Supplementary memorandum by the Office
of the Deputy Prime Minister (DEC 01(c))
You will recall that at the oral evidence session
on 28 January I undertook to write to the Committee with further
information on a number of points.
In addition I would like to take the opportunity
to clarify the remarks I made about the impact of incorporating
the Housing Health and Safety Rating system into the decent homes
standard.
A FORECAST OF
THE NUMBER
OF PROPERTIES
WE EXPECT
TO BE
BROUGHT UP
TO STANDARD
BY 2010
We can only provide forecasts up to the end
of 2005-06 as progress thereafter is dependent on the outcome
of the 2004 spending review. A table is enclosed. Our forecasts
are presented as ranges to take account of the significant number
of assumptions that have to be made. The basis of the forecasts
is the current plans that local authorities have in place for
delivering decent homes supplemented by information on changes
to these where authorities have, or are seeking, places on ALMO/transfer/PFI
programmes. It follows that our assumptions are subject to change
as local authorities complete their options appraisals.
PRUDENTIAL BORROWING
The discussion at the Committee focussed on
whether or not the prudential system would allow local authorities
to borrow in order to deliver decent homes. The prudential system
will apply to all authorities, releasing them from the need to
get Government approval to borrow. It is expected to give authorities
greater flexibility to manage their financial affairs to make
best use of resources. It will not, on its own, allow them to
borrow significantly more as it will not provide authorities with
any more resources to service additional debt.
THE COST
OF MAKING
ALL PRIVATE
SECTOR HOMES
DECENT
The English House Condition Survey 2001 shows
that there are 5.4 million homes in the private sector which fail
to meet the decent homes standard. The cost of making them decent
is as shown in the table below and total £44.2 billion. This
is a static position and over the period to 2010 other homes in
the private sector will become non-decent because of deterioration
of the fabric etc. At the same time a proportion of this stock
will be made decent by the owners with no public sector input.
The table does, however, show the overall scale of the problem.
| Numbers non-decent (m)
| Total cost of making decent (£ billion)
|
| Owner-occupied dwellings | 4.3
| 33.6 |
| Private rented dwellings | 1.1
| 10.6 |
| Total | 5.4 | 44.2
|
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|
I have also enclosed an explanation of our trajectory for
vulnerable households in the private sector component of the target
and to clarify what was said in Committee.
HOUSING HEALTH
AND SAFETY
RATING SYSTEM
(HHSRS)
In Committee you asked about the additional number of homes
that would become non-decent as a result of the introduction of
the rating system.
In 2001, there were just under seven million non-decent homes
under the current definition which includes the fitness standard.
Replacing the fitness standard with Category 1 hazards will increase
that figure by around 450,000. Of these, only around 20,000 will
be in the social sector. By far the greatest number will be in
the private sector.
The net increase in the proportion of non-decent homes in
local authority stock due to the change from fitness to HHSRS
is 1.6%. The increase in the RSL sector is 0.5%. In the owner
occupied sector the increase is 8.8% and 3.5% in the private rented
sector. Overall the increase is 6.3%.
Keith Hill
Current ODPM Forecasts on Reduction in Non-Decent Homes
and Associated Expenditure
The forecasts have upper and lower limits for the reasons
set out in the letter.
1. Upper limit
| 2001-02 | 2002-03
| 2003-04 | 2004-05
| 2005-06 |
| Non-decent at start of year (000s) | 1,480
| 1,330 | 1,150 | 1,000
| 790 |
| LA expected spend on HRA (£ billion) |
2.1 | 2.3 | 2.6 |
2.7 | 2.9 |
2. Lower limit
| |
| | |
|
| 2001-02 | 2002-03
| 2003-04 | 2004-05
| 2005-06 |
| Non-decent at start of year (000s) | 1,480
| 1,330 | 1,150 | 1,000
| 810 |
| LA expected spend on HRA (£ billion) |
2.1 | 2.3 | 2.5 |
2.5 | 2.7 |
| | |
| | |
1. The expected spend comprises; use of credit approvals,
major repairs allowance, use of capital receipts, revenue contributions
to capital, ALMOs. It excludes the PFI credits of £1.3 billion
although the outputs are included in the numbers of non-decent
homes.
VULNERABLE HOUSEHOLDS
LIVING IN
NON-DECENT
HOMES IN
THE PRIVATE
SECTOR
For the purposes of the PSA7 target to make homes decent
in the private sector the Department has focussed on vulnerable
households who are most likely to be unable to fulfil their ownership
responsibilities and maintain their homes in good repair. For
the purposes of monitoring progress vulnerable households have
been defined as those on the principal means tested or disability
benefits.
The English House Condition Survey 2001 showed that, using
this definition of vulnerability, there were 2.9 million vulnerable
households in the private sector, and 1.3 million living in non-decent
homes. This translates to the baseline target figure of 57% of
vulnerable households in the private sector in 2001 living in
decent homes. The trajectory for the PSA7 target is that this
increases to 65% by 2006 and 70% by 2010.
The Committee asked why the target for 2010 was chosen as
70% and not 100% and as an illustration of the costs involved,
what would be the cost of increasing the target from 70% to 75%
for the year 2010.
From the EHCS 1001 data it is again possible to estimate
the cost of making decent the 1.3 million non-decent homes occupied
by vulnerable households in that year. The total cost if £11.6
billion made up as follows:
| Numbers of homes (000s)
| Average cost of making decent (£000)
| Total Cost (£ billion) |
| Homes requiring renewal/modernisation | 532
| 18.6 | 9.9 |
| Homes requiring work to themal comfort only
| 739 | 2.3 | 1.7
|
| Total | 1,271 | 9.1
| 11.6 |
| |
| |
The above table represents a snapshot of the position in
2001. To make an estimate of what would be a realistic target
to achieve by 2010 requires assumptions to be made about a wide
number of variables. In particular the target is focussing specifically
on vulnerable households rather than dwellings and over the period
to 2010 households outside the 1.3 million target population captured
in 2001 could become vulnerable and may be living in non-decent
homes. Therefore given the larget number of non-decent homes in
total in the private sector it is not realistic to expect to ever
get the target to 100% by 2010.
Other factors to take into account are the extent to which
private investment will make homes decent without public sector
intervention and the extent to which the new local authority policies
of offering loans rather than grants for private sector renewal
will allow more homes to be made decent for a given public sector
cost. In practice this is very difficult to do.
It is possible however to demonstrate the scale of resources
required to deal with non-decent homes in the private sector by
illustrating the extra cost of adopting a target figure of 75%
by 2010 rather than the existing 70%. This is shown in the table
below:
| 2001 EHCS | 2010 PSA7 Target
| 2010 assuming 75% target by 2010 |
| No of vulnerable households in private sector
| 2,944 | 3,295 | 3,295
|
| Vulnerable households in non-decent homes |
1,268 | 988 | 824
|
| Number of dwellings made decent over 2001 baseline
| | 280 | 444
|
| % of vulnerable households in decent homes |
57% | 70% | 75%
|
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For the purposes of setting the PSA7 trajectory to 2010 we
have assumed that the total number of vulnerable households living
in the private sector increases to 3.3 million. This is an extrapolation
of the rate of increase in vulnerable households which took place
between 1996 and 2001. To meet the current 70% target by 2010
the number of vulnerable households living in non-decent homes
will need to be reduced from 1.3 million to 990,000. To increase
the target to 75% this number must be reduced to 820,000 requiring
a further 164,000 properties to be made decent at an average cost
of £9,100 per dwelling.
That produces a total extra cost to achieve 75% by 2010 of
£1.5 billion which over the six years remaining is an increase
of about £300 million per annum.
This additional resource compares with the current level
of resources going into the main private sector renewal programmes.
Local authority spending on private sector renewal from the single
housing capital pot is about £260 million pa although only
about 70% of this (£180 million) is spent on major or renovation
grant work which is likely to make homes decent. The Warm Front
programme is running at about £150 million pa but again this
includes a proportion of smaller grants which would not necessarily
make homes decent. Lifting the target by 5% by 2010 would therefore
require an approximate doubling of the current level of resources
aimed at dealing with this problem.
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