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

3 Progress towards the 2010 target

93. Witnesses expressed a virtually unanimous view that meeting the 2010 Decent Homes target was a major challenge. The ODPM itself readily admitted that there is no time to lose.

94. When giving evidence to the Committee, the ODPM Director of Housing, Neil McDonald provided some indication of the challenge and of the fact that the success in meeting the target will stand or fall with the allocation of funding in the current and future spending reviews:

Mr McDonald: The 2010 target is a challenging one. We need to be constantly vigilant, following up what is going on and taking any corrective action right the way along the process.

Mr Betts: You have concern that we will not meet it, do you?

Mr McDonald: We are not complacent.

Mr Betts: Do you have a risk estimate of what the possibility is that you might meet it or might not meet it?

Mr McDonald: We do not have a formal figure that we can give you.

Chairman: Is the Treasury one of the risk elements?

Mr McDonald: Continued funding is vital if the Decent Homes target is to be achieved."[95]

95. However the Minister of State for Housing, Keith Hill appeared optimistic, indicating that the Government is doing its bit, and that the rest is up to local authorities and tenants:

"…the Government is determined that we should meet the 2010 target and we are providing the resource and the opportunities for that target to be met. Secondly, I have to believe that local authorities and tenants will want themselves to benefit from the opportunities of significant improvements in people's own homes by that date. […] We are determined to work with local authorities to ensure that the target will be reached but, of course, it takes two to tango."[96]

The rate of progress

96. The Department has submitted forward projections of progress up to 2005-06. Projections cannot reasonably be taken further because funding will depend crucially on the outcome of the 2004 Spending Review. However, it is informative to consider the rates at which improvements have occurred, in order to see whether the target would be met given the current speed of progress.[97]

97. When considering the rate of progress it is necessary to proceed with some caution because the collection of data on Decent Homes is no exact science. This is partly because it is dependent on a considerable degree of interpretation of the Standard. Consequently, there is a significant margin of error in all the figures used here. For example, the English House Condition Survey from which much of the data on Decent Homes is derived is just that, a survey, albeit with a large sample of approximately 20,000 dwellings. Extrapolating national figures from a sample, particularly when broken down into different groups of tenure etc., invariably carries a margin of error. As a result of this inexactitude of the data, there are discrepancies between data from different sources. For example, in 2001, the English House Condition Survey reported 1.2 million Local Authority owned homes to be non-decent, but on the basis of aggregates of Local Authority returns, the ODPM arrived at a figure of 1.4 million.[98] The fact that the ODPM use both sets of figures complicates matters.

98. Such inconsistencies between data from different sources may form part of the explanation for some worrying inconsistencies between the data on past and projected rates of achievement of the Decent Homes target used in two supplementary memoranda from the ODPM to this inquiry. DEC 01(b) covers the period 2001 to 2003. This showed that Registered Social Landlords (RSLs) and Local Authorities were reducing the number of non-decent homes by around 130,000 a year. If they continued at this rate they would not reach the target until March 2013, over two years late. This memorandum also implied that the unit cost of bringing one non-decent home up to standard was around £21,500, much less than in the period 1997 to 2001.[99]

99. The information in DEC 01(c) gave forecast investment and numbers of non-decent homes for Local Authorities only. This covered the period to the start of 2005/06, two years longer than the figures supplied in DEC01(b). There were a number of contradictions with the data provided in DEC01(b). The reduction in non decent homes between 2001 and 2003 was greater, despite the fact that these figures exclude any improvements made to RSL stock. As illustrated in Figure 4, projecting forward the mid-point of the range[100] implies that the target would be met by November 2009, over a year ahead of schedule. This is despite the fact that a greater LA baseline is used. The unit cost was significantly lower at around £15,000 for the period covered by DEC 01(b) and just under £16,000 for 2001-05 inclusive.

100. The fact that DEC 01(c) only includes Local Authority stock is not a reasonable explanation for these contradictions. It would imply that RSLs do not start improving their housing stock until much later and have a unit cost vastly in excess of that for LAs. It is conceivable that differences in datasets and calculation methods account for parts of these discrepancies. It is also possible that Right-to-Buy sales and stock transfers may contribute towards some of the improved picture for the Local Authority sector shown in DEC 01(c). However, the ODPM does not provide any explanation, and that in itself is worrying.Figure 4: Projected achievement of Decent Homes Standard in the social housing sector with different ODPM data sets.

Source: ODPM memoranda DEC01b and DEC01c.

101. The Committee is disturbed by the large unacknowledged and unexplained discrepancies found in the data provided by the ODPM on progress towards the Decent Homes target. The discrepancies effectively make it impossible to assess whether the Department is on course to delivering one of its key PSA targets. We recommend that the ODPM investigate this matter very carefully, and that it make public its findings and a full explanation along with the most accurate set of figures and projections.

The social housing sector

Local Authorities

102. The Chief Inspector of Housing at the Audit Commission, Roy Irwin, was refreshingly frank in evaluating the probability of the Local Authority sector reaching the 2010 target:

"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."[101]

103. When questioned whether a lack of funds, planning, or poor management would be to blame for failure to reach the target, Mr Irwin answered that:

"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."[102]

104. Mr Irwin also identified Local Authorities caught between the wishes of their tenants and the Government's refusal to provide dedicated Decent Homes funding for Local Authorities who retain stock management in-house as one of the reasons for the target not being met:

"It just seems to me that those places where, yes, their own resources as local authorities retaining their stock will not hit the target, their performance currently is not good enough, and it may be that their tenants do not want stock transfer - and those places exist - that something is going to have to give and I doubt if it is the tenants' views."[103]

105. When questioned by the Committee, Keith Hill, Minister for Housing admitted that the processes involved in Local Authority options appraisals have tended to take up a considerable amount of time before work on the actual improvement of non-Decent Homes can even begin. The Minister thereby indirectly admitted that the options appraisal process may have caused delays in starting the work on improving homes. However, the Minister also indicated that things would speed up along the way.

"Remember that we are in a new process with the options appraisal process and it has been a learning curve and local authorities have had to improve their approach to these matters. Therefore, as in all programmes, in the initial stages one can expect to be somewhat slower but, once programmes are understood, once schemes are in place, there is a learning curve and we would expect the process to accelerate."[104]

106. The Audit Commission also sounded a word of caution with regard to the situation beyond 2010. In their memorandum, the Commission warned that it is not simply a question of being able to achieve the Decent Homes standard, but also of maintaining it subsequently:

"In some cases the real difficulty faced may be in identifying the long term resources to sustain homes as decent."[105]

107. The Committee is concerned that a lack of funding as well as the delays caused by lengthy options appraisals procedures and tenant ballots may result in Local Authorities being unable to meet the 2010 target.

Registered Social Landlords

108. With regard to Housing Associations achieving the 2010 Decent Homes target, the National Housing Federation wrote to us that:

"The vast majority of larger associations have plans in place to ensure that all their homes reach the Decent Homes Standard by 2010. These are included within their general improvement plans to provide tenants with facilities well above the minimum required by the Standard. The position is less clear for smaller associations."

109. This assessment was broadly endorsed by the Housing Corporation who indicated to the Committee that they currently have a total of 84 Housing Associations on their risk register. The risk register is divided into an A List comprising cases leading to 'significant concerns'. Forty Housing Associations with stock of just under 180,000 homes, of which an average of 28% failed the Decent Homes standard, are on the A-list. These associations will be the subject of an asset management review by the Corporation in the course of the next twelve months. A further 44 Housing Associations are on the B-list which means that they are being actively monitored, and if the Corporation is not satisfied, these may move on to the A-List. The B-list Associations comprise 150,000 homes, 20% of which fail the Standard.[106] Given that there are more than 2,000 Housing Associations in England, it is less than 5% of Associations that are currently on the Housing Corporation's risk register.[107]

The Private housing sector

110. At this stage there is very little data available to gauge the rate of progress on the Decent Homes target in the private sector. The only information supplied to us is for the 1997-2001 period, i.e. before the Decent Homes target came into force. The proportion of homes (rented and owner-occupied) in the private sector, occupied by vulnerable households, which failed the Decent Homes standard declined from about 55% to 43% between 1997 and 2001. Data for the post 2001- period should become available towards the end of 2004.[108]

111. We are not persuaded that the ODPM is doing everything possible to ensure the target is met in full across the different sectors. In particular, we are concerned that the year on year rate of improvement is not rising fast enough to meet the target. We recommend that the ODPM take immediate action to ensure that the rate of improvement be increased and sustained at the level required.

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

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)
Average per year
Average per year
(4 years to March 2001)
(2 years to March 2003)

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.


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:  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

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