Memorandum by Westminster City Council
and CityWest Homes (SRH 28)
SUMMARY OF
KEY ISSUES
AND RECOMMENDATIONS
— Public funding may have been increasing
at national and regional levels, but we have not seen the results
at the local level in Westminster where demand for social housing
significantly exceeds supply. In the face of increasing demand,
levels of funding have been declining.
— The cessation of Local Authority
Social Housing Grant and the move to sub-regional allocation of
development funding have had dramatic consequences. The annual
development programme in Westminster has fallen from 500 new units
to less than 100 in the past five years.
— The housing supply and homelessness
agendas do not seem to be working in tandem, causing inefficiencies
and potential conflict between local responsibility for homelessness
on the one hand, and an increasing regional and sub-regional responsibility
for supply on the other.
— Mechanisms are needed to ensure that
new housing supply in the Growth Areas around London is accessible
to people from across London.
— Funding needs to be re-directed to
central London's existing communities where opportunities for
increasing the supply of new homes do exist.
— The ALMO model has proved very effective
in Westminster in improving the quality of homes and services
to residents. Further success could be delivered through additional
flexibility being granted to:
— Borrow outside HRA constraints.
— Use full rental income to provide
services.
— Build new social and intermediate
housing.
— Deliver management services on behalf
of others.
— The private rented sector is very
large in Westminster, but only a small proportion of it is accessible
to those reliant on Housing Benefit. Partnerships with landlords
are bearing fruit, but substantial incentives and guarantees are
required to attract landlords to the market.
— The private rented sector provides
a legitimate housing option for many homeless households, however
many view the rights attached to a social tenancy as far superior.
A change in homelessness legislation is required so that an offer
of a private tenancy can be considered appropriate settled accommodation.
1. INTRODUCTION
1.1 Westminster City Council welcomes the
opportunity to provide evidence to this Select Committee Inquiry.
Rented housing—in both the social and private sectors—plays
an extremely important role in the central London housing market
of which Westminster is part. It is, in fact, the dominant form
of tenure in Westminster. Ensuring an adequate supply of such
accommodation is critical to the Council's ability to meet a range
of housing needs and we have a wealth of experience and expertise
to bring to the national debate.
1.2 Demand for affordable rented housing
significantly exceeds supply in Westminster. Over 5,000 households
are on the waiting list and in priority need for social housing.
Many are homeless and living in long-term temporary accommodation,
or are living in severely overcrowded conditions. Yet we are facing
a decline in resources for new affordable housing in Westminster.
As recently as five years ago we built some 500 new social homes
with our housing association partners, but this financial year
we will build less than 100 new units.
1.3 The City Council recently invited an
independent group of experts to investigate a range of housing
issues in Westminster, including the supply of both social and
private rented accommodation. The report of the Westminster Housing
Commission was launched on 13 September 2006. A number of the
Commission's recommendations will be particularly pertinent to
this Inquiry and these have been incorporated within the City
Council's submission below.
1.4 Through this submission we aim to highlight
some of the issues regarding rented housing here in central London,
and the challenges we, as a local authority, face in terms of
ensuring a range of affordable and appropriate accommodation is
available for Westminster residents. We also propose ideas that
the Government should consider implementing in order to address
many of the issues raised.
2. RENTED HOUSING
IN WESTMINSTER
2.1 As mentioned above, the majority of
households in Westminster live in rented accommodation. This makes
Westminster's housing market quite unusual, when compared with
many other parts of the country. Comparisons from the 2001 Census
are shown in Figure 1 below.
2.2 Approximately 35% of Westminster's residents
live in private rented accommodation; and a further 29% live in
social rented housing. The private rented sector is growing, both
in terms of absolute numbers and as a proportion of the total
residential stock. The stock of social rented housing has remained
relatively stable since the early 1990s, with new build RSL schemes
replacing City Council units acquired under the Right to Buy.
Figure 1
HOUSEHOLDS BY TENURE, 2001
Source: Census, 2001
2.3 In Westminster, the two rented sectors
accommodate quite different types of households. While a small
proportion of private rented units are at the lower end of the
market, the sector is predominantly very expensive, and part of
the global, rather than local, housing market. Average rents for
two-bedroom properties exceed £400 per week. Single person
households account for half of all private tenants, and childless
couples account for a further 20%. Less than 20% of households
in the sector are families with children.
2.4 The social rented sector—some
24,000 dwellings—is owned by the City Council and Housing
Associations in equal measure. Demand for this stock far exceeds
supply. Over 5,000 households are on the waiting list, 3,000 of
them currently living in temporary accommodation. 22% of households
in social housing are families with children. Average rents for
a two-bedroom property are circa £90 per week.
3. SUPPLY OF
SOCIAL RENTED
HOUSING
The level of public funding required to meet social
housing needs
3.1 Put quite simply, the level of public
funding available to meet Westminster's demand for social housing
is far too low. While public funding may have been increasing
at national and regional levels, we have not seen the results
of this at the local level in Westminster where demand for social
housing significantly exceeds supply.
3.2 As Figure 2 below shows, we have actually
seen declining levels of public funding for social housing in
Westminster, and a consequent reduction in the number of new units
we are able to produce. Demand for these units, however, has continued
to rise.
Figure 2
INVESTMENT IN SOCIAL RENTED HOUSING, 2000-01
to 2007-08
NB—allocations for 2004-06, and 2006-08
have been averaged over the two years in each allocation period.
3.3 Two major changes to the funding regime
in recent years have combined to bring this situation about. Firstly,
the abolition of Local Authority Social Housing Grant and, secondly,
the move to sub-regional allocation of affordable housing funds.
3.4 Local Authority Social Housing Grant
(LASHG) was utilised very successfully to develop affordable housing
in Westminster. In 2000-01, at the height of our use of LASHG,
we were able to develop over 500 units in Westminster. With its
withdrawal in early 2003, combined with the move to deliver investment
through the sub-regions, we have been unable to sustain anywhere
near this level of activity. In 2004-05, our total programme was
down to just 150 new units. When LASHG was withdrawn, the Government
promised a replacement scheme would be instituted but, as yet,
we have seen nothing in its place.
3.5 Westminster used LASHG for a number
of purposes to supplement the traditional funding programmes,
including:
— purchase and repair of three-bedroom
properties in Westminster and other boroughs;
— topping up Housing Corporation grant
on schemes that required extra subsidy to make them work financially
and the Council considered to be value for money; and
— affordable housing schemes that came
to light outside the strict deadlines for Housing Corporation
bidding rounds.
3.6 There were very few restrictions placed
on what LASHG could be used for and it was this flexibility that
was a great strength, particularly in an area like Westminster.
The removal of LASHG from our suite of funding options has greatly
reduced the flexibility we had to respond to particular housing
needs in Westminster. It has, for example, totally removed our
ability to procure individual units or schemes, on an ad-hoc basis,
as the opportunity arises.
3.7 The Housing Corporation's sub-regions
have been formed to join boroughs with more limited land opportunities
with those that have greater scope for development, in the hope
that pooled resources will generate greater development opportunities
for all boroughs while also enabling mobility for residents. Westminster
is in the North London sub-region, along with Barnet, Camden,
Enfield, Haringey and Islington.
3.8 For the 2006-08 allocation period the
North London sub-region has been allocated £262 million towards
delivering approximately 2,500 rented units. Westminster's individual
allocation is £13 million for 121 rented units. We are now
three years into the new approach, but the benefits of such partnership
working are yet to be seen on the ground. To date, only 16 units
of new rented supply have been made available to Westminster residents.
3.9 In Westminster, we are faced with many
competing pressures. On the one hand, there is the Government
target to reduce homelessness and the number of people living
in temporary accommodation. Yet, on the other, we must manage
our housing stock to meet the needs of existing tenants, particularly
those who are living in overcrowded conditions. Each is a difficult
enough task on its own, given such high levels of homelessness
and other housing need here in central London; but when we are
also faced with the prospect of a diminishing supply line in the
form of new social housing units, the task becomes impossible.
The relative funding priority being given to social
rented housing as opposed to shared ownership and other forms
of below market housing
3.10 Westminster is a place where just about
everyone, apart from the extremely wealthy, finds buying or renting
a home unaffordable. We have very high levels of demand for social
housing but also a large cohort of people who could benefit from
below market, or "intermediate" housing market products.
3.11 The intermediate housing market was
one of the key focus areas for the Westminster Housing Commission.
The Commission formed the view that in Westminster, with good
transport links, it is about mixed income communities and not
a "key worker" issue. A far greater range of products
and broader eligibility criteria are needed to ensure that people
who contribute to the local economy and keep communities stable
are retained within Westminster.
3.12 The Government's focus on key workers
as the only category of people entitled to (Government funded)
below market housing products has meant these programmes are very
restrictive and may not, in fact, be addressing housing needs
in local areas. In Westminster, for example, there is a need to
provide affordable housing for workers in the hospitality sector,
which is central to the economic vitality of London as a whole.
We would argue that affordability, rather than occupation, might
be a better criterion for determining eligibility for intermediate
market housing.
3.13 Evidence suggests that the key worker
programmes have at times resulted in housing that is unattractive,
unaffordable and often not suitable for families. Subsidies on
the open market have proved popular, but these build demand without
additional supply and, as far as Westminster is concerned, have
resulted in people leaving the City rather than remaining here.
3.14 We are particularly keen to develop
intermediate products that are attractive to families and to existing
social housing tenants. However, we recognise that such products
may need a significant level of subsidy to make them affordable
in central London. A balance has to be struck between intermediate
and social rented housing—a particularly complex issue in
a place with high levels of homelessness and overcrowding and
where "ordinary" families are being priced out of the
market.
The geographical distribution of subsidies for
affordable housing
3.15 Since 2003, when the housing sub-regions
were formed, affordable housing funding from the Housing Corporation
has been allocated via sub-regions rather than individual local
authorities. The housing needs of individual boroughs are now
to be met by new housing developed within each sub-region as a
whole. Clearly, for a given sum of money, a greater number of
homes can be developed in the outer, cheaper boroughs than can
be built in central areas like Westminster. More units can be
produced at a lower average grant rate, and this therefore represents
better value for money for the Housing Corporation.
3.16 The North London boroughs have very
different housing markets—from the outer boroughs with slightly
cheaper land and development costs, to the inner boroughs with
some of the most expensive land in the world. A standard grant
rate applied across the sub-region means that outer boroughs have
many more viable schemes. In Westminster, the grant rate is not
enough to make schemes competitive without further subsidy from
other sources.
3.17 Sub-regional arrangements mean that
subsidy is being directed to lower-cost areas where more housing
can be developed for less, while high-cost, high-demand areas
are missing out and are finding it increasingly difficult to meet
local housing need. And we foresee a real danger of this situation
getting even worse when the Mayor of London takes responsibility
for affordable housing funding decisions. It is well documented
that the Mayor's priority is to promote development in the boroughs
of the Thames Gateway Growth Area, which will further divert resources
away from central London.
3.18 A particular difficulty that local
authorities face in this new regime is that, while funding for
affordable housing is now on a regional/sub-regional basis, homelessness
is still a local responsibility. Increasingly, as investment is
targeted at the Growth Areas around London, mobility of residents
will become an important issue. At present there is no means by
which to ensure that residents outside these areas also have access
to the rehousing opportunities available for all London boroughs.
3.19 We would argue that this approach neglects
the substantial development opportunities that exist in inner
London. Westminster's Housing Commission concluded that there
is considerable potential to develop new housing within inner
London on a sustainable basis and within acceptable residential
density levels. Sir Terry Farrell, one of our Commissioners, cites
the example of Kensington & Chelsea which, while having the
highest residential densities in the country, also enjoys high
levels of residential amenity, largely due to the style of development
there—Georgian and Victorian terraces, rather than tower
blocks. The advantage of developing in these existing communities
over the Growth Areas is that much of the infrastructure is already
in place to support a large number of new homes to be built.
4. SOCIAL HOUSING
MANAGEMENT
The future role for local authorities as builders
and managers of social housing
4.1 Westminster would very much like to
see Arms Length Management Organisations (ALMOs) being granted
the right to bid for Housing Corporation funding, particularly
as a vehicle for development on existing council estates. This
is preferable to introducing another developer, such as an RSL,
as the ownership and management of properties on the estate is
retained within the one organisation (the problem of multiple
landlords/managers is outlined below).
4.2 ALMOs alongside their local authorities
provide an excellent vehicle for new build—they bring the
leverage of land currently held within the HRA. By expanding the
ALMO remit beyond social rented housing into intermediate housing,
schemes built on vacant land can be made self-financing as found
in the Hounslow studies.
The effectiveness of different social housing
models including traditional local authority housing, ALMOs, housing
co-operatives and housing associations
4.3 Westminster's housing stock has been
managed by an ALMO—CityWest Homes—since April 2002.
The ALMO model has proved very positive in Westminster, and CityWest
Homes has twice been awarded the Audit Commission's highest inspection
rating—three stars, with excellent prospects for improvement—the
latest awarded last month.
4.4 Setting up the ALMO has allowed the
City Council to concentrate firmly on strategic housing issues
while CityWest Homes has been able to concentrate on improving
service delivery to tenants and leaseholders. In its most recent
inspection report (September 2006), the Audit Commission praised
CityWest Homes for its customer-focused and proactive delivery
of services. CityWest Homes has been very successful in involving
tenants in decision making, planning for the future of their homes
and local areas, monitoring service delivery; has driven down
costs, focused on achieving value for money and has maintained
a very strong local presence in Westminster neighbourhoods.
4.5 CityWest Homes has the inherent advantage
over Westminster RSLs of very tight geographical focus and local
scale, along with a strong relationship with the City Council.
This allows them to ensure residents receive consistent, broad
and locally tailored services.
4.6 In Westminster there are over 50 RSLs
that own or manage properties. Some have very small portfolios,
which can lead to patchy service delivery to tenants if the RSL
does not have a local presence. In addition, it is sometimes the
case that there are many different landlords (including the City
Council) operating on the same estates, which can cause confusion
when problems arise, and the organisations' differing management
standards can cause dissatisfaction among tenants who see themselves
getting different levels of service.
4.7 The City Council would like to see some
stock rationalisation and/or management agreements put in place
where multiple landlords exist, but there are many barriers to
this. We believe that a more flexible approach by the Housing
Corporation would go a long way towards breaking these down.
4.8 In an area like Westminster, property
values vary markedly from one area to another—we have some
of the most deprived wards in the country as well as some of the
most affluent. An organisation that owns a small portfolio of
high value property in one area is unlikely to want to swap it
for lower value property in another area, even if it were more
closely located to other property in their ownership. The organisation
will have very sound financial reasons for retaining ownership
of their small portfolio.
4.9 As noted above, the ALMO model is working
very well in Westminster. However, we believe that the following
ingredients are important to continue the success that ALMOs have
shown to date in raising the standards of the housing services
they offer:
— an ability to borrow outside HRA
constraints;
— an ability to use their full rental
income to provide their services;
— an ability to build new social and
intermediate housing; and
— encouragement to improve local community
cohesion through housing management provision. In particular,
removal of the need to charge VAT to RSLs for this service.
5. PRIVATE RENTED
HOUSING
The role and effectiveness of private rented housing
in meeting housing needs
5.1 Westminster has one of the largest private
rented sectors in the country—approximately 35% of the housing
stock, or about 38,000 dwellings, is privately rented. The sector
in Westminster serves a broad spectrum of tenants, from those
living in Houses in Multiple Occupation (HMOs) right through to
international business people seeking luxury, city-centre apartments.
It is, however, a very expensive sector. We estimate that Housing
Benefit operates in, at most, 15% of the market in Westminster.
5.2 Westminster's private landlords operate
in a buoyant, high demand market. They experience minimal void
periods, can charge very high rents, and can be extremely choosy
about who they accept as tenants. In such a market, they do not
have to rely on tenants in receipt of Housing Benefit to take
properties that nobody else wants. Many, in fact, flatly refuse
to deal with tenants who are dependent on Housing Benefit.
5.3 Despite this, we believe that there
is scope for this sector to better assist those in housing need.
The City Council has had some success recently in attracting landlords
to our "Landlord's Incentive Scheme", which has been
introduced to help households that might otherwise become homeless,
find a home in the private rented sector. In a market such as
Westminster's, however, it must be recognised that schemes such
as this are not possible without considerable incentive payments
and other guarantees being made. In return for an offer of a 12
month renewable tenancy to our nominated tenant, the Council pays
the landlord a non-refundable sum and arranges insurance cover
for the tenancy period. In addition, we provide Housing Benefit
payment guarantees and provide an on-going liaison service to
resolve problems when they arise.
5.4 As noted above, Westminster's supply
of social rented housing is limited. Yet, we are faced with very
high levels of demand from people who qualify and, given current
housing and homelessness legislation, have a right to be accommodated
in such housing. Westminster's view is that, for many of these
households, the private rented sector would be a legitimate housing
option. But a change in legislation would be required for this
to occur so that an offer of private rented accommodation would
be considered to be a "discharge of duty".
5.5 Current homelessness guidance from Government
stresses that "authorities review the extent to which qualifying
offers of ASTs are being made to households in temporary accommodation
in their area; whether there are any barriers to such offers being
made or accepted and if so what additional steps would need to
be taken to address these barriers." (Homelessness Code of
Guidance, section 3.18). In this instance, it is the legislation
itself which is the barrier and out of keeping with the strong
message coming through the guidance that the private rented sector
can provide settled homes.
5.6 In the absence of legislative change,
local authorities face difficulty enouraging people who might
otherwise qualify for social housing to view a private tenancy
as a viable alternative. The security and other rights that are
attached to a social tenancy (particularly a council one) are
seen by most households as far superior, and even an extremely
long period in the "limbo" of temporary accommodation
is not enough in many instances to pursuade them of the benefits
of a home in the private sector.
5.7 In London, the private rented sector
has expanded in recent years, reversing decades of decline. While
the sector has difficulty attracting long-term institutional finance,
it has attracted many small landlords through buy-to-let investment.
The tax regime, however, acts as a disincentive to investment
for many people and/or institutions. Increased investment in the
sector would be encouraged through reforms.
6. GOVERNMENT
INSTITUTIONS
The priorities and effectiveness of the Housing
Corporation, English Partnerships and the Regional Housing Boards
in responding to housing needs
6.1 Our experience has been that national/regional
bodies set priorities at national/regional levels, and that it
is very difficult to fit local priorities within the largely inflexible
frameworks to which these organisations work. They often apply
"one-size-fits-all" approaches which do not sit well
with individual borough circumstances.
6.2 Until very recently, for example, a
priority of the Housing Corporation and the London Housing Board
has been to meet targets for the number of units delivered within
their programmes, rather than focusing on what is actually needed
and where. This has meant that schemes delivering high numbers
of small units have been favoured over those delivering a lower
number of larger units, for example, which may not actually have
been what the particular local area needs. We are thankful that
the Housing Corporation has now seen fit to amend the basis on
which they allocate grant; however, there are still anomalies
within the system.
6.3 The Westminster Housing Commission recently
heard evidence from housing associations that developing large
homes in inner London is unviable, given current social housing
grant levels and the rents that are able to be charged. Even with
the Housing Corporation's new approach of allocating grant according
to the number of people housed (rather than simply grant per unit),
there is still a capital funding gap (which a housing association
must privately finance) of about £100k on a four-bed dwelling,
compared with £80k for a two-bed dwelling. In addition, there
is an ongoing revenue gap as housing associations can get £180
per week for two two-bedroom dwellings and only £110 per
week for a four-bedroom dwelling. For housing associations, it
is therefore more financially viable to build two two-bedroom
units than one four-bedroom dwelling.
6.4 The Westminster Housing Commission has
recommended that the Housing Corporation introduce a grant premium
for the larger, family-sized properties which are in such short
supply. An increase in grant would need to ensure that the capital
pay-back periods for large and smaller units were the same, and
additionally, were sufficient to bridge the gap in revenue costs.
6.5 In an area like Westminster, the shortage
of larger accommodation is a key factor in the growth of overcrowding.
Westminster is one of the top 10 most overcrowded boroughs in
London and Census figures show that nearly 12% of households in
Council housing are overcrowded. This particularly affects our
large population from BME communities, who make up nearly half
of the resident population.
6.6 While we welcome the London-wide targets
for increasing the proportion of family-sized housing in new developments,
it is unlikely that this will be achieved in areas like Westminster
given the current funding regime. Grant rates are determined regionally,
rather than locally, so the same grant rates apply, for example,
in Enfield and Westminster—two boroughs with entirely different
land and development costs. We are finding it increasingly difficult
to fund developments in Westminster without topping them up from
other sources, due to this one-size-fits-all approach.
7. THE PLANNING
SYSTEM
The role and effectiveness of the planning system,
including section 106 agreements in the provision of rented housing
and securing mixed tenure housing developments
7.1 The planning system has no control over
the provision of private rented housing. Generally, private
residential schemes are granted permission, and are then either
owner-occupied or privately let. However, through the use of the
City Council's affordable housing policies and the section 106
agreements mechanism, the City Council is able to ensure the provision
of social rented housing in order to create mixed tenure
developments.
7.2 Virtually all affordable housing opportunities
in Westminster come through section 106 agreements, as the high
cost of land means that Housing Associations can rarely compete
with private developers for development sites. Securing affordable
housing this way is a complicated process, but Westminster has
very clear policy requirements that give developers certainty,
and section 106 has proved to be an effective tool in securing
new affordable housing.
7.3 Westminster's policy of requiring on-site
development of affordable housing, wherever possible, has been
effective in creating mixed-tenure housing developments in very
expensive, inner-city areas. The policy outlines, as a general
guideline, that where 30% affordable housing is being provided,
25% should be for residents in housing need (typically the social
rented sector) with 5% for key workers. The allocation of affordable
housing units where more than 30% of the units are to be affordable
will be guided by housing needs assessments to ensure that the
mix of affordable housing provided is meeting the immediate and
longer term needs of households who require housing. This will
often include additional provision for key workers. It is only
in special circumstances, where non-viability can be clearly demonstrated,
that financial contributions toward affordable housing are accepted.
7.4 Private rented accommodation is an important
part of the tenure mix in Westminster. However, short-term letting
takes units out of the residential sector that could house permanent
residents and the City Council endeavours to enforce against unauthorised
temporary sleeping accommodation. Short-term letting is a considerable
problem throughout Westminster, partly because of the appeal of
Westminster as a visitor attraction to tourists—it is in
relation to holiday lets that the City Council receives most complaints.
7.5 Since 1998 the City Council has had
a dedicated "short-term let" enforcement team who proactively
monitor blocks of flats with a known history of short-term letting,
and also act upon information provided by permanent residents.
During 2005 the team dealt with 560 short-term let enforcement
cases and "closed" 264 cases. At any one time, the enforcement
team has over 1000 short-term let cases under review. This illustrates
not only the scale of the problem in Westminster, but also the
length of time and effort it takes to enforce against. It is worth
noting that the city council has had absolute support from the
Secretary of State in terms of short-term let enforcement appeals,
partly because of the strength of the planning policy.
8. HOUSING BENEFIT
The effectiveness of housing benefit as a means
of providing access to rented housing to those in need
8.1 Despite great improvements in the administration
of Housing Benefit in many authorities, non-payment of Housing
Benefit is still a significant cause of homelessness as landlords
evict tenants who are in arrears. Where the arrears are no fault
of the tenant, in most cases these households will be determined
to be homeless and owed a housing duty by the local authority.
Authorities are working very hard to prevent this happening; working
with both landlords and Housing Benefit departments to enable
tenants to remain in their homes.
8.2 Housing Benefit rules and administration
are currently very complicated for both tenants and landlords,
and need to be rationalised. As we have noted above, many landlords
will not accept tenants who are dependent on Housing Benefit.
Landlords will be reluctant to accept people on Housing Benefit
unless regulations and administration are simplified and made
more flexible, and the risks to them of taking HB tenants are
minimised.
8.3 We are concerned, however, that the
Local Housing Allowance rent areas will be very broadly defined
geographically, with little recognition of the high rents charged
in Westminster and other parts of central London. If this is the
case, there is a danger that people will be driven out of central
London to cheaper parts of the city, and our efforts to create
more sustainable communities in central London will be adversely
affected.
9. CONCLUSION
9.1 These are just some of the housing supply
issues faced by local authorities. We welcome the attention that
Government is now paying to the need to raise levels of supply
nationally, and the additional resources that are being put into
social housing, in particular. But, we cannot stress enough that
the additional resources are not reaching many areas of very high
need.
9.2 The Westminster Housing Commission has
recently investigated the issues facing Westminster, and we would
commend its report to you as many of its recommendations are directed
not just to the City Council, but to central government and national
agencies.
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