Memorandum by The Housing Corporation
(EMP 32)
A. INTRODUCTION
1. One of the important objectives of the
Housing Corporation's investment and regulatory activities is
encouraging better functioning housing markets. Accordingly, we
have welcomed the number of initiatives the Government has taken
since the last Inquiry, such as the establishment of the low demand
pathfinders and the provisions in the Housing Act 2004.
2. The Corporation has a long track record
of championing research and addressing the issue of housing markets
experiencing systemic low demand, such as those now covered by
the low demand pathfinders. We also have considerable experience
in working with the Empty Homes Agency and housing associations
to support local authorities in bringing vacant property in higher
demand areas back into use. Therefore, we welcome the opportunity
to provide evidence to the Select Committee concerning these two
aspects of where housing markets are not working effectively.
B. THE CORPORATION
IN CONTEXT
3. The Corporation is a non-departmental
public body, charged with the registration, regulation and funding
of housing associations[20].
4. The Corporation's investment role covers
the allocation, distribution, monitoring and auditing of Social
Housing Grant (SHG). SHG is given to associations to produce affordable
housing, to contribute to regeneration or restructuring housing
markets and to meet the needs of vulnerable people. Grants are
distributed according to a development programme endorsed by Regional
Housing Boards and agreed by the Minister for Housing and Planning.
Under the Housing Act 2004, the Corporation can now fund other
organisations to provide affordable homes.
4. The latest Approved Development Programme
(2004-6)[21]:
— consists of £3,303 million to
fund 67,542 new or improved homes;
— including homes for 16,000 key workers;
and
— 4,800 new or improved homes in the
nine low demand pathfinders;
— with over 4,000 homes being built
in villages with less than 3,000 residents;
— and 2,215 homes built for rent as
part of the Supporting People regime.
5. The Corporation's regulatory role includes
the registration of housing associations, the setting of regulatory
standards, monitoring of association financial, governance, management
and service performance, supervision of under-performing associations
and intervention to protect tenants and public funds.
C. THE CORPORATION'S
ENGAGEMENT WITH
LOW DEMAND
AND EMPTY
HOMES
6. Given its national investment, regulatory
and policy advice roles, the Corporation has engaged extensively
with transforming low demand markets and empty homes. Our contributions
addressing low demand have included:
— co-funding the research that led
to the establishment of the pathfinders;
— funding other key research, such
as that by the Universities of Birmingham, Sheffield Hallam and
Heriot-Watt;
— seconding a senior officer to work
with ODPM in establishing the pathfinders;
— providing designated Corporation
officers to the boards of all nine pathfinders;
— allocating over £200 million
Social Housing Grant of our current investment programme to develop
and (occasionally) demolish housing in pathfinder intervention
areas;
— supporting other areas' initiatives
to address systemic low demand eg Tees Valley Living;
— offering £2.7 million worth
of Community Training and Enabling Grants for the nine pathfinders;
— reviewing national policies to make
them more appropriate for associations operating in low demand
markets;
— co-founding the North West Agencies'
pathfinders coordination group;
— co-hosting the housing association
network for those involved in pathfinders;
— drawing up our offer to assist the
Northern Way process;
7. Our engagement with addressing the issue
of empty homes has included:
— supporting the Empty Homes Agency
over many years with recent Innovation and Good Practice grants
totalling around £300,000 for such items as:
— studies into new ways associations
could bring empty properties into use;
— and promotional conferences
— contributing to the Building and
Social Housing Foundation report "Recycling the City"
on international lessons for unlocking the potential of empty
properties;
— monitoring the levels of vacant homes
owned by associations;
— making regulatory interventions if
levels or durations of vacancy become inappropriate for the market
where an association is operating;
— ensuring associations develop and
implement effective asset management strategies that take account
of changes in demand;
— requiring housing associations to
consider the sustainability of demand and communities before bidding
for investment;
— developing our market intelligence
skills to contribute to attempts to forecast demand and prevent
future empty properties.
D. MATCHING INTERVENTIONS
WITH THE
CAUSES OF
HOUSING MARKET
FAILURE
8. It is important that the measures employed
to tackle low demand and empty housing relate to the causes of
that particular market failure. The causes will usually be complex
and a mixture of the following:
— systemic market changes, such
as demographic changes, the decline of staple industries, tenure
imbalances,
— localised weaknesses, such
as poor environmental conditions or social problems including
anti-social behaviour, crime, etc.
— stock issues, such as the
condition, size, type or layout of housing;
— un-conducive ownership and/or
management strategies, such as absentee owners following inheritance,
speculation of future gain either through compensation or sale
after market interventions, unrealistic expectations of current
values,
— insufficiency of owners/residents'
resources, such as lack of financial or personal resources
to invest or repair stock, improve or effectively manage.
9. Addressing these causes will guide the
types of interventions whether focussing on the market, the property
or the owners. We acknowledge that many of the tools currently
available, or which are about to become available under the Housing
Act 2004, will take time to be demonstrably effective.
10. There is a growing body of anecdotal
evidence that suggests resolving systemic low demand or individual
empty homes can prove profoundly challenging. Interventions in
markets produce counter-vailing or counter-productive outcomes.
In low demand areas, the publishing of intervention strategies
can result in speculative increases in previously moribund house
price levels. Equally, action to address anti-social behaviour
can merely result in its displacement to the next disadvantaged
neighbourhood.
E. COMMENTS ON
SPECIFIC ISSUES
RAISED BY
THE INQUIRY
11. This section contains our responses
to the areas for investigation raised by the Committee which are
relevant to our remit. It analyses the extent of the problem,
and focuses on the range of opportunities and remedies available
to the sector to tackle the issue of empty homes and low demand.
F. EMPTY HOMES
Facts
12. Figures from the Empty Homes Agency,
drawn from Housing Investment Programme (HIP) returns, show that
the housing association sector is an effective asset manager.
Of 689,675 homes in England recorded as empty at 1 April 2003,
39,195 were in the housing association sector. This is a sector
which owns and manages in excess of 2 million homes.
13. We record, through the Regulatory and
Statistical Return (RSR), data on duration and reasons for vacancy
in association stock. Looking specifically at general needs, the
RSR at 31 March 2004 recorded a total of 41,738 housing association
homes vacant. (These figures are in units and bedspaces, so the
total of self-contained dwellings will be lower.) Table 1 in Appendix
A provides detailed figures.
14. Of the total vacant, 46.2% are available
for letting, with 6,813 homes recorded as vacant for three weeks
or less. These homes are likely to be in the lettings cycle, rather
than "empty homes" as such.
15. Of the 22,464 vacant housing association
homes not available for letting, 27.4% are awaiting or undergoing
repair or improvement. 4,130 of these have been vacant for over
a year. While this number may seem considerable, there are management
reasons for these voids. (For example, a block of flats might
be awaiting repair, but with some tenants remaining. Repair works
would be delayed until all flats were vacated, and it might be
impractical to re-let vacant units in the interim.) Homes recorded
as vacant for "other reasons" will include properties
kept vacant for management purposes, such as decants for major
works, and voids awaiting demolition.
16. The more detailed breakdown shows that
many empty homes in the housing association sector have been vacant
for relatively short periods, and are likely to be within usual
transactional levels of vacancy. The figures compare favourably
with the private sector where, in London alone, 36,649 homes had
been empty for more than six months.
PROBLEMS
17. In low demand areas, rapid turnover,
falling value and abandonment can lead to fractured communities
and an increase in empty homes. It is well established that a
cycle can develop, where perception of an area as unpopular or
failing lowers quality of life and leads to further lessening
of demand. Rapid tenancy turnover is also linked to anti-social
behaviour, feeding a cycle of dereliction.
18. In some ways, it is more problematic
to address the presence of large numbers of empty homes in high
demand areas. In areas of very high prices, a property can retain
its investment value when empty. Owners may be unwilling to engage
in property management, or may be absent. Corporate landlords
may not always be concerned about vacancy. In our response to
Empty Homes: Temporary Management, Lasting Solutions in August
2003, we said that housing need should be a factor in deciding
the extent and proportionality of intervention, and this will
clearly be the case in high demand areas.
19. Some homes will be of the wrong type,
or in the wrong place, for modern needs. A notable example in
the social sector is bedsits, which, even in London, are unpopular
across all districts. Empty property may not be suitable for immediate
reuse, and there are issues around funding for improvements and
repairs. These factors are not necessarily linked to demand. For
the future, the Decent Homes Standard will help to ensure that
homes remain fit for purpose.
SOLUTIONS
20. The Corporation has considerable expertise
in housing markets and can help associations to drive innovative
solutions that meet local needs. The Corporation has presence
at regional level, is involved in regional decision-making, and
can target funding through partnership arrangements with developing
and managing associations. We have a track record of involvement
in initiatives to renew markets and meet need.
PRIVATE SECTOR
OPPORTUNITIES
21. A key solution is the range of private
sector opportunities open to associations. Working with the private
sector brings clear advantages: additional temporary accommodation
can be provided quickly; private landlords are encouraged to keep
homes in use; and residents benefit from good quality management.
22. 44,300 homes (general needs and supported)
are provided through involvement with the private sector. Nearly
15,000 of these homes are leased from private landlords (either
via local authorities or directly by associations) to provide
additional social housing. Some of these are Private Sector Leasing
(PSL) arrangements, which can provide financial incentives to
private landlords to work with the social sector. Others may be
shortlife housing, often co-operatives, where grant funding may
have been provided to bring marginal property back into use. Table
2 shows the increase in stock managed under temporary housing
schemes from 1996 to 2004.
HOUSING ACT
2004: WORKING WITH
LOCAL AUTHORITIES
23. The Housing Act 2004 gives powers to
local authorities to take over management of empty homes. These
provisions are very new, but it is likely that authorities will
seek to involve associations as managers, to meet the requirement
to ensure proper management of the home. These new provisions
will also complement the existing flexibility of local authorities
to reduce or remove Council Tax discount for long term empty homes.
LIVING OVER
THE SHOP
24. The Corporation has funded initiatives
to bring space above commercial properties into residential use,
and is involved with the ongoing ODPM study into Living Over the
Shop.
ASYLUM SEEKERS
AND REFUGEES
25. In seeking to make better use of housing
in low demand areas, associations can return homes to use as accommodation
for asylum seekers or refugees. But this needs sensitive handling.
Landlords must ensure that these groups are not housed in poor
quality stock, simply to keep property occupied.
KEY WORKERS
26. Certain types of home, notably bedsits,
are not popular. Some associations have proposed creative solutions
to this problem, for example by upgrading facilities and rebranding
as apartments for single key workers, where homes are no longer
suited to general needs use.
G. LOW DEMAND
PATHFINDERS
— the scale of resources for low demand
initiatives
27. The original announcement of £500
million funding and its subsequent extension in Spending Review
2004 constitute important contributions by the Government of new
money to address market restructuring. Due to the scale and intractability
of low demand, we consider it essential that this resource continues
to flow for at least 15 years.
28. Following discussions with the regional
housing boards in the North and also the West Midlands, we have
committed over £200 million of our current allocations to
support schemes in the existing pathfinders. This commitment,
particularly in the North West where there are four pathfinders,
has resulted in some local authorities outside the pathfinder
areas receiving substantial reductions in Social Housing Grant
allocations.
29. As there will be competing demands for
investment in pathfinder areas and in other parts of the country
where there is low demand, regeneration and specific vacant property
issues, such as in the former coalfields, it is probable that
future allocation rounds will reflect these pressures and investment
patterns will change.
30. We are having to be careful in timing
the allocation of Social Housing Grant resources in the pathfinders.
Some of the timetables for delivery of new homes have already
been shown to be unduly optimistic given the complexity of preparatory
works.
— housing association access to pathfinders
funds
31. Despite associations' eligibility for
pathfinder funds, we have detected only limited amounts being
allocated to associations. We recognise that it is not always
appropriate for associations to be lead agents in implementing
intervention strategies or operating as developers or managers.
However, Transform's Fir Vale initiative in Sheffield is a good
example of how pathfinders could work more closely with associations
in recasting neighbourhoods, especially in complex multi-ethnic
situations.
— additional interventions beyond the
original pathfinder areas
32. The pathfinders account for only about
half of the low demand housing in England. There is evidence that
a number of other areas will require significant interventions.
Our submission to the Spending Review 2004 indicated that it would
be desirable if other interventions occurred across the country.
Accordingly, for areas such as Tees Valley, the East Midlands
Coalfield, the Black Country, as well as places such as Hastings,
it will be important that additional capital resources are made
available to restructure housing markets. However, we concur with
ODPM's view that it may not be necessary to reproduce the pathfinder
delivery structure in many (if any other) places.
33. It is also important to achieve a critical
mass of resources in each pathfinder area to achieve market change.
We would not advocate existing resources being spread more thinly.
34. A further point relates to the existing
pathfinder intervention areas. We consider that it will be desirable
in the future for pathfinders to be able to be flexible in relation
to the boundaries of their intervention areas at the margins to
accommodate the inevitable displacement of low demand into adjoining
communities and other adjustments in markets.
— the priority given to the demolition
35. Demolition of housing should be the
last resort of public agencies. However, it is important to emphasise
that in markets where there is systemic low demand or where there
is an oversupply of particular house types or where houses are
obsolete or obsolescent, demolition will be the best practicable
solution. In such circumstances, we would expect associations
and other agencies, such as the local authorities, would have
staff and arrangements in place to work with the residents throughout
the process from announcement, through identification of housing
solutions, planning and provision of alternative housing of the
right tenure type.
36. Given that demolition is the correct
response in a limited number of cases, it would be appropriate
for demolished properties to be included as a more sophisticated
and acceptable output for the Corporation's service delivery targets
in market interventions alongside the supply of new housing. At
present we use limited amounts of resources to acquire homes for
demolition but gain no recognition for this activity.
H. CONCLUSION
37. The persistence of both empty homes
in the midst of affordable housing scarcity and areas of systemic
low demand in England means scarce public and private resources
are underused and could ultimately be wasted. It is important
that the public sector continues to examine ways of ensuring housing
demand and supply are kept in better balance.
Table 2
Total stock managed under temporary housing schemes
1996-2004 (at 31 March)
| 1996 | 1997
| 1998 | 1999 |
2000 | 2001 | 2002
| 2003 | 2004 |
| Number of units (000's)
| Number of units (000's) | Number of units (000's)
| Number of units (000's) | Number of units (000's)
| Number of units (000's) | Number of units (000's)
| Number of units (000's) | Number of units (000's)
|
| HAMA | 10.6 | 13.2
| 14.0 | 15.1 | 17.2
| 18.2 | 18.5 | 23.0
| 24.2 |
| HAMA Plus | 1.0 | 1.8
| 2.9 | 2.4 | 2.1
| 1.7 | 3.6 | 2.9
| 1.0 |
| PSL | 2.3 | 2.1
| 2.3 | 2.0 | 2.5
| 2.7 | 2.8 | 6.9
| 6.3 |
| Shortlife | 7.1 | 8.2
| 9.8 | 11.4 | 11.0
| 9.2 | 8.6 | 8.3
| 8.4 |
| Other temporary accommodation | n/ap
| n/ap | 2.0 | 4.3
| 3.8 | 4.5 | 5.7
| 6.0 | 4.4 |
| Total | 21.0 | 25.3
| 31.0 | 35.2 | 36.6
| 36.3 | 39.1 | 47.1
| 44.3 |
Source: RSR
Part C, question C2, lines 1 to 5
HAR10/1 and RSR Part J (1996 to 2001)
Notes:
(1) Units = self-contained and shared bedspaces combined.
(2) n/ap=not applicable.
(3) Figures may not add up due to rounding.
20
This term is used instead of the less well-known legal term of
Registered Social Landlords. Back
21
Data obtained from Investment Bulletin 2004. Back
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