Memorandum from The Royal Institution
of Chartered Surveyors (RICS) (SRH 30)
1. THE LEVEL
OF PUBLIC
FUNDING REQUIRED
TO MEET
SOCIAL HOUSING
NEEDS
The level of public funding required to meet
social housing needs is substantial. Social housing is part of
the glue that binds society together. It provides affordable housing,
a foundation for sustainable communities, facilitates labour mobility
and ensures a safety net for the most vulnerable in society.
All social housing requires subsidy, be it derived
from capital funding, the planning system and Section 106 Agreements,
or, to a lesser extent, Local Authorities. The level required
will vary in each locality, depending on the amount of new housing
needed.
Evidence suggests that although the level of
people aspiring to own their own homes is increasing, the percentage
able to afford to do so is declining, particularly in high growth
areas such as the South East.
First time buyers, unable to afford the first
steps onto the property ladder, and older owners, who are choosing
to rent to relieve themselves of the burden and the maintenance
of home ownership, are two key groups increasingly choosing to
rent rather than buy their homes. Consequently, the social housing
market turnover is slowing while demand for good quality, low
cost, rented accommodation is rising.
The demographics and aspirations of society
are changing and, in turn, so are the demands on social housing.
Policy and practice needs to reflect a modern and forward looking
approach; it must be based on a pro-active master plan, not just
re-active policies, if it is to meet society's needs. A general
feeling prevails that the current levels of public funding are
not sufficient to deliver the scale of regeneration and quality
of housing needed.
2. THE RELATIVE
FUNDING PRIORITY
BEING GIVEN
TO SOCIAL
RENTED HOUSING
AS OPPOSED
TO SHARED
OWNERSHIP AND
OTHER FORMS
OF BELOW
MARKET HOUSING
Current Housing Corporation funding is broadly
split: with 25% for low cost home ownership and 75% for rent,
although there is a higher proportion of sale to rent in London.
RICS broadly support the current ratios but would emphasis the
need for greater provision of family sized properties in both
categories.
Demand for social housing, both social rented
and shared ownership, varies from location to location; those
of the Thames Gateway vary greatly to those of Oxford and they,
in turn, from those of Stoke-on-Trent. Likewise, there is a vast
spectrum of variety within the relatively small geographical area
of the London Boroughs. Social housing policy should be addressed
with a one-size-fits-all approach, but should be about matching
the ability to pay for stock with the needs of the local market.
Research by the Housing Corporation (Public
Attitudes to Housing 2006) indicates that approximately 82% of
people aspire to own their property but that only approximately
70% can afford to do so. This situation raises an ethical question:
is it right for the public purse to subsidise the homeownership
aspirations of the remaining 12% of the population through shared
ownership schemes?
Government policy encourages shared ownership
schemes. Both the private sector and, to a lesser extent, RSL's
have indicated an interest in funding the shared ownership market,
but there are obstacles. Yet the market is limited and largely
untested, with high delivery costs. There are also signs that
unless shared ownership is made more affordable tenants will continue
to prefer the route of outright sale.
RICS supports efforts to allow individuals the
opportunity to own their own home but believe it must be achieved
in a sustainable and low risk manner. Anticipated rises in interest
rates, utility bills and personal debts are likely to further
reduce affordability and push more people away from shared ownership,
thus placing greater pressure on the rented sector. Research,
by Shelter in 2005, found that people on low incomes already place
living in a safe neighbourhood and affordability above the desire
to own their own home. Recent CML research echoes this trend when
it found that the percentage of 25-34 year olds who aspire to
buy within two years is already declining.
The Government advocates mixed tenure communities
as the way forward for social and economic prosperity. Yet shared
equity schemes can undermine the principles of a truly mixed tenure
community by reducing the percentage of social rented homes. We
would therefore question Government's contradictory policy of
encouraging mixed tenure communities, then promoting their erosion
through the promotion of shared equity schemes. Government must
decide how it wishes to balance the changing need for social housing,
particularly rented, with the growing and contrary, homeownership
aspirations of the population.
3. THE GEOGRAPHICAL
DISTRIBUTION OF
SUBSIDIES FOR
AFFORDABLE HOUSING
Inaccurate perceptions have often camouflaged
the reality between where affordable housing subsidy is needed
and the actual distribution. The traditional assumption was polarised;
the South, particularly the South East, was regarded as an area
of high demand and need while the North was viewed as an area
of low demand and abandonment. The tide of thought has shifted.
There is now recognition that some parts of the North suffer from
real problems of affordability. Research by the University of
York in 2005, highlights the golden triangle area of North Yorkshire,
rural commuter areas of Northumberland and the South Lakes of
Cumbria. The need for social housing in rural areas as a whole
has also been acknowledged.
Public subsidy for social housing is as much
about increasing quality and choice and market restructuring as
it is about increasing supply. Therefore the decision of how to
distribute subsidies for affordable housing must be made alongside
an analysis of what the subsidy is trying to achieve: greater
ownership, urban regeneration or a rural renaissance. It must
also take into consideration, and support, existing initiatives
such as the Pathfinder programme, but simultaneously be mindful
that many areas of need may not have such support: Sunderland
and parts of Western Cumbria, for example, do not have Pathfinder
status.
RICS believe the policy for the geographical
distribution of subsidy should be based upon sound calculations
and analysis of need, reviewed every two to three years, so as
to continuously consider the value that the investment will bring.
4. THE FUTURE
ROLE OF
LOCAL AUTHORITIES
AS BUILDERS
AND MANAGERS
OF SOCIAL
HOUSING
Local Authorities should play a key role in
the provision and management of social housing, but only in a
strategic capacity through the analysis of local markets and policy
and not as builders or managers.
A key strength of the current bodies dealing
with social housing is their ability to specialise in specific
roles and thereby, in principle, simultaneously maximise resources,
reduce duplication and offer expertise.
In theory, allowing local authorities to build
and manage social housing could create a more level playing field
and generate more competition and efficiencies. These benefits,
combined with the long term interest Local Authorities have in
their communities, could prove a worthy case for consideration.
Conversely, the lack of experience Local Authorities
have in raising private finance is likely to be a significant
hindrance in achieving the scale of funding required. Also, it
is important to consider whether local authorities can deliver
the same rate and quality of stock required from the same, or
less, public funding than is currently being achieved?
Increasing pressures on public sector borrowing
are forcing the Government to consider alternative means of raising
funding for investment in social housing. Expanding the role of
local authorities into building and managing social housing may
be overlooking the obvious route of developing the co-operation
and joint working between the public and private sector in the
provision of social housing. Currently, there is little incentive
for joint working between the private and public sector and we
would welcome further information into recent Government proposals
to extend the PFI/ PPP initiative into the social housing sector.
We await with interest the outcomes of the Lyons
review and the forthcoming Local Government White Paper.
5. THE EFFECTIVENESS
OF DIFFERENT
SOCIAL HOUSING
MODELS INCLUDING
TRADITIONAL LOCAL
AUTHORITY HOUSING,
ALMOS, HOUSING
CO -OPERATIONS
AND HOUSING ASSOCIATIONS
Comparing the effectiveness of the different
social housing models is extremely difficult. Each model plays
a valuable but different role in the provision of social housing.
In addition, their size and remit of influence varies considerably
not only between models but within them too. Such variety is a
strength, as it caters for the diverse scope of local needs. Their
collective advantage comes from their ability to each deal with
different niches within the social housing market.
All the models are inspected against their own
targets by the Audit Committee, albeit through different mechanisms
and, therefore, while their effectiveness is assessed they are
not necessarily officially compared.
The perceived level of effectiveness of the
different social housing models is often closely linked to the
access to funding each has. If they cannot find the capital to
raise or maintain the stock they are seen to be ineffective. Inadequate
funding has led some models to engineer innovative ways of increasing
their capital and, in turn, the supply of rented housing.
The individual effectiveness of each of the
models in the provision and maintenance of social housing is of
great importance but, the collective effectiveness of all the
models working together must not be ignored.
6. THE ROLE
AND EFFECTIVENESS
OF PRIVATE
RENTED HOUSING
IN MEETING
HOUSING NEEDS
The private rented housing sector plays a vital
and important role in helping to meet housing needs. It fills
this role because there is a demand. It is market driven and aims
to generate a financial return and capital appreciation for its
investors. Its existence should not be confused with a notion
that it was established to compliment, or answer, any shortfalls
in the social housing market.
Private rented housing provides flexibility
and choice in the market. Evidence from the University of York
suggests that it services an intermediate market which cannot
afford to buy at the lowest quartile, but has incomes too high
for housing benefit. It is also meeting the short-term lifestyle
needs of the population. Research by GMAC-RFC (2005) found that
61% of 18-34 year old tenants saw renting as a way to allow them
to live in a better area, and access a better quality of accommodation,
than if they bought a home. The private rented sector provides
this group with the freedom and flexibility to move around and
the opportunity to leave the family nest without the burden of
home ownership.
The stock market crash and, more recently, the
pension crisis have contributed in a widening of the private rented
housing portfolio to include more individual, small-time owners,
not just large company investors. The quality of the stock demonstrates
an equal amount of variety. As a largely unregulated sector, it
suffers from pockets of low standards. The recent introduction
of Houses of Multiple Occupations (HMO) has made an effort to
redress this situation, but there is still a long way to go.
Concerns have been raised that radical moves
to regulate the private-rented market could reduce profits and
drive investment abroad. This shift of market occurred when the
regulation of the insurance market was increased and partly contributed
to the appeal of the housing sector as an investment opportunity.
The average national cost of bringing a private sector home up
to current standards is £7,780, but increased regulation
could increase this dramatically.
Greater regulation at the low end of the market
to improve standards will go some way to ensuring that the private
rented housing sector supply provides a good quality standard
of living and contribute positively to sustainable communities.
7. THE PRIORITIES
AND EFFECTIVENESS
OF THE
HOUSING CORPORATION,
ENGLISH PARTNERSHIPS
AND THE
REGIONAL HOUSING
BOARDS IN
RESPONDING TO
HOUSING NEEDS
The target-driven nature of the Housing Corporation
makes it adhere to strict funding rules and is therefore highly
inflexible. Nevertheless, it is effective even if it does not
lend itself to dealing with new or innovative proposals, or increased
productivity standards. For example, in the Lake District National
Park there are areas where the current cap on grant rates makes
it impossible to provide new affordable homes for local people.
English Partnership, in contrast, draws strength
from its holistic, outcomes-led approach to regeneration, using
new and bespoke delivery models to provide affordable housing
and wider regeneration.
The proposed merger of these two bodies offers
an opportunity to bring together, under one roof, the funding,
land holdings and regeneration expertise to support innovation
and new models of delivery which would provide a more holistic
response to the housing needs and a wider goal of creating sustainable
communities.
The effectiveness of the Regional Housing Boards
is yet to be fully assessed. It is, however, anticipated that
they can play a key role in agreeing regional priorities and effectively
targeting the relevant resources. The merger of housing and planning
in the Regional Assemblies should increase opportunities for lobbying
on housing issues and strengthen the strategic decision-making
process of planning and housing investment.
In sum, all the bodies responsible for housing
need to operate on a quicker, more streamline and inter-related
basis. Frequent duplication of work is resulting in increased
competition of resources and confusion in the market place.
8. THE ROLE
AND EFFECTIVENESS
OF THE
PLANNING SYSTEM,
INCLUDING SECTION
106 AGREEMENTS IN
THE PROVISION
OF RENTED
HOUSING AND
SECURING MIXED
TENURE HOUSING
DEVELOPMENTS
The planning system, and in particular the use
of section 106 (s 106), is at present the best means available
for capturing the economic value of developments for social housing
provision and mixed tenure developments. Nonetheless, inconsistent
application of s 106 agreements has led to mixed results when
attempting to deliver the homes that are needed. At present, too
much emphasis is placed on outputs—in terms of the number
of homes required to tackle the supply issue and satisfy demand—and
insufficient emphasis is placed on outcomes—such as the
delivery of a more sustainable housing strategy drawing together
social, environmental and economic factors to create mixed communities.
Any action in this area must examine the condition of properties,
the desirability of communities, the mix and quality of estates,
and try to balance people's aspirations with their need.
Section 106 agreements can be an effective tool
for capturing the economic value of development but the effect
is less pronounced in those areas where land values are not especially
high. For example, in the North s 106 agreements provided an average
of only 38% of the total affordable completions in 2004-05, and
36% in 2003-04. Where rented schemes do not stack up financially
and the local authority can achieve a higher price from private
developers for land without a percentage of social housing, there
is little incentive for the local planning authority to insist
upon s 106 agreements. There are also examples of local authorities
using sums from developers in order to achieve other strategic
objectives. To address these problems, the RICS would like to
see incentives which are not just based upon numbers but also
upon quality, housing need and improved infrastructure.
Whilst there are a number of innovative examples
of delivery models which make best use of a combination of public
and private assets (for example joint ventures and special purpose
vehicles), the RICS would encourage greater engagement with the
private sector. This would increase the opportunities for capturing
the value of increased land values and thus further encourage
delivery of social housing.
In sum, clarification is needed over how s 106
agreements should be applied, but this should be accompanied by
further clarification of the Government's future plans for this
area (ie will planning-gain supplement be introduced, and if so,
what form will it take?). Existing inefficiencies must be addressed
and local authorities should be incentivised to deliver a fast
track system which allows a quicker reaction to changes in need
and demand. In conclusion, more use can be made of the planning
system to stimulate demand, drive up standards, contribute to
innovations in design, enhance energy efficiency and promote sustainable
methods of construction.
9. THE EFFECTIVENESS
OF HOUSING
BENEFIT AS
A MEANS
OF PROVIDING
ACCESS TO
RENTED HOUSING
TO THOSE
IN NEED
Housing benefit should act as a means of providing
access to rented housing to those in need. In theory, it does
increase the ability to access housing for those who would not
otherwise be able to afford to rent and also provides security
and confidence to housing providers and lenders.
Unfortunately, the current system is costly
and highly administrative and there are many unintended negative
consequences. Significant changes need to be made to streamline
the system to make it more effective and user-friendly. However,
15% of the population is on some form of housing benefit so the
magnitude of risk and the potential fall-out that could occur
if any alternative did not work have hampered any moves to-date
to update it.
10. THE IMPACT
OF THE
OPERATION OF
COUNCIL TAX
BENEFIT ON
THE AFFORDABILITY
OF RENTED
HOUSING
Council tax benefit should positively impact
on those who have access to it, but as take-up is low and the
system used to calculate entitlement does not allow for a sliding
scale of affordability, it leaves many on low incomes facing high
council tax bills. In addition, the system is complex and a few
people do not understand it. Figures suggest that only one in
four pensioners fail to apply and Help the Aged argue that the
problem is large and growing.
This evidence would suggest that, operationally
Council Tax Benefit does not impact highly on affordability, but
research by the New Policy Institute in 2005 concluded that if
it were better presented and administered and had higher levels
of take-up, then it would act to protect people on low incomes
from bills they cannot afford (The Impact of Council Tax on Older
People's Income).
If the current system is to remain, we recommend
that the Government introduce targets on the take-up of council
tax benefit, review the income thresholds and provide services
to support people to make claims.
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