Examination of Witnesses (Questions 240
- 259)
MONDAY 22 JANUARY 2007
MR PETER
WALLS, MR
JOHN CRAGGS,
MR CHRIS
LANGSTAFF AND
MS CATHERINE
PARK
Q240 Mr Hands:
Can I ask as a follow-up on the question of supported borrowing?
How much do you think the council is aware of some of the risks
involved with the supported borrowing if the interest rate that
ends up being ultimately paid on that debt turns out to be in
excess of the Government guidelines?
Ms Park: At the moment we are
still within the housing revenue account subsidy system. The interest
rate matches the interest rate you pay, so that risk is completely
covered. If we were to go self-financing and come outside of the
housing revenue account subsidy system then that is one of the
risks that we would have to manage within our self-financing business
plan, so at the moment there is not a risk.
Q241 Emily Thornberry:
I was interested to hear what you had to say about the involvement
of tenants before this work is done. I would like to ask, first
of all, if you have any leaseholders and, if you have any leaseholders,
do you have framework contracts, preferred bidders, and, if you
do, do your leaseholders get a choice on whether or not they are
getting value for money, a choice of contractors, when the work
is to start?
Mr Langstaff: There are 2,500
leaseholders and we have 14,000 tenants, so it is about 15%, and
once you have entered into the main framework contract, they then
do not have a choice in terms of which of those framework contractors
is going to do the work, but they have, of course, been involved
in that tendering process; they get served their section 20 notices
in exactly the same way. What we try and do is engage them though,
as we do with the tenants, in what components should be in the
scheme and what the end result should look like. Because they
are not paying for all of the Decent Homes work, they do not get
the internals basically. So, it really comes down to paying for
windows, roofs and, if they are on a district heating system,
a new heating system. Where the choice can really come along is
on external works, because on two of our estates we have done
some estate regeneration and that is where, for the leaseholders,
there is greatest concern.
Q242 Emily Thornberry:
Yes, it is most unpredictable, is it not?
Mr Langstaff: It is most unpredictable
and on those we have got a process now where we engage at a much
earlier stage with the leaseholders to say, "What do you
even want in the scheme in the first place?" We do not even
start with saying, "This is the scheme". We are asking
them what they want in the scheme because some of it does benefit
them and some of it they do want. So, it is quite a process; but
on those two estates some of the bills were in excess of £15,000
per leaseholder.
Q243 Sir Paul Beresford:
What is the situation if a leaseholder is on an estate where the
programme is some years away and they decide to do their own improvements,
double glazing, et cetera? How much freedom have they got under
the restrictions?
Mr Langstaff: For something like
window replacement, they should be asking us anyway, whether they
can do it or not. What you want to try and achieve is something
that is going to last into the future and is going to be easy
to maintain. So, by and large we want to try and do it as a package
and if you do it as a package they can get them much, much cheaper.
Q244 Sir Paul Beresford:
Say they have to wait five or 10 years for the package and they
want to move now and they have got your agreement, Do they have
to contribute that share when it comes around in the full package
later even though they have met your standards?
Mr Langstaff: If they were not
having new windows put in, they would not have to pay again because
they would have already put their windows in.
Q245 Mr Olner:
I think my question revolves around that as well because I have
a little bit of experience. How transparent are the standards
and how transparent is the tendering process? Most local authorities
are big, easy targets for contractors whereas as an individual
leaseholder you perhaps get a different take on it.
Mr Langstaff: We work standards
out with the tenant and we work those out on each individual estate
and what we do is a show flat where we will try out different
windows and let tenants and leaseholders come in and see those
different window styles. I know one estate where we changed those
styles three times and delayed the programme by something like
six months until we ended up with a window style that both tenants
and leaseholders were happy with. I think it is better to do that.
Q246 David Wright:
I am interested, Peter; you were talking about that you were looking
at estates and transforming estates and regeneration and I know
that you have been carrying out a review of your structures in
terms of looking at your regeneration role and property development
role. What do you think the barriers are for that diversification
and expansion of your role? I am interested in how you operate
in terms of the strategic functions of the local authority and
where you are delivering on some of those strategic functions
in terms of regeneration.
Mr Walls: There are a couple of
issues. We take the overall principle that we are not a local
authority, we do not have a strategic role—we meet as another
stakeholder with the local authority under LSP—so we do
both sit together separately at that and, of course, we operate
jointly on certain issues. There was an announcement this morning
about a Respect pilot area in Sunderland. It is both of us. We
have certain stuff we do and the council has another bit that
they do, so we work very well on that. We found that since we
got started bricks and mortar are rather obvious targets for an
LSVT, it is its raison d'être—why it was created—to
improve these homes. To make those neighbourhoods sustainable
we have started to get involved much more in the schools, so we
have a construction challenge. Young kids out of school on our
estates are doing real construction work as a preamble to apprenticeships.
We have 100 apprenticeships in the city—which we did not
have anywhere—and when we started 2,000 people turned up
one morning to try and get those jobs. We have got an adult challenge
and we have some entrepreneurial money, which we got off the Phoenix
Trust to try to get people to start young and new businesses.
Q247 David Wright:
Is there anything stopping you doing more? If you had a chance
to say to this Committee: "We would like you to recommend
three changes or one change", what would it be?
Mr Walls: I think there is much
made of the restrictions on RSLs and Corporation control and we
have not found that in our time. We do not want to replicate stuff
that other people do, that is an absolute waste of money; but
we seek to use the resources we generate to enhance our operations.
We are supporting the Council in their academy process as a result
of other things we have done because that is right in the heart
of one of our renewal estates and it is a bit odd if we do not
do something.
Q248 David Wright:
How do existing tenants feel they fit into this? Do they feel
that this is good stuff, that it is legitimate? Do they think
that you are over-reaching yourself?
Mr Walls: No, I think many of
them benefit. Take, for example, the Phoenix Trust money that
we got. In a city that is not famed for its innovation and business
enterprise—and if it is it would not last three months—in
the first six months I think 18 businesses were set up, 14 of
them were tenants of the group setting up some kind of business.
They were not BP by any means, but they were there having a go
at being independent and doing things on their own. Those things
feed through; futures for their kids feed through; so I think
they take that very positively. We have a whole spectrum of tenant
groups involving up to about 3,500 people from all over the city
who we run everything past and they contribute by coming to that
and it is very lively. The bricks and mortar argument in a place
like Sunderland is only a part of the story and we need to get
much more of the rest right.
Q249 Mr Betts:
Coming back to Hounslow and pioneering the building of new homes
by ALMOs, I think it is probably the only one in the country so
far that has got bricks on the ground. How supportive have the
Government been in your quest to do that and while, I suppose,
high house prices in London were not always thought of as being
an advantage, given the amount of subsidy you can generate from
rented houses by building houses for sale, then selling them on
and using the proceeds, is the way you are going about it probably
something that is particular to London and more difficult to replicate
elsewhere?
Mr Langstaff: Yes, I am sure being
in London is a great advantage and we are just using the values
of the land to support the building of affordable homes and, as
a rough guide, we can build two new homes, sell one on the open
market and we can keep one and we have no need to do that with
any other grant other than the free land that is on our estates.
That land, by and large, is land that has been pretty badly abused
anyway, old garage areas, or it has been dumped on or it is a
gathering point for youths and the like, so in that sense it has
been most valuable. To correct one point: we have not got a brick
on the ground yet, unfortunately, but we have taken it to the
stage of getting planning approval for our first project. The
DCLG have been heavily involved and actually very supportive,
I think they would like to see this work because this can be done
in London without subsidy and can help as a partner and we have
only done it as a part of estate regeneration. We are not into
the kind of volume build type of business, but if we do this across
Hounslow, just on housing estates in Hounslow, we can build about
1,000 new affordable homes just on that redundant land which is
sitting there waiting to be dumped on really.
Q250 Chair: Can
I ask you on that, do the existing tenants mind the spaces being
built on?
Mr Langstaff: It is an extremely
good point and one we have had to work a lot on with the tenants,
and they are not going to agree to this unless they are really
seeing something that they will benefit from, so it has to be
part of an estate regeneration package where they are going to
get something out of it as well.
Q251 Chair: Do
you think it is a sort of blackmail: "We will regenerate
your estate but only if you let us build on your open spaces"?
Mr Langstaff: No, we can do a
second regeneration without new-build. The first estate we are
working on is predominantly one- and two-bedroom properties and
we have a huge shortage of three bedroom properties in the borough
anyway. The affordable homes we will build will all be three-bedroom
houses and what we have said is we will ring-fence those to transfers
within the estate. It is going to be built on two old garage blocks
that, if you can imagine it, are two-storey, concrete garage blocks
that have been closed off because they have been so heavily vandalised,
and tenants are more than happy to get rid of those in the first
place, so double advantage for tenants, I think.
Q252 Emily Thornberry:
How big is the waiting list?
Mr Langstaff: Roughly speaking,
there are 13 people chasing every property, so we have got about
13,000 on our waiting list.
Q253 Emily Thornberry:
Do you want to ring-fence an estate and transfer within an estate?
Mr Langstaff: The huge pressure
at the moment is on existing tenants in terms of transfer. When
you look at the proportion, only 5% of our tenants will now get
a transfer during the course of the next 12 months and that is
because with the homeless pressure there is a bit of an imbalance
now.
Q254 Mr Hands:
There has recently been a change of political control in Hounslow.
Is the new administration being as supportive as the previous
administration or is it the policy of the new administration to
do this?
Mr Langstaff: You are quite right,
there has been a change, and as you would expect with any administration
they have come in to take stock, but now their executive—equivalent
to a Cabinet—has approved the first scheme which was the
original pilot, so that can now go ahead. It has approved a second
scheme which will include some demolition and is another 200 homes.
They have agreed that in principle, subject to us going back with
the detailed work around the tenant involvement, around price
and quality.
Q255 Martin Horwood:
I notice that you say turnover within the group's affordable rented
stock has reduced from 13½% five years ago to just 8.7% recently.
Can you tell us a little more about the reasons behind that?
Mr Craggs: Yes, I think there
are probably three main reasons for that. First of all, 36% of
all new tenancies used to fail in the first 12 months and quite
often that was young people setting up home for the first time
and not realising some of the implications of doing so. We have
appointed tenancy support workers to help people before they get
a tenancy and to help them through the early stages of that with
benefits, furniture and such like, to try and make it sustainable.
Each time a tenancy failed, or was terminated, it cost us £1,200,
in lost rent and/or repair costs; so there was a good business
sense in doing that anyway. I think the second thing is: because
we are modernising the homes to such a high standard people are
realising that they are getting a much better deal now; so they
are getting a fully modernised, if not a new, home and are paying
somewhere in the region of £60 a week for that. In comparison
to anything else on the market, that is a good deal. I think the
third main area for the reduction is because, before the stock
transfer, but not because of it, the majority of people who terminated
a tenancy were going to buy property in the private sector. Virtually
nobody terminates a tenancy to go and buy somewhere because property
values have gone up so much in the five years since transfer.
In the last couple of years the North-East has had the highest
percentage property increase in the country, it has become unaffordable
to go and buy somewhere for the vast majority of our tenants,
so they are staying put. In terms of community sustainability
it is a good story. Tenancies are lasting much longer. If you
have got a home, it is a good time to have one, if you have not
got one there probably has never been a worse time because before
the transfer we had about 15,000 properties in no demand and now,
five years on, we have on average 73 applicants chasing every
vacancy that we have for rent.
Q256 Martin Horwood:
I am sure the first two of those do sound like good news. The
third one, the house prices, sounds as though they have got no
alternative, so I am not sure that is so positive. What is the
failure rate now amongst tenancies? You said it was 36% originally,
what has that fallen to now?
Mr Craggs: We have got about nine
staff delivering that service and we have more than half the failure
rate of first-time tenancies, so that is a good news story.
Q257 Martin Horwood:
Do you think other registered social landlords are seeing similar
decreases?
Mr Craggs: In the North-East,
yes, it is quite commonplace, particularly for that affordability
issue, that tenancies are being terminated for people to go and
buy somewhere, so there is not that legacy of leaving a tenancy
for someone else to come and say: "I will take it on".
Q258 Martin Horwood:
That is quite possibly more due to the market situation across
the region.
Mr Craggs: We have sold 22,000
properties through the right to buy in Sunderland so it is a very
high proportion; the vast majority of those are on estates that
are very sustainable but, nevertheless, even an ex-council house
going back on the market now has seen a huge percentage increase
in property valuation and it has become unaffordable for people.
Q259 Mr Olner:
A very quick one and perhaps you could write to the Committee
because I do not think there is a quick answer. I think you ought
to tell us how you want to see housing revenue accounts and funds
for social housing more equitably distributed throughout the country.
You perhaps need to write to us on that.
Mr Walls: I am happy to do that
if you wish me to.
Mr Langstaff: I think it needs
a more fundamental change rather than a more equitable distribution.
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