Examination of Witnesses (Questions 434
- 439)
MONDAY 16 APRIL 2007
MR BOB
YOUNG AND
MR ASHLEY
HORSEY
Q434 Chair: Can
I welcome you both to this afternoon's session? As you know, we
were expecting to have the Minister after you and we do know that
Mr Young has another appointment which is the reason why we have
started 10 minutes early. We would like to use this session to
tease out from you how your model works and how directly applicable
it may be elsewhere. Can I start in particular by asking why you
created Local Space in Newham, whether you think there are specific
circumstances in Newham which make your model particularly appropriate
and whether you think your model can be applied elsewhere in London?
Mr Young: It was part of a raft
of housing and regeneration policies which underpinned a 10 year
housing strategy in Newham back in the 2000-01 period. It was
meant to provide for a stable, long term supply of temporary accommodation.
The view in the Borough at that time was that the developments
in housing policy were leading to a situation where there would
be a long term need to rely upon a substantial portfolio of temporary
accommodation in the Borough and possibly elsewhere in London.
As to whether it was only a Newham phenomenon and why particularly
Newham, Newham at the time had the largest dependency on temporary
accommodation for homeless people. That is the reason Newham would
have felt was the imperative in this particular approach. Also,
the Borough was moved to consider that, if there was to be a long
term dependency on high cost temporary accommodation, this meant
that there would be a long term income stream. If that could be
harnessed to provide social housing which in the long term could
be affordable, that was preferable to the short term provision
secured simply by achieving three to five year leasing from private
landlords who would themselves get the benefit of both the cash
and the equity appreciation in the property. In Newham at the
time it was felt it was better that the council should secure
that for the public sector.
Q435 Chair: My
understanding—maybe I have this wrong—was that 450
properties that you started with were in the council's ownership.
Mr Young: That is true.
Q436 Chair: Those
properties were being used for what? For permanent or temporary
accommodation?
Mr Horsey: They have been used
as temporary accommodation, non-secure tenancies. The London Borough
of Newham along with a number of authorities has been resorting
to using their permanent HRA council stock for many years as an
additional form of temporary accommodation. Predominantly, these
were one bed properties and they had not necessarily benefited
from particular stock investment over many years. The council
perceived that they were going to continue using those units of
accommodation—maybe not those exact properties but that
sort of quantum—for many years into the future. Being able
to put that into a body such as Local Space or a new vehicle which
could be used to lever in a significant amount of private sector
funding to deliver a much wider programme was felt to be something
that was very preferable to the council at that time.
Q437 Chair: Are
there other London boroughs that would be in the same sort of
situation as Newham?
Mr Young: There are many of them.
There are about 14 or 15 that have a dependency of more than 1,000
units of temporary accommodation. We did explore with London boroughs
in the north, six boroughs in the north and seven boroughs in
west London, opportunities for procuring temporary accommodation
in this way. That has informed much of their thinking that has
led to the recent bidding round that the Government initiated
with the GLA to look for some demonstration projects.
Q438 John Cummings:
Would you tell the Committee to what extent is the viability of
your temporary to permanent initiative dependent upon the favourable
borrowing rates which public sector support enables?
Mr Young: The viability of the
scheme is very much relying upon high rents and a continuing,
committed, guaranteed rental stream. That is the biggest necessity
to make the scheme viable.
Q439 John Cummings:
High rents in relation to what? What is your yardstick?
Mr Young: The rents are high because
the renting arrangements for securing temporary accommodation
for homeless people are even higher than market rents. The housing
benefit cap puts a premium on local authorities being able to
get accommodation out of the private rented sector in order to
provide for this priority category, so the rents are high. It
is largely the use of high rents over a 10 to 15 year period that
drives this model. As to interest rates, clearly preferential
interest rates were achieved in our case for three reasons. One
is that we have RSL status. Another is that the local authority
put in £50 million of equity. The third is that the Housing
Corporation, in order to mitigate the impact on the affordability
of the council, itself committed £25 million of social housing
grant to the first 1,000 properties.
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