Select Committee on Communities and Local Government Committee Minutes of Evidence


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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