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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 703-iv House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE OFFICE OF THE DEPUTY PRIME MINISTER: HOUSING, PLANNING, LOCAL GOVERNMENT AND THE REGIONS COMMITTEE
Affordability and Housing Supply
Monday 16 January 2006 MR PETER DIXON and MS MARGARET FORD YVETTE COOPER MP and MR ANDREW WELLS Evidence heard in Public Questions 416 - 528
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Committee on Monday 16 January 2006 Members present Dr Phyllis Starkey, in the Chair Mr Clive Betts Lyn Brown Martin Horwood Mr Mark Lancaster Anne Main Mr Bill Olner Dr John Pugh Alison Seabeck ________________ Memoranda submitted by The Housing Corporation and English Partnerships Examination of Witnesses
Witnesses: Mr Peter Dixon, Chairman, Housing Corporation and Ms Margaret Ford, Chairman, English Partnerships, gave evidence. Q416 Chair: Can I start the meeting because we are very short on time this afternoon. I am anxious to use the time as effectively as possible. Can I welcome both of you to this evidence session. Can I start by asking each of you, both of your organisations are stressing the importance of increasing housing supply. Can I ask you to say briefly what you think is the greatest constraint on house building, what the Government should do to unlock supply and whether English Partnerships is confident that it can double the number of homes that they are delivering by 2008/09? I d not mind which one of you starts. Ms Ford: We had indicated each of us wanted to make a very brief opening statement. Due to the constraints on time, do you want to move on? Q417 Chair: I would like to move straight to the questions. If there are additional things you would have said in your statement, afterwards we will be happy to get an additional written briefing from each of you. Ms Ford: Thank you. I am representing English Partnerships today because we are currently without a Chief Executive, David Higgins has gone to run the Olympic Delivery Authority so I am standing in for him. I think in terms of the constraints for house building and affordable house building, certainly from our perspective, I suppose these come down to two or three key things. The availability of land supply, which of course English Partnerships is heavily involved in, is one; the delays in the planning system, which of course Government is trying to address through a wide range of measures, really is another. English Partnerships is very actively trying to address both of these issues. We are working very closely with other government departments at the moment to broker surplus public sector land and we are doing that in three ways. We manage the register of surplus public sector land, which starts now to give much greater visibility to those assets which previously we did not see before they came to the open market. Secondly, we are working in an advisory capacity with organisations like Defence Estates and increasingly helping those organisations to overlay Government policy on their surplus assets before they dispose of those. Of course, in terms of our own programme, as you rightly said, Chair, we are increasing the amount of housing starts and completions quite considerably compared with what English Partnerships, for example, was charged to do five years ago. The availability of land continues to be a challenge. The price of land across certain parts of England, particularly in the South East, continues to be a challenge. We are using all of our efforts to address those challenges at the moment. Q418 Chair: Mr Dixon? Mr Dixon: I think as far as we are concerned, and I would agree very much with Margaret's view, the prime constraint is the availability of land, and very particularly land for affordable homes. We have seen the price of that commodity go up sharply. It is costing us something like £50,000 per home in the London area, £30,000 per home across the country. Land is the main constraint as far as we are concerned. Insofar as the other constraints that may exist are concerned, one of them is obviously around the capacity of the industry to build more homes and again we are taking steps to make sure that more of our programme is delivered via modern methods of construction. We have committed to delivering a minimum of 25 per cent of our current programme through modern methods - we are going to hit something like 40 per cent - that will help to deal with labour supply problems and will therefore enable us to build more homes. The other constraint quite obviously is cash at the end of the day. The more money there is in the system for us, the more we can develop affordable homes. We are not throwing money at the problem, we are seeking to ensure that we procure those homes more effectively. There was something like a nine per cent reduction in the cost of each home we procured in our most recent programme against the one before, that is despite increased construction costs and despite the rise in the price of the land. The other issue I would refer to obviously is the planning system again. It is not just about delays, it is also about the quality of the processes in which we all engage. We are working as closely as we can with housing associations, and with the local authorities, to make sure that we maximise the outputs from the planning process. The Committee suspended from 4.39pm to 4.47pm for a division in the House.
Chair: Can we restart. Can we move onto the next question which Mr Olner was going to ask but maybe Lyn could do it? Q419 Lyn Brown: You are both promoting shared ownership schemes. Why is it necessary for English Partnerships to be involved at all in promoting shared ownership schemes through the Londonwide Initiative and the First Time Buyers Initiative? Ms Ford: Yes, I think it was. You are quite right to say that we are both involved in shared ownership schemes but using different forms of subsidy, I think it is good to have comparisons for that. English Partnerships is able to use its land as equity in these schemes, that is reducing the price for first time buyers; the Corporation uses more conventional forms of subsidy, I do not think that is a problem. Over the piece, it would be useful to compare these and to learn lessons from each. I think the key thing, from the consumer's point of view, is we must not look confused to the consumer and that is where the zone agents are key. Frankly, it does not matter where the subsidy comes from, from a consumer point of view, as long as you, as the zone agents, are able to point people in the direction of the right product but I do not think there is a problem with it. Q420 Lyn Brown: Do you know the average income of those you have assisted in shared ownership schemes, in particular in areas of high housing costs like London and the South East? Ms Ford: I do not have that data to hand because EP has not been that active in shared ownership to date but the Corporation may have average figures. Mr Dixon: I do not have an average figure but I can say that the people who are helped, their starter incomes are not much more than £15,000 or £20,000 a year. Q421 Lyn Brown: Would it be possible to have additional written information? Mr Dixon: We will see if we can access that and find it for you. Q422 Lyn Brown: Okay. Are the roles of the two organisations adequately differentiated and complementary or is it just one more layer of bureaucracy alongside local and central Government? Mr Dixon: Not at all. I think we do different things, we have different sets of skills and different assets that we bring to the situation. We do work together very closely and we make sure that we do not trip over each other because we do have a different role. Ms Ford: Yes, I would agree with that. I think that question has been asked to me on numerous occasions in the last four years when I have been in this job, and it might have been a feared question four or five years ago when our two organisations were not working particularly effectively together, I think we were quite open about that. Over the last four years I have seen a huge change in the way our organisations work together, very complementary but absolutely not duplicating each other's efforts and the relationships are now arguably very, very strong. Q423 Chair: Could I ask you about the £60,000 house that the ODPM have been pushing. Given that land costs are such a big proportion of the cost of a house or a property, does that £60,000 house only work if it is a leasehold scheme or is there some other way of helping to reduce house prices overall? Ms Ford: In the Design for Manufacturer Competition, which set out the challenge to the industry to construct a house for £60,000, the Deputy Prime Minister was very clear, he never set out to say the eventual cost of the house would be £60,000. The competition was looking at bringing construction costs down because there are three elements to the cost of a house. There is a land cost, there is a construction cost, then there is your associated cost with 106 contribution, then there is developer's profit and the cost of time it takes to get through the planning system. What we have been trying to do with the surplus public sector land polices is address the first of those chunks of cost. The design for a manufacturer competition was meant to say, let us use modern methods of construction to get the construction element costs down to £60,000 or below, in fact it has come in below in many cases. We cannot deal directly with the developer's profit and so on as Government. It was never intended that the eventual cost of the house would be £60,000, although it happens to be if you factor in a shared equity product you get to somewhere around that. Q424 Anne Main: Following on from that, since often the ultimate cost of a house is determined by the land costs which you referred to earlier, could you extrapolate then if a unit of a house was £60,000 what the final outcome of a house would still be? Ms Ford: It absolutely varies literally from council to council area. If it was in one of the growth areas, say in the South East --- Sorry, did you say the land costs or the construction costs were £60,000? Q425 Anne Main: No, the final unit cost. The fact that someone is trying to get a £60,000 house they must have some idea of a saving that would make. In a high growth area, what would you say the ultimate full unit cost would be, by the time you have added in all of those other factors which you referred to, as an estimate? You are still looking at a price of about what? Ms Ford: If you do a Londonwide programme, one bed apartments in London, the open market value without any kind of subsidy would be, it would again depend on the borough, say £150,000. On the Londonwide programme those would be offered for sale at around £90,000. That is the kind of order of saving we are anticipating but it does vary tremendously. Q426 Dr Pugh: Can I ask about the Housing Corporation priorities, and in a sense about your core business as well. Traditionally, you see the Housing Corporation as being an organisation that funds social housing for rent by and large but you do other things as well, key worker schemes and also shared ownership schemes. Is there a shift in the balance for your funding and is there a shift in the balance of your priorities? If I can add a further rider to that, if there is a shift what motivates the shift? Mr Dixon: Yes, there has been a shift. At one time virtually everything we did was for 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. There are a variety of reasons for that. Partly there is huge un-met need for products other than rented accommodation. People cannot afford to buy and various forms of shared ownership do give them opportunities that will not otherwise exist. The other reason is that it is a contribution to creating mixed and sustainable communities. If all that people are creating is housing for rent and nothing else then you are likely to be seeing some of the problems that we have got in some areas on an ongoing basis where you have got a mono-tenure, mono-culture and all the associated problems. How far that process will go, I would not like to say. I suspect it will not go much further than that because the demand for rented accommodation is so great. Q427 Dr Pugh: You mentioned a variety of criteria that determine your pattern of spend. Is the need to make the maximum use of resources available part and parcel of the criteria that you will use insofar as promoting shared ownership presumably takes up a less subsidy? Mr Dixon: Yes, it does. You will get something like twice the number of homes through the low cost home ownership products as you will through the rented programme. If you talking about just putting out numbers of homes, you would get more out of an ownership programme than you would out of an entirely rented programme and there is no doubt the headline numbers are sometimes attractive. Q428 Dr Pugh: Within your budget you are relatively free to vire money to whatever target you think? Mr Dixon: No, we are not. The targets that we work to are set effectively by the regional housing boards. The regional housing boards work very closely with the various government offices. Our programmes are built around the priorities that are identified within the regional housing boards. Q429 Dr Pugh: You say one of those targets was to provide money for key worker housing schemes and they were not to be used up in total, you could use or transfer the money into shared ownership schemes? Mr Dixon: To a limited extent, but not entirely. We have to keep pretty closely to the parameters that are set by the Regional Housing Boards. We cannot go off and do our own thing and we should not be able to go off and do our own thing. We can do it around the margin to make sure that we are giving effective programmes. We cannot radically change it. Dr Pugh: Okay, that is very interesting. Q430 Mr Betts: If there is not the full take up of shared ownership products you can then switch them into rental benefits? Mr Dixon: We can at the margin. Q431 Mr Betts: Do you feel comfortable then as the major funder and provider of social rented housing accommodation in this country with a crisis in rented housing, which we have in many areas, not just in the South East now but in my own area, like south of Sheffield. There is a crisis in rented housing, and, as the major provider of funding, you are doing no more than you were five years ago to fund social rented housing? Do you feel comfortable with that? Mr Dixon: No, I do not. I would far rather have a lot more money than we currently have. We do not have that extra funding, therefore what we have to do is to make sure that it goes as far as we can. Making it go as far as we would have regard both to the nature of the programmes between rented accommodation and between low cost home ownership and ensuring we are getting value for money in procuring those homes. Q432 Mr Betts: Those who could influence those decisions are very clear about your views, that you are not comfortable? Mr Dixon: I think everybody knows that we want more and that we believe we could spend it effectively. If they do not then this is a good way of telling them. Q433 Anne Main: The new PPS3 could enable greater development on greenfield sites but is there a danger that will undermine English Partnerships' efforts to promote the reuse of brownfield land and regeneration on the slightly more awkward sites that developers often would rather not do? Ms Ford: No, currently the new statement is out for consultation and we have been looking at that very closely. The slight change of emphasis around brownfield, in other words the abolition of the sequential test and the replacement with this prioritisation of brownfield land, we do not believe necessarily that takes you to using up more of the greenfield. We think the way in which that can be developed will be very productive. I do not necessarily think that the changes in the planning consultation document will inevitably lead to a diminution of level of interest in brownfield land, quite the reverse. Q434 Anne Main: If that is the case, do you feel then that there is really the need for this alteration in the planning statement? Ms Ford: I think it is quite helpful because the sequential tests certainly gave you clarity around what you were doing but it did not offer you a great deal of flexibility. I am perfectly well aware that in some constituencies, particularly in the North West of England, a little more flexibility around the brownfield agenda would be helpful because what it does not take account of is affordability. If I give you the example of Warrington, where there is a lot of already serviced land which has been there from the time of the Warrington Development Corporation, it is owned by Government, it is already servicing substantial need but it cannot move forward for a long number of years even though it is land zoned for development because of the rigidity of the sequential test. In that particular constituency, Warrington South, average house prices are over seven times the average income. Whilst the brownfield policy area is working very well in terms of protecting the green belt what it is not doing is addressing the affordability question. It might be the case that the changes afford us a little bit of flexibility around trading those things off but that would all have to be agreed locally obviously, but it does open the door to give us a bit more flexibility than traditionally we have had. Q435 Anne Main: Can I clarify what I think you just said. The slowness of the process in bringing up brownfield land on-line, because of that you would like to be allowed to look at more greenfield sites? Ms Ford: No, I did not say that. It was not the slowness of it, it is just in certain constituencies we have a tremendous amount of brownfield depending on historical patterns of industry in those areas and that sometimes can lead to the brownfield sequential test having much more in the system than can be brought forward affordably. I think affordably is the key here. Sometimes that brownfield is a lot more expensive. Q436 Mr Olner: You mentioned in your evidence the varying quality of planning gain negotiation by local authorities. How do you think these negotiations can be improved? Ms Ford: I think both of us referred to the variability and the inconsistency around section 106. I suppose the two complaints I have about 106 as it applies at the moment, one is the time it often adds to the planning process but, secondly, the kind of uncertainty that it adds because you do get very different conclusions in different parts of the country. I think the consultation that is out now in Planning Gain Supplement certainly addresses the issue of consistency, and as Government intends Planning Gain Supplement to be developed it would help both with the time it takes to negotiate 106 currently and also this question of equity and inevitable treatment across our country. The new measures that are being proposed are potentially very helpful. Q437 Mr Olner: You made those views known to the ODPM during its negotiations for changing the planning gain structure? Ms Ford: The changes are not in place yet and the consultation is still alive and we will respond formally to ODPM but we work closely with colleagues in ODPM and they know about our frustration with the way 106 currently operates. Q438 Mr Olner: Having looked at this, there is always this point of conflict between section 106 providing social housing and perhaps Planning Gain Supplement, which is being looked at now, is going to provide infrastructure. It might well be that social housing loses out. Mr Dixon: No, in point of fact the new arrangements, which we would welcome, are going to mean that section 106 agreements are going to be much more tightly drawn around the provision of affordable housing, and we would welcome that. We are glad that is the way it is going. The Planning Gain Supplement is a separate issue outside of that. There is one other point that I would make in addition to Margaret, as far as our organisation is concerned. The Housing Corporation is engaged in discussions with the LGA at the present time around developing the protocol around the use of section 106 and making sure that we maximise the gains from it because we see huge variability around the country. The point of having a protocol with the LGA is that we can jointly turn around and say "We think this is the way to do it, it is going to result in more affordable homes and better value for money". We are working on them currently to get that protocol. Q439 Mr Olner: One final question on this. I can see section 106 is on planning gain, brownfield sites and greenfield sites. An awful lot of the deserts that occur in communities are where there is housing that is no longer up to the standard that people want to live in, and it does appear to me there is a huge hole there that does not attract any of these things that are able to assist. Mr Dixon: That has been partly addressed by some of the programmes that the large scale voluntary transfer movement has moved towards. Some of these big old estates have been transferred to housing associations and are being re-developed. Sorry, I misunderstood you. Q440 Mr Olner: It is not only local authority or rented accommodation, it is also in some of those areas where there is a mix, it is being able to get the private sector on board as well. It seems to me to be a huge area. There is no stimulus coming either from Government or from yourselves to address it. Ms Ford: I think there are some very good examples now coming forward of where English Partnerships, at the request of ODPM, is trying to deal with exactly that issue. If I can give you the example of the Woodside Estate in Telford, a New Towns estate very typical of its age, mid 60s, it started being built. We had exactly that situation, in fact I spoke to this Committee about it four years ago. We have dealt with it there by a very selective process of demolition where appropriate, then releasing that land value to mix the tenure to bring in private housing and intermediate housing in that area and also some really fabulous community facilities which had been lacking in the past. The kind of work that we are doing in Woodside, the kind of work that we are doing in the Hattlersley Estate near Manchester are just a couple of examples of the different ways of working where we are using the land assets very sensibly from what were failing or sub-optimal estates to try and address the very point you make. Q441 Lyn Brown: There has been some criticism about the number of organisations involved in the Thames Gateway. Do you accept this and how do you think it could be resolved? Ms Ford: I think the issue for us on the Thames Gateway is less about the number of organisations involved and more about the clarity of decision-making processes. What we have tried to do in English Partnerships, and I can only speak for my own organisation, is to be very focused in the projects that we have been involved in, in Barking Riverside, on the Greenwich Peninsula and so on. We have about three or four major projects and what we are trying to be very clear between ourselves and the relevant local authorities about the nature of those projects, the kind of communities that are being built there and how we can work with the Department for Transport, and with the Mayor's Office when and where appropriate and so on to bring those to fruition. I am passionately keen to be focused and be able to communicate very clearly what we are doing and every organisation, and you are right there are many of them, needs to do the same. Q442 Lyn Brown: You do agree there is confusion? Ms Ford: I think all the feedback from the work that has been done recently asking people's perceptions of the Gateway suggests that there is confusion there, yes. Q443 Lyn Brown: We have heard from some of the people who have appeared before us that the development potential within the Thames Gateway will not be maximised because of inadequate infrastructure. Do you agree with that? Ms Ford: I think you can only maximise the potential of the Gateway with very serious attention to the infrastructure. I think we are all clear that transport infrastructure is absolutely critical but also, again, from recent very good work done about the perception of communities in the Gateway, people believe that unless there is community infrastructure, unless there is educational and cultural infrastructure - interestingly which came out very strongly in the most recent report - then people will not be attracted to go to the Gateway. Whilst it is a phenomenal opportunity, there is also a big ask in terms of infrastructure investment. Mr Dixon: There is also a timing issue here which we must not forget and it is a 20 year plus project and getting it right will require infrastructure developed over that period and the economic regeneration and the housing will follow that, but it is not overnight. Q444 Lyn Brown: Do you think the Milton Keynes model can be looked at for tariff work? Do you think it could work across such a large area? Ms Ford: We are very pleased at English Partnerships out the tariff approach which will raise just around three million over the next period of development. Milton Keynes has now been approved by Treasury. We are very pleased about that because English Partnerships has been working on the tariff approach for nearly two years now and we think that method of having voluntary, but very impressive contributions by developers, is a very sensible way forward. Because of the certainty of those contributions English Partnerships can now fund the cash flow upfront for a lot of the necessary infrastructure for Milton Keynes. I think it is a very good model and it is capable of being replicated in other parts of the country, by no means all because it depends on the pattern of landownership in a particular area but it is a very good model. I am very pleased that the Treasury have given us leave to pursue it in Milton Keynes because it will move things along faster. Q445 Lyn Brown: Will it work in the Thames Gateway? Ms Ford: It could work in parts of the Gateway, but the passion of landownership and the willingness of those landowners to voluntarily commit would be critical. Q446 Anne Main: Can I briefly ask, there have been some concerns expressed about design quality to do with these cheaper units, particularly using the modern methods of construction. How can you avoid design suffering as a result? Mr Dixon: I think the question has partly been misplaced. We are very firmly committed to high quality design standards, eco-homes standards. We are absolutely not going to move away from those in the pursuit of value for money because it will not be value for money. If you look at the designs that came out of the £60,000 home competition, they were quite imaginative and they were creating the sort of homes that people want to live in. From what I have seen recently a large percentage of the homes that are being put up by housing associations are places that anybody would be very happy to live in. We are not going to let go of those standards. Q447 Anne Main: Will you implement the new standard LPS 2020 developed by the Council of Mortgage Lenders? Mr Dixon: I am not aware of that one. What is it? Anne Main: We had this when we had the mortgage lenders, there were some concerns over the construction methods used and the quality of construction --- Q448 Chair: It is something the mortgage lenders have developed in order to try and encourage people to give mortgages. They were concerned that the ODPM and the Housing Corporation should sign up to it. Mr Dixon: It has not come across my desk yet. It presumably will at some stage. Q449 Mr Betts: Is it not rather difficult to understand then that you are funding quite a large number of units using modern methods of construction and you have not got design standards in place, have you? Mr Dixon: No, absolutely not. We have a complete list of design standards which typically are far higher than those used by private developers. All the development that we fund will also have private finance going into it and the housing associations will have to ensure whatever they are using in the way of construction methods is acceptable to the mortgage industry. Q450 Mr Betts: This is guaranteed for how long? Mr Dixon: It will be guaranteed for however long it needs to be in order to be acceptable to the lenders. If you are talking about a private development, you have a ten-year NHBRC guarantee. Typically, we would expect a 60-year life out of the properties that we are funding; it does not mean that they are guaranteed for that long. Bear in mind there is 30 billion of private finance in housing association investments at the moment. All of that is to the satisfaction of the mortgage lenders. I would not imagine our standards are going to be a problem to them. Q451 Mr Betts: Do you not think it rather strange that when the Council of Mortgage Lenders came here, they talked about this new standard they were developing and said it had not been developed? They were very concerned indeed that there were not standards laid down and they were very clear with their estimates. Ms Ford: If I can be blunt, I would take that with a pinch of salt. We have found, over the last two years, the most difficult crowd to deal with has been the Council of Mortgage Lenders. Not only ourselves but private developers absolutely tear their hair out because the Mortgage Lenders have refused to countenance up until very recently the modern methods of construction were actually a runner at all, despite all the evidence to the contrary. I am delighted, absolutely thrilled to bits, that they have come here to tell you they are now converted to the DPN's agenda. Peter and I will rush off and find out exactly what they are talking about. Q452 Mr Betts: Perhaps we might ask the Minister to get you all in the same room and try and resolve the issue. Mr Dixon: I do not think we have a problem, but if we have we will solve it. Q453 Chair: I am very conscious that we have to rush this session, particularly because of the vote, but you will understand we are keen to get the Minister in here. Can I suggest if there are any additional things you think we ought to be aware of, then please put in additional written evidence. It may be that members of the Committee will have additional questions they might wish to ask that we will pass on to you. Thank you very much indeed. Mr Dixon: Thank you.
Witnesses: Yvette Cooper, a Member of the House, Minister for Housing and Planning, Office of the Deputy Prime Minister, and Mr Andrew Wells, Director, Communities Plan Directorate, gave evidence. Q454 Chair: Minister, can I welcome you to this session. We are conscious of the fact that you have an appointment after, as I understand, and we are very keen to use this period as effectively as possible. We will try and keep our questions short and to the point, and obviously we will appreciate it if you reciprocate in your responses. Can I start by asking about the Government's commitment to increase the annual rate of house building from 150,000 to 200,000. Can you explain what has really changed to enable that enormous step change in the level of house building? Are you planning to break down the 200,000 target by region? Yvette Cooper: Thank you, Chair. Can I say I am at the Committee's disposal because I know we have had votes and things so I can be flexible in terms of the running of the Committee to make sure we cover all of the points that you want to. Obviously there is a huge range of issues here. You asked the question about the proposals we set out in the Barker Response and what we have said is the latest figures show for 2004 150,000 new homes being built and the projections for household growth are for 190,000 new households being formed each year. Clearly, that is a very substantial gap between the rise in housing demand and the current level of new housing supply. We have done a lot of work around the impact on affordability but also just simply looked at the practical impact of that household growth. That is why we have said that we believe we need to increase the level of new house building to 200,000 a year by 2016. We have not set out the pace at which we believe we should make those increases. That was quite deliberate because clearly the pace at which we are able to build additional new homes depends on things like infrastructure availability and that depends on things like the Comprehensive Spending Review and those sorts of important discussions that still need to take place. It is because we believe that the links with infrastructure are so important that we have said we will set out the pace at which we need to increase house building as part of the Comprehensive Spending Review. We do need to look in more detail at the regional breakdown also. We have said as well that we think housing pressures are no longer simply pressures faced by the South. Now, as well as having our growing ageing population, we have a growing population in other regions as well; the northern regions are seeing growth in population too and there are clearly pressures on housing faced in particular areas, in the South West and East and West Midlands too. We want to do further analysis on what the appropriate increase in housing needs to be in every region and obviously that will be part of the regional planning process as well. Q455 Chair: Do you have a timescale of when you might be able to give a more accurate regional growth plan? Yvette Cooper: I think part of this will be part of the Spending Review timetable. I think we need to have a very clear idea by the end of the Spending Review timetable because clearly it is 2006 now, and in order to increase the level of new house building before 2016, we need to make progress as we go. Obviously, we will do this work as fast as we can. We want to set up the National Advice Unit, which will contribute to a lot of this work, by the autumn of this year. Q456 Chair: Affordability is a key part of this. Given that house prices appear to be levelling off, does that mean that you might re-calculate the level of housing required to deal with the affordability issue? Yvette Cooper: What we need to be able to do is distinguish between the cyclical impact and the current point that we are at in the housing market cycle and also the long-term impact of price increases. What Kate Barker did in her study was to set out the long-term house price increases to argue that these were significantly higher than in most other European countries and also higher than was good for the economy, the wider society and so on. Our modelling looks at long-term house price increases not the position we happen to be in in the cycle at the time. That is why the research that we have done in the additional document that was published shows, if you look at the current position, that just over 50 per cent of 30-year old couples could afford to buy their own homes on the basis of their earnings. On the current level of house building, if we carried on at that level over the next 20 years, bearing in mind the level of household growth, we would see only around a third of them able to afford to buy their own homes by 2026. That is based on the long-term trend not the short-term position in the housing market cycle. Q457 Mr Olner: Could I follow on what the Minister said on that one little point alone before I get to household growth. There is an ever-complex series of mortgage or financial packages put forward; it does not solely rest now on the person's income as to whether they can buy a property. Yvette Cooper: You are absolutely right. I think that poses a concern over the next 20 years also because I think we are likely to see a situation, if we do not increase the level of house building, where people who will be able to afford their own homes will be people who get gifts, inheritance or other support from their families. Now that is fine, but I think it is unfair if those are the only people who can afford to buy their own homes and the people who are unable to get a foot on the housing ladder are those whose parents were not homeowners before them. I think there is an equity and fairness issue as part of this. Q458 Mr Olner: You have suggested and I think you mentioned, Minister, the number of households is growing at about 190,000 a year. Can I ask what the basis of that theory is? How scientific is it or is it a good guess on a Friday night? Yvette Cooper: Obviously there is a lot of work that goes on into projecting household growth, and there is work that is done by the ODPM which maybe I will ask Andrew Wells, who heads up the work on housing supply in the Department, to say a little bit more about it if you would like or we can provide you with further detail. There is additional research done by people like the Town and Country Planning Association who have looked in some detail at this. It is based on ONS work, it is based on very rigorous long-term projections about what the impact will be in the future. Q459 Mr Olner: I would imagine some of the stuff is dealt with on the projections based on the 2001 Census? Mr Wells: Yes, that is quite right. Q460 Mr Olner: Could I ask when will that in be in the public domain? When will you be publishing it? Mr Wells: There are projections in the public domain. They start, as you say, from the census projections done by the ONS and we carry them forward into household projections. I think we have done two lots of forward household projections while I have been involved in this job. There was a set based on 1990 projections, another one based on 2002 projections, and there will be another set later this year. The last set is based on the 2001 Census. Q461 Mr Olner: When will they be issued? Mr Wells: I am sorry I do not have the exact date, but there are 190 --- Q462 Mr Olner: We are near the end of January now. Is it going to be in the first, second or third quarter? Mr Wells: I am sorry, I just do not know when. There are current projections. We can let you know when the new projections are out. There are a good set of projections there, they are just being carried forward as the ONS takes its projections forward year on year. The present ones are based on 2002 figures and I think the new ones will be based on 2004 figures. Q463 Mr Olner: Does that not cause a problem because CPRE suggests that the 2001 Census shows that the surplus number of homes over households has increased since 1991? Does that not undermine your argument? Yvette Cooper: You can always have arguments over figures and about the level of figures. We think that the work that has been done around the 190,000 projection is the most rigorous there is, it is really very detailed and thorough. In addition, I think that it has been supported by a series of independent studies and research as well. You can also see two things are reinforcing each other that suggest that these are pretty accurate. You have the figures which show 190,000 projected household growth compared with 150,000 housing supply. Then you have the figures about what is happening to house prices, about those long-term pressures which reflect exactly the same thing, that demand is increasing faster than supply. From an anecdotal level in all of our constituencies, we know there are pressures of more people wanting homes than are able to get or afford homes and then you see the actual figures reflecting the same thing. That is why I think you have to be relatively confident that these figures are going in the right direction. Q464 Chair: Can I clarify with Mr Wells that we are right in thinking that the projections are based on up to date population figures, but it is still the 1996 data on household formation, is that right? Mr Wells: I think that is right, yes, and the new thing, which will come along, is better figures on household formation. Q465 Chair: Those are the figures that you are not certain when they will be coming out, but it will be later this year? Mr Wells: I cannot tell you an exact date. Yes, that is exactly right, but they are based on the 2001 Census. Q466 Martin Horwood: Is it not true that these kinds of national trends and projections mask a host of much more complex regional and local markets and situations where the causes of affordability or unaffordability are much more complicated than, I have to say, your Department is really suggesting? In the South West, it is clear that a lot of it is to do with inward migration and a lot of that is to do with second homes. Are we to accept this sort of market-driven analysis whereby we just have to accommodate this inward migration forever or is that not almost a definition of unsustainability? Yvette Cooper: It is certainly true it is very complex in different parts of the country. In some areas, the challenge is relatively straightforward: it is simply high demand across the area and there is much higher demand than there is supply of new homes. The areas which are perhaps the most complex are those where you have a very high demand alongside areas of very low demand, some areas where you have particular communities where house prices have been rising very fast right next door to areas where house prices have either fallen or stayed very low. Some of the challenges of low demand areas that we are trying to address through the housing market pathfinders really do exhibit the complexity of this at the local area. That is exactly why we have said that this does need to be looked at in a lot of detail at the sub-regional level, which is the level of the individual housing market, the individual labour market. At that level you will see very different pictures: some being very high demand, some being a mix of high and low, some being lower demand and some being high demand but facing particular pressures. The issue you raise on the South West I think is an important one because what you have in the South West is affordability linked not simply to demand for housing but also to wage levels and economic growth relative to other areas as well. Certainly we accept there is a series of different complexities. The intention behind the planning reforms, the PPS3, in order to address those kinds of complexities, is to not have the same approach applied everywhere. I do think also it is true that you do need to look at the housing market everywhere, wherever you happen to be, whatever that sub-regional housing market is. You do need to look at those market factors, otherwise you are not properly reflecting the whole situation we face. Q467 Martin Horwood: We have a local housing market in Gloucestershire where you can see differences which cannot really be related to housing supply because the places are only four or five miles apart and where it is much more related to quality of place and availability of jobs and things like that. Is housing supply not too simplistic a tool to be using, as lots of the evidence we have heard suggests? Yvette Cooper: In the pathfinder areas we often find it will be areas where sometimes they get into spirals of decline and disadvantage, and having boarded up properties then has an impact on the rest of the street with things like crime and vandalism and so on as well. Certainly I would agree there is a complex mix of factors. However, I think you can also take a step back and look at what the global position is across the country as a whole, and say that household growth is substantially higher than new housing supply across the country as a whole. There just is that gap and as long as there is that gap, we will still see overall, across the country as whole, long-term house prices rising significantly higher than they are in other European countries and at a rate which means that first-time buyers and people with housing needs in future generations will face very serious pressures unless we respond. Yes, the response needs to be sensitive to different areas, but we cannot deny that there is a nationwide problem. Q468 Martin Horwood: Why is house price inflation now falling? Yvette Cooper: If you look at what is happening it is interesting in the housing market, we are at a different point in the housing market cycle. There is always a housing market cycle, but against that you have long-term trends in house prices as well, and that was what the Barker Review was very clear about. Q469 Anne Main: You focused on equity in terms of people inheriting house wealth and so on, and you want to make things more equitable. It has been described as socially regressive to focus on buying houses with only very few houses being built to rent. Do you have a view on that? Yvette Cooper: I think we need to build more social housing, more shared equity housing and more private housing, we need to do all three. Certainly we cannot just do more private housing as part of this, we need to have more social housing as well. We have already set out increases in the level of social housing as part of the current spending review, but we said as part of the Barker Review we want social housing to be a priority for the next spending review as well. We will set out what we think the level of increases needs to be over the next spending review as part of that process. I think we do need to recognise that increasingly people want to be able to buy their own home or to have a share of homeownership and we need to respond to that. I think it is important to support those opportunities, but we need to support opportunities for people who want to rent also. We said at the beginning of the Barker Review that we have three clear aims: a step on the housing ladder for future generations; quality and choice for those who rent; and mixed and sustainable communities as well. I think we are clear that we need to do all three. Q470 Mr Betts: Some of us might agree with the analysis that we need to build more homes in this country and we are obviously aware of the potential constraints for the future on public spending, yet we can see the enormous requirement for investment in infrastructure costs in the South East and then more funding hopefully for social housing and shared ownership projects. Where is the money coming from? Yvette Cooper: It is because we think that there are additional investment requirements that we set out the proposals for the Planning Gain Supplement and we are consulting on a proposal for a Planning Gain Supplement to raise some of the additional investment for infrastructure from the gain that takes place purely as a result of the change in planning status because we know there are very considerable gains. Some of those are tapped into by the section 106 process, but we think the Planning Gain Supplement would be a better way to do so and is a way to raise additional resources for infrastructure investment in particular. We said this needs to be something that we address as part of the Comprehensive Spending Review as well. That is why the Treasury has proposed a cross-cutting spending review, which brings together all the different departments not simply ODPM and the Department for Transport, but also Health, Education and so on to look at what the infrastructure requirements and the extra investment needs are. We should recognise that some of the investment is simply a question of where it is allocated; it is not just about level because you need to educate the same number of children wherever they happen to be. It is not simply about the new housing; costs arise from children needing education. There may be capital costs that are additional in terms of the location, but otherwise it is simply a distribution issue and not simply additional resources. Q471 Mr Betts: In terms of the extra resources needed to ensure we get the new housing that your forecast indicates we need, have you any idea the feel for how much of that money is going to come from central Government through a Spending Review and how much is going to come from 106 and public accounts? Yvette Cooper: No, I think we cannot set that out at this stage. That is something that will depend on part of the consultation and consideration around the Planning Gain Supplement but also the Spending Review process. Q472 Mr Betts: But it would be fair to say then to successfully develop a planning gain system is essentially crucial now to delivering the targets you are forecasting that need to be met? Yvette Cooper: We think it is an important part of providing the additional support for infrastructure. What we cannot do is say categorically how much would need to come from which and what the different resources were because that is the process we are now engaged in as part of the Spending Review. Q473 Mr Betts: That will be announced at the time of the Spending Review, will it? Yvette Cooper: We would expect to announce as part of the Spending Review then how much additional public sector investment we can put in, whether it is for infrastructure or additional social housing, for example, the Spending Review timetable. The Planning Gain Supplement timetable will obviously be affected by budgets and budget considerations as well. Q474 Mr Betts: Sorry, I did not quite understand that. Yvette Cooper: What I mean by that is we said that Planning Gain Supplement could not be introduced before 2008. What I cannot say to you at this stage is whether decisions about Planning Gain Supplements will always be announced as part of spending reviews rather than budgets. Obviously those are decisions for the Chancellor. Q475 Mr Betts: It would be helpful if they were. It is very difficult to get an understanding as to how we are going to meet national targets if spending is being done in different --- Yvette Cooper: Sure. The debate about these will be linked. Q476 Chair: Can I ask about the level of private householding. Is that an end in itself or are the targets set in order to generate sufficient subsidy for social housing? Yvette Cooper: No, we did not work out what level of private housing was needed in order to have an impact on social housing. We looked at an overall figure for the level of need given the impact on things like household growth. Q477 Anne Main: You mentioned the number of children who need educating, for example. What assessment has been made of the type of housing you are building, whether it is family housing also, to know how to best direct resource facilities? Yvette Cooper: I think that is a really interesting issue and it is certainly something that is coming up in a lot of the debates about London, for example, the need to build, say, additional family housing and larger properties as well. I think this is something that needs to be addressed at the more local level in terms of whether particular areas have oversupply of one kind of housing. There are some areas where, for example, they have lots of three-bedroomed houses but very few small flats for single people; there are other areas where the big need is for larger homes for families. Q478 Anne Main: You do an assessment of that? Yvette Cooper: That is the kind of thing that needs to be assessed as part of local development plans. We set out in the PPS3, which is the planning guidance for housing, the need to do that kind of analysis and to make sure you are supporting properly mixed communities and that you do recognise the kinds of housing needs that you have in the area. Q479 Anne Main: You do not worry that some of your density targets may well mean you cannot build, say, bungalows or bigger family houses? Yvette Cooper: 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. Good design means you can look at all sorts of areas of London, where there are Georgian and Victorian terraces which are very high density, often a lot higher than the levels we specify in PPS3 but also provide good design space and accommodation for families too. Q480 Anne Main: The detailed costs for development in growth areas has yet to be accurately calculated but are likely to be high. Are you concerned that development potential will not be maximised on sites in growth areas, particularly the Thames Gateway, because of inadequate infrastructure? Yvette Cooper: I think we have said that we think there needs to be more investment in infrastructure. We are putting a lot of investment into infrastructure already. If you look at the overall investment for the Thames Gateway, there is £6 billion going into the Thames Gateway from different kinds of mainstream funding sources and we have targeted investment also, whether it is through the support for things like Channel Tunnel Rail Link for the Department for Transport, programmes like FastTrack in Kent or Milton Keynes Station, there is a lot of that kind of infrastructure investment going in at the moment. £1.2 billion is the ODPM's contribution over the next three years for additional capital investment to facilitate growth. It is certainly true that infrastructure investment is critical, but that is exactly why, first of all, as I have said, we have not specified how fast we can increase the house building because we want to make sure we consider the investment needs as part of the Spending Review first and, secondly, why we think the PG estimate and things like that are so important. Q481 Anne Main: You are happy that all the government departments are going to buy into this, allocate sufficient funds and give sufficient priorities? Yvette Cooper: I think the cross-cutting spending review is certainly an opportunity to do that. It was the Treasury's proposal for a cross-cutting spending review, that means they are holding the ring on this and getting the other departments to contribute. We have got quite a lot of enthusiasm now from individual departments and certainly it is true to say in the past that we have not had enough co-ordination between different departments about the growth areas, but I think that really is increasing now. For example, the Department of Health has introduced a new growth area for adjustment into their formula for primary care trusts, but we clearly do want more co-ordination between departments on this for the future. Q482 Mr Olner: You say that most of the decline in house building over the past few years is because of the collapse in council house building with the private sector staying pretty much the same. Given that is correct, why are most of the new measures in draft PPS3 aimed at freeing up the private house building market? Yvette Cooper: I think everybody needs to get planning permission. If you are an RSL or a housing association and want to build new houses, you have to get planning permission as well. A lot of housing associations tell us they have difficulties with planning permission, with planning systems and so on and so forth. Whether they are private development, social housing or shared equity schemes and so on, there are issues for the planning system in terms of the way in which to treat housing development. Secondly, I think we have seen a big change over the last 30 years in terms of homeownership, attitudes towards home ownership, a big increase in home ownership and people wanting to be able to own their homes compared to, say, 30 years ago. There are even recent surveys showing very high percentages of people who are in council housing or in housing association accommodation, who say they would buy their home if they could afford to or they would like to be homeowners if they were able to. I think you have to recognise that shift in terms of demand and people's attitudes towards housing and be able to support those aspirations. Certainly, it is true we need to increase social housing and we set out some measures in the report about how, for example, high performing local councils and ALMOs might be able to do more using their own assets as well to build more housing too. There is a range of things we need to do, but that does not get around the need for there to be more private house building too. I think it is interesting at a time when there has been increased demand for private housing, because you have got more people wanting to own their own homes, but why has the private house building market not expanded to fill that gap? What is the market failure here? Why is it that house builders are not building far more houses in order to respond to that private demand? I think there is a serious question here that is not just about the planning system, it is also about the way in which the house building industry has responded to the housing market cycle, the way in which they are not looking at those long-term needs and not increasing house building to meet those long-term needs. Q483 Mr Olner: Hopefully the planning gain system will be able to address that. I do not want to steal the thunder of colleagues who will be asking questions. It is this silly number where you predict how many houses need to be built, the land is then made available, very painfully sometimes, and then it is not used. All the while, there is a pressure on local authorities to ensure there is a proper adequate supply of social housing. Less than two per cent of the local authorities who were surveyed felt they could meet the need in social housing in their particular areas. I have to say, I have seen it in my own area where there is plenty of choice within the private sector, there is very, very little choice offered to people who are trapped in the socially rented areas. I think that is because there has been no building allowed. Yvette Cooper: We should be clear there has been a lot of building in terms of social housing. It has been concentrated in the areas which have got the highest demand and the highest cost. I think we need to do more to address areas like yours, areas across Yorkshire where my constituency is and so on, where there are social housing needs as well. As part of our social housing analysis that we do in the Spending Review we need to also look right across regions and not simply at the southern regions in the same way that we do with the private sector. Q484 Mr Olner: One final thing on this because I think it is so important. We mentioned earlier, Minister, about the various financial packages the finance industry is very clever in putting forward now. We seem to have lost the connection between the price of a rented property and the price of a property which is being bought. I think if we increase the amount of social housing and let local authorities be the managers that do that, I think you will start to see some stabilisation in private house prices. Yvette Cooper: I am not quite sure what you mean by that. Certainly, there is a big gap between social housing rents at the moment compared with private sector rents. The social and housing rents certainly in London and the South East are significantly lower than private sector rents. It is obvious why that should be the case. I am not sure what the point is about the link with house prices. Q485 Chair: I think what Mr Olner is trying to say is that if more people could get social rented property they would not require to buy. Yvette Cooper: Certainly, there is a link between the two because I am sure the social housing waiting lists go up in areas where people cannot afford to buy their own home where they might want to otherwise, so there is clearly a link between the two. I think we have to recognise that people often want to buy housing or want to have a chance to be able to buy a share of their own home, maybe they cannot afford to buy all of it, but they want to be able to get a foothold on the housing ladder as well. Q486 Anne Main: Following on from that, Minister, do you believe you can stem the increase in house prices in a sufficient way to allow a significant number of households to get onto the housing ladder? In which case then, what is the balance between increasing access to home ownership by helping more first time buyers and increasing the supply of housing? Yvette Cooper: To take the first part of your question first: the analysis we did, as I said, showed that if you carry on with the 150,000, broadly, a year over the next ten or 20 years compared with the level of household growth, the impact you would have is that the proportion of 30 year old couples able to afford their own home would drop, so it would fall from just over 50 per cent down to nearer 30 per cent or about a third. If you increase the level of house building, you could substantially increase the proportion of those 30 year olds who are able to buy in 20 years' time. You do have to recognise that it has a long-term impact and sometimes the impact of the additional house building over the next five years might have its greatest impact in terms of affordability over a much longer timescale. This is not something where there is a quick fix and you can increase house building. Q487 Anne Main: You said substantially, do you have any figures to plan for that? Yvette Cooper: I think there are some figures in one of the documents. As you can see I have come carrying huge numbers of Barker documents. If I can draw your attention to something on the Government Response to Kate Barker's Review of Housing Supply: The Supporting Analysis. This sets out some particular different models, it does not set out specifically what it is we are going to do because the pace of that will depend on the Spending Review. It has a model compared with what would happen by 2026 under the current proposals, and under current levels of building it has another model with higher rates. Q488 Anne Main: There has been a large amount of scepticism by people who have reported to this Committee that you can build out that price differential sufficiently to make them truly affordable. Yvette Cooper: It is certainly the case that regardless of the plans in terms of house building, there are a lot of people who also need assistance in terms of shared equity. People who would like to be able to afford their own home, have steady incomes, can afford to buy their own home or can afford to keep up with regular mortgage payments, but cannot afford to buy the whole home and for them increasing shared equity is a real opportunity. Yes, we do think we should have far more shared equity products. Again, I think there is an interesting question about why it is that the private sector has not already expanded shared equity products and why there is not more shared ownership at the moment. We want to push that, we want to increase it both through housing associations, but also through working with the private sector as well. Q489 Anne Main: I think it follows on from what has been said, there has been a degree of concern expressed that you are helping those on the margins of home ownership stand on tiptoe rather than helping those in greatest housing need. Yvette Cooper: You need to do all three things. You need to expand supply overall, but as part of that you also need to increase social housing and increase shared equity housing. Q490 Anne Main: Are you convinced you have the proportions right? Yvette Cooper: We have not set out exactly what the proportions should be at this stage because that is part of the debate as part of the Spending Review. We have clearly set out our proposals over the next few years in terms of shared equity, but said that we want to go further. We have set out our proposals for social housing over the next two years as part of the Spending Review, but in terms of where we go from there, we need to do further work on exactly what the right balance should be. Q491 Martin Horwood: We have some evidence, and it is following on, again, from Mr Olner's point, that it is the lack of social housing itself which may have contributed to the inflationary effect on house prices and the reason why people need to get on the housing ladder - as you said, they all want to get on the housing ladder - is because of the chronic lack of social rented housing, is that not possible? Yvette Cooper: Clearly, I do agree that we need to build more social housing. The thing I think that analysis does not reflect is that, first of all, we have overall household growth compared with the overall level of house building, where there is clearly such a substantial gap, the 190, 000 figure compared with the 150,000 figure. However you build the homes, whatever kind of homes they are, there is a substantial gap between the level of household growth and the level of new housing which you need to increase. Therefore, I simply do not think a smaller increase in social housing will solve the problem that you face in terms of overall housing need. The second issue which it does not reflect also is that people's attitudes towards housing have changed. Increasingly people want to be able to own some assets themselves, even if they are only able to afford a share of their own home. I think it is right that the Government should respond to an increased desire to own assets and to share in asset growth across society rather than it simply being the preserve of a smaller number. Q492 Dr Pugh: Can I come on to the PPG3 and its removal and replacement by PPS3, the draft Planning Policy produced as part of the Pre-Budget Statement. Personally, I was very encouraged by that and I have also been very encouraged today about what you said about sub-regional markets, flexibility and also by your general tendency to engage with the Committee in a very open-minded, evidence-led way. Playing devil's advocate on this, the general drift is to make brownfield sites marginally less attractive and, if I can add a rider to that again, is this partly because some of the brownfield sites that are the prime sites, the best sites and easy to develop have, in a sense, gone and we are now looking at a second wave of brownfield sites which are more difficult or simply windfall sites being brought about by the closure of a factory or something like that? Yvette Cooper: I do not think that is the intention behind PPS3 at all. Certainly it is our intention to increase the amount of land being brought forward for housing, particularly in high cost areas. The key thing I would draw your attention to in the PPS3 consultation is there is a chart, which I think is at annex D, which sets out the different ways in which it might work for different kinds of areas because it would be different in different kinds of areas. Milton Keynes is very different from Merseyside; different kinds of pressures apply in different areas. We have been very clear that the brownfield target must be retained, that local areas should also set their own brownfield target, which should be applied over the course of a five-year time horizon, that local authorities should also be playing a much more active role in terms of bringing brownfield land forward because we do know that, yes, there are some great brownfield sites which may already be being developed, but there are also a whole load of brownfield sites which could be being developed, but they may need a bit of additional work, maybe additional public sector involvement, maybe remediation work and maybe additional infrastructure, for example, in order to make them appropriate for development. That is why we have been clear that there has got to be an active strategy by local authorities to bring forward brownfield land rather than simply a passive process which says, "You just wait for it to come through the planning system". The other thing we want to do is consult on whether there should be different rates of planning gains and supplement for brownfield and greenfield land as well as an interesting question to ask. Q493 Dr Pugh: How do you deal with the difficulty that you may get even within a sub-region where you may get people, quite legitimately, worried about urban sprawl, where the centre of a city is to be developed, which is all good, and not erode the green belt? Within the same sub-region, you may get other areas, maybe smaller towns - we can think of a number of those - where there is limited capacity to develop brownfield capacity and yet the planning regulations tend to inhibit any development and, in effect, they simply work as a restraint on economic growth? How do you deal with that kind of dilemma? Yvette Cooper: That is why, again, I think it does go back to whatever the sub-regional market is. That is why people have to decide across the sub-regional market what is the appropriate level of development, but also location of development. We do also have some sympathy; we had some points raised with us by people representing rural communities. They said there is an issue about sustainability, sometimes of small villages or small towns. A lot of our concern about sustainability has often traditionally been about, having new building near to where transport hubs are, near to major centres or towns, whereas people are saying, "Yes, it may mean more car journeys if you have got additional new house building in a particular village". On the other hand, you may have a village where, because of the ageing population within the village, there is a need for a small amount of additional housing in that village in order to keep that village sustainable, to give it a life for the future. We have tried to reflect that kind of sensitivity in PPS3 as well compared with the previous guidance. Q494 Dr Pugh: Why on earth in the first five years have our local authorities to phase the release of sales? Yvette Cooper: In annex D of the PPS3 document we do say that may well be appropriate for areas, for example, where they have low demand. We have set out areas where there might be low demand, where it might be appropriate to phase the development over the first five years, but there are an awful lot of areas where there is high demand or medium levels of demand where it should not be appropriate to phase because what that phasing is doing is slowing down development. You have got some areas where local authorities are saying, "Well, because this particular bit of land has not been developed yet, therefore no development can take place" and it may be that the reason why that particular piece of land has not been developed is because of an infrastructure problem or because of a particular complex ownership row which is going on between different players and, therefore, that should not be used to hold up the level of housing development that is needed. Again, we have set out in annex D examples where you might have phasing beyond the five years that would be appropriate in different ways for different kinds of housing markets depending on the level of demand in that area. Q495 Dr Pugh: Can you explain your view on windfall sites because obviously there is a difference of opinion there as to how they should be treated? Yvette Cooper: We looked at different approaches to this. What we do not want is the approach to windfall sites to be unrealistic. One view put to us was that you should not take account of windfall sites at all, you should have no anticipation of windfall sites and just plan on the basis of the sites you know about. Clearly, particularly in London, for example, a lot of the development which takes place takes place through windfall sites. You need to have some sensitivity to that but, equally, you should not use a kind of over-optimism about windfall sites as an excuse not to identify the land which might be needed. Q496 Mr Betts: Before we had PPG3 and the sequential test we had lots of derelict urban land in Sheffield and basically nobody wanted to build on it, they went for greenfield after greenfield after greenfield. Suddenly, because of this sequential test, we have found a big change in our developers, they are queuing up to start building on brownfield sites. On each occasion, if they could show there were not brownfield sites capable of being built on, they could build on greenfield sites. Is this flexibility not already in the existing PPG3? My worry is once you take that pressure off developers, they will revert back to the easy options of building on the greenfield sites. Yvette Cooper: What we are doing is by saying you have got to identify a five-year allocation of land, it may well be that in somewhere like Sheffield the majority of that allocation is brownfield and the vast majority of that five-year allocation should be brownfield sites. It still allows a strong concentration on brownfield. It also allows flexibility for phasing, as we set out, depending on different kinds of areas. We think there is also an issue about local authorities setting brownfield targets. My view on this is that you need to avoid developers trying to cherry-pick in terms of the process and trying to get round brownfield development. Equally, you need to avoid a particular single brownfield site which has got problems being used as an excuse to bring forward other brownfield sites or other sites which might be appropriate. It is finding the right kind of guidance which gives the balance. That is our intention behind the guidance and that is why we are consulting on the detail of it at the moment. I think also that giving local authorities the incentive to do more work around some of the brownfield sites themselves is an important part of it, you cannot just allow the planning system to do the work, sometimes the local authority needs to engage with some of these sites, maybe through using CPO powers to bring forward some of the brownfield sites too. Q497 Mr Betts: You can have local flexibility if a local authority wants to continue using a sequential test approach, will it be allowed to? Yvette Cooper: It will depend on the kind of area that it is and the level of housing demand and also the level of development which has taken place. What I would draw your attention to is annex D in the PPS3 because that does set out the different kinds of situation that would apply for different areas. Q498 Martin Horwood: I am interested that you have not even mentioned the environmental impact in all this. One of the risks of this relentlessly market-driven approach, it is fine when you are trying to bring forward brownfield land in desirable areas, high cost areas, which I obviously support, I am sure most of us would, but it puts the same kind of pressure on greenfield sites as well. The areas of high demand and high cost are going to be the ones with the most sensitive green environments often. Is that not a threat in this very market-driven approach by the government? Yvette Cooper: I kind of assumed you were all going to ask me about environmental constraints, which is why I had not mentioned detail of the environmental considerations earlier. Q499 Martin Horwood: You are the one who is talking about market failure, market driven and high costs, but not the environmental impact. Yvette Cooper: In terms of the ability to take account of environmental impact, what we do, again in this annex D, is set out that you might have an area where you have high demand but you also have environmental constraints. Those would be treated differently from an area where you have high demand but you have lower environmental constraints. There are some areas, for example, where although there is high demand, the green belt is very tight around the border around the urban area, perhaps for good reason to do with Areas of Outstanding Natural Beauty or particular environmental constraints and therefore, it is not appropriate to build in those areas at the same rate that it might be, for example, in the Thames Gateway. There are differences that also are not simply about the level of demand, they are also about environmental constraints and we do try and set that out. We have categories where you have got high demand but also environmental constraints and high demand but only limited environmental constraints in order to try and be sensitive to those different kinds of circumstances. Of course, you are right that environmental considerations need to be a central part of the planning system. We are not saying that the market should override environmental considerations, we are saying that market considerations should be taken account of in the planning system in a way that they are not currently taken account of. Q500 Mr Olner: Obviously with brownfield sites one of the problems with them nine times out of ten is contamination. I know English Partnerships have given evidence before and I know they have had some difficulty falling foul of the European Union competition rules. Has all that been cleared out of the way now, where we are playing on a UK board, are we? . Mr Wells: I do not recognise the European problem you raised, but the EP are certainly engaged in this in the mediation of particular brownfield sites. The circumstances vary an awful lot. Sometimes brownfield sites are almost as easy to develop as greenfield, other times, as you say, they are very contaminated and a lot of work goes on to decontaminate them. Mr Olner: The essence of it was that the public purse had to pay, quite rightly, for that bad contamination to go and then we missed out because European competition law said that the ones that are cleaned up could not get it out right again. It was a real problem. Chair: There seems to be a bit of confusion about this. Can we suggest that you provide chapter and verse in writing afterwards and we get an answer back? Mr Olner: Yes. Q501 Anne Main: First, you said some land may not be developed because of infrastructure. Currently, in a lot of areas there is a recognised infrastructure deficit. Are you taking that into account, not just the infrastructure for the new things proposed? Secondly, back on the environment: I think there are concerns about the amount of pollutions and carbon emissions that come out of houses, and some areas already have air quality management issues that will be exacerbated by intense development. What is being done because very little is done to manage the air quality management issues we have got already? Yvette Cooper: On the infrastructure, obviously we have said very clearly that we are providing substantial investment for infrastructure but, equally, we believe we need to go further to set that out very clearly. Q502 Anne Main: To address the deficit? Yvette Cooper: It is always the case that particular local areas will ask for more resources and we recognise that, whether it is because of housing growth or because of regeneration needs and so on, that is the situation which is always the case right across the country. Every individual area will set out what it is that its individual resource needs are and will also request additional resources. Q503 Anne Main: Would you recognise a genuine deficit? Yvette Cooper: I think there are some areas where we need additional investment in infrastructure and there are others where the infrastructure investment is quite sufficient to provide the additional houses, it varies from area to area. We have said where, for example, we think there is additional infrastructure needed and we will look at that as part of the Comprehensive Spending Review as well. I think the point you made about environmental protection is a really important one because environmental protection is not simply about the kind of brownfield/greenfield debate, it is also about the environmental standards of the housing. You raised the issue about the impact on air quality for transport and if you design your sustainable development in the right way and you get homes closer to jobs rather than expecting people to have huge long commutes, for example, to work - as is the case often at the moment if people cannot afford house prices near the areas where you work - you can reduce commuting distances and you can reduce that impact in terms of the carbon emissions from transport journeys. We also think we need to do more in terms of environmental standards in terms of the building of housing, which is why we set out the Code for Sustainable Buildings and also, for example, measures to tighten water regulations as well to reduce the water use. We developed those in discussion with Defra and also the Environment Agency as being a particularly important measure there. Q504 Martin Horwood: The Code for Sustainable Building has come in for some criticism, mainly because it is voluntary and it is only likely to be applied to schemes with public sector input. Will the Government consider making the Code compulsory for all private housing developments by incorporating it as part of the building regulations? Yvette Cooper: What the Code does is it sets out five different levels. It is not simply a single code that you have to meet particular standards. It is underpinned by the building regulations. You need to keep that statutory requirement. This is not an "instead of having statutory requirements", the idea is to have further standards that are above the statutory requirements. What I think is the opportunity for the future here is to say that over time you raise your statutory requirements towards your voluntary code and you improve your voluntary code as you get new technology, for example, and so on. We have already increased the statutory requirements on building regulations to improve energy efficiency by 40 per cent for new buildings. What the Code does is it goes even further than that in terms of higher potential standards that are voluntary, although we have said that all homes built by English Partnerships and the Housing Corporation would meet level 3 of the Code, demonstrating that it is possible to go further to improving environmental standards. I think the more you have got that happening in practice, demonstrating that it is possible, the easier it is to do future reviews of your statutory baseline. Martin Horwood: There are commercial house builders whom I have talked to who quite reasonably say they will not incorporate this because they have no market incentive to do so because they cannot command a premium in price as a result of the investment required. Until you make it mandatory, it is not going to happen, is it? Q505 Chair: Can I add to that. Certainly the experience from the growth area in Milton Keynes is that there will be estates where the public housing is to higher environmental standards and next door there is private housing to a lower environmental standard. It is already happening that the private sector is not delivering? Yvette Cooper: We think that it is one of the reasons why we need to monitor the Code very closely and we need to look at whether we should consider incentives around the voluntary code. I think the principle is to have a statutory standard which everybody has to meet, which you do increase over time, and we have just increased it. There is a whole debate about increasing your statutory standards, but also in addition to your statutory standards having a voluntary code. It is like the eco-homes standard which has been used in lots of different areas, but it is broadening out from the eco-homes standard to have a code which can be used everywhere, where everybody is clear what the standards are, that encourages people to go further than the statutory baseline, whatever it might be. Q506 Martin Horwood: By the time you have gradually increased the statutory standards, we will have had climate change changing the climate, we will have a Canadian winter and you will have to change them then. At some point you are going to have to take account of the scale of the environmental crisis we are facing. Yvette Cooper: Do not underestimate the fact that we have had a 40 per cent increase in the environmental standards of the building regulations in five years, so I do not think we are reluctant to increase the energy efficiency standards. What we are saying is that we should also have the opportunity to go further. For example, the highest level of the Code talks about promoting micro-generation. You could not prescribe micro-generation, you could not make that compulsory as part of the building standards at this stage, it is still at an early stage of development, and there is a whole series of issues in terms of cost-effectiveness. What you could do is use your voluntary code to promote the greater standards that you then, over time, allow your statutory baseline to move towards. Q507 Martin Horwood: Micro-generation is an interesting point. That raises an issue which is the wider housing market, existing homes, which pose an even bigger challenge than new build under the environmental performance, and I allow micro-generation into that. What can the Government do to improve that portion of the housing stock? Yvette Cooper: We want to make it easier to get planning permission for certain forms of renewables and at the moment we are looking at that and want to consult on on doing that. We have also set in place a wider review of existing buildings which we are conducting with Defra as well, which is looking more widely at what other things you might be able to do. We have a big impact with boilers, for example, in term of existing buildings, but it is harder with existing buildings. Q508 Martin Horwood: Including tax incentives? Yvette Cooper: We are looking at a whole wide range of whether you could do things through incentives or do things through a whole wide range of things. Q509 Lyn Brown: It seems to me that one of the biggest problems in London and the South East in terms of housing supply and affordability is that if somebody is not in the subsidised rented sector, in some parts of the country they may find work unaffordable. Is there any work being done within the ODPM and with other departments in order to deal with that? Yvette Cooper: You mean by this the impact on things like housing benefits? Q510 Lyn Brown: Yes, basically. Yvette Cooper: We are doing some work with the Treasury and the DWP on the relationship between things like housing benefit and work incentives and how you can support people into work. We have got some quite interesting pilots going on, certainly in parts of London, at the moment, which are looking at this, particularly for people who are homeless and for people who are in temporary accommodation to help them get into work. We are looking at some quite interesting pilots in both Newham and, I think, Walthamstow as well. Q511 Lyn Brown: There are many factors which affect house prices. How would you ensure that factors such as interest rates are taken into account when considering if land supply is adequate? Do you think a five-year land supply is sufficient? Yvette Cooper: What the planning guidance does is say that local authorities ought to be identifying a 15-year horizon. They may have a five-year allocation of developable land, but beyond that they should really be looking 15 years ahead. Certainly, if you are thinking about planning for long-term infrastructure requirements, you do need to think that far into the future. I think that is an important part of it. I was not quite sure how the first aspect followed. Q512 Lyn Brown: Interest rates. Mr Wells: The figures the Minister quoted earlier for the proportions of 30-year-old double earner couples who could afford to buy, those take account of present day interest rates and they compare them in various charts with what the position was in the past. What they exhibit is there is a real problem, even though interest rates have come down, and that makes debt less expensive, obviously. Nevertheless, there is a real problem over affordability for people in that sort of position. It is not a problem which does not exist because although home prices have gone up, interest rates have gone down, there is a real problem with affordability here Q513 Alison Seabeck: Planning Gain Supplement: there have been a number of attempts in the past to introduce a planning development tax and all of them have faced the threat of repeal by subsequent governments. You have already talked about the problems we have in getting house builders to build for a range of reasons. Clearly, there will be further anxieties about any Planning Gain Supplements, therefore, I can understand the concern raised in a consultation about the level at which it will be pitched. Is there a real danger that the level could be set so low, as a result of that anxiety and caution, that the receipts are insufficient to achieve what you hope to achieve with them? Yvette Cooper: I think we have always recognised that the need, whether it is for things like social housing or for infrastructure investment, requires a cross-cutting Spending Review, not simply a debate on PGS, we have always been clear about that. The purpose of the PGS is both to simplify the system, but also to look at whether it is possible to raise additional resources. We are clear that it does need to be at a modest rate in order to continue to support development, but that it should also, obviously, be set at a rate which would allow you to raise additional resources for infrastructure above and beyond the current section 106 system. Q514 Alison Seabeck: Given that this is going to be a national tax, can you explain your thinking on how this is going to be released for local use? Obviously there is an option here that a proportion of this will be held centrally, who is going to oversee the distribution to local authorities? Do you see the percentage that goes out from local authority to local authority varying? Would you be putting pressure on the Treasury, for example, for that centrally held proportion, perhaps, to be used to support social housing grant? Yvette Cooper: We are still consulting on all of this at the moment. The way we set out our thinking is that we think all of the PGS needs to be used to support growth, but that some of that may be needed at the local level and some of it may be required for regional infrastructure, strategic infrastructure, which cuts across local authority boundaries. Therefore, we are consulting on whether, for example, there should be a fixed percentage which should go back to local authority areas. We certainly think the majority should go back to local authority areas. I think there is some value in transparency there for local authorities knowing what the consequences would be if you have a particular development and knowing what the impact of that would be. We have not yet set out any kind of specific details about levels or what the process would be. There are options involving sub-regional areas, there are options involving regional decision-making, about some of that cross-boundary infrastructure as well. It is also being able to take account of if you have a particular area where there are very significant infrastructure needs, but you are not getting particularly high planning gain, perhaps because you are developing brownfield sites, for example, where you may see less planning gain, therefore, making sure you can fund that infrastructure as well. Q515 Alison Seabeck: The planning gain on brownfield sites perhaps does not come at the point of the developers taking on the land, but possibly ten years down the line because a lot of brownfield sites are inner city sites which are potentially very valuable in terms of rental income. Are we missing out on something here? Yvette Cooper: That is true. We have not said for certain whether we would do a differential rate because we wanted to have a response in consultation. We have consulted on it because we are certainly attracted to the idea of having an incentive for brownfield development. Q516 Alison Seabeck: My point is that the brownfield site initially you might need some incentive on, say you have an inner city site, brownfield gives the cheaper option but in the longer term because it is a prime site, development on that land could accrue significantly more income for a developer because of the rental or whatever. Yvette Cooper: Your point is you get a development gain long-term down the line and the costs are needed upfront? Q517 Alison Seabeck: Is that something which is part of the consideration which is going on at the moment? Yvette Cooper: One of considerations is the way in which the planning gain is looked at is to say what is the gain which arises from granting planning permission and to measure that section in the process. There are certainly issues about what you need to do in order to sort out brownfield land to improve brownfield land. There are different ways in which you might be able to do that. One is by having a process in which local authorities are able to use prudential borrowing because they know there will be gains further down the line. Others are looking at other kinds of ways of funding the infrastructure which might be needed at an earlier stage. Yes, it is a consideration, but I think there are ways of addressing it. Q518 Alison Seabeck: Finally on section 106: it is much better understood now by local authorities that have to negotiate, but clearly part of the problem with 106 has been the fact that local authorities have not understood how to negotiate them. How will you ensure that the progress which is being made currently is not lost under the new system and that funds are therefore not siphoned off for infrastructure and other things which are inappropriate? Yvette Cooper: We need to continue the progress which has been made on 106. We think 106 should continue because the infrastructure which is related specifically to that site, the immediate needs for that site, the roads that will go across the site, social housing on the site as well, section 106 needs to still cover those issues and, therefore, there is a continued process of improving section 106 negotiations. We also think the tariff approach being developed in Milton Keynes, which effectively is a version of a section 106 agreement, has great potential to be used between now and the implementation of the Planning Gain Supplement and especially in the growth areas. We want to promote the development of that. People sometimes think because we are consulting on a PGS maybe we are not interested in tariff, quite the reverse is true. We think there is huge scope for the tariff approach in the Thames Gateway, for example, and in other areas as well. Q519 Mr Betts: Coming back to the planning system. There has been an awful lot of change, has there not? We have PPG3 which brought in the sequential test and some of us thought that was going to work. I put the point to Kate Barker at a conference that perhaps one of the difficulties was that a change of that significance did create a bit of a hiatus in builders' plans, they suddenly had to start switching where they were going to build. We have now got PPS3, which is slightly different; we have got the major changes in the 2004 Act and we are now asking Kate Barker to do another review of the planning system. Is not this degree of uncertainty around one that is likely to put off builders committed to the future? Yvette Cooper: I think the general response we have had from the building industry has been very positive about the planning for housing reforms and this is something that they have welcomed. I hope they would not see that as a problem in terms of an uncertainty and a reason not to take forward developments. It is certainly the case that there can be uncertainties that are created by change and you have to do everything that you possible can to mitigate against those. In terms of the additional work that Kate Barker is now going to be doing and looking at planning, we have made very clear that is to look at other aspects of the way in which planning supports economic development, it is not to revisit the whole process around PPS3 and housing development. Q520 Mr Betts: In terms of the impact of the PPS3 changes, as I understand it, the draft you produced accepts that there could be extra costs for developers and also extra costs for the planning authorities at regional and local level because of the different processes they need to go through as this more flexible system is introduced. Who is going to provide the extra resources for the planning authorities? Yvette Cooper: We are already providing additional resource for planning authorities through things like the planning and delivery grant. Q521 Mr Betts: These are additional costs. Yvette Cooper: As I said, we are already providing additional resources. Where there are clear new burdens, we have a new burdens principle in which we provide additional resources. We also think there are significant savings to be made from improving the system, making the system swifter and more effective as well. In the end, when applying the new burdens principle and deciding what additional resources might be needed, you have to look at all of those in the balance. Q522 Mr Betts: Is there any detailed analysis being done as to how those savings can be made? Can it be made available to the Committee? Yvette Cooper: Certainly anything that we have, we can make it available to you. Obviously the stage we are still at at the moment with PPS3 is we are still consulting on it. Q523 Mr Betts: Has any analysis been done on whether extra planning staff might be required and whether they are available? Yvette Cooper: I do not know whether that detail of analysis has been done. We have to do a Regulatory Impact Assessment, which I assume is what you are quoting from. Mr Wells: We do a partial Regulatory Impact Assessment which is here, which is probably what you are quoting from, part three of this document. We do a full one, the final thing that came in, which would be when you would look at those details, bearing in mind what people have said back to us. Q524 Mr Betts: Would it count in the demand for planners whether they were available as part of that? Yvette Cooper: That is one of the things effectively that you ask about or consult on. By publishing a Regulatory Impact Assessment is to ask people what impact they think that will have. Q525 Mr Betts: I am going to look at the location of where we are proposing the new houses to be. In some ways it seems a bit perverse, does it not, that if we want to build new homes in this country, we choose the place which has got the most congestion, the least amount of water and has the highest cost for the houses we are going to build? Yvette Cooper: This is interesting, is it not, because I assume you are inclining the idea that the South is more congested, more urbanised than the North, so therefore why build there? Whereas if you look at the urbanisation figures by region, you find that, for example, the East of England is substantially less urbanised than the North West of England. The urbanisation figures for the North West are something like just under 11 per cent, whereas the urbanisation figures for the East of England are under seven per cent. Yes, it is true that London is a huge big city and, yes, there are considerable congestion problems for London, but the idea that the East of England and the South West - the South East is about the same as the North West in terms of levels of urbanisation - are somehow far more congested and, therefore, that you should build in other regions is not borne out by a lot of the urbanisation fact. If underneath your question is a broader question about the regional balance of growth, you do have to recognise levels of demand, the costs that are there and also economic pressures as well. I take the view that we need to look far more at the rising housing demand in other regions and not simply in the South. I think that is a shift in the Government's position compared with previously, but, equally, you cannot ignore the fact that a lot of those demands for additional homes are in the South. Q526 Mr Betts: Then we look at the commitment which has been made, and it would probably quite work in principle with the new growth points. It is only £40 million and it looks like a good idea which is not really funded. If you look at the Northern Way - we had evidence on this - many people, myself included, can see the benefits of the concept, but then you go to the Department for Transport and say, "Where is the money for the infrastructure investment to make HA and Northern Way?" and it is not there because it is all going to the South East to back the housing. Yvette Cooper: Partly this goes back to the point I was making before that every area wants its money and every area can tell you all sorts of reasons why additional resources are needed. Even at a time when we are massively increasing investment in public infrastructure, there is always an argument between competing districts and areas. I think the £40 million new growth points money is just initial funding, we should be very clear about that. This is in order to start development in particular additional areas to our existing growth points. We are asking areas to come forward to us and put in their proposals to say what sort of level of housing growth they think their area could sustain. We have areas, towns and cities that are saying they think it is important and in their local interest for them to expand, it will improve the town centres, it will better sustain their local economies as well and the £40 million is just initial funding to get those areas developing. Clearly, there will be much more infrastructure needs for those areas in future. Q527 Alison Seabeck: Ministers, and specifically the Deputy Prime Minister in the past, have expressed concern about the size of private house builders' land banks, something when they came and saw us they denied they had almost. If more land is released, how would it be possible to stop house builders building up even larger land banks without necessarily producing more houses? How are you going to incentivise them to build? Yvette Cooper: This is a big challenge for the house building industry because if we make reforms to the planning process, they need to respond and they need to build more houses. One of the things we have done is make it possible to change the time limits on planning permission so that you do not have companies applying for planning permission and holding the planning permission for a long time before any development takes place. There are questions, not simply, interestingly, about the land banking but about the process of holding options on land, which is much more difficult to understand what is happening. I think there are some questions about that. The challenge for the house building industry is to respond. We have made very clear the need for additional housing, that we want to set out a process of providing additional infrastructure funding and we want to make the planning system more flexible, but they do need to respond. We have also said we are concerned about the strong cyclical response of the house building industry, so that it is not just responding to long-term trends in house building, it is very strongly cyclical in terms of the response and also the need to ensure there is new entry in the proper competition within the house building industry as well. I think this is an area obviously we will continue to monitor. Q528 Alison Seabeck: Have the house building industry expressed a view to you that by building on the sort of scale you would like them to build on, it will depress their profit margins effectively because you are aiming to build so many that the price levels will stabilise? Is that a discussion you have had with them? Yvette Cooper: Certainly, they have not raised that concern with them. I do not know if they have raised that with officials at all? Mr Wells: They tend not to say that. Bear in mind how much house prices have gone up and a lot of that has gone into land. I think they would find it difficult to make the case that they could not be profitable at considerably higher levels of house building. Yvette Cooper: They will sometimes say it about individual sites, they will raise points that they need to phase the development of a particular site, but I have certainly not heard them raise concerns to me about the overall levels that we are talking about. Chair: Minister, can I thank you very much indeed, particularly since we have overrun the time you gave us. Thank you very much. If we have any additional questions, we will let the department have them and I am sure you will respond. |