Memorandum by the Merlion Group plc (AH
25)
1. EXECUTIVE
SUMMARY
1.1 Government spending cannot realistically
achieve the critical mass to address the scale of demand within
the Intermediate Housing Market. The private sector alone has
the capacity and flexibility to meet public aspirations for getting
on to the housing ladder without the need for public subsidy.
The current system is being distorted by the unnecessary use of
large amounts of public money.
2. INTRODUCTION
2.1 Merlion Group plc welcomes the opportunity
to respond to the Committee's inquiry into Affordability and the
Supply of Housing. Merlion is the largest provider of non-grant
funded shared-equity housing in the country. Our vision is to
provide affordable housing in the most cost-effective way, without
the need for taxpayers' money. At present the market in the provision
of low cost homeownership is being distorted by the use of Housing
Corporation subsidy to the disadvantage of the taxpayer. We believe
tens, if not hundreds, of millions of pounds is being wasted,
money which could be far better spent on the provision of social
housing.
2.2 Since 1991 we have made over 1,000 homes
available to lower-paid workers under both shared-equity and shared-ownership
schemes. We are growing rapidly and are on course to deliver around
250 units this year.
2.3 One of Merlion's non-executive directors,
Dr Norman Perry, in his former capacity as chief executive of
the Housing Corporation, was a member of the Home Ownership Task
Force which reported to the Government.
3. BACKGROUND
3.1 The steep rise in house prices in comparison
to earnings in recent years has put home ownership increasingly
out of reach for large numbers of key workers and first time buyers.
The proportion of new homes sold to first-time buyers is the lowest
since records began.
3.2 As part of its wider response to expected
housing needs, the Government is now committed to a significant
increase in housing supply and aims to widen the opportunities
for home ownership to as many people as possible, from today's
70% owner occupation up to 75%.
3.3 The ODPM has announced a number of proposals
to increase home ownership opportunities, including a range of
products within the Homebuy scheme. A review of the planning system
is also underway.
3.4 The Government's sustained focus on
tackling some of Britain's entrenched housing problems is very
welcome. However, we believe that initiatives announced to date
lack both the capacity and the flexibility to keep pace with the
true growth in demand for high-quality affordable housing, particularly
in the intermediate market. The scale and problems of the intermediate
housing market are only now beginning to be understood. A recent
report by the Joseph Rowntree Foundation attempted to measure
the scale of the problem. It found that in 40 local authority
areas, at least 40% of all younger working households can afford
to pay more than a social sector rent, but still cannot afford
to buy at the lowest end of local house prices.
3.5 The Government's plans for Homebuy cannot
realistically address demand on this scale. Public resources are
already stretched and should be directed to where the need is
greatest, in social rented housing. Encouraging a primary role
for the private sector in the provision of affordable home ownership
would help to achieve a better balance between demand and supply,
improve affordability in the housing market as a whole; and, most
importantly, this could be achieved at no extra cost to the taxpayer.
3.6 We have set out below our main concerns
about the current system and some specific suggestions of how
to improve the delivery of low cost home ownership.
4. WHAT NEEDS
TO CHANGE
4.1 At present RSLs have an unfair competitive
advantage. The market is being distorted by their ability to overbid
for land using Housing Corporation direct subsidy. Merlion has
direct experience of over £8 million being misspent in this
way in this year alone (see appendix 1). RSLs frequently use public
money to inflate land values to the sole benefit of the landowner.
Some RSLs also use previous social housing subsidy to sustain
an inefficient level of internal overhead which would be unsustainable
for their private sector competitors.
4.2 The Housing Corporation potentially
spends in excess of £300 million of taxpayers' money on shared-equity
schemes annually. All of this money could be saved and diverted
to provide more social housing.
4.3 Government programmes should work with
private sector models to maximise the efficiency of tax payers'
money. Low cost homeownership could be streamlined and made more
effective by defining it as an activity financed and carried out
by the private sector and facilitated through Planning Obligations/Section
106 Agreements. This would create a level playing field between
RSLs and other providers. More decisive use of Planning Obligations/S106
Agreements could avoid or minimise inefficient use of taxpayers'
money.
4.4 Private sector providers like Merlion
already have a good track record delivering high quality housing
on a limited scale and are well-placed to expand numbers rapidly.
We believe the potential exists within the private sector as a
whole for over £1 billion to be invested over the next decade,
delivering over 100,000 units of affordable housing.
4.5 Delivering land to meet the broad range
of housing need at local level will depend on greater clarity
in planning policy from central government and a more flexible
approach from local authorities and regional planning bodies.
4.6 Local planning assessments by councils
have often failed to take into account the range of affordable
housing options available in their areas to meet demand in the
intermediate housing market.
4.7 Ideological bias means that some local
authorities still see Registered Social Landlords (RSL) as the
sole legitimate provider of affordable housing despite the ODPM's
recognition of the contribution which private housebuilders can
make.
4.8 Regional Housing Strategies should set
out clearly that local authorities need to include shared-equity
explicitly within their local spatial and housing strategies.
The Government should place a duty on local planning authorities
to include shared-equity housing, and to consider the role of
the private sector, in their planning policies and Section 106
agreements.
5. SUMMARY
5.1 We believe encouraging an expansion
in the role of the private sector would be the quickest means
of bringing more affordable housing within the reach of more people,
and at no cost to the taxpayer.
5.2 By enabling greater private sector provision
the Government could focus more resources where they are needed
most, such as Decent Homes, Social Rent and Social HomeBuy.
5.3 The private sector is not asking for
subsidies but would like to see those obstacles removed which
are currently restricting its potential to respond fully to the
urgent demand for affordable housing.
| 
