Examination of Witnesses (Questions 500
- 519)
THURSDAY 19 APRIL 2007
YVETTE COOPER
MP, MS TERRIE
ALAFAT AND
MR PETER
RUBACK
Q500 Mr Betts:
Has the Government got any monitoring systems in place to look
both at whether there is any impact on supply and also any impact
on the quality of housing, which is presumably what the reforms
are meant to address?
Yvette Cooper: Yes. We are doing
quite extensive monitoring and obviously there are different aspects
to the programme: there is selective licensing, there is the HMO
licensing and other programmes as well. We are doing the monitoring,
but you will be aware, obviously many of these measures are just
coming in now and are only just being implemented. Some of them
were implemented in the summer of last year. The Tenancy Deposit
Scheme, for example, is coming in this spring, and so there are
different measures being implemented at different timescales.
It will obviously take time to be able to monitor the impact of
all of these things, but we are doing monitoring. Do you want
to add anything, Terrie?
Ms Alafat: Just to let the Committee
know that we are working with the Building Research Establishment.
They have conducted a baseline survey for us, so we have some
idea where we are starting from, and then they will produce another
report on impact, probably 2008, in the summer. So, that is quite
helpful, because we should have a "before and after"
to answer some of these questions. The other thing is that the
organisation LACORS is providing advice to local authorities on
application of best practice, that kind of thing, but, as part
of that, they are going out and taking informal looks at what
is going on in the sector so they can build that back into their
work with local authorities. I think that is quite important,
because what we need to know is the extent to which local authorities
are applying licensing, where there might be problems with that
and what steps we might need to address to make certain that it
is rolled out appropriately.
Q501 Chair: When
is that likely to be brought in?
Yvette Cooper: The baseline report
should be available May/June time of this year, so that is not
too far in the future. Then, as I say, 2008, probably the summer,
we will have an impact analysis.
Chair: Can we move on then to a few questions
about shared ownership. Bill.
Q502 Mr Olner:
Could I ask, probably the first one on this, Minister. The Homebuy
schemes were supposed to be simple, uncomplicated and attractive.
They appear now to be neither of those and are putting a lot of
pressure on the social rented sector. Do we need to revisit that
and look at it again?
Yvette Cooper: No, I think the
shared ownership programmes are playing an extremely important
role. I think nearly 80,000 families have been helped into publicly
subsidised shared ownership schemes since 1997. What we are trying
to do with the shared ownership schemes—because obviously
the shared ownership schemes require investment often, just in
the same way that social housing does, although it is a reduced
level of investment—is to look at ways in which we can lever
in additional private finance to support shared ownership schemes,
particularly for those people who are not far outside the housing
market, who are not able to buy, to get a mortgage for 100% of
the home but actually might be able to afford 75%, or might, if
they got a bit more help with the deposit, or whatever.
Q503 Mr Olner:
Is this a target that is never achievable given the increase in
house prices that is constantly and determinedly going up all
the while? The people who can afford are forever slipping down
the chain.
Yvette Cooper: I think that there
are groups of people who can maintain regular mortgage repayments.
They have got steady incomes, secure jobs, and so on. They can
maintain regular mortgage repayments, but they cannot manage to
get onto the property ladder right now given what has happened
with house prices, and I think it is fair to try and give that
group of people a bit of a helping hand to get onto the ladder.
What we would like to be able to do is have more private sector
support for those who actually only need a little bit of help
to get into the market, and then to be able to concentrate more
on government investment, or public sector investment to those
who are on lower incomes, maybe for them to be able to get a share
in assets and for them to be able to get additional support to
get a share in their own home. Getting the private sector to do
more on shared ownership is a gradual process. We are trying to
create a market that has not really existed in any extensive form
in the past, so that is why, I think, the extended open market
Homebuy programme that was introduced in October, the partnerships
with the lenders, is important, because it is about trying to
get lenders to start doing equity loans. It does not fit with
their business model, because they are a traditional business
model. They are used to lending to individuals rather than investing
in property, effectively, or investing in equity, so it has required
them to change their approach. Equally, for organisations and
businesses that traditionally invest in equity or invest in property,
they are not used to doing loans to individuals. This is a kind
of different market that we are trying to create. However, it
is a market that, frankly, ought to exist. There are a group of
people, there is huge demand from them to get onto the property
ladder, they cannot quite afford to do it and it ought to be an
area where the private sector should invest. That is why I think
this is a gradual and complex process, because you are trying
to create a private sector market that does not fully exist at
the moment.
Q504 Mr Olner:
But the British Property Federation say that there will be more
private sector money levered in for affordable shared ownership
schemes if the Government guaranteed the investors would have
future staircasing payments?
Yvette Cooper: Yes, I am not sure
if I properly understood the point that the BPF were making. I
think this is the issue about if you deliver affordable housing
through a planning agreement, through a section 106 agreement,
we do say that it is not really enough to just have a kind of
one-off affordable housing provision that then rapidly disappears.
In other words, if you have an investor who provides some 75%
shares in this first wave of a new development, a whole load of
first-time buyers buy 75% shares, they then staircase up later
on and buy the remaining 25%, the investor pockets that 25% and
takes it off somewhere else. That is not really affordable housing
for that area for the long term. We have introduced conditions
(and we have made that clear) as part of the planning process,
and I think that is the right thing to do. I know that there are
some developers and investors who would like us not to do that,
but we think it is the right thing to do. Otherwise you are only
providing short-term help for affordability; you are not providing
the level of affordable housing needed for the longer term.
Q505 Mr Olner:
I was one of those people who was very lucky early on in life
and had a 100% mortgage given to me by my local authority. What
role is there for local authorities to play in affordable housing?
Yvette Cooper: I think there is
a very big role for local authorities to play, and I would like
to see an increasing role from local authorities on both shared
ownership and new social housing as well. While we are on the
subject of the shared ownership, we think that it should be possible
for local authorities to do more with public sector land, with
their own local authority land, and look at ways of having, effectively,
shared ownership where the equity contribution from the public
sector comes from that local authority land and for local authorities
to be developing their own kinds of shared ownership using their
land to do so. There are some obstacles to doing that, and we
are looking at what those obstacles are and whether there are
other ways in which we can overcome them and other ways in which
we can encourage local authorities to do that. Some local authorities
are already doing that in partnership with housing associations.
We think they should be able to do it both in partnership with
housing associations and potentially on their own or with private
developers as well. I can say more about the local authority's
role in social housing if you like.
Chair: Can we pick up on that later on.
Q506 Mr Hands:
A quick question about shared ownership and the impact of rising
interest rates at the moment. Has any thought been given to looking
at Australian-style schemes where the percentage of equity held
by the person in shared ownership might actually decline as interest
rates rise in return for keeping a much lower level of interest
being paid? I am slightly worried with some of these shared ownership
schemes that as interest rates rise, which undoubtedly they are
and look set to do so, people may get into trouble with some of
their mortgage repayments, and the sensible thing might be, at
least temporarily during a period of interest rate rises, for
the level of equity to fall slightly.
Yvette Cooper: There are often
provisions for people to be able to staircase down if they have
financial pressures and need to be able to do that. I am not aware
of the Australian scheme. I do not know, Peter, if you are aware
of it.
Mr Ruback: No.
Yvette Cooper: But we would happily
look at it.
Q507 Chair: The
GLA, again, who seem to be the only body that does enough research
on this (so we are better informed about the London market than
anybody else) have done research which suggests that those who
are able to afford intermediate schemes are exactly the people
who could anyway have afforded to rent, presumably without any
public subsidy, in the private sector. I am somewhat concerned
about the fact that we seem to be creating three separate tenures;
that people who buy shared equity are actually only ever able
to buy again within shared equity and not actually able to accumulate
enough to be able to move into the market ownership sector. Do
you have any evidence on that? Is it a matter of concern or not?
Yvette Cooper: There are different
groups. There are some people who need shared ownership to get
started but, because of either their career pattern or because
they move to cheaper areas at a later stage in their lives, can
staircase up effectively, can afford full home ownership at a
later stage in their lives but might not be able to do so early
on. A lot of key workers will be in that position, and so for
them it is right to have approaches which allow people to buy
increasing shares in their own homes; but there may be other people
who will always only own a smaller share of their own home, and
I think it is probably a good thing to introduce that as a new
option rather than have a polarised approach in which people either
own the entire home or can own nothing at all and do not have
any assets that they are building up. I think we would see it
as a positive thing to be able to have growing shared ownership.
What I think we have to make sure we do, however, is have enough
of a range of shared ownership properties so that, as people have
bigger families, for example, they may start off in a shared ownership
flat and not be able to staircase up but, as their families grow,
may need a family home and may, therefore, be looking for shared
ownership family properties as well. You made a previous point
as well though, did you not?
Chair: No, I think that has mostly dealt
with it. Martin.
Q508 Martin Horwood:
Shelter raised in their evidence another issue of the shared ownership
scheme, which is that, because they track market prices, in some
high cost areas they are inevitably going to become more and more
unaffordable, even to key workers, and they said that you had
introduced a cascade mechanism to broaden the availability out
to a wider group of people. Quite rightly they point out, that
is great for the people that are involved, but is that the right
use of a public subsidy: because, in effect, you are taking it
beyond its original remit and providing a new cheap housing sector
for a bunch of people who probably, as we have said, might have
been able to afford to get on the ladder anyway?
Yvette Cooper: I think you are
trying to support different groups of people in different kinds
of circumstances: some are those who might be key workers, whether
in a particular public service, and for economic reasons you might
want to be able to help them in order to be able to keep them
in a particular location; some are those who, as I said, are not
that far off being able to afford to get onto the housing ladder
but they just need that bit of extra help. For that group we would
like to be able to encourage more private sector support for them
rather than needing to use public subsidy, or to be able to reduce
the level of public subsidy to help them but to ensure that they
can get support, because I do think it is fair that they should
be able to get a chance. They should not be denied the chance
to get on the housing ladder because of the generation, effectively,
they were born into. Then there are other groups, those on lower
incomes, who will always find it difficult to be able to afford
a full home but who ought to be able to have a chance to accumulate
assets and to share in that way. I think it is right to look at
different ways to help all of those groups, but it will be different
kinds of help that you will be providing for all of them.
Q509 Martin Horwood:
I accept that argument, but the specific technical point was about
the price, even of this sector, inflating with the market more
and, therefore, more and more people beginning to drop out of
the bottom of even being able to afford this?
Yvette Cooper: That gets you back
to the wider problem that we have, which is long-term increases
in house prices due to us needing to build more homes. Our starting
point with all of this is: we need to build more housing across
the board, that is more market housing, more shared ownership
housing and more social housing. You start from that position,
but it is not enough to simply build more houses; in the interim
we also need to help those who cannot get on the housing ladder
while we are building the additional homes we need.
Martin Horwood: I would refer you back
to our Report last year, which suggested there were rather more
policies on offer than just building more houses.
Chair: Yes, but the Report did also say
that we thought the Government should be building 200,000 more
and, indeed, doubted whether it was necessarily enough.
Q510 Mr Hands:
It sounds like your position is that there should be different
degrees of percentage ownership in shared housing to suit those
who are entering for the first time, perhaps at a much lower percentage
than 50 or a third. I have heard people talking about 10%. Is
there a certain point at which you cannot go any further down
because at some point it becomes almost meaningless, the degree
of home ownership they have, and where is that point?
Yvette Cooper: At the moment the
social Homebuy pilots have a minimum share of, I think, 25%. We
are interested in looking at what would happen if you offered
10% shares. There are, obviously, a whole range of issues that
you need to look at: whether people might be better in, for example,
a savings scheme rather than a 10% share; what obligations people
take on in terms of the maintenance of their properties, because
clearly it does not look as fair for them to take on maintenance
obligations if they are only owning a 10% share of their home
compared to if they are owning a 75% share of their home. There
is a series of different issues. There is also the question of
making sure that people are not taking on burdens that they cannot
afford or taking on unacceptable risks if they are on a low income
as well. We are very interested in exploring smaller shares as
a way of giving people assets for the future, but we also want
to look at all of the issues that surround that to make sure that
we are doing so in a responsible way.
Chair: I would like now to move on to
the social housing sector.
Q511 David Wright:
Minister, you have talked today about wanting to promote a mix
of housing choices for people, and clearly social housing is extremely
important within that. Could you tell us a little bit more about
your projections on household growth? You said in, I think, Westminster
Hall towards the end of March that there had been some revised
projections on household growth. I presume this would potentially
have an impact on your social housing targets, but your published
social housing targets have not changed, I do not think, since
2005. Can you tell us what your thinking is on that at the moment
and whether those targets need to be revised, whether you need
to build more social housing on the back of those projections?
Yvette Cooper: The social housing
building target we have set simply runs up until 2007-08, so next
year, by which time we want to be providing over 30,000 new social
housing units. We have not set additional targets that go beyond
that, because obviously that is a matter for the Spending Review,
so we are looking at what additional level of social housing would
be needed as part of the Spending Review. It is clearly the case,
however, that increases in household projections will have an
impact on every sector, on market housing, social housing and
shared ownership demand as well. We obviously have a lot of analysis
going on at the moment around the need for social housing in the
future. I think probably our view is that the best available analysis
around newly arising need is probably Alan Holman's work, which
I think you are aware of, that Shelter has also been involved
in. That early assessment of newly arising need, I think, did
not take account of the most recent projections around household
numbers, but we have been looking at that further as part of the
Spending Review. There are also different views about how you
address, in addition to the newly arising need, the numbers of
people in temporary accommodation who also need housing and what
proportion of them might benefit from shared ownership and from
social housing, and so on, as well. So there are different assumptions
that we are also looking at. We will say more about what our assessment
is as part of the Spending Review. The final piece of work we
are doing as part of this is to look as well, not just at the
macro level and at theoretical analysis, but also to look at some
particular locations to see what the number looks like, to do
the reality checks, almost, on the analysis as well. So, that
work is underway.
Q512 David Wright:
Are you able to say where that sub-market analysis will be, what
locations those will be in?
Yvette Cooper: We cannot. We have
just looked at a whole load of individual local authority areas.
If we can provide you with additional information on that at this
stage, then, certainly, we will, but obviously a lot of this is
still work in progress and we will say a bit more about this as
part of the Spending Review.
Q513 David Wright:
What is your view about how much of the total national housing
stock should be social housing in 10 years' time? What level should
we be at at that particular point?
Yvette Cooper: I do not think
we have set a particular figure or a particular proportion. There
are different views taken by local authorities in their planning
process, and we obviously take a view on that as part of looking
at the regional spatial strategies and things like that, about
the level of social housing that is needed in particular areas,
because it will vary from one area to another. It does partly
depend on the nature of house prices in the area, the levels of
income in the area as well, so you probably have to look at this
far more on a sub-regional housing market basis rather than a
blanket national prescription.
Q514 Emily Thornberry:
I have a question which I am sure you knew in advance I was going
to ask. Is there going to be a London-specific housing policy?
Given that we have such a housing crisis in London, will the Spending
Review be specifically addressing that crisis?
Yvette Cooper: We already have
regional allocations and then regional housing boards draw up
specific strategies for those regions. What we think is the right
thing for London is for the Mayor to draw up the London housing
strategy, and that is part of the GLA Bill; so that is very clearly
about having specific measures to address London. The temporary-to-settled
pilot programme that we announced yesterday is, again, specifically
about London, and we also have the £20 million overcrowding
programme, which, again, is specifically about London. We do recognise
that London has additional and different challenges and higher
pressures in a lot of ways than other areas, so we do already
try to build that into both the policy approaches around things
like temporary-to-settled but also into the funding arrangements
as well, and I think a lot of the funding allocations have reflected
that over the last few years; but you will be as aware as I am
that the challenges in London are so considerable that there are
not quick fixes that solve some of the pressures that we face.
Q515 Chair: Minister,
I think some of the other members of the Committee are slightly
concerned about what other parts of the country might be covered.
I do not want you to point them out now, but you mentioned that
you were looking at data from a variety of local authorities.
I think it would be helpful if we could have a list afterwards
of those local authorities?
Yvette Cooper: Yes. We very much
did that because we did not want to simply make judgments on a
London basis; so we did say we needed a whole range for the North
East or the South West and all that kind of thing as well.
Chair: I think the list would reassure
us.
Q516 Dr Pugh:
Can I go back to the social housing target. There is obviously
a social housing target and there is actually quite a laudable
target in support of just having more housing generally, because
in economic terms an increase supply would bring down the price,
but there is a certain interplay between the two in some areas.
I have had builders come to me and say sometimes the specification
by the local authority for a high level of social housing makes
the development of relatively small plots uneconomical and quite
difficult. Do you recognise this problem, and what advice would
you give to a local authority that was failing to produce the
right number of affordable housing even though builders were building
elsewhere, maybe in neighbouring authorities?
Yvette Cooper: Always there are
local judgments that need to be made about the level of affordable
housing that is viable within planning agreements, within section
106 agreements. Areas which have higher land values, obviously,
can sustain higher section 106 agreements, particularly where
there have been land value increases as a result of planning decisions
being taken, but it will vary across different parts of the country.
The judgment the local authorities have to make is about how much
they think is viable, how much is, "Developers would say
that, would they not?", and how much is, "No, there
are genuine economic pressures on them", and it is always
a judgment and it will be for individual areas to do so. We do
provide guidance as part of the planning policy statement on housing
and around section 106 agreements, and so on, as well, so we can
certainly forward to the Committee any of that guidance.
Q517 Dr Pugh:
Does the local authority, when it makes those judgments, have
the benefit of fairly robust advice from the Department when clearly
it is missing its targets in every respect, both in overall supply
terms and in terms of social rented housing?
Yvette Cooper: If they are failing
to deliver the additional homes that are needed, then the Government
Office, in particular, may work with them around what the issues
are. The new planning policy statement does put greater obligation
and greater responsibility on local authorities to ensure that
those additional homes are being met, and obviously there are
implications for the appeal system if they are not ensuring that
enough homes are coming through and enough land is coming through
for that housing. The additional point I would make on this, because
I think it is interesting, is that there are very substantial
variations in different regions on the level of section 106 contributions
and, therefore, the level of affordable housing that is required.
A part of that is what you would expect, because you would expect
London, where there are much higher values and also where there
is higher demand for affordable housing, to be sustaining higher
levels of affordable housing through some of those planning deals,
but we do take the view that, particularly across the northern
regions but also in quite a few rural areas, more could be done
to get more affordable housing through section 106 agreements.
I have to send to the Committee some very interesting tables from
the Housing Corporation about the average cost of new social housing,
or the average level of grant for new social housing and new shared
ownership by region, which is a bit counter-intuitive: because
although in London you would expect there to be a higher level
of grant per unit because of the high construction costs, high
land value costs, the North West I think is higher than the East
Midlands and higher than the South West in terms of the level
of grant that is required for an individual unit, and part of
that is probably because they are not getting as much section
106 contributions for that additional social housing or for that
shared ownership housing in those regions. That is why we do think
there is more that could be done through section 106 in particular
areas.
Q518 Chair: Can
I draw your attention to the fact that when we were in Manchester
we were told that they had been very surprised in their Pathfinder
area how quickly the land values had altered. So, whereas previously
section 106 would have been out of the question because there
was not any value to capture, there now was. I suggest to you
that maybe the Department should be looking at that issue and
making sure that local authorities that have previously not been
able to use section 106 because there was no value do now have
the relevant expertise to be able to do it when there is value
there to be exploited.
Yvette Cooper: We are doing work
on that, which is one of the reasons I wanted to raise it.
Q519 Martin Horwood:
Returning to the issue of the overall balance between social and
private sector housing, in your memorandum you bravely, but quite
rightly, point out that the right to buy has been a major factor
in this. You talk about since 1981, but it is true, even under
this Government, since 1997, 1998 that the number of housing units
lost under the right to buy has outdistanced the number of new
build and the number of new units bought by something like two
to one. Do you think that is a desirable trend or do you think
that ultimately that risks the ghetto-isation of the remaining
social housing stock being just for those people who absolutely
cannot afford it and are the poorest of the poor?
Yvette Cooper: I think the right
to buy has played an important role in terms of giving people
a chance to get onto the property ladder, to get access to assets.
It has also in many areas contributed to mixed communities. There
are some areas, particularly on some estates, where some of that
property has, as you were describing earlier, gone back into the
private rented sector and into temporary accommodation, and so
that has mitigated against mixed communities, and I think John
Hills points that out in his work as well; but there are a lot
of other areas where the right to buy has contributed to mixed
communities, it has kept people in the area who might otherwise
have moved out as their incomes rose. I think the issue really
for us is how we make sure a lot of those receipts are invested
back into increased housing provision, new housing associations
and so on, and that is why we have said, as part of the social
Homebuy scheme, that the receipts from that should be predominantly
recycled back into new social housing so that you can ensure that
you are expanding overall supply at the same time.
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