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


Memorandum by the Yorkshire and Humberside Housing Forum (AH 74)

INTRODUCTION

  The Yorkshire & Humberside Housing Forum is the recognised voice of housing in the region that brings together providers and stakeholders from across all housing sectors. Dialogue has taken place with a number of research institutions in the region including Sheffield Hallam University and the Joseph Rowntree Foundation, members of the Northern Way Team, as well as a number of key housing organisations in the region including Shelter, the Home Builders Federation and other housing providers, in order to formulate this response.

  The Yorkshire & Humberside Housing Forum particularly welcomes the opportunity to respond to the specific issues raised by the Inquiry as the region has experienced and is continuing to experience serious affordability problems in particular "hot spots" within each of its four sub regions as house prices continue to rise. The Forum would like the Committee to be aware of the impact of the shortage of housing and high housing costs on the housing markets within the region, and the crucial role of housing supply in supporting economic growth across the north.

  Whilst we have restricted our comments in this response to the issues around affordability and the supply of housing, the Forum will also be responding to the two further inquiries relating to shared ownership and equity sharing programmes, and housing for rent. It is our view, however, that these housing options are inextricably linked to the affordability agenda and that people should have a choice of what type of housing they want to live in, depending on their own preferences and financial circumstances. Our premise is that a range of options should be available to people, rather than an assumption that home ownership is the preferred route.

AFFORDABILITY AND THE REGION

  The Yorkshire and Humber Region has seen a very dramatic increase in house prices in recent years—house prices rose by 93% between 2001 and 2004, the 3rd highest in the UK—exacerbated by a growing population as in-migration increases to record levels. Supply is not keeping pace with demand in this buoyant market, and the situation is compounded by an acute growing imbalance between housing markets in parts of the region.

  There are high value/high demand areas where there are significant shortages of affordable housing. We are concerned to ensure that additional housing is provided in these areas, particularly to meet the needs of local people and to sustain local economies. There is a significant lack of affordable homes for rent in the region—only 1,740 homes were built by housing associations in 2003-04, with similar numbers proposed over the next two years. We therefore support the case for increased public investment in affordable rented housing for those not in a position or who do not choose to buy.

  The increase in house prices across the region has had a serious impact on the ability of lower income households' ability to access the home ownership. Consequently the demand on affordable homes for rent has increased significantly, and local authorities and housing associations are experiencing the worst pressure for a number of years. However, the issue is not simply one of supply. There are complex factors at play when people are deciding where to live; it is not simply about availability.

  Members are of the view that an increase in supply of housing will not in itself bring down prices and stabilise the housing market, and that what we need in the north is to develop a more sensitive framework for what is built where. It is therefore crucial that the Regional Spatial Strategy is developed to ensure we are building the right type of housing in the right places within the overall context of supporting economic growth.

SPECIFIC COMMENTS

The potential benefits of and scope to promote greater home ownership and the extent to which it tackles social and economic inequalities and reduces poverty

  1.  There is a strong case to be made to increase the provision of homes for sale in the region to meet growing demand. This is being catered for within the auspices of the Regional Spatial Strategy, with housing numbers being increased to take account of future economic growth. There are a number of potential benefits to promoting home ownership—households have a personal stake in their own home and neighbourhood and, dependent on market conditions, it can be a sound financial investment with the spin-offs associated with asset ownership. It also reduces the need for public subsidy.

  2.  However, because of the significant increase in house prices in the region - house prices for first time buyers are in the region of £130,000 and with house price/income ratios well outside normal definitions of affordability in both urban and rural locations - there is a need to develop low cost home ownership as an affordable option to those people on moderate incomes who cannot afford to buy on the open market. Initiatives like shared ownership, HomeBuy and the use of equity loans must be sustainable for both provider and purchaser, and can play an important role in helping to access home ownership in certain areas and ensure more mixed communities.

  3.  Low cost home ownership (LCHO) options can make it easier for employers to recruit and retain "key" workers. In particular parts of the region, for example York, key workers, those on lower incomes and first time buyers are being forced to search further afield for affordable housing. There is a need to open up the benefits of LCHO to a broader spectrum of people. Regional Housing Boards should be able to target LCHO on broader considerations of income groups priced out of the market and on local definitions of `key workers' to take account of local recruitment and retention difficulties.

  An area where the promotion of home ownership could be beneficial, though controversial, is in bringing empty properties back into the market. Councils should be given stronger powers to buy back, through the use of compulsory purchase and other means, properties that have been empty for a period of time, modernise and then sell, or pass on to a developer to modernise and sell.

  5.  Housing providers, in partnership with other stakeholders, are trying to deliver more mixed communities—generally acknowledged as being more sustainable. Investment in LCHO alongside affordable renting can help create the mix needed in local areas and provide the opportunities for people to move from renting to ownership without having to relocate. Home ownership opportunities must not be promoted at the expense of losing homes for rent as currently under the Right to Buy. There is a severe shortage of affordable homes for rent in the region, which is being exacerbated by RTB (12,380 homes sold on 2003-04).—only 1,740 homes were built by housing associations in 2003-04, with similar numbers proposed over the next two years.

  6.  In order to achieve this mix and range of housing, the Government needs to recognise the extent of affordability problems in Yorkshire and the Humber and distribute funding accordingly. Whilst the Forum welcomed the new simplified formula for distribution of the Single Housing Pot across regions, we did not feel it took account of the affordability issues in the northern regions, and would ask that this be revised in the light of this Inquiry.

  7.  It is difficult to see how owning your own home can address issues of social and economic inequalities and reduce poverty across the board. Housing is the single greatest asset of wealth held by individuals in the UK. Between 1971 and 2002 the share of national wealth held in the form of housing almost doubled from 22.1% to 42%, however increases in housing wealth have not occurred uniformly and thus housing wealth can lead to greater social and economic inequalities. Indeed, the levels of inequality in housing wealth have increased between the poorest areas and best off areas. Housing wealth in the poorest areas doubled during the 1990s but increased more than four fold in the best off areas. [136]There are pockets of considerable deprivation throughout the region—of the 100 most deprived Local Authorities, nine are in the Yorkshire and Humber region.

  8.  What we are seeing at the moment are considerable numbers of people being priced out of the market, and many cases of people taking on more debt than they can afford as mortgages become easier to get hold of. The Committee should be aware of the work of the Sustainable Home Ownership Inquiry being carried out by the Joseph Rowntree Foundation. JRF has been working with Janet Ford and Steve Wilcox at York University to look at the issues for sustaining home ownership, considering how people on lower incomes can retain their homes when they experience problems and is shortly going to make recommendations for the future on this. It considers the safety net for homeowners and how this could be improved, and has important implications in relation to assumptions about the extent to which home ownership can in fact worsen people's financial position in certain circumstances. There are a number of working papers of relevance.

The economic and social impact of current house prices

  9.  In 1997 the average house price in Yorkshire and the Humber was £58,521, in 2005 this price is now £133,692. [137]However although house prices have more than doubled, incomes have not. Analysis of housing market affordability carried out by Professor Steve Wilcox in 2004 showed that there has been a sharp deterioration in affordability in the Yorkshire and Humber region. It is now 24% less affordable to buy a home in Yorkshire and the Humber compared to 10 years ago. This increasing market unaffordability is having a huge impact on people's ability to access the housing market and means that people who would have left, or not chosen to live in, social rented housing and moved into owner occupation now live in social housing. Ultimately this means that those who are vulnerable and in the greatest housing need are then unable to access social housing when it is needed.

  10.  Demand for social housing in the region is high. 197,650 households are registered on council housing lists in the Yorkshire and Humber region. Of the 25 local authorities with the largest housing registers in the country, six are in Yorkshire and the Humber and the top three, ie those with the highest number of people waiting for social housing, are Sheffield, Bradford and Leeds. [138]A failure to close the affordability gap and to ignore the growing demand for good quality homes for rent will result in a growing homelessness problem and an inability of the region to meet a range of housing needs across the region including BME households and asylum seekers.

  11.  In terms of accessing home ownership, lenders have made great efforts to improve underwriting processes, looking at how monthly mortgage repayments relative to disposable income as a principal guide to mortgage affordability rather than crude income multipliers. With nominal interest rates it has been possible for lenders to extend higher income multiple loans. It is interesting to note that 10 years ago nearly 85% of all loans to first time buyers were at an advance to income multiple of less than 3x with less than 1% of four or more. Now over 40% of first time buyers are at advance to income multiples below 3x, 35% between 3x-4x and over 20% are at 4x or more.

  12.  Despite the considerable innovation affordability pressures have become more of a serious problem. Over 550,000 first time buyer loans were extended each year at the start of the decade—the figure is now below 330,000. The major factor is their ability to raise a deposit. Five years ago 50% of first time buyers took out a mortgage equivalent to 90% or more of the purchase price. This proportion has shrunk to around 35%. The impact of this means that a typical first time buyer now needs to raise a deposit of £17K, equivalent to over 50% of gross annual household income, compared with £6,150 equivalent to 25% of annual income five years ago. Access to home ownership is even less affordable by the operation of stamp duty. The average first time buyer house price comfortably exceeds the lower threshold in the least affordable regions. As a result first time buyers are increasingly seeking assistance to raise deposits from parents (55% at end of 2004).

  13.  An example of how current house prices have impacted in one part of the region: The Golden Triangle area is located within the Yorkshire and Humber Region and is an area of high value/high demand housing. The area consists of York, Harrogate and areas of Leeds, which exhibit similar characteristics, in terms of high value and demand, as properties in the neighbouring Local Authority areas of York and Harrogate. In the Golden Triangle area of Leeds only 14% of the market is social housing. Demand for such housing is extremely high (three times higher than the city average) and turnover low (almost half that for the city as a whole). Accordingly there are problems with affordability and access, especially for newly forming households and young single people. In Harrogate the problem is further exacerbated as the total social housing sector makes up only 9.4% of the housing market. Similar issues are experienced in York where the social housing market makes up only 15.9% of the market. This compares with a regional average of 23%.

  14.  Based on average house price data, the average cost of a terrace property is £135,280 in the Golden Triangle area. (In 2005 the average house price across North Yorkshire was £191,581). The New Earnings Survey 2003 provides an average earning for Leeds, York and Harrogate of £22,847. In order to get a mortgage, the formulae are usually the average income x 3.5, which in this case equates to £79,964. It can therefore be seen that those on an average income are not able to access even starter homes in the Golden Triangle area, which require a mortgage multiple of 5.9.

The relationship between house prices and housing supply

  15.  A key factor in relation to prices has got to be housing supply, which, up until two years ago, had decreased to its lowest level since 2006. However, there are more complex factors at play rather than a simple econometric model. This has been evidenced in ongoing research by Sheffield Hallam University (CURS) into "Rising Housing Markets" in Yorkshire and the Humber. People bring a number of different factors to bear when choosing where to live and these can be quite complex.

  16.  In the region there are a variety of different housing markets operating, the weaker markets being addressed through HMR activity. Consideration has also got to be taken of the interventions proposed to tackle the frail housing markets in these areas. Therefore increasing housing supply on its own will not stabilise prices. In the north, the importance of housing supply in supporting economic growth must not be under-estimated and is key to the Northern Way Strategy. The Regional Spatial Strategy needs to take account of broader strategies for regeneration and economic growth across the region. Northern Way research is currently looking to develop an approach, which will ensure that the RSS provides a more sensitive framework for what is built where.

Other factors influencing the affordability of housing for sale including construction methods and fiscal measures

  17.  Whilst it is acknowledged that to some extent the increase in house prices is a factor of supply shortage, there are a number of other factors which influence affordability:

  The rising costs of construction. These costs are in part driven by an acute shortage of traditional skills, such as bricklaying and other trades, within the industry. Developers are having to pay higher prices to attract and keep a skilled workforce, and the industry is seeing no signs of this abating. Government intervention is required to address this issues with training organisations and employers.

  18.  Whilst certainly exacerbating difficulties around the affordability of housing, both spiralling house prices and rising construction costs are being addressed within the region. The drive towards Modern Methods of Construction (MMC), together with the move towards the Code for Sustainable Buildings and the development of environmental standards within house building (Eco Homes), have been embraced by a number of housing associations working within Yorkshire and the Humber. The Deputy Prime Minister's Design for Manufacture competition has set down the challenge to house builders to produce a home for £60,000. This challenge was taken up by the Northern Edge consortium, two of whose members hail from within the region. Northern Edge is the only housing association lead consortium to make it through to the finals of the competition and demonstrates how despite apparent adverse conditions within the market, it is possible to produce quality homes at a reduced cost. The key issue now is to roll out these measures outside of the Design for Manufacture competition and ensure that the benefits are available to prospective house buyers across the region.

  19.  Planning for affordable housing. JRF done several pieces of work to look at how the planning system has been delivering on affordable housing and how far section 106 agreements have helped. Most of this work has been done by Sarah Monk and colleagues at the Cambridge Centre for Housing & Planning Research. The most recent report shows how delivery of affordable housing has declined and how half of affordable housing is now delivered via section 106 rather than housing association provision direct. A new project is looking at enforcement of section 106 to ensure delivery. Whilst the region has an excellent track record on in providing section 106 agreements without the use of subsidy (the only region in the country), there are now high value sites where this is becoming impossible to achieve without subsidy. This links back to the argument that there is a severe shortage of affordable housing across the region, which requires additional Government subsidy.

  20.  Land Values. As mentioned above, this is becoming problematic in terms of achieving low cost affordable housing on section 106 and other sites. Where possible, housing providers need to work closely with Local Authorities and other public bodies (NHS Trust, MOD, Universities, etc) to negotiate the sale of land holdings at less than market value. Government support to encourage public bodies to work with Local Authorities and others to support the provision of affordable housing through land released at less than best price would be welcomed. In the meantime housing providers across the region are considering a range of innovative procurement and delivery measures to keep construction costs down.



The scale of the Government's plans to boost housing supply, the relative importance of increasing the supply of private housing as opposed to subsidised housing, and the scale of housing development required to influence house prices and the impact of promoting such a programme on the natural and historic environment and infrastructure provision

  21.  The Barker Report made a case for significant increases in housebuilding to tackle the shortfall in supply of some 60,000 houses per year on recent construction rates. The RSS process is taking account of the growth agenda in the north, but increased numbers do need to be balanced with environmental issues and the capacity of the building industry. Local Planning Authorities need to have in place deliverable adoptable plans which fit with the objectives of the RSS.

  22.  Barker recommended 23,000 extra affordable homes per annum, but to date the Government has only committed to 10,000. Robust evidence needs to be in place to identify the true need across the country. Currently in Yorkshire and the Humber, some 1,750 affordable homes are expected to be built each year for the next three years. Research recently carried out by Shelter has identified a need for an additional 1,170 homes per year over the same period. Demand for social rented housing is at an all time high, there are currently 2,100 homeless households in temporary accommodation, and there is an urgent need for long term housing for asylum seekers who are unable to be housed immediately following their asylum decision.

  23.  Investment in new affordable homes needs to balance the need for affordable rented homes alongside low cost home ownership. This should be determined by regional or sub regional assessments based on in-depth housing market analysis.

How the planning system should respond to the demand for housing for sale

  24.  Planning policy can help ensure that land release and designation matches regional and local housing assessments. In doing so it is not just about responding to the demand for housing for outright sale but also to the need to build homes for affordable rent and LCHO. In this way planning policy should deliver for a range of income groups. It should also deliver for this range in mixed communities. The ODPM's proposed revisions to PPG3 need to be strengthened to match these aspirations, in particular, local authorities should be required on the basis of local housing assessments to specify in their local plans the mix of homes required by tenure (for example: open-market sale, market renting, intermediate renting, new build Homebuy and affordable renting).

  25.  We welcomed the government's proposals in its recent consultation on PPG3 Planning for Housing Provision that local plans needed to be responsive to changes in the housing markets. However, signals on house prices must not be allowed to dominate decisions about the amount of housing to be built in different areas. Of equal importance are housing needs considerations. Responding to the market should not be at the expense of promoting more sustainable patterns of development—homes close to job opportunities, making best use of existing physical and social infrastructure etc. Planning for housing based on markets areas should be undertaken within a wider context of analysis of functional sub regions and planning for new housing provision in sustainable locations within these functional sub regions. Policy and guidance needs to recognize that housing markets are rarely clearly defined entities—they overlap, vary according to type of housing involved and change over time. They include for example first time local buyers, prosperous in migrants, local movers seeking a different school catchment or better local environment etc.

  26.  There is not enough recognition of low demand markets and how these need to be addressed, eg restraint in areas adjacent to low demand markets and support to re-engineer urban areas needing to deliver significant land use change due to economic re-structuring and functionally redundant social housing provision. Market information provides a helpful context for monitoring the delivery of new housing, however it is equally important to understand the what is driving the price change which can be a variety of social and economic factors and what sort of policy interventions are necessary. For example a falling market could be driven by local factors such as quality of education provision, perceptions of crime and safety which require policy interventions that will have a more significant impact than managing the release of land for housing.

  27.  The planning system needs to operate on the basis of an evidenced Northern Way perspective for the provision of new homes so that in future the right type and size of new homes are developed in the right locations in order to address housing need and make a positive contribution to the economic growth of the region. The RSS is not just about demographics but must take account of strategic priorities for the region.

  28.  Circular guidance on planning and affordable housing (circular 6/98) lacks clarity and as such, differences have evolved in negotiating targets for affordable housing, in "definitions" of affordability, in the mechanism for determining when and how much affordable housing is viable and for securing the housing as long as need exists. This inconsistency means that it is difficult to be sure that the maximum number of affordable homes has been secured at an appropriate cost to occupiers and at the lowest cost to the public purse. Furthermore, differences in approach between authorities that are closely linked have been used by some developers to undermine the negotiating process. Clearer guidance, together with a more streamlined approach to seeking planning approvals, would greatly assist in providing more affordable homes more quickly.

  29.  Mechanisms need to be found to speed up land release to increase the supply of homes for sale and rent. Co-operation between English Partnerships, the Housing Corporation, and the Regional Housing Boards should focus on joint financial packages to pump prime this work, and facilitate more partnerships at the regional level. We believe there is potential for English Partnerships to facilitate the production of many more homes for sale and rent.

The regional disparities in the supply and demand for housing and how they might be tackled

  30.  It is important that the Government recognises regional differences in the supply and demand of housing and understands the reasons why. Housing and planning policy needs to reflect regional markets—"one size cannot fit all".

  Each region will have its own complex inter-relationships of sub-regional and local housing markets. Both high and low demand issues need to be addressed. It is important that:

    —  investment in new homes is supported through the Regional Spatial Strategy at a more global level, and regional and locals housing assessments based on housing analysis. This is particularly important in relation to type and location of housing;

    —  in growth areas there is a need for investment in adequate infrastructure to support housing developments;

    —  continued Government support for the Housing Market Renewal Pathfinder Programme.

  31.  Regional differences should be taken into account in the formula for distributing regional funding allocations. We have some serious concerns about the ability of the formula to recognise the extent of the affordability issues in Yorkshire & Humberside, as set out in full in our response to the "Housing in the Investments" Consultation Paper sent into the ODPM in February. Whilst welcoming the simplified formula, the new distribution policy exacerbates the differential between the north and the south, with a heavy weighting towards the growth areas in the south and no recognition of the Northern Way Growth Strategy and growing affordability issues. We want to continue to work with Government to influence future allocations.



136   All stats come from : Bethan Thomas and Danny Dorling, Know Your Place: Inequalities in Housing Wealth (Shelter 2005). Back

137   <is0p1>Source: Land Registry Residential Property Price Report April-June 2005, and April-June 1997 (Reported in July-September report.) Back

138   ODPM Housing Strategy Statistical Appendix (HSSA) (annual). Back


 
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