Memorandum by the Chartered Institute
of Housing (CIH) (AH 58)
1. INTRODUCTION
The Chartered Institute of Housing (CIH) is
the only professional body for individuals working in housing.
Its primary aim is to maximise the contribution that housing professionals
make to the well being of communities. Membership status is dependent
on completion of a professional qualification and a track record
of professional achievement.
CIH has over 19,000 individual members working
for local authorities, housing associations, Government bodies,
educational establishments and the private sector.
CIH welcomes this inquiry and the opportunity
it provides for deeper consideration of the debate around supply
and affordability of private housing which has been at the fore
of the housing community since the publication of the Barker Report.
2. SUMMARY
Government attempts to increase supply and address
problems of affordability in owner occupied housing are welcome.
The approaches currently being taken do, however, need further
consideration, development and revision if these national problems
are to be tackled effectively.
Our main recommendations for consideration include:
— Continue emphasis on increasing supply
of housing.
— Improve terms of and access to affordable
equity release schemes for outright owners.
— Introduce a sinking fund to promote
maintenance by lower income households.
— Give non-owners access to assets
through schemes such as HomeSave.
— Emphasise renting as a positive choice
for some households.
— Increase population limits for rural
exception sites.
— Recognise that housing supply has
limitations as a tool to influence prices.
— Ensure that the planning system is
primarily strategic and enables housing need to be met.
— Move away from emphasis on numbers
and focus on provision of the right mix of size, type, and cost
of housing.
— Promote models to keep housing affordable
such as Community Land Trusts.
— Increase the supply of housing suitable
for households wanting to downsize.
— Acknowledge that affordability can
be affected by factors other than purchase price.
— Emphasise the importance of design
and quality alongside speed of delivery.
— Improve coordination for infrastructure
funding and provision.
— Give greater public emphasis to affordability
problems in the north and midlands.
— Publicly support HMRP use of demolition
to restructure housing markets.
3. (a) The potential benefits of and
scope to promote greater homeownership
3.1 Government has placed homeownership
at the centre of its drive to promote asset based welfare and
supports a culture where homeownership is favoured over other
tenures. Homeownership does bring financial, social, and psychological
benefits to many, but it can also cause problems and hardship
especially for lower income households. Government must take account
of the potential problems of increased homeownership alongside
consideration of potential benefits when deciding future housing
and welfare policy.
3.2 Homeowners with equity in their property
can enjoy significant financial benefits as they can borrow against
the value of their home and pass their wealth on to younger generations
through inheritance. Home ownership also gives individuals a degree
of control, stability and security above that available to private
and (to a much lesser extent) secure/assured social tenants. Some
communities may benefit from a strategic promotion of greater
ownership where it can help to retain residents and mix incomes,
household types etc. The extension of these benefits to a greater
number of households/communities therefore initially appears to
be a laudable policy aim.
3.3 These benefits do not, however, come
to all homeowners, and there can be significant disadvantages
in homeownership. There is an inherent risk in purchasing property
as an investment because its value can go down for reasons beyond
the control of the owner. Also, many people are burdened by the
practical and financial responsibility for ongoing maintenance,
and not all owners benefit from substantial equity or the ability
to release it through sale or borrowing. Mortgage repayments for
people entering the housing market have taken up a greater proportion
of income in recent years, and so research should be undertaken
to establish what households have cut spending on and whether
it is damaging quality of life in the short or long term. These
issues present a considerable threat to the success of property-focused
asset based welfare policies, and must be addressed before steps
are taken to further increase ownership.
3.4 The scope to promote greater ownership
is limited by the financial capacity of individual households.
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.
3.5 CIH has developed the HomeSave model
which would enable tenants to have some access to the equity/financial
benefits of ownership without the negative implications. Information
can be found at http://www.cih.org/policy/homesave.pdf.
4. (b) The extent to which home purchase
tackles social and economic inequalities and reduces poverty
4.1 Around half of Britain's poor are home
owners, [111]which
clearly shows that ownership per se does not reduce poverty.
4.2 A consequence of the high numbers of
poor homeowners is a large number of properties in poor condition.
There were 468,000 unfit owner-occupied properties in 2001, and
4.2 million owner occupied homes were below the Decent Homes Standard
in 2003. [112]
4.3 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 (eg
bungalows) for relocation/downsizing. This presents a strong challenge
to the asset based welfare philosophy which is driving the ownership
agenda. If people are to use property to provide for themselves
in later life, steps must be taken to improve commercial equity
release schemes and provide more suitable housing for those wishing
to move to a smaller and cheaper property. CIH and CML have previously
published a proposal for a national affordable equity release
scheme. To address the level of disrepair, and if greater ownership
is to be encouraged amongst lower income households, provision
should be made for homeowners to be able to pay into a sinking
fund alongside mortgage payments to enable them to maintain their
property when necessary.
4.4 There is some evidence that increasing
home ownership in an area which is dominated by rented property
can help to tackle social and economic inequalities. Increasing
the financial resources of an area increases supply and choice
of services which can be accessed by the whole community. This
is not a consequence of increasing ownership but of diversifying
income levels in an area: increasing ownership amongst lower income
households will not have the desired effect. The experience of
those living in low demand areas, often on welfare benefits, shows
how owners can become trapped in an area and have little equity
to release through sale. Government must recognise that ownership
increases exposure of householders to the down side as well as
the positive elements of the housing market.
5. (c) The economic and social impact
of current house prices
5.1 Many rural areas find that they are
unable to retain local members of their community because of high
house prices and lack of affordable/social rented housing. This
causes social and economic problems as communities are broken
up and low-wage employment struggles to recruit. The exception
site policy population limit may need to be significantly increased
to help tackle the lack of affordable housing.
5.2 Many existing owner occupiers have benefited
from recent house price rises as households with mortgages have
easy access to their equity for spending on the house or other
consumer items. However, geographical mobility of existing owner-occupiers
is still limited by regional disparities in house prices.
6. (d) The relationship between house
prices and housing supply
6.1 The straightforward notion that the
inability of supply to meet demand pushes prices up has been advocated
by Barker and many other economists. There is less agreement about
the extent to which increasing supply in line with demand causes
prices to stabilise.
6.2 Prices can be affected by what people
can pay as well as by supply. When the average buyer has more
disposable income (eg as a consequence of rising wages or low
interest rates) or lending-income ratio is high, sellers can ask
for a higher sale price.
6.3 The debate has focussed too much on
increasing the supply of houses to control prices without recognising
the importance of the type of property which is built to meet
particular requirements and create balanced communities. Whilst
some areas are building high numbers of new homes, need for larger
family houses is not met as building costs and density requirements
lead to overprovision of smaller flatted accommodation. A number
of urban authorities eg Southampton and several London boroughs,
are reporting over-provision of one bed flats at the expense of
other types of much needed accommodation.
6.4 The recent consultation paper, Planning
for Housing Provision, proposed predominantly using price information
to determine levels of house building. This concept does not give
an adequate picture of the full housing market and will not support
intelligent approaches to planning for housing provision. Consideration
of house prices immediately excludes all social rented housing,
does not look at the relationship between prices and local incomes
(affordability), and does not look at wider issues affecting demand
such as education, employment, and transport opportunities. If
demand for housing is led by demand for good transport etc, a
more strategic approach might be to improve infrastructure in
other areas which can satisfy demand and promote sustainability
of other areas.
6.5 In many areas it is not possible to
increase supply sufficiently to come close to meeting demand.
High density urban areas, such as desirable parts of inner London
have no available space for building. In rural areas restrictions
on and resistance to development, and desire to preserve existing
quality of life all limit the ability to meet demand. Other methods
to improve affordability need to be considered to tackle these
problems.
6.6 More strategic consideration of the
current housing supply can help to make better use of the existing
stock. For example more existing family homes may become available
for families to purchase if owners who are under occupying were
able to find suitable property to move to. Homeowners wishing
to downsize are unlikely to want to move into flats, and many
struggle to locate or afford smaller houses or bungalows in suitable
locations.
7. (e) Other factors influencing the
affordability of housing for sale including construction methods
and fiscal measures
7.1 The cost of land has a big impact on
the affordability of housing, and removing it from the sale cost
can have a significant impact. A private developer in Rugby recently
sold new houses leasehold rather than freehold in order to make
the properties more affordable. Interest in Community Land Trusts
is growing as they can both provide affordable housing in perpetuity
and bring wider benefits for the community. CIH is a member of
the new CLT Forum which is working to encourage the growth of
the CLT movement. English Partnerships should give serious consideration
to this model when it is disposing of state land for housing development.
Longer term benefits may come from transferring land to a CLT
than selling to the highest bidder.
7.2 Evidence that modern methods of construction
are consistently cheaper than traditional methods is not yet available,
although they have been shown to speed up delivery times and overcome
problems of lack of skilled labour. Government should take action
to increase investment in MMCs, as increasing their use will reduce
their cost. This would benefit affordable housing developments,
but whilst developers are still able to sell properties at the
prices they ask for them, we must question whether cutting costs
would lead to reduced prices or increased profits for open market
property.
7.3 In areas such as Cornwall which have
high wealth, high poverty and a high income-price ratio, restructuring
the economy could be a better long-term approach to tackling affordability
problems than relying on public or private housing initiatives.
7.4 Affordability of housing for sale is
not just related to the purchase price. High service charges for
flats or high energy costs can also make property unaffordable
for low income owners.
8. (f) The scale of the Government's
plans to boost housing supply
8.1 The drive to boost housing supply in
England is welcome: more houses are clearly needed if we are to
meet economic and social demands. Further work to address objections
to housing growth is needed. It is unfortunate that the ODPM work
on communicating the case for housing growth has not been progressed.
8.2 There is too strong a focus on numbers
of additional properties needed and not enough on the size, type
and affordability of those new homes. Many areas and households
are suffering greatly from lack of larger family houses and those
built to lifetime homes standards, but the emphasis on speed of
delivery means that these are not being provided. Using a quota
system for the development of new housing and the numbers of affordable
homes to be delivered within new developments does not allow a
quality-focused approach to creating or extending communities.
The rush to build raises concerns about the quality of property
to be developed, ability to integrate the necessary infrastructure,
and consideration given to future estate management. The recommendations
of the 1999 Urban Task Force relating to these matters should
be revisited and given renewed emphasis.
9. (g) The relative importance of increasing
the supply of private housing as opposed to subsidised housing
9.1 It is unrealistic to talk about the
importance of private versus social housing, as this ignores the
range of provision within each tenure and does not recognise that
increasing the supply of private housing does not remove the need
for subsidised housing.
9.2 Supplies of private and subsidised housing
should be increased according to current and projected local economic
and social circumstances, not because of an ideological prioritisation
or concept of importance. 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.
9.3 It is necessary to create balanced communities
with a mix of houses of an appropriate size, type, and tenure
which can attract a range of household profiles. It is unwise
to argue that only affordable housing should be built in an area
as this is unlikely to meet the needs of an area or lead to a
balanced community. There is a need to provide more expensive
housing for wealthier households as well as ensuring that lower
income households can secure accommodation. The introduction of
a PSA target for mixed communities would help to promote this
strategic approach.
10. (h) How the planning system should
respond to demand for housing for sale
10.1 The purpose of the planning system
is to create sustainable communities and so it should primarily
be strategic and take a medium-long term view of an area's development.
It should be improved rather than overridden to achieve increased
supply and other sustainable outcomes. CIH has recently produced
a paper on the strategic role of local authorities which can be
purchased from http://www.cih.org/publications.
10.2 Proposals in Planning for Housing Provision
to make the system primarily responsive to demand erodes its strategic
approach and hinders its ability to provide for those groups who,
for practical or financial reasons, cannot express their demand
by bidding for or purchasing homes. These groups include lower
income households and those with a physically disabled family
member. A system which responds to demand may not respond to need.
10.3 Proposals to speed up land release
to meet demand in growth areas could cause serious impediments
to preventing urban sprawl and promoting regeneration.
10.4 The planning system is currently geared
against meeting some kinds of demand. Density requirements which
are based on dwellings per hectare make it difficult to deliver
larger family houses. The need for these houses is high in some
areas, especially amongst some BME communities, but they are not
being provided. Regional plans need to emphasise these problems—the
London Housing Strategy has taken tentative steps in this direction.
Likewise, reducing floor space can cause problems for those who
need wheelchair accessible housing.
11. (i) The scale of housing development
required to influence house prices and the impact of promoting
such a programme on the natural and historical environment and
infrastructure provision
11.1 Building new homes will necessarily
use some land, but the impact can be mitigated. There are some
good examples of developments which seek to enhance the natural
environment (Barking Riverside, London) and integrate with historical
assets (Urban Splash, Salford). However, current pressures to
increase supply quickly can prevent impact minimisation.
11.2 A number of developments have sought
to minimise immediate and ongoing impact through materials used,
sourcing of materials, and use of efficient heat, energy, and
water supplies in properties. These are still the exception rather
than the norm and more incentives and requirements should be used
to promote this.
11.3 Infrastructure provision is currently
a major obstacle to increased housing supply. Where responsibility
for coordinating or providing finance for infrastructure lies
with different bodies, aligning infrastructure provision with
plans for housing has proved extremely difficult and hinders development.
Coordination of finance and delivery must be improved.
12. (j) The regional disparities in the
supply and demand for housing and how they might be tackled
12.1 It is appropriate to take a regional
and housing-market based approach to disparities in supply and
demand for housing.
12.2 Many of our members have commented
that the perception that northern regions have low demand for
housing whilst southern regions have high demand is extremely
misleading. Earnings-price ratios in all regions reflect affordability
problems nationwide. These problems are experienced even within
Market Renewal Pathfinder areas where price increases are pushing
first time buyers out of the market.
12.3 A concerted effort should be made to
lead economic demand north rather than letting it continue to
focus on the South East, not least because it is much more cost
effective to build houses in the midlands or north than London.
Links between Regional Economic, Housing, and Spatial Strategies
must be improved to enable this to happen. CIH West Midlands branch
is a key partner in the West Midlands United Initiative which
is trying to address these issues.
12.4 Where there are mismatches between
supply of and demand for housing, such as in the pathfinder areas,
government must support the plans for demolition of obsolete housing
and must not give into short sighted media and political pressures.
111 DWP Research Report no 251 http://www.dwp.gov.uk/asd/asd5/rports2005-2006/rrep251.pdf Back
112
English House Condition Survey 2001 and 2003. Back
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