Examination of Witnesses (Questions 360
- 370)
MONDAY 5 FEBRUARY 2007
MR MATTHEW
GARDINER, MR
GAVIN SMART,
MS TERESA
BUTCHERS, MR
DAVID COWANS
AND MR
RICHARD BAYLEY
Q360 Emily Thornberry:
Going back to the regulation of Housing Associations per se. If
there was to be a range of financial incentives for Housing Associations
which perform well, are we in danger of restricting the market
and, therefore, ending up with fewer homes if we simply give financial
incentives to the most successful?
Mr Smart: I do not think providing
incentives to perform well should restrict their aspiration to
housing, if anything that should encourage more successfully run
Housing Associations. It should be an efficient business in all
sorts of ways and that would include the ability to deliver and
generate more new housing. I think you see the most efficient
Housing Associations able to do more of that because if they are
running a financially-sound ship they are not wasting money and
they are reinvesting the surpluses that they make in service delivery
but also in new supply, so it should be of benefit.
Q361 Martin Horwood:
A couple of questions for most of the people really. You are pretty
powerful advocates of using the private rental sector, market
rent sector, to access funds, both for social housing and possibly
for community projects, and I think you have got some nearly 5,000
market rent properties yourselves. Do you think there is any limit
to RSLs getting involved in the market rent sector which is already
pretty competitive, has lots of interest and is not really your
core business, is it?
Mr Cowans: I think our core business
is to provide housing choice for people, so I would disagree with
that. If there are people who want—God forbid, their economic
circumstances might improve—to move their position and their
tenure, we should be in the business of helping them. We are very
keen to provide a range of housing tenure, preferably all in the
same place because I think there are real disadvantages in concentrating
deprivation. There is a lot of research internationally now that
if you concentrate poverty, you not only add to people's difficulties,
you multiply them, and you restrict their routes out of it, and
I think that is morally wrong, frankly. If we exist as a business
to create something, it is to create a place that you and I would
want to live in, that we would have an opportunity to trade up
and down tenures as befits our circumstance, and has a really
good environment, and I think that is a good thing to be involved
in. I do not think we are in the business of just providing for
particular disadvantaged parts of the community because I do not
think they want that, frankly.
Q362 Martin Horwood:
Can you clarify that? Are you talking about properties as well
as tenants moving from social rented to market rents?
Mr Cowans: We have got examples
of how it is entirely possible to do exactly that.
Q363 Martin Horwood:
Is there not a risk then that you are going to lose social housing?
Mr Cowans: No, because the way
we try and do it is we keep the affordable in all its guises,
right from rented right through to shared ownership and all the
gradations of low cost home ownership in the same development
as the for sale properties and we cross-subsidise from one to
the other. We are very clear that we do not want those properties
to go on the market. The big advantage of an organisation like
ours doing the lot is that is not going to happen. I think there
is a real issue about people trading in the market and keeping
properties vacant because they are trading for capital uplift.
Of course they will, it is a commodity, and people in markets
do that, whereas we do not do that. We act as the investor but
we let them, we do not keep them for ages.
Q364 David Wright:
Is there not a problem with scale here though because quite clearly
you are very able to do that?
Mr Cowans: Yes, there is a problem
with scale.
Q365 David Wright:
Clearly there will be many people who would say, "I would
like a bit of that in my neighbourhood", but they may have
20 or 30 RSLs operating with smaller unit numbers. Do we not need
some kind of model there to pool assets, pool resources? The only
other alternative is increasing merger.
Mr Cowans: There is an issue of
scale, and I do not have any easy answers about how you resolve
that. It is possible for smaller organisations to do some of this
and to grow strength as a consequence, but I am still driven by
this idea that places should be mixed income, viable places, that
you and I would want to live in. I do not think anybody would
argue with that, the tough bit is doing it. You are dead right,
the issue is about scale.
Q366 David Wright:
We do not want to drive out the small BME community.
Mr Cowans: Not at all.
Mr Bayley: We are not saying that.
Mr Cowans: We would not want to
do that. The reality is that a mixed community often drives all
sorts of other providers. I do not think there is a problem with
that at all.
Mr Bayley: And you are going to
find those specialists being very focused on a particular market
niche and that would work.
Q367 Martin Horwood:
Are you supporting any smaller RSLs in your area?
Mr Cowans: Yes, we have got our
own black minority ethnic organisation in the group, Kush which
operates in Hackney and, also, we provide agency services for
several others. I think it is a good thing. The other thing we
are very keen to do is we will happily, where they are good, allow
local authorities, ALMOs, or anybody else who is good, to manage
stock because I think that is the other issue which can be addressed.
Q368 Martin Horwood:
Can I ask you about the gap funding model which you talk about?
Do you want to explain that and talk about why you think it is
a good idea?
Mr Cowans: We have been trying
to come up with ideas simply to contribute to the debate in a
creative way about what could we all do to increase the amount
of housing generally and affordable housing specifically. We have
looked at it and there are lots of advantages. There is the current
grant regime, I am not necessarily attacking it, but it does not
generate the numbers we want and it needs to be more efficient.
The obvious way to become more efficient is to reduce the grant
per property. How would you do that? One of the ways is to capture
cross-subsidy from sales properties. The problem is, it is back
to the scale problem, you have got to do both, not everybody can,
but there are issues there. The cross-subsidy system works on
that basis. You do the whole scheme, you take a proportion of
the sales proceeds and you put it over into the affordable, both
to improve standards and to reduce the grant level. We have modelled
it, and it is only a contribution to the debate, nobody is saying
we have got any sort of monopoly on wisdom, there will be lots
of other views about it, there will be problems about doing it,
but it struck us as a legitimate thing to put forward as part
of the debate, could we not do that? Yes, if you have got scale,
how you build the scale will then become an interesting issue.
The other issue for us is the introduction of some form of equity
finance, especially if the scale argument leads people like us,
indeed, to land bank. If you are up against the private sector,
private sector land bankers, like house builders, will have significant
slugs of equity. If you are up against them, purely debt financed,
you have got an immediate problem because you have got to pay
the carrying costs of the site for the three, four years you have
got to keep it to build up the planning case to get it into production,
they have equity financiers who are prepared to be patient. They
expect a bit more at the end, sure, but they are prepared. You
pay them out when you have got the return from the land. There
are lots of issues around this which we need to address. They
are not immediate solutions, they are things we need to think
about for the future, but we need to find ways of building the
capacity of providing affordable housing, increasing housing,
and these are just some ideas which we think are worthy of debate.
Q369 Martin Horwood:
Just for the record, did you say then that you think private sector
land banking is a problem?
Mr Cowans: No, it is not a problem,
it is a problem for people like us to compete with other people
who are after those sites. If you want the cross-subsidy model
to work then, by definition, it helps to have the land in the
first place, because you have to capture as much value as you
can from the sales in order to put into the cross-subsidy in order
to reduce the grant level in order to produce more rented affordable
housing.
Ms Butchers: I just want to make
a brief point that this kind of thing, particularly around the
gap funding, can be done on a smaller scale because my association,
in fact in partnership with a private developer, is working on
the kind of sites, Places for People can do on their own, so that
you can scale this down. Certainly, both the Corporation and English
Partnerships within the region have been very helpful in enabling
an association of my size to work with the private developer on
some of these big mixed tenure schemes of the kind that David
has just described.
Q370 Martin Horwood:
Are there real barriers to doing it at the moment, or is it possible
within current legislation?
Mr Cowans: Personally speaking,
it is possible to do it now; it is just not part of the mindset
and it is not very common. There are lots of examples, and I think
Teresa is dead right, there are lots of people doing this. What
we need to do is get to the point where more people do it and
I believe that will play its part—there is not one simple
answer to any of these issues—in increasing the production
of rented housing.
Mr Bayley: The opportunity exists
now with Communities England for that to be taken forward.
Chair: I think we have might have exhausted
the topics, unless any of you did not get much of a look-in or
think there is something else you wanted to comment on which has
gone before? No, great. Thank you all very much.
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