Memorandum by Milton Keynes Council (SRH
11)
1. BACKGROUND
TO MILTON
KEYNES
In 1999, the price of an average property in
Milton Keynes was 3.7 times the average earnings of someone working
in the authority. By 2003 this had risen to over 6.3 times the
average earnings. The relationship between local purchase prices
and local incomes is clearly important. In the first quarter of
1999 an average house in Milton Keynes sold for a price which
was 71.3% of the South East average—so housing in was much
cheaper than the regional average. At the same time an average
house in Milton Keynes sold for a price which was 115.6% of the
East Midlands average. By the first quarter of 2001 an average
house in Milton Keynes sold for 145% of the price of an average
house in the East Midlands, but by the first quarter of 2006 this
had fallen back to 116.5%. Meanwhile, the average house price
in Milton Keynes is now 76.6% of the South East average. Therefore,
the average house in Milton Keynes is still much less expensive
than in the rest of the South East of England, but is more expensive
than in the neighbouring East Midlands area.
In the second quarter of 2000, 50% of all completed
property sales were priced at less than £80,000. This figure
was below 10% of all sales in 2005. £80,000 is a key price
band because it is around the maximum mortgage which is likely
to be available to single first time buyers from key worker groups
such as teachers, nurses and police officers. Affordability for
this group of workers has declined sharply. Conversely, the number
of houses selling for over £150,000 has risen from around
15% of all completions to over 50% of the total. The stabilising
of house prices in 2005 is reflected in the number of properties
selling for under any particular price band also remaining stable.
However, the level at which prices have stabilised have left the
vast majority of properties in Milton Keynes beyond the reach
of many first time buyers.
In Milton Keynes the Draft Housing Needs Study
2006 (by Opinion Research Services Ltd—ORS) identifies a
need for 20,978 additional dwellings over the next five years.
The net requirement is attributable to an indigenous growth of
5,266 households (as more households form than dissolve) coupled
with a net gain of 15,713 households through migration. This equates
to annual requirement of around 4,200 new homes per year. By contrast,
the policy requirement for MK in the draft South East Plan is
15,000 dwellings over the period 2006-11 which will require building
new homes at the rate of 3,000 dwellings per year. A rate of 3,000
homes a year, whilst below the figure suggested in the ORS study,
is in itself a level rarely achieved in the heyday of the former
Milton Keynes Development Corporation and more than twice recent
completion rates—a considerable challenge. This has implications
for the extent to which the needs identified in the HNS can be
met—in a system that is largely dependent on the market,
the lower the completion figures, the less likely we are to meet
local housing needs.
The balance of housing requirements calculated
so far in the Draft Study is 13% social housing, 15% intermediate
housing (including sub-market/intermediate rented housing, shared
ownership etc) and 72% market housing. This balance is determined
on the basis of affordability, assuming that the relationship
between house prices and income remains constant.
The annual social rented element would equate
to around 545 new homes each year. These figures are still subject
to some discussion but it is clear that in Milton Keynes there
is a very pressing need for social rented housing.
The figures also show that significant amounts
of funding will be needed for other intermediate tenures. Whilst
there is a clear need to provide funding for social rented housing
intermediate housing should not be forgotten. Indeed funding for
this sector will contribute towards providing mixed and sustainable
communities. This issue is reflected in this submission.
2. COSTS OF
PROVIDING SOCIAL
RENTED HOUSING
AND RESOURCES
The amount of Social Housing Grant needed can
be calculated by multiplying the 545 new social rented homes by
the average Social Housing Grant per Unit figure (Social rent,
2006-08 National Affordable Housing Programme). The average for
the Programme in Milton Keynes was £42,000 per unit. So the
annual cost for providing the social rented housing that the Draft
Housing Needs Study is showing would be 545 x £42,000 = £22
million. There would need to be a significant shift in the level
of public funding to the South East Region in order to bring this
about. A word of caution needs to be added here. This figure is
taken from a Draft Report which is still the subject of much discussion.
It, could, if anything, increase—the figure of £22
million based on 545 new social rented homes per year should therefore
be seen as a minimum figure.
The National Affordable Housing Programme could
be more focused in its approach to the Growth Areas. Whilst it
is accepted that this would have to be at the expense of other
areas in the Region, most other areas do not have Growth Area
status and arguably Growth Area status should bring about a higher
level of funding than we are currently experiencing.
The Council could also provide more funds if
the Government changed the rules around capital receipts pooling.
In addition, there is a clear case for allowing the Council to
use all of the capital receipts that it receives in respect of
assets built by the former Development Corporation (instead of
being obliged to repay them to the Government as currently required).
There needs to be more encouragement local authorities
to build its own homes where it wants to and where it is able
to. If a local authority wants more council housing then it should
not be discouraged as currently simply because it runs contrary
to a Government policy decision. In our view Government advice
has been too focused on how local authorities should be disposing
of stock, whether it is permanently (by stock transfer) or by
shorter-term arrangements (such as Arms Length Management or the
Private Finance Initiative). Such proposals are one-sided and
are mistrusted by many local communities. It also removes housing
from democratic public control and places it in the hands of "not
for profit" organisations that make "surpluses"
(a difference which can be hard to disentangle).
The usual argument that the Government traditionally
uses against allowing local authorities building their own homes
generally centre on "value for money". The introduction
of the Housing Act 1988 gave housing associations the onus to
raise most of the money its needs form the money markets rather
than from Government subsidy. Successive Governments were then
able to say that the resulting capital costs represented better
value for money (as typically it only had to find 50% of the capital
costs of a scheme as opposed to 100% for a council housing scheme).
This issue could be resolved by simply allowing local authorities
the same freedom as Registered Social Landlords to bid for the
public funds that they need from the Housing Corporation. However,
behind this is a further argument that successive Government's
have used which ultimately come down to one economic argument—that
this would raise the Public Sector Borrowing Requirement (PSBR)
which is seen as "a bad thing" (traditionally because
of its alleged effects upon inflation). This problem in turn could
be solved if the Government were to move towards the Central Government
Financial Deficit model of accounting which we understand is more
normal in Europe and which has the effect of treating borrowing
for capital investment differently.
However, it would be wrong for the Inquiry to
simply focus on housing numbers and/or the associated capital
costs. Any increase in housing numbers will need an increase in
funding for physical infrastructure and community/social infrastructure.
An example of the type of community/social infrastructure needed
is the Supporting People Budget. This aims to meet the support
needs of the most disadvantaged in our society and enable them
to take their place in the community. Yet since the inception
of Supporting People the budget nationally has been continually
cut. This has been the case in Milton Keynes and it is hard to
reconcile this with our Growth Area status.
A further issue that the Inquiry needs to consider
is that of quality and in particular, in space standards. We believe
that there needs to be a nationally minimum space standard for
rented housing in the first instance. There is also a case for
a more acceptable standard for the private sector.
In Section 1 of this submission the point was
made that the funding and delivery of intermediate tenures should
not be forgotten. Such tenures make a contribution towards meeting
housing need and providing mixed and balanced communities (as
no-one wants to return to single-tenure estates as was the norm
in the days of the former Development Corporation). In other words
there is a case for making public funding available for meeting
identified local housing needs irrespective of tenure (rather
than the current system whereby the Housing Corporation has to
"earmark" a certain amount of its funding for social
rent and a certain amount for shared ownership).
3. VIEWS OF
THE MILTON
KEYNES LOCAL
HOUSING STRATEGIC
PARTNERSHIP
In Milton Keynes the Local Strategic Partnership
has set up a number of sub-groups looking at key strategic topics.
Housing is covered by a Local Housing Strategic Partnership which
consists of key stakeholders (for example Parish Council's, Shelter,
the local REC, Registered Social Landlords, Milton Keynes Partnership).
The Council recently consulted this group about the Select Committee's
Inquiry. Consequently its views form the basis of the Council's
submission to the Inquiry.
The views can be summarised under the following
topic headings:
— The role of the Private Sector
and Private Sector Landlords.
— The Importance of Quality.
— The Balance between meeting
Local Needs as opposed to a Regional/Sub Regional Need.
— The Need to Improve the fabric
of the Existing Stock and the Quality of Life of Residents.
— More Social Rented Housing is
clearly needed.
4. THE ROLE
OF THE
PRIVATE SECTOR
AND PRIVATE
SECTOR LANDLORDS
In our view the reliance on, and the de-regulation
of the private sector is a cause for concern. For example, the
use of assured shorthold tenancies may well have encouraged more
landlords to come into the market as it makes it easier for landlords
to regain possession (in comparison to a council tenant holding
a secure tenancy). However, this does leave residents living at
the whim of a private sector landlord. Such landlords are always
free to sell with very little notice which makes for a lack of
security for residents. Private landlords often appear to be individuals
who have little or no training or expertise in the complex business
of managing/letting properties. Perhaps one way to resolve this
perception would be for local economic development agencies to
assist landlords with business planning.
Whilst the private rented sector can be useful
(for example in providing short-term accommodation) it does have
a number of other problems. Monthly rentals are considerably more
expensive than the social rented sector. The Draft Milton Keynes
Housing Needs Study 2006 shows that existing rents in the social
sector tend to be around the target rent set by the Housing Corporation.
Even the cheapest properties in the private sector typically cost
double this amount. A further problem is the practice across the
sector of charging rent in advance as well as a deposit.
A further barrier is the Housing Benefit regime.
Ironically the only people who can afford to live in the private
rented sector are those who are financially better off, and those
who are solely reliant upon Housing Benefit to pay the rent. This
in turn creates a poverty trap and the proposed Housing Allowance
does not provide a solution to this conundrum. This has clear
implications for delivering sustainable communities and for equalities.
In our opinion these problems could be resolved.
The Government could make any future encouragement for the private
sector dependent upon a set of national standards to ensure competence
and professionalism in management. There could/should also be
requirement that all landlords should enter into a binding Area
Agreement to ensure common standards of high-quality management
irrespective of tenure.
5. THE EQUALITIES
GAP
The Partnership is concerned at the increasing
residualisation of social rented housing. & the corresponding
effect on creating mixed tenure/communities. There is a widening
inequality gap. In Milton Keynes for example, one estate which
comprises mainly social rented housing has a lower level of life-expectancy.
Social rented housing appears increasingly to be identified with
those in the worst social/economic circumstances. The Government's
continued emphasis on home ownership options serves only to devalue
rental housing as a tenure and reinforces the feeling that social
rented housing is only for those people in society who can't attain
or aspire to how ownership. Indeed, some of the options being
encouraged (such as shared ownership) are increasingly becoming
unaffordable in Milton Keynes. For some particular groups such
as families with large numbers of children, the price of a four
or five bedroom property is simply unobtainable. Some government
schemes, e.g. Homebuy appear to accept and perpetuate high cost
housing solutions i.e. through giving people interest free equity
loans for up to £50K. Also, the potential downside of pushing
home ownership with regards to the effect on labour market mobility
is not recognised.
Situations can also arise where "Buy to
let" investors are offered or can negotiate preferential
terms. This displaces, out-prices and of course upsets prices
those who might otherwise be in a position to buy. This happened
on a development in Milton Keynes in the Netherfield area fairly
recently.
Again, these problems can be solved. The Government
could stop emphasising how the private sector in general and how
home ownership in particular is the state to which all should
aspire. Over time, right to buy can undermine a mixed tenure approach
to new development. The language used to describe social rented
housing needs to change—perhaps the phrase rental housing
should be used instead?
6. THE PLANNING
SYSTEM
Even if the Inquiry was to conclude that more
social rented housing is needed, how would it be delivered? A
view expressed at the LHSP by planning colleagues is that there
is an over-reliance on the planning system to provide social rented
housing. In practice virtually all house building is carried out
by private sector house builders. The Council is not encouraged
by the Government to directly provide its own housing (even on
its own land). Even housing association/registered social landlord
properties are built by the private sector (usually as part of
a larger development owned by a house builder or by the private
sector as a building contractor).
Many Local Planning Authorities (LPAs) have
to work in the dark with regards to knowledge of the amount of
Housing Corp money that will be available to assist in their areas,
both in the short and long term. The viability of social rented
housing on most sites and even the development viability of a
site can be extremely dependent on grant. The Housing Corporation
in my experience is an organisation that gives the message that
it is committed to working with local authorities to deliver affordable
housing but of course it has to meet government priorities, rather
than local ones.
The planning system must be flexible enough
to respond to changing priorities. This can be difficult where
outline consents for major developments fix tenure splits at the
outset. A developer will not agree to something that they can't
cost. One way round this would be through the developer making
available free land, with the Housing Corp/RSL making up the extra
cost for more grant hungry tenures. However, to some extent the
government has defeated itself in terms of reducing affordable
housing costs through guidance such as Circular 6/98 and the move
to reducing the role of local preferred partner RSLs. This has
meant that attempts by local authorities to reduce RSL costs through
planning obligations (such as free land for local partners supported
through ADP, or local partners agreeing not to pay more than £x
for a site) have been undermined by outside cash rich RSL competitors
bidding for land and subsequently bidding up the price payable
to the landowner (which in turn has to feed through to higher
housing costs to the subsequent occupants).
The physical delivery of housing is in the hands
of private house-builders, not local authorities. House builders
are in an extremely powerful position and this has to be a matter
for some concern. Whilst there is no denying that the private
sector has resources and expertise that isn't largely enjoyed
by the public sector, there is a major democratic deficit. Private
house builders are primarily in business to make profits for their
respective shareholders—they are not in business to meet
the social and economic well-being of the communities in which
they want to build. Consequently house builders resist delivering
affordable housing (especially social rented housing) because
of the effects on their land values.
House-builders often point to the planning system
(and by default) local authorities as the problem or obstacle
to housing delivery. However, to deliver the social rented housing
that is needed, the planning system should if anything be strengthened
in the favour of local authorities. Put simply, the Planning system
should be strengthened in favour of the Plan, not profits. The
Government can achieve this in a number of ways such as:
— Giving greater clarity on how
to do housing needs assessments;
— More support for tenure—specific
housing policies in planning documents;
— Ensuring that Planning Delivery
Grant is made available to both "reward" those local
authorities that are doing its best to meet housing delivery targets
(such as Milton Keynes). Conversely this can (and should) also
be used to improve performance elsewhere in those authorities
that does not enjoy the level of planning expertise that Milton
Keynes enjoys. It can also be used to ensure that planning systems
remain professional and flexible enough to respond to changing
priorities;
— Finalise its intentions concerning
the "planning gain supplement", tariff approach to S106;
and
— Making the Sustainable Code
mandatory for the private sector as well as the public sector.
7. IMPORTANCE
OF QUALITY:
IMPROVING/USING
THE EXISTING
HOUSING STOCK
AND THE
EXISTING COMMUNITY
There could well be a case for considering better
use of the existing housing stock as a way of increasing the supply
of social rented housing. This could work in a number of different
ways. A return to a Government-funded Cash Incentive Scheme would
be an effective and value for money way of encouraging local authorities
to set up schemes that in turn enable more people to move from
existing unsuitable accommodation to better accommodation elsewhere.
Whilst an increase in Disabled Facilities Grants/Aids and Adaptations
could (and would) have an impact it would not in itself solve
everyone's problem. An incentive to move to vacant, more suitable
stock elsewhere could help people who are faced with having to
make these choices. This in turn links to the point made earlier
about the Sustainable Code only applying to the public sector.
A further point is that there seems to be a case for minimum space
standards for all housing. This is because the response by some
house builders to rising prices has been to make their Markey
housing cheaper by providing very small units (eg Redrow Debut/D
Wilson Homes IPad) Ironically, if this continues, the private
sector will have lower space standards than RSL units on a site
that comply with the Housing Corporation's Scheme Development
Standards.
There should similarly be more incentives for
local authorities to improve its own stock and stock in the private
sector. A key incentive would be to release local authorities
from the vagaries of the Housing Revenue Account Subsidy System.
The rules effectively mean that many authorities have to repay
large sums to the Government each year. Nationally this is around
£1.3-£1.5 billion. In Milton Keynes we had to repay
£6 million in the 2005-06 year and are facing the prospect
of these repayments rising by around £1-£1.5 million
each year. These resources could be better used locally for example
by meeting an enhanced Decent Homes Standard or by refurbishing/improving
unpopular, difficult to let sheltered housing schemes. The freedoms
discussed earlier (around freeing the Council from capital receipts
pooling and "claw-back" of receipts from sales of former
Development Corporation assets), could release more funds that
could usefully be spent on meeting the Decent Homes standard in
the private sector.
In some areas of Milton Keynes HMOs are starting
to become the norm rather than the exception. Local communities
feel strongly that there should be stricter provisions to prevent
the proliferation of HMOs in any given area in order to maintain
its character. There is a real Issue of how private rental housing
in general is increasingly viewed by some members of our community
because of the impact that it can have in potentially undermining
"sustainable communities", (ie town centre schemes-apartments
with a preponderance of buy to let—relatively high turnover
of people with a perceived lack of interest/care in their neighbours/surroundings).
This is happening more in suburban new builds, where more HMOs
are appearing in response to a lack of affordable housing and
arguably it has the potential to be a major contributor to changes
in a local community's fortunes.
Whilst we are aware that the Housing Act 2004
allows Local Housing Authorities to put in place Selective Licensing
Schemes to deal with the effects of this, we feel that there should
be powers for a Local Housing Authority to prevent such a situation
arising in the first instance.
Mention has to be made of the Right to Buy.
It simply does not make sense that a scarce and valuable public
asset is simply disposed of, at a discount, to an existing tenant.
Ending the Right to Buy will straight-away stem the flow of affordable
homes that pass into private ownership (and often in turn into
the "buy to let" or HMO sector). Allowing local authorities
to build and replace the homes that they have lost through "right
to buy" should be encouraged for the reasons discussed earlier
in this submission.
8. THE DEMOCRATIC
DEFICIT: BALANCING
GOVERNMENT/REGIONAL/LOCAL
NEEDS
The number of Government Agencies/Quangos involved
in the planning and delivery of housing does lead to a democratic
deficit. Local people struggle to understand exactly who is responsible
for providing strategic services in Milton Keynes. Local people
vote for the local authority, yet many decisions around funding,
planning etc are taken by Government//Regional Agencies (which
local people did not vote for). This serves only to create a democratic
deficit.
In Milton Keynes for example there are a number
of agencies focusing on delivering the national agenda in our
locality. Some examples are:
— Milton Keynes Partnership (a
sub-committee of English Partnerships responsible for delivering
the Growth Area);
— English Partnerships (the National
Regeneration agency for England; owns significant land holdings
inherited from the former Development Corporation;
— The Housing Corporation (government
agency that regulates Registered Social Landlords);
— South East England Regional
Assembly (responsible for regional planning);
— Government Office for the South
East (representative of Government Agencies/Departments in the
South East); and
— Regional Housing Board (although
recently transferred to the South East Regional Assembly.
Each of these Agencies has significant powers,
responsibilities, targets, funding streams, and purposes. They
do not always accord with the objectives set out in the Council's
Housing Strategy (or even with each other's policies). There are
some excellent examples in Milton Keynes of joint working (such
as the Joint Housing Delivery Team with English Partnerships,
GOSE, Housing Corporation). However, co-ordinating all the different
Government Agencies/Quangos data and activities in Milton Keynes
is not easy but is essential.
One simple way to address this would be to reduce
the number of Agencies active in Milton Keynes and the recent
transfer of the Regional Housing Board to the South East England
Regional Assembly was a step in the right direction. Obviously
we will be watching the review of English Partnerships and the
Housing Corporation with interest but we still feel that more
could be done to rationalise the different levels of Government
bureaucracy. As well as addressing the democratic deficit it should
also make co-ordination easier.
A further way to redress the democratic deficit
could be to give parish councils the right and the resources to
provide affordable housing in its Parish. Parish Council's currently
have express powers to acquire land but not the power to provide
or manage such accommodation themselves—these powers are
reserved for local housing authorities. However, Parish Council's
often do not have the resources to provide or manage the accommodation.
A Government initiative to encourage and fund the provision of
housing through parish councils in agreement with the local housing
authority, perhaps through a Local Area Agreement could be a significant
way to increase the supply of affordable housing.
A key issue that the Inquiry needs to consider
is for whom is the social rented housing intended? The experience
of Milton Keynes as a New Town has shown all too clearly the dangers
of developing lots of social rented housing and then "encouraging"
people from other areas to uproot to the area. Whilst it can be
mitigated to some degree this can only happen if there is investment
in social/community infrastructure (as was the case with the former
Development Corporation which employed a range of community development/arrivals
workers). The South East Plan makes it clear that the Growth regional
Growth Areas and development on other major greenfield sites will
provide significant opportunities to deliver new affordable housing.
However, development in these areas will not solve all the region's
affordable housing shortages and therefore the general principle
will be that affordable housing needs, particularly needs for
social rented housing, should be met where they arise. In our
view this is eminently sensible and we whole-heartedly support
this. Again, our experience as a New Town shows that local needs
should (and must) be met first failing which local people will
not support any increase in the amount of housing being provided.
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