Examination of Witnesses (Questions 520
- 539)
THURSDAY 19 APRIL 2007
YVETTE COOPER
MP, MS TERRIE
ALAFAT AND
MR PETER
RUBACK
Q520 Martin Horwood:
Would you ultimately want those two to balance or the new supply
to balance the lot?
Yvette Cooper: We do already put
more into housing, including social housing, than we get from
right to buy receipts.
Q521 Martin Horwood:
I meant in numerical terms, not in financial terms.
Yvette Cooper: I think the issue
you need to take account of is: what is the overall level of need
as opposed to simply saying you need to have precisely the current
level of social housing stock that you currently have regardless
of trends in income, house prices and everything else. You decide
the additional level of new social housing according to what the
overall need is, which obviously takes account of issues like
the right to buy, and so on, but needs to look at the broader
level of need for the future.
Q522 Chair: Can
I raise an issue about how much of the additional money that the
Government has been providing for social housing has been absorbed
by an increase in land prices, particularly in the South East
and London where land prices are so high?
Yvette Cooper: This is obviously
an important constraint in terms of the level of new social housing
you are able to build. Compared to 1996-97 we have doubled in
cash terms the level of investment going into new social housing
and over a 50% increase in real terms in new social housing for
this current year compared to 1996-97 and a 70% increase overall
in real terms in investment in affordable housing, so if you include
low cost home ownership as well as social housing.[2]
However, that is over a period in which land prices have gone
up and construction costs have gone up, so inevitably that creates
pressures. We have managed over the last few years to increase
the level of outputs significantly as part of the current Spending
Review alongside putting in the additional investment. We have
done a lot to try and reduce costs through a series of different
programmes of work as part of the Housing Corporation improving
the efficiency and procurement. Peter may be able to add just
a bit more detail about that.
Q523 Chair: Minister,
I am trying to concentrate on the land costs. The construction
costs are clearly important but it is land values and how much
of public funding is being absorbed by that and in particular
where housing associations may be competing one with another and
driving up the level of money that is then required from the public
sector.
Yvette Cooper: I do not have here
any figures on precisely what proportion would be taken up with
land costs but we can certainly send them to the Committee.
Mr Ruback: We have got figures
on the overall grant levels that we have to pay over time by region
and those are staying fairly stable and falling on average, even
whilst land values are clearly going up.
Q524 Chair: That
would suggest that that is because construction costs are going
down, which is welcome, but presumably we could get even better
value if there was not competition between housing associations
driving up land value.
Yvette Cooper: Well, land values
have been driven up by housing associations having to compete
with private developers as well. The overall impact of what is
happening with land values is obviously driven by a much wider
series of issues and also by the approach to the planning system
and what has been happening in the housing market over time. There
is a limit to what you are able to do to address that. We obviously
want to bring in more public sector land where we can because
that helps as part of the process, but what we have been trying
to do is effectively use both section 106 agreements and reductions
in construction costs to try and counteract what has been a long-term
increase in land values.
Q525 Mr Hands:
A couple of quick questions about the submission that you gave
to us on the White Paper. In the summary, paragraph 11, it says:
"Investment in new social rented housing will have increased
by almost £1 billion between 1997 and 2008". Can we
get the actual figures for that?
Yvette Cooper: Yes.
Q526 Mr Hands:
Secondly, later on you talked about the actual outcome, the number
of new homes, and there you chose two figures, one from 2007-08
to compare it with 2004-05 as an increase of 50%. I am wondering
why we cannot have those two aspects of this phenomenon over the
same timescale, so over those 10 years. What is the increase in
homes planned in 2007-08 compared to 1997-98 or 1996-97? I guess
what I am getting to is your earlier answer about the increase
in real terms spending since 1996-97 has not led to an increase
in social housing units that deliver and in the last 10 years
there have been fewer units delivered than I believe in the previous
10 years. There are all kinds of reasons for that and a variety
of factors, rising house prices and so on, but I am wondering
whether you think it is in any way a source of regret that there
has not been more social housing for rent built in the last 10
years?
Yvette Cooper: We can certainly
send the Committee the information in terms of the numbers that
you want. I have got some of that information here but—
Q527 Chair: I
think it would be easier if we got it subsequently.
Yvette Cooper: As I say, we have
got a 50% increase taking place in the level of new social housing
being built over this three year period. We are clear that increased
land values have obviously been a factor and it was clearly much
easier to build social housing at a time when there was a housing
market crash in the early 1990s, so when land values fell through
the floor and the housing market fell through the floor that had
an impact on construction costs and clearly that is not a scenario
we want to return to. I do not think the scenarios of the previous
10 years are necessarily desirable whether it is social housing
provision or any kind of housing provision. The second point I
would make is clearly it would also have been possible to go further
on social housing new build if we had not simultaneously had to
address the massive backlog of repairs and maintenance in existing
social housing, into which we needed to put billions of pounds.
Over a 10 year period we will have to put in effectively £40
billion in repairing and improving existing social homes so that
they do not become unliveable or leave people just not living
in decent accommodation. There are all kinds of pressures around
housing budgets and obviously we would have loved it if we had
not had to do a lot of that investment in the decent housing and
had been able to put more investment into new social housing as
well.
Q528 Mr Hands:
But most of the investment is in the years to come rather than
the last 10 years.
Yvette Cooper: An awful lot of
it has happened already. We have already cut the number of non-decent
homes by over a million, so that has halved by 1997. That is quite
substantial. From memory I was going to say it is £16 billion
public sector resources and an additional £9 billion levered
in through housing associations but I think those are out of date
figures now, it is probably more than that. It is £8.1 billion
private sector but we are not sure what the comparable public
sector figure is. It is substantial, it is billions of pounds.
Q529 Mr Hands:
It sounds like you are not entirely satisfied with the rate of
delivery over the last 10 years but you think there have been
a number of other factors involved. Do you think the Government
could have done more in the last 10 years to deliver more?
Yvette Cooper: I think we are
doing more. We are increasing the level of new social housing
at the same time as improving the quality of stock of social housing,
improving the quality of life for social tenants and addressing
some of the housing market renewal areas, the areas where you
had whole communities completely devastated and left behind and
ignored where there is also a need for capital investment in housing
to improve those areas and that has been an important part of
the programme as well. We have had a series of demands where capital
investment has been needed. I think it is right that we try and
address all of those problems rather than simply ignoring particular
communities or particular groups.
Q530 Mr Betts:
I want to look at how you are trying to expand capacity to build
more social housing, which I think we all want to try and achieve,
and to look at how we utilise existing stock. I know we have had
discussions in the past and we have had evidence to the Committee
about a desire by ALMOs and local authorities to get back into
the business of building homes and they believe they could offer
good value for money, but certain technical restrictions of the
housing revenue account prevented them in the pilot scheme of
the six authorities. I have had evidence from my own authority,
Sheffield, where the ALMO is three stars and performing extremely
well and the local authority is a top performing council and they
all want to get into the business of building homes but we are
still waiting for the go-ahead. When is it likely to happen?
Yvette Cooper: We do need to see
councils building more homes and believe that councils should
be able to build quite substantial numbers of additional homes.
It is clear that we think housing associations will be increasing
the number of homes that they will be building because they have
the ability to lever in additional private sector borrowing that
local authorities are not able to do. We will always need to recognise
that. In addition to that, we would like to remove some of the
other barriers that face local councils in terms of building more
homes, which include the operation of the housing revenue account.
The housing revenue account is important because it redistributes
between different areas, it takes account of the fact that the
historic funding decisions that affected different areas will
leave some with considerable resources and others with no resources
but substantial need and so on. The housing revenue account plays
an important redistributive role, however it does make it less
viable for councils to do their own new build, even when they
have got additional land or other assets that they can put into
the process. There are two ways that we are trying to address
that. The first is around the self-financing pilots that you talked
about that Sheffield is part of. Those pilots are very complex
because what you do not want to do is disrupt the housing revenue
account in a way that those who benefit opt out of the housing
revenue account but those who would not benefit stay within the
housing revenue account and you end up with an unfairness between
it is in everybody's interest if they are going to benefit to
opt out but those who stay in then have greater problems as a
result. There is a fairness issue as well as the complexity around
the way the process works. We are continuing to look at those
pilots and we are very interested in whether you can have a process
of local authorities, both with and without ALMOs, being able
to effectively take their housing stock out of the housing revenue
account in order to have greater flexibility to plan for the long
term, to keep rents from new homes that they build to repay debt
or to plough them back in for future investment. The other approach
that we are looking at is a change that we have made as part of
the prospectus published by the Housing Corporation a few weeks
ago which is about encouraging ALMOs and local authorities who
set up special venture companies to be able to do new build homes
which are effectively kept outside the housing revenue account.
So you do not take all of the housing outside the housing revenue
account but for additional new build housing it operates outside
the housing revenue account and that allows you to recycle the
rents from those properties back into paying for the borrowing
that put those homes up, it is that kind of approach. I hope I
have got the technicalities of that right.
Mr Ruback: Pre-prospectus.
Yvette Cooper: Pre-prospectus,
sorry.
Q531 Mr Betts:
So what is the timescale for this?
Yvette Cooper: That is the pre-prospectus
for the next phase of Housing Corporation funding.
Q532 Mr Betts:
Right.
Yvette Cooper: So that is from
2008—
Mr Ruback: The launch of the competition
this summer.
Yvette Cooper: That is the launch
of the competition this summer. That is for the next round. That
will make it easier for ALMOs and some local authorities who can
set up special venture vehicles directly without waiting for the
self-financing pilots to be able to build homes.
Q533 Mr Betts:
What is the timetable on the self-financing pilots?
Yvette Cooper: That is ongoing
work. If there is any further information I can give you about
progress then I will but I do not have that with me.
Q534 Mr Betts:
There is not going to be a requirement, is there, because there
is a concern around that local authorities are going to be forced
to divest themselves of the ownership of ALMO properties in order
to get the right to build?
Yvette Cooper: No. There are ways
in which you could have ALMOs going to become tenant management
organisations.
Q535 Mr Betts:
But it is not going to be an insistence?
Yvette Cooper: No. The two approaches
that I have described, the one that was set out as part of the
pre-prospectus on special venture vehicles and self-financing
pilots are not about using the ownership of the ALMO stock at
all but very specifically looking at the local authorities with
and without ALMOs for some of these as well.
Q536 Mr Betts:
To come on to the issue of housing associations, clearly there
are some associations which are constantly bidding for Housing
Corporation support to look to develop new homes and there are
others who seem rather content just to sit there and manage their
existing stock but are often sitting on large amounts of capital
assets which are not doing much to improve the numbers of social
houses that are available. Have you got any ideas what could be
done to unlock some of those resources?
Yvette Cooper: We have been doing
some work with the Housing Corporation to look at what the existing
assets are of housing associations, because some obviously engage
in far greater levels of borrowing against their stock than others
do, and to look at whether there are untapped assets. We would
like to see housing associations increasingly working in partnership
perhaps. You might have a housing association which does not want
to build itself but have assets that could be used in partnership
with another housing association, for example, to be able to draw
on those assets to lever in additional borrowing that could then
add further resources for new social housing. We are very keen
for housing associations to look much more closely at this and
how much better we could use the assets that they have. We are
looking into it ourselves through the Housing Corporation because
it has impacts for the level of grant that you need to give through
the Housing Corporation as well.
Q537 Mr Betts:
Have we any idea how much money might actually be locked up in
housing associations that currently they are not using?
Yvette Cooper: There are different
estimates that have been done on this. I do not have a specific
figure off the top of my head that has been estimated but I can
certainly look and see what further figures we can provide.
Q538 Martin Horwood:
I return to my suggestion that you are slightly obsessed with
building new houses when there are other ways to expand social
housing stock. Some of the more interesting evidence we have received
has been about some of the more imaginative and, frankly, larger,
housing associations being able to buy social housing stock. That
is not an option that is available to all social landlords but
it seems like an exciting one that does improve the mix of communities
as well. Is that something that you want to see encouraged and
would you think about extending that ability to social landlords
and local authorities?
Yvette Cooper: There are two points.
Firstly, the temporary-to-settled initiative is actually an example
of that. It is an example of effectively buying back social housing.
In addition to that, John Hills raised some interesting questions
as part of his review about how you can do more as part of mixed
communities, effectively pepper-potting, buying individual properties
here and there. We are looking further at a mixed communities
approach as part of the response to his report.
Q539 Martin Horwood:
And beyond housing associations?
Yvette Cooper: Sorry?
2 Note by witness: Between 1996-97 and 2007-08
the real terms increase in social housing investment is 49.3%
and 71.6% for affordable housing (social plus low cost home ownership). Back
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