Memorandum by The Audit Commission (EMP
22)
CONTEXT
1. The Audit Commission is an independent
body responsible for ensuring that public money is spent economically,
efficiently and effectively to achieve high-quality local and
national services for the public. Our work covers local government,
housing, health, criminal justice and fire and rescue services.
Our housing work includes responsibility for inspecting local
authority housing functions, housing arms length management organisations
and registered social landlords.
2. The Audit Commission was appointed in
December 2002 to undertake a number of roles in supporting the
Low Demand Pathfinders and the Office of the Deputy Prime Minister.
These roles are;
— to act as a "critical friend"
to the pathfinders, initially as they prepared their prospectuses
to bid for resources from OPDM and then as they developed their
on-going programme;
— to scrutinise the prospectuses and
provide time bound recommendations in a public report for use
by ODPM as part of their assessment and allocation of resources;
— to monitor the delivery of pathfinder
strategies through a six monthly monitoring programme and provide
the pathfinders and ODPM with an assessment of progress;
— to share learning through events
and communication, and to comment on the effectiveness of the
programme through an annual review. The annual review for 2003-04
is due to be published as a web based document within the next
few weeks.
3. Where appropriate, through its inspection
role, the Commission makes reference in public reports to the
arrangements which organisations have in place to manage their
own stock, vacancy levels, their housing strategies and investment
programmes. In the context of low demand and empty homes these
inspections will comment on the adequacy of arrangements the organisations
have in place to address these challenges.
The rest of this response focuses on the nine
questions set out in the ODPM Press Release of 16 December 2004.
(a) The scope and scale of the initiatives
proposed and underway in the Government's Housing Market Renewal
pathfinder areas and other areas with problems of empty homes
4. The pathfinder programme is different
to other regeneration programmes as it aims at restructuring the
housing market in particular areas which run across local authority
boundaries. Most of the areas have a history of previous government
funded interventions which have failed, to varying degrees, to
ensure their ongoing sustainability. This programme has a different
approach, one which seeks to understand and address the causes
of low demand instead of simply dealing with the symptoms. The
Audit Commission in its annual review of pathfinders 2004[6]sets
out the task facing pathfinders as:
— to understand what drives the housing
market, identifying the extent to which different factors encourage
people to move into, stay or leave an area;
— to understand why previous attempts
to regenerate their area may have failed;
— to promote conditions that will restore
market confidence in response to the main drivers identified,
for example by reducing dereliction, and working with partners
to improve the quality of the urban environment and particularly
to reduce crime;
— to influence the market in the future
so that the housing on offer meets the diverse needs of a mixed
and sustainable community; and
— to reduce the need for continued
public investment as the programme progresses, over time.
5. With pathfinder resources of £500
million committed in the Comprehensive Spending Review period
to March 2006, and rising to up to £450 million for 2007-08,
very substantial government support is being demonstrated. This
is a long-term programme as neighbourhoods with a degree of market
failure cannot all be turned around quickly and resources may
well be needed to support a 10 to 15 year programme.
6. In relation to non-pathfinder areas,
limited, unspecified, additional resources have been promised
for some areas, as yet undefined. The Sustainable Communities
Plan[7]indicated
that about 120 local authorities in the North and Midlands suffer
from low demand. There is concern that insufficient resources
may be available to tackle these problems. The challenge is for
Regional Housing Boards to understand the problem and allocate
resources accordingly.
(b) The commitment and contribution
of all Government departments and other agencies to tackling the
underlying causes of empty homes
7. The Audit Commission is able to comment
in relation to Low Demand Pathfinders.
8. There is no doubt about the commitment
of the ODPM to the pathfinder programme, with a dedicated team
working with the pathfinders and the Audit Commission. ODPM Ministers
regularly visit the pathfinders and are clearly in touch with
the challenges they face.
9. Many of the pathfinders include areas
supported through the various funding regimes of the Neighbourhood
Renewal Unit that complement many of the initial programmes that
pathfinders are developing, particularly around neighbourhood
management.
10. English Partnerships is playing a leading
role in facilitating and securing long term renewal of the pathfinder
areas. It is a member of the pathfinder Boards and has already
funded the acquisition of run down sites and properties in order
to assemble land for remodelling neighbourhoods providing the
opportunity for private investment to create new homes. It has
also contributed to master-planning for some local area frameworks.
11. The Housing Corporation has appointed
a lead officer at a national level and allocated resources specifically
for use in pathfinder areas. The level of engagement between housing
associations and pathfinders is however variable, which has caused
associations some concern as they are major stock owners in a
number of areas.
12. The Regional Development Agencies have
also been engaged by the pathfinders to assist in site assembly
and advise on some of the economic challenges pathfinder areas
face. They have also identified resources to complement programmes.
13. The Regional Housing Boards as part
of their responsibilities are required to develop strategies to
tackle the housing issues in their region and this includes the
allocation of resources to both pathfinder and non pathfinder
local authorities where appropriate.
14. The Commission is not able to comment
more specifically on actions government departments and agencies
are taking to tackle the underlying causes of empty homes.
(c) The availability of resources outside
the pathfinder areas and the development of strategies to deal
with weak housing markets
15. Local authorities have a legal requirement
to assess their housing market annually and produce a housing
strategy to address imbalances in that market. This may lead to
interventions, where necessary, using their housing revenue account,
if the intervention relates to their own housing stock; general
fund revenue resources; and available capital resources. They
may also secure external resources, subject to qualifying criteria,
such as Social Housing Grant from the Housing Corporation.
16. However, mainstream resources have in
the past been insufficient to tackle weak housing market problems.
This has now been acknowledged by government and led to the establishment
of market renewal pathfinders. Nevertheless, this only addresses
the problems in the intervention areas in the 25 local authorities
included in the pathfinders.
17. Pathfinders have identified a need for
significant public sector resources to research the problems;
finance a major portion of their early programmes; engage partners
effectively; and gain the trust of residents. If interventions
elsewhere are necessary to transform localities rather than ameliorate
the current difficulties, they too will need proportional additional
resources. However, beyond the first few years, there is scope
to lever in considerable private sector resources. If those authorities
outside the pathfinders, with a clearly evidenced problem, were
allowed to recycle capital receipts in the way pathfinders are,
this scope could be greatly enhanced.
18. Where local authorities outside the
pathfinders intervene, they should ensure that it is based on
well-evidenced and coherent sub-regional housing, planning and
economic strategies. This has not always happened in pathfinders
as the Commission's independent scrutiny of the prospectuses has
identified.
19. These potential approaches by local
authorities should be set against the overall level of low demand.
The low demand and long term vacancy[8]rate
between 2001 and 2004 reduced, nationally, by 6.3%. However, the
equivalent figure for the pathfinder local authority areas increased
by 9.2%. Within this was an increase of almost a third in low
demand in the private sector that was partially offset by a reduction
in the social rented sector.[9]
20. The table attached at Annex A shows
the low demand and long term vacancy position across all sectors,
as identified in local authority housing investment programme
data returns.
21. This data shows that the pathfinders
actually hold 50% of the total identified low demand and long-term
vacant stock, although this will not all fall within the pathfinder
boundaries. Outside the north and midlands only one authority
in 2004 had a low demand and a long-term vacant figure in excess
of the national average.
22. In addition, the problem of low demand
and abandonment in former coalfield communities has been recognised
through the funding and support for the work of English Partnerships
on the National Coalfield Programme, the Coalfield Regeneration
Trust and the Coalfield Enterprise Fund. This amounts to over
£500 million over 10 years but is a programme which the Audit
Commission is not involved in.
(d) The dissemination of good practice,
innovation and co-ordinated interventions within and outside pathfinder
areas.
23. Pathfinder programmes are relatively
new, with the first allocation of resources (Manchester Salford)
being made by government in October 2003, and others following
in 2004 and 2005. The speed with which strategies and programmes
have been put together to meet the spending cycle means that there
has been little opportunity for demonstrable innovation. In fact
early interventions have generally been driven by the pathfinder
constituent local authorities with many existing standard projects
being taken off the shelf.[10]
24. The lack of an in-depth understanding
of the evidence about the true nature of the housing market problems,
combined with the time pressure to achieve results, means that
some early projects have been approved that have no clear link
with the housing market problems. Pathfinders have distributed
some early funding according to various other criteria, such as
sharing funding between different local authorities or areas,
so that it is seen to be allocated fairly.
25. In order to share good practice and
information on general pathfinder activities, the Audit Commission
has introduced a quarterly Pathfinder Bulletin[11]aimed
at the widest possible audience within the pathfinders and their
constituent authorities.
26. The Audit Commission has also produced
a scrutiny review,[12]
published in January 2005, that identifies some learning and positive
practice as well as commenting on the programme in general. This
should help pathfinders as they move forward and play a part in
shaping the development of the programme and equally will be of
application to non pathfinders as they pursue solutions to their
problems.
27. The Audit Commission recently completed
the Comprehensive Performance Assessment (CPA) of District authorities,
which included diagnostic studies of housing. For those authorities
who had transferred their stock, this diagnostic study covered
the authority's approach to balancing their local housing market.
Based on that work, and the learning from the pathfinders, the
Commission will be looking at opportunities to have a dialogue
with those non-pathfinder authorities, and their key housing association
partners, experiencing low demand and abandonment problems. However
this needs to be seen in the context of reduced regulatory activity
by the Commission.
(e) Whether Councils have sufficient
powers to tackle the problem of empty homes in their areas
28. The application of current powers for
dealing with empty homes can be protracted and this has discouraged
many local authorities from using them. The difficulty in tracing
owners, the cost of boarding and the removal of waste and hazards
and the cost of remedial work, all of which may not be easy to
recover, has discouraged many from using their full range of powers.
29. The Housing Act 2004, however, includes
new powers enabling local authorities to make Empty Dwelling Management
Orders which allow an authority to take over the management function
of a property from an owner where it considers this is necessary
to ensure that the property becomes occupied. To make an order
it is proposed that approval would have to be sought from a Residential
Property Tribunal that would require certain conditions to be
met. As the powers were only enacted in December 2004 it is too
early to comment on whether the powers will be effective.
(f) The priority given to the demolition
of homes and the consideration given to effective methods of refurbishment
30. Each pathfinder has a different profile
of expenditure, but typically up to 50% of their budget in the
current allocation to March 2006 is for acquiring sites and demolition.
This is divided between the use of clearance powers and compulsory
purchase orders on private sector sites as well as demolition
of social rented stock that has come to the end of its useful
life.[13]
31. The majority of the private sector stock
being demolished is terraced housing, that is considered by pathfinders
and their constituent local authorities to be obsolete and no
longer meeting the aspirations of potential owner occupiers or
tenants.
32. Currently, refurbishment and home improvement
make up about 15% of pathfinder budgets and at present follow
traditional methods. In the social rented stock, local authorities
covered by pathfinders are seeking to remodel some estates and
are focusing particularly on delivering the Decent Homes Standard.
33. The local authority response to the
private sector is to encourage owners to bring their properties
up to standard using the powers of the Regulatory Reform Order
on Housing Renewal 2002.
(g) The availability of the necessary
skills and training to support staff promoting projects to tackle
the needs of areas with weak housing markets
34. The skills of people involved in the
market renewal programme underpin the whole exercise. Some of
the local authorities in the pathfinder areas have a good base
of skills for the practical work supporting market renewal, such
as engaging with diverse communities with diverse views and interests;
master planning; clearance of housing; and programme management;
while others have relatively little recent experience in these
areas[14]
35. In most pathfinders, local authorities
have a key role both in generating project ideas and in delivering
them. The performance of the local authorities in the pathfinder
areas varies greatly, from excellent to poor under the Comprehensive
Performance Assessment, with the average performance slightly
lower (worse) than English councils as a whole. There are clearly
performance issues in some of the individual local authorities
that pathfinders rely on, which are likely to affect the pathfinders'
performance at various points in the supply chain. Indeed, poor
local services such as cleaning and maintenance of the environment,
or education, may have contributed to the housing market weakness
in the first place. It may also have a direct impact on the pathfinder's
work, from strategy development through to their involvement in
the delivery of projects.
36. Pathfinders need to work closely with
a range of agencies to deliver their plans, and in this sense,
the pathfinder is at the head of a delivery chain for market renewal.
Pathfinders should be well aware of which other agencies they
rely on to deliver their plans, and they need to focus on potential
weak links in the delivery chain, which may occur at the interface
with other public sector bodies. If delays occur in critical activities,
the whole project may be put permanently behind schedule. In their
determination to achieve results, pathfinders need to ensure their
expectations of other supporting agencies are realistic, particularly
because many agencies are quite likely to have different priorities
with different time frames to those of the pathfinders.
37. Major infrastructure investment programmes,
like market renewal, invariably give rise to concerns over the
capacity of the building industry. This is particularly true where
other building programmes are happening on a local basis as in
several pathfinder areas. The concern which arises is how value
for money can be maintained where there are competing opportunities
for the industry.
(h) How housing market renewal is addressed
in other strategies including local and regional plans and other
regeneration programmes
38. The market renewal programme is a key
plank of the Government's sustainable communities plan, which
has been important in securing buy-in from a range of national,
regional and local agencies[15]
The most obvious area where coordinated action is required is
between the pathfinders' plans and planning policy and economic
development programmes in their region. Unfortunately this is
not always in place, and in some regions, planning frameworks
have been brokered between authorities which would increase the
supply of housing in areas that would compete directly with the
pathfinders for residents.
39. Where pathfinders have developed a strategy
which is based on a sound analysis of market intelligence and
supports, and is supported by other local and regional strategies,
their constituent projects need to be appropriate. This is not
always the case, and pathfinders have agreed too many projects
that reflect the priorities of individual local authorities in
the renewal areas, rather than being focused on market renewal
per se. In order to direct and co-ordinate local activity
better, pathfinders need to make their strategies more specific
and to establish project appraisal and decision-making processes
which generate and assess projects in a more rigorous and objective
way.
40. To succeed[16]
the housing market renewal pathfinders will need to work within
an overall policy framework which is supportive of the programme's
aims. One of the key risks to the programme is the presence of
regional spatial strategies which do not support the pathfinders'
strategies. This is a significant issue in some regions, and in
order to ensure that public investment in market renewal is optimised,
there is a need for:
— local and regional planning frameworks
to take into account adjacency effects in the way that pathfinders
currently are required to do. When devising regional spatial strategies
and local development frameworks, authorities should be required
to consider the impact of their plans on adjacent areas, particularly
if they have pathfinders close by. If significant amounts of house
building are agreed in areas adjacent to the pathfinders, this
will continue to encourage flight from the areas that the programme
was set up to rejuvenate.
— government offices to support this
process by seeking to ensure that regional planning bodies do
not agree strategies which jeopardise the renewal of the housing
markets in pathfinder areas, or in other areas outside of the
pathfinders which have clearly deteriorating housing markets.
— the government to support the pathfinders
by ensuring that its messages regarding the housing market renewal
programme are consistent to all agencies, especially government
offices and the Planning Inspectorate, and that these messages
are heard.
(i) How Pathfinders are seeking to
involve the private sector in their long term planning and programmes
41. At present there is variable involvement
of the private sector in pathfinder programmes. Some pathfinders
have a private sector person on their Boards and others have set
up private sector forums.
42. Private sector representation is essential
in encouraging a more commercial culture among the pathfinder
Board and staff. There are a range of barriers to this, not least
potential conflicts of interest, but this should not be cited
as an excuse for inaction. The purpose of widening private sector
involvement is to increase the range of skills available to pathfinders
and bring different perspectives to bear on issues raised. There
is no single "best way" to do this, since the most appropriate
method of involvement will depend on the existing structures and
balance of skills across the organisation. People from private
sector organisations could be involved in many different ways,
such as seconding in staff, setting up advisory panels or including
them as co-opted members on boards.
CONCLUSION
43. There is now a broad recognition that
some housing market failure is due to over, or inappropriate,
supply. The serious challenges of this programme are unlikely
to be capable of being resolved within the usual programme timeframe
of three to five years. There is room for innovation given that
the most seriously affected of pathfinder areas have already had
national and local interventions which may have had some success
but have not created sustainable housing markets. If well-managed,
this programme would not only contribute substantially towards
sustainable development but will achieve the establishment of
sustainable communities supported by a sustainable housing market.
Annex A
AUDIT COMMISSION ANALYSIS OF LOCAL AUTHORITY
HOUSING INVESTMENT DATA
| England
| 120 Local authorities in North and Midlands with most significant low demand
| Pathfinder LA's |
| 2001 | 2004
| 2001 | 2004 |
2001 | 2004 |
| Local authority low demand | 322,067
| 198,450 | 296,562 | 179,705
| 165,336 | 121,388 |
Registered social landlord
low demand
| 81,852 | 64,685 | 66,405
| 53,695 | 33,647 | 29,215
|
| Private Sector low demand | 533,169
| 607,711 | 388,837 | 487,934
| 281,358 | 366,490 |
Private Sector vacant for
over six months
|
310,221 |
297,716
|
148,977 |
155,431
|
55,589 |
68,317 |
Overall low demand &
vacant for over six months
|
1,247,309 |
1,168,562
|
900,781 |
876,765
|
535,930 |
585,410
|
| Total Stock | 21,360,647 |
21,739,151 | 8,871,320 | 8,998,876
| 2,894,998 | 2,925,151 |
| % of total stock | 5.84 | 5.38
| 10.15 | 9.74 | 18.51
| 20.01 |
| Change 2001-04 | | ¸78,747
| ¸24,016 | ¸24,016 |
| 12,728 |
| Change 2001-04 | | ¸6.31
| ¸2.67 | ¸2.67 |
| ¸9.20 |
Private sector demolished/
Brought back into use 2002-04
| | 48,223 | |
21,567 | | 10,140
|
| | |
| | | |
6
Para 8 Audit Commission Scrutiny Review January 2005. Back
7
Page 24 Sustainable communities: building for the future February
2003 ODPM. Back
8
Dwellings vacant in excess of six months. Back
9
Audit Commission analysis of local authority HIP data supplied
to ODPM. Back
10
Paras 36 and 45 Audit Commission Scrutiny Review January 2005. Back
11
Audit Commission Pathfinder Bulletin 1 see appendix 2. Back
12
Audit Commission Scrutiny Review January 2005 see appendix 1. Back
13
Para 50 Audit Commission Scrutiny Review January 2005. Back
14
10 Paras 72-78 Audit Commission Scrutiny Review January 2005. Back
15
Paras 70 Audit Commission Scrutiny Review January 2005. Back
16
Para 85 Audit Commission Scrutiny Review January 2005. Back
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