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


Memorandum by the Welsh Streets Home Group (WSHG) (AH 78)

EXECUTIVE SUMMARY

  1.  There is an urgent need to review the ability of HMR to deliver affordable and appropriate housing for all—including those on low incomes.

  2.  Adjusting to radically altered market conditions has clearly been a challenge for the HMR Pathfinder companies who need to be offered effective means of shifting their practice to accommodate the changing market without penalty. This might include the suspension of all demolition targets (if indeed they do exist).

  3.  The cost and other benefits of refurbishment need to be recognised in practice, with retention and repair of existing stock pursued in all, including ongoing HMRI scheme delivery.

  4.  Vacant brown-field sites must be acquired and exhausted before any clearances are approved in order to maintain existing affordable housing, and social benefits whilst still delivering new housing choices.

  5.  Robust mechanisms for the return to occupation of empty homes as previously recommended by the Urban Task Force require rapid action particularly in areas where the empty homes are in public ownership.

  6.  It is neither desirable nor ethical to demolish houses on the basis that they occupy valuable land parcels with development potential.

  7.  There are problems with the premise that government has the power to influence house prices, or that such influence is appropriate were it available.

BACKGROUND

  This evidence is presented by the Welsh Streets Home Group (WSHG) a residents group in Toxteth, Liverpool. It reports feedback to the inquiry questions from and group members, and the wider community.

  The group formed in response to the HMRI Pathfinder Scheme, which caused widespread concern regarding affordability and supply of properties following proposed demolitions.

  Loss of community and self-determination were repeated worries, compounded by a disturbing absence of evidence regarding the viability of existing housing stock. The HMR has yet to address to address mounting problems associated with a market boom in Liverpool.

  These worries afflicted homeowners, social tenants and private tenants, the young, the elderly, workers, claimants and children. They affected residents who had lived in their homes from a few months to over 50 years.

  Since the HMR proposals became public in March 2004 over 200 Welsh Streets residents used the WSHG forum as a means of expressing their concerns. Residents of the broader Toxteth neighbourhood and Liverpool as a whole, also communicated concern.

  ODPM apparently view resolution of problems arising around HMR in Liverpool as a matter for local government. The group respectfully suggests it is appropriate for national government to maintain duty of care and a controlling stake in the delivery of its important scheme. HMR has the potential to vastly improve housing, but regrettably also the power to shatter lives, strip assets and destroy communities.

  Baseline concerns initially expressed by the WSHG as early as August 2004 have re-emerged in the ongoing debate around what may be viewed as a housing crisis.

  It is understood that Merseyside Civic Trust, are submitting evidence regarding the hoarding of housing supply by RSL's in Liverpool. Therefore WSHG ask that this evidence be considered in the context of Merseyside Civic Trust which shows how demand for existing property has been concealed.

1.   Potential benefits of and scope to promote greater home ownership

  Home ownership apparently confers many benefits on owners. It is the most significant purchase many people make. Investment in a property asset is likely to accrue value, provide capital and security in old age. It removes financial responsibility and maintenance from public and housing bodies.

  Homeownership also has negative outcomes. In instances where the market and housing stock are subject to manipulation and enforced purchase, homeowners may be subjected to policy which is financially and physically damaging.

  So far as the scope to promote greater homeownership is concerned there are a number of key issues.

A.  Supply/Lack of supply/Control of supply

  There is a lack of homes for private sale in the Welsh Streets. At the outset of HMR a single RSL owned over 65% of all housing stock in the Welsh Streets, whilst in Toxteth the figure is estimated at 70% of stock in RSL ownership.

  There is evidence showing that both RSL tenants, and private buyers seeking homes to own and occupy have been turned away by RSL's.

  It is thought that "right to buy" and right to acquire' offering significant discounts to public sector tenants have been overlooked here, and that packages could have been offered which provided less expensive means of delivering access to the housing market for low income residents. Use of such strategies could deliver the aims claimed by HMR, tenure diversification and homeownership would increase.

  Further extension of the release into the market of RSL owned properties to people wishing to move into the area as owner occupiers would add to the implicit HMR aims of expanded social mix, and the explicit aim of reducing void properties. It should be noted that empty properties in the area were low prior to the decanting the HMR scheme has inflicted on the neighbourhood.

    "Some of our neighbours would have liked to have bought their houses off their RSL landlords months ago, but the landlord would not sell them. How is `greater homeownership' being promoted in such cases?"

Welsh Streets resident

CASE STUDY 1

  42 Kelvin Grove currently three flats, potentially five bed family home owned by Liverpool Housing Trust a RSL

  tenants required to leave in 1999, sealed with tin sheet, abandoned and un-maintained. Remains empty, continues to blight the street,

  Potential buyers known to WSHG who have requested permission to buy and occupy the property      = 6

  Total interest registered in becoming owner occupiers of this property type via WSHG market research      = 86

    "We offered the asking price on 42 Kelvin Grove, but it was rejected by LHT even though the property was on the market. It is hard to find big houses like this to buy in L8, after City of Culture caused house prices in L8 to rocket, we were forced to leave Toxteth and move across the water."

Potential owner occupier; education worker

  As an experiment the WSHG have conducted two market research exercises. A property in Kelvin Grove was advertised in a local property magazine in May 2004, and a "promotion" of all house types in the Welsh Streets area was conducted in July 2005. A database now exists showing unsurprisingly keen interest in property, often "withdrawn" from letting, repair or sales schedules by the RSL's. A range of people hoping to buy and refurbish existing properties, have since re-registered interest, stating their view that public funds cover the cost of renewing roads, paving, street lighting and essential services.

  Clearly homes can only be owned by individuals and families where they are allowed to circulate in a market place.

  In the rare instances when the minority supply of privately owned stock is circulated via the market it tends to sell quickly.

    "The two bed terraced house up the Rd from me in Dombey Street sold within 24 hours for £89K, and the house renovated by the Trevor Macdonald show in Powis St sold for £65K within three weeks despite being in a demolition zone. At those prices I would not be able to afford to get into the market, it's lucky I managed to buy when I did"

Toxteth resident—probation officer 2005

  The Halifax Estate agency reported increases in Liverpool property prices in April 2005 at 22% as opposed to the national trend of 9.7%. Despite a general cooling of the market, key housing issues for less wealthy residents is supply and cost of accommodation. Those with wealthier backgrounds are accessing the market via parental or family loans, but this is not an option for many.

LIVERPOOL PROPERTY PRICE ANALYSIS LIVERPOOL L8 (TOXTETH) TERRACE PRICES

  Source: http://propertyinvesting.net/content/ripple-effect-lpool.htm

    "Liverpool L8 Granby is a district just east of the main L1 city centre—close to the Duke Street redevelopment and South Docks. Prices have gone up four fold since late 2002! The area is well placed to take advantage of re-developments in the city centre and the City of Culture attractions planned in the L1/L2/L8 areas.

    Liverpool L8 Terrace prices have doubled from lows of 20,000 to 40,000 since mid 2002—the real impetus was the successful mid 2003 bid for European City of Culture in 2008. Investors arrived and prices shot up in the last year in this area, which is mostly close to the city centre (L1/L2 districts)."

  There is a pressing need, possibly specific to Liverpool 8 for a review of current public housing sector organisations and local authority behaviour, if the government is serious in it's intent to increase or even maintain home ownership and to encourage the flow of wealth.

  Proposals for the valuable Welsh Streets site allow for the ownership of only new homes. New homes come with a price premium, as estate agents will confirm.

2.   The extent to which home purchase tackles social and economic inequalities and reduces poverty

  Manifest in this neighbourhood as the extent to which forced removal of homes feeds social inequalities and increases poverty.

B.  Financial means

  House prices reflect the money supply. The stability of earning opportunities have immediate effect on the demand for, and cost of housing. Interest rates and borrowing power impact quickly on house prices.

  In the affluent South prices are higher than in areas like Liverpool with it's lower earnings and long term poverty. Significant "equity wealth" has accumulated in the South, arguably a factor in increased housing cost in the North. 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. There is little evidence to imply currently high levels of investment in the city is upwardly shifting local incomes, although the cost of living in the city is increasing .

  Via rental mechanisms wealth is further concentrated in the hands of the wealthy and until government are able to spread earning power more evenly across the North South divide this is unlikely to change.

  An aim of HMR is to retain higher earning workers in the city, and attract a greater social mix to pathfinder areas, in order to foster sustainability. However if this is at the cost of the most vulnerable doubts about the scheme will continue.

  The definition of Pathfinder areas includes reference to indices of multiple deprivation. By definition low earnings, no earnings, scant borrowing power and shortage of capital assets already restricts populations in the Pathfinders

INCREASING POVERTY AND HARDSHIP

  Yet the majority of new homes which the Pathfinder scheme suggests occupants of Victorian property proposed for demolition require residents to cover significantly increased housing costs. In some instances this represents in excess of five fold increases in the real cost of home ownership to current owner occupiers. Without similar increases in income, these homeowners are likely to find themselves back in rental accommodation. Current waiting lists are long. 18,000 people await accommodation in the social rental sector in Liverpool, with in excess of 7,000 people living in overcrowded conditions (Shelter report October 2005.)

  Whilst residents in Pathfinder areas are apparently able to effectively "jump the RSL queue" this may not be viewed as a useful or effective use of public housing resources.

  Apparently tenants of RSL's in receipt of benefits, may be supplied with new build homes on the site for rent, at rents the Council are prepared to pay in housing benefits. If demolition and new-build is enforced it raises two issues:

    —  How is the social rental supply on site going to match the high demand for such property and tenure type. At the outset of the scheme over 70% of residents were social renters. Some will have the means to move either with or without shared equity schemes into homeownership, but scrutiny of local incomes implies that this will not be a reality for many. Further social renters who are members of WSHG, or have contacted the group express distress at their powerlessness and lack of choices in the current scheme.

    —  Why is there such inequity for owner occupiers in the Pathfinder, who despite buying and maintaining their own homes, face either increased housing costs, the reluctant taking on of debt, or increase of debt, removal to other areas, loss of community, and if they accept "Homeswap" exchanges, the possibility of continued removal from the path of the bulldozers. They will be vulnerable to fluctuation in the interest rates and required to make higher payments on new more expensive homes.

  Homeswap is a scheme via which RSL's make available properties they already own, outside defined clearance areas.

  Since Newheartlands, the Merseyside pathfinder currently seeks 42 million pounds for clearances in their current funding bid, a lack of confidence is developing in the "Homeswap" scheme. It is implicit that all Victorian Housing remains vulnerable to future clearance, particularly in areas where the RSL's hold significant property stocks, and given the length of time the Pathfinder Scheme is predicted to run for.

  WSHG have received reports from owner occupiers that their existing properties are being valued by the local authority at prices up to a third lower than the valuations provided by independent estate agents and surveyors.

    "I have been offered just 42k for my house. What can I buy in Liverpool for that sort of money? It's half the price of a replacement terrace, and a third of the price of a new build."

Owner occupier

  There are reports (which could presumably be verified via the land registry) of houses purchased for demolition at 60k to 75K which represents expenditure in excess of that required for complete refurbishment to a 30 year life specification and to current environmental standards.

  Shared equity schemes which combine rent and purchase have just been launched.

    "As a 68-year-old pensioner and having lived in my house for 44 years, I suddenly find out through government intervention, my home is marked for demolition. Having bought this house and land I thought, the rest of my life would be spent here.

    My present home is a comfortable three bedroom terrace.

    The cost of new property is as follows:

    Two bedroom flat from £90,000

    Two bedroom house from £105,000

    Three bedroom house from £120,000

    Four bedroom house from 140,000'

    My option is "shared ownership", being an OAP. This works out at paying £60,000 for a 50% share, then £164 per month rent on a three bedroom property.

    The loss of friends and neighbours, people I have known here all these years, due to the fact they will be re-housed, not together, but split up in and out of the area. A community spirit that will never be repeated, due to government policy."

Pensioner 1: ex-factory superviser

CASE STUDY 2

  Pensioner 1; potentially forced from 3 bed Victorian Terrace to similar sized property at Clevedon Site—the homes to which those threatened with demolition are invited to move. He would be forced to take on a garden, even though he does not want one, if he is to retain three bedrooms.

  The shared ownership for the elderly scheme would only offer a two bed flat or "cottage" unit. Many pensioners are offered less of a home, at greater cost.

  Having cleared mortgages, rental payments will be an additional cost. If eligible for housing benefit this represents a cost to the taxpayer, and if in-eligible for housing benefit, the cost will be an additional sum to be found.

  How does Pensioner 1 benefit? If left alone he would be reaping significant increase in the asset value of his existing home. This potential cost increase is repeated across a variety of households including families and single people.

  Another option available to owner occupiers is to stay put, live in dread of a Compulsory Purchase Order and then request Public Enquiry. This demands the ability to commit immense human and financial resources and comes at great—arguably unacceptable human cost. Small groups of residents with scant resources are pitted against large organisations with vast financial and political power, in their quest to remain in the home of their choice, at a price they can afford.

  Owner occupiers in Pathfinders are often the first generation who have achieved home ownership, and ascended lower rungs of the housing ladder. The HMR threatens to push them off this rung, but could be encouraged or enforced by government to achieve greater cohesion between it's own aims as a (self fulfilling) scheme, and the aims of residents with regard to their investments.

  After years of low market valuation the land in Toxteth is accruing value rapidly. It seems churlish not to allow existing owners to capitalise on their increasing asset values, and to replace this potential with crude asset stripping.

  It can be argued that the benefits of homeownership in the house and place of choice, are forcibly removed not only does economic and social poverty ensue, but a loss of faith in political structures, health and well being, quality of life and confidence in the future.

  Given the real housing choice of a home which can be afforded, as opposed to one which offers a garden and debt and insecurity we have many residents who would like to opt for the former.

3.   The economic and social impact of current house prices

  A life of renting damages aspirations, economic progress and choices for individuals. In the context of daily TV output in which the wealthy flaunt via their property assets, it the cause of stress.

  People who are succeeding in their lives feel that they are failing. This has health, family and social consequences. Some work pays very little, and some people are never going to earn very much. In this respect the term "key workers" is less than useful. The social and economic structures of the country will not function without low paid workers of many kinds, and to view teachers, nurses and firemen as more "key" than others reveals a lack of vision. Low paid workers are faced with the prospect of a long wait for social rented housing, or alternatively paying private landlords for accommodation and increasing the owners wealth, whilst over passing empty homes on the way to their low paid jobs.

CONCLUSION

  If HMR schemes were to allowed adjust to increased face the fact of a property values they may be able to better exploit a real access opportunity. De facto use of refurbishments except in exceptional circumstances where structures are deemed dangerous by engineers results in less expensive accommodation.

  This could enable increased ownership amongst ready markets. Cost savings if re-invested into housing could add to positive benefits for all.

  The assumption that government can affect the complex and dynamic housing market either by increasing supply, "restructuring" markets or destroying housing stock is problematic. It may not be within the governments ability to exert control or even influence over the movement of wealth and capital on the scale currently sought.

  Since the ability to earn and acquire wealth, or borrow and accumulate wealth are the issues controlling entry to and purchase on the market, increasing supply or choice may prove too narrow an approach to development of access and equality.





 
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