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Memorandum from Savills (BDH 48)
BEYOND DECENT HOMES - DECENT HOUSING STANDARDS POST 2010
1. What lessons can be learned from the Decent Homes programme
and equivalents in Scotland,
It is
indisputable that, in overall terms, the introduction and subsequent
implementation of the Decent Homes Standard in
There are many issues in relation to the introduction of the Decent Homes Standard and many lessons that can be learnt. A summary of some of the key items are as follows:
1. Standards are always subject to interpretation, however prescriptive they are. As a consequence people can use standards to suit their own purposes unless there is very tight control. In the case of Local Authorities who have been determined to retain their stock at whatever cost, a minimalist approach has been taken to the achievement of the standard, which is often difficult to argue against. Conversely organisations such as ALMOs, who have a vested interest in increasing the quantum of work required to meet Decent Homes, have taken a different approach. This is not necessarily a criticism of the standard but the difficulty of implementing it.
2. The Decent Homes Standard is relatively low and does not take into account all aspects of maintaining properties, particularly in relation to issues around sustainability and the environment. This is fundamental to tenant satisfaction and neighbourhood management. As the Decent Homes programme has gradually been delivered, the attention of tenants and stakeholders has turned to the environment and many questions are now being raised.
3. The Scottish Housing Quality Standard is a
higher standard than the Decent Homes Standard and the Welsh Housing Quality
Standard is higher again. The funding
requirements will therefore be different across
4. The Decent Homes Standard is a "one size fits all" standard and whilst applicable for many parts of the Social Housing stock, it does not address the key issues in many portfolios.
5. The achievement of the Decent Homes Standard by 2010 has had the advantage of being a relatively short term simple objective. However the real problem areas for many landlords are the costs of maintaining portfolios as properties get older and cease to be fit for purpose. Addressing these issues and the affordability thereof has not been the focus during the last 5 years. Landlords now need to move on to adopt articulated Asset Management Strategies based on an assessment of the long term viability of the stock to drive efficient and economic investment decisions.
2. Where targeted housing fails to reach the Decent Homes criteria by 2010, how should this backlog be addressed?
Some of the backlog at 2010 will simply be a timing issue. For example, stock transfers and ALMOs that have completed within the last couple of years, and where the promises made to tenants mean that there is a delivery plan in place that will mean completion of the DHS - and subsequent investment to keep it at that standard - in the early part of the new decade.
The real issue here is for the stock that does not have a plan in place and/or where there is insufficient funding, even under a new HRA system, to allow the standard to be met without additional funding being made available.
The key risk area will be Local Authorities who, following whatever settlement is agreed following the HRA review, cannot fund the investment necessary, either because they do not have the borrowing capacity or where their ALMO funding is either not secured or withdrawn.
Any change to the HRA system needs to provide a potential fund for Authorities to bid to, which would allow them to undertake partial stock transfers, to achieve Decent Homes. This would be similar to the Estate Regeneration Challenge Fund operated in the late 1990's. This could potentially be funded through the HRA review mechanism, by redistributing more than the current attributable debt (but less than the total estimated value, to provide a cushion) leaving a fund to be administered by the HCA.
3. Should minimum acceptable social housing standards be amended to take account of environmental standards, fuel poverty and the estate?
During the last few years organisations have increasingly been asking about "life after 2010". Landlords and residents are seeking future standards that take more into account areas such as the environment, fuel poverty and the general condition of the estates in which properties are located. These factors are critical to neighbourhood and environmental sustainability.
In terms of fuel poverty, the Decent Homes Standard has gone some way to improving the energy performance of properties. One of the key drivers has been the installation of efficient heating to properties that do not currently have it, together with improvements to cavity insulation and loft insulation. These are all significant issues in the context of fuel poverty. However, the new Government targets for carbon reduction and the general acknowledgement that this will only be achieved by focusing on the existing housing stock across the country, rather than just new build, means that this area must be a key focus in any new standard. Moreover the cost of fuel has been increasing and fuel poverty continues to be a significant issue. The areas to focus on will be to improve the existing energy performance of the properties by conventional means, e.g., more efficient heating systems, more insulation etc., the provision of renewable energy initiatives where applicable and, last but by no means least, improved education which can have a significant impact.
In terms of the general environment, there is an acknowledgement by virtually everyone involved in housing that addressing the issues of the environment surrounding properties is as important as the fabric of the properties themselves. Indeed there are significant pockets of social housing stock throughout the country where the need for environmental improvements/works is arguably more important than the work to the fabric of the properties. An acknowledgement of this in any new standard is therefore very important. At the same time the big challenge will be to avoid investment in the environment of properties where long term retention is not a sustainable proposition and alternative strategies are required, e.g., redevelopment, new build etc.
4. Do the management organisations-councils, including via ALMOs, and housing associations-need to change? Will they have sufficient funds
For Local Authorities, including those managing through ALMOs, the key issue will be whatever emerges from the HRA review. If the proposals for self financing are delivered, with a significant uplift to the MRA, then Councils generally should have sufficient funds, providing that the move to standards beyond current decency levels are taken into account by the uplift. There will however be some that will require additional assistance in clearing the current backlog and we have set out our thoughts on this under question 2.
Although we are generalising here, there are two areas of weakness that we see within many Local Authorities, both at a senior level, both of which will need to be strengthened under self financing. The first is the lack of strategic financing skills within housing, and this will need to be expanded to include a wider treasury management function. There will need to be a move away from annual budget setting to working within a Business Plan environment. This is often a weakness of newly established stock transfer Associations, where the Director of Finance has transferred into the post from the Council.
The second is the lack of strategic Asset Management skills within Councils, particularly smaller ones. Although most authorities have become efficient at delivering with limited resources, moving to a more planned investment programme over a longer time period requires a culture change and wider skill range, particularly if the benefits that can arise through strategic procurement are to be realised.
For Associations, the challenge is different, although some of the comments on key skills similarly apply, particularly for smaller ones. Many Associations face difficult financial times, particularly those that have significant development programmes including sales and low cost home ownership developments. This will be exacerbated by rent reductions resulting in a more strict financial regime than they are used to. Business Plans will have limited capacity for carrying out significant works beyond the current Decency Standards in the near future.
Finally, all landlords will need to be equipped to the regenerate or redevelop properties that are no longer fit for purpose due to changes in demand, irrespective of their condition. This will include the repositioning of much of the sheltered housing stock. They will require skills in strategic analysis and development and the resources to match.
5. What are the implications for decent housing standards of the Government's proposal, currently out for consultation, to move to a devolved system of council housing finance?
Although largely in favour of the devolved system being proposed, there is a danger that any global settlement based on a series of notional costs will mean that some Authorities cannot raise the necessary funds to meet the current standards. There is an even greater danger that any increase in those standards will not be taken into account and will leave Councils in an impossible position of having a financial settlement based on an investment need that is immediately increased with no access to additional funds and lacking the delivery skills to make it work within the finances available.
The redistribution of debt will be key. Although we do not envisage that the Government currently plan to redistribute more than the current level of debt, if this were to happen, then this would cause difficulties for some Councils. On the other hand if this were done in a pro-active way to create future funding opportunities for those worse hit, a sort of safety net, then this may be a way of smoothing any inequalities that arise from notional redistribution.
6. How should the Decent Homes target for private sector homes occupied by vulnerable people be taken forward?
Very few Authorities have significantly addressed the poor standards of accommodation within the private sector. The funding arrangements for housing renewal have been limited and there are very few major programmes similar to those seen in previous times.
The likelihood of change to the funding regime is small, meaning that any real change to the quality of private sector homes occupied by vulnerable people is also unlikely. The significant backlog of investment will continue to grow and enforcement is difficult. Some progress has been made with Housing in Multiple Occupation, but unless some funding streams become available that enable Councils to use a carrot and stick approach to renewal, this is an area that is unlikely to improve. This is particularly a concern when considering environmental efficiency factors, including heating, insulation, etc.
7. Are adequate arrangements in place for the future regulation of minimum acceptable housing standards?
The monitoring of the Decent Homes Standards, and more importantly, the plans that Landlords have had to achieve them, has not been well managed. Too often, over-ambitious plans have been followed by poor performance and slippage, lack of evidence, etc. but with little action taken. This has led to regulatory action to remedy the failures in the RSL sector but with little consequential action for Local Authorities.
We are assuming that once single domain regulation is achieved that the responsibility for monitoring housing standards will fall to the TSA across all Social Landlords which should improve consistency of approach. It will need to equip itself with the analytical tools to monitor compliance.
There remains a question of accountability and enforcement. Although the TSA has various sanctions that it can use to ensure compliance by an Association, it is certainly not clear to us what powers will be available to the TSA in response to Councils that are slipping behind acceptable standards.
8. Are there local examples of innovative best practice with wider post-2010 applicability?
There are a whole host of examples of good practice across the country. We will not list specific organisations in this paper but would make the following general observations on where these organisations have been focusing their efforts:
1. In almost all the good practice examples that we have seen, the organisations involved have developed a standard of housing in close consultation with their tenants, taking on board the requirements of Decent Homes Standard and also other matters that are important to them including affordability within the business plan. This has resulted in a local standard which everyone is happy with, often termed a "Decent Homes Plus Standard". This tailoring of the standard is fundamental to the future sustainability of properties.
2. Some organisations have had a big focus on fuel poverty and are "ahead of the game" in terms of focusing on renewable energy together with the education of Technical Officers and tenants on the wider issues surrounding energy.
3. Many organisations are already looking at the environment and fully acknowledge the importance of this in terms of creating sustainable housing.
4. The advanced organisations are ones who have taken the achievement of the Decent Homes Standard as merely one piece in the jigsaw. The clever ones have developed in-depth Asset Management Strategies, gathering the necessary information to fully understand the future performance of their properties, not just in terms of future investment, but all other aspects. These organisations have, in turn, identified properties where investment is not appropriate and an alternative needs to be considered. This has enabled them to focus their funding on the properties that have a long term future. This is really a key aspect for the future affordability of whatever standard is developed. If the simple view is taken that there is a standard and all properties need to be brought up to that standard in any circumstances the model will not be sustainable. The fact is that there is a large group of properties across the country that do not have a long term future and where redevelopment is more appropriate, resolving the false dilemma between investment and development. Some organisations are addressing this, others are not.
5. The advanced organisations have gathered information to enable them to fully understand the medium to long term repairs and maintenance needs of their properties and have developed programmes accordingly. This has enabled them to procure work on the basis of long term contracts on an informed basis. This has been very attractive for contractors and, as a consequence, these organisations are receiving far more value for money out of their procurement. From a tenant's perspective there is far more certainty about the work that is going to be undertaken and from the organisations perspective, far more certainty as well as a model that is far more affordable.
October 2009
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