the target of bringing
70% of all homes in the private sector occupied by vulnerable
households up to the Decent Homes standard. This figure is contrasted
by the £30 million per annum budgeted for by the ODPM to
support improvements to non-Decent Homes in the private sector
occupied by vulnerable households.[112]
119. The Committee is concerned that, having set
a very limited target for Decent Homes in the private sector,
the Government should now address seriously how this target is
to be achieved.
95 Q163 - 166, Neil McDonald, Director of Housing,
ODPM. Back
96
Q501 - 502, The Rt Hon
Keith Hill MP, Minister of State for Housing. Back
97
DEC01(c), pp 1 and 3. Office of the Deputy Prime Minister (ODPM). Back
98
DEC01, para 5.2. Office of the Deputy Prime Minister (ODPM). Back
99
DEC01(b). Office of the Deputy Prime Minister (ODPM). Back
100
The ODPM provides effectively two sets of calculations, a best
and a worst case scenario for each data point. This is because,
in projecting the data forward, a range of assumptions have to
be made, creating a potential for error. The mid point is simply
the mid point between the worst and the best case scenarios. See
also ODPM01(c) Back
101
Q184, Roy Irwin, Audit Commission Back
102
Q185, Roy Irwin, Audit Commission Back
103
Q202, Roy Irwin, Audit Commission Back
104
Q504, The Rt Hon Keith Hill MP, Minister of State for Housing. Back
105
DEC61, para 43. The Audit Commission. Back
106
DEC66(b) The Housing Corporation. Back
107
The Housing Corporation web-site: http://www.housingcorp.gov.uk/aboutus/whoweare.htm#1
Back
108
DEC01 paras 5.6 and 5.11.
Office of the Deputy Prime Minister (ODPM). Back
109
Q106, Anne Kirkham, ODPM. Back
110
Q107, Neil McDonald, ODPM. Back
111
DEC01(c) Office of the Deputy Prime Minister (ODPM). Back
112
DEC01, para. 6.2. Back