Select Committee on Communities and Local Government Committee Written Evidence


Supplementary Memorandum by the Department for Communities and Local Government

  1.  At the start of the session (Q479) there was some debate on vacant premises and the Minister agreed to send information on the incidences of properties being purchased as an untenanted investment (buy to leave), particularly in Leeds. At Q482, the Minister agreed to send information on the relative activity of individuals and institutions in the buy-to-let market.

  The Department collects information from local authorities on the number of empty properties within their area and whether they have been empty for less or more than 6 months. The data is not attributed to particular addresses. As part of the regeneration of urban areas the Department acknowledged that there appear to be issues of residential development that have not been fully occupied. We believe this can be for a number of reasons: the developments may not be responsive to demand; are seeking to create a market for city centre living; or responding to what is considered to be a sound investment option. Often we accept the answer will be specific to particular developments. The material we have provided in respect of Leeds is, we believe, a helpful case study. The Leeds City Council's empty properties strategy 2006-10 is at attachment 1 and a short overview by the Council at attachment 2.

  The Committee asked about the relative activity of individuals and institutions in the buy to let market. The term buy to let was derived from the creation of a mortgage product that allowed individuals to borrow money to enable them to buy a property to let out. Institutional investors will not access funds through this route. Therefore it is the Department's view that central to the concept of buy to let is that it is an individual who is entering the rental market and therefore we do not consider institutional investment in the private rented sector as buy-to-let.

  2.  Mr Hands asked about the impact of the energy performance certificates (Q480-481) and the Minister agreed to send the Committee copies of the estimations of the actual impact that the Department has made.

  A copy of the RIA of the energy performance of buildings is at attachment 3.

  3.  Later in the session (Q483-485) research commissioned by the GLA into the market for newly built dwellings was highlighted. The Committee is aware of this research (who buys new market homes in London) but would like the Department to provide any supporting evidence of the GLA's findings.

  "Who buys new market homes in London?"" produced for the GLA is attached at 4 and the GLA's press release is attachment 5. CLG does not have any supporting evidence of the findings of this research.

  4.  At Q492, temporary to settled programmes were discussed. The Committee would be interested in obtaining further information about the specific funding arrangements of these new schemes.

  The basic principle behind temporary to settled schemes is that rental income is used to repay borrowing that has been used to buy a home, instead of going to a private landlord to pay for renting a property as temporary accommodation. After 10 to 15 years, the borrowing has been repaid to a level that allows the properties to be converted to social housing, let at affordable rents.

  DCLG and GLA launched bidding round for a £30 million Settled Homes Initiative (previously known as Extra Homes pilot) last October, with a deadline for bids of 16 January. 20 bids were received totalling just under £117 million. An assessment panel comprising the GLA, CLG, Housing Corporation and GOL evaluated the bids with London Councils as observers.

  Yvette Cooper jointly announced with the Mayor Ken Livingstone on 19th April the winning bids for the £30 million Settled Homes Initiative launched last October, to help families in London accepted as homeless and living in temporary accommodation move into long term housing.

  Housing schemes in Bromley, Hackney, City of Westminster, Brent, Ealing and West London will receive a total of £30 million to help fund the purchase of around 900 homes and convert them over time into quality settled social housing.

  Bids were assessed against the following criteria:

    Providing settled accommodation

    Contribution to the 2010 temporary accommodation reduction target

    Value for money

    Sound delivery plan and risk mitigation

    Housing quality standards

  The new pilots will build on the range of existing and emerging "temporary to permanent"" housing schemes, such as the "Local Space"" scheme in Newham which s working to provide more affordable and settled homes over the long term by capturing funding that was previously being used to pay for costly temporary accommodation.

  Our aim is that by offering a bit of capital investment up front, we hope these schemes can work in a way that provides homes that are more settled and more affordable earlier on.

  The pilot will also explore new approaches which help families to overcome barriers to work, provide settled homes, and reduce the cost of funding expensive temporary homes through housing benefit.

BACKGROUND

  The Chancellor announced an Extra Homes Pilot in the 2006 Budget. Further information was given in press releases on 4 April and 14 July, with the latter announcing that there was £30 million available for the pilot (£10 million of which has come from Treasury).

  The bidding process was launched on 24 October by Yvette Cooper and the Mayor. All bids were assessed by a panel including representatives of the Mayor, Government Office for London, ALG, Housing Corporation and CLG.

  There are six successful schemes.


Scheme
Grant requested
Proposed SHI
allocation
Number of units

Bromley
£4,125,000
£4,000,000
73
Hackney
£6,755,000
£4,000,000
50
Westminster
£7,000,000
£7,000,000
200
Brent
£5,000,000
£5,000,000
260
Ealing
£5,000,000
£4,000,000
150
West London
£16,975,000
£6,000,000
171
Total
£44,855,000
£30,000,000
904


  The final report by Civis consultants `Review of temporary to permanent arrangements is at attachment 6.

  5.  At Q511-512, and also at Q515, data on the sub-regional demand for housing was debated and the Minister agreed to send the Committee a list of local authorities which it includes in the review of the data.

List of local authorities included in the review of data

    Middlesbrough

    Ryedale

    Kingston upon Hull

    Manchester

    Derbyshire Dales

    Malvern Hills

    Epping Forest

    Hertsmere

    Kensington and Chelsea

    Tower Hamlets

    Taunton Deane

    East Hampshire

  6.  The Committee would like to receive the tables that the Housing Corporation produced detailing the average cost of new social housing and the average level of grant for new social housing and new shared ownership by region (Q517, page 28).


LCHO grant per unit
Social Rent grant per unit
2003-04
2004-06
2006-08
2003-042004-06 2006-08

East Midlands
21,118
21,690
20,111
48,73043,75344,150
East of England
26,966
23,230
14,749
49,10148,21539,563
London
48,137
46,792
42,368
96,217100,932100,683
North East
28,333
34,517
18,725
53,72857,83160,449
North West
27,609
30,506
33,663
55,62063,84163,177
South East
28,655
26,913
18,271
61,04858,93953,711
South West
21,794
18,537
18,995
40,52641,02144,239
West Midlands
24,495
31,605
20,278
53,90456,24849,722
Yorks & Humber
33,448
28,619
26,643
50,31353,09352,816
National
34,961
31,057
26,828
65,50766,88661,907

Source: Housing Corporation.





LCHO Total
cost per unit
Social Rent
Total cost per unit
2006-07
2006-07

East Midlands
100,856
94,640
East
126,972
106,881
London
174,467
188,494
North East
82,027
102,101
North West
109,919
114,606
South East
132,172
124,591
South West
109,052
100,111
West Midlands
97,928
99,282
Yorks & Humber
88,807
102,807
National
134,902
128,877

Source: Housing Corporation 2006-07 Affordable Housing Programme average total scheme costs for approved bids (excludes OMHB and TSH).


  7.  On page 30 of the transcript (Q523) the Chair requested figures on precisely what proportion of the additional funds made available (say over the last three years) have been taken up with land costs.

  The Housing Corporation's publication "Unlocking the door"" (attachment 7) shows land and build costs for low cost home ownership schemes and social rented schemes (Graphs 3 and 4) from 2004-05 to 2007-08.

  8.  At Q525 and 526 Mr Hands requested a direct comparison between expenditure and output between 1997 and that predicted for 2008.

  No direct comparison can be made between spend in one year and completions in that same year due to the length of time it can take for a scheme to be built. Spend in any one year will be on a mix of payments for starts on site and practical completions.

AFFORDABLE HOUSING COMPLETIONS AND EXPENDITURE


Total Social Rent completions
Total SociaL Rent
(£m)
Total LCHO completions
Total LCHO
(£m)

1997-98
35,780
782
11,684
173
1998-99
33,576
752
8,874
125
1999-00
28,743
823
5,116
94
2000-01
27,077
937
5,244
117
2001-02
26,836
1,009
5,541
121
2002-03
23,946
1,198
8,387
229
2003-04
22,698
1,399
14,793
576
2004-05
21,059
1,085
15,526
590
2005-06
23,415
956
22,073
582
2006-07 provisional
25,159
1,433
19,571
523
2007-08 plans
31,440
1,390
25,499
697

Notes:

  1.  The above completion figures include the following programmes:

    Affordable Housing Programme

    Local Authority Social Housing Grant

    Private Finance Initiative

    Starter Home Initiative

    First time buyers and London wide initiative

    Local Authority schemes

    Delivery through S106 without grant

  2.  The above spend figures include the following programmes:

    Affordable Housing Programme

    Local Authority Social Housing Grant

    Starter Home Initiative

    First time buyers and London wide initiative

  9.  The Minister agreed to send the Committee further information on the progress of the self-financing pilots (Q533) including timetable

  Six local authorities three with ALMOs are developing model business plans to test the costs and benefits of severing ties with the housing subsidy system. The authorities and ALMOs are: Sheffield City Council and Sheffield Homes; the London Borough of Hounslow and Hounslow Homes; Carrick District Council and Carrick Housing; Cambridge City Council; Darlington Borough Council; and Warwick District Council.

  "Self financing" housing authorities would have a one off adjustment to their housing debt based on the net present value of anticipated future subsidies or surplus payments within the HRA subsidy system. They would then leave the subsidy system, retaining future rental incomes, receiving no further HRA subsidy and making no further surplus payments.

  Work to date suggests that self-financing has the potential to increase efficiency, improve asset management and lever in more private investment. More work is required to quantify the benefits and find ways to manage the risks of self financing.

  We expect to complete the modeling work in the summer. Decisions on next steps will be made in the context of the Comprehensive Spending Review. Any changes would have to be fair to councils who remain within the redistributive HRA subsidy system, as this is an important means of allocating resources on the basis of need.

  10.  The subject of housing associations underutilizing capital assets was discussed at Q536 and 537 and the Minister agreed to send estimations made on the total value of capital assets not being used by associations.

  The Housing Corporation commissioned work from the accountancy firm Grant Thornton to identify capacity within the RSL sector to lever in more private finance. The analysis is set out in the Housing Corporation's "Unlocking the Door" (attachment 7, see the section on "shifting the balance between subsidy and private finance from page 16).

  The work indicates that:

    —  there may be potential for additional debt capacity of £4.6 billion, excluding property sales, or £6.8 billion including property sales, within the 348 associations analysed;

    —  63% of the additional capacity is with associations with 5,000+ homes;

    —  Housing associations based in London, South East and North West have the highest levels of capacity;

    —  associations can withstand, within limits, adverse changes in the macro-economic environment and reduced grant rates and continue to develop;

    —  increases in running costs and a downturn in the housing market pose the biggest threats.

  11.  The movement of social tenants between homes, particularly in London, was discussed and at Q550. The Chair requested detailed information about how schemes to encourage greater movement are or are not operating.

  The contract for delivering housing mobility services (moveUK) ended on 20 January 2007. This decision was made in the interests of the public and the taxpayer because of serious concerns about the performance and fitness for purpose of the software developed by CLG's contractor to provide those services.

TRANSITIONAL ARRANGEMENTS

  Whilst we are finalising arrangements to effect the long term delivery of mobility services, we have developed transitional arrangements to minimise the disruption to customers and landlords.

  London Councils' has agreed to provide a transitional service for the Seaside and Country Homes (SSCH) and the LAWN Mobility Scheme, on a medium term basis. Both schemes focus on moving people out of London and have provided high value for money and highly sustainable moves.

  It should be noted that the LAWN Mobility Scheme facilitates moves out of London arranged by and through London Authorities and some northern counterparts. This scheme is continuing unchanged in all practical effects.

  London Councils is now finalising proposals for how it intends to deliver the objectives of the Seaside and Country Homes Scheme prior to seeking formal approval from its Executive Committee. This is likely to result in new mobility services for London based applicants from July 2007.

  Local and sub-regional Choice based lettings schemes (CBL), also facilitates additional social housing moves other than those from out of London. CLG is currently considering bids for a Regional Challenge Fund to increase the number of cross boundary schemes from the existing 26 schemes across England.

CBL AND MOBILITY IN LONDON

  There are currently 11 CBL schemes operating in London, with 27 Boroughs participating.

  3 cross-borough schemes:

    —  Choice Homes UK : Hackney, Havering, Newham, Redbridge, Southwark, Waltham Forest.

    —  Home Connections: covering the North London sub-region, comprising Barnet Camden, Enfield , Islington, Haringey, Westminster; and also Kensington & Chelsea, Kingston, Merton (with Lambeth going live soon).

    —  Locata : Brent, Ealing, Hammersmith & Fulham, Hillingdon, Hounslow and Harrow

  And 6 standalone schemes in :

    —  Barking & Dagenham (operated by Choice Homes UK)

    —  Croydon

    —  Greenwich

    —  Lewisham

    —  Sutton

    —  Tower Hamlets

  CBL schemes allow people who have registered for housing to choose the property and area they would like to move to. All the schemes operate on a similar basis. Properties that are available to rent are advertised on a weekly or fortnightly basis, eg on a dedicated website, local newspapers or bulletin sheets which are widely distributed (eg council offices, libraries, hostels). Applicants registered with the scheme "bid" for properties they are interested in (eg by phone, text message, online or through coupons). Some schemes restrict the number of properties you can bid for per cycle. Once people have "bid" for properties, bidders will be assessed according to the priority system adopted by the scheme partners, which may be a points-based system or a wider banding system.

  People with the highest priority will be put onto a short list. If the applicant with the highest priority refuses a property after having had the chance to view it, the next person on the shortlist will be invited to view the property. Feedback on recent lettings will be published to help people make informed decisions about whether and what to bid for in future.

  Cross-boundary mobility. All three sub-regional schemes allow for an element of mobility within the sub-region (ie across local authority boundaries). Locata partners put 10% of their properties into a "pool" which applicants resident in the other LA districts can apply for. Choice Homes UK operate an exchange scheme (with 8% of properties advertised this way: eg. a property in Hackney will be made available for Newham applicants to bid for and vice versa. In the North London sub-region (where they use Home Connections), all new build and some adapted properties are advertised sub-regionally.

  We have also agreed with The Cabinet Office a medium term plan to adapt the Government website "Directgov" to ease access to customers to facilitate moves. This website provides:

    1.  facilities to make direct applications to LAs and Housing Associations and their housing exchange schemes across England;

    2.  links to other service providers of mutual exchange services and information (most are free, some charge a small fee) across England;

    3.  details of other housing schemes (ie Homebuy, Right to Buy, Low-Cost Ownership Homes including the Key Worker Living Programme);

    4.  other social housing related information.

  In addition, there are links to other Government services such as the "Looking for Work" facility which links to the Jobcentre Plus database with job vacancies throughout the UK, and a variety of pages relating to local information (ie schools, hospitals and local services). Users can also access the full range of other Government services on Directgov.

  12.  In addition to the above, which the Department has already agreed to send, the Committee would like the Department's view on emerging evidence from the GLA that households that are eligible and are able to afford intermediate schemes could have afforded to rent accommodation from a private sector landlord, and whether the schemes should be adjusted so that those who are able to afford to rent are not eligible.

  This request refers to analysis undertaken by Peter Williams and Steve Wilcox for the GLA as part of the work on the market for intermediate housing. The analysis illustrates that many of those eligible for low cost home ownership assistance could afford to rent a suitable property in the private rented sector.

  Social tenants remain the highest priority for our low cost home ownership schemes. Helping a social tenant to move into low cost home ownership can achieve significant savings through freeing up their socially rented property for another household.

  But there is also a role for Low Cost Home Ownership in helping other households, including those who afford to rent in the private rented sector. Indeed, around 40% of low cost home ownership purchasers rent in the private sector before moving into low cost home ownership.

  The private rented sector has an important role to play, particularly for younger households who may need to move home to follow employment opportunities. But we recognise that home ownership is an aspiration for a large number of households, and that it has significant benefits both for families and the wider community. Home ownership offers a security of tenure which can be important for families with children. And offering opportunities for low cost home ownership can help essential workers like police officers, nurses and teachers to live in the communities in which they need to work.

  13.  During the session, Mr Hands asked about the Department's view on shared-equity schemes recently made available in Australia. There are public schemes where the Government (Western Australia) contributes to the purchase and retains a share. There are also private schemes where the bank offers a loan but instead of paying interest on the loan, some of the capital appreciation is surrendered. The Committee would like to know the Department's opinion on the applicability of the public and private schemes and what lessons can be learnt from them.

  There are a wide range of shared equity products currently being developed by state housing authorities, government agencies and the private sector in Australia. Some of these products have been launched but most are still in the early stages of development. Mr Hands specifically mentioned two schemes.

  First Start is provided by the Western Australian Government Department for Housing and Works. It is an equity loan scheme, and the detailed operation is very similar to our own Open Market HomeBuy. The main difference is that equity loans are available for up to 40% of the property value, and that the loan is provided entirely by the Department for Housing and Works. Under Open Market HomeBuy the equity loans are for 25% of the property value and they are jointly funded by government and mortgage lenders.

  Adelaide Bank Equity Finance Mortgage is an entirely private scheme developed by Rismark International. It is currently only sold through Adelaide Bank but Rismark hope to attract other mortgage providers to the scheme.

  Under the scheme, purchasers take on a conventional mortgage for at least 75% of the property value alongside a deposit of at least 5%. The remaining 20% is purchased with an equity loan (known as an "Equity Finance Mortgage". There are no ongoing interest charges on the equity loan, but on redemption the lender takes 40% of the value of total capital gains on the property. If the value falls they take up to 20% of losses.

  So far, this type of scheme is not yet available in the UK (although we are aware that Rismark International have made initial enquiries into the market here). Private sector equity sharing mortgages are available, but they are structured differently. The Adelaide Bank / Rismark product has no ongoing charge on the equity loan, but the lender takes a proportionately larger share of the capital gains than they originally financed. Shared equity mortgages available in the UK have an ongoing interest charge on the equity loan, but the capital gains are shared proportionately.

  CLG are keen to promote the development of the shared equity market in England so that it offers a diverse range of competitive products. In support of this, the Chancellor announced in the 2007 Budget the first stage of a Competition to select lenders to work in partnership with Government in developing Open Market HomeBuy from 2008 onwards.

  14.  At Q542 there was reference to the Housing Corporation monitoring asset sales on the part of the Housing Associations. It would be useful to know how the monitoring is being done and what it's showing so far.

  The Housing Corporation has very recently published a report on its thematic review on disposals. Introduced as a new regulatory product in 2006, the thematic reviews use existing sources of data that the Corporation holds on housing association, examining specific areas of performance by specific sections of the housing association sector.

  The review on disposals (attachment 8) examines the volume and frequency with which associations are selling rented units and the reasons behind these decisions.

  15.  Larger homes for families was also discussed (Q546). The Committee would like to know the proportion of the social housing budget being spent to provide "family" housing. The Minister indicated that figures for London would be available but the Committee would like to receive information about similar activity in other regions. PPG3 introduced the ability for local authorities to monitor and influence the size and type of housing. The Committee would like to know about examples of local policies that define and require a certain size of dwelling and any appeal cases where the size and type of dwelling has been a material consideration.

PROPORTION OF HOUSING CORPORATION EXPENDITURE ON SOCIAL RENTED HOMES SPENT ON LARGER (3+BEDROOM) HOMES


2006-07
2007-08 (forecast)

East Midlands
24%
27%
Eastern
24%
25%
London
30%
33%
North East
34%
35%
North West
33%
41%
South East
20%
21%
South West
23%
24%
West Midlands
27%
32%
Yorkshire and Humberside
42%
42%
Total
27%
29%


  New planning for housing policy—Planning Policy Statement 3—published on 29 November 2006 gives stronger policies on affordable housing, giving tools to local planning authorities to deliver more affordable homes in rural and urban areas.

  Regional Spatial Strategies and Local Development Frameworks should set out an Affordable Housing target for their areas, with the latter setting separate targets for social-rented and intermediate affordable housing where appropriate. Local Planning Authorities should also specify the size and type of affordable homes needed, the range of circumstances in which affordable housing will be required, and the approach to seeking developer contributions.

  The requirement to provide an affordable housing target in RSS is new. But the key element to the PPS3 approach is in how local authorities identify how many market and affordable homes are needed, using Strategic Housing Market Assessments which take an evidence based approach to assessing housing need and demand. CLG published in March supporting practice guidance, which sets out a framework for local authorities to bring together available evidence about the size of households requiring housing, demand for housing of different sizes and current preferences for different dwelling types, and so help them produce robust and consistent Strategic Housing Market Assessments.

  The guidance in PPS3 about separate targets for social rented and intermediate housing, and the wider mix of housing (both for affordable and for market) have not yet had time to be reflected in emerging Development Plan documents.

  Attachment 9 has extracts taken from local planning authority local plans, or supplementary planning guidance, illustrating policies setting out any particular requirements of dwelling size or tenure in relation to proposed affordable housing provision in their plan area. These policies, being drawn up before the publication of new PPS3 in November, do not of course yet take into account the new policy approach.

LIST OF ATTACHMENTS

    1.  "Empty properties strategy 2006-10"—Leeds City Council

    2.  Leeds City Council overview of the empty homes strategy

    3.  Regulatory Impact Assessment—Energy Performance of Buildings   Directive Articles 7 -10—Communities and Local Government

    4.  "Who buys new market homes in London", December 2006

    5.  GLA news release on "Who buys new market homes in London"

    6.  Review of temporary to permanent arrangements—final report—Civis   Consultants, September 2006

    7.  "Unlocking the Door"—Housing Corporation, February 2007

    8.  "Disposals"—Housing Corporation, April 2007

    9.  Extract from local plans/supplementary planning guidance policies   setting out size/type of affordable housing.






 
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