Memorandum by the South East England Regional
Assembly (CRED 37)
SUMMARY
— The South East England Regional Assembly
is the statutory Regional Planning Body for the South East, and
chairs the Regional Housing Board. We are therefore well placed
to advise the Committee on matters relating to the achievement
of the Government's house building targets.
— In its proposed changes to the South
East Plan the Government proposes 662,500 homes be built in the
South East over a 20 year period (33,125 per annum), 4% higher
than the independent inspector panel's recommendations. We believe
that evidence shows that such a target is unrealistic in the current
economic climate.
— We believe the current economic situation
will fundamentally affect the linkage between supply and demand
for housing. In the short-term we believe that the Government's
continued focus on delivering its targets for more homes has the
potential to create problems of a longer-term nature, particularly
relating to ensuring provision of the right size and type of home
in the right location. We wish to create mixed communities without
the dominance of a single tenure.
— The current economic situation is
compounding existing problems relating to the provision of affordable
housing. With the number of new starts dropping due to wider market
conditions, so the importance of public sector investment increases
if we are to maintain a supply of affordable homes.
— We believe that the Government will
need to make available additional funds for investment to ensure
a suitable level of affordable housing is delivered. There is
a critical need for the Government to address the gap in public
funding to deliver the affordable housing needed in the South
East. In addition we believe that the Government should allow
the region greater short-term flexibility in the use of the funding
that is currently available to our region.
— Public sector investment can help
deliver the enabling infrastructure that gives house builders
confidence that planned growth will continue to be realised. We
believe it is essential that the region is given greater flexibility
in the targeting of the investment funds available.
— We believe there is a need for the
current Housing Revenue Account Subsidy System to change. The
South East is currently a net contributor to this scheme nationally.
Given the need for investment in our own region, we are concerned
that South East tenants, many of whom have very limited finances,
are effectively being taxed to pay for investment in other regions.
1. INTRODUCTION
1.1 Thank you for the invitation to submit
evidence to your inquiry. The South East England Regional Assembly
is the statutory Regional Planning Body for the region. The Assembly
prepared the draft South East Plan, the Regional Spatial Strategy
for the region. The Plan was supported by a comprehensive evidence
base that was compiled in partnership with local authorities and
other partners across the region. The South East Plan, and its
supporting evidence base, was the subject of independent testing
by a panel of inspectors.
1.2 In addition the Regional Assembly chairs
the South East England Regional Housing Board. The Housing Board
is a partnership board and is responsible for preparing the Regional
Housing Strategy, for monitoring progress against its delivery
and advising Government on regional priorities for investment.
1.3 The Regional Assembly is therefore well
placed to advise the Committee on matters relating to the first
of its key lines of inquiry—achievement of the Government's
house building targets, both for market and social rented housing.
It is already clear that the current economic situation is compounding
existing problems relating to the provision of affordable housing.
More specifically we believe that the Government will need to
make available additional funds for investment to ensure a suitable
level of affordable housing is delivered in the region. In addition
we believe that the Government should allow the region greater
short-term flexibility in the use of the funding that is currently
available to our region.
1.4 I would be pleased to supplement this
written submission with oral evidence to the Committee.
2. HOUSING TARGETS
2.1 In its proposed changes to the South
East Plan the Government proposes 662,500 homes be built in the
South East over a 20 year period (33,125 per annum), 4% higher
than the independent inspector panel's recommendations. We believe
that the evidence shows that such a target is unrealistic in the
current economic climate.
2.2 A recent survey by the South East England
Development Agency of 15 major house builders identified:
— House prices have fallen 15% this
year, flats 30%. Residential new starts are expected to be 60%
down year-on-year by December.
— Job security is now as big an issue
as mortgage availability in preventing buyers committing to a
purchase.
— Development of many major sites is
now on hold.
— Changes to the stamp duty regime
have been largely irrelevant given that the majority of properties
in South East England are valued at above the £175,000 threshold.
— Concerns that the Government's `rescue'
package announced in early September—interim small scale
initiatives—is being read by many purchasers as an alarm
bell, damaging confidence rather than providing comfort.
2.3 A fall in commercial developments also
means a fall in the scale of affordable homes and supporting infrastructure
that can be delivered through s106 arrangements in the planning
system; and more widely it affects the scale of funding available
through the Housing and Planning Delivery Grant. The Assembly
believes that the current economic situation will fundamentally
affect the linkage between supply and demand for housing. The
implications of this change, together with changes in migration,
demographics and wider sustainability factors, need to be monitored
on an on-going basis in order to assess the appropriate level
of development in the region.
2.4 The timing and regularity of reviews
of the South East Plan will need to be informed by the outcome
of this monitoring process. However, in the short-term we believe
that the Government's continued focus on delivering its targets
for more homes has the potential to create problems of a longer-term
nature, which we set out below.
2.5 A key issue for the South East Plan
and the Regional Housing Board is the need to provide the right
size and type of home in the right location. In addition it is
essential that new homes are built to the appropriate standards.
The requirements to build to certain standards are particularly
important to consider in relation to public sector investment
in the delivery of new affordable homes, as it has significant
cost implications for delivery.
2.6 We are concerned that through its agencies—the
Housing Corporation and its successor the Homes and Communities
Agency—an over-emphasis by Government on headline numbers
runs the risk of these principles being compromised. Notwithstanding
the need to deliver a larger number of affordable homes, we must
avoid such a situation occurring. We wish to create mixed communities
without the dominance of a single tenure, and there is a danger
that by only building social housing this would not be achieved.
3. AFFORDABLE
HOUSING
3.1 It is clear that the house building
market is experiencing difficulties of a profound nature. With
the number of new starts dropping, so the importance of the public
sector investment increases if we are to ensure an appropriate
supply of affordable homes. We believe that there are two key
issues relating to public sector investment that require consideration
in the current circumstances.
3.2 Firstly public sector investment can
help deliver the enabling infrastructure that gives house builders
confidence that planned growth will continue to be realised. In
these situations we believe it is essential that the region is
given greater flexibility in the targeting of the investment funds
available. The guidance issued by Government in respect of the
preparation of the Regional Funding Advice encourages the region
to be creative in its thinking and to focus on how the funds available
might best be used to deliver planned growth.
3.3 The guidance explicitly refers to the
potential to invest in the establishment of a Regional Infrastructure
Fund (RIF). The purpose of the RIF is to pump prime the delivery
of enabling infrastructure with the investment recovered through
the planning system. We have already identified funds from the
transport and economic development components of the existing
Regional Funding Allocations to establish the South East England
RIF. Working in partnership with the South East England Development
Agency, we envisage that the RIF will be operational at the start
of 2009.
3.4 In our existing Regional Funding Allocation
advice to Government we identified the potential benefit of investing
a small proportion of the housing component of the allocations
into the RIF. This proposal was supported by partners in the region
and would have increased the potential of the region to invest
counter-cyclically. The region's commitment to the RIF, notwithstanding
the lack of support from within CLG to this aspect of our initiative,
demonstrates the critical role that a public sector pump-priming
fund has in unlocking land for housing development.
3.5 We believe that the basis for investing
a proportion of the housing component of the allocations into
the RIF remains valid. However, this requires Government to accept
that the number of affordable homes delivered directly through
public sector investment may be lower in the short-term. Delaying
affordable housing in this region is something we would not do
lightly, and only where a clear long-term benefit is evident.
Any short-term impact on delivery of affordable homes would only
be considered if it will enable better delivery in the longer-term.
This means not only enabling the subsequent building of affordable
homes, but also freeing up commercial developments which would
reap an affordable housing benefit for the region.
3.6 The benefit of such investment is its
potential to help increase the speed at which market recovery
eventually takes place. Government must therefore accept that
its continued focus on headline targets set before the current
downturn has the potential to be counter-productive in the medium-term.
3.7 The second aspect of public sector investment
that needs further consideration in the current climate relates
to the average level of grant funding. We have previously raised
with Government our concerns regarding the adequacy of the funding
available to support individual proposals. An analysis undertaken
by the Assembly showed that, based on the average level of grant
made in respect of new affordable homes, the overall level of
funding made available by Government was insufficient to deliver
the need set out in the draft South East Plan submitted to Government.
The Government's proposed changes to the South East Plan increases
the target for the region without being matched by any increase
in the overall level of funding.
3.8 The existence of a "funding gap"
is supported by the evidence available through the monitoring
data collected at the regional level. In 2006-07 the region saw
7,100 new affordable homes built against a target of 11,600 homes.
Notwithstanding our major concerns regarding the Government's
overall housing target for the region, it is clear that a higher
level of overall investment will be required by Government if
we are to meet the affordable housing needs of the region.
4. THE HOUSING
REVENUE ACCOUNT
4.1 The Regional Housing Board is taking
a keen interest in the Government's review of the Housing Revenue
Account Subsidy System. It is clear that there is a need for the
current system to change.
4.2 We estimate that in 2008-09 local authorities
in South East England will make a net contribution of some £185
million to the subsidy system nationally; the equivalent of a
contribution of £951 per tenant, representing 28% of rents
collected from tenants across the region. Given the need for investment
in our own region, the Board is deeply concerned that South East
tenants, many of whom have very limited finances, are being taxed
to pay for investment in other regions.
4.3 The current economic conditions exacerbate
this concern. The Chairman of the Housing Board recently wrote
to the Housing Minister, encouraging her to ensure that the Government's
review of local authority housing finance enables those funds
to be retained within the region to provide affordable housing
and reduce the impact of climate change. We are developing more
detailed proposals which will be considered at our next Housing
Board meeting on 20 November. We would be pleased to share this
work with the Committee.
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