Memorandum from the Riverside Group (TRG)
(SRH 19)
1. EXECUTIVE
SUMMARY
1.1 We support the National Housing Federation's
call for 104,000 new affordable homes per year. Our experience
is that affordability remains a key issue particularly as house
prices in many areas are rising faster than inflation. The costs
of development in the North West are disproportionately high and
we argue that the Government must take into account the economics
of delivery in different parts of the country.
1.2 Government should amend tax regulations
to incentivise the improved provision of affordable homes through
cross subsidy deals where it can be demonstrated that proceeds
are being utilised for the provision (or re- investment in) affordable
housing.
1.3 We are concerned that the efforts to
maximise supply, evidenced by the development of the new Open
Market Homebuy product, will actually reduce the range of affordable
home ownership available to those on the lower end of the income
spectrum. Traditionally, we have been able to assist people on
the margins of owner occupation (eg owners moving out of clearance
areas) with shared ownership products; the new Open Market Homebuy
may not be available to such groups. There is also a sense that
some Low Cost Home Ownership (LCHO) schemes may encourage people
to purchase beyond a level they can afford which, in turn, can
create homelessness and work against sustainable communities.
1.4 There is a need to mainstream housing
renewal processes rather than to adopt a short to middle term
approach. We are calling for a shoring up of the commitment to
the Housing Market Renewal (HMR) programme. It is dangerous to
assume that the worst of the problems of obsolete housing and
disrepair have been resolved. The Riverside Group (TRG) is tracking
improvement in areas across a range of sustainability indicators
and our findings are that a hardcore of neighbourhoods in HMRI
(Housing Market Renewal Initiative) areas (principally Merseyside)
are not showing significant signs of improvement. We are concerned
that what was once a holistic strategy based on the Pathfinders
is now being eroded and that government must ensure there is no
loss of nerve, particularly in areas where demolition is the only
sustainable option.
1.5 Our view is that local authorities are
now most effective as strategic enablers rather than core housing
providers, and this sits well with current government thinking.
It is perhaps too late to turn the tide back in favour of local
authority provision, and the success of many stock transfers and
ALMOs suggests that alternative models may be the best way forward.
However, if local authorities are to have a role in provision
we suggest the following tests:
— The ability to lever in private funding
to keep grant levels commensurate with the Registered Social Landlord
(RSL) sector.
— Capacity to achieve value for money
and ultimately deliver more outputs for less money.
1.6 We argue that RSLs offer the best and
most effective model, evidenced not least by the success of the
Housing Corporation and individual RSLs in levering-in private
finance over the last decade.
1.7 Our comments on other housing solutions
are:
— Housing co-operatives can provide
an effective solution and the benefits they offer in terms of
empowerment and sustainability are not always easy to measure.
However, they will always be a niche solution rather than a large-scale
model.
— ALMOs have enjoyed some success in
terms of performance but do not offer the flexibility associated
with the RSL model.
— Our experience of PFI contracts is
that, although the end product may be worthwhile, they are expensive,
bureaucratic and fraught with delay.
1.8 Given our group structure and geographical
spread it is difficult to give a unified view of the private sector.
The quality of the accommodation provided and the motivation of
the landlords varies from good to extremely poor. We believe the
private sector should be subject to more regulation in terms of
stock condition and quality of tenancy management (including taking
more responsibility for anti social behaviour). Private landlords
should be subject to the same sort of standards as social landlords
including Decent Homes targets.
1.9 We are concerned that the more affluent
parts of the private sector on Merseyside may not be sustainable
due to market saturation. The poor quality provision in areas
such as Kensington tends to be offered to some of the most marginalised
groups in society because much social housing is being absorbed
by the demands of the clearance programme.
1.10 The Housing Corporation has been extremely
successful as a vehicle for regeneration, always spends to target
and has been successful in levering-in private finance. English
Partnerships' focus on new/affordable housing is important but
should not lead us to overlook stock condition and customer service.
1.11 If there is an imperative for change
we believe that housing strategy and direct investment could productively
be combined in one agency which has the same boundaries as those
for economic development. We also believe that investment and
regulation should be co-located, as the ability to control investment
gives "teeth" to the regulators.
1.12 We argue that DCLG should undertake
a comprehensive review of the way local authorities utilise S
106 agreements: identifying best practice and setting targets
where feasible. Local authorities should involve social housing
providers in the early stages of negotiation. Recent Audit Commission
guidance to Local Authorities should assist with processes but
there needs to be more focus on outcomes. We are also convinced
that there would be much to be gained from sharing good practice.
1.13 The present regime dictates that S
106 agreements are only effectively used in areas where high site
values and a strong market prevail.
1.14 Housing benefit is a vital element
in the welfare benefits system. It supports access and helps to
safeguard social landlords' income stream. We would resist strongly
any attempts to remove the ability for landlords to receive direct
payments or for housing benefit to be withdrawn as a sanction
for tenancy misconduct. Both options would penalise the landlord
and generate more homelessness.
2. INTRODUCTION—THE
RIVERSIDE GROUP
2.1 The Riverside Group (TRG) is the third
largest social housing and regeneration organisation in England,
owning or managing around 40,000 houses from the far north of
England to the Midlands, It employs more than 1,100 people and
has a turnover of more than £126 million. It is the parent
body for seven housing associations, including the former Newcastle
and Whitley Housing Trust, which joined the Group as Riverside
North East in April 2006.
2.2 We have been engaged in sustainable
regeneration and renting homes for a social purpose for 78 years.
Our commitment to neighbourhoods can be seen in the millions of
pounds we invest in community projects each year, and in the hundreds
of new homes we build annually for shared ownership, rent and
outright sale. We aim to be the partner of choice for major regeneration
projects.
2.3 TRG welcomes the opportunity to respond
to the inquiry. We have summarised our comments in relation to
each of the ten points in the terms of reference, limiting our
response to issues where we feel we have first hand knowledge
or experience.
3. THE LEVEL
OF PUBLIC
FUNDING REQUIRED
TO MEET
SOCIAL HOUSING
NEEDS
Global amount of public subsidy
3.1 We support the National Housing Federation
view that there is a national demand for 104,000 new affordable
homes per year for the next 20 years. This is of course consistent
with the findings of the Barker report, which identified long
term structural weaknesses in housing supply and rising demand
for housing coupled with increasing lack of affordability. Our
own experience on the ground is that affordability and the ability
to raise a mortgage are significant issues for a large number
of people on lower incomes. Therefore some subsidy has to be provided,
whether capital or revenue or a combination, as at present. We
believe that the current overall level of subsidy does not meet
the requirements that are evident across a whole range of needs
and including subsidies on the support side too. We know that
house prices (and by inference, market rents) are rising faster
than inflation and incomes (especially at the lower end of the
scale) and therefore the ability of people to afford what the
market can offer is going to deteriorate. This strongly implies
that the need for public funding into housing will continue to
grow.
3.2 Our own experience is that there is
still an overwhelming demand for rented accommodation evidenced
by the fact that we are currently receiving at least a thousand
calls per month from people who wish to register on our choice-based
letting system, adding to the 71,000 already registered. On average
we advertise fewer than a hundred properties (sometimes much less)
per month on our system which demonstrates the fundamental mismatch
between supply and demand. This relationship between supply and
demand is evidenced in the table below, which illustrates average
weekly activity on our choice-based lettings system based on a
six-month period (March to August 2006).
| Weekly average |
| Properties advertised | 14 |
| Bids made | 1,096 |
| New registrations | 253 |
| Average number of bids per property | 80
|
| Ratio of new applicants to properties advertised
| 18 |
Source: TRG statistics 2006
CASE STUDIES:
TRG CBL SYSTEM
The supply and demand scenario means that customers often
wait for a number of years before they are successful in gaining
a property. Here are some examples drawn from our own choice-based
lettings system.
— A 3-bedroom, modernised house, with gardens, in
a high demand area, was advertised in the ad-sheet cycle which
closed on 25 September 2006. 243 applicants made a bid for this
property, 10 of whom were priority cases. The earliest date of
registration on the list of bidders was 18 April 2001. This demonstrates
the level of interest which the property generated and the length
of time bidders may be waiting for properties.
— A one-bedroom, un-modernised flat in a medium
demand area, was advertised in the ad-sheet cycle ending on 18
September 2006. 71 applicants made a bid for this property; the
earliest date of registration on the list of bidders was 11 June
2001. This demonstrates that a medium demand property still generates
a healthy level of interest and the length of time applicants
may wait.
Source: Riverside CBL system 2006.
Scheme by scheme subsidy
3.3 We agree it is right for the Government to seek to
get more out of existing provision to help meet the need for social
housing, but feel strongly that this must not be reduced to a
"numbers game". If the wider objective of delivering
sustainable communities is to be achieved, it is important that
the Government takes account of the economics of delivery in different
areas of the country.
3.4 Developing RSLs are under severe criticism in the
North West for being too expensive in grant-per-unit terms for
the 2006-08 programmes. The North West is apparently the second
most expensive region, after London. The average North West SHG
Allocation for the 2006-08 programmes is £57.5k per unit
in grant. This is just over 50% of the Total Scheme Costs.
3.5 In the case of TRG, it has pitched its bid at break-even,
and so the grant required is a function of the build costs and
income (rent levels and sale values). The Housing Corporation
effectively determines rent levels and the areas we work in attract
some of the lowest rents in the country. Property values are also
relatively low in the areas receiving NAHP support.[33]
(For TRG in the North West 18 out of 21 projects receiving allocations
were within HMRI areas.)
3.6 Costs are high because almost all of the projects
require remediation, complex site assembly and "bespoke"
solutions to the challenges they present. Where RSLs are dealing
with developers selected by HMRI teams they are less able to influence
costs.
CASE STUDY—ORRELL
SCHOOL SEFTON,
LIVERPOOL
The complexities of delivering affordable housing in a HMRI
area are demonstrated by this case.
The site of Orrell School was referred to TRG when an alternative
new school was being developed, The site was agreed to be in a
good location for development for affordable housing for rent
to support the decanting of householders from the proposed area
of clearance within the Klondyke HMRI area. Work had been carried
out to arrive at a mix that would both suit the decant needs and
provide a sustainable small estate going forward.
The site ownership is not entirely with Sefton MBC. It owns
the majority of the site but the important corner that will provide
the "face" of the development is split between several
commercial owners. The corner is also heavily trafficked, and
in consultation with the Planning and HMRI teams, a non-residential
use for most of this area was felt most appropriate. This was
a convenient location for a new church building that is needed
in the area. Although the school site is available now and needs
to be developed quickly to provide re-housing, the commercial
interests have resisted selling and the premises form part of
the CPO related to the HMRI area. The Inquiry for this was held
in the summer of 2006, and (if it is successful) the purchase
is likely to be delayed until alternative premises can be provided
for some of the businesses. However, the land required for the
church and that covered by the commercial properties do not exactly
coincide, and so this delay will affect part of the housing site.
Achieving the best site layout is a complex task because
the site is closely defined by roads on each boundary, access
is limited because of the heavy traffic flows to two-sides, the
requirements of the Church and the residential area had to be
balanced, and CABE have been involved in offering comments. The
decant requirements have meant that on this relatively small site
(33 homes) there have to be four different house types, plus an
apartment block. Achieving agreement with the Local Authority
on the land value, the amount of open space to be provided, and
the commuted sums payable for off site works (road improvements,
other open space) has also been protracted.
The entire site is brownfield, and the school itself contains
asbestos. Whilst ground conditions in the area of the school site
are not anticipated to be problematic, those under the school
and commercial buildings will cause problems and one of the commercial
users (a taxi firm and car repairer) is anticipated to have caused
pollution of the ground that will need thorough investigation
and remediation. This cannot be finalised until access is gained
as part of the commercial purchases.
These issues described above have all had the effect of extending
the time taken to progress the development, reducing certainty,
and increasing costs.
Whilst each site is different, the general issues of site
size, varied mix, ownership and ground conditions affect most
of the sites within market renewal. This means that these sites
are more vulnerable to variations in cost and programme, and more
expensive to bring forward for development than more simple sites.
sites are more vulnerable to variations in cost and programme,
and more expensive to bring forward for development than more
simple sites.
3.7 The grant cost per unit of the TRG programme is also
influenced by the balance of the programme between tenures. Its
allocation has a low proportion of home ownership in the North
West, with only 55 (15%) out of the 357 properties funded being
Homebuy (compared to 116 (37%) out of 307 in Midlands).
3.8 In addition, TRG's North West programme does not
benefit from reduced land prices arising from s 106 agreements[34]—a
high proportion of Midlands projects (and those of others outside
the North West) benefit from these, hence lower "per unit"
scheme costs (for TRG, £38k in Midlands compared to the £57.5k
in the North West).
3.9 Therefore we believe that in particular areas such
as the North West, there are good reasons for the apparently high
costs of the affordable housing programme which does not mean
that it is "too" expensive. Rent levels are relatively
low when compared to other regions and incomes are still relatively
low in national terms. We are struggling to maintain the rented
element of Homebuy at a level that makes it worthwhile for purchasers
to buy a 50% share.
3.10 The tax system is acting as a disincentive to the
effective provision of affordable housing by the private sector.
If RSLs use their land assets to generate cross subsidy for the
provision of affordable housing, disposal proceeds (whether in
cash or kind) they are currently subject to Corporation tax at
30%. For example, TRG is facing a number of situations where it
is aiming to dispose of land to private developers (as part of
mixed tenure schemes), using the receipt to subsidise the provision
of new affordable homes or re-investment in existing stock. Tax
advice suggests that the receipt is subject to Corporation tax,
thus reducing the subsidy available and affordable housing outputs
achievable by 30%. Government should amend tax regulations to
incentivise the improved provision of affordable homes through
such cross subsidy deals where it can be demonstrated that proceeds
are being utilised for the provision (or re-investment in) affordable
housing.
4. THE RELATIVE
FUNDING PRIORITY
BEING GIVEN
TO SOCIAL
RENTED HOUSING
AS OPPOSED
TO SHARED
OWNERSHIP AND
OTHER FORMS
OF BELOW
MARKET HOUSING
4.1 TRG has always sought to minimise the reliance on
grant required and achieve a sustainable balance on estates by
mixing the tenures of new schemes. However, to ensure home ownership
options are truly affordable and are available to those households
on medium to lower incomes, subsidy in the form of grant or equity
loan may still need to be significant. The lower the level of
grant, the less support to the purchaser is available.
4.2 Different forms of affordable home ownership (with
different subsidy regimes) are required to provide a better balance
across the social housing sector. This would produce a range of
intervention levels with social rented receiving the heaviest
subsidy element, with the likes of Open Market HomeBuy at the
other end of the spectrum. Our concern is the concentration on
maximisation of supply (playing the numbers game) which has driven
the new Open Market HomeBuy product (and the shared equity task
force) will actually result in less of a range of affordable home
ownership products accessible to households on lower to middle
incomes. The net effect may be to force lower income households
to turn to social renting, when they could have afforded a more
affordable home ownership option.
Recent analysis of shared ownership sales completed by TRG
Home Ownership Division has demonstrated that our purchasers have
average incomes of £20-£25k. The availability of shared
ownership meant that these purchasers were able to obtain properties
with a market value of up to £120k. which would never be
affordable for outright purchase.
Source: Riverside Home Ownership statistics April 2004-April
2006.
4.3 Affordable Home Ownership schemes such as shared
ownership and shared ownership for the elderly have helped a diverse
range of households. The North West Regional Housing Board has
noted this and included this diversity of households in the target
groups they wish to support through HomeBuy products. However,
the effect of the proposed CML Open Market HomeBuy product will
effectively be to remove the ability for many in the target groups
from being able to access HomeBuy.
4.4 Our evidence suggests that the majority of shared
ownership purchasers opt to buy a 50% share. For example owners
moving out of clearance areas, elderly households wishing to move
to more appropriate accommodation, new households arising out
of relationship breakdown, or tenants that have been able to amass
significant savings are largely excluded from Open Market HomeBuy
by virtue of the requirement to raise a significant mortgage.
CASE STUDIES
Mrs D and MissG/Mr M are leaseholders who have purchased
50% equity in shared ownership flats. Although their circumstances
contrast neither would have been able to afford to buy an equivalent
property on the open market. Equally neither would have been able
to raise sufficient funds to purchase a 75% share under the Open
Market Homebuy scheme had it been available.
4.5 Again, these cases emphasise the need to maintain
a well-balanced and properly funded affordable home ownership
programme, or to develop Open Market HomeBuy (where savings, equity
and deposits can be used to reduce the size of the mortgage) to
assist particular groups such as those outlined above.
4.6 We are always mindful that we should not be encouraging
marginal home ownership and have tailored our approaches to low
cost home ownership accordingly, always ensuring that we check
affordability and do not encourage buyers to overreach their repayment
capacity.
5. THE GEOGRAPHICAL
DISTRIBUTION OF
SUBSIDIES FOR
AFFORDABLE HOUSING
5.1 Government has been keen to emphasis the role that
social housing can play in delivering sustainable communities
by providing decent homes and being accountable to local needs.
5.2 In doing this, we need to mainstream housing renewal
processes and rediscover the mechanisms to tackle obsolete housing
and housing in disrepair as a regular part of ongoing renewal
activities, rather than having the crisis intervention approach
of Pathfinders. This means long-term resources for market restructuring,
allowing authorities to tackle problem neighbourhoods in some
sort of sequence, rather than all at once. Some authorities may
need to re-learn lost skills and all authorities need to be encouraged
to undertake regular housing market assessments with partners
(many already do) and systematically identify areas of housing
which are likely to become obsolete, bringing forward renewal
proposals as part of "fit for purpose" housing strategies.
Failure to renew the worst of our Victorian and Edwardian housing
stock that is at the end of its useful life, is storing up a major
problem for future generations.
5.3 As part of this approach, we need firm commitment
to completing the Housing Market Renewal programmes which have
already commenced. Notwithstanding movement in housing markets
reflected in increasing house prices, we must not be deceived
into thinking that the problem of market restructuring is solving
itself through private investment. There is strong evidence to
suggest that in the worst neighbourhoods, the house price gap
is actually increasing. The most recent New Heartlands Housing
Markets Report (ECOTEC 2006) states "although prices have
risen across Merseyside, including within the NewHeartlands pathfinder
the differential between average prices within and outside the
pathfinder intervention area has grown wider as house prices have
increased". TRG's own systematic assessment of the 71 neighbourhoods
in which it is active, would suggest that whilst most neighbourhoods
are gradually improving across most indicators, a hardcore of
neighbourhoods are not showing significant signs of improvement
(Neighbourhood Investment Strategy 2006). All of these are in
HMRI areas, mostly within Merseyside.
We have first hand experience of the level of impact of speculative
investment on properties which would otherwise have no market
appeal. Here is a commentary from one of our directors working
in a pathfinder area.
"There are "SOLD" signs on retail and other
premises in Kensington where the property is gutted or burnt out
and in the middle of a terrace where all of the other unsold properties
are in the same condition. These signs of recent sales occur on
properties where the locally agreed and well-known strategic intention
is the clearance of the block in which the property stands.
I have received many letters from brokers or dealers who
"wish to invest" in Liverpool because they are aware
it is undergoing major regeneration—these have varied from
crude statements of intent to enjoy the investment gains available
to more subtle offers of "investment support" where
the offer is money which I can invest on their behalf because
they don't understand what business I am in and assume I would
want to share their investment gain through my local knowledge.
The Liverpool auctions last year were a celebration of speculation
where many purchasers were made over the telephone on behalf of
absentee buyers who had not seen the property upon which they
were bidding. This resulted in many derelict or run-down houses
or shops bought and left unoccupied or if ever occupied—then
not by the purchaser—more often by desperate private tenants
(asylum seekers etc)."
Source: Tom McGuire, Director of Community Seven (2006).
5.4 Further research published by ECOTEC in September
2006 also explains that whilst vacancy rates have fallen in some
areas like Manchester and Salford, they have remained "stubbornly
high" across the pathfinders. Brendan Nevin writes "this
illustrates the long term nature of the task being faced by the
housing market renewal partnerships as they attempt to diversify
the choice of accommodation across large urban areas and alter
the long term population trends that have led to depopulation".[35]
5.5 The Government must not lose sight of the "big
picture"—that is a number of cities have a huge oversupply
of obsolete industrial housing which is reaching the end of its
useful life, and that worse, these homes are concentrated in extensive
neighbourhoods which have obsolete infrastructure and facilities.
Looking at Merseyside, whilst there are good prospects for economic
and net household growth into the future, this will not be captured
in the core urban areas and will not fuel genuine and sustainable
urban renaissance, unless there is major public intervention to
reshape urban neighbourhoods beyond what is deliverable by the
private sector. In launching the Pathfinders, the Government originally
recognised the scale of this problem, however, the resources available,
combined with the rise in unit costs of acquisition and clearance,
has meant that Pathfinder programmes are becoming piecemeal (rather
than comprehensive) in approach. For example clearance proposals
in the NewHeartlands HMRI areas have been scaled back by around
one third after a three-year period (Scheme Update 2005). As a
consequence, there is a real danger that critical mass for transformational
regeneration will not be achieved, and this will have negative
consequences for communities where expectations have been raised,
and where considerable public monies have already been invested.
5.6 The Government took the bold step of launching the
Pathfinder process on the basis of high-level evidence, which
supported the argument about obsolescence, housing type and urban
structure—for example, the work undertaken by the Centre
for Urban and Regional Studies (CURS) on Merseyside and in other
Pathfinder areas. In the run-up to the Comprehensive Spending
Review (CSR) 2007 it is essential that Government steps back and
reviews this evidence at a macro level, drawing upon the recent
work of the original authors. Whilst progress has been made by
the Pathfinders, we believe that the limited scale of intervention
to date (in terms of outcomes) means that Government will find
that the root causes of the problem they were established to address,
by and large remain.
5.7 The Pathfinder programme needs to be seen as no less
than a "Cities Modernisation Programme", a key ingredient
in an attempt to develop more competitive City Regions. The Government
needs to do more to get across a public message about what is
at stake, and lead a sustained national media campaign to support
local media activities initiated by the Pathfinders and their
partners.
5.8 We acknowledge the need for Government to keep a
balanced investment programme between North and South. However,
although increasing supply in the South to keep pace with demand
is essential it should not be at the expense of allowing northern
urban areas to flounder and become uncompetitive.
6. THE FUTURE
ROLE FOR
LOCAL AUTHORITIES
AS BUILDERS
AND MANAGERS
OF SOCIAL
HOUSING
6.1 Traditionally, local authorities have been very effective
providers of housing but they are now constrained by their lack
of ring fenced funding to keep their stock in good condition or
develop new property to meet local needs.
6.2 Whilst we are not opposed in principle to the involvement
of ALMOs or high performing LAs in the direct provision of social
housing, there need to be two tests applied:
— The most efficient provision of affordable housing
will always involve maximising private sector investment. The
principal must be established that any involvement of ALMOs/LAs
in direct provision must also be capable of levering in private
funding, in addition to unlocking the latent value in owned assets.
The Government must not accept higher levels of subsidy per unit,
in the interests of diversifying provision away from RSLs.
— The Housing Corporation has successfully reformed
RSL development by a dramatic reduction in the number of developing
RSLs, through encouraging the establishment of cost effective
delivery partnerships benefiting from economies of scale of supply
chain management, modern methods of construction and so on. By
channelling SHG through a small number of skilled partnerships
the Corporation has established a balance between competition
and scale of delivery. There is also a well-documented skills
shortage in the sector. It follows that the introduction of new
developers into the provision of social housing must be well thought
through, and consistent with aims of achieving value for money
and ultimately delivering more outputs for less money.
6.3 However, Government policy sees local authorities
as strategic enablers rather than simply builders and managers
of housing, a view which was endorsed in Ruth Kelly's acceptance
speech when she became Secretary of State. [36]It
may be that in embracing this role local authorities will be better
placed to address the critical issues, such as stock condition
in the owner-occupied and private rented sector and community
cohesion.
7. THE EFFECTIVENESS
OF DIFFERENT
SOCIAL HOUSING
MODELS INCLUDING
TRADITIONAL LOCAL
AUTHORITY HOUSING,
ALMOS, HOUSING
CO -OPERATIVES
AND HOUSING ASSOCIATIONS
7.1 Our view is that RSLs have a unique position in the
sector and offer the most flexible and cost effective model for
the delivery of social housing.
7.2 RSLs have been hugely successful in levering in private
finance. Since 1997 the amount of private loan funding TRG has
raised has multiplied dramatically from £65 million in 1997
to £211 million in 2006. They have tackled neighbourhood
issues in a unique manner and in a way which has impacted on health,
employment, and community facilities as well as housing provision.
In many cases we are holding neighbourhoods together and this
position is affirmed in Renewing the Housing Market of Liverpool's
Inner Core[37] which
states that "the commitment of RSLS to these neighbourhoods
has prevented a complete market collapse".
7.3 Housing Co-operatives, at their best, can empower
people through the provision of housing in a way that, whilst
difficult to measure by normal "efficiency" tools, can
fundamentally alter their life-chances in a way that cannot be
measured for "efficiency". Likewise, the benefits for
people living with a good Co-op in terms of neighbourhood sustainability
are very difficult to measure in terms of efficiency. On balance
however, their contribution is likely to be marginal in the wider
housing context.
7.4 LSVTs can be a very effective model for improving
the standard of existing social housing and, in the longer term,
moving into new provision. Some of the most effective RSLs were
formed because of LSVTs. However, as with all other RSL "types"
it does not follow that because an RSL is from an LSVT background,
it will necessarily be efficient.
7.5 Even within the "traditional" RSL sector,
there is a huge range of types and performances. Most of the larger
regional and national RSLs have adopted some form of Group Structure,
to deal with their particular business needs. The HC has been
effective in reducing the amount of developing RSLs by partnering,
although there is still room for improvement in the management
of the partnering programme. Larger RSLs covering numerous regions
may sometimes have efficiency challenges due to the spread of
their work but if they are well managed they can use their size
to deliver efficient central services to a range of locally based
"hubs" which provide customer focused effective local
services. Some associations are addressing the efficiency agenda
by forming consortia to deliver elements of work (eg Fusion 21
in Merseyside) and this is likely to spread with the National
Framework for procurement. Associations also have access to more
general "buying clubs" such as Procurement for Housing.
CASE STUDY
TRG is a member of Fusion 21 is a radical construction partnership
set up by a group of Merseyside RSLs which has initiated a seven-year
programme for a £225 million upgrade of homes across Merseyside.
The programme has re-engineered the traditional construction supply
chain allowing Fusion 21 to manage the cost of both materials
and installation using sophisticated sourcing procurement and
strategic cost management techniques. Savings from Fusions approach
mean that partners get "more for less".
For example a window replacement programme originally designed
for just 79 properties was able to add an additional 12 homes.
In 2006 the partnership anticipated efficiency gains of 1.6 million
(21%) for TRG. The gap between Fusion process and the market is
increasing for many aspects of its work. For example the cost
per unit of window and door replacement in Fusion 21 properties
is around 40% less than Building Cost Index Service inflated cost
from the base date.
Source: Housing Corporation Gold Award Submission 2006
and TRG statistics (2006).
7.6 Attempts to measure efficiency and compare across
the sector are notoriously difficult—the Operating Efficiency
Index and the proposed Grant Index being examples where the publication
of simple data without context is at best unhelpful and at worst
presents a misleading picture that could have serious and inappropriate
effects on the reputation of individual RSLs.
7.7 ALMOs are able to invest, but are tied, at least
in their early years, to specific geographic locations. The stock
they manage is constrained by the ultimate ownership and their
funding arrangements tend to be less flexible than ownership RSLs.
They have proved to be an effective shorter-term measure and have
proved successful in raising the game of social housing providers
by demonstrating capacity for improved performance and customer
satisfaction. Audit Commission inspections have confirmed the
ability of the ALMO model to deliver savings along with improved
service however, it is not necessarily a one way route to success
as evidenced by recent reports of the first rating reduction for
an ALMO from two to one stars.
7.8 PFIs are a relatively new phenomenon. Non-HRA (Housing
Revenue Account) PFIs tend to be on a relatively small scale and
have been effective in delivering individual projects. This model
may be of use in the future where particular needs are identified
and can be discretely delivered. HRA PFIs are much more complex
to set up and although it would appear that they may be able to
deliver in a more streamlined way than some Local Authorities,
the cost of set-up by the contractor and the Local Authority is
substantial and will partly outweigh the savings on delivery.
It is probably too soon to tell clearly whether HRA PFIs will
be more cost effective in overall terms in the long run.
7.9 TRG has been successful in securing two PFI contracts,
RAF Cosford (MOD scheme—146 units) in 2000 and Sandwell
(HRA scheme—1,300 units) in 2006. Whilst we are confident
we can deliver our social housing objectives within these regimes
our experience has been that the lead in processes are resource
intensive, expensive, and fraught with delay. For example set-up
costs for the Sandwell PFI have amounted to some £4.5 million.
These costs are a function of the bureaucracy rather than any
lack of efficiency on the part of the parties to the contract.
Furthermore in our experience they are unduly lucrative for the
consultants who specialise in advising on their complexities.
8. THE ROLE
AND EFFECTIVENESS
OF PRIVATE
RENTED HOUSING
IN MEETING
HOUSING NEEDS
8.1 Our experience of private rented housing is indirect
and makes us hesitate to generalise. There has been a proliferation
in Liverpool, of higher end private renting, largely in the city
centre, where large numbers of new build apartments have been
constructed. Many of these have been purchased as investment opportunities
by absentee investors and remain unoccupied whilst others are
let through local management agencies. Their condition is likely
to be good and their rents typically high. However, management
arrangements vary from intensive on-site management to casual
arrangements via individual owners undertaking management and
maintenance responsibilities. It is too early to assess the impact
of these arrangements on stock condition and turnover of tenants
due to the relative youth of this new build sector.
8.2 However, there is some evidence that a "saturated"
city centre market is forcing a reduction in rents thus making
these apartments more accessible to potential renters from outside
the city centre. This in turn produces a higher number of vacancies
outside of the city centre in inner urban areas, where increased
costs associated with increased turnover and interrupted occupation
might impact upon private landlords' inclination to repair and
maintain.
8.3 There are significant numbers of units of private
rented stock in outer urban areas where the quality of the stock
is good, the location desirable and turnover low. However, the
appearance of much of the private rented stock in the inner urban
areas bordering the city centre suggests it is poorly maintained
and badly managed and located in neighbourhoods, which are run
down high turnover areas with high levels of vandalism, environmental
blight and anti social behaviour. Would-be landlords find that
the only way to make a return is by buying a low value property
and delivering services to poor standards. There is a very low
take up by private landlords of voluntary registration with City
council landlord accreditation schemes. The capacity of city councils
to drive landlords into these schemes is affected by limited resources
within environmental health teams which would be required to apply
enforcement actions.
8.4 We have some experience of private renting in the
inner core of Liverpool. In the Kensington area, which is a New
Deal for Communities area, private renting comprises 20% of all
tenure with owner occupation 40% and social renting 40%. In this
community the BME constituency has increased exponentially over
the last decade from 4% to an estimated 20% of population. Almost
all of this increase is accounted for by asylum seekers and refugees
or migrants on work permits where almost all have English as a
second language and where many are traumatised and vulnerable.
8.5 Since Kensington sits within the HMR pathfinder area
and is subject to significant clearance of terraced housing to
assemble sites for new building, most allocations of social rented
stock are made to clearance decants. The upshot of this is that
new lettings are made almost exclusively to the pre-existing long-standing
residents whose homes are to be cleared. The new arriving BME
residents mostly settle in private rented housing, which is typically
in poor condition with least security and thus that part of the
community with most vulnerability is subject to the least support
and worst conditions.
8.6 A further consequence of this settlement into this
specific private rented sector is the emerging negative political
reaction of pre-existing residents who see the new arrivals living
in poor housing and thus associated with poor housing and increasingly
seen as responsible for the quality of that housing.
8.7 Where the amount of private rented stock is so large
relative to social housing, the capacity of a planned or structured
approach to building sustainable, stable neighbourhoods is undermined.
The private sector must be regulated and encouraged to participate
in partnerships with other public and private agencies committed
to the construction or maintenance of sustainable neighbourhoods.
8.8 We think that if the private sector is to be encouraged
or even incentivised then landlords should be regulated and subject
to the same standards as social landlords. This would mean they
would be compelled to deal with stock condition and anti social
behaviour via strategies which are analogous to the Decent Homes
and the Respect Standards.
CASE STUDY
A gang of 11 teenagers has been banned from an area of Liverpool
after terrorising a community for two years. The gang members,
who called themselves the Kensington Riot Squad, were all given
anti-social behaviour orders (ASBOs) by magistrates in the city.
The court heard how they set cars and houses alight, smashed windows
and carried weapons in the Kensington area. Local residents fought
back and took evidence of their behaviour to police, the council
and housing association. A Safer Neighbourhood Officer employed
by Community Seven a subsidiary of TRG Housing Association, collected
evidence about the gang's behaviour over a two-year period. This
culminated in the granting of the 11 ASBOs which the police said
would be "rigorously enforced".
This case study demonstrates the level of commitment that
is required from responsible landlords to tackle anti social behaviour.
None of the people receiving ASBOs in this case study were TRG
tenants and the majority lived in the private sector.
Source: BBC News, Online, 2006.
9. THE PRIORITIES
AND EFFECTIVENESS
OF THE
HOUSING CORPORATION,
ENGLISH PARTNERSHIPS
AND THE
REGIONAL HOUSING
BOARDS IN
RESPONDING TO
HOUSING NEEDS
9.1 As mentioned in a recent discussion paper on Housing
Corporation funding[38]
the current regime has "enabled associations to attract £30
billion of private loan finance. A secondary advantage of the
funding regime is that any financial benefit sits within non-profit
distributing, highly regulated bodies and is recycled into new
schemes and better services".
9.2 The Housing Corporation has managed its programme
effectively and always spends to target. As our regulators they
have an unparalleled understanding of the sector and it would
be disappointing if any new solutions undermined support for the
RSL sector.
9.3 English Partnerships largely focuses on new/affordable
housing which is important but not everything. We should not lose
sight of the problems of stock condition and assume that Decent
Homes Standard will be the panacea by 2010 as the problems will
not have gone away. We need to be continually mindful of the role
of refurbishment and renewal as part of the housing offer.
9.4 If there is an imperative for change we believe that
housing strategy and direct investment could productively be combined
in one agency which has the same boundaries as those for economic
development. We also believe that investment and regulation should
be co-located as the ability to control investment gives "teeth"
to the regulators.
10. THE ROLE
AND EFFECTIVENESS
OF THE
PLANNING SYSTEM,
INCLUDING SECTION
106 AGREEMENTS IN
THE PROVISION
OF RENTED
HOUSING AND
SECURING MIXED
TENURE HOUSING
DEVELOPMENTS
10.1 DCLG should undertake a comprehensive review of
the way in which local authorities utilise s 106 agreements to
deliver affordable housing, identifying best practice, and setting
performance targets for all authorities where the use of s 106
agreements are commercially possible.
10.2 Section 106 agreements usually have the effect of
reducing (sometimes to zero) the value of the plots that are required
to be affordable. This means that they are cheaper for the public
purse to support—with nil or low grant.
10.3 There is no doubt that at the moment the greatest
benefit from s 106 agreements accrues in times of high site value
and strong market conditions. Whilst some LAs are very skilful
at maximising provision through s 106 agreements our experience
of working in many different LAs confirms DCLG's concern that
there is no consistent approach. Some local authorities are outmanoeuvred
in negotiations with well-represented private sector developers.
Others (and this is the case in the North West) do not use s 106
agreements at all for the provision of affordable housing, normally
because they regard them as a potential barrier to development
where housing markets are weaker. Where this is the case, authorities
should be required to justify their non-use of s 106 powers through
evidence.
10.4 It is our experience, that the most effective approach
(especially, in the delivery of homes for rent) is for a LA to
involve a social housing provider in the earliest stages of s
106 negotiations to ensure that the location, mix and quality
of provision is optimised. LAs should be encouraged to identify
RSL partner shortlists to present to developers prior to planning
approval, to prevent provision being shaped by last-minute bidding
wars, providing best price to the developer, often at the expense
of a high quality product. It is our direct experience that the
best s 106 agreements arise out of robust negotiation processes,
and LAs should be encouraged (or required) to develop policies
and procedures which deliver these and strengthen their own negotiation
positions. This might be part of the criteria for achieving a
"fit for purpose" housing strategy. The Audit Commission's
recent good practice document should assist local authorities
in improving their use of s 106 agreements through improved processes,
however, there also needs to be a focus on the outcomes
of agreements.
10.5 The whole s 106 system relies upon negotiated agreements
between LAs and developers, and so an over-prescriptive approach
is clearly not appropriate. However, LAs can be encouraged to
raise their game through establishing targets for provision with
DCLG, developing robust procedures and learning from good practice.
11. THE EFFECTIVENESS
OF HOUSING
BENEFITS AS
A MEANS
OF PROVIDING
ACCESS TO
RENTED HOUSING
TO THOSE
IN NEED
11.1 Housing benefit is crucial in allowing access to
social housing to people with limited incomes. It has been a central
plank in welfare benefits provision since the 1980s and because
of the scope for direct payment has been vital to landlords as
a means of safeguarding the rental income stream. In 2005-06 just
20% of tenants moving into Riverside Housing Association properties
did not qualify for housing benefit.
11.2 However, the administration of housing benefit is
of variable quality. Some local authorities have excellent arrangements
in place to support applicants and streamline relationships with
social landlords, whilst in other cases there are issues with
payment delays and over zealous approaches to the reclaiming of
overpayments. There should be clear standards in place for service
delivery and liaison, supported by robust service level agreements
with relevant agencies.
11.3 In some areas we have set up productive arrangements
where TRG staff are trained to act as verification officers for
the housing benefit claims made by our tenants. This has the effect
of streamlining procedures and ensuring that claims are processed
more quickly and accurately to the benefit of both landlord and
tenant.
11.4 Furthermore our findings are that many tenants who
are most in need of housing benefits under claim. TRG runs a welfare
benefits advice service in our Waterfront Division and we conduct
regular surveys of clients who obtain assistance from the service.
78% of tenants who used our welfare benefits advice service
in quarter 1 of 2006-07 were enquiring about housing benefit and
58% received increases to their weekly income as a result of housing
benefit reassessments, with tenants reporting additional income
of between £10 and £20 per week.
Source: TRG Welfare Benefits advice records 2006-07.
11.5 It is also our experience that the housing benefit
system acts as a disincentive to people who are not in paid employment
but have the opportunity to take up work which is relatively low
paid. (Once a claimant's income exceeds their applicable amount
their housing benefit reduces by 65% of any additional income.[39])
We also find that tenants whose financial circumstances fluctuate
are disadvantaged by the system, which can be slow to respond
when people move from unemployment to part time work or from employment
to disability benefits.
11.6 We are extremely relieved that the government has
chosen not to pursue proposals to allow social housing tenants
to have their benefit paid direct to them rather than the landlord.
Government must accept that housing benefit acts as a safeguard
to the vulnerable and financially excluded and it should not put
their tenancies in jeopardy by removing or reducing direct payments
to landlords. People who live in straitened financial circumstances
will inevitably be tempted with cash in hand and to remove this
option is to withdraw support rather than offer choice and empowerment.
CASE STUDY
Tenant A was in rent arrears of £1,527 and TRG was proceeding
to court to request a possession order. The welfare benefits advisor
was notified and advised the tenant on housing benefit eligibility.
However, it emerged that she had applied for housing benefit herself
and had the money paid into her bank account. When asked why she
had not used this for rent payment she explained that she had
not realised that the award had been made and subsequent credits
had been cancelled out by her overdraft. Direct payment has now
been re-established but court action is ongoing due to the current
level of arrears which stand at £1,932.
Source: TRG Welfare Benefits advice records 2006.
11.7 Furthermore housing benefit should not be used in
a punitive manner to deal with problems like anti-social behaviour
which should be addressed with bespoke strategies and remedies.
We cannot condone any attempt to take housing benefit away from
perpetrators of anti social behaviour. This would simply make
their tenancies unviable and lead to reduced sustainability of
the community and punish landlords by eroding the rental income
stream.
11.8 Government should be looking at the whole of the
welfare benefits infrastructure with a view to taking more people
out of poverty and giving tax and benefit incentives to ensure
they are rewarded for taking up employment.
33
In the North West 62% of properties are in council tax bands A
or B (valued at 52,000 or less in 1993) compared to 25% in the
South East. Back
34
Section 106 agreements (also known as "planning agreements")
are arrangements whereby developers of sites agree to provide
"planning gain" in order to secure consent. See Section
10. Back
35
Inside Housing 22 September 2006. Back
36
"To support this work I want to see local authorities taking
an increasingly important strategic role on housing. Traditionally
their role has been that of a social housing provider. I see their
future role increasingly as a commissioner and strategic leader
of their local areas, using all their levers-such as their planning
powers as well as housing policies-to create mixed communities,
particularly in areas of concentrated disadvantage." Letter
from Ruth Kelly to the Prime Minister 12 July 2006. Back
37
Lee, P & Nevin, B (1999) Renewing the Housing Market of
Liverpool's Inner Core-CURS Report 8 University of Birmingham. Back
38
IQ (Tribal magazine) Winter 2005-06. Back
39
The "applicable amount" is the minimum amount which
the benefit rules state a person needs to live on based on size
of household, age and any health problems. Back
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