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

4 Housing Supply

The Supply of permanent affordable housing

106. The shortage of suitable permanent low-cost housing is a fundamental cause of homelessness. The high price of private housing is putting home ownership beyond the reach of a significant minority of people who consequently have to rely on the provision of subsidised housing. These pressures are particularly strong in the South, and especially in London. Even in the Midlands and the North, in areas where private housing is less expensive and the issue has been the condition and suitability of the stock rather than shortage, the market is changing rapidly. Much of the evidence we have received from the areas which have been called low demand, like Salford, describes recent rises in private house prices and major increases in homelessness demand which the local authorities cannot meet.

107. The extensive periods which homeless people spend in temporary accommodation or hostels is a result of a shortage of homes at the disposal of local authorities to let or make nominations to. The supply of new, affordable social housing is failing massively to keep up with demand, and right to buy is reducing the number of lettings from existing stock.

AVAILABILITY OF SOCIAL HOUSING

108. Since 198l, the number of homes owned by local authorities and housing associations has dropped by about 1.2 million to 4.1 million in 2003-2004. This decline is mainly a consequence of local authority tenants exercising their right to buy and of councils not being allowed to build new housing following the change of Government in 1979. Housing association development has increased but not sufficiently to replenish the stock or meet increasing demand. The result is that the proportion of the housing stock owned by local authorities and housing associations has fallen by about 10% to 19%.

109. With the decline in the social housing stock, the number of lettings by housing associations and local authorities has fallen. In 1996-97, lettings totalled about 561,000 By 2003/04 it had fallen by about 190,000 to 370,000. The number of lettings to homeless people in the same period fell by about a third from 95,000 to 69,600 despite the rapidly rising demand. The London Borough of Hammersmith and Fulham said:

"Net demand is outstripping existing supply of affordable housing (our available new lets are estimated to be 787 units per annum) by a factor of 4.6. In comparison with Inner London and London as a whole, Hammersmith and Fulham's need for affordable housing is significantly higher at 47.9 per 1,000 households per annum than Inner London and London requirements which are 32.3 and 27 respectively. Only 37% of all households needing to move within the year can afford to buy the accommodation they need on the open market in the borough…essentially, existing and future demand for affordable housing cannot be met through available relets and new build alone. This is leading to a number of adverse impacts including households living in overcrowded conditions and high numbers of households reporting homeless and having to live in temporary accommodation".[150]

110. In London on average about 65% of local authority lettings are to homeless people; in Westminster it is 83%. Ms Genevieve Macklin from the ALG highlighted the dilemma faced by local authorities and housing associations who want to, and are required to, meet the needs of homeless people but also have other serious needs to meet and also want to meet the Government's agenda of trying to create more sustainable and economically mixed communities.

"The problem here is that the overall lettings available have dropped by about 30 per cent in the last three or four-year period. The supply and demand statistics show that the RSLs [Registered Social Landlords] are accepting a higher proportion of homeless households. Nevertheless, they argue that they would prefer to have more economically active households in order to fulfil sustainable communities and the more mixed and balanced communities agenda, and they are requesting that boroughs work with them to develop local letting plans. That is fine, but again it comes back to the severe problems around the level of overcrowded and homeless households that need to be accommodated".[151]

NEW HOUSING SUPPLY

111. Virtually all our witnesses suggested that a major programme providing low-cost homes to rent was a key component in tackling homelessness. Our report on Affordable Housing, published in 2003, underlined the importance of subsidised affordable housing to tackle the increasing needs, particularly with the rising cost of market housing.[152] Since our report, the Government has increased funding to the Housing Corporation. However, its enlarged programme is not adequate to tackle the backlog of housing need, is not sufficiently targeted at the needs of homeless people and is not in the right location.

112. A key principle of the Government's housing policy is to increase the overall housing supply with a view to stabilising prices. We suggested in our 2003 Report that the number of private homes required to have any impact on house prices would be impractical and could have serious environmental problems.[153] The review by Kate Barker into the supply of housing, commissioned by the Treasury, suggested that a mixture of market and social housing was required to stabilise the house price increases and tackle housing needs. It recommended an increase of 17,000-23,000 affordable homes each year above current provision, and a doubling of homes developed by the private sector, which would provide an additional 125,000 to 140,000 homes per year.

113. The joint submission by the National Housing Federation, the Local Government Association and Chartered Institute of Housing to the Government's 2004 Comprehensive Spending Review argued for a mixed housing association programme, to deliver 60,000 affordable rented, low-cost home ownership and intermediate rented homes a year by 2007-08. The National Housing Federation said:

"The outcome of the Spending Review resulted in resources that should enable development of 115,000 homes over three years still a shortfall of 25,000 from the Federation's submission to the Spending Review. We will continue to argue for additional investment to bridge this gap".[154]

SHARED-OWNERSHIP HOUSING

114. Much of the evidence questioned the priority given by the Housing Corporation to funding shared ownership housing for key workers. Shelter in its submission pointed to the increasing proportion of Housing Corporation funds being allocated for shared ownership housing. Nationally, the Housing Corporation has allocated over £1 billion in 2004-05 and 2005-06 for shared ownership housing, with a significant proportion for key workers in the wider South East. Shelter estimated that this reflects a 32:68 percentage investment split respectively between intermediate (including key worker) housing and social housing for rent. Witnesses questioned the value of the investment which subsidised the purchase of a private home because it did not increase the overall supply of affordable housing and benefited those people already with a home. Mr Adam Sampson of Shelter argued:

"First of all, some of the way that some of the money has been spent on key workers, it seems to us, is misplaced. If you look at the cost effectiveness of some of the schemes, for example simply to give particular categories of key workers grants to compete on the housing market for purchase, and the long term impact of that is merely to fuel house price inflation. It does nothing to increase the supply and availability of housing in the longer term. It increases house price inflation. In my work with the Home Ownership Task Force last year quite a lot of that discussion was considerable criticism of the current ways of subsidising key workers, which are not very cost effective. The second question is a question about whether we genuinely are right in prioritising housing aspiration over housing need. In the end if we have limited government subsidy it seems to us to be somewhat perverse to use that subsidy to improve the position of people who have housing but are aspiring to better types of housing over people who, by and large, have no access to housing at all".[155]

Southampton City Council pointed out:

"Public investment is weighted too far in favour of investment in housing for key workers. Whilst the council welcomes the provision of resources for key workers this should not be at the expense of those who are in acute housing need i.e. the homeless. Despite increased central investment - and investment by Southampton City Council —we are seeing a decline in the number of new homes to rent".[156]

115. Councillor Tony Newman from the London Borough of Croydon, representing the ALG, questioned the Government's definition of key workers highlighting the low take-up of housing funds allocated to help them:

"There is clear evidence that there is not a take-up across London and it is very ill-defined. My own local paper recently carried a half-page advert which said, "Are you a key worker? Ring this number and get a house for £50,000". Well, most people in housing are still trying to work out the definition of a key worker, let alone readers of The Croydon Advertiser, so there is a lot more work that needs to be done on this. Clearly some housing for key public service workers is a reasonable aim, but the ever-expanding list of who is a key worker at the expense of those in immediate housing need, I think we need to keep this at the very least under a very thorough review indeed".[157]

HOUSING IN THE GROWTH AREAS

116. Our evidence highlighted the importance of meeting the needs of the homeless people where they are currently inadequately housed so that they can maintain their local support networks. The Chartered Institute of Housing pointed out

"The location of provision of housing, especially temporary accommodation is very important. The experience of homelessness can dislocate households from all of their natural lines of support (friends and families). Children's education can be disrupted by the experience of one or more moves, and permanent offers can frequently be in areas too far removed from current schooling etc. Most councils have two or three hostels for temporary use and frequently this can lead to children having to attend a different school for a short period, with the likelihood of another school move when permanent housing is found".[158]

117. There are concerns that the Government's focus on development in the Growth Areas will not address the needs of homeless people in inner city areas in London and indeed will undermine boroughs' ability to meet their housing needs. Councillor Angela Harvey from Westminster Council pointed out that

"The move to sub-regional procurement of affordable housing and away from direct funding to local authorities and the advent of the Growth Areas make it more difficult to satisfy people's demands to be housed locally".[159]

Westminster also argued that if the whole cost of provision, including the cost of infrastructure, were taken into account it could be argued that it was no more expensive to provide homes in inner London than in the growth areas.

LOW DEMAND AREAS

118. In the parts of the Midlands and the North with an oversupply of housing, there is still a need for suitable affordable housing. Much of the housing is obsolete and located in areas where support services are not available. The North West Regional Housing Forum pointed out

"However there appears to be a perception from outside of the region that the North West does not suffer problems of homelessness with an over supply of void properties which are in low demand. It is important to emphasise at an early stage in this response that low demand properties should not be classified as supply. Many are awaiting decisions around demolition, and if we are to encourage sustainable lettings we should not simply be offering homeless applicants low demand stock. There are issues around the mis-match of supply and demand in the region, and these are issues that organisations are attempting to address through initiatives to deal with the inadequacy and obsolescence of such stock". [160]

119. There are however concerns that that some decent affordable housing will be lost with the demolition programmes developed by the nine Housing Market Renewal Pathfinder initiatives,[161] and it will be replaced with unaffordable housing, as Salford City Council pointed out

"Salford and Manchester are a Housing Market Renewal Pathfinder along with neighbouring Authorities, this will have an impact on affordability particularly for homeless people and other vulnerable client groups in particular as areas are cleared and new accommodation is not available due to

a)  construction of replacement taking some time to complete

b)  those properties not being accessible or affordable to homeless people".[162]

120. Some local authorities are being innovative in accessing private rented sector housing for homeless people in low demand areas. We heard about schemes all over the country, for example to enable homeless people to afford a deposit and rent in advance to take up private accommodation. Salford City Council, for instance, is letting out private sector housing in the low demand areas and has set up an accredited private landlords scheme.

"What we are doing is that where there are housing market renewal areas going on, and where those properties have been empty we will take those properties back in and in the short term we will use those properties for the housing of homeless families, so that is one avenue that we are looking at. As we say, another key for us is that there is a lot of private rented sector accommodation around. We have an accredited landlord service in the city and we want to make sure that we are using all the possible stock that we have got around".[163]

121. The stock of affordable housing has declined considerably as a result of right to buy and the cessation of local authority house-building. As a result the number of lettings to homeless families has fallen by a third. A major building programme of low-cost permanent housing to rent is required for homeless people. The serious shortage of permanent housing for homeless people is causing long stays in temporary accommodation. It is unacceptable that homeless people should spend very long periods, sometimes several years, in hostels and other forms of temporary accommodation waiting for a settled home. We believe that the experience of living in temporary accommodation is likely to be damaging to families and vulnerable single people and is likely to lead to significant additional costs in other social programmes. Providing permanent secure homes is a classic case of investing to save.

122. The Government has increased public investment in subsidised permanent housing but this is still not adequate to meet the needs of the increasing numbers of homeless people. The proportion of funds allocated for key worker housing is excessive. We accept that key workers may require a housing subsidy in some high cost areas, but we recommend that the Government reviews the effectiveness of its key worker housing scheme to ensure that it is achieving its objectives. There are major problems with defining a key worker and a danger that subsidising home purchases could add to spiralling house prices by increasing purchasing power without increasing housing supply. Funding for key worker housing should only be used for new-build shared ownership housing and the purchaser should not be able to buy 100% of the home unless covenants guarantee the price of the home remains discounted. Local authorities should identify the groups of key workers eligible for a housing subsidy in consultation with local employers and housing associations. Reflecting the deepening homelessness problem, we recommend that not more than 15% of the Housing Corporation's funds should be spent on key worker housing.

123. The Government is concentrating new house-building in the Growth Areas. However these areas are not necessarily where housing needs are greatest. The Government's housing investment programme should seek to meet the needs of more homeless people where they are currently located so that their support networks can be sustained.

124. There is a homelessness problem in areas suffering from low housing demand in some parts of the North and the Midlands. We recommend that the Government encourage and facilitate innovations on the part of local authorities in reusing some of the empty private housing for homeless people. The Government needs to ensure that local authority empty homes strategies effectively consider the potential of leasing private housing. Where homes are being demolished as part of the Government's Low Demand Pathfinder initiative, the effect on house prices and availability of affordable homes must be carefully monitored and a programme of provision of low-cost housing to rent must be included.

---

150   HC 61-II, Ev 96 Back

151   Q 90 Back

152   Affordable Housing, Third Report of the Office of the Deputy Prime Minister; Planning, Local Government and the Regions Committee, Session 2002-03 (HC 75), hereafter HC 75 Back

153   HC 75, para 25 Back

154   Ev 117 Back

155   Q 50 Back

156   Ev 10 Back

157   Q88 Back

158   HC 61-II, Ev 117 Back

159   Q76 Back

160   Ev 74 Back

161   The Government has allocated £500m between 2004-2005 and 2007-2008 for nine Market Renewal Pathfinders projects to tackle the most acute areas of low demand and abandonment in parts of the North and Midlands. The aim is to turn whole communities around by improving the quality of private, local authority and registered social landlord housing. Back

162   Ev 39 Back

163   Q 166 Back

---

Prepared 27 January 2005