Examination of Witnesses (Questions 480
- 499)
THURSDAY 19 APRIL 2007
YVETTE COOPER
MP, MS TERRIE
ALAFAT AND
MR PETER
RUBACK
Q480 Mr Hands:
Thank you. You mentioned various changes coming up. A very quick
question about the assessment. What sort of impact are you assessing
there is going to be on introducing energy performance certificates
on the private rented sector and what cost that might give to
landlords and tenants. What sort of early estimate have you attached
to that?
Yvette Cooper: Obviously we can
send you assessments that we have around the impact of the energy
performance certificates. We also need to always do regulatory
impact assessments around introducing new measures like that.
We think that the energy performance certificates for the private
rented sector are particularly important, and the private rented
sector raises some additional challenges when it comes to energy
efficiency measures because for home owners they have an incentive
to make improvements to the energy efficiency of their homes because
they can cut their fuel bills and the home owner themselves is
the same person who has the reason to invest in the loft insulation
but will also benefit from the reduced fuel bill as a result.
In the private rented sector, of course, often it is the tenant
who will benefit from the reduced fuel bill but it is the landlord
who needs to invest in the additional lagging to the loft, or
the additional cavity wall insulation, or whatsoever it might
be. So, I think this does raise some particular challenges in
terms of improving the energy efficiency of stock across the board,
and it is an area we have been looking at as part of the work
across government around improving energy efficiency of homes
and we would see the role of energy performance certificates as
an important part of that process. I think the important thing
to recognise about energy performance certificates and energy
improvements to homes is that they can substantially cut people's
fuel bills; so they can make a difference, they are beneficial
to residents and so can have a worthwhile impact financially as
well as in terms of cutting carbon emissions.
Q481 Mr Hands:
You have to balance that against the costs of carrying out a study
and get the certificate in the first place. If you can send me
a copy of those estimates, I would be very grateful.
Yvette Cooper: We can certainly
send the Committee the information we have available at the moment.
Chair: It will doubtless be relevant
to our future inquiry on energy efficiency of existing housing.
Dr Pugh.
Q482 Dr Pugh:
Minister, you spoke a few minutes ago about monitoring the buy-to-let
sector in what is, generally speaking, the rental market. I was
not entirely clear what your take on it was. There is one view
that a lot of the increase in buy-to-let is coming from institutional
investors, there is another view that it is capital-rich baby
boomers worried about the viability of the pension industry, and
so on, and putting their money into property. Does such analysis
as you have done, even if it is only of a preliminary kind, reveal
disproportionately individuals or institutions? Basically, what
is the breakdown, in your view, between individual investors and
institutional investors in the buy-to-let market?
Yvette Cooper: I do not think
I have that breakdown here, but we can certainly send it to you.
We have done some analysis around the changes in the private rented
sector and, from recollection, I think it showed that there had
not been substantial changes in the nature of the private rented
sector over the last few years, but I will ask the officials with
me, either Peter Ruback or Terrie Alafat, whether they have any
further information on that.
Ms Alafat: The other further information
I have, which is because of the research the GLA undertook in
London, which is an interesting piece of work—
Q483 Dr Pugh:
But London may be quite atypical?
Ms Alafat: It may, so I do not
want to give the impression it is across the piece, but at least
it is a detailed piece of work on this particular issue. Approximately
two-thirds of the new build properties in London in 2005 were
purchased by investors and a third by, what you would say, individuals.
That is what their research showed in London.
Q484 Mr Hands:
I am sorry, individual investors or institutional investors?
Ms Alafat: What they have said
is purchased by investors versus purchased by owner/occupiers,
so it could be individual investors or it could be institutional.
That is the information we have got from that particular piece
of research.
Q485 Chair: Is
that research published or could we have a copy of it?
Ms Alafat: Yes, it has been produced.
It was published in January 2007.
Yvette Cooper: London Development
Research published it, commissioned by the GLA.
Dr Pugh: I would point out that the owner/occupiers
are not essentially buy-to-let people, are they?
Mr Hands: Quite the opposite.
Q486 Dr Pugh:
We are a bit unclear about what the picture is in the sense of
who is entering the market. Are we clear about what they are actually
doing within the market? There is one view that they are squeezing
out owner/occupiers, people would not buy these houses if they
were not bought to let, but there is another view, obviously,
that it is simply providing extra capacity in the rental market
and people who choose that will be delighted to see that capacity
there. Which of those two views is probably correct?
Yvette Cooper: I think if you
look at the overall figures and you look at the overall size of
the private rented sector, there is not evidence at this stage
that the overall size of the private rented sector is increasing
substantially at the expense of owner occupation. So, I think
if you look at the national picture and the overall size of the
private rented sector, that is not the picture that you see. If
you look at such local housing markets, and in particular if you
look at new build, you start to see a slightly different picture.
I think the idea that two-thirds of new build properties in London
in 2005 were purchased by investors rather than home owners is
quite an interesting and quite a significant figure. There is
also, I think, evidence that with new build properties you are
getting higher levels of investment for the private rented sector
as opposed to investment in existing stock. One of the issues
that I also am concerned that we do more to monitor is what impact
this also might have on the kinds of properties that are built
in particular areas and what the market demand is, effectively,
for the kinds of new properties that are created. You could envisage
a situation in which demand by investors for private rented sector
flats to rent—because those are the easiest flats to rent—ends
up creating demand in terms of the kinds of properties that developers
put in planning applications for, and that, therefore, potentially
crowds out family accommodation in a particular area. So, this
is one of the reasons why we put much stronger guidance in the
new planning policy statement, in PPS3, around the need for family
homes, the need for mixed communities that are not simply about
mixed tenure but also look more widely at mixed communities. I
think this is a developing area that we are monitoring and I think
the evidence of an overall national picture, the one you describe,
the private rented sector crowding out owner occupation, is not
there, but I think there are more complex pictures developing,
in particular more local housing markets that we would expect
local councils and the planning authorities to monitor and that
we are monitoring as well.
Q487 Dr Pugh:
You say there is no evidence, but the latest survey of English
housing apparently indicated the number and proportion of owner/occupiers
had decreased even though the total number of households had increased,
which prima facie looks as though there is a growth in
the rental sector as opposed to growth in the owner/occupier sector.
But, if that were the case and we moved to a situation where there
was just simply renting in England rather than owner/occupiers,
maybe to a more continental pattern, or whatever, from the Government's
point of view is there anything wrong in that, in policy terms?
Yvette Cooper: I think people
probably want different things at different stages in their lives.
I think what people want when they are in their early twenties
and moving from one area to another, or from one job to another,
and deciding what to do with their lives may be very different
from what they want when they are in their mid forties and have
children and want to be in a settled location for settled schools
and things like that. I think it is important to recognise the
sort of life cycle here.
Q488 Dr Pugh:
Have life cycles changed appreciably from what they were in the
'70s?
Yvette Cooper: There is some evidence,
is there not, that people are having children later and that they
also, therefore, are entering home occupation later, partly because
of affordability pressures but also because of life cycle changes
as well. I think that home ownership is an important aspiration
for people in Britain and that people should be able to own housing
assets if they are able to. We are concerned about the impact
of long-term increases in house prices on affordability for first-time
buyers, which very much reflects the fact, I think, that we have
not been building enough houses for a generation and we need to
build more homes in order to be able to address long-term affordability
pressures. There is some research which suggests that 90% of people
want to be able to own their own home at some point in their lives,
and I think that we should be making sure that people do have
the opportunity. They may not be able to buy a full home, but
may be able to buy a share in their home and be able to build
up assets in that way.
Q489 Emily Thornberry:
If it is right that there is a growth in the private rented sector—and
we always have to balance, do we not, the right of tenants as
tenants and the importance of encouraging landlords to go into
business and to rent out—is now perhaps the time to address
the balance in terms of tenants' rights?
Yvette Cooper: I think we have
already, obviously, had with the Housing Act a series of improvements
to protection for tenants, to support for tenants, with the measures
around licensing for HMOs, with the measures around Tenancy Deposit
Schemes, and so on. There is obviously further work that the Law
Commission has done around single tenancy issues that we are interested
in and, obviously, are continuing to look at, and there may be
other issues that are raised along the way, but I think in terms
of our priorities in programmes of work around the Spending Review
and programmes of work at the moment, we see the private rented
sector as an area where the priority is to implement the main
changes that were introduced in the Housing Act but that there
is also a big need to focus on social housing and shared ownership
housing and expanding supply, and that needs to be effectively
the priority for the Spending Review work and for the Department
at the moment.
Q490 Mr Olner:
You mentioned earlier, Minister, the supply of housing. I just
wondered whether your Department was putting more emphasis on
factory produced homes that could be built very, very quickly
but to good standards on small areas of land. What are you actually
doing to increase the amount of properties that could cover because
(a) they would be affordable and (b) they would be able to be
done very quickly?
Yvette Cooper: There is a range
of things we are doing to increase the housing supply, some of
which involves bringing forward more land through the planning
system, but the Design to Manufacture Competition, which was launched
by the Deputy Prime Minister a couple of years ago, was all about
using modern methods of construction to try and reduce the construction
costs, rapidly improve the speed of construction, but also make
sure that you are building in high design standards as well, and
I think the quality of design was critical to that. The Housing
Corporation has also been pushing quite strongly a lot of those
modern methods of construction in its procurement process for
both shared ownership and social housing as well. I think we have
done quite a lot to try to shift the balance towards some of those
modern methods of construction that can speed up the process but
with that important qualifying point about quality design.
Q491 Mr Olner:
But have we done enough? Is there more we can do?
Yvette Cooper: There may well
be. I think this is now likely to be taken forward as part of
the work to deliver zero carbon homes: because we have now set
the timetable that all new homes have to be zero carbon within
a decade with big improvements in terms of the Building Regulations
in three years' time and then again in six years' time. I think
that will drive a lot of the work around modern methods of construction,
and so what is happening at the moment is that the house building
industry, both in the private sector and the social sector, is
looking quite intensively at different ways of building homes
in order to reach those higher environmental standards.
Q492 Mr Betts:
Can I look at the issue of temporary accommodation in the private
sector. Some of us went on a visit to a property in Westminster,
a one-bedroom flat in a tower block, sold under the right to buy,
then bought by a private investor, effectively then managed by
a housing association and leased back to the local authority to
buy temporary accommodation for a homeless person at £450
a week. I think many of us were absolutely staggered by this and
thought it a complete waste of public resources, the whole process
that had gone on. Have you any comments on that?
Yvette Cooper: Yes. I think we
are concerned about the high cost of temporary accommodation.
Some of this, obviously, is about the long-term need to build
more social housing, so we are clear about that, but, in addition,
there will also be people who need supported accommodation now
and cannot wait simply until a new social housing unit becomes
available for them. So, we have to provide temporary accommodation,
and the private rented sector is often the best way in which to
do that. We are concerned, however, about the costs of it, partly
because of the impact that that can have on work incentives as
well. It is one of the reasons why we have begun the temporary-to-settled
programme. I do not know if the Committee have seen, but we put
out details of the local councils who had got funding for the
temporary-to-settled pilots yesterday,[1]
and we can certainly provide further details if you have not had
those. This is the idea that you effectively set up a programme
where, over a long term, you bring those properties into the social
rented sector through different ways of financing it. It is modelled
on the Local Space scheme that I think you are aware of in Newham,
but actually goes further to improve value for money and also
to bring the rents down to more affordable levels more quickly
and to bring the properties into the social rented sector more
quickly than the Newham model.
Q493 Mr Betts:
We obviously had evidence from Local Space on Monday, and I think
many of us could see that it was better spending public money
to get a public asset at the end of the day, rather than simply
adding to the profits of investors who contributed nothing, and
to get the homes brought up to a decent standard as well, but
we are concerned that the very high rents that are involved effectively
lock people into unemployment as well as providing them with housing.
Yvette Cooper: There is a separate
issue about what more you can do to help people who are in expensive
temporary accommodation in terms of working centres that the Working
Future pilot is looking at that we are very interested in, but
putting that aside, we do agree that there is a need to try and
bring the rents down to more affordable levels and that is something
we built into in this round of temporary-to-settled pilots. The
new Local Space programme was developed by Newham, it was very
much a pioneering programme, but we have learnt some lessons from
that as part of the new temporary-to-settled programme that we
published yesterday. I do not know if Terrie can add anything
about what it means for rents for the ones that we announced yesterday.
Ms Alafat: The Committee might
be interested, we have got a range of schemes with slightly different
financing arrangement, which was partly the idea of the pilot,
but within those and with both the resource we put in, and in
a number of cases the local authorities themselves putting resources
in, they are looking at slightly different lengths of time to
convert to social rent. The first thing to say is that the rents
that they are charging, although high, are still cheaper than
temporary accommodation. They are not social housing rents, but
they are cheaper than what temporary accommodation would be costing,
so it is somewhere in between. For example, Brent is hoping to
bring them into affordable rents in nine years' time, but Westminster,
interestingly, are hoping to bring their new accommodation into
affordable rents within four to five years' time. So, you see,
the pilot that we have launched is quite interesting and, as Yvette
has said to you already, what we have tried to do is to encourage
getting people into settled accommodation at affordable rents
as soon as possible, and that is what we are trying to test with
this scheme.
Q494 Mr Betts:
What happens, even in the five years, to people who are still
paying rent which probably cannot be affordable if they work and
do not get housing benefit, can it?
Ms Alafat: This is still an outstanding
issue, as Yvette has said. What we have discussed with each of
the pilots, and one of the criteria for the pilots was to say,
as well as trying to achieve settled accommodation at affordable
rents as soon as possible, can you also look at issues to do with
worklessness and work incentives. Some of the schemes are looking
at a situation where they might put some of their rents on to
a social rent level sooner rather that later if people get on
to work. So, what they are trying to do is to marry up the provision
of accommodation with training and support to get into work. So
it is quite a mixed picture. In the meanwhile, just to give you
some idea, temporary accommodation is averaging about £355
a week. Local Space and the pilots are averaging a rent of about
£250, and that is obviously not at the level of social housing
rents.
Q495 Chair: Are
these all figures for London?
Ms Alafat: Yes, these are the
London—
Yvette Cooper: The temporary-to-settlement
scheme is only in London.
Q496 Mr Betts:
It may be obvious, but would not a way round it, given the fact
all these schemes depend on public subsidy through the housing
benefit, be simply to give the public subsidy in another way and
leave rents at affordable levels?
Yvette Cooper: That is one of
the things that the culmination of the temporary-to-settled programme
and the Working Future pilot are trying to look at. If you wanted
to do something on a much bigger scale, you obviously need some
evidence around some of these pilots to look at different ways
of doing it—what the different incentives are, what the
impacts are, what the financial consequences are—because
sometimes things that theoretically look like they are going to
be savings actually turn out not to be so in practice. One of
the reasons for having these kinds of pilots is to look at whether
there is a wider and a different approach that we ought to take
in order to improve work incentives across the board.
Q497 Mr Betts:
Is there a timescale for this?
Yvette Cooper: We need to look
at the impact from the pilots, and we are obviously doing further
work, both as part of the Spending Review but also in response
to John Hill's Review around worklessness, social housing and
housing costs as well. It is ongoing work really.
Q498 Martin Horwood:
There is a particular dimension that Mr Betts has just touched
on of the use of private market rent flats for temporary accommodation,
which is that actually somebody in that situation could not afford
to come off housing benefit because the market rent was so astronomical.
In the case we saw, even an adjustment has instantly put the lady
into arrears, through no fault of her own, and if she had been
asked to pay any significant proportion of the full rent she would
have had to lose her home basically.
Yvette Cooper: But probably if
she went into work she would get housing benefit. On a rent of
that level, if she went into work, she would still be getting
housing benefit. Housing benefit is paid to people who are in
work. Part of the problem that we have with housing benefit is
that a lot of people do not realise that they can get housing
benefit when they are in work, and that contributes to some of
the issues around work incentives. What the Working Future pilot
is doing is effectively paying the subsidy in a different way
so that from the point of view of the tenant, they feel as though
they are paying social rent and then the rest of the money is
paid directly through other routes. So the experience from the
point of view of the tenant who goes into work is that you are
paying a social rent rather than a full market rent or a full
temporary accommodation priced rent. The Working Future pilot
is looking at that kind of issue, but it is important to recognise
that you will still get housing benefit if you are in work. It
is just that the incentives are less.
Q499 Mr Betts:
We have had some significant reforms to the private rented sector
with licensing private accommodation in certain circumstances
and HMO licensing as well. Is there any evidence that that may
have started to restrict the supply of private rented accommodation
in some areas?
Yvette Cooper: I am not aware
of any such evidence at all.
1 Note by witness: announcement of the successful
Settled Homes Initiative schemes was delayed and the press release
went out on Thursday 19 April instead of 18 April as planned. Back
| 
