 House of Commons |
Session 2007 - 08 Publications on the internet General Committee Debates Housing and Regeneration Bill |
Housing and Regeneration Bill |
The Committee consisted of the following Members:Hannah Weston, Committee
Clerk
† attended the
Committee
WitnessesDavid
Orr, National Housing
Federation
Alan
Walters, Defend Council
Housing
Nic Bliss,
Confederation of Co-operative
Housing
Terry Edis,
National Federation of Tenant Management
Organisations
Michael
Gelling, Tenants and Residents Organisations of
England
Andrew
Heywood, Senior Policy Adviser, Council of Mortgage
Lenders
Richard
Hughes, Social Housing Panel Member, Council of Mortgage
Lenders
Paul Stevens,
Social Housing Panel Member, Council of Mortgage
Lenders
Public Bill CommitteeTuesday 11 December 2007(Afternoon)[Mr. J oe Benton in the Chair]Housing and Regeneration BillWritten evidence to be reported to the HouseH&R 01 Defend Council
Housing
H&R 02 National
Housing
Federation
4
pm
The
Committee deliberated in
private.
4.8
pm
On
resuming—
The
Chairman:
Good afternoon, Mr. Orr. You are
welcome. We have a series of questions to put to
you.
Q
4646
Margaret
Moran (Luton, South) (Lab): In the Bill,
housing associations or registered social
landlords—
David
Orr:
Housing associations,
please.
Margaret
Moran:
Back when I was involved it was RSLs. Under the
Bill, housing associations can lower the amount of public subsidy that
they must invest in affordable social housing by cross-subsidising
through sales at market rates. I have asked some parliamentary
questions about that, which you might be aware of. Do you think that
there is sufficient regulation? In other words, are some registered
social landlords simply selling off at open market rates to bolster
their reserves, rather than to create more affordable
housing? Secondly, in the context of the Bill, will the separation of
the Homes and Communities Agency and Oftenant—we should think of
a better word for that—prevent RSLs that are genuinely using the
mechanism to create more affordable social housing from doing so? I
stress the word
“genuinely”.
David
Orr:
The answer to your first question
is I think, on balance, that there is too much rather than too little
regulation of the way in which housing associations dispose of their
assets. At present, before disposing of anything it is necessary to
have the consent of the regulator. We do not argue that there should be
no regulation of disposals, but we do think that there should be more
opportunity for class decisions, if you like, so that if for example
garages are being sold, that might happen without
the specific consent of the regulator for every individual
transaction.
I think
that where housing associations dispose of assets it is in pursuit of
their business plans. That is also part of the present regulatory
environment. If assets are disposed of it is necessary to be able to
demonstrate that the proceeds from that sale are being
used for proper purposes, for investing in stock or for
cross-subsidising against new social rented homes. If you or any of
your parliamentary colleagues had evidence that sales were being made
merely to bolster reserves, we would be disappointed. That is highly
unusual and I do not think that that is how things happen at
present.
You may not
be aware that it is not at present possible to achieve the core
objective of providing a new supply of high-quality rented housing
without some cross-subsidy. Housing associations on average invest
about £25,000 per unit of money that they raise, primarily from
transfers of shared-ownership housing, towards the cost of rented and
shared-ownership housing. That activity cannot be funded purely from
present Government subsidy and private borrowing. There is that
additional subsidy. You might say that that is a loss-making activity
that under present arrangements can be managed only with that form of
internal subsidy.
Margaret
Moran:
The second part of the question was whether the new
proposals for the Homes and Communities Agency and Oftenant would
prevent such practices.
David
Orr
:
We are generally
supportive of the idea that there is a separation between the
investment agency and the regulator. The reason for that is that there
have been occasions in the past when the threat of action by the
investment part of the Housing Corporation underpinned regulatory
intervention, and that is not a helpful way of progressing the
regulator’s responsibilities. We believe that future investment
through housing associations should be done by contract: that the new
agency will enter into a contract with the housing association in the
same way as it would with a private developer. There would be an
agreement about the nature of the product to be provided. There is
sufficient protection in the Bill to ensure that the HCA and the new
regulator would have to pay regard to each other; in particular there
is a requirement for the HCA to pay regard to the views of the
regulator. There is sufficient
protection.
Q
47
Margaret
Moran:
I challenge your point about having to make sales
to bridge the gap; it is borrowing from equity, surely. However, to
come back quickly to the first question, are you assuring us that the
current regulatory framework does not allow within an RSL’s
business plan, for example, the sale of property on the open market,
not just to boost reserves but to pay extremely inflated wages to chief
executives?
David
Orr
:
Any sale of an asset
that has been publicly funded in any way must be approved by the
regulator, so before making such a sale the association must provide
evidence about what the proceeds are to be used for. My view is that
those proceeds are used to invest in the business, to do the work that
housing associations are required to do. If there is evidence to the
contrary we should be disappointed to hear it, and would want to know
about it.
The
Chairman:
Before I call the next question, I apologise
because I should have asked you if you wish to say any words of
introduction. I shall give you the opportunity now, if you wish to do
so.
David
Orr:
Thank you, Chairman. I would just
like to say a couple of things. First, we strongly welcome this Bill,
particularly the part relating to the creation of the Homes and
Communities Agency. We have been supportive of that concept and think
that the objectives for and the powers of the new agency are
sufficiently broadly drawn for it to be potentially a real generator
for new investment. That is welcome. However, the one issue that we
have with regard to the Homes and Communities Agency is, we argue, that
where it owns land it should be required to dispose of it for the
greatest public benefit, rather than for the best consideration. We
think that that would send a strong message about the use of public
sector land in meeting public policy
objectives.
Secondly,
with regard to the regulator, as I have already said, we think that it
is important that the sector is properly regulated. We support the idea
of domain-based regulation, that is, regulating the product—the
social housing—without necessarily agreeing that the
organisation should be regulated in its entirety. Indeed, the Bill as
written makes it clear that private sector providers of social housing
will be regulated only in respect of their provision of social housing.
That is proper and should be the case right across the
domain.
4.15
pm
We are anxious
that the Bill at present creates the potential for the primary
ownership of decisions relating to the policy and practice of housing
associations to rest with the regulator and, potentially, the Secretary
of State, rather than with the boards of individual housing
associations. We are concerned about that. I would be happy to discuss
that
further.
Q
48
Mr.
Andrew Love (Edmonton) (Lab/Co-op): As always at times
like these the debate still continues about whether a housing
association is voluntary and non-profit-making or whether it is tending
towards private profit-making activity. We have already had a
discussion about what the regulator will regulate. Considering the
balance between the private profit-making activity and the voluntary
non-profit-making activity, should not the regulator be involved in
ensuring that voluntary, not-for-profit housing associations do not
transmute into something quite different, which would be of concern in
relation to the delivery of social housing into the
future?
David
Orr:
Yes, although there is no
realistic prospect of that happening. My contention is that every
housing association in the country is a not-for-profit social purpose
organisation. When you have visited as many housing associations as I
have—I think that I am able to say that with a degree of
confidence—there is no
question—
Q
49
Mr.
Love:
Can I interrupt you for a second? There seems to be
a gap opening up—tell me whether you agree—between the
large associations that build and the other more specialist
associations, and there is concern about the large end. For example,
Places for People now has some 4,750 market rent properties. The
balance has been changed. A lot of that has been encouraged by the
Government. I am not holding that body responsible, but the balance is
changing. Are you at all concerned about that? Should the regulator
have a role in that
respect?
David
Orr:
I think the regulator has a proper
role in ensuring that providers are operating in accordance with their
constitutions and objectives. On the 4,700 market-rent homes, in a
market where there is a real problem for people who cannot afford to
buy, but where there is not enough social rented housing, the provision
of market rented housing is a proper response to the demands of the
market at present and the needs that people are
expressing.
Places for
People probably has in excess of 50,000 homes, of which about 40,000
will be social rented. A small number in relation to that will be
shared ownership and then there are the market rent properties. That
kind of plurality of supply is to be welcomed. It is important that we
look at the failures in the housing market and try to identify
appropriate
solutions.
It is not helpful if affordable
social rented housing is going to people who have a bit more income but
cannot afford to pay present market prices for owner-occupation. If it
is possible for housing associations to use their commerciality to
cross-subsidise in pursuit of their social objectives, it would be
foolish to argue against
it.
I will give you a
specific example: the traditional housing association model would be
that the Government provide a grant which, on its own, would allow a
housing association to provide 20 homes for rent. It is a welcome model
and something that we have been successful at doing. However, if, with
the same amount of grant, the housing association can build 100 homes,
sell 50 of them on the open market, use the profit not for paying
dividends but for cross-subsidising against 25 houses for shared
ownership, 25 for social rent, and perhaps providing some play
equipment, then 100 homes have been created, rather than 20. That is
five more social rented homes than would have been the case, and a
contribution has been made to a mixed-tenure, mixed-income community.
It seems that, if we can use that commerciality and profit-making
potential for that purpose, everyone
wins.
Q
50
Grant
Shapps (Welwyn Hatfield) (Con): Thank you for that
introduction, Mr. Orr. I want to pick up on a couple of
points. You mentioned welcoming the Homes and Communities Agency. A
concern with the Bill that has struck many of us is that the highest
price will be the required criterion for whether a piece of land is
sold. Many of us feel that the public good might require more than
simply a judgment on the highest price; I believe that the Government
may be looking at this again. I would be interested to draw you on that
point.
If I may get
two points in in one go, there has previously been talk of lessening
the red tape for good or excellent housing associations. That is not
forthcoming in the 208 clauses of the Bill. Is it something that you
had hoped to see, and, out of the 1,200 housing associations, what
proportion do you think might have benefited from such
legislation?
David
Orr:
To answer the first point, it is
clear that one of the advantages of best consideration is that it is a
figure; it is quantifiable, so you can say,
“£110,000 is more than £100,000; take the
£110,000”. An assessment of public benefit is to some
extent a judgment. I believe that the Homes and Communities Agency
should be given the power to determine what is the public benefit,
although it may need to be approved by the Secretary
of State. I cannot give you a one-sentence answer saying,
“Instead of best consideration, here is the descriptor for what
constitutes the greatest public benefit.” The federation would
be happy to work with members of the Committee or civil servants
to explore what that descriptor might be, if that would be
helpful.
The present
arrangements allow local authorities and other public bodies to dispose
of land at less than market value if it is in the public interest, but
that power is not used very often and there is no compelling guidance
that creates a framework. Guidance would be a necessary
component.
With regard
to the burden of regulation, we have been going through a fairly
lengthy process over the last few years. Members of the Committee will
know that a review was carried out by Sir Les Elton. I was pleased to
be a member of that review group, which looked into reducing the burden
of regulation on housing associations. It has been helpful and has made
some progress. No housing association in the country would not welcome
a further reduction in the burden of regulation. One of the objectives
of the Bill is to ensure that the regulatory burden is limited,
although those are not the exact words
used.
Our concern is
with other components of the objectives, particularly the line of
decision making that allows the Secretary of State to direct the
regulator with regard to standards, and the regulator to require
regulatory bodies to act in a particular way—even if there is no
misconduct or mismanagement—and to intervene if they have not
followed that instruction. We think that that is imposing a regulatory
burden too far, not so much in terms of the volume of regulation, but
rather because of the decision to relocate decision making away from
the committees of independent, not-for-profit social businesses,
towards the regulator and potentially the Secretary of
State.
Q
51
Lyn
Brown (West Ham) (Lab): I was interested in boards, not
regulators, and I am obviously interested in the tenants. I could go
into numerous cases in which I have seen housing associations behave in
what I believe to be an appalling way towards my constituents. I have
no levers to use against them and, more importantly, neither do my
tenants. They cannot run against them at a local election, they cannot
vote against them, they do not have any power to wield against an
offending housing association.
On Second Reading there was a
fabulous speech by my hon. Friend the Member for Islington, South and
Finsbury, in which she talked about the rats, and the lack of heating
and hot water for young mums as well as elderly tenants. I am
interested in taking that idea a little further, because for me, it is
public money, public service, public accountability. I am interested to
hear your response.
David
Orr:
Well—
Q
52
Lyn
Brown:
Before you start—sorry, I know I am
mean—let me add that I am sure that many of the housing
associations that I take issue with would be considered excellent using
other indicators: they may, for example, be the bigger ones. Therefore,
when I hear someone say, “Wonderful housing association:
it’s big, it’s huge, it’s wonderful, it does great
things”, for me that does not deliver where it needs to, which
is in the interest of my tenants.
David
Orr:
There are a number of things to say about that.
First, neither I nor anyone else involved in housing associations will
say that all practice is perfect in all cases. We do not live in a
perfect world and there is no doubt that on some occasions, the
performance of individual housing associations, either with respect to
individual places, tenants or more generally, falls below the standards
that we expect. However, whenever there is a systematic evaluation of
the performance of housing associations, they always do better than
local authorities. That is in systematic evaluations of tenant
satisfaction levels and related matters.
The issue is about how to
ensure high-quality standards. My argument is that housing associations
as independent organisations have been invested in by the Government to
deliver a service. It is proper that they should be accountable to
Government for the public investment that they have received. It is
correct that the regulator should be able to direct with regard to
rents and housing management standards, and we do not take issue with
that. Our issue is about the extent to which the regulator is
able to require a housing association to do things that are not
necessarily in pursuit of the housing association’s own
objectives, and to intervene even though there has
been no mismanagement or misconduct. The provisions currently in the
Bill would allow that.
David
Orr:
No, we are worried about the power that the
regulator has, or would have under the legislation, to require a
housing association to behave in a particular way, even where there is
no evidence of mismanagement or misconduct. It would be the regulator,
or potentially the Secretary of State, who would require that
action.
Q
54
Andrew
George (St. Ives) (LD): I follow on from that theme.
Throughout your paper, and the comments that you have made, you refer
to your concern about the threat to housing associations’
non-public body status. I know that that is an accepted piece of
terminology, and I do not want to get into semantics. However, to what
extent would you say that housing associations are public bodies? They
are non-profit-distributing organisations, they work for public benefit
with public bodies, local councils and others; they accept public funds
and resources and they are state-regulated to a significant extent,
although not to the extent that you fear they are in the Bill. To what
extent are they public bodies and to what extent is it important to
differentiate them from public bodies?
4.30
pm
David
Orr:
They are not public bodies, and it would
be in no one’s interests for them to be
classified as such. The state has invested about £30 billion in
the work of housing associations, which has been matched by about
£35 billion of private borrowing. If housing associations were
classified as public bodies, all that private borrowing would be
classified as public money, so there is no gain for anyone in
associations being classified as public
bodies.
We tend to make the issue more
difficult than it is. We have private sector organisations that exist
to provide dividends to shareholders; their purpose is to make profit.
We have public bodies that do as they do because they are owned and
invested in by the public and the state. Housing associations are bona
fide third-sector organisations—not-for-profit
social purpose organisations—and it is extremely important that
that status is protected. There is a danger in reclassification. If it
was deemed that the regulator could direct the entity or organisation
in its constitution or its behaviour, there would be a real threat to
housing associations remaining non-public.
Q
55
Andrew
George:
But what would happen if the state withdrew its
funding and these non-public bodies were not in receipt of public
resources? They would presumably not be able to develop at
all.
David
Orr:
It would be considerably more difficult for them
to develop—that is clearly the case. There would be some
development, but the capacity for development would be substantially
reduced. The Government have identified a figure of slightly in excess
of £8 billion for investment in new affordable and social
housing in the three-year spending period from 2008 to 2011. Our
expectation is that housing associations will bring £12 billion
to match that funding and meet the new housing provision requirement.
That is a very good deal and one that we need to
protect.
Q
56
The
Parliamentary Under-Secretary of State for Communities and Local
Government (Mr. Iain Wright):
May I go back to
a point that Lyn Brown talked about, Mr. Orr, because it
relates to one of your fundamental concerns—the Secretary of
State’s power to the direct the regulator to go into
micro-management areas of a housing association’s operations?
May I suggest that the Bill brings housing regulation up to date and
takes into account the statutory regime and framework that are in place
at the moment, including the Legislative and Regulatory Reform Act
2006? The Hampton principle says that everything should be
proportionate, encourage economic activity and prosperity wherever
possible and look to scale back regulatory boundaries where necessary.
However, is the key point not that that balance needs to be struck and
that tenants need to have the rights and responsibilities that Lyn
described incredibly eloquently? In that respect, the framework that we
are proposing is right. With the greatest respect, Mr. Orr,
you are probably exaggerating the ability of the Secretary of State to
direct, which is not going to
happen.
David
Orr
:
The Bill, as drafted, creates the
potential for that kind of intervention. If it is not the intention
that the Secretary of State should intervene to that
level, I submit that it would be helpful if the wording of the Bill were
amended so that it matches the intention. Part of our anxiety is that
the Bill is being drafted in the present context, where we know the
players, but the regulatory environment that it creates could be in
place for 10, 20 or 30 years, by which time we will not know the
players and the environment in which it is being used. The future
potential created by the Bill is our biggest concern. Of course, the
Bill includes the issue of proportionate regulation as one of the
regulator’s objectives, but it is not clear whether that is an
overriding objective. If the Bill were amended to state that it was the
first objective, or the second or third one after issues about rents
and housing management, we might be less concerned.
I do not overstate the
potential of the Secretary of State to intervene. I do not anticipate
the Secretary of State intervening daily, but under the legislation it
will be possible for the Secretary of State to intervene for
the purpose of what the jargon calls “policy
passporting”, whereby the Government of the day have a
particular policy objective that is imposed through regulatory
intervention. That is the nub of the anxiety. In Martin Cave’s
report to the Department for Communities and Local Government, he
warned specifically against such policy passporting, but the Bill
increases rather than decreases the danger of it
happening.
Q
57
Mr.
Wright:
In the federation’s example to the
Committee, it mentions the risk that community-based initiatives such
as crèches could be stopped because the regulatory regime is too
onerous. However, again, I return to the sense that regulation
must be proportionate. One Hampton principle is that we must ensure
that economic progress is advanced as much as possible. The principle
states:
“Regulators should
recognise that a key element of their activity will be to allow, or
even encourage, economic progress and only to
intervene”—
this
is the key point—
when
there is a clear case for
protection.”
Is that not
what the Bill does?
David
Orr:
Not as presently drafted, because there is no
limitation on the regulator’s ability to intervene in the way in
which it is drafted. If a limitation on protection were introduced, we
would consider it very carefully. I cannot say that we would be happy
to see it, but it would create a limitation. As you know, we have
argued that the present test, whereby intervention should take place
only when there is evidence of mismanagement or misconduct, should be
retained. Creating standards, providing guidance on them and asking
people to identify how they perform against them are all fine, but
intervention should take place when there is wrongdoing or failure and
not just when a particular policy of the Government of the day has not
been followed. It is instructive—for us, at least—that
the Charities Act 2006, which is probably the most comparable recent
legislation, retains the mismanagement and misconduct
test.
Q
58
Ms
Angela C. Smith (Sheffield, Hillsborough) (Lab): I want to
return to the best consideration issue and put two points to
Mr. Orr. First, the key principle
of allowing local authorities to sell or lease land to charity or
community groups is accountability to politicians. The
politicians—the cabinet, the leader or the executive—take
the decision to offer the land at less than best consideration. Do you
agree that, as far as housing associations are concerned,
accountability to elected members of one kind or another should be the
key principle, if land is offered at less than best
consideration?
Secondly, on another key
principle, if land is offered at less than best consideration, and, for
instance, homes are passed on to owner-occupation, there should be
provisos in the agreement to recompense the public sector for the loss
of the social benefit. In other words, if the benefit of the subsidy on
the land is to remain, there should be a proviso whereby the homes
concerned are always be on a shared equity or rented basis, if the
benefits given by the subsidy on the land are to stay in
place.
David
Orr:
This is effectively the same model as that on
rural exception sites, and we are enthusiastic supporters of it and
wish it to be retained. If the Homes and Communities Agency, a local
authority or any other public body were disposing of land at less than
market value for a public benefit, and a housing association were the
vehicle by which that public benefit was delivered, we would expect
that to be written into the contract or the agreement between the owner
of the land and the housing association and that that would be part of
the long-term contract. We have absolutely no wish to see land offered
at something other than greatest consideration being used for other
than the purpose for which it was
intended.
David
Orr:
This is just the law. Housing
associations have to be accountable to their boards, and, as
organisations that exist for the benefit of the community, they have to
be accountable to the community. It is a failure of the housing
association movement that we have not demonstrated successfully to you
and to others that we are properly accountable to the communities in
which we work. It is an issue that the federation is working on quite
closely at present.
Q
60
Ms
Smith:
In terms of offering land at less than best value,
and accountability for making that offer, the decisions have to be
taken by elected members whether that is through guidance from
Government or a final decision in difficult areas by the Secretary of
State. There has to be some mechanism for ensuring that land offered at
less than best consideration is offered by an elected representative of
some kind or another, because we are talking about public sector
land.
David
Orr:
Indeed. If a housing association is the
beneficiary of land at less than best value, the purpose for which that
land is being used should be written into our contract, and the housing
association would expect to follow the terms of that contract. It is a
contract compliance issue. In the present arrangements, and in any
future arrangements that we can identify, it is a regulatory
requirement that the housing association follows the terms of the
contract and does not move away from it without the consent of the
regulator or the other party to the
contract.
Q
61
Ms
Smith:
What I am interested in is at
what point would the decision be made to offer their land? Who would
make it? In your view, who is the best body to make that decision and
under what terms and
guidance?
David
Orr:
I am not sure that I entirely understand your
question. If the land is in the ownership of the local authority, only
the local authority can offer that land for use at less than best
value. If it is in the ownership of the Homes and Communities Agency,
the agency would have that responsibility. My view is that the HCA
should be working closely with the local authority before making
decisions of that kind. However, the housing association is the
recipient of the land, so it would not make the determination about the
sale of the
land.
Q
62
Mr.
Nick Raynsford (Greenwich and Woolwich) (Lab): First, I
apologise that I could not be here for the start of the sitting. I want
briefly to turn your attention to clause 111 of the Bill, which defines
the registration of profit-making or non-profit-making organisations.
This is different from the existing framework, which requires
registered social landlords to be not for profit. Is it your
understanding that that would, as it is currently drafted, enable
registered social landlords to convert from not-for-profit organisation
status to plc status?
David
Orr:
It is not, although we may need to
take some more formal advice on the matter. My understanding of the
clause is that it is to ensure that private sector providers of social
rented housing should be registered and subject to
regulation.
Q
63
Mr.
Raynsford:
But as there is no proviso, unlike the current
Housing Corporation guidelines, it appears to prevent a registered
social landlord from seeking registration as a profit-making
organisation. Is that possibility not at least
there?
David
Orr:
I think the main determinant as to whether or
not a housing association could change its status would be industrial
and provident society law, because virtually every housing association
in the land is an industrial and provident society, and in practice it
is extremely difficult to change from being an industrial
and provident society to being a publicly listed
company.
David
Orr:
There has been a great deal of media speculation
that some have expressed an interest in doing so. My own view is that
no housing association is actively seeking to convert to public listed
company
status.
David
Orr:
It
would.
The
Chairman:
Order. I am sorry, but we have come to the end
of this session. I thank you, Mr. Orr, on behalf of the
Committee, for your attendance and for the evidence that you have
given.
David
Orr:
Thank you.
4.45
pm
The
Chairman:
Good afternoon, Mr. Walters, and
welcome to the Committee. Thanks for coming. I wonder whether you would
like to say a few words of
introduction.
Alan
Walters:
Thank you very much, Chairman, and thanks
for inviting me. Defend Council Housing, which I represent, was formed
nearly 10 years ago to oppose the privatisation of council housing and
council homes being sold off through stock transfer and to campaign for
direct investment. Despite many premature predictions of the end of
council housing, there are still more than 2.5 million council tenants
and strong demand, as witnessed by the number of people on council
housing waiting lists. We argue that council housing is not perfect,
but local authorities are democratically elected and
accountable—you have just covered some of those
issues—with landlords providing secure tenancies at lower rents.
Particularly in the current situation, if we did not have council
housing, we would have to invent it.
Our concerns about the Bill
fall into two categories. First, we have built a broad coalition around
what has become known as the fourth option for council
housing—to bring about changes to the housing revenue account
and housing finance so that councils can improve all existing homes,
build a new generation of first-class council housing and maintain both
the existing and the new as first-class council housing for years to
come. Despite all the warm words on council housing over the summer,
however, there is nothing in the Bill that will provide a mechanism to
achieve a level playing field and secure a long-term future for council
housing.
Secondly,
there are a number of measures in the Bill that we think are quite
dangerous, from the increasing stigmatisation of council housing to the
introduction of a means test. We do not want bog standard council
housing in the same sense as bog standard schools; we believe that
council housing should be first-class housing for everybody, rather
than being only for those who cannot do any better, in the same way as
we all see our local hospitals, schools and other parts of the public
sector as being first-class services for everybody. We are concerned
about the transfer of power from elected politicians to the regulator,
including the blurring of distinctions between local
authorities—there was a discussion this morning about
whether you are going to try to get local authorities in
under the regulator from the beginning, which would
significantly undermine the protections and rights that council tenants
have today over those of housing association tenants—and the
blurring of lines between not-for-profit and for-profit
landlords.
The
Chairman:
Order. Sorry to interrupt you, Mr.
Walters, but I think that that is a sufficient introduction. Thank you
very much indeed. We have some questions for
you.
Q
66
Alistair
Burt (North-East Bedfordshire) (Con): My first question is
on one of the issues that you have just raised. The definitions of
social housing in clauses 67, 68 and 69 appear to create a
relationship between an individual’s ability to pay and whether
they
should be in social housing. Why do you think the clause has been drawn
that way, and are you content with how the current Housing Act 2004
defines low-cost rental? What do you think the reason for the change
is?
Alan
Walters:
We are broadly content with the current
situation, although, having said that, a real distortion in council
housing has been brought about by shortage. The number of council homes
becoming available has fallen massively, and the availability of new
lets has also fallen massively, so councils have had to limit new
allocations to those in the most desperate circumstances. That has
changed the composition of council estates. John Hills did some useful
work in his report “Ends and Means”. He took a snapshot
in 1979, when 20 per cent. of council tenants were in the top 10 per
cent. of earners. The position now is clearly different. Our argument
is that if more first-class council homes were built, and if the people
on the waiting list were housed—Shelter’s ROOF
magazine has identified that people on the waiting list are from a wide
social mix—that imbalance would be redressed and council estates
would again become mixed communities. The only way of seeing the
eligibility clause is in the context of demands from a particular
political position that wants to reduce council housing and public
housing to housing of last resort, and to push everyone into the
private market. We oppose
that.
Alan
Walters:
No. It is a fundamental principle that there
should be first-class public rented housing for everyone who wants it,
and that people should not be forced into the private sector just
because they are not on the
breadline.
Q
68
Alistair
Burt:
The Bill seems to open up greater opportunities for
local authorities to build their own houses than has been the case
recently, although a later question will ask how real that opportunity
is. Do you draw a fierce distinction between local authority-built
housing and housing run by housing associations and others in the
social rented sector? Do you feel that there is a market in itself for
council housing and, if so, what sort of proportion should it
be?
Alan
Walters:
The evidence is clear. We have had some
anecdotal evidence today, and many MPs and councillors will say that it
is harder to hold a RSL to account than a local authority. The greatest
evidence is probably those council tenants who, despite being bribed
with promises of new kitchens and bathrooms—it is almost saunas
and jacuzzis—have turned down privatisation and stuck out for
direct investment. People can see that a secure tenancy, an elected
landlord and lower rents are not abstract dogma, but something real in
an increasingly insecure world. People want the opportunity for council
housing that the RSL sector does not
provide.
Q
69
Dr.
Roberta Blackman-Woods (City of Durham)
(Lab): Mr. Walters, do you think there are any
circumstances in which it might be useful for tenants to have an
independent body to set standards in their interests? I shall give an
example from my constituency. About two weeks ago, I saw some tenants
whose homes had supposedly
been brought up to the decent homes standard, but the workmanship was
shocking—I mean shocking—and they should not have been
expected to live in houses in such a
state.
The
ruling group on the council is not elected by council tenants, so
council tenants have little voice in getting policies changed. From
where they are sitting, it would be useful to have an independent body
to tell the council, or anyone else, that it should treat tenants
properly and bring their homes up to a decent standard. What can
tenants do if they do not have a democratic voice, because they are too
small a group and do not vote in the right way to elect the ruling
group?
Alan
Walters:
As chairman of my tenants
association and a member of the federation, I suppose that I would say
that the best protection is to have tenants’ organisations and
to make representations to landlords and other bodies. We are not
opposed in principle to a regulator, but the problem is that the Bill
is worded in such a way that the regulator is not obliged to consult
tenants. The provision is extremely woolly and vague, and I believe
that the obligation is to consult one organisation, which could be the
limit of the consultation, so the danger is that an independent, remote
body will never reflect tenants’ views and tenants will be no
more empowered than they are
now.
Q
70
Mr.
Robert Syms (Poole) (Con): May I ask about the housing
revenue account and the subsidy system? Poole has an arm’s
length management organisation but nevertheless has to pay 20 per cent.
of its council rents into a national pool, which is money that could be
used locally. We have quite high house prices, and so the situation is
difficult. Do you have a view on whether that system should remain, or
do you think that the money that has been paid by tenants should stay
in the political district or borough in which it has been
paid?
Alan
Walters:
The fundamental problem is
that successive Governments have been siphoning money out of council
housing. Although tenants pay rent, there is a gap of £1.8
billion between the amount that tenants pay in rent and the amount that
councils get in allowances for management, maintenance and major
repairs. Therefore, the fundamental problem is that Governments have
taken money out of council housing, which causes a gap in available
resources to maintain, improve and build
houses.
As
regards whether there should be a national or local housing revenue
account, we support the argument put forward by the Audit Commission in
its report two years ago that there needs to be more transparency and
local accountability. Councils should be able to retain and ring-fence
all the rental income and capital receipts to pay for the maintenance,
improvement and building of council housing and not for the
mayor’s new parlour or swimming pool. Any surplus beyond that
should be pooled nationally, and councils should be allowed to bid for
money from that pot. There is an argument for having all income
ring-fenced locally, but the fundamental problem is that the Treasury
takes money out of council housing, which is why most councils face
financial problems
today.
Q
71
Mr.
Wright:
On ring-fencing the money, does that not relate to
the wider community issue? You have mentioned a swimming pool. I think
that you meant it
in a flippant manner, but the point is that communities are about not
only bricks and mortar, but cultural and leisure opportunities. Are you
outlining what you want far too
strictly?
Alan
Walters:
I use a swimming pool every day. If a
community needs a swimming pool, then council tax should be used to pay
for it. The whole community should pay for that facility. However, what
we are talking about here is council tenants’ rent. I think that
100 per cent. of it should be used for the maintenance, management and
improvement of council homes. Apart from council tax, we do not take
money from home owners to pay for a swimming pool. Council tenants
should not be penalised twice, which is what has been going on. What is
particularly absurd and obscene is that money taken out of council
housing has been used to fund Government subsidies for home ownership.
If people want to be home owners, that is fine, but council tenants
should not have money, which we need to improve homes on estates, taken
from them to subsidise other people being home owners. If people want
to be home owners, they should do it
themselves.
Q
72
Margaret
Moran:
I just want to clarify your position on the
housing revenue account. You have quite rightly referred to a
£1.8 billion surplus. Is there not an argument for using that
surplus not only to manage and maintain, but to enable local
authorities to build new homes? As regards ring-fencing, I am
particularly confused. As you will be aware, some local authorities are
in great surplus. Arm’s length management organisation are in
surplus to the extent that they could fit jacuzzis in some of their
properties, because they have achieved decent homes standards several
times over. Broomleigh housing association is one such example. On the
one hand, some authorities are over-providing, if that is possible, but
London councils have a massive deficit in their housing investment. Can
you explain your argument on ring-fencing in that
context?
Alan
Walters:
Our position is that rental income and
capital receipts should be ring-fenced locally to
manage, maintain and improve existing council housing and build new
council housing. If councils can manage and maintain their existing
housing and they have some money left, they should use that to build
new council
homes.
As
regards the London situation, some authorities are in serious financial
need and in receipt of positive subsidy, largely because there is a
massive overlap in terms of high levels of historic debt. The big
metropolitans that built lots of housing in the 60s and 70s tend to
have high levels of historic debt and therefore need support. The Audit
Commission in its 2005 report “Financing Council Housing”
recommended paying special attention to that small number of
authorities. We would argue that, as part of introducing a level
playing field, Governments should take over local authority historic
debt, to get rid of that imbalance. That would be financially
absolutely neutral, and it would not have any impact in terms of either
pound notes or PSBR, but it would put all authorities on to the same
footing.
On some
authorities being in surplus, I would be surprised if any were. Perhaps
some ALMOs are quite comfortable in terms of their capital budgets, but
a large number of ALMOs face the same kind of
pressures on their housing revenue account, medium term, and will be in
deficit. Defend Council Housing predicted that ALMO was two-stage
privatisation, and we are getting lots of stories of ALMOs talking
about stock-transferring their homes, once they have met the decent
home standard, because their HRAs do not stack up. It is clear that
there needs to be a fundamental review of housing revenue accounts. We
do not think that the proposals in the Bill to allow the Secretary of
State to negotiate with individual authorities either to opt out in
total or to opt out in part on a piecemeal basis will provide a secure
future either for those opting out or for those
staying.
5
pm
Q
73
Mr.
Andy Slaughter (Ealing, Acton and Shepherd's Bush) (Lab):
How far are you pushing this means-testing point? If there is a
criticism of the clause, I should have thought that it is that the
phrase “below market rent” could mean anything.
Wandsworth Council at one stage called properties at 99 per cent.
market rate affordable homes. My local authority is targeting its
affordable housing at people on between £50,000 and
£60,000 a year. That is the criticism that could be made: it is
slightly vague. Surely council housing, even in its heyday, was
targeted towards people in housing need to some extent, whether they
were people in substandard housing or people who were homeless. I
entirely agree that there is a need for such housing for people who are
in overcrowded conditions, but should you not be focusing on that
issue—the need for the supply of genuinely affordable
housing—rather than trying to recreate some sort of halcyon day
that never existed?
Alan
Walters:
If we want to achieve the sustainable mixed
communities that the Government say are their
ambition—
Alan
Walters:
I certainly want to do that. I live on an
estate and I know the problems of people moving in and out and
right-to-buy leaseholders selling on to management companies and
short-term six-month lets. You meet people in the lift whom you have
never seen before and you wonder why there are all these white goods by
the bins all the time. Having mixed tenure on our estate does not
improve the community; it means that people who are coming and going
have no commitment to the area. If you want to make council estates
mixed communities again, we have to bring people back to those estates
from a wide social mix—that means the teachers, the nurses and
the IT workers, as well as the butchers and
bakers.
Q
75
Mr.
Slaughter:
I know the problem that you are talking
about—it is a big problem for me—but those disruptive
properties are often the ones that are being let out at market rents,
because they are right-to-buy properties that have been bought by
companies on a buy-to-let basis and are being rented back to housing
associations or local authorities as short-term lets. Often there are
also people renting at commercial rents living in them. You cannot
designate exactly who you want to live everywhere. We are not living in
the sort of society where you can say, “You live here”
and “You
live there.” I really think that you are trying to capture some
sort of visionary world that never really existed. In doing so, you are
rather ignoring the problem, which is that thousands of families,
particularly in places like London, are living in extremely
overcrowded conditions and need new social homes. You are rather
blurring that issue.
Alan
Walters:
I suppose that what we think is that, if we
are going to have a housing regeneration Bill after waiting all these
years, we should do it properly, by ensuring that current council
estates and the new estates that we build are mixed communities. We are
not for intricate social engineering and you cannot sort out who will
live at No. 25, but we should ensure that council housing is
first-class housing that a wide range of people want to live in and are
proud to live in. It should not be stamped as housing of last resort
that only those who cannot afford anything better would move into. That
means massively expanding the numbers of council
houses.
We are
concerned about the proposal for local housing companies, and you have
already discussed what kind of consideration councils should have when
selling public land. We would argue that, where there is public land,
it should be used to build first-class public housing, because there is
massive demand for that. It is quite clear that that is what people
want. That process would provide the homes, create mixed communities
and get rid of the stigmatisation. It would be win-win all the way
round. There is massive popular support for the Government to do
that.
Alan
Walters:
Defend Council Housing is a
particular campaign, and we do not pretend that we have a view on every
issue that has a big H in it. We have concerns about the cross-domain
issues. The Bill does not include local authority housing, although in
the discussion this morning, we heard the LGA and the Chartered
Institute of Housing say that, in the next month, they hope to come up
with some words that would allow the Bill to take that on. That scares
us.
I said at the
beginning that there are big differences between council housing and
the alternatives. The key thing is that council tenants need to be
consulted—which they have not been—before there are any
changes. I suspect that most council tenants would be in favour of a
levelling-up exercise, if we are talking about RSL tenants and private
sector tenants having the same rights for all tenures, with the
landlord being obliged to consult tenants about management and change
of ownership. Perhaps that would be acceptable to council tenants, but
I do not think that that is what is being suggested. It will probably
be more of a levelling-down
exercise.
In terms of
crucial issues like tenant voice, we do not believe that there is
strong demand from council tenants to change the management of their
homes. There is a lot of emphasis put on that, and there is a new
clause that allows small groups of tenants to demand a ballot. We see
that more as a landlords’ charter, empowering landlords to seek
out those estates where there are two blades of grass and a bit of
children’s playground, where they could build some
homes for sale and then set about trying to get a group of tenants who
will go along with it. That is quite
dangerous.
We are
concerned that the Cave report has not taken on board the opportunity
to make it a requirement for landlords to fund genuinely independent
tenants’ organisations. A top-down tenant panel or consumer
panel has nothing to do with most tenants on the estate. We are
concerned with where all of this is going. The danger with what the
Government are setting up is the opportunity for a levelling-down
exercise where council tenants lose their rights under law and a
situation where the Government have some tame panel that it can consult
and, in the name of that, impose changes on all
tenants.
Q
77
Mr.
Raynsford:
Why should a group of tenants that has a poor
standard of service from its council landlord not seek a ballot on the
transfer to an alternative
one?
Alan
Walters:
In principle, there is absolutely no reason
at all. We have never been opposed to people having ballots. What we
have said is that there should be a very clear code of practice to
ensure that that ballot is conducted in a way that most people would
think is democratic. There should be a clearly set out timetable, so
that people know when the vote will be and a fair and balanced debate
with resources for people to put both sides of the argument. That is
not what you have in the vast majority of stock-transfer ballots today,
where the council has all of the resources and it pitches a very
straight PR campaign promoting the stock transfer. Often there is no
argument put up against it at
all.
If you accept the
principle that tenants should have the choice, you would give RSL
housing association tenants the right to ballot to return to the
council. That is not there, so the democracy bit ends up being a cloak
to create the circumstances in which public council housing can be
transferred to the private sector. There is a big lobby in favour of
doing that. However, there are not a lot of tenants across the country
demanding a change of landlord. They want decent, modern homes in
estates; they want improvements, but that is about investment and a
need for change to the housing finance regime. I do not think that many
tenants think that a change in landlord will make much difference to
them.
Q
78
Mr.
Raynsford:
Mr. Martin Cave, in his review,
specified three principal objectives for the regulation of social
housing: to insure the continued provision of high-quality social
housing; to empower and protect tenants; and to expand the availability
of choice of provider at all levels in the provision of social housing.
Do you agree with those
objectives?
Alan
Walters:
As I have said, we think that the problem of
empowerment is best solved by helping tenants organise locally and
requiring the landlord to respect the democratic views that tenants
express. All too often, there is a token tenant participation
operation, which is top-down and has more to do with ticking boxes.
When tenants say, as we do in Camden, “We don’t want
stock transfer, PFI or an ALMO; we want the council to have the money
to carry out
improvements”, we are ignored. Therefore, we take the empowerment
objective with a pinch of salt. Sorry, I have forgotten what the third
objective
was.
Mr.
Raynsford:
To expand the availability of choice of
provider at all levels in the provision of social
housing.
Alan
Walters:
That is obviously part of a bigger
discussion. There is a strong argument in favour of people having the
choice of which local school and hospital they use. I feel that most
people want a first-class local school, a first-class local hospital
and to live in first-class housing, and the issue of choosing a
landlord is not any more of a real concern. I do not think that that is
at the top of the priority lists of the people who live on my estate or
who attend the tenant meetings that I go to around the country. They
will complain about what their landlord is doing and want to be able to
hold them to account and to see their estates improved, but changing a
landlord is not really an issue for tenants, although it might be an
issue for the
industry.
Q
79
Alistair
Burt:
I want to return to the definition of social housing
and clarify your thinking on that. Do you feel that the provision of
council and rented housing generally is an issue of principle and that,
if you want to rent, you should feel able to, regardless of who you are
or where you come
from?
Alan
Walters:
There is a principle there, absolutely. It
is wrong that people should be forced into home ownership, as a lot of
people do not want the burden and responsibility, because it does not
suit their lifestyle. For an awful lot of people, it is not a
consideration, because they cannot get anywhere near affording it, so I
think that having a rented sector is a matter of principle. It is then
a question of what kind of rented housing, and we would argue that
council housing provides the secure tenancies, lower rents and
accountable landlords, and those advantages mean that it is worth
defending and extending.
Q
80
Alistair
Burt:
There is an argument that many fewer people rent in
this country than do elsewhere, such as the continent, because there is
a stigma attached to renting. Is it your belief that, if we introduced
a means-testing provision, we would add to that sense of stigma and the
public would never have the chance to rethink renting in such a manner,
as they obviously do on the
continent?
Alan
Walters:
Yes, it is remarkable how much public
opinion and perception has changed over the years. Not that long ago,
people were quite happy to rent. They had complaints about the
condition of their housing, but I do not think that the issue of
ownership or renting was a major political issue in this country.
Political opinion can shift, but it can equally shift back the other
way.
The Government
argue that the majority of people aspire to be homeowners, and it may
well be true that, if you asked people in the street whether they
wanted to be a homeowner, a lot would say yes. However, a whole lot of
people face chronic overcrowding, and a whole generation of young
people cannot move out from under their parents’ feet. If you
said to each of
those groups, “Here are the keys to a first-class council home
with a secure tenancy at lower rent, and you can choose between that
and the aspiration to home ownership—this is what you will pay
in rent, and this is what you will have to pay if you get a
mortgage”, public opinion would in my view swing massively back
towards a desire for first-class council
housing.
It comes down
to the available options. The problem is that successive Governments
have discriminated against council housing—both financially, by
taking money out of that system and disinvesting, and by deliberate
stigmatisation. We want investment to go back into council housing, to
improve existing homes and build new ones, and we want an end to
stigmatisation. Let us make council housing a form of housing that
people can once more be proud about.
The
Chairman:
Order. I have learned that you have a bad back.
Is there any way in which you can make yourself more
comfortable?
Alan
Walters:
I am fine, thank
you.
5.15
pm
Q
81
Alistair
Burt:
I am interested in whether you
read the Bill as I do. The clause states that accommodation should be
made available in accordance with rules that are eligibility designed
to ensure occupation by people who cannot afford to buy or rent at a
market rate. That implies that if people begin living in a property
because their income is X, and they improve their circumstances such
that their income is X-plus, somebody will come along at some stage and
say, “You’ve got to
go.”
Alan
Walters:
The clause clearly means that people will be
“means-tested
in”.
Alan
Walters:
People will be means-tested in order to
decide whether they qualify. The position on what happens after that is
ambiguous. However, if people are going to be means-tested to enter
council and low-cost housing, there is logic in continuing to apply
means-testing for the duration of occupancy. That is not the direction
that we want to go in, and we believe that most people in the country
do not want it either.
Q
82
Andrew
Gwynne (Denton and Reddish) (Lab): I
apologise for not being present when hon. Members
declared their interests. I declare for the record that until May I
shall be a member of Thameside metropolitan borough council, which is a
housing authority.
There is no
pretending that stock transfer and large-scale voluntary transfers are
not controversial. Two ballots have occurred in my
constituency—one in Thameside in 1999 which produced a
favourable vote for new charter housing, and another in Stockport in
2003 which rejected proposals for LSVT, although eventually an ALMO
resulted. Given what you said in response to an earlier question, do
you not recognise that the mere fact of housing being in the control of
a local authority does not necessarily imply democratic control? The
large overspill estates were created in the 1960s, when slum clearance
took place and people were shifted out of one local authority to live
in a new estate that was
often in the back of beyond in another local authority. Councillors for
areas with overspill estates can find it very frustrating that they
have no representation on the authority that runs the housing, from
which they often feel quite detached. Similarly, tenants sometimes feel
very detached from their landlords. They feel that they do not have a
voice and that they are second-class tenants who come after other
tenants of the authority. In the light of all that, what are your
objections to housing associations being interested in running such
estates—particularly those associations that already operate in
the
area?
Alan
Walters:
You are right in everything that you have
said about the limitations on the accountability of councils. It is
right too, as has already been said, that council tenants form a tiny
minority in some wards, so they do not register on the political radar.
Some accountability exists, however, whereas registered social
landlords are not accountable at all. It is not a completely black and
white situation, and there is no doubt that some RSLs originate from
the cuddly local community movement. However, the dynamics in the
sector are driving towards massive regional, national and multi-million
pound private companies in law driven by business plans and
increasingly looking to development for profit. In that situation, the
idea that tenants have any hearing or that landlords, operating across
dozens or, in some cases, more than 100 local authority boundaries, are
in the least interested in, or capable of, responding to the needs of
particular tenants is nonsense. Councils have limitations, and we argue
that we need to strengthen the relationship between tenants in council
housing and local authorities. However, that is massively better than
the relationship that most tenants have with
RSLs.
Q
83
Andrew
Gwynne:
If I had been a councillor representing the
Haughton Green overspill estate in Tameside in my constituency when it
was the responsibility of Manchester city council, I would have had no
voice on Manchester city council and no way in which to force the
council to do anything. How is it different now that Irwell Valley
housing association is responsible for Haughton Green estate? Surely
the only difference is that major investment is now going into that
estate, whereas before there was none. Where is your argument about
democracy
there?
Alan
Walters:
You can always find examples in which the
principle is more tenuous. Nevertheless, however tenuous that
relationship, you are up for re-election and will have to look over
your shoulder at who will re-elect you. The RSL board of directors is
not up for re-election and, therefore, is not looking over its
shoulder. The majority of council tenants will have a closer and more
direct relationship with their local councillors. In the majority of
cases, the relationship is better than in the exceptions that you are
painting.
On the
second part of the issue, about areas that, having been transferred,
made improvements, we think that it is outrageous—this is where
you must question all the talk about democracy, empowerment and
ballots—that if tenants, when asked to make a choice, make the
wrong one, the council’s debt is not written off and the tenants
do not get the improvements, whereas if they agree to
privatisation, those improvements are made.
Between 1993 and 2004, the
Government siphoned £24 billion out of the national HRA.
However, in 2000, the backlog of repairs and improvements was estimated
by the then Office of the Deputy Prime Minister at £19 billion.
That was outrageous! The money was available to carry out the
improvements that tenants wanted. The work could have been done by
local authorities, and it was only because of dogma that it was not. We
need to reverse that situation and to respect tenants’ choices
by allowing them to stay with a landlord and get their improvements.
This Bill should be doing
that.
Q
84
Andrew
Gwynne:
In the Stockport part of my constituency, where
they rejected stock transfer, one of the issues for tenants was the
protection of their rights under the local authority and fears that
they would not be protected following stock transfer. However, where
transfer has taken place, do you think that the provisions in this Bill
will strengthen tenants’ rights through Oftenant? Do you think
that it will provide a level of protection not currently in
place?
Alan
Walters:
My understanding is that it is unclear
exactly what Oftenant will do. It is not at all clear whether it will
be accountable to tenants or whether what it will do will be done on
their behalf. There is a very great danger that, because the Bill blurs
the distinction between so-called not-for-profit and for-profit
landlords, and allows for-profit landlords to operate in this area, the
overall effect will be to the massive detriment not only of council
tenants, but of RSL tenants. It is dragging the whole thing in the
direction of the private sector. What we know about private sector
landlordism is that it benefits not tenants, but those who own the land
and the banks lending the money—the industry. The answer,
probably, is no—the overall impact will be to the detriment of
all tenants. There is a lot of ambiguity in the clauses, but some of
them are off our
radar.
Q
85
Paul
Holmes (Chesterfield) (LD): I want to explore a little
further the issue of democratic choice. We have just heard examples of
what I would have thought were fairly unusual circumstances around the
country in relation to overspill estates. Where I used to work in
Buxton, there was an example of a Manchester overspill estate, so I
have seen it there, but in the case of most councils, surely there is a
very direct relationship. In Sheffield, on the council estate where I
grew up, there was a direct relationship between tenants, votes and the
council—a relationship that has now gone because the council has
gone to ALMOs and housing associations. In Chesterfield, people were
able to vote against a council with low satisfaction ratings and elect
a council to which they now give high satisfaction ratings. Presumably
most councils have a fairly direct link, do they
not?
Alan
Walters:
If we had a research department, I would ask
it, but we do not, so I cannot. Not enough is known about how exact
that link is. There is a lot of anecdotal evidence from talking to
councillors that people know what their tenants association is, and if
there is not a tenants association, they know people who are active in
the community. In particular, they know who is involved when it gets
close to an election, whichever party those people are in.
One of the other interesting
things is that there are a number of authorities where there was a
stock transfer ballot in which tenants voted no, and then the political
control of the authority changed at the next election. I am sure a
number of factors are involved in that, but there are cases in which it
has been quite clear that the tenant vote has counted. We do not say
council housing is perfect in a whole number of areas, including
accountability. We are arguing that it offers something that is
significantly stronger than what alternative forms of landlord offer.
Therefore, if tenants choose to remain as council tenants, there is an
obligation on the Government to stop robbing their rents and to fund
improvements. If people on a council waiting list are clearly saying,
“We want to be council tenants,”—actually, quite a
lot of them are saying, “We would prefer to be a council tenant
than an RSL tenant, because we think that the council is a better
landlord, the rents are lower and the repairs are done
better”—a Government who say that they are in favour of
choice should respect that choice. The Bill is an opportunity for the
Government to do that. That means a fundamental review and overhaul of
the HRA to give councils the means—whether you call it a fourth
option or anything else—to improve, maintain and build new
council
housing.
Q
86
Paul
Holmes:
Further to that point, in about 120 or 140
authorities, the tenants have voted at least once—four times, in
Camden’s case—not to transfer. However, they are offered
a choice—correct me if I am wrong—whereby if they
transfer to the housing association, the housing association keeps all
the rents and reinvests them, but the council keeps only whatever
percentage it is allowed by the Government. Money is taken away from
three quarters of councils. The housing association keeps 75 per cent.
of right-to-buy money; the council keeps 25 per cent. The historical
debt of the housing association is written off; that does not happen
for the council. Even though it is a pretty loaded, undemocratic
choice, there are still 120 or 140 areas where the tenants have said,
“We want to stay with the
council.”
Alan
Walters:
I think that that is extraordinary. That so
many council tenants have voted to remain with the council is to the
credit of council tenants and, to be fair, to the credit of elected
councillors, MPs and the trade union movement, who have supported the
argument. It is an almost unprecedented mandate that the Government
cannot afford to ignore. Lots of people are for or against all sorts of
Government policies, and they might moan and protest. It is partly a
historical accident, but council tenants were given a ballot, and many
council tenants have exercised that right and turned down what was
offered. When you consider the blackmail and bullying that have gone on
in terms of twisting people’s arms to go for the privatisation
solution and the bribes of new kitchens, bathrooms and so
on—people are often desperate for those improvements—we
think that the Government should respect the choice that people have
made, which means allowing councils to do the job that their tenants
want them to do. The Bill has to do
that.
Q
87
Mr.
Wright:
A quick question: on principle, are you opposed to
the use of private borrowing to help to allocate additional social
housing?
Alan
Walters:
No. I think the answer has
to be absolutely not, in principle. The question is what conditions or
costs are involved. We would certainly defend secure council tenancies,
lower rents and accountable landlords. If we can find a way of squaring
that circle that maintains all those elements and does not mean private
landlords or consortiums of developers in effect taking over our
estates, we would be prepared to look at the
options.
The
Chairman:
Order. We are about to come to the end of this
part of the sitting, Mr. Walters. On behalf of the
Committee, I thank you for your evidence and hope that your back gets
better.
Alan
Walters:
Thank
you.
5.30
pm
The
Chairman:
Order. Good afternoon, Mr. Gelling,
Mr. Bliss and Mr. Edis. Welcome, and thank you
for coming. Would you like to make an introductory statement,
Mr.
Gelling?
Michael
Gelling:
The document states that we are from the
same organisation, but that is certainly not the
case. I chair the Tenants and Residents Organisations of
England.
Nic
Bliss:
I represent the
Confederation of Co-operative
Housing.
Terry
Edis:
And I represent the National Federation of
Tenant Management
Organisations.
Q
88
Paul
Holmes:
We have heard in previous evidence that there has
been controversy in the past about ballots on transfer and how they
have been run. There have been suggestions that ballots are
not always run openly and fairly. Clause 257 of the Bill tries
to introduce principles such as making a ballot mandatory, if it has
not been so before, and establishing a fixed period for tenants to make
their views known during the process. Will that solve the problems that
used to exist in respect of ballots on stock
transfer?
Nic
Bliss:
By and large, most of the stock transfer
ballots have been run relatively legitimately. The Bill crystallises
what is actually done in practice at present. One of the key issues for
our three organisations is that we want tenants in communities in this
country to be in a much stronger position and to be able to make
decisions about their homes and neighbourhoods. That is fundamental to
us.
One of the things
that is particularly important about the stock transfer ballot is that
councils are forced to engage with their tenants during the process,
and the resulting organisations have generally been some of the better
landlords in this country and have engaged with their tenants. That is
the reality of the
situation.
One of our
concerns is that in changes in the management of housing association
tenants—things like mergers between different housing
associations—tenants are not in a position to have any say. It
would probably be better for them if they were in a position to vote,
because landlords would be required to go through a strenuous process
to engage with them,
which is what happens in the stock transfer process. I am sure there
have been some incidents of stock transfer ballots that have not been
quite right, but, by and large, the process is relatively robust and is
actually very good at engaging with
tenants.
Michael
Gelling:
The process has improved since it began.
Today, independent tenant advisers are more independent than they were
five or six years ago, and they are not influenced as much by the
existing landlord’s wishes in respect of the transfer, but it is
still sad when a landlord does not really engage until a transfer is on
the menu. Engagement with the tenant should be there as standard
anyway, and it should not improve just because people want to talk
about a transfer. It should be there as the standard, normal thing to
do on a day-to-day basis about all services that are
provided.
I thoroughly
endorse what Nic has said with regard to the housing association
sector. The tenants in that sector have no control and no say in any
mergers or group structures that are created within that sector, and
half the tenancies in England now belong to the housing association
sector.
Terry
Edis:
I certainly think that the provision closes a
loophole. There are local authorities that use that loophole. As Nic
has said, the majority of local authorities go along in the right frame
of mind, as far as their tenants are concerned, but I think that
putting it in the Bill will close a possible
loophole.
Q
89
Margaret
Moran:
Can I get your views on the
right-to-manage proposals within the Bill? Do you think that they go
far enough? Are they likely to be effective? Are there changes that you
would like to see? And are you aware—I guess that you are very
aware—of the proposals for resident-led self-regulation, with
tenants and residents being involved, for example, in inspection
procedures, particularly within RSLs? Do you think that such measures
should be included in the Bill? Would they help to assure you that the
Bill truly has tenants’ concerns at its
heart?
Michael
Gelling:
Our experience, as the Tenants and Residents
Organisations of England, is that many landlords engage with tenants.
Tenants have been inspectors in all kinds of roles within our
organisation, and they have inspected everything that landlords do,
because there is best practice out there. There are very, very good
landlords out there in all sectors. My organisation represents tenants,
and we are not particularly interested in who the landlord is—we
are interested in how the landlord acts and relates to the tenant.
There are good landlords in all the sectors.
Where it is
difficult is where a landlord does not engage with tenants. If tenants
do not know that they have choices, or if tenants and communities do
not know that they can be empowered, they will not be empowered. Many
people in this country do not know that they are empowered to influence
local authorities in any venue and discipline that they take notice of,
never mind the landlord discipline. So I think that we still have a lot
of educating to do, to tell people what is expected from them if they
want to engage in their community and with their service providers,
because it is about engaging with not only local authorities, housing
associations and landlords, but all the disciplines and services that
are provided. If that is the agenda of the Government, there is still a
long way to go.
Terry
Edis:
You would probably expect me to say this as
chair of the National Federation of Tenant Management Organisations,
but I do not think that the right-to-manage goes far enough. I think
that it should exist within not only the local authority sector, but
the RSL sector. Then, we would start to get “the right to
manage”, which is the phrase that should be looked at. The Bill
does not go far enough. What is in the Bill is certainly helpful, but
as chair of the National Federation of Tenant Management Organisations,
I would like to see it go further, certainly within the RSL
sector.
Nic
Bliss:
For many years, tenants have consistently
raised with us the issue that the right to manage should be extended to
the RSL sector. It sends the wrong signals to housing association
tenants that that is not the
case.
The work that
has been done to streamline the tenant management organisation
structure and to set up process is welcome. Most of the actual
nuts-and-bolts work to improve the process and to set up tenant
management organisations is not legislative—it is more
procedural in some ways. That kind of work is going on at the
moment.
Resident-led
self-regulation is a new concept, and it is too early to legislate on
it, to be honest. People such as ourselves have only really been
involved in these kinds of debates in the past two years or so. Before
it is realistic to expect tenants of housing associations in particular
to be seriously and properly involved in the regulation of housing
associations, a lot of work is going to have to be done to make that
real, quite frankly. What we do not want to end up with is a handful of
tenants who do not really know what is going on trying to regulate
housing associations. That is not directed at housing
associations—it is true of councils as well—but
unfortunately, in the majority of both sectors, there is a culture of
disempowerment. The landlord makes the decisions and the tenants are
there to receive the service, and sometimes they get a good service and
sometimes they get a bad service. There are only a few examples of
landlords really welcoming tenants being involved in decision-making
processes. Until that whole culture starts to change, trying to drop
resident-led self-regulation on it is not going to
work.
Q
90
Sir
George Young (North-West Hampshire) (Con): Mr.
Gelling, you talked a moment ago about empowering tenants. Have you
considered the position of tenants who want to move from one area to
another but who, in the absence of any national mobility scheme, find
it difficult to do so? Have you addressed that issue in any
way?
Michael
Gelling:
I do not think that that is about mobility;
I think that it is about the lack of properties to move to. There are
about 1.2 million people on waiting lists in this country waiting for
houses in our sector. I live in a small unitary authority, and I work
as an advocate on a day-to-day basis to assist people with housing
issues. I currently represent a lady who has six children and wants a
bigger property, but there is not one in the borough that she can move
to. She cannot stay in that community, and her children cannot stay in
that school. They have to move somewhere else because—it is not
a criticism; well, maybe it is—the
right to buy has diminished the amount of stock currently available for
local authorities and housing associations to offer people in need.
There is a real issue about people moving and mobility in the rented
sector. That is not their fault; it has been managed by things
happening at your level. You made the law on the right to buy, and we
have lost 6 million properties because of
it.
Terry
Edis:
With the building of all the new properties and
what have you, there needs to be a big element of rented social
housing. Then we can have, more gradually if you like, people moving
from area to area. That is a big thing that we need to look at within
the programme of building all the properties that we are looking
at.
Q
91
Mr.
Raynsford:
We are going to receive evidence later from the
Council of Mortgage Lenders. Its written evidence
states:
“While
accepting that some tenants can and do participate successfully in
management, lenders will be uncomfortable with the reference to
control.”
Is that an
issue in relation to housing
associations?
Terry
Edis:
Walsall decided in 2001 that it was going to
transfer all its stock. We have eight tenant management organisations
in Walsall—I know that you have been to see ours at Burrowes
street—that did not want to be part of the main transfer
vehicle. We decided to set up our own registered social landlord, which
would be completely tenant-controlled. One tenant from each of the
eight tenant management organisations is on the board, plus four
independents. It is completely controlled by tenants, but more to the
point of your question, we had lenders queuing up to lend us the money.
We had to go through a process of interviewing them to see which one we
wanted—not what they wanted to do—as our preferred
partner in using the money. For us, that certainly answers the
question.
Nic
Bliss:
I can back that up. The reality is that
lenders are competing with each other to lend to tenant-led
organisations as much as to any other organisation. Lenders are not
going to stop lending to the social housing sector, because it is
relatively safe borrowing for them. I worked with the tenants to set up
the Preston community gateway association, which is a tenant-led
organisation that has explicit commitments to things such as tenant
management, and similarly the Watford community gateway association.
Lenders strongly competed to lend to both of them, and they actually
found the involvement of tenants in decision-making reassuring. They
were lending at the same rates as any other organisation, so I suggest
that the CML is not reflecting what is happening in
practice.
5.45
pm
Michael
Gelling:
I think you need to define what
“control” and “tenant-led” mean. Tenants do
not have to sit on a board to lead an organisation. If the board and
the organisation have a philosophy of putting the tenant’s voice
first, the professionals can still make the decisions, but they will be
based on the empowerment that they have given to people to write the
menu, as it were. It is important to understand that we are not
different from other people just because we are tenants.
Q
92
Mr.
Raynsford:
May I move on to a slightly different, if
related, issue? You commented on the lack of opportunity for housing
association tenants to comment on transfers in the sector. However, I
must say that that is not always the case. In a previous incarnation, I
advised housing association tenants who were considering a transfer to
another association, so it can happen in certain
cases.
There are circumstances,
however—let us take what has happened in the past few weeks with
Ujima—in which an association that is in serious financial
difficulty would go to the wall, literally, with the risk to
tenants’ tenure, if it was not transferred rapidly to another
association with greater financial strength and the ability to provide
that safeguard. That seems to be difficult to reconcile with the
procedures that apply—you would probably like to apply
them—to having some degree of tenant say on a
transfer.
Nic
Bliss:
Perhaps tenants should be involved in the
association all along. In my experience of working with tenants, I have
found that they are interested in the financial structure of their
association and that they would like to be involved in those kinds of
decisions. If tenants had been involved in the situation you mentioned,
perhaps they would have seen that problems might arise before they did,
and would have prevented them or found some way to move in a direction
that they wanted.
You
are right to say that some associations are good at engaging with their
tenants, but the reality in most housing association transfers or
mergers is that the decisions are made behind closed doors by two chief
executives, more or
less.
Michael
Gelling:
One of them is usually retiring.
Terry
Edis:
If the tenants are there at the
beginning and making the choices and what have you, their vested
interest is not to let the association sink so low. At the end of the
day, it is their homes that count.
Q
93
Mr.
Raynsford:
My point was that there are certain
circumstances in which safeguarding the security of tenure, and
protecting tenants from the risk of having their homes repossessed,
might justify something that is slightly less than ideal.
Terry
Edis:
Do you put that down to tenants or, as I said,
bad management of the housing
association?
Michael
Gelling:
Is that not about guardianship and the time
when you engage? People should know if their tenure is being
jeopardised by bad management. It is a question of how to deal with
that. There will be always be exceptions to all rules—there must
be; that is what rules are for.
Q
94
Mr.
Raynsford:
That takes me to my third point, which is about
the role of the regulator in the new legislation. As spelt out, the
legislation will enable the regulator to keep a close watch on the
range of things, such as those we described, that might indicate poor
management and financial control by an organisation. Would you like to
make an observation on the definition of the remit and role of the
regulator? Do you think that the regulator will be effective on those
terms, or do you think that they could be
improved?
Nic
Bliss:
We welcome the general thrust of the Bill
because the regulator will have a widened scope and objectives,
particularly on involving tenants in decision making about their homes
and neighbours. I obviously support that.
As with anything of this
nature—the changes are wide-ranging—the reality of how
the Bill, which provides a framework, is implemented will determine its
success or otherwise. It is important that tenant representatives are
involved in the formation of both the HCA and Oftenant. Tenants must be
right at the heart of the process, to ensure that they can get involved
in decision making about the kinds of things that we are discussing.
That must be built into every part of the new organisation. I do not
know whether that is yet the case; perhaps it needs to be looked
at.
Q
95
Mr.
Wright:
I want just to push you a little further on the
point that Nick Raynsford was making about the whole regulatory
framework and the Secretary of State’s ability to direct the
regulator. We heard evidence earlier from the National Housing
Federation, which has expressed concern about that. Will you reaffirm
that you are happy with that regulatory framework, in terms of the
direction from the Secretary of State down to the regulator, and on to
housing associations? Secondly, in terms of standards, clause 173
states
that
“Standards
under subsection (1) may, in particular, require registered providers
to comply with specified
rules”
A range of things
are then specified, such as
“the nature of the housing
demands...the extent to which demand is to be
supplied...terms of tenancies...anti-social
behaviour...landlords’ contribution to the environmental,
social and economic well-being of the
areas”.
Are you happy
with those
standards?
Nic
Bliss:
I think we are. That is the
short answer. I can understand where the National Housing Federation is
coming from, in terms of trying to protect their members and so on, but
the reality is that when you go out and talk to tenants and explain to
them about organisations in which tenants can get involved in decision
making, both housing association and local authority tenants are
shocked that they do not have those kinds of powers and rights as well.
For years, we have been trying to come up with ways to cajole both
local authorities and housing associations to start to work with their
tenants. In some cases that has had some success, but the reality is
that the majority of social landlords at this stage are not really
working with their tenants and do not have the culture to work in
partnership in decision making with their tenants. In the 21st century
it is shocking that tenants are unable to get involved in decision
making about their homes and neighbourhoods, so if it takes putting it
in the Bill I think that it should be there.
Terry
Edis:
I agree with Nic. Again, we come back to the
issue that while we agree that the things that you have mentioned are
in the Bill and we would support that, we would also say that it must
be driven by the tenant
movement.
Michael
Gelling:
Again, that comes back to the regulator. If
the regulator is seen to have tenants involved in the regulation, that
sends the message out to organisations that tenants are at the heart of
things.
You have got to teach people by example, and tenants have got to be
there through due process, not just cherry-picked—we have seen
enough of that in the past and it does not work. People have got to be
there through a process that is about accountability and
representation. There must be some justification for getting there.
That is important. I would just say one thing though: we hope that
regulation does not increase rents.
Nic
Bliss:
Or decrease
services.
Q
96
Ms
Smith:
I want to tease out the issue of tenants’
empowerment because I think that most people, if not everybody, around
this table would accept that tenant empowerment should mean at least
some meaningful control over the management of your home. I will for
ever hate the colour maroon because when I was a child all our houses
had to have their front doors painted maroon. We had no choice whatever
about the colours or the maintenance of our homes. We have all moved a
long way since then, and I hope that that is now accepted, at
least.
I want to
tease out your ambitions with regard to the more difficult management
issues in the tenanting sector in relation to allocations, which is
where it gets difficult. For instance, I have a difficult case at the
moment involving an individual whose wife has left him and taken the
children with her. He has now been told by Sheffield council,
which incidentally for the record is not a shining example of
tenant empowerment, that he will have to move to a one-bedroomed
flat—and that he will be moved back to a three-bedroomed
property if he gains access to the children. Such situations of
powerlessness are not acceptable.
Terry
Edis:
Or bureaucracy gone
stupid.
Ms
Smith:
On the other hand, allocations can be difficult
when vulnerable people and vulnerable families are
involved—those that no one wants to live next door to. I would
be interested to hear your response, as the voice of tenants, on how
you see tenant empowerment working when it comes to the difficult
issues of allocation and tenancy—basically, the management of
limited
supply.
Terry
Edis:
A few years ago, it was said
that tenant management organisations outperformed local authorities in
every department—rent collection, antisocial behaviour, lettings
and everything else. The structure is there, through the tenant
management system; the policies are made by the tenants but they are
carried out by the paid staff. There is a line, and that line should
never be crossed. The defining line is that, yes, we make the policies,
but the staff carry them out. As long as they are carrying them out, we
would not encourage any tenant management organisation whatever to get
involved with the management of the properties, or any aspect of
it.
Michael
Gelling:
One of the biggest issues is allocations,
because of the confidentiality of dealing with particular families in
their particular circumstances. I know that tenants were involved with
allocations policies way back in the early 1980s; tenants actually sat
down and wrote allocations policies.
Allocations policies work very
well when you have officers who carry out the allocations in a human
way,
with flexibility and understanding. Allocations policies are not tablets
of stone. They are there to assist people. We are talking about a
commodity that is quite rare now, and we have to allocate on a fair
basis. I would not use the word “needs”, but the
allocation must be fair and equitable.
If we want balanced
communities, the commodity has to have people in there who work, who
earn money, who may be on benefits, who may be single parents, who may
be black, who may be white, who may be Catholic, Protestant or Muslim.
If we want mixed communities, that is what we must have. Once you start
saying, “Well, these people—or those people—cannot
be allocated to these properties,” we start ghettoising, with
little pockets of people within our communities. That is certainly not
the way that we want to go.
Allocations is the most
sensitive issue. We can all pick paint for our front doors and all that
business, but allocations is at the heart of everything that we do,
because you cannot go and tell the world why you got that house. You
cannot do that, but behind the scenes tenant activists need the
ability, as always, through a confidentiality provision, to scrutinise
the allocations policy to ensure that the officers are being fair and
equitable.
Q
97
Ms
Smith:
That statement implies the belief that tenant
management on that sort of scale is more successful in ensuring a fair
and flexible interpretation of allocations policy than you might get
with a large-scale local authority landlord. Is that
so?
Nic
Bliss:
There are a number of different ways for
tenants to be empowered and to be involved in decision making, and we
think that there should be a whole range of different ways in which
that should happen. Some of it is tenant management. I live in a
housing co-operative. There is a staircase of opportunities, and so on,
and we think that all those opportunities should be available. The
further you get up, the more responsibility you take on, so the more
training you have to go through to be in a position to take those
decisions. My experience of working with tenants throughout the country
is that, when we work through the issues with people, they are
generally far more keen to see a fairer system of allocation than some
local authorities. Sometimes, local authority systems can become
formulaic and a bit
soulless.
6
pm
Tenants
recognise the need to house vulnerable people with different ways of
life from themselves. They want to create support mechanisms for those
people. In my experience, tenants want to see that happening—if
we work through the issues with them. Sometimes, when you first start
to talk sense to them—if they have not had any engagement with
the issues and so on—they might say all sorts of things, but
once we actually work through the issues, my experience is that tenants
will generally be fair and want to set up the right system.
[
Interruption.
]
The
Chairman:
Order. I ask not only members of the Committee,
but members of the public to check their mobile phones to see if they
are switched off.
Q
98
Mr.
Slaughter:
Do you see a role for TMOs as being an
exceptional alternative to other forms of social housing, whether
council or RSL? Do you think that TMOs should be a sector that stands
alongside other forms of social housing, such as council housing and
RSLs if the right for TMOs and RSLs is granted, or do you see it as
more of an exceptional circumstance? I ask that question because, in
theory, there is no reason why TMOs should not have grown at the same
rate as RSLs, but they clearly have not. If you think that TMOs should
be a substantial sector, why has that not
happened?
Usually,
a bad existing landlord or a very good and motivated group of tenants,
or possibly both, are needed to make that happen. Although local
authorities do not often say publicly that they are anti-tenant
management, some will often do everything that they can behind the
scenes to prevent that from happening. We could argue that the sort of
comments that we have heard from the CML imply that there is something
flaky about TMOs. Those are my reasons, but should like to hear your
reasons.
Terry
Edis:
It is a question of what is right for that
area, the group of tenants or whatever. If they want to consider tenant
management and, if it is right for them, they should be allowed to do
it and not stopped. We all know of local authorities that have actually
closed tenant managements when they were outperforming the local
authority in every aspect. I see that as running alongside, not as an
alternative and cutting everything else off. If it is right for people
in the area, and they want to do it, fine. If they want to stop with
the council, fine. If they want to stop with an RSL, it is a bad
choice.
Nic
Bliss:
There should be a range of opportunities for
tenants to get involved in decision making in respect of their
landlord, from very informal things such as being able just to talk to
the landlord at one end of the spectrum, through to tenant management.
Tenant management should not be seen as some sort of exception, but as
something that tenants can do if it is right for them in their area. It
has been said that the Council of Mortgage Lenders might consider such
matters as flaky, but there is no evidence to suggest that that is the
case. All the evidence of tenant-controlled, tenant-managed and
tenant-owned organisations is positive. It says that generally, when
tenants are properly trained and in the position to make decisions
about their homes and neighbours, they make better decisions.
Obviously, that will not be right for every area. Different solutions
will be right in some
areas.
Q
99
Mr.
Slaughter:
I think I am implying that there is not a level
playing field. Barriers are put in the way of tenants when they want to
manage their own
estates.
Nic
Bliss:
The key issue that I want to come back to is
the fact that, with most social housing landlords, tenants are not in a
position to get involved in decision making. That is the problem,
whether it is the tenant management organisation or anything
else.
Terry
Edis:
More knowledge that they actually can do it.
That is what is lacking with a lot of local authorities, certainly with
housing associations. They do not want to tell the tenants about it in
case they
decide that they want to set up a tenant management organisation.
Although it is on the statute book that, yes, people can set up a
tenant management organisation, some local authorities put obstacles in
the way until tenants decide that they have had enough, they cannot go
any further and that is it. More knowledge is needed to make it easier
and to make local authorities more accountable to the people who pay
them—the tenants.
Nic
Bliss:
It is not a simple matter of just one or two
issues; a process of cultural change needs to happen across all our
public services. It is about people being prepared to say that those
who use the services can get involved in decision making and can make
the thing better. To a certain extent you guys need to lead that
process; you need to be out there saying it repeatedly. That is what we
need you guys to do. We can work with the nuts and bolts down on the
ground but you need to set the tone to say that that is what should
happen.
Terry
Edis:
One thing in
the Bill concerning local authorities, and certainly we welcome it, is
that it gives tenants rights if they want to explore them. Again, we
can give you examples of local authorities that let tenant management
organisations look at different stock options, and spend public
money—we are talking about thousands of pounds—but when
they say, “That’s the option we want,” the council
says, “Well that is not the option that we want, so you are not
doing it.” That has happened not once but on several
occasions.
Michael
Gelling:
Is it not alarming that the Chartered
Institute of Housing has an award ceremony every year for landlords who
do wonderful things with tenants and vice versa and so does the
National Federation of ALMOs and the National Housing Federation, but
the message about best practice does not seem to go out to all the
landlords? But it is there; it is happening in some areas and we cannot
get away from it.
It is
surprising that in a large local authority or an even larger housing
association there can be pockets of best practice in one area but not
in others, and you ask, “How is that done?” It must be
down to personalities and cultures in certain areas. The question is
how you get that culture to spread. It is one of the only cultures, or
diseases, that you want to spread, to get it out there and get
everybody having a bit of it. It happens even in the same organisation
and the question is how we turn it around and inform tenants what the
menu is, because if they do not know they can never make those
decisions.
Terry
Edis:
And local authorities do not want to grab it.
They are not going to tell the tenants anyway, are
they?
Q
101
Mr.
Raynsford:
The second of the three objectives spelt out in
the Cave review for the regulator is to empower and protect tenants.
Let us assume that the regulator is established; if you had to advise
him on examples of good practice, which two or three would you each
select as really good examples of tenant empowerment and involvement
and why would you recommend them? What are the characteristics that
have made them
successful?
Terry
Edis:
Well, without a doubt I would say Watmos
Community Homes, of which I am chair. Eight tenant management
organisations took the bull by the horns and said, “We want to
set up our own
RSL.” We have done that and we did not have to draw money off our
lenders until 12 to 18 months before we projected that we had to, so it
was good value for money. The other aspect is that we are now, after
three years—we are coming into our fourth year of
being—classed as a low-risk housing association by the Housing
Corporation. I can give you no better example that
that.
Nic
Bliss:
I would mention three
things. I have been personally involved with trying to develop the
community gateway associations, which are stock transfer associations
that have been about transfer into tenant membership organisations.
There is a long process to develop the empowerment structure within
those bodies.
On the
empowerment issue, you have to make a commitment and work with it for
years. It takes five to 10 years to change the culture and embed that
among tenants and staff, and so on. I would like to talk about the
process that the community gateway associations are going through as an
example of how that has changed. In Preston’s case, a council
that was previously not very receptive to involving its tenants in
something has changed and over 2,000 tenants are now members of the
Preston community gateway association. People have come forward
voluntarily and said, “This is my association; I want to be part
of it” and signed up as part of
it.
The other thing
that I would like to talk about, because I am from the Confederation of
Co-operative Housing, is housing co-operatives. I moved into a housing
co-operative back in 1987 or so and I was staggered by the small-scale
community organisation involving people from all walks of life who got
together to make decisions about their homes in a small community. That
has driven what I have been trying to do for most of my life, which is
to make those kinds of opportunities available to tenants more
generally. That kind of small-scale community approach—the
community identity that comes from that—is the basis on which my
housing co-ops and communities
work.
Part
of the problem, in terms of your question, is that I
do not think that there is enough research into successful models of
empowerment. I can only talk about examples that I have specifically
come across, which have changed tenants’ lives. But there are
other examples. There are good examples of housing associations and
local authorities working with their tenants, but the sad thing is that
there are not enough of them and the good examples are not being
disseminated enough to other tenants and other
landlords.
Michael
Gelling:
I mentioned awards by three organisations. I
have been fortunate enough to be invited to be a panel member
disseminating all the information. It is difficult to identify two or
three organisations and I do not feel comfortable doing so. But many
hundreds of organisations out there have done quality work with
individuals—whether young individuals or people who find it
difficult to communicate with their landlord—and go that extra
mile. There are huge numbers of tiny examples. They are not usually the
winners of awards, because the good examples are hidden in the
projects, even if a project has not won. However, there are good
examples in there. I have spoken to one or two people in the awards
systems, saying, “Let’s ask judges in future to try to
extrapolate some of those little pieces of work
and good examples of how you actually communicate with people and
empower them
locally.”
There
is fear about tenants being in charge and being in
control. However, they do a good job. Many of the
ALMOs are three-star organisations led by tenant chairs and
tenant-majority boards. I am not just picking on ALMOs. I live in the
housing association sector, but I cannot promote my own landlord,
unfortunately.
There
are a huge number of examples. It is a task to disseminate the
information, but somebody needs to do it—and if you give us
funding we will go away and do a bit of it for
you.
Terry
Edis:
Just leading on from that,
those organisations forge partnerships with others outside the housing
remit, including all sorts of organisations such as community radio,
fibre-optic broadband and all that sort of thing. It is that sort of
thing that tenant organisations really want to get into. The days
of—
6.15
pm
The
Chairman:
Order. I am sorry, I have to stop you there, as
we have come to the end of our session. On behalf of
the Committee I thank you very much, Mr. Bliss,
Mr. Gelling and Mr. Edis, for your submissions
here this
afternoon.
Good
evening, gentlemen. Mr. Stevens, Mr. Hughes,
Mr. Heywood, would you like to say a few words by way of
introduction, one on behalf of the three of
you?
Andrew
Heywood:
Thank you very much for inviting us this
evening. We are very pleased to be given the opportunity to give
evidence, because we feel that we are a significant stakeholder in the
social housing world and, going forward, an important source of
funding. I am pleased to introduce myself, Andrew Heywood, working for
the Council of Mortgage Lenders. On my left are Richard Hughes from
Halifax Bank of Scotland and Paul Stevens from Abbey, both
organisations that make a substantial contribution to the funding of
the housing association sector and have done for many years. We would
be pleased to answer any questions that you may wish to put to us. I
simply point out that probably our key areas of knowledge, on which we
may be the most help to you, are funding, clearly, but also
regulations. Lenders derive significant comfort from effective
regulation, particularly of finance and governance. Those are areas in
which you may find us particularly
helpful.
Q
102
Sir
George Young:
May I ask two questions? The first relates
to what you have said in your memorandum: that clause 37 should be
deleted. I have looked at that clause, and it basically states that if
you sell a property that has had a social housing grant, the person to
whom you sell it has the same obligation that you had to repay it. As
far as I can see, it simply replicates what is in the 1996 Act. Why do
you want it
deleted?
Richard
Hughes:
Our reading of the Bill—we are happy
to be corrected if it is incorrect—is that there will be a
change in the Government’s relationship with the RSL sector in
particular. At the moment the
Housing Corporation, acting as both funder and
regulator, has a commonality of interest. With the setting up of the
HCA there appears to be a change, in that the Government seem to want
to derive some sort of return from their investment in social housing,
as opposed to the grant that has previously
gone.
On our reading,
clauses 36 and 37 seem to say that the HCA can demand its grant back
and a return on it—we assume some sort of equity-style return.
Particularly in clause 37 on binding successors in title, that seems to
undermine the security that we get by taking a first fixed charge over
rented housing. That is incredibly technical, and I appreciate that it
is probably more of a detailed discussion. Our reading of the Bill
suggests that the security valuations that we take of our charged
property would need to be adjusted to reflect any grant that has been
sunk into those
properties.
Q
103
Sir
George Young:
You are not saying that the Government
should not have the right to claim back the grant if the property
changes hands, are you?
Mr.
Richard Hughes:
No, we are not saying that. We are
saying that the current premise is that that right is subordinated to
our charge. The Bill does not have that same effect, but I am perfectly
willing to be told that I am wrong.
You make it
quite clear that you value effective regulation, which has enabled you
to lend money at a lower rate than would otherwise have been the case.
If we abolish the existing regulator and set up a new one, the risk is
that the baton may be dropped as they go around the course, so what
undertakings are you looking for to ensure that the collective
regulatory wisdom that has been built up in the Housing Corporation is
carried through to the new organisation?
Paul
Stevens:
That is absolutely right.
Maintaining lender confidence in the current economic and banking
climate will be extremely important. There are only a handful of active
lenders who have deep pockets and are prepared to support ourselves. In
fact, only last week, or the week before, Bradford & Bingley
disposed of its properties, so there is one fewer lender in the sector.
Maintaining that confidence is absolutely crucial at a time when there
is talk of £8 billion of additional grant funding, which in
itself will require about £16 billion of additional private
finance. If the Government are to deliver their objectives of building
capacity and building more properties to satisfy demand, we must
maintain that confidence.
Our position on the transition
of the regulator is that we see ourselves as a key stakeholder. We want
to engage in looking forward to the new regulator, and we want to be
confident that a chief executive, or an equivalent, and a chair within
the new regulator will be appointed early. I understand that that is
happening. We also want to have the opportunity, as a key stakeholder,
to engage in establishing the new regulator, such that that confidence
is maintained.
Q
105
Alistair
Burt:
I wanted to come in on what Mr. Stevens
said about the pulling out of Bradford & Bingley. Can you help us
out? Is it a temporary blip, or
something based on a fundamental distrust or dislike of the sector? And
how will the Bill make a significant difference to that?
Paul
Stevens:
If you read the press releases that Bradford
& Bingley put out, the issue was about the best use of capital from
its perspective. It felt that it could lend more profitably elsewhere.
There is an issue in the sector about the Basel II capital accord and
the treatment of capital for social housing lending, whereby the
Financial Services Authority has, in my view, arbitrarily imposed a 10
per cent. floor on loss-giving default. This is all getting technical,
but in essence it means that lenders, under that capital treatment,
have to put more capital aside for such lending, and therefore our
returns, which are not great anyway, are reduced.
Not all lenders are able to
seek the advanced status under Basel II in order to get the most
advantageous capital treatment, and one of them would have been
Bradford & Bingley. Most smaller building societies are unable to
compete in the market, because they are unable to get the most advanced
capital treatment.
Q
106
Alistair
Burt:
I return to a point that I made earlier to other
witnesses: the Government’s record of providing social housing
has not been good. What in the Bill would make a difference to the
access-to-capital problem that you have just outlined?
Paul
Stevens:
There is nothing specifically
linked to capital treatment in the Bill. The issue is about
maintaining lender confidence in a market that is clearly unstable from
the credit crunch—and we can all argue why that has
happened.
However, the
reality is that lenders are understandably more conservative than they
have been hitherto, so we need to ensure that the lenders who are
active remain active and do so at a price that does not penalise the
RSLs for situations that are, to some extent, outside their
control.
Q
107
Alistair
Burt:
But there is always going to be a rented sector, so
why is it not a better
bet?
Paul
Stevens:
A better bet than
what?
Alistair
Burt:
A better bet for lenders to get into. If they are
worried about confidence and security, you could argue that it will be
a rather more stable market than the home ownership market, which is
bound to fluctuate
more.
Paul
Stevens:
Yes, possibly so, but it is a very
specialist area of lending and that is why the activity of financing
RSLs has been brought to a situation in which there are only a handful
of lenders. They are all specialist lenders who have a significant
commitment to the sector, the skills to deliver it and the ability to
build internal systems that give them the right capital treatment.
There is nothing stopping a new entrant coming in other than those
issues concerning building the expertise and the capital models that
enable them to compete. If pricing in the market increases, we might
find that there are more entrants, and only time will tell—that
is market forces.
Richard
Hughes:
The issue of why there are so few funders is
partly because of the success of the Housing Corporation. The margins
are so low. HBOS, which I can speak for, has a £5 billion
portfolio that is already
sunk in the sector on the basis of the current analysis of risk. If
there is a significant change to that risk analysis, for a new entrant
coming in, the risk might be acceptable at a different price. However,
we have priced that risk on the current price at the market and there
is a potential for a change in the risk profile.
To go back to
your first question, there are some barriers to the delivery of some
aspects of the additional points that are to be regulated. At the
moment, however, RSLs respond on a nice-to-have basis and there seems
to be a requirement for an additional cost that is being thrown on to
RSLs that potentially will impact on their ability to deliver more
housing.
Q
108
Mr.
Raynsford:
Can you help me, as I am a bit
puzzled by this. Over the last 20 years or so, you
have probably managed to raise around £32 billion to £35
billion for the sector and I think that I am right in saying that there
has not been a single failure. Can you name any other market sector of
that scale that has a similar record of no losses through bankruptcy or
failure?
Paul
Stevens:
No, it is the best example of levering in
private financing that exists; there is no question of
that.
Richard
Hughes:
It is the change in the risk profile. I do
not think I am giving away any trade secrets by telling you that a good
quality RSL will borrow money at a cost of approximately 0.2 per cent.
in the current market. A good quality private residential landlord will
probably borrow at approximately 1.2 or 1.5 per cent. The market has
got to the stage where it is effectively deemed risk free, so any
change that increases the risk imperils our existing portfolio, and
that is our point. If we were starting with a blank sheet of paper,
following on from the Bill, and we were asked, “Would you lend
into this sector?”, I am sure that we would, but we possibly
would not lend at the margins that we currently lend
at.
Q
110
Mr.
Raynsford:
We had evidence earlier today from the National
Housing Federation expressing nervousness that the regulatory regime
was being tightened, which might jeopardise the standing of RSLs as
non-public sector bodies. Why do you see that as a
risk?
Andrew
He
ywood:
The areas that we consider to
be key in regulation—it is important to make this
distinction—are in the areas of financial performance and
governance. The National Housing Federation might have arguments about
other aspects of regulation which probably concern us less. However,
that particular relationship makes the risk-return ratio acceptable in
the end and gives social housing a place as one portfolio within a
broader portfolio. The existence of sound, dependable regulation
focusing on those two aspects is crucial.
6.30
pm
Mr.
Raynsford:
You have obviously considered the Cave report.
In fact, I am sure that you all contributed to Martin Cave’s
considerations. What is your feeling
about the blueprint in that report? Do you feel that it is sensible to
go for domain regulation rather than simply the current housing
association regulation
system?
Paul
Stevens:
The CML response to the Cave report was
supportive of its recommendations. We support the notion that there
should be an independent domain-wide regulator. The detail of that has
yet to be worked out. How are you going to manage the for-profit bodies
and the not-for-profit local authorities coming in? All that needs to
wash through. But I hope that we will end up with a more effective
regulator, which can recognise the differences between those
organisations that are providing social
housing.
Mr.
Raynsford:
My puzzlement is getting worse because we have
established that this is a successful market, that there have been no
failures, that you have been fully consulted about the new regulatory
regime, you have fed into it and you are broadly sympathetic to it. Yet
you say to us that it is all very risky and the chance of continued
investment is not
certain.
Paul
Stevens:
No, I do not think that we are saying
that.
Mr.
Raynsford:
The tone of what seems to be coming across is
that you are nervous about continued investment in the
sector.
Paul
Stevens:
No, we are saying that there should be
no dilution or perceived dilution of the current
regulatory environment that underpins our lending to the sector. I talk
of more effective regulation because there must be a recognition that
RSLs, particularly the more progressive, highly developing ones, are
taking on increasing risk. They are far more exposed these days to
market forces in relation to build for sale, because they try to create
more social housing out of less grant, so they supplement the grant by
getting involved in areas that carry more
risk.
Mr.
Raynsford:
But their balance sheets are very much stronger
and larger than they were about 15 years
ago.
Paul
Stevens:
Well, it depends how you measure that, of
course. They are gearing up their balance sheets considerably so, from
a lenders’ risk perspective, that carries greater risk. We all
understand why they are significantly gearing up their balance sheets;
they are sweating their assets because that is what they are being
asked to do. Therefore, from a lender’s perspective, there is
more risk attached to
it.
Q
111
Mr.
Raynsford:
I turn to the issue raised by the National
Housing Federation about whether the new regulatory regime might put at
risk the classification of RSLs as non-public sector bodies. Have you
given consideration to that
issue?
Andrew
H
e
ywood:
Yes, in a
general sense. Clearly, the ability of the housing association movement
to access private finance depends on its status as being outside public
sector borrowing. So, to that extent, yes, we
have.
I do not think
that we would claim that we have a huge technical grasp of the
particular triggers that, at any one point, might be sufficient to
change that status
in the eyes of the Office for National Statistics. However, we are aware
in a general sense that pushing up regulation willy-nilly and
increasing a culture of control unnecessarily must, in the longest
term, add to the straws that could eventually break the camel’s
back. That is why we would be quite selective in our own focus on
regulation.
We focus
on financial performance in government, because we feel that that is
key to underpinning the material existence of the movement. Indeed, the
focus on that allows the movement the discretion to undertake some of
the things that it has done on its own initiative, which an excess of
regulation could conceivably
stop.
Paul
Stevens:
I find it hard to contemplate. Given that
one of the key drivers for introducing private finance for RSLs was to
take it off the public sector borrowing requirement, I find it hard to
contemplate why this Bill would seek to do anything other than maintain
the private status of RSLs
.
Mr.
Raynsford:
I am sure that that is the intention; I cannot
believe that it is not. The Cave report said that the possibility of
the Department for Communities and Local Government being the regulator
would have disadvantages because it would cast doubt on the private
sector classification of housing associations. A concern that has been
voiced to us is that the Secretary of State for Communities and Local
Government could direct the regulator under the legislation, and that
might imply a chain of command. That is essentially the argument. I do
not believe that it is the intention, but it could be a consequence,
and that would be
unfortunate.
Paul
Stevens:
One concern that several of my customers
have expressed is that—whether this pans out to be the case or
not, I do not know quite what drives this—if they are regarded
as public sector organisations, they might move out of the sector,
because they do not want to work for a public sector organisation. We
have seen an improvement in the quality of executive management of
RSLs, and I would not want that to
disappear.
Andrew
Heywood:
There are strong practical reasons why
making the Government the regulator or the Government too closely
directing the regulator is a mistake. They have a particular interest
in boosting housing supply, and in stock transfer. If they have too
much leverage in relation to the regulator, that could mean that the
regulator does not look objectively at its job of balancing the various
interests at stake. There are practical reasons as well as the ultimate
quasi-constitutional reason of the
PSBR.
Q
112
Mr.
Wright:
Gentleman, I suggest that you are excellent
and worthy successors to Alan Greenspan. You have been speaking for a
while, but the cryptic tone of your message is such that I do not
understand what you are saying. Let me try to obtain
clarity.
In the
current political environment, with housing at the top of the agenda
and substantially increased public investment in the housing sector, I
would have thought that you would regard this as a sure-fire bet. You
seem to be suggesting that the relationship between the risk profile of
some housing associations
and the margins in terms of increasing the risk for RSLs is such that
you might consider your investment. I thought that this would be a good
and key area of business for you, and that it would grow over the next
15 years. I also thought that the regulator’s risk-based
analysis in the regulatory approach and focusing on performance would
help to achieve that. Have I got that completely
wrong?
Richard
Hughes:
I think there may be an unintended consequence of the
Bill. We have been lending in the sector—I personally have done
so—for approaching 15 years, and we are comfortable with our
arrangements with the Housing Corporation. We have a good relationship
with its regulatory side, and it has a 100 per cent. track record of
sorting out problems, although it may not be as good at heading them
off at the pass. With the splitting of the investment and the
regulatory roles—I am more than willing to accept that I am
wrong—I am reading into the Bill a change in the role sought by
the investment agency, and that it no longer sees grant given to
housing associations as sunk-free money. It sees grant given to housing
associations as a potential equity investment. We have never had
clarity in the relationship between the grant that the Housing
Corporation makes in terms of priority of repayment and our investment
as a senior secured
creditor.
Clauses 36
and 37 provide the investment agency with the ability to demand money
back from housing associations based on “any
sums”—it does not just say
“grant”—so we see a potential equity investor with
the ability to demand money back, and a regulator, which is another arm
of government, enforcing that liability to repay money, so where do we
sit as senior secure creditors? Yes, you are absolutely right that
risks have been very low. Yes, it is a very safe bet. That is why we
are charging margins that are exceptionally low. As I said in my
earlier example, they are probably 20 per cent. of the margins that a
private rented sector business would be charged if it was not
regulated.
We are
nervous of a change in the status quo that blurs the relations that we
have had with the corporation and that we have had with the money that
the Government have invested in the sector. We are seeking clarity. If
the intention is that our position as senior, secure creditors will
continue and that the grant will be subordinated to our investment, we
will be happy. We are seeking some form of reassurance that that is the
case. That is the basic premise of where we are coming
from.
In terms of the
regulation, I should declare an interest in that I am the chair of an
RSL in an unpaid, voluntary capacity. There is an issue that came up in
the Cave report about regulatory creep. Housing associations have
suffered, for a number of years, from having Government policy imposed
on them through the regulatory regime. That seems to be codified in the
Bill with a number of additional constraints being put on them in terms
of what assets will be regulated and what outputs are expected from
RSLs. That will undoubtedly add to the cost base and will impact on the
delivery of additional
housing.
Q
113
Mr.
Wright:
To summarise, following a very turbulent summer in
the financial markets, you are probably more risk-averse than you would
normally be.
Given that there is a change in the regulatory regime, you are a bit
nervous, but there is nothing to suggest that the safeguarding of your
investment is being compromised in any way. It is just that you might
be slightly apprehensive about anything new. Is that
fair?
Richard
Hughes:
That is fair, but I would go beyond that.
There are things in the Bill that, through possibly unintended
consequences, could undermine our investment. We are nervous about
that. If we can get some reassurance about where Government grant will
rank compared with us as senior, secure creditors, we would get some
substantial
comfort.
Q
114
Mr.
Love:
I hope that the Minister has heard that loud and
clear, but I want you to spell out your concerns about ranking. What is
it that makes you think that there is the possibility of a change in
your ranking and of not being above the possible retaking of
grant?
Richard
Hughes:
I am no lawyer, so forgive me if I get my
legal terminology wrong. At the moment, in England, a housing
association grant is an unsecured creditor to RSLs. We are secure
creditors. In this situation there is a statutory obligation on the
regulator to look after Government money, but no statutory obligation
to look after private finance. It is a situation whereby assets can be
transferred between RSLs, purportedly without the consent of funders,
with no reference to funders’ charges. That creates uncertainty
about the
situation.
You are
right that currently we have a bit of an uncertain situation with the
ranking of grant, but it has always been deemed to be unsecured. Now we
have situations in which an equity-type investor, which the HCA seems
to be, potentially ranks as an unsecured creditor. In the rest of our
business, an equity investor ranks below any creditors. Those are the
levels of
uncertainty.
We would
like a fairly bald statement of where grant would rank or where any
liability to the HCA would rank in an insolvency and some clarity about
the ability to transfer assets and those sorts of things. These are
probably quite small changes and I am quite aware that they may have
been unintended consequences when the Bill was drafted. It is just that
we are nervous about what impact it might
have.
Q
115
Mr.
Love:
I am sure that the Minister will think very
carefully about that. I do not want to raise your anxiety levels, but I
fear that I am going to. In the previous section, when we were dealing
with the right to manage, we heard that it has not been, or is not
likely to be, extended to housing associations. The reason given by the
Government is a potential loss of lender confidence. Would you lose
confidence in a situation where the tenants of a housing association
were given the right to manage it?
6.45
pm
Richard
Hughes:
That depends on the circumstances of the
organisation. Certainly as previous speakers noted, we have been more
than happy to lend into community gateway models of stock transfers. On
a
personal level, many of the stock transfer associations that I have been
involved in and that have got into difficulties, would probably not
have got into those difficulties had there been strong, empowered
tenants involved on the board. It depends on what you expect that
organisation to do, and whether those tenants have the necessary skills
to manage the business, and indeed want to manage
it.
Q
116
Mr.
Love:
Let me press you on that. The last report
that I am aware of—there may have been subsequent reports as
this one dates back a few years—showed that tenant-managed
organisations were more efficient, collected a higher proportion of the
rents and ran the organisation with fewer staff as compared to local
authorities or indeed housing associations. Does that not reassure you
that the reality is that where there is a strong group of tenants, they
can do it better than others?
Paul
Stevens:
There is a danger that we are generalising
in terms of tenant involvement in RSLs. RSLs can be very different. It
could be a sleepy, local RSL, that is not developing, that does an
effective job in terms of management—it is not necessarily using
its assets to its full capacity, but it is doing an effective job. Or,
it could be the largest developing RSLs which, as we have heard, take
on very different risks. When we make an assessment about lending to an
RSL, we consider the management in the light of their operating
environment, their business plan and the challenges that they face. We
make a judgment in terms of whether that board, and the executive
management, have sufficient skills and experience to manage it. We are
not necessarily saying that a tenant-controlled board is a bad thing.
It depends on the RSL in question, and whether we feel confident that
that board has the ability to manage
effectively.
Q
117
Andrew
George:
Those are two sides of the regulatory coin,
particularly in relation to Oftenant. Given your opening remarks in
which you indicated that you obtain comfort from increased regulation,
and given that Oftenant will only be regulated with respect to the
provision of social housing, are you concerned that it is so
restricted—so many housing associations have different arms to
their operations, dealing with shared equity, low-cost home ownership
and other private investments? Would you like to see that regulator
extend its reach? Would you get greater comfort from that?
Richard
Hughes:
That is a difficult question because
it depends on the impact of that non-regulated
business. The question is what reliance on that unregulated business is
there within the core business of the RSL to which we are lending? How
dependent is it on that unregulated business to service its core
borrowing?
We are
happy to invest in non-core activities by RSLs, and we will do so on a
commercial basis as if they were a commercial entity. We are also happy
to put in sufficient controls and covenants as we would do with a
private business, but the issue arises if you have
a large RSL that depends on cross-subsidy and those unregulated
businesses to support the main core
business.
Q
118
Andrew
George:
At the moment, you are content with, and would not
wish to expand, the current draft of the proposal, or what is contained
within the regulatory powers of the proposed regulator. You do not
think that the Council of Mortgage Lenders would seek to give greater
comfort through extended
regulation?
Paul
Stevens:
There is a question mark over the definition
of social housing. The Bill, as it stands, seems to be anything that is
below over-the-market rental levels. The inference, therefore, is that
it would capture non-core activity. Apart from a build for outright
sale, our sales are involved in intermediate and sub-market rents to
supplement income.
There is a danger of regulatory
creep. My experience of the Housing Corporation on the regulatory side
is that there seems to be a recognition that many of our sales are
taking on these increasing risks. Its position seems to be that that is
okay providing it does not put at risk existing publicly funded assets.
I am not sure whether that is particularly well monitored or policed at
the moment. It is one of those aspects of detail that we would like to
work through with the new regulatories. How are you going to monitor
the increasing risk over here, which essentially is being forced on our
sales by the lower grant
levels?
Q
119
Andrew
George:
The other side of the coin is that there are many
parts of the country in which an intermediate market has developed.
That is because the open market is dysfunctional. There are many
families who fall between the ability to obtain any kind of social
housing and the ability to make the stratospheric leap into the full
market. The creation of this intermediate market is contained within
the Bill itself, and yet there is some difficulty in getting that
market going. Is there anything that can be done within the Bill to
give you greater comfort to create a more dynamic intermediate market,
which includes shared equity accommodation and so on?
Richard
Hughes:
The issue with shared equity
accommodation is that there is no such thing as free money. If a house
costs £250,000, that is what it costs. It does not matter
whether that money comes from a private sector or a Government
investment. It is the basic cost that is the
issue.
Andrew
George:
On many occasions, it is the notional unfettered
value of the land that counts if it were released on to the open
market. Often it is not necessarily money, it is a notional value which
is held in equity by social
landlords.
Richard
Hughes:
But you still have to access that
land.
Richard
Hughes:
It either has to be accessed through the
planning system or a public subsidy to acquire that
right.
Q
120
Andrew
George:
Both the potential residents of those properties
and the housing association are saying, to an extent, that they have
difficulty in getting mortgage lenders to back many of these schemes.
Therefore, is there anything more that can be done within the Bill to
give you the greater comfort to enable the intermediate market to take
off to a greater extent than it
has?
Andrew
Heywood:
Sorry, may I just ask a question of
clarification here? Are you referring more to the shared equity schemes
through which borrowers can access the properties, such as the
Government’s open-market homebuy schemes, rather than the issue
of building the properties?
Andrew
George:
It is primarily the individuals. You need to have
the buyer coming into that market, and able to take advantage
of what the housing associations bring forward. There have been many
difficulties in getting agreements for those part-purchases to go
ahead.
Paul
Stevens:
To me, that sounds like more of an issue for
our colleagues looking after retail mortgage lending, as opposed to our
position, which is focused on lending to the RSLs to enable them to
develop a
property.
Andrew
Heywood:
Having said that, the CML has worked closely
with the Government on the shared equity retail schemes. Without
wanting to go into a lot of detail, and to digress too far, there have
been problems with take-up of those schemes. Those problems tend to
centre on the degree to which the schemes are straightforward and
comprehensible—from the point of view of lenders training up
staff to undertake very low-volume work, and the degree to which they
are attractive to and comprehended by buyers. It would be fair to say
that there have been problems on both those counts. We have made
suggestions to the Government, but I am not sure that those problems
could be easily addressed within a public Bill of this sort, to be
quite
honest.
Q
121
Mr.
Raynsford:
May I take you back to the issue of tenant
control? Your written memorandum specifically asks us to remove the
reference to control from clause 173(2)(i), which deals with rules
applying to regulators. I understood Mr. Stevens to be
saying that there is nothing inherently wrong with tenant-controlled
organisations, and that the key issue is the nature of the management.
Are you really asking us to remove a reference that would allow
tenant-controlled organisations, when you do not appear to be
inherently opposed to them? Or are you just expressing caution, once
again?
Paul
Stevens:
The point was that we do not want the Bill
to be prescriptive and to say that tenants must control the
RSL.
Andrew
Heywood:
It is also about the paradigm for
involvement. I do not think that RSLs, tenants or lenders disagree that
tenants should be involved. The
question is whether fundamentally one is going for an activist or a
consultative paradigm. Lenders will tend to favour a consultative one
simply because being a tenant does not mean in
principle that you have an interest in housing management or, indeed,
skills in that direction, any more than getting your mortgage from a
bank or building society means that you want to run
it—particularly at the moment. If a tenant is paying their rent
and paying for somebody to manage the property well and to consult them
effectively to ensure that the service is relevant and of a
high-quality, from their perspective, one could legitimately ask why
that tenant should be expected to manage it for free. If this was in
the private sector, tenants would be looking
askance.
Q
122
Mr.
Raynsford:
The other way of looking at it is that if they
wanted to get involved and to have that degree of control, would you
say that they must pull back and be in a position only to influence the
more professional
managers?
Andrew
Heywood:
I do not think that it is an issue of
discrimination, but of asking, when a tenant wishes to get
involved—all the feedback suggests that only a very small
percentage of tenants wish to do so—how that can best be done.
We would prefer alternatives to broad-brush, prescriptive treatments
that imply, at one or two points in the Bill, that the regulator ought
to be saying to tenants, “Come on chaps, you ought to want to be
involved”. Frankly, I do not think that it is the mark of a good
tenant that they should be actively involved in that
way.
Q
123
Mr.
Raynsford:
You would not want to be labelled as the people
who say that tenants should not be
involved?
Andrew
Heywood:
No.
Andrew
Heywood:
As my colleague suggested, we are saying
that it needs to be looked at specifically. If a tenant is interested
and genuinely committed, involvement is a good thing. However, it would
be a mistake, on a point of principle and across the board, to try and
get people involved whether or not they are committed and
interested.
Andrew
Heywood:
Indeed.
The
Chairman:
Order. We have come to the end of the session. I
thank you, gentleman, on behalf of the Committee, for your
attendance.
May I
also take the opportunity to remind Committee members that we are
meeting on Thursday in the Grimond Room, so do not leave any papers
here.
Further
consideration adjourned.—[Liz
Blackman.]
Adjourned
at Seven o’clock till Thursday 13 December at Nine
o’clock.
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