Memorandum by Northern Housing Consortium
(SRH 05)
1. BACKGROUND
1.1 The Northern Housing Consortium (previously
the Northern Consortium of Housing Authorities 1974-2002) was
established in April 2002. It is an independent non-party political,
membership organisation working to improve and promote housing
services across the North. Its 245 members include Local Authorities,
Registered Social Landlords (RSLs), Large Scale Voluntary Transfers
(LSVTs), Arms Length Management Organisations (ALMOs) and other
organisations involved in housing.
1.2 The Northern Housing Consortium is governed
by its members, who between them manage over 86% of social housing
in the North, over 1.3 million homes. These organisations are
drawn from the three Northern Government Office regions of the
North East, North West and Yorkshire & Humberside, as well
as the Housing Corporation (North).
2. THE LEVEL
OF PUBLIC
FUNDING REQUIRED
TO MEET
SOCIAL HOUSING
NEEDS
2.1 The level of public funding required
to meet social housing needs is significant. Social rented housing
provides an essential route to good quality affordable housing,
and a safety net for the most vulnerable in society. Investment
in social housing also supports many Government priorities including
sustainable communities, social cohesion and economic development.
2.2 Social housing is not always the tenure
of last resort and there is increasing evidence that the social
housing market is widening to include existing home owners and
customers who would traditionally have gotten onto the first rung
of the property ladder, but are increasingly unable to do so because
of lack of affordability. In the social housing market turnover
is slowing down eg Bradford has seen a 39% reduction in homes
becoming available to let between 2004-06. Similarly parts of
the North are seeing demand for good quality, low cost rented
accommodation rising dramatically eg housing providers in the
North East are experiencing average choice based lettings bids
of up to 44 per home and in the North West up to 80 bids per home.
Around 42% of the 300 referrals to First Choice Homes Oldham from
owner occupiers or private tenants have chosen a rented home.
We believe this is in response to the decreasing affordability
of home ownership. Evidence from the Oldham and Rochdale housing
market renewal pathfinder shows that displaced owner occupiers
and tenants of private landlords are choosing to rent from a social
landlord. Experience is showing that marginal owners, or those
whose homes have a market value which enables debts to be repaid
and a new start made, are choosing to rent. There is evidence
to show that graduates and young people are choosing to rent for
freedom and flexibility, and older owners are choosing to rent
to relieve themselves of the burden and the maintenance of home
ownership.
2.3 Increasingly the market has widened
because social landlords, in particular RSL's, are planning for
a greater share of the market by improving quality and design,
increasing access to housing and offering a greater range of products
and services. In the renewal estates of Sunderland new rented
homes, which have been built to exceptionally high standards,
are raising aspirations and challenging the traditional view of
social housing. Again there is evidence of owner occupiers choosing
to rent these homes.
2.4 The policy and practice needs to reflect
a modern approach to meeting social housing needs, and one which
also reflects the way in which society has changed. The North's
housing providers recognise that the models of delivery of the
past will not necessarily deliver the best solutions for the future,
and there are many examples of pioneering new approaches to delivery
eg the Preston Community Gateway. They also recognise that they
must make best use of their available assets to lever in additional
investment, and the North has an excellent track record in this
regard.
2.5 However, there is a strong feeling that
current levels of public funding will not be sufficient to assist
them in delivering the scale of regeneration and quality of housing
offer needed in the North.
3. THE RELATIVE
FUNDING PRIORITY
BEING GIVEN
TO SOCIAL
RENTED HOUSING
AS OPPOSED
TO SHARED
OWNERSHIP AND
OTHER FORMS
OF BELOW
MARKET HOUSING
3.1 Housing Corporation funding in the North
for 2006-08 is split approximately 24% for low cost home ownership,
76% for rent (similar to ratios elsewhere in the country except
London which has a higher proportion of sale to rent). We would
support the relative priorities currently being given.
3.2 Whilst government policy is encouraging
home ownership we would urge the government to ensure the policy
implications are understood, and policy tools are developed to
ensure home ownership is sustainable. Research by the Housing
Corporation (Public Attitudes to Housing 2006) may show that 82%
of people aspire to own but if a proportion of those cannot afford
to own, it is unsustainable and risky to encourage ownership.
In 2005 Shelter reported that people on low incomes place living
in a safe neighbourhood and affordability above the desire to
own. Recent CML research also shows that the percentage of 25-34
year olds who aspire to buy within two years is declining which
raises questions about the long term future demand for home ownership.
A recent survey by the Citizens Advice Bureau showed that many
people do aspire to home ownership, but may not be in a position
to afford to own their own home. 19% of people who rent, or around
2.6 million people, say they would like to own their own home
but don't anticipate ever being able to afford it.
3.3 The market for shared ownership is limited
and largely untested. There is evidence of an increasing interest
in funding shared ownership from the private sector, which is
encouraging, but will there be a market for the purchase of equity
shares in the future? There has been modest interest from RSL's,
delivery costs of shared ownership are high and the signs are
that unless shared ownership can be made affordable enough there
is limited interest from tenants, who prefer the option of outright
sale. In the North East evidence shows that Homebuy cannot be
delivered in high value areas at the income thresholds set down
in the policy. This suggests that using current rules, prioritising
spending on shared ownership does not provide for value for money.
3.4 Increasing ownership to the detriment
of increasing supply and standards in the social sector will do
nothing to help remove stigmatisation in the social sector, nor
will it help to tackle welfare dependency. The value for money
the Government receives by investing in the social rented sector
is also enhanced through the added value in terms of health, crime
and educational benefits. Research by Cambridge University argues
that spending on housing, and education, could prove better value
for money for the known effects on health.
3.5 Certainly legitimate social rented housing
needs should not be overlooked in the desire to increase shared
ownership. However, the North does have real hot spots of affordability,
evidence of an intermediate housing market in some areas and a
need to create mixed communities. Members would be interested
in the opportunity to create flexible tenure options, allowing
the customer to choose the tenure and the level of ownership if
required. This would help create truly mixed and tenure neutral
communities.
3.6 Overall, we support the provision of
homes for sale where it is necessary and sustainable. However,
we strongly recommend a balanced cross tenure approach which is
assessed upon a regional basis, and based upon sound housing market
and housing needs assessments. Achieving this appropriate balance
is a long term "investment" and not unsustainable "spending".
4. THE GEOGRAPHICAL
DISTRIBUTION OF
SUBSIDIES FOR
AFFORDABLE HOUSING
4.1 The distribution of Housing Corporation
funding in 2006-08 favours the South, and whilst we do not argue
against funding in the South, we argue that the North has not
received the level of investment it needs.
4.2 In the past, the view of the North has
been one of low demand and abandonment. Whilst this has been the
reality in some areas, there are many parts of the North in which
there are real problems of affordability. Research by the University
of York in 2005 highlights the golden triangle area of North Yorkshire,
rural commuter areas of Northumberland and the South Lakes area
of Cumbria. But affordability is not just an issue in these high
value areas. In many areas eg the city regions and former coal
mining areas not only are house prices out of the reach of average
incomes but there are real issues about providing a choice and
a mix of housing types to break up monolithic estates and provide
mixed income communities, addressing the issue of wrong supply,
and providing a real choice of good quality accommodation in the
market place. Public subsidy for social housing is as much about
increasing quality and choice, and market restructuring as it
is about increasing supply.
4.3 Market restructuring is beginning to
occur in many of the pathfinder areas, but there is still much
to do. There is evidence that a hardcore of neighbourhoods in
HMRP areas, eg Merseyside, are not showing significant signs of
improvement. This is particularly apparent in those areas which
have not had pathfinder status for example Sunderland and parts
of Western Cumbria. Members of the NHC have also highlighted the
impact on the intermediate labour market of growing affordability
problems in Cheshire. It is therefore crucial to consider the
economic case for housing investment in the North in order to
close the economic gap between the North and South in line with
the objectives of the Northern Way and the city regions model.
4.4 The geographical distribution should
therefore be based upon a sound analysis of the need and consideration
of the value that investment will bring for the North.
5. THE FUTURE
ROLE FOR
LOCAL AUTHORITIES
AS BUILDERS
AND MANAGERS
OF SOCIAL
HOUSING
5.1 The Northern Housing Consortium supports
the role that local authorities play in developing sustainable
communities. In considering the role of local authorities as builders
of social housing, the costs and benefits of delivering through
this approach would need to be fully understood eg are local authorities
geared up to deliver at the rates and quality we require with
the same or less public funding? What would be the impact on the
public sector borrowing requirement and can they compete in terms
of value for money?
5.2 On the one hand, there are issues of
capacity as local authorities do not have the experience which
RSL's and LSVT's have in raising private finance. Similarly if
we are ever to change the view of social housing as a welfare
product for good, we must think of moving away from direct state
provision, and instead build capacity in the local authorities
as strategic enablers and commissioners rather than direct providers.
This could be achieved by strengthening the local authority planning
function and incentivising local authorities to take a more strategic
lead on delivery.
5.3 On a positive note, allowing local authorities
to build and manage would create a more level playing field, increasing
competition for resources and stimulating efficiency and innovation.
Local authorities also have the necessary long term interest in
neighbourhoods and the development of the community. Increasing
the range of housing providers is a positive move away from a
central control, one size fits all, approach towards a new localism.
It could be an opportunity for local authorities who own stock
and need to improve or build new housing, and if local people
have voted to keep stock that is a democratic decision which should
be respected. This is local decision making in action, and links
to the community engagement and localism agenda, which is something
to be encouraged.
5.4 However, for this model to work, the
local authorities would need to think creatively, moving away
from the public sector mind set and embracing innovative ways
of delivering housing growth for example through the community
gateway or community land trust model, by setting up independently
owned joint venture companies or through ALMO development companies
etc. Those models which allow the authority to take a strategic
approach to providing affordable mixed communities with the local
community in control and the value held in perpetuity would be
most attractive. Local authorities could be encouraged to release
land for development at nil cost where they will be retaining
the asset and with preferential terms where "best consideration"
is about community benefit rather than attracting income for other
strategic objectives.
5.5 We await with interest the outcomes
of the pilots of local authorities operating outside the HRA system,
the Lyons review and the forthcoming Local Government White Paper.
6. THE EFFECTIVENESS
OF DIFFERENT
SOCIAL HOUSING
MODELS INCLUDING
TRADITIONAL LOCAL
AUTHORITY HOUSING,
ALMOS, HOUSING
CO -OPERATIVES
AND HOUSING ASSOCIATIONS
6.1 It is very difficult to make comparisons
between the effectiveness of the different models as they each
have different roles and strengths and each with a very valuable
place in the rented housing market. Similarly there is as much
variation in effectiveness within each model as between them.
6.2 However there are numerous examples
of each model finding innovative ways of increasing the supply
of rented housing in the North. Local authorities are developing
effective sub regional partnerships which enable the strategic
delivery of rented housing. Housing associations are very effectively
levering in substantial amounts of private finance with limited
public funding, sometimes no grant, and supplying rented housing
in conjunction with social investment in communities. They are
leading the way as social investors creating sustainable communities
by investing in Academies, infrastructure and environmental improvements.
Where they exist co-ops can provide an effective solution and
the benefits they offer in terms of empowerment and sustainability
are significant although not always easy to measure.
6.3 However, given a level playing field,
comparative approaches to regulation, and the same freedoms and
flexibilities there should be no reason all landlords could not
deliver the same. The greatest effectiveness does come from a
partnership of all models working together to provide a holistic
approach to creating sustainable communities and providing the
community with a menu of housing choices which suit local conditions
and create flexibility in the market place.
7. THE ROLE
AND EFFECTIVENESS
OF PRIVATE
RENTED HOUSING
IN MEETING
HOUSING NEEDS
7.1 Private rented housing has a varied
and vital role in creating flexibility in the market, for the
student market, move on accommodation in the support sector, labour
mobility etc. The market varies considerably from large investment
trusts to small providers, buy to invest and the low end intentionally
homeless market. Similarly, there is large variation in quality
and cost. The role is often not to intentionally contribute positively
to communities and it is not strategically planned, but market
led.
7.2 Despite this private rented housing
does meet a need. Social housing supply and market restructuring
takes time to react to neighbourhood decline and changes in demand.
This has led to low and sometimes wrong supply which does not
meet the needs of the market. Similarly there is evidence of an
intermediate market which cannot afford to buy at the lowest quartile
yet have incomes too high for housing benefit (University of York
2005). In the private rented market it is estimated that 47% of
renters are true intermediate households (Hometrack 2006). The
Hometrack evidence also shows that the private rental market is
meeting the needs of the younger market keen to own but not able
to do so yet, those who cannot access social housing due to lack
of supply in the right places, and the demand from international
and internal migrants. Research by GMAC-RFC (2005) found that
61% of 18-34 year old tenants believed that renting enabled them
to live in a better area than if they bought a home and enabled
them to access better quality accommodation. Evidence shows that
this group value the rental sector for the freedom and flexibility
to move around and the opportunity it gives to leave the family
nest without the burden of home ownership. It is estimated by
Hometrack that demand for private rented accommodation will increase
nationally by 600,000 households by 2021, but that demand will
only materialise by increasing the supply which is estimated to
require investment of £100 billion.
7.3 In terms of effectiveness, the sector
is dogged by poor standards; it is expensive to those on housing
benefit and is largely unregulated. The average national cost
of bringing a private sector home up to standard is £7,870.
Crude multiplication therefore reveals that an investment of £2,856,810,000
is needed in the North (EHCS 2003). We know that of the 1,056,000
vulnerable households in the private sector who are in non decent
homes just over one third (34.4%) reside within the three Northern
regions.
7.4 Anecdotal evidence shows that in some
areas the private rented sector is having a negative impact on
communities due to the number of homes being purchased as an investment
or pension fund rather than to meet household requirements, and
homes being bought up by investors looking to capitalise on CPO
in renewal areas. In the North East there is evidence of the buy
to let market hindering the ability to improve sustainability
on estates and is proving costly to local authorities in terms
of environmental, neighbourhood and community safety expenditure.
In response to the concerns of members the Northern Housing Consortium
is beginning to scope out research on the impact of "buy
to let" and "buy to invest" on Northern housing
markets.
7.5 We support the need for regulation at
the low end of the market to improve standards which will go some
way to ensuring that the private rented housing supply provides
a good quality standard of living and contributes positively to
sustainable communities.
8. THE PRIORITIES
AND EFFECTIVENESS
OF THE
HOUSING CORPORATION,
ENGLISH PARTNERSHIPS
AND THE
REGIONAL HOUSING
BOARDS IN
RESPONDING TO
HOUSING NEEDS
8.1 The Housing Corporation's strength
lies in the resident involvement agenda and promotion of RSL's
as social providers. However, the partnering approach can be exclusive
and the efficiencies in grant use are diverse across the North.
There is evidence that the rules under which the Housing Corporation
work clearly have an impact on how they respond to new and innovative
proposals. For example in Cumbria, there are areas such as Eden
and the South Lakes where the current cap on grant rates makes
it impossible to provide new affordable homes for local people.
8.2 English Partnerships draws strength
from its holistic, outcomes led approach to regeneration, using
new and bespoke delivery models to provide affordable housing
and wider regeneration.
8.3 The opportunity to bring together in
a new agency, the funding, land holdings, regeneration expertise
to support innovation and new models of delivery, with more balanced
approach to regulation, would provide a holistic response to housing
needs and wider goal of creating sustainable communities. We also
believe that investment and regulation should be co-located as
the ability to control investment gives "teeth" to the
regulators.
8.4 The regional housing boards have a key
role in agreeing regional priorities and effectively targeting
resources to those priorities. There is a need for the boards
to use a strong evidence base to set priorities, using sub-regional
housing market assessments as a foundation to prioritise spending.
The merger of housing and planning in the Regional Assemblies
should increase opportunities for lobbying on housing issues,
and strengthen the strategic decision making process of planning
and housing investment.
9. THE ROLE
AND EFFECTIVENESS
OF THE
PLANNING SYSTEM,
INCLUDING SECTION
106 AGREEMENTS IN
THE PROVISION
OF RENTED
HOUSING AND
SECURING MIXED
TENURE HOUSING
DEVELOPMENTS
9.1 The planning system, and in particular
the use of section 106, is vital to capture the economic value
of new developments for social housing provision and mixed tenure
developments. However, at present there are too many inconsistencies
in the effectiveness of the system, and the use of s106, to deliver
the homes that are needed. The current system places too much
emphasis on outputs and the number of homes required to tackle
the supply issue and satisfy demand, and not enough emphasis on
outcomes and the move towards a more holistic approach. A lack
of supply is not the general problem in the North, but rather
the need to create mixed and sustainable communities. This requires
a more holistic approach to planning looking at condition of properties,
desirable communities, sustainability of neighbourhoods, mix and
quality of estates, aspiration as well as need. These are the
issues which are more fundamental to the North's success in balanced
housing.
9.2 Section 106 is a more effective tool
where land values are high and there are examples in the North
where s106 is working well. For example Cheshire has taken a sub-regional
approach which has led to greater numbers of units being delivered
through s106 than through grant funding. By sharing examples of
good and bad practice, housing providers have tried to focus LA's
on the issues that RSL's and developers face in delivering new
units and this has begun to have a positive effect. Another very
positive outcome of joint working in Cheshire has been an ability
to respond quickly to opportunities for additional funding. Harrogate
makes use of model agreements and early engagement of the private
sector to maximise affordable housing provision on all development
sites which are suitable in terms of access to services. A key
to their success appears to be the early engagement of all partners,
where the local authority, the developer and the RSL sit around
the table gaining an understanding of local need and the factors
which will affect financial viability before a planning application
is made. A process which challenges developers clearly need not
be an obstacle as long as it is clear and negotiation occurs up
front.
9.3 However, the North in general provided
through s106 an average of only 38% of the total affordable completions
in 2004-05 and 36% in 2003-04. Land costs in the North East and
North West are some of the highest in the UK and where rented
schemes do not do not stack up financially and the local authority
can achieve a higher price from private developers for land without
a percentage of social housing, there is currently little incentive
for the LA to insist upon the s106 agreement. There are also examples
of local authorities obtaining maximum land value from developers
to meet alternative strategic objectives. We are keen to see local
authorities taking a more strategic, "best consideration"
approach to the sale of land and the delivery of affordable rented
housing based upon quality, housing need, and improved infrastructure.
9.3 Overall, we would welcome an approach
which creates a much clearer framework about how s 106 should
be used ie to create affordable homes to rent or buy for those
who cannot afford to buy at market level. The system must tackle
existing inefficiencies, create incentives for local authorities
to deliver, and create a fast track system that allows a quicker
reaction to changes in need and demand. In addition we would welcome
better use of the planning system to stimulate demand by driving
up standards, innovation in design, enhancing energy efficiency
and promoting sustainable methods of construction. Developing
innovative approaches to supply which can reduce delivery costs
and time would enable an increase in supply with existing resources.
10. THE EFFECTIVENESS
OF HOUSING
BENEFIT AS
A MEANS
OF PROVIDING
ACCESS TO
RENTED HOUSING
TO THOSE
IN NEED
10.1 Housing benefit does increase the ability
to access housing for those who would not otherwise be able to
afford rent. It provides security and confidence to housing providers
and lenders, and our members express concern that a withdrawal
of housing benefit would penalise landlords and increase homelessness.
10.2 But, does housing benefit provide value
for money and is there a moral argument to be made? The current
housing benefit system is costly and highly administrative, and
there are many unintended negative consequences. Housing benefit
creates a welfare dependant culture with clear disincentives to
work, it restricts choice, acts as a stigma and does nothing to
empower. Encouraging people out of benefit dependency would lead
to increasing wealth and increased opportunities to own.
10.3 Innovative schemes in the South show
that housing benefit funding can be used to build new homes to
meet local needs. The homes will be available for 10 years with
a percentage being sold off after that date—the number depending
on house price inflation, and the remaining homes having rents
reduced to an affordable level. This could provide an opportunity
in the North to increase supply without grant.
10.4 However, any alternative to the current
system would need to help create a consumer culture, increase
choice and drive up standards in the sector. Empowering people
to make their own choices and budget their resources. This would
need to be coupled with support for the vulnerable to navigate
the system and have a voice which will enable them to make more
informed choices.
11. THE IMPACT
OF THE
OPERATION OF
COUNCIL TAX
BENEFIT ON
THE AFFORDABILITY
OF RENTED
HOUSING
11.1 Council tax benefit impacts on affordability
for those who have accessed it. However, the operation of council
tax benefit means that there is limited impact on affordability
as take up is low and the system used to calculate entitlement
does not allow for a sliding scale of affordability, leaving many
on low incomes facing high council tax bills. This in turn is
creating disincentives to work. The DWP are aware that up to one
in four pensioners fail to apply, and three quarters of a billion
goes unclaimed by pensioners. Help the Aged argue that the problem
is large and growing. From this evidence we can argue that operationally
council tax benefit does not impact highly on affordability. Clearly,
the system is complex and people do not understand it.
11.2 Research by the New Policy Institute
in 2005 concluded that if council tax benefit was better presented
and administered and had higher levels of take up then it would
act to protect people on low incomes from bills they cannot afford
(The Impact of Council Tax on Older People's Income). If the current
system is to remain, we recommend that the Government introduce
targets on the take up of council tax benefit, review the income
thresholds and provide services to support people to make claims.
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