Examination of Witnesses (Questions 460
- 477)
MONDAY 16 APRIL 2007
MR BOB
YOUNG AND
MR ASHLEY
HORSEY
Q460 Sir Paul Beresford:
One of the things that concerns me is you are at the moment a
pilot scheme effectively and very limited. You are talking perhaps
of 50,000 additional homes across London. One of the concerns
must be, as a central taxpayer as we all are, that Newham is getting
a special benefit—not just London but Newham—along
the lines we are talking about that is not available elsewhere.
If it was available elsewhere, the drain on the central taxpayer
would be just enormous.
Mr Young: I think I need to ask
you to reflect on the four year development period that it has
taken to get Local Space up and running. During that period the
London Borough of Newham sunk over £2.5 million of council
tax payers' resources into the development of this scheme. Her
Majesty's Government put in over £350,000 of development
finance.
Q461 Sir Paul Beresford:
Council tax is the business rate that central government gets.
Mr Young: Local resources were
applied in huge quantity to this so that other boroughs could
benefit. There is an issue here about the fact that Local Space
when it was set up enjoyed the title of being one of what was
then ODPM's strategic partnering task force pathfinders. It was
a mouthful but it was meant to be part of rolling out the Gershon
agenda so that many boroughs could benefit from procuring temporary
accommodation through Local Space. It is the case that the London
Borough of Newham took it on the chin, pushed that forward and
used its own resources in order to create a facility for all London
boroughs to utilise. That is what we are. We were established
on the basis that we would be a strategic partnering instrument.
We are not a pilot project; we are a business and a successful
one.
Q462 Sir Paul Beresford:
You said earlier on that people obtaining this property were homeless
people in Newham or from Newham or linked to Newham, so how are
the other boroughs benefiting?
Mr Horsey: Newham has entered
into a supply contract with us at this moment in time. We are
providing them with a supply of temporary accommodation to meet
their current and future demands. There is nothing stopping any
other borough. We are proactively and constantly in discussion
with other London boroughs to start them buying into the same
service. The specific circumstances of Newham meant that Newham
had 450 properties that they felt able to put into this model
and of course additional assets and equity will make any model
work better. The input of capital assets is not a fundamental
requirement of the temporary to permanent Local Space model. The
income stream that my colleague referred to earlier is at the
heart of this. If any local authority has capital or equity or
any assets, or the Government or the Housing Corporation wishes
to put money in, of course the model will generate even more or
it will generate an outcome quicker or at a lower cost. That is
the specific set of circumstances that exist in Newham.
Q463 Sir Paul Beresford:
Your 50,000 additional within London is dependent upon all those
things you have ticked off.
Mr Horsey: The 50,000 is a calculation
we have done based on the potential private sector borrowing that
can be serviced by the current housing benefit outflow from local
government to the pockets of private landlords for the current
level of private sector leasing that exists across London. It
is about capturing that housing benefit outflow, not just for
the supply of a temporary accommodation service now, but for the
long term supply of social housing into the future.
Q464 Mr Betts:
That model does not depend on any extra public sector resources
for housing benefit?
Mr Horsey: Absolutely not.
Sir Paul Beresford: The other possibility
is that you are taking the housing benefit money from potentially
the private sector landlords which will mean an effect on the
rents of the properties that the private sector landlords own
or will own in the future. They will go up.
Q465 Chair: Or
down.
Mr Horsey: There are plainly different
views around the table.
Q466 Chair: Has
there been any evidence within Newham? Obviously there are private
landlords within Newham who are being paid housing benefit presumably
by Newham Council for temporary accommodation? Is there any evidence
on rent levels locally?
Mr Young: Over the last three
years my understanding is that the London Borough of Newham has
been procuring lower and lower rent levels from private landlords
but that is in the nature of developing a relationship with them
and driving down prices on the basis of renewals.
Q467 Chair: Have
your rents gone down commensurately, because yours are supposed
to be market rents, are they not?
Mr Young: Our rents commenced
at a particular level. Bearing in mind that we have one, two and
three bed properties, the average was £240 a week and the
rent lift per annum in our 15 year agreement is 1% per annum nominal.
That is locked in for the whole of the term.
Q468 Chair: Could
you, either now or subsequently, provide us with any information
on how your rents have gone up and what has been happening to
private sector rents for comparable properties in Newham?
Mr Young: We could but I do not
believe there is any kind of cause and effect linkage that we
could draw out from this.
Q469 Sir Paul Beresford:
You have had no influence on the ability of Newham to drive the
private landlord rents down?
Mr Young: In the situation in
which we are operating and over the last 12 months in which we
have bought over 550 properties, we have seen a huge increase
in property prices and pressure on rents. I think this is more
to do with the Olympics and the Channel Tunnel Rail Link than
it is to do with Local Space.
Q470 David Wright:
Could I focus on the documentation we have seen in the briefing
note which is about how you finalise the deal at the very end
of the process. There is a statement in the documents that there
may be a need to sell off a number of properties. It strikes me
that that is the variable, is it not, that you use to balance
the whole project out at the end of the process. How do you think
that is going to pan out at the moment? Presumably, if the project
does not finance itself, does not wash its face, the more stock
you have to sell. What is your view at this point about where
you are with that?
Mr Young: The numbers we are working
with at the moment are that we acquire 1,000 units over two years.
We are well on with that. Of course we have the 450 properties
that we were provided as equity stock, which means without any
further growth in the portfolio that at the exit point there are
1,450 properties. Our forecast is that we will be left with 1,150.
In other words, 300 will be sold. That is what the model predicted.
As Ashley said a few minutes ago, the way in which the model is
performing suggests we will not have to sell any properties.
Q471 Mr Betts:
Clearly you believe that the whole strategy is based on the belief
that this is a model which can be replicated in other London boroughs
for a London-wide strategy. Are there any lessons that can be
learned? Can this be applied outside London, given the big difference
in rents which exists and probably in house prices?
Mr Young: For sure. I failed to
respond to an earlier question that went into this area. We have
already been invited to support the Housing Corporation in the
south west and have spent some time working with boroughs and
RSLs in the south west, where I understand that Bournemouth and
Poole are beginning to develop this kind of initiative. We have
had approaches from the West Midlands and from the north east,
from Yorkshire and elsewhere, and there is a certain interest
there. Beyond homelessness, we also feel that the harnessing of
housing benefit, particularly to long term provision models especially
in the housing market renewal areas, is something that has real
possibilities.
Q472 Mr Betts:
Could you develop that? You are saying beyond homelessness but
it will not change the scheme significantly, will it?
Mr Young: What I think we have
become aware of—and this is not an area in which we have
developed any particular model yet—is that for instance,
whereas in London some 50% of people who present as homeless are
accepted as homeless, outside London in other parts of the country
it is a much lower percentage. That is partly because people are
able to make much better provision for prevention work and for
finding people accommodation in the private rented sector. What
we know is that the private rented sector outside London has large
numbers of long term benefit dependent people within it. This
has become a social malaise particularly in the market renewal
pathfinder areas. For that reason we think it is possible to develop
models which harness that long term income stream in order to
replace that private rented accommodation, which is of a low standard
and in most cases does not meet the decency standard, with RSL
provision of the kind that we offer.
Q473 Chair: Can
I ask whether you are buying any new build from developers off
plan?
Mr Young: Off plan and in other
ways with intelligent procurement, yes, we are.
Q474 Chair: Are
the developers coming to you and deliberately offering them to
you first before they put them on the market?
Mr Horsey: It is difficult to
answer that categorically. We are becoming known as a buyer of
property across our buying area. Your average private developer,
if they are coming to the end of a scheme or just trying to get
a scheme started, will look to maximise potential sales. We are
having them knock on our door now which is obviously very pleasing,
which means we are able to make sure we get the best deals we
possibly can. What we are not looking to do is just to buy whole
estates, whole blocks coming off. It is about pepper potting the
households but also mixing up our portfolio. We are looking at
this into the long term. Effectively, this is going back to some
of the growth of housing associations in the late '60s/early '70s
which was just buying up the street properties that become available
and that is what we are trying to do.
Mr Young: I need to add that the
model includes 250 new build in the 1,000. It always has from
the very beginning.
Q475 Anne Main:
You mentioned 450 houses that you were given by Newham and, as
a result, that has pump primed your model. If other boroughs are
to benefit, are you expecting them to put in similar quantities
or proportions of their own social housing?
Mr Young: Not at all. The way
in which the model works, without equity stock and without social
housing grant, is to deliver after 15 years 70% of the initial
portfolio as long term, affordable, social, rented housing. In
other words, 30% has to be sold in a situation where there is
no equity stock and there is no social housing grant. Clearly
social housing grant and equity stock make it a more efficient
model. Equally, higher rents will compensate.
Q476 Anne Main:
I wonder why Newham would want to give away 450 houses and the
other boroughs do not.
Mr Young: The latest P1E figures
indicate that there are in London about 7,500 local authority
flats in the main that are occupied by homeless households on
a non-secure basis at varying rents from housing revenue account
policy rents up to £250 or £300 a week. Half of those
or thereabouts we suspect are possibly properties which are being
used temporarily for temporary accommodation because they are
in blocks that are being demolished or awaiting major refurbishment.
All we did in Newham was we looked at 900 units which were being
used. These were hard-to-let, largely one bedroom units that were
being used by the Borough for homeless households and had been
for a number of years. There is a number of boroughs that have
more than 1,000 units still in temporary accommodation for homeless
households. We have said it is possible to take a number of those
properties and to use their value in order to augment existing
provision. That is all we did. It was already being used for homeless
households.
Q477 Chair: Can
I ask you about the attitude of Government to your scheme? Is
it enthusiastic? Is it looking to roll it out elsewhere or what?
Mr Horsey: We have been very fortunate
to have received support from the Government in the past, the
direct development funding that helped to set Local Space up in
the first place, encouragement with the Housing Corporation and
the social housing grant. I think it is fair to say that we have
a healthy debate and discussion with the Department about their
definition of temporary accommodation, the 2010 temporary accommodation
target which is referred to in the evidence that you will have
seen before you, but I hope that that is always a positive and
robust discussion between the two of us. We continue hopefully
to enjoy the support of government by demonstrating that we are
doing what we said we were going to do. This time last year we
had not bought a single property. We are now halfway through our
buying programme. We have every confidence that we are going to
achieve our original buying programme, deliver the take-up of
grant from the Housing Corporation and ultimately, in 10 or 15
years' time, the proof of the pudding will be in how many permanent
homes we are able to deliver. It is our intention to maximise
that number. We are in this for the long term as a housing association.
Chair: Thank you very much indeed.
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