Examination of Witnesses (Questions 226
- 239)
MONDAY 22 JANUARY 2007
MR PETER
WALLS, MR
JOHN CRAGGS,
MR CHRIS
LANGSTAFF AND
MS CATHERINE
PARK
Q226 Chair: Could
I ask you, if you would not mind, to introduce yourselves and
say who you are.
Mr Craggs: John Craggs from the
Sunderland Housing Group.
Mr Walls: Peter Walls, Chief Executive,
Sunderland Housing Group.
Mr Langstaff: Chris Langstaff
from Hounslow Homes.
Ms Park: Catherine Park, Director
of Finance from Hounslow Homes.
Q227 Martin Horwood:
How urgent do you think it is to resolve the future of ALMOs after
2010?
Mr Langstaff: Perhaps I will take
that as these guys are LSVTs. I think it is quite important to
do that now. Hounslow has been an ALMO since 2002; we have finished
our Decent Homes programme, we have got our three stars with excellent
prospects; we are now starting to work on three new initiatives;
we have got some new build programmes and planning permission
for one of the schemes and we are working on the Government's
self-financing pilot. We are also looking at what we now call
"Decent Estates", which is the next step that we think
needs to take place from Decent Homes, but we have only got five
years left on our contract, so for us it is very important that
we are trying to sort out the long-term future. I think really—to
follow on the point from Sheffield—this is about what is
the best for our tenants and how best can we take forward affordable
housing into the future in a west London borough where house prices
are pretty difficult and where we do need to keep moving forward
and making improvements; so for us it is very important.
Q228 Martin Horwood:
In terms of the range of services that you would like to be able
to offer—I have certainly been lobbied by my local ALMO
that it could be greater and there are restrictions that could
be lifted—how do you think the structure of the ALMO environment
should change after 2010 or how would you like it to change?
Mr Langstaff: I think it is interesting.
We are following the new-build proposals now which we think we
could do within the existing structures, and because we are wholly-owned
by the council, borrowing can be done through the London Public
Works Loan Board; so that could be still achieved, but a longer-term
process to that would be much better and ultimately, of course,
the housing subsidy system is working against us in London. As
you probably know, rents are going to go up by 5% which should
bring in £2.5 million worth of extra income, but the subsidy
system is taking £1.5 million away from us.
Q229 Mr Olner:
I wonder where all of this money is going.
Mr Langstaff: If we could get
outside of that system—and the whole point of working with
the DCLG at the moment is to try and get outside of that system—we
can capture that rental stream to the benefit of local services
and to help us support new house building.
Q230 Martin Horwood:
What are some of the kinds of services that you would expand into
doing? Do you want to tell us a bit more about this Decent Estates
concept?
Mr Langstaff: I would not exactly
say they are new services. The new-build is something that we
have not done since the early 1980s and is something which we
could start again. The Decent Estates is actually all about dealing
with the communal areas and the external environment on estates.
We have got many blocks of flats which are now 40, 50 or 60 years
old, where the drying areas, the refuse collection arrangements,
the car parking areas, the estate roads and the boundary fences
have just not been touched. We need to do that work and we need
to invest to improve quality of life for our tenants.
Q231 Martin Horwood:
Would you be offering to take over the management of some public
assets in the vicinity of your housing, is that the idea?
Mr Langstaff: Yes, that is a real
potential. Something we are looking at on one of the schemes is
to do that.
Q232 Martin Horwood:
If you were given this sort of freer financial environment, would
that extend, for instance, to what other businesses might look
at, which is mergers and re-arrangements of the geographical aspect
of ALMOs?
Mr Langstaff: I think the huge
value of an ALMO is the strength of its local tenants and having
a local board that makes decisions about local things. I do not
think mergers, for us, are the right way forward. What I would
see is collaboration between ALMOs where we have joint services
but not a merger.
Q233 Mr Olner:
Could I ask whether you have experienced any particular problems
in delivering such large Decent Home programmes?
Mr Walls: We hit the Decent Homes
programme about a year ago in December and that was only part
way through our spending programme anyway. It was going to go
between five and 10 years but we accelerated the programme in
the early years after transfer and hit the programme about a year
ago in December.
Q234 Mr Olner:
Were there any risks in achieving that?
Mr Walls: I think, initially when
we transferred the stock, one of our concerns was about the potential
inflation on the obviously large amount of work we had to do in
terms of delivering it. As it has worked out we have managed to
virtually maintain the programme with almost nil inflation across
certainly the first five years which has produced a saving to
the business plan of around £17 million in real costs. All
that can be translated, if the main building inflation indices
apply, to about £28 million. We have been very fortunate
in the way that we have procured the work, kept the contractors
on board delivering very high customer standards—about 98%
satisfaction—with all of that and kept the costs down. If
that goes wrong it is a major ingredient in your business plan,
that is a problem.
Mr Olner: I take it for granted that
the tenants had an involvement in the design and the delivery
of the decent homes improvement?
Chair: Can we just get confirmation that
was the case, please.
Q235 Mr Olner:
In both cases.
Mr Walls: We had an annual and
robust ideal homes standard before we introduced the decent homes
standard and the tenants came every year and reviewed the content
of it, the work plans. They were told, probably two years into
the transfer, the exact year and quarter in which the work to
their home was going to be done, which was a massive advantage
for people to prepare and not to have to disrupt their home unnecessarily.
They were very involved in a city-wide basis because the whole
city was invited to that over a number of days. Then we obviously
individually consult locally and have quite a robust feedback
mechanism from which we get better returns on performance than
we used to do, so that is quite good.
Q236 Mr Olner:
Before I ask Mr Langstaff the same sort of questions on Hounslow,
I take it you have got a fairly robust tenant satisfaction barometer
or register, call it what you want?
Mr Walls: Yes, it is individually
scored by each person who experiences the work to their home and
it is separated into different bits around the standard of workmanship,
the quality of the products, the behaviour of the workmen and
a whole range of other things. We measure each component rather
than a big, lumpy, satisfaction score; we measure each component
and then review them. They are part of our organisational targets
to continue to improve those standards even from where they are,
which is quite high, so that works all right.
Mr Craggs: We also, if I may add,
let the tenants loose directly on the contractors themselves and
that tends to keep their performance quite high.
Mr Langstaff: I think by the sound
of it they are very similar arrangements and our tenants were
involved right at the outset helping to draw up the specification.
We ran some pilots again where the tenants were involved in those
which iron out all sorts of those silly things: do you put coving
around the ceiling? We had one tenant who had flocked wallpaper
in her kitchen; do you replace that with like for like? It was
all those types of arrangements. Working closely with tenants
to draft what the standard would be and what the expectation would
be, they were also involved in the selection of the contractors.
We do not draw up any programme of works unless it has been through
and discussed with the tenants, so our five year programme is
a rolling programme published every year and agreed with tenants.
I would say, in terms of delivering the programme, we have got
£100 million Decent Homes funding, we put another £68
million of our own funds in and against that £168 million
we made Gershon savings of about £27 million, which is about
16%. We engaged cost consultants to work with us during that process
and not only were we measuring the quality of work but we were
using cost consultants to keep driving down the price. Our view
was that prices should not go up at all during the four year period;
we were expecting prices to go down, and they did, and they went
down in real terms. We entered into arrangements for the purchase
of bathrooms and kitchens ourselves because we have got a DLO
who were one of the contractors as well, so we did work in terms
of the supply chain management as well.
Q237 Mr Olner:
Can I ask how you have managed to re-arrange your business since
you accelerated it and finished it? What are you doing now?
Mr Walls: I think at the point
of having the whole programme mapped out there were certain bits
of Sunderland which, to be honest, we have had a go before at
improving, and it has not been terribly successful. I am sure
that is not unique to Sunderland. We have got a thing called a
neighbourhood assessment matrix which reviews the estate not simply
from its bricks and mortar, but looks at a whole load of other
indices on deprivation, and we got that validated by a university.
There were certain of our neighbourhoods where we believed the
simple modernisation and improvement would not rescue some of
our more entrenched neighbourhoods which we have had for a number
of years. We went back and consulted people and came out with
some feedback that we should go for a more radical solution of
renewal. How do we do that work? We had to go back to the lending
institutions and say: "We have not got enough money to do
that, how about some more money"; and we moved the capacity
we were able to spend from about £350 million planned to
nearly £600 million which allowed us to go into renewing
certain estates and providing more holistic solutions than improving
their internal circumstances. We are on the way to doing that,
as challenging as that is, because, like everywhere else in the
country, there are a number of owner-occupiers who live on some
of the estates and it is a very difficult journey; but nonetheless,
we are pressing on. At the same time we then arranged with the
housing corporation, which was not possible either, that we should
build homes for sale. We now generally ourselves build mixed neighbours
of rent and sale. At the moment because of the demand in the city,
70% of the homes are for rent and 30% of the homes roughly are
for sale.
Q238 Chair: Is
that compared with the open market or shared equity?
Mr Walls: Open market. We can
do equity share; W are doing some on renewal estates to help people
with value problems. Then we take the money we make in surplus
from the house sales and we cross subsidise to fund the rental
properties. The upshot of all of that in the city is that against
a regional average grant—which is going on in our region
of about, say £50,000 per property. If you take all of our
assets that we put in we work it out to be about £21,000
per property grant rate, and the properties are identical to the
owner-occupied ones. They have the same white goods, the same
facilities and have en-suite bathrooms—which are higher
than the corporation's SDS standards. That is where we started
and now we are looking to how we expand that opportunity. If we
can make public funding stretch a little bit further by this model,
then we are anxious to have a look at that.
Q239 Mr Hands:
Can I come back to Mr Langstaff`s point on Hounslow about the
£68 million put in by the council. Is that PWL borrowing
that has been put in there? I am assuming it is.
Mr Langstaff: It would be a mixture
of supported borrowing. The Government approves supported borrowing,
together with major repair allowance funding that comes through
as part of the housing revenue account subsidy system.
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