Memorandum by Places for People (SRH 36)
EXECUTIVE SUMMARY
Places for People is one of the largest property
development and management companies in the UK, with 58,625 homes
either owned or managed in a mixture of different tenures. It
is a not for dividend organisation whereby all profits are reinvested
in to the business.
This submission sets out our view on the supply
of rented housing in the UK. We understand that there is a need
for affordable rented housing, but the view of Places for People
is that this requirement should be met through the provision of
mixed communities with the long-term objective of creating high
quality, safe and sustainable communities. Places for People has
assets of £2.3 billion and an annual turnover of over £255
million, giving it the financial strength to create communities
of choice. All the developments created by the Group span the
whole range of tenures from private for sale homes to shared ownership
to affordable rent, producing truly mixed communities. Unlike
most private developers, Places for People manages developments
in the long term, and so it is in our commercial interest to generate
sustainable, attractive environments, with the infrastructure
required, where people want to live and work.
The key points we would like to make in response
to the committee's inquiry:
— In order to get better value for
public money and increase the supply of rented housing we believe
that a gap funding (where Government funds the gap between the
total costs of a development and the potential revenues) model
is able to support the future provision of affordable mixed-tenure
housing in a manner that gives better value for money.
— To enable programmes to be developed
that will deliver genuine mixed communities, we feel that there
is a clear case for considering a new delivery agency whose remit
would be to provide a framework to enable the delivery of mixed
tenure, mixed use places. We believe that this new delivery agency
should be a fusion of English Partnerships, the Housing Corporation
and the Neighbourhood Renewal Unit. It would report to the Department
of Communities and Local Government (DCLG) at a regional level
and work alongside the merged Regional Planning and Housing Boards.
— Places for People believe that to
achieve sustainability, neighbourhoods need to have a mix of housing
types and tenures, including market and affordable rent. We feel
that Housing Associations are well placed to deliver these neighbourhoods
as they have the ability to use their asset base to raise private
finance.
ABOUT PLACES
FOR PEOPLE
Places for People is one of the largest property
development and management companies in the UK, with 58,625 homes
either owned or managed in a mixture of different tenures. With
2,500 employees, it is a unique organisation that provides a diverse
range of products and services to build quality, safe and sustainable
communities. In 2005-06, Places for People had a £255 million
turnover and a not-for-dividend profit of £15.7 million.
During 2005-06, we built 1,250 new homes and had a £2.3 billion
asset base. In addition, we achieved a full set of green lights
in our last Housing Corporation Assessment (October 2005). Places
for People regards itself as a housing and regeneration organisation
that puts people first. We provide solutions that not only cover
a range of different housing tenures but also offer a range of
support services including affordable childcare, elderly care
and financial services—all the things that contribute to
making neighbourhoods of choice; prosperous, popular and truly
sustainable. The Group structure is outlined in Appendix A.
Places for People currently have 44,600 affordable
rented properties, 4,800 properties available for market rent
and some 9,000 properties where we retain a freehold stake as
part of either shared ownership or "right to buy" arrangements
in a number of developments throughout the UK.
The level of public funding required to meet social
housing needs
Recent research by the National Housing Federation
suggests that there is a national demand for around 80,000 new
affordable homes per year for the next 20 years. With population
growth on the rise and a lifestyle changes such as immigration
and an increase in one-person households, the level of public
funding to meet social housing needs is very significant.
Places for People believes that if the Government
is to maximise what it gets from its investment in housing, a
gap funding approach must be implemented. By using this model,
developers such as Places for People will be able to deliver increased
amounts of housing—including social housing—for the
same amount of public investment.
In addition, we believe that the provision of
grant funding solely for affordable and social housing is not
generating effective, mixed-income communities for the future
and there is a clear disconnect between the Government objective
to create vibrant mixed income communities and the fact that there
is currently no explicit programme to deliver this.
We believe that the best way of getting funding
to focus on creating mixed-income communities would be through
the gap funding of a complete mixed tenure scheme—namely:
providing funds to pump prime developments where there is a gap
between total costs of the development and the developer's estimates
of income required to fund the debt.
We feel that, when combined with an output-led
regulation of the kind outlined below, gap funding provides a
greater practical incentive for companies to develop sustainable
communities in a more commercial way, as well as enabling Government
to focus its spending on elements of the sustainable communities'
agenda that require it most.
We have undertaken some broad financial modelling,
based on similar principles to those used in the Housing Corporation's
Financial Workbook, for assessing project viability and grant
requirements. This modelling takes the current annual output of
affordable housing, together with the current annual Housing Corporation
grant and examines how the grant could be allocated differently.
Assuming current costs, it shows that total investment could enable
profits from market sale homes to be recycled by developers to
either:
— increase the amount of affordable
homes from around 30,000 to 40,000 with the current £2 billion
annual subsidy;
— reduce the housing subsidy by about
£300 million and still build the current number of affordable
homes.
Equally, gap funding could also help with incentivising
investment in the redevelopment and/or demolition of market-renewal
areas. Whilst the levels of total investment might be proportionately
higher for these areas, such a mechanism would create a more efficient
use of public investment by concentrating it on areas where it
has most impact. We think that this is one way that the Government
could reinvigorate the current Housing Market Renewal Programme.
Gap funding, combined with regulation based
on sustainable communities output (see below), would also encourage
developers to realise synergies from the provision of complementary
products and services, such as:
— new business start-ups;
— environment and landscaping services
(eg through the integration of Neighbourhood Renewal Unit funds
as pump priming resources).
Such a regime should also require developers
to provide ongoing management of the mixed-tenure neighbourhood
in order to protect and achieve on-going value from the original
investment. We feel that this is particularly important in the
context of the future growth in the post-retirement population
and the increasing emphasis on diversity and ethnicity in the
provision of customer service.
In summary, a gap-funding model, of the kind
outlined above, not only has the capability of achieving better
value for money on Government expenditure on sustainable neighbourhood
outputs, but also, crucially, the capability of producing higher
numbers of market sale, market rent and affordable houses.
The relative funding priority being given to social
rented housing as opposed to shared ownership and other forms
of below market housing
Places for People's focus on building mixed-tenure
neighbourhoods, in response to what the particular area/population
requires. We feel that Government needs to move away from funding
developers to create developments that are not suitable for the
area in which they are built—and focus on delivering neighbourhoods
with the balance of tenures and house sizes that are required.
Clearly, housing requirements vary from area to area and there
must be flexibility in the approach to developments that reflects
this. Research by Places for People has constantly showed that
the creation of mixed-income, mixed-tenure housing provides a
platform that enables many of the Government's sustainable neighbourhood
outputs to be achieved.
Overall Places for People believe that to be
sustainable in the long term, neighbourhoods need to have a mix
of housing types and tenures. People are attracted to our developments
because we can give them a choice—they can either buy outright,
rent or part buy/part rent with a range of low-cost, home-ownership
options available.
In fact, Places for People are one of the four
original housing associations involved in the Government's Social
Homebuy pilot. This scheme has enabled two of our customers from
Chorley, who have been renting a property for 10 years, to buy
their home with a discount and on a shared-ownership basis. We
are currently processing over 150 applications and have plans
to roll out this scheme nationwide.
Moreover, building communities that have people
from different social backgrounds and with different income levels,
contribute to the success and longevity of the new places we create.
All our homes, regardless of whether they are rent or for sale,
are built to the same high standard, with the same specifications
making different tenure indistinguishable. In London, for example,
we have created a mixed tenure, mixed-use development on a large
brownfield site at Kleine Wharf, Hackney. This is an area that
has sunk into economic decline, where Places for People have created
a £20.5 million development of 39 apartments for sale and
32 for affordable rent, in addition to 25,000 square feet of commercial
work space.
We believe that funding should be distributed
to all social housing creation schemes regardless of tenure in
order to ensure genuine mixed sustainable communities can be created.
The geographical distribution of subsidies for
affordable housing
It is clear that the distribution of Housing
Corporation funding for 2006-08 is weighted in favour the South
of England over the North and Midlands. This, we believe, is due
to the high land values and build costs in the South. However,
it is generally easier to generate cross subsidy from sales schemes
in the South where there are relatively higher values.
In Housing Market Renewal (HMR) Pathfinder areas
in the North (where the bulk of the areas allocated Housing Corporation
money and Places for People's affordable programme is targeted),
affordable homes can still be expensive to fund because of ground
conditions and costs/interest charges relating to re-housing and
demolition. In addition, homes for sale can be difficult to develop
in the HMR areas as costs will often exceed values.
Places for People believes that the Government
could achieve better value for money from its current overall
distribution balance by:
(a) The adoption of a proposed "gap
funding" approach to extract value from market sales scheme
thereby enabling a more effective use of allocated resources.
(b) Getting better coordination of Social
Housing Grant, pathfinder and English Partnerships funding to
support the use of gap funding in lower value areas, such as in
the HMR areas.
The future role for local authorities as builders
and managers of social housing
Places for People is a commercial organisation
with large assets that it can borrow against and use to raise
private finance when required. This allows us to create both small
and large scale developments that are truly mixed tenure and that
use the surpluses generated by our commercial activities to cross-subsidise
the development of affordable housing as well as community services
and infrastructure.
As the largest Registered Social Landlord in
the UK, and a major house builder and developer, we feel that
housing associations are best placed to meet the needs of providing
social housing in mixed sustainable communities.
We have a proven track record in delivering
high quality developments from small-scale, local projects to
whole-area master planning, with a specific focus on being environmentally
friendly. Because we will be managing the developments long term,
Places for People has a vested interest in developing high quality,
sustainable development.
With local authorities having increased demand
placed on their budgets, Places for People believe their priorities
would be best focused on streamlining planning regulations, playing
a more strategic role in managing their local areas and ensuring
that the required levels of infrastructure are delivered.
In recent years, there has been an increasing
focus on the need for community leadership from local authorities
and on the need to involve a wide range of local stakeholders
in identifying housing needs and planning responses.
With the forthcoming Local Government White
Paper set to devolve more powers to local authorities, there is
the opportunity for them to take on an increasingly important
strategic role in housing. Places for People will further develop
relationships and strategic partnerships with local authorities
in combating the affordability crisis and creating sustainable
mixed communities. The scale of the housing challenge requires
that all resources and skills be brought to bear in a coherent
way.
At one of our developments, at Walker in the
East End of Newcastle, we are already working in partnership with
Newcastle City Council, Bridging Newcastle Gatehead and
the local community to create a vibrant, mixed neighbourhood.
We are currently four years into a multi-million pound master
planning project that will see the creation of 1,800 new homes
for sale and rent, together with improved shopping and leisure
facilities, better schools and integrated transport links. This
proves that RSLs and local authorities can work together for the
good of the community.
The effectiveness of different social housing
models including traditional local authority housing, ALMOs, housing
co-operatives and housing associations
We believe that it is difficult to make comparisons
between the effectiveness of different social housing models as
they all have different roles and strengths in providing rented
housing.
We feel that Housing Associations are best placed
to meet the growing demand for affordable rented housing. In fact
a recent report by the Housing Corporation has suggested that
Housing Associations have upgraded three times as many properties
to the Decent Homes Standard than was expected. This equates to
some 60,000 homes achieving the Decent Home Standard last year
against the 20,000 figure that was laid down by the Government.
At Places for People we have been very effective
in generating surpluses from our commercial activities and then
redirecting these extra surpluses to subsidise the development
of affordable housing, and a range of community services and infrastructure.
In this way, Places for People is able to add to the supply of
housing with less reliance on government investment. All of our
products are developed in response to what customers say makes
a neighbourhood a desirable place to live.
The role and effectiveness of private rented housing
in meeting housing needs
Uncertainty and rising prices in the housing
market has led to people opting for private and social rented
housing. Although, it is not the desired choice for many individuals
it is clear that demand for housing in the UK far outstrips supply
and to plug the gap good quality private rented accommodation
is necessary. Private rented housing has also proved to be vital
to labour mobility, which in turn is crucial to the growth of
the UK economy.
Sharp rises in house prices mean that home ownership
is now unaffordable for an increasing number of households. For
example a recent report by the NHF and Chartered Institute of
House Builders estimates that by 2011 house prices will rise to
£322,000 in the South East and given that there is an expected
population growth of 450,000 people over the next 10 years, private
rented housing will be crucial in filling the gap in the short
to medium term. However, the scale of small "Buy to Let"
properties is not going to impact on the major shortage of housing
accommodation in London and the South East and it is the issue
of housing supply that the Government need to address in the long
run.
Places for People has recognised the key part
the private rented sector plays in developing a sustainable mixed
community and has increased its holding in this type of tenure.
We now have 4,761 market rent properties in a number of mixed
tenure sites. One of our new developments in Wolverton, Milton
Keynes will see the creation of 300 new apartments available for
outright sale or market rent, in addition to 90 affordable homes
on disused brown-field site. This approach both increases the
supply of private rented accommodation and the development of
mixed communities.
We believe that having the ability to privately
rent a property through the use of our management arm is a crucial
part of our flexible tenure options thereby offering the customer
more choice as to when they want to rent/part/buy/buy outright
at any particular time. Places for People has recently developed
new financial products, including loans and mortgages that offer
increased options for customers with regard to flexible tenure
options. By providing flexible mortgages whereby customers can
staircase up as well as down, meaning that a person can buy their
own home and sell it back to us if their financial circumstances
change—and vice versa. This in turn helps to create and
maintain mixed income, mixed tenure communities. This is a capability
that does not exist with private sector builders or buy to let
landlords.
The priorities and effectiveness of the Housing
Corporation, English Partnerships and the Regional Housing Boards
in responding to housing needs
Places for People believe that there is a clear
case for a new delivery agency to be formed under the auspices
of the DCLG. We think that this new delivery agency should be
a fusion of English Partnerships, Housing Corporation and the
Neighbourhood Renewal Unit which, for investment and land supply
purposes, would operate at a regional level in conjunction with
the merged Regional Planning and Housing Boards. The regulation
function for places should sit within the DCLG but operate on
a national level, possibly in a similar manner to the new Ofsted
school review arrangements.
A key part of a new set of arrangements would
be to provide more effective links with relevant Government organisations
at city/region level, working alongside the merged Regional Planning
and Housing Boards and from there to local levels through groups
such as the Local Strategic Partnerships and through Local Area
Agreements. The intention should be that the provision of complementary
services and infrastructure, such as Policing, Education, Health,
Learning and Skills, and Transport infrastructure etc, could be
better planned and targeted at a local level.
We think that the effective delivery of mixed
tenure sustainable communities is also likely to require a mechanism
where various public/private sector contributions can be better
co-ordinated to ensure supporting infrastructure (eg transport,
schools and hospitals) is provided in a phased manner to support
new places and improve existing places. Currently the trigger
point for developing schools for example is far too late meaning
that there is a lack of local education provision at new developments,
which could be avoided by closer coordination between bodies.
We agree with the Barker Review conclusion that
such a delivery agency should also have planning and CPO powers,
together with the resources and expertise to achieve the level
of co-ordination necessary to deliver the housing and regeneration
strategy. In addition, we think that such mechanisms could be
linked to the proposed Planning Gain Supplement mechanism, which
we believe should be based on the overall percentage increase
in land value (taking into account negative valuations of land
where appropriate).
Places for People believes that the merged Regional
Planning and Housing Boards should have a commissioning role in
setting up and giving direction for these mechanisms, thereby
providing one voice to the Local Development Vehicles (LDVs) that
might be required to pump prime developments in a region.
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 particularly the use
of Section 106, is vital to securing the economic value of new
developments and mixed tenure housing. However, we feel that Section
106 is too often used as a blunt instrument by local authorities
when the market in a particular area may not require it to be
appropriate for a mixed tenure mixed income community. For example,
Local Authorities insisting on 30% or 50% affordable housing for
a particular development because it is their standard policy.
Places for People feels that Local Authorities
need to give more consideration to the housing requirements in
any particular area, and in some cases simply specifying that
a certain percentage of affordable homes are required may not
address the particular local requirements.
In addition, simply specifying that a percentage
of the properties are affordable can lead to the construction
of poor quality housing, or ghettos of poor quality housing within
a larger development. Places for People builds all the tenure
housing types to the same standard and "pepperpots"
the different tenures so they are completely integrated within
the development.
For example, at Arbury Park in Cambridge, a
development of 282 homes, there will be 141 properties for affordable
rent and shared ownership with 20% of the shared ownership properties
being made available to key workers and a new visitor to the site
would not be able to distinguish between these and the private
for sale homes. We feel that simply specifying a percentage does
not encourage developers to provide high quality affordable housing
and that more guidance and specification with regard to standards
is required if we are to create neighbourhoods of choice for all.
Places for People supports the sequential testing
of brownfield sites. It is clear, however, that brownfield alone
is not going to provide sufficient developable land to meet projected
demand. We therefore suggest that a greenfield sequential test
should be developed that incentivises the development of sustainable
communities in areas that have infrastructure that can support
it to ensure the impact on the countryside is properly understood
and managed. This is likely to identify areas currently considered
greenbelt but of a low environmental quality.
We also feel that planning officers need to
be prepared to plan for climate change. In order to create truly
sustainable housing developments there needs to more emphasis
on the "can do" attitude from planning officers to harness
renewable technologies and to build zero carbon buildings. For
example, at our development at Broughton Atterbury we had to work
very closely with local planning officers and English Partnerships
to achieve homes that are the leading edge of energy efficiency.
As a result all 229 homes at Broughton received an Eco-Homes
Excellent rating, making it one of the largest developments in
the country to achieve this standard.
The effectiveness of housing benefit as a means
of providing access to rented housing to those in need
Places for People feel that there is a need
to distinguish between the production of housing and the way people
pay. For those people who do not have access to finance streams
to enable them to pay for housing, then housing benefit is the
legitimate option.
However, for an increasing number of people,
there are flexible tenure finance packages available that give
people the access to different financial options. We believe that
more of these options could be released if capital and revenue
funding streams could be joined together and used to cross-subsidise
the tenure options on offer.
The impact of the operation of Council Tax Benefit
on the affordability of rented housing
Places for People does not feel that it is best
placed to comment on this.
APPENDIX A
THE PLACES
FOR PEOPLE
GROUP: STRUCTURE
AND ACTIVITIES
The Group's key objectives are to provide excellent
housing in great places, a wider choice, deliver high quality
neighbourhoods and mixed communities, and to work towards ending
poverty rather than accommodating it. These are delivered through
the internal divisions and closely linked specialist companies
listed below, all of which are strengthened by the expertise and
financial strength that comes with being part of one large organisation:
— Places for People Homes owns
and manages the 46,000 homes within the Group. It is active in
over 200 local authority areas and works in partnership with a
wide range of statutory and voluntary organisations to deliver
a locally responsive service. Stock includes rented housing and
apartments for families, couples and single people through a mixture
of tenures.
— Places for People Individual Support
is committed to providing the support required for individuals
to live independently in the community. Our portfolio of 5,000
homes includes housing and services for older people, people with
learning disabilities, homeless people and preventative and practical
access to services for women at risk from domestic violence.
— Places for People Neighbourhoods
ensures that the Group does not simply manage, build and rent
houses but supports the regeneration and wellbeing of whole communities.
Providing childcare facilities, employment opportunities, training
schemes and new business start ups, Places for People Neighbourhoods
demonstrates the Group's commitment to communities.
— Places for People Development
is a major player in construction and is driving forward the sustainability
agenda by raising standards and translating this into demands
on suppliers. Planning takes place in partnership with communities
to support the development of a vision for an area by encouraging
participation and local consultation.
— Places for People Financial Services
will provide flexible financial products such as mortgages, interest
free loans and equity shares to tenants and local communities.
Providing flexibility and choice for its customers is a key objective
for the Group. It does this by looking at the housing market and
designing products and financial services that allow people access
to housing that meet their needs, and allows them to gain an equity
stake in their home.
Within the Group, there are a number of closely
linked companies providing specialist services and products to
local communities. These include:
— Castle Rock Edinvar: formed
following the merger of Castle Rock and Edinvar Housing Association.
It manages 5,000 homes in the Edinburgh and Lothian regions.
— Places for Children is aligned
closely with the Government's National Childcare Strategy and
the Sustainable Communities Plan and aims to meet the needs of
parents and communities. Places for Children has invested over
£8 million creating neighbourhood nurseries in some of the
most challenging and deprived areas of the country.
— Kush works in black and ethnic
minority communities and manages over 700 properties across North
London. It helps homeless and socially excluded people access
housing, work and education opportunities.
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