Examination of Witnesses (Questions 400
- 419)
MONDAY 19 MARCH 2007
PROFESSOR JOHN
HILLS
Q400 Martin Horwood:
But that does not solve the problem of the estates where the housing
stock is overwhelmingly poor and, as you say, has stigma.
Professor Hills: This a very big
long-term problem but ensuring that allocations policies are not
that the poorest and greatest need people go into the worst areas
the whole time; using the potential of market renting and of like-for-like
sales where we can; using infill developments of a different kind
where we can, which is happening across different parts of the
country, this is obviously possible in parts of London but also
in parts of Sheffield and Leeds, but at the base one of the points
that the report makes is that, if you are trying to mix the incomes
in an area it is thinking through what do we do to support the
incomes of existing tenants that is important. I am not so pessimistic
as to assume that all people who are without work at the moment
within social housing, even if they are disabled, are going to
be permanently unable to work, I would be more optimistic than
that, and I think there are lessons to be learned from things
like the Department of Work and Pensions Pathways to Work
pilots where the kind of personalised support people can be offered
does help people get into work, and it is through that that we
will fundamentally change some of these areas. So it is a mix
of all these things. We are starting from a very large problem
so I do not have any miracle changes overnight but there are a
whole series of different things we can start to do to put things
in the right direction.
Q401 Martin Horwood:
You mentioned like-for-like sales and the Rowntree approach of
running at a loss originally to buy up properties in more desirable
areas. Is that compatible with the responsibility on councils
or ALMOs if they were to try and pursue this kind of policy trying
to achieve best value from public subsidy? Is that going to be
acceptable?
Professor Hills: As I understand
the subsidy rules, which is probably in not enough depth, a council
would find it difficult to do that. It would be easier for a housing
association to make that kind of transfer, but I cannot give you
chapter and verse
Q402 Mr Betts:
If the aim is to try and get more balanced communities, just looking
at the right to buy, it might be very sensible to encourage more
right to buy in a big estate where perhaps only 5% of the houses
have been sold, for obvious reasons, but do you have any recommendations
for estates where the majority of houses have already been sold
but presumably where the right to buy in those circumstances creates
a less varied and less mixed tenure estate?
Professor Hills: As you have all
been referring to, and it is hardly news to you, the effect of
the right to buy can cut both ways. In some areas it can have
a stabilising effect in that people can remain within an area
where they otherwise would have moved; it would meet some people's
aspirations in a way that remaining a social tenant would not.
In other places the effect of the right to buy is that somebody
has sold up, whoever is running the property then lets it, does
not look after it very well and lets it to people who may have
been evicted from social housing in the same area and it can be
very negative. I do not have a solution as to how you screen between
those. I do think one has to look rather carefully at the level
of discount that is available within the right to buy and at the
use of the proceeds from right to buy. There is a level of right
to buy discount where in overall economic terms the state is not
making a loss, and if the money was put aside it could re-provide
in the 15 years' time that a property would be likely to come
up on average, and you will note Professor Steve Wilcox's work
on this as to what would be a cost neutral discount. I think I
would rather operate on getting the level of discount right than
trying to think of a blanket way of saying that there are certain
areas that are no-go for right to buy and other areas where we
would give hugely preferential treatment.
Q403 Mr Betts:
You mentioned the point about houses being sold on and let in
ways that may not be terribly desirable, but I am not quite getting
this. I am getting it in areas of quite attractive social rented
housing where, because they are very attractive over the years,
maybe 60, 70 or even more per cent of those properties have been
sold so we are creating a mixed tenure community in an area where
perhaps most of the houses round about were in the private sector
to begin with, but is not the reverse, therefore, that if we were
carrying on offering public subsidies in the form of discounts
to encourage more people among existing tenants to buy their properties
we would actually change the tenure mix for the worse? Is that
not something you might have recommended we do something about?
Professor Hills: Well, the report
recommends that in the more radical end of thinking through the
options available to people we might review it might be sensible
to review the right to buy as a whole and its relationship to
the kind of rights available to other tenants, and one might do
that as part of that, but there are two sides to this. One is
the effect on an area of people either moving on or staying put,
and the other is the effect on the individual life as in people
having opportunities to build up assets and to get on in their
own lives, and I think to rule out the right to buy entirely in
particular areas and to say: "Well, we would much rather
you stay paying a sub-market rent for ever" than to exercise
an option which might have lower net cost to the public sector
in the future, would seem to me to be slightly odd.
Q404 Mr Betts:
Or move with a discount to another area where there are fewer
right to buys and release that property for someone to come and
rent? Would that not be a more logical approach, to try to get
mixed tenures which you seem to be getting at?
Professor Hills: I am not quite
sure how that would work and I would be interested to see how
somebody would have a right to a discount because they had been
a tenant but that discount was only usable in a different area.
I have not I have not come across that kind of proposal before
so I do not know how it might work.
Q405 Sir Paul Beresford:
You touched on the use of capital receipts. In the early days
of right to buy many local authorities used capital receipts to
turn them back into estates from whence they came, or to adjacent
estates. This had the effect of people who wished to rent getting
improvements to their properties and those that purchased on the
right to buy staying because the standard of living around them
by virtue of their own capital receipts improved. Have you thought
of a mixed or a change of use of capital receipts?
Professor Hills: I have not looked
at how capital receipts would work, no.
Q406 Mr Hands:
On infill, and its mirror image policy, which would be partial
demolition, if I describe two estates in my constituency, in fact
my old council word, which are absolutely fascinating, Fulham
Court is one side of Fulham Road in Fulham and has had 396 flats
of which only three have had right to buy done on them. It is
incredibly dense 1930s housing which is basically a big problem
estate. PCSOs refuse to patrol there, it has a culture of gangs—all
the problems you might expect in an inner city estate. On the
other side of the road you have Lancaster Court, which has a huge
green open space and is very popular, with 30-40% right to buy,
and over the years the Council has tried in different guises to
do something about each of them. On the Fulham Court side it proposed
demolishing a couple of the blocks but was met with such fierce
opposition from the tenants, and political opposition because
it was seen to be potentially removing social housing, yet on
the other side of the road a proposal a few years ago to build
some infill for housing association properties on the estate also
met with opposition. What in your experience do you see is a way
of overcoming this kind of popular opposition, because it is going
to be key if you are going to do infill, or indeed the reverse
policy, to get local support?
Professor Hills: Popular opposition
has its roots in two very important features. One is the value
of open space to existing communities, and obviously one has to
manage that very carefully, and the other is the huge disruption
to existing communities when any option involves demolition, and
that makes this very difficult. However, having said that, there
are examples in different parts of the country where people are
succeeding in mixing areas through selective infill. There are
areas where people have had no alternative but to go for big demolition
options, but those have both imposed quite large financial costs
but also costs to existing communities of disruption while the
demolition happens, so I think what you are reflecting are genuine
advantages of where people start and genuine costs of trying to
move to something different. That is I guess the business of local
politics.
Q407 Mr Hands:
Can you name one part of the country which, in your view, has
very good practice on this?
Professor Hills: I think I would
have to have notice of that.
Chair: Well, we saw Manchester last week
where two of the estates that we saw had exactly gone for wholesale
demolition with agreement. Indeed they were pushed into it.
Q408 Mr Hands:
Is that your experience as well, Professor Hills? Is Manchester
a model for this?
Professor Hills: I do not have
enough experience of visiting parts of the country.
Martin Horwood: I can offer two contrary
examples in my own constituency in Cheltenham, both poor areas
of town, one where demolition took place which was welcomed by
tenants because it was seen as an escape route from what were
fairly dire post-war tower blocks, and the other a much more settled
area where there was enormous opposition because people felt that
had investment been made in the housing stock itself it would
have been good enough to transform the housing, so these things
can work in very different ways. The residents in St Paul's, which
is the second example, did have a bit of a case in that if the
same kind of investment and attention had gone into improving
the area and the basic quality of the housing stock and maintaining
it that could have been part of the solution without resorting
to market mechanism.
Chair: Can we move on to explore the
issues about mobility and work business. Clive?
Q409 Mr Betts:
One of the things you had a look at was the housing benefit system
and the problem people have when they get a job in that they suddenly
lose their housing benefit and the question whether, even with
all the changes to tax credit, it was worth the people going out
to work, and you were suggesting some sort of continuation in
housing benefit for people going into employment to allow that
transition to occur. Can you say a bit more about your proposals
in that regard?
Professor Hills: One is that the
clearest piece of research evidence is that people have a very
low level of knowledge about what their housing benefit position
would be if they got into work and, in fact, possibly for some
social tenants quite a low level of understanding of what their
rent is. If people are having their rent effectively paid for
them directly they may not even know what their rent is and therefore
may have fears about what their position would be if they got
a job which are unjustified, so there is certainly potential for
making sure people have access to better information about what
their situation would be in work even within the current rules
of the system. As far as social tenants are concerned, where they
are renting below market levels, the kind of calculations you
can do as to whether they are better off in work or the extent
to which they would be better off in work would be that much more
favourable than the calculation would be for private tenants.
Having said that, there is ignorance about whether you get housing
benefit at all in work but people also have, as far as I can see
from the evidence, fears of how long it would take to get housing
benefit sorted out if their lives changed—and of course
lives can change in more than one direction. They can get a job
and then possibly lose it, and there are certainly fears about
getting back in on the system. The main suggestion I make there
is to point to the way in which we run housing benefit at the
moment, which is on the basis that as your circumstances change
it is not exactly minute by minute your housing benefit should
be adjusted but it should adjust very rapidly to any change in
circumstances, and that has two effects. One is that it does mean
that people cannot rely on that income for necessarily a very
long period because it might change and the second is it is very
hard to administer that system, and I think those two feed into
one another in that people's fear of disruption and how difficult
it would be to get the right level of benefit established ties
in with the local authorities' administering housing benefit and
having to cope with frequent changes of circumstances. So my recommendation
there is not necessarily about specific run-ons of benefit as
people move into work, although I think there is evidence that
that is done, partly in some cases for lone parents, for instance,
but more that the overall structure of the system could perhaps
adjust less rapidly as anybody's circumstances change, and therefore
give them a bit more certainty and make the system easier to run
and therefore more efficient.
Q410 Mr Betts:
Do you think the Government should move to a housing allowance
system?
Professor Hills: We have moved
to a housing allowance system where the amount you are paid does
not depend on your rent, or we are moving further in that direction,
within the private rented sector, and I talk about some of the
evidence from the extensive analysis which have been done on Pathfinders
which is, generally speaking, rather positive, and we are not
currently planning to move in that direction for social rented
housing. I do suggest that we should look at the advantages that
appear to have come from more of the money being paid to private
tenants rather than going to the landlord within the private sector
and see whether that could be extended within the social sector
in terms of financial inclusion, in terms of giving people more
feel of control over their lives but actually more knowledge of
things like what the rent is. Moving towards a fixed housing allowance
within the social rented sector would be quite difficult given
the current structure of social rents, and that does raise some
quite big issues starting from where we are at the moment. I can
see a kind of distant green upland horizons world in which for
some parts of the country, even within social housing, there could
be more of a system run on the basis of fixed allowances, but
I think we are quite a long way from being able to get there at
the moment.
Q411 Mr Betts:
Did you have a look, in terms of disincentives to work, at the
very interesting pamphlet the LGIU did a few months ago which
compared the threshold at which a low income family with children
getting into the work place started to pay council tax, in other
words the level where council tax benefit could be withdrawn,
compared with the point at which they started to pay income tax,
which is quite a bit higher in terms of income levels, and the
fact that you introduce disincentives to work for those poorer
families if you equate the threshold at which they start to pay
council tax compared with the threshold for income tax? Have you
looked at that?
Professor Hills: No. I have not
looked at that.
Q412 John Cummings:
Do you endorse David Freud's recommendation that Jobcentre Plus
Officers should administer housing benefit and, if you do, what
benefit do you believe could be derived from a particular move?
Professor Hills: I have not looked
in detail at who should carry out administration of housing benefit
so I have not looked at whether that should be done by job centres
or by local authorities or by anybody else. What is very striking
from some of the research evidence is that even within the local
housing allowance Pathfinders where reforms were being carried
out that should have made it easier for Jobcentre Plus staff to
give clear advice to people on what their housing benefit situation
would be if they got a job, the Jobcentre Plus staff were not
necessarily aware of that, and I think that was one example I
raised in the report of the lack of connection between support
we give people for their housing needs and the support we give
people for their employment needs. So in a way I think it is for
others to judge who is best to carry these jobs out. The point
I was trying to make is that often we have different agencies
dealing with people in the same situation but without knowing
what the other one is doing.
Chair: Can we move on to models and financing
of social landlords, Clive?
Q413 Mr Betts:
In terms of the various managers of social housing, and I suppose
councils have increasingly less amounts of housing stock but ALMOs
are now increasingly gaining housing stock and housing associations
as well, did you do any analysis of the relative merits of the
different organisations as far as their management capabilities
were concerned?
Professor Hills: No, I did not.
Q414 Mr Betts:
In terms of the realities of future house building, housing associations
have ways of adding to their stock but very obviously councils
and ALMOs are not in the building business at present and there
appears to be some perversity in terms of the way the housing
revenue account works in providing disincentives to building new
properties. Did you have a look at the pilots which the Department
currently is doing with six authorities and their ALMOs about
taking those authorities out of the housing revenue account to
see if it brings about a more favourable regime to encourage development
in the future?
Professor Hills: I did have some
aspects of those pilots explained to me. Obviously they are still
on paper and at the time I was writing the report they were still
at the beginning stages of seeing what the results would be, so
I have not seen those. One of the advantages of the way policy
has moved in the last 15-20 years has been a gradual move towards
running social housing as an asset rather than running it as a
kind of day-to-day cashbook basis. There are definitely advantages
in the structure of housing association finances which encourage
them to think long-term about how they reinvest in major repairs
and about provision for the depreciation of the stock and about
the long-run husbandry of that stock, and that is very difficult
within traditional housing revenue accounts where you are operating
on a day-to-day, year-to-year basis. As I understand the paper
exercise about looking at what would happen if there was a change
in that for ALMOs, it is partly trying to achieve that long-term
focus and that would seem to me the important outcome that might
then produce better outcomes, but I have not seen evidence beyond
that.
Q415 Mr Betts:
Following on a related point in terms of housing associations
they have that capacity because they are effectively independent
organisations and if they want to go borrow money against their
asset base in the financial markets they are free to do so, but
we have this slightly perverse situation in this country compared
with the Europeans that even an arm's length organisation like
an ALMO, if it had not had the asset base transferred to it it
still could not borrow against it without being caught against
central Government borrowing requirements, and therefore it would
be in a different position and not as able to think about its
own long-term future independently as a housing association is
going to be. Have you given any thought to that?
Professor Hills: I did not look
at that as part of this report. Whether it is going to count as
public borrowing or not would depend on who is bearing the risk
if something goes wrong with the organisation, and it would be
different if it was something within the public sector from something
that was outside the public sector.
Q416 Mr Betts:
Except the housing association would pick up the risk effectively
if the housing association went bankrupt?
Professor Hills: Well, you should
pursue, I think, with officials from the Treasury as to how these
lines are drawn!
Q417 Mr Betts:
We will do that with your approval?
Professor Hills: Looking at the
most effective ways of ensuring that we make best use of both
the existing stock and new investment seems to me to be paramount.
Q418 Anne Main:
On best use of existing stock, do you think there has been any
assessment made of the actual land where the stock is? In my constituency,
for example, there are lots of derelict garage blocks and huge
long gardens that people are not utilising in a very derelict
state. Has there been any assessment made by councils?
Professor Hills: I think whether
one is talking about councils or housing associations, and this
goes back to an earlier part of the discussion, we have a long
history of not thinking of them as asset managers. We have tended
to assume that what happens is that a social landlord builds a
new house and puts a tenant in it and the tenant stays there and
the house remains in the ownership of the landlord in perpetuity,
along with other things like possibly derelict garages or whatever,
without necessarily much thought being given to whether this is
the best way of using those assets. One of my suggestions is that
maybe we should think a bit more about encouraging landlords to
think of themselves as asset managers in the way that any other
organisation that had assets would think about what we most need
at the moment, given the current level of demands on us. So that
would be one aspect of that. I cannot say how many local authorities
actually go through that kind of exercise but obviously it would
be valuable if they did.
Q419 Chair: Can
I ask you a question that arose out of some of the Merseyside
housing associations last week, and ask about the way rents at
the moment are benchmarked against market rents and whether it
would not be better if they were benchmarked against costs of
providing and managing homes?
Professor Hills: Well, my understanding
of the rent restructuring formula which drives this for both housing
associations and local authorities is that it does partly relate
to cost of managing and maintaining property in different areas.
A lot of the formula relates to local incomes and not very much
of the formula relates to the respective merits of particular
properties, so it is a rather flat formula. Now, you could argue
for a situation where those rents varied rather more between larger
and smaller property, and property in more or less desirable areas,
but that was not the decision that was taken a few years ago when
the rent restructuring formula was set up, the effect of which
is to bring together rents of housing association and local authority
property if it is similar, but not to leave very big differentials
between different kinds of property.
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