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
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
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
| 2003-04 | 2004-06
| 2006-08 |
|
| East Midlands | 21,118
| 21,690 | 20,111
| 48,730 | 43,753 | 44,150
|
| East of England | 26,966
| 23,230 | 14,749
| 49,101 | 48,215 | 39,563
|
| London | 48,137
| 46,792 | 42,368
| 96,217 | 100,932 | 100,683
|
| North East | 28,333
| 34,517 | 18,725
| 53,728 | 57,831 | 60,449
|
| North West | 27,609
| 30,506 | 33,663
| 55,620 | 63,841 | 63,177
|
| South East | 28,655
| 26,913 | 18,271
| 61,048 | 58,939 | 53,711
|
| South West | 21,794
| 18,537 | 18,995
| 40,526 | 41,021 | 44,239
|
| West Midlands | 24,495
| 31,605 | 20,278
| 53,904 | 56,248 | 49,722
|
| Yorks & Humber | 33,448
| 28,619 | 26,643
| 50,313 | 53,093 | 52,816
|
| National | 34,961
| 31,057 | 26,828
| 65,507 | 66,886 | 61,907
|
|
| 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
First time buyers and London wide initiative
Delivery through S106 without grant
2. The above spend figures include the following programmes:
Affordable Housing Programme
Local Authority Social Housing Grant
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)
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.
|
