Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Third Report


3  Meeting Housing Needs and Aspirations

27. To achieve sustainable communities, the new housing must

  • Cater for different housing needs and aspirations;
  • Provide for different household sizes;
  • Ensure different tenures are integrated;
  • Be built as part of mixed use areas, providing employment locally, and
  • Have minimal impact on the natural environment.

28. Strategies to deliver these criteria need to take account of variations between localities in terms of income, housing costs, the nature of the existing housing stock and the requirements of the local economy.

Meeting Housing Needs

29. Since 1995, the number of families in temporary accommodation has more than doubled to 100,000 families. At the same time, the number of new affordable housing completed fell by almost half, from 32,500 in 1995 down to 16,700 in 2004. We received much evidence relating to the effect of the decline in social house-building on the rise in unmet housing demand over the last ten years. Our predecessor Committee's 2005 report on Homelessness concluded that, while the number of families accepted as homeless was levelling off, the number of families in temporary housing was increasing with associated costs to both society and the family.[17]

30. Shelter has called for a major increase in public investment in social housing to tackle the backlog of need:

"Decades of underinvestment lies at the root of Britain's housing crisis - we still only spend 0.2 per cent of GDP on providing new social housing. Investment would need to be trebled, bringing it up to around 0.5 per cent of GDP over the long term, to have any prospect of meeting the chronic shortage of affordable housing".

Shelter pressed for a significant increase in investment in social rented housing to tackle rising needs.

"The failure of successive governments to invest in social housing for rent lies at the root of Britain's housing crisis and explains why a million children are growing up homeless or in damp, cold and overcrowded accommodation. All the evidence shows that bad housing can have a devastating impact on the health, education and life chances of children, leaving them at risk of permanent social exclusion in later life. A decent, affordable home has an essential part to play in improving their life chances".[18]

31. Shelter estimated that 20,000 extra social rented homes were needed annually over and above existing commitments:

"to meet acute newly-arising housing need and ensure the Government meets its very welcome target of halving the number of homeless households trapped in unsuitable temporary accommodation by 2010. We estimate that this increase in output will require additional investment of more than £1 billion a year from 2008, finally bringing real-terms investment up to the level achieved by the Conservative Government in the mid-1990s".[19]

In response to the Barker report, the Government announced that it would "set out its ambitious plans for increasing social housing supply, with new investment alongside further efficiencies and innovation in provision, as part of the 2007 Comprehensive Spending Review".[20]

32. We welcome the Government's commitment to boosting investment in social housing as part of the next Comprehensive Spending Review. Housing needs differ from area to area, and any approach will have to allow flexibility for projects to meet specific local requirements. The overwhelming need is for social rented housing to make up the shortfall in supply and to recoup the very significant losses in social housing that have occurred over the last 15 years.

33. It is vital that social rented housing make up a significant proportion of the enlarged house-building programme proposed by the Government. We endorse Shelter's estimate that 20,000 homes are required above current proposals to achieve the Government's target to halve the number of homeless households in unsuitable temporary accommodation by 2010 and to meet newly arising housing needs.

THE ROLE OF SHARED OWNERSHIP HOUSING

34. The evidence pointed to a second group requiring affordable housing: those who were not eligible for social housing, but could not afford to buy. Two recent research projects, by Professor Glen Bramley of Heriot Watt University and Professor Steve Wilcox of York University, highlight the need for intermediate forms of tenure. The Housing Corporation told us that

"Work by Glen Bramley for the Housing Corporation's Home Ownership Task Force suggests that of all newly forming households, less than 40% could afford to buy outright in their local market: in London this figure was 22% in the East Midlands and northern regions around 50%.

The recent Joseph Rowntree Foundation study by Steve Wilcox identifies more than 40 local authority areas where 40% or more of all younger working households can afford to pay more than social sector rent, but still cannot afford to buy at the lowest decile point of local house prices. These authorities are found in London (13), the South East (15) and the South West (11). Ryedale in Yorkshire is also unaffordable for this group. Affordability issues are most pronounced in London where house prices to income ratios exceed four to one in all areas except Bexley and Havering".[21]

35. Government funding to the Housing Corporation has increased considerably since 1998, and a significant proportion of this additional funding is now being spent on shared ownership and equity share schemes. The Chairman of the Housing Corporation, Peter Dixon, told us that there has been a shift. "At one time virtually everything we did was housing for rent. A few years ago it was probably 85 per cent rent, 15 per cent various other products including some of the home life products. In the current programme it is probably shifting to around 70:30".[22]

36. The tables below show that up to 2002, the proportion of funding spent on social rented was relatively constant at about 80-90% of the Corporation's total investment programme. In 2003, the Corporation's expenditure was increased by £787 million but the share of funding spent on social housing fell by 12%. The trend is more marked with the number of completed homes, because the level of subsidy on shared ownership and equity share products is about half that necessary for social rented housing. In the last two years, more than 40% of the homes completed with funding from the Housing Corporation have been shared ownership or equity share, compared with 25% in 2002. The charts and tables below show the breakdown of Housing Corporation expenditure on shared ownership and social rented housing and the number of homes funded by tenure.

Table 2: Housing Corporation Expenditure and Outputs 1997-2004: Funding by tenure
Year
Expenditure on social rented (£m)
Expenditure on shared

ownership housing (£m)
Total expenditure (£m)
1997
545
160
705
1998
505
115
620
1999
582
79
661
2000
658
97
755
2001
736
90
826
2002
845
187
1,032
2003
1,272
547
1,819
2004
1,126
520
1,646

Data source: Housing Corporation

Chart 1: Housing Corporation Expenditure and Outputs 1997-2004: Funding by tenure in percentages:

figure 1 here

Data source: Housing Corporation

Table 3:Housing Corporation Expenditure and Outputs 1997-2004: Completions by tenure
Year
Social rented
Shared ownership
Total
1997
26,313
10,793
37,106
1998
24,737
8,202
32,939
1999
21,160
4,535
25,695
2000
18,724
4,196
22,920
2001
19,892
3,742
23,634
2002
18,515
6,460
24,975
2003
18,031
12,635
30,666
2004
17,114
12,801
29,915[23]

Data source: Housing Corporation

Chart 2: Housing Corporation Expenditure and Outputs 1997-2004: Completions by tenure in percentages:

figure 2 here

Data source: Housing Corporation

37. One key reason for the Housing Corporation's increasing investment in intermediate tenure housing is to maximise the number of units secured per pound of public funding. Peter Dixon told us that, "what we have to do is to make sure that [funding] goes as far as we can make it…ensuring we are getting value for money in procuring those homes".[24] In future years, the balance of Corporation funding between social rented and intermediate tenure housing is set to continue at the recent levels. About 35,000 homes in the 2006-2008 programme will be part of equity share schemes, which is about 41.5% of the total output, and 49,000 homes will be social rented.

38. The Government and the Housing Corporation are rationalising the intermediate housing programme under three initiatives:

  • Social Homebuy, a programme to help social tenants buy their homes;
  • New-build Homebuy, a programme to provide new build properties for low cost home ownership, and
  • Open Market HomeBuy, a programme to provide an equity loan to purchase a home on the open market.

The Housing Corporation is continuing to manage the Key Worker Housing Programme which targets Homebuy products at specific, usually public sector, occupations in areas with high housing costs.

39. Several of our witnesses supported the role of intermediate housing in meeting particular housing needs. The submission by the Mayor of London said the aim of intermediate housing was "to aid retention of key workers and prevent low to middle income families leaving London".[25]

40. Other witnesses, however, pointed out that the benefits of intermediate housing schemes were limited because they were only affordable to a small group on the margins of homeownership. Surrey County Council estimated that "an income of at least £20,000 would be needed in the South East to purchase a 50% share in a property under this scheme. This is well above the average income for social rented households of £16,000".[26] The Lake District National Park Authority raised concerns that "the redirection of resources from rented to shared-equity that is occurring raises questions about whether public money is being used to help those in greatest need, or merely subsidising an already over-inflated market".[27]

41. The Chancellor's 2006 Budget statement reinforced the Government's commitment to increasing its shared ownership programme. It established a task force to consider the scope for shared equity products to assist more households into homeownership.

42. Low cost homeownership schemes can meet the housing requirement of specific groups which housing authorities wish to retain or attract to particular areas. Schemes which subsidise homeownership without increasing the supply of housing risk contributing to increasing house prices. The Government is introducing new shared ownership schemes. We recommend that the Government ensure that all low-cost home ownership schemes operate in such a way as to support increases in overall housing supply rather than intensifying pressure on the existing supply. The benefits arising from the public subsidy should be passed on to future purchasers.

43. The increase in funding to the Housing Corporation over the last four years has, in the main, been used to support additional low-cost homeownership schemes. It is important that the Housing Corporation does not lose sight of its fundamental role as the main funder of new social rented housing. We recommend that a limit be set on the proportion of the Housing Corporation's funding that is allocated for low-cost homeownership schemes. The proportion spent on equity share and shared ownership will vary from one region to another depending on the nature of the priority needs. It is the responsibility of the Regional Housing Boards and Assemblies to identify priorities. The Chancellor's 2006 Budget statement gave prominence to expanding equity share schemes, but equal importance should be given to increasing the supply of social rented housing.

HOUSING SUPPLY, HOUSE PRICES AND AFFORDABILITY

44. As confirmed in its response to the Barker Report, the Government is prioritising the increase in the supply of housing for sale, with a view to tackling the recent sharp increases in house prices, and to meet the aspirations for homeownership. It said "improving affordability and helping future generations of homebuyers get a foot on the housing ladder will require new housing supply in England to increase over the next decade to 200,000 net additions per year. This will help take home ownership to 75 per cent".[28] The breakdown of the enlarged house-building programme between market and affordable housing is as yet uncertain. Some of our witnesses questioned whether the Government's strategy would have the desired impact on house prices, and whether the current level of homeownership was sustainable, or its expansion realistic.

45. The Government's strategy is based on the basic economists' supply and demand model: if you increase the supply, the price will drop. Many, however, believe that the housing market is more complex than this model suggests. The Royal Town Planning Institute said:

"The economics of housing markets are far more complex. Housing has several unique features that make conventional market economics inappropriate, such as a fixed location, with values dependent on many externalities, their long life and the fact that they are (increasingly) regarded as an investment, rather than consumption, demonstrated, for example, by the growth of the buy to let sector".[29]

46. Economists for the Government have sought to quantify the impact of different increases in housing supply in terms of their impact on price rises using models which take into account various factors affecting the housing market and prices. Kate Barker's study was intended to identify how house price inflation could be reduced to the European average in order to prepare Britain for EMU entry. Her final report said that:

"Taking as the baseline the level of private sector build in 2002-03, 140,000 gross starts and 125,000 gross completions, it is estimated that: reducing the trend in real house prices to 1.8 per cent, would require an additional 70,000 private sector homes per annum; and more ambitiously, to reduce the trend in real house prices to 1.1 per cent, an additional 120,000 private sector homes per annum would be required".[30]

47. A report prepared for the ODPM by a group of academics led by Professor Geoff Meen from Reading University highlighted the complexity of using housing supply to increase affordability and to develop affordability targets. It concluded that:

"Large increases in construction do have significant effects on affordability, measured in terms of the ratio of lower quartile house prices to incomes. But the increases in construction have to be large. The increases have to be across a whole region and spatial targeting presents practical problems. On the one hand, regions may be considered too large as entities since many regions contain areas of both high and low demand and expansion of construction will have a differential effect according to which is chosen. On the other hand, targets for smaller spatial areas are probably impractical because of the induced migration inflows".[31]

48. The Government's proposals are generally consistent with the mid scenario tested by the Reading team. This suggests that the rate of increase in house prices would decline but to a limited extent and that the impact would vary greatly between different types of area.[32] With the new housing supply figure so close to the projected increase in the number of households, it is difficult to see how the Government proposed building rate will have any detectable impact on house prices.

49. The Reading team questioned the practicality of setting a date by which an affordability target should be met:

"Although we have been asked to look particularly at 2016 as a target year, we would not recommend the choice of any single year as a target. Affordability is simply too volatile over the cycle for this to be a reliable target. Supply-side policies, linked to the planning system, cannot be used to offset the short-run cycle". [33]

50. The South East County Leaders group challenged Barker's figures. An alternative study, which it commissioned from the Institute for Public Policy Research, concluded that price rises could be reduced by 1.1 per cent with half the number of new private homes that Barker suggested was required. The Leaders' chairman Councillor Keith Mitchell commented that "it simply confirms the scepticism around trying to predict house price behaviour through a model. Neither is correct in my view, but we have a demonstration of the problem".[34]

51. Many have questioned whether it is in the interests of house-builders to increase supply to the extent that house price rises would be significantly affected and whether there is the capacity in the building industry to support such an increase in output. Surrey County Council told us that it had

"doubts as to whether the house building industry will respond in the way Government intends, e.g. the Chief Executive of Barratt Homes has recently stated that his company will 'not chase volumes for the sake of it. We would prefer to protect margins and selling prices.' More practically, questions must also be asked about whether the house builders have the capacity to deliver significant additional levels of housing, given the scale of construction work underway in the region and the potential demands posed by construction of Olympic facilities".[35]

52. A simple supply and demand model cannot be applied uncritically to the behaviour of the housing market and house prices. The particular nature of the housing market makes it very difficult to be certain about the effect which a certain level of increase in supply will have on prices and thereby affordability.

53. It is unclear what impact the Government's objective to increase house building to 200,000 by 2016 would have on affordability. It is likely that a very large number of new homes would be required annually to have a significant impact on affordability. There is no clear reason why house-builders would be committed to increasing housing supply to such an extent as to compromise their profit margins.

Other factors affecting affordability

54. Demand-side factors, such as income levels, interest rates, the availability of credit and taxes, can also affect the price and affordability of private housing. One model quoted in research from the ODPM measured the impact of several factors. Under this model, assuming all other factors, remain constant:

  • "If incomes rise by 1%, house prices will rise by between 1.7% and 3%;
  • If interest rates rise by 1%, house prices will fall by between 0.02% and 0.04%;
  • If the housing stock increases by 1%, house prices will fall by between 2% and 3%;
  • If the stock falls by 1%, house prices will increase by between 2% and 3%, and
  • If the number of households increases by 1%, house prices will rise by between 2% and 3%. This relationship is basically the inverse of the relationship with stock".[36]

The availability of credit and inherited wealth have a considerable impact on house prices but there are problems in quantifying the impact.

55. Surrey County Council pointed out that as interest rates rose during 2004 and early 2005, the rate of house price inflation in Surrey slowed:

"Although figures have not yet been published for the 3rd quarter of 2005, nationally there is evidence from the Nationwide Building Society and the Halifax Bank that the easing of interest rates in August 2005 has stimulated the housing market, with house price inflation beginning to rise again".[37]

56. There are many factors, other than supply, which affect the affordability of housing. The Government needs to examine a range of strategies which might influence demand such as interest rates, the availability of credit and taxation, as possible approaches to stemming price rises and improving affordability.

Potential to sustain and increase current homeownership levels

57. Between 1981 and 2005 homeownership levels in England rose from 57% of households to 70%. The ODPM says that, since 1997, there have been an additional one million homeowners. These increases can be attributed to council tenants exercising their right-to-buy, the availability of mortgage finance at low interest rates and rising incomes. However, it is becoming more difficult for younger people to get a foot on the homeownership ladder. The ODPM points out

"that among couples in their early thirties who are currently renting, just over half can afford to buy their own home. If we carry on building at current rates that figure will fall to only a third being able to buy within the next 20 years. First time buyers are getting increasingly older and their average deposit has gone up from £5,000 in 1996 to £34,000 in 2005".[38]

This increase in deposits is a result of parental contributions and inherited wealth supporting home purchases.

The Council of Mortgage Lenders argued that the high levels of borrowing and higher price to income ratios were affordable because of low interest rates. Bob Pannell, their Head of Research and Information, said that

"For first-time buyers, the median income multiple was 3.2 in the middle of this year. That compares with something like 2.4 ten years ago, and of course, what has happened in the intervening period is the macroeconomic backdrop has changed dramatically, particularly in terms of the interest rate environment. Interest rates are well below half the level that was prevailing 10-12 years ago".[39]

58. Other witnesses were concerned that the high levels of borrowing meant that households were overstretching themselves and made them vulnerable to changes in the economic climate. The Cheshire Housing Alliance said that

"The UK has one of the highest rates of personal debt in the developed world, largely due to mortgage debt, equating to over 60 per cent of annual GDP. It is inevitable that promoting greater home ownership will result in higher levels of borrowing and there is a danger that it will encourage those on the lowest incomes to take on levels of debt that will cause hardship in the long term, particularly given the current low interest rates".[40]

Similarly, Housing Justice was concerned that "Government policy aimed at expanding home ownership will increasingly bring into owner occupation more marginal groups who may find it harder to keep up mortgage repayments if interest rates were to rise in the future or if unemployment increases significantly. It suggested that "interest rate rises, coming on top of the record levels of consumer debt, might result in large numbers of repossessions"[41] Shelter points to the recent increase in repossessions:

"After a period of over a decade, when the number of court possession actions for mortgage arrears was falling, possession actions are now rising alarmingly. Nationally, between the third quarter of 2004 and the third quarter of 2005, there was a 55 per cent increase in possession actions…If trends continue at this rate through 2005, it will mean that over 50,000 more households will be at risk of repossession and homelessness this year compared to last".[42]

59. Some witnesses suggested that more effective safety nets were required for homeowners who had problems in servicing their mortgages. The Housing Corporation said that

"More could be done to make home ownership sustainable for those on the margins of affordability if there was greater investment in flexible tenure, such that there was funding for associations to buy back shares from owners allowing buyers to flex the share they own downwards (or upwards) to suit their personal circumstances, perhaps, due to a loss of household income due to divorce or sickness".[43]

Professor Glen Bramley called for "a more adequate safety net based in insurance, social security benefits or a widened housing allowance would reduce the risks of homeownership for a substantial group of households".[44]

60. There are also concerns that the Government's emphasis on promoting homeownership will further marginalize the social rented sector. The Chartered Institute of Housing argued that an excessive emphasis on promoting homeownership could create perceptions of exclusion amongst those who could not afford it. It said that

"It is inappropriate to 'promote' greater ownership as the best option to people who will clearly not benefit from it, and it is important that renting is seen as a positive choice for some households either throughout or at some point in their life. The emphasis on developing schemes to help more people into ownership, and references to a 'home owning democracy', run the risk of creating a perception of exclusion of those who chose not to or are unable to become owners".[45]

61. We recognise that homeownership is popular and is an important means of increasing personal wealth. The recent increase in homeownership has been achieved as a result of increasing household formation, right-to-buy purchases, higher incomes and low repayments. There will always be a sizeable number of households which either cannot afford to buy or choose not to. The rights and security for people who rent either in the private or social sector, and issues of exclusion, will be considered in a further report.

62. Some households have accumulated high levels of debt from buying their homes and borrowing for other purchases, making them vulnerable to interest rate rises and economic downturn. The high levels of consumer debt make households more vulnerable to losing their homes. The Government should investigate the effect of easy access to consumer credit and its connection to home repossessions and take appropriate action. It should also look at offering opportunities through the Housing Corporation for homeowners to reduce the equity they own in their homes to avoid them losing their homes.

Achieving current house-building targets

63. Existing house-building targets are not being met. The emerging and adopted regional spatial strategies have an overall target of about 170,000 new homes per year. This target is not being achieved: in 2005 only 160,000 homes were built. In some areas there are large numbers of unimplemented outline planning permissions and sites allocated for housing which have not been taken up. In the South East, for instance, seven years' supply of land has been identified. There are several reasons why these sites have not been developed. Kate Barker's report highlights the problems of securing infrastructure and her interim report suggested that 40,000 homes were being held up in the South East due to the lack of suitable infrastructure.[46] We consider infrastructure issues later in this report.

64. Some witnesses drew attention to the fact that developers are holding back sites from the market to maintain prices. The Campaign to Protect Rural England told us that

"Measures are needed to discourage housing developers from sitting on landholdings which have planning permission. The 14 leading UK house-builders held around 240,000 housing plots with full or outline planning permission in 1998. This figure rose by more than a third to 331,000 plots in 2004".[47]

The Government shares this concern over land-banking. The Deputy Prime Minister, Rt Hon. John Prescott MP, told The Guardian that "A lot of ruddy builders shout about planning, but find it more profitable to hold on to land in tremendous land banks. They are on to a damn good thing. They blame planning, but I wish they would tell us how much land they have got in the bank".[48]

65. The Planning and Compulsory Purchase Act 2004 reduced the time allowed to implement planning permissions. Developers now have three years, rather than five years, from gaining outline planning permission to apply for approval of the reserved matters and two years from the date of approval of the last of the reserved matters to implement the planning permission. Planning permissions are no longer automatically renewed and fresh applications are required once they expire.

66. Existing house-building targets are not yet being achieved. There are a large number of sites which have been allocated for housing, some with outline planning permission. There is potential to increase the take up of these sites. Local authorities need to investigate any housing sites not being developed in their areas and identify the reasons for the delay; where infrastructure problems or other reasons are holding it up, Councils should be encouraged to work with the Regional Development Agencies and English Partnerships to unlock the development potential.

67. If house-builders are holding on to sites which are ready for development, Councils should be encouraged as a last resort to use their compulsory purchase order powers and to find an alternative developer.

CATERING FOR DIFFERENT HOUSEHOLD SIZES AND NEEDS

68. With the Government's commitment to boost the housing supply, it is important that a diverse range of housing requirements are met, including the needs of families, elderly people and the disabled. With reliance on a wide range of providers, there is a greater challenge to meet all those needs. Demographic pressures vary from region to region and this should be reflected in the mix of new housing planned.

69. Evidence suggests that there is a preponderance of flats being built rather than family housing, particularly in town and city centres. This is a result of Government policies seeking to achieve a higher density development in urban centres and agencies, including the Housing Corporation and local authorities, interpreting current trends in household sizes too literally. Developers may also maximise their profits by building smaller homes.

70. The East London Housing Partnership pointed out that the concentration of smaller units does not help create stable communities. It told us that

"It is inevitably more economically attractive for developers to build high density one and two bedroom units for sale than family housing. We are therefore concerned that much of this housing will be occupied for relatively short terms by childless couples who are then more likely to purchase family housing elsewhere at a later date".[49]

The Mayor of London highlighted a major shortage of larger homes in the private and social rented sectors:

"Housing products must change across tenures. In social housing, the GLA's Housing Requirements Study identified that 42% should be 4-bed plus, to tackle the backlog in family housing provision. This need for larger homes holds for intermediate housing, where the policy driver is to aid retention of key workers and prevent low-to-middle income families leaving London. The need is for family-sized dwellings, rather than the 1-bed/studio homes developers often see as the primary intermediate/key worker product. Although the percentage of 3 bedroom or larger social rented dwellings increased from 16% to 20% between 1991/2 and 2003/4, this is well below the required figure and analysis of schemes under development indicates that this proportion is falling. In the market sector, output of 3 and 4 bedroom homes fell from 28% to 19% between 1991/2 and 2003/4 - against the trend in all other regions except the North East".[50]

71. Many witnesses argued that while there was an increasing number of smaller households, this did not necessarily mean that more smaller houses or flats were required. Peter Lee, from the Centre for Urban and Regional Studies at Birmingham University, commented that "we are in danger of developing too many monolithic one and two bedroom apartments on the assumption that households will be smaller. Households will still have friends and, where they have been divorced and have families, they will want their kids to stay over".[51]

72. The Minister for Housing and Planning, Yvette Cooper MP, pointed out that housing needs varied across different areas and that local authorities should make proper assessments. She told us that the Government was keen to encourage higher density development to create more sustainable communities, but that this did not necessarily preclude family housing.

"I think it is very possible to meet the density targets and have a wide range of different housing. For example, I think we underestimate the terraced house. You can have very large terraced houses with plenty of bedrooms which are relatively high density. I think people think the only way to deliver density is through blocks of flats and that is simply not true".[52]

We note that while Planning Policy Guidance Note 3 (PPG3) on Housing set a minimum density target of 30 dwellings per hectare (dph) for new housing development, the recent draft Planning Policy Statement 3, which will replace PPG3, proposed a range of densities depending on the location, with 30dph as a minimum. It also proposes that planning authorities should stipulate the balance between different household types to be provided for across the plan area.

73. Higher density development does not have to comprise smaller units or a preponderance of flats. To create sustainable areas, a range of unit sizes which caters for a range of needs is required. Funding priorities and local authority policies need to be sufficiently flexible to enable the new housing supply to reflect the range of needs and household sizes in their particular areas.

74. The Government's policy to concentrate mixed development in town and city centres has successfully encouraged increasing numbers of new homes in many urban centres. In some areas the housing market is distorted by significant levels of buy-to-let investments, which have driven up prices and not created stable communities. In these areas, the fact that housing offers a higher return on capital investment than equities has driven up prices artificially and is making home purchase unaffordable for local buyers, forcing them into rented accommodation. The London Borough of Barking said that, as a result, it was concerned that

"much of this housing will be occupied for relatively short terms by childless couples who are then more likely to purchase family housing elsewhere at a later date. The social impact of this is that communities are very transient and people are not encouraged to establish long term roots in an area. Whilst the market is flooded with smaller units, the prices of larger family homes will continue to rise.

The secondary impact is that much of this housing will be purchased as part of the vibrant buy to let market, which whilst a necessary part of the growth of a developing economy does not contribute to the social benefits of homeownership".[53]

75. The Welsh Street Homes Group in Liverpool told us that

"The increased borrowing power available to Southern, or Irish property owners has enabled the purchase of 'buy to let property' in regenerating Northern cities. This has affected supply, and the cost of buying and renting accommodation in Liverpool".[54]

These views were supported by Sunderland City Council, which told us that

"Another concern for the city, which stems from market movement is the increased amount of investor buyer from people who live outside the city and North East region. This is especially common in the new-build apartment market. The trend has contributed to pushing up purchase prices and prevented more local people from buying such properties".[55]

76. The buy-to-let market is attracting additional investment and new opportunities for private renting in many town and city centres. In some areas, however, the transient population living in the private rented housing adds to the instability of the area; the activities of investment funds can skew, albeit temporarily, any indicators of affordability as the house prices reflect the expected financial return rather than what the local population can afford. The local population is thus excluded from homeownership.

77. Local authorities should be encouraged to take account of the potential impact of housing developments being used as buy-to-let schemes when giving planning approval. If necessary, the Government should consider whether local authorities need additional powers to ensure a broad range of family housing units are available in inner cities.

The needs of the elderly and the disabled

78. There is an increasing number of people with special housing needs such as the elderly and disabled people. There are concerns that with the increasing emphasis on promoting homeownership the needs of these groups will be neglected. The specialist housing association John Grooms highlights the low level of homeownership among disabled people. It told us that

"The Government's emphasis on pursuing policies to promote homeownership will further reduce the opportunities which disabled people have for living independently in a house which is accessible and adapted to their needs".[56]

The Disability Rights Commission points out that "The crisis we face is not just about affordability. It is, crucially, also about a chronic dearth of housing which is accessible to disabled people and designed to meet and adapt to the needs of occupants over their lifetime".[57] According to the Commission, many local authorities require all new homes to be built to the lifetime home standards and many homes funded by the Housing Corporation also provide it. It is not, however, a standard requirement for new house-building. The lifetime home standard is included in the draft Code for Sustainable Homes but only at the very highest level. John Grooms called for all housing to be built to lifetime homes standards, with 10% built to the higher wheelchair standard.[58]

79. The charity Scope emphasises that to cater for the needs of disabled people, land for housing development

"must be near or easily connected to public transport infrastructure … and should be in close proximity to essential services, shops and facilities or if not that these elements should be contained within the development proposals with guarantees from the relevant stakeholders that they will be in place before planning permission is granted".[59]

80. A report by the House of Lords into the economics of an ageing population noted the increasing proportion of the population over 65.[60]

"In 1971, persons aged 65+ comprised 13.2 per cent of the total UK population, and persons aged 80+ comprised 2.3 per cent of this total. By 2000, the 65+ population had grown to 15.6 per cent of the total, but the 80+ population had almost doubled its proportionate share to 4.0 per cent. Over the 50 years to 2050, the Government Actuary's Department projects that the 65+ age group will have expanded to 24.4 per cent of the total UK population, but that the 80+ age group will have more than doubled to reach 9.1 per cent of this total".[61]

81. There is some evidence that older homeowners tend to under-occupy their homes and some have problems maintaining them because they are 'asset rich and cash poor'. The Survey of English Housing has developed a 'bedroom standard' by which it has assessed whether occupants are under-occupying or are living in overcrowded conditions. Analysis of the Survey, by the Elderflowers Projects, shows that under-occupancy rises with age:

"In the 45-49 age group 31% of households are under-occupying, this rises to 42% in the age category 50-54, to 52% in the age category 55-59, to 56% in the age categories 60-64 and 65-69".[62]

82. The Cheshire Housing Alliance highlighted the results of a survey which shows that many older people had to sell their homes to finance residential care in later life, and there is evidence that the responsibility of maintaining a property in old age creates financial hardship. "Homeowners cannot always access grants and benefits that may be available to those in the social sector and many are not aware of or mistrust equity release schemes".[63] The Chartered Institute of Housing point out that

"In theory home purchase should reduce poverty experienced by established homeowners in later life, because equity can be released from the property. In reality 70% of poor homeowners own their home outright - even when the property is debt-free, ownership does not lift the household out of poverty. It is difficult for many people to turn property-based wealth into income because of the extremely poor terms offered by many equity release products and the lack of suitable property (e.g. bungalows) for relocation/downsizing".[64]

83. With the Government's emphasis on promoting home-ownership, there is a danger that the needs of disabled and older people, and those with other special housing needs are neglected. It is important that the housing, in both the private and social rented sectors, is built to a standard which can be easily adapted to meet the lifetime needs of their occupants. We recommend that the Code for Sustainable Homes be amended to give greater priority to ensuring homes are built to lifetime home standards. We further recommend that the Government ensure that housing for disabled people is provided on sites with easy access to essential services.

84. Many older people are occupying homes which are too big for them. We recommend that the Government work with the Housing Corporation, house-builders and local authorities to increase the provision of smaller homes suitable for older people.

85. Many equity release schemes offer poor terms. We believe that the Government should work with financial services providers to develop more appropriate schemes which enable older people to realise some of the capital tied up in their homes.

Mixed Communities

86. Much of our evidence emphasised the importance of creating mixed communities with a mix of tenures if we are to achieve sustainable communities. Mixing homeowners with social residents helps to avoid stigmatisation. Providing a range of unit sizes caters for the changing needs of residents. Social rented, affordable and private housing need to be fully integrated in terms of layout and indistinguishable in terms of the design. Appropriate strategies will vary from one area to another depending on the tenure balance and unit mix. The Chartered Institute of Housing said that

"Some areas with a high concentration of social housing may wish to increase the supply of private housing to rebalance the housing market and alter the local economic profile. Areas with a dearth of social housing where local residents have to leave to secure affordable accommodation may wish to prioritise social or intermediate housing over private provision…There is a need to provide more expensive housing for wealthier households as well as ensuring that lower income households can secure accommodation".[65]

It also argued that a PSA target for mixed communities would help to promote this strategic approach.[66]

87. Both Barking and Dagenham Council and the West Midlands Regional Assembly emphasised the need for 'aspirational' housing to retain the population in inner urban areas. Ken Jones, Head of Housing Strategic Development at Barking Council, told us that

"we need to attend to the needs of the existing community, so we are looking at a balance between social rented, intermediate forms of home-ownership and also aspirational housing, because currently there is a shortage of that sector of housing in Barking and Dagenham. Barking and Dagenham has, I think it is, the second highest percentage of social rented homes in outer London".[67]

Steve Gregory, Chair of the West Midlands Regional Housing Partnership, highlighted the importance of providing aspirational housing to stop executives fleeing to the suburbs. "Our strategy is built around initially retaining the existing population and making sure there are adequate aspirational housing opportunities for the existing population, with an ambition for the executives to remain in the conurbation".[68]

88. The higher level of house-building being promoted by the Government should be delivered in a way that ensures the overall tenure mix is appropriate to an area. Local authorities need to develop evidence-based approaches which ensure that new housing development provides for the full range of needs of local residents, especially families, the elderly and disabled people. We recommend that Government guidance also encourages the provision of private housing to meet the aspirations of all those living and working in the area.


17   Third Report from the ODPM Committee, Session 2004-05, on Homelessness, HC 61-I.  Back

18   Ev 278 Back

19   Ev 279 Back

20   Government Response to the Barker Review, p.4. Back

21   Ev 326 Back

22   Q 426 Back

23   These figures are higher than the ODPM's live tables because they include the private market homebuy and other schemes under the Government's Starter Home Initiative. Back

24   Q 431 Back

25   Ev 197 Back

26   Ev 111 Back

27   Ev 128 Back

28   Government Response to the Barker Review, p. 15. Back

29   Ev 347 Back

30   Barker, Kate, Review of Housing Supply - Delivering Stability: Securing our Future Needs, Final Report - Recommendations, (hereafter "the Barker Report"), March 2004, p. 9. Back

31   Affordability Targets: Implications for Housing Supply, ODPM, December 2005. Back

32   Government Response to the Barker Review.  Back

33   Affordability Targets: Implications for Housing Supply, ODPM, December 2005. Back

34   Q 271 Back

35   Ev 112 Back

36   A sustainability impact study of additional housing scenarios in England, ODPM, December 2005, p.122. Back

37   Ev 113 Back

38   Ev 285 Back

39   Q 48 Back

40   Ev 160 Back

41   Ev 263 Back

42   Ev 277 Back

43   Ev 330 Back

44   Ev 373 Back

45   Ev 255 Back

46   Barker Review Interim Report, HM Treasury, 2003, p.160. Back

47   Ev 252 Back

48   The Guardian, December 2, 2005.

 Back

49   Ev 133 Back

50   Ev 197 Back

51   Q 87 Back

52   Q 479 Back

53   Ev 133 Back

54   Ev 335 Back

55   Ev 413 Back

56   Ev 147 Back

57   Ev 358 Back

58   Ev 147 Back

59   Ev 207 Back

60   House of Lords, Aspects of the Economics of an Aging Population, Fourth Report from the Select Committee on Economic Affairs, Session 2002-03, Paper 179. Back

61   Aspects of the Economics of an Ageing Population, p.12. Back

62   Ev 155 Back

63   Ev 161 Back

64   Ev 255. The Survey of English Housing has developed the "bedroom standard" which is the number of bedrooms that a household is calculated to need on the basis of the household composition. Households with fewer bedrooms than the bedroom standard are over-crowded. Those with 2 or more bedrooms above the standard are deemed to be under-occupying. (The bedroom standard does not allow for a spare bedroom which is now generally considered not to be a luxury.) Back

65   Ev 257 Back

66   Ev 257 Back

67   Q 216 Back

68   Q 196 Back


 
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