Memorandum from The North West Housing Forum and 4NW (CRED 15)

1. Whilst welcoming the measures announced between July and September 2008 to meet the challenges in the housing market, there are concerns about the level of impact that these will have in addressing these current market conditions. This is for a number of reasons including the sheer scale of the problem, something that could not have realistically been foreseen in the early days of the credit crunch. Furthermore they do not address some of the fundamental issues in terms of access to lending; whether home ownership should remain the key priority; and whether the already challenging targets for delivery are realistically achievable in the current climate.

 

2. We do however welcome this inquiry, and the chance to respond. We also look forward to future opportunities for working together to not only make these initiatives work, but to identify new ways of working which will help the sector respond to these difficult market conditions.

 

3. The following bullet points summarise the main aspects of our response. Further comments on the individual measures are outlined in the subsequent paragraphs.

 

· The measures are welcomed, and we would urge Government to build on these with a long term commitment to housing.

· Whilst outlining concerns around the likely impact of the individual measures we do recognise that these need to be considered as an overall package.

· There is still room for innovation, and adding to this package, and we welcome opportunities to present Government with proposals for new ways of working.

· We do believe that the measures need to be more regionally focused/administered.

· To meet our ambitions will require a short, medium and long term approach.

· The challenging targets for new build must be revisited in the current climate.

· We cannot undermine our strategic and spatial priorities in the push to deliver numbers.

· Can we really continue to push owner occupations as the tenure of choice?

· The housing market is about more than new build, and the existing stock is a key part of this, particularly in the North West region.

· A continued commitment to regeneration is welcomed.

 

4. Increase in the level at which stamp duty will apply from £125,000 to £175,000: This had been long called for by the banking and building industry, and was initially welcomed. However this is unlikely to have a significant impact as: access to mortgages has become a major issue; and there appears to be a reduced appetite to taking on a mortgage in the current climate. Certainly there does not appear to be any early indications that this has impacted on the slow down in the housing market. Furthermore we need to be mindful that in many regeneration areas in the North West, despite house price increases over recent years, properties remain significantly below the national or indeed regional average, and therefore this will have little or no impact in these areas.

 

5. £300m shared equity scheme: It is too early to assess the take up and therefore impact that this is going to have. An initial concern however is that this could perhaps confuse the shared equity/homebuy/part ownership etc market further. With the plethora of schemes now available, it is becoming increasingly difficult for first time buyers to understand the options that are available to them, and which product is actually the best for their needs. This also compounds the view that we need to get more people into home ownership, potentially increasing the number of marginal home owners, whilst resources could be more effectively directed to ensure that we have the right supply of good quality rented homes in both the social and private sector. It is also not clear whether the money for this initiative, which we understand is to come from existing Regional Development Agencies' budgets, will need to be repaid back to the Agencies at some point after the first 5 years.

 

6. £200m mortgage rescue scheme: Whilst well intended, this will only address the problems of a maximum 6,000 households across the Country, and we do have concerns in that it this will not work for many of those in the greatest need i.e. recent buyers finding themselves in negative equity and finding difficulty in securing a new mortgage deal. Furthermore the expectation is that the scheme will be administered through all Local Housing Authorities, and we have real concerns around the capacity to deliver this. This could possibly be addressed through a regional approach/vehicle, but this will require further explorations. There are a number of other issues which we have not had the time to investigate fully but will require further considerations including: What is the appetite for this from Housing Associations? Should this not have a more strategic approach than simply being linked to homeless prevention? Are there potentially moral issues arising around causes of arrears?

7. £100m investment for Support Mortgage Interest: We welcome the temporary reduction in the waiting time from 39 to 13 weeks for all new working age claimants, and the increase in the capital limits from £100,000 to £175,000. Unfortunately however this does not come into force until April 2009, and this 7 month delay from the initial announcement could potentially put many more households into financial difficulties.

 

8. £400m boost in spending for social housing providers [to enable them to provide more affordable housing schemes by bringing forward funding]: This underlines the Governments commitment to the provision of new affordable housing, however the success or otherwise of this will be dependent on Housing Associations willingness and ability to continue delivering new affordable housing programmes at a very challenging time. All the indications are that there will be a significant slow down, and that the targets set previously will be difficult to meet. Indeed we would urge Government to revisit these targets which were set during a very different economic period. It is crucial that we remain committed to our strategic and spatial approach to new build, and there are real dangers that the rush to meet targets results in the development of non strategic sites which could put other housing markets at risk.

 

9. We also need to understand what is meant by the 'limited flexibility' given to the Housing Corporation with regard to efficiency targets. The North West region has responded well to past efficiency targets, however there now needs to be a recognition that the current system of funding is fundamentally broken, and rather than flexibilities in this system we need to be looking to new ways of working. Indeed the new Homes and Communities Agency offers us real opportunities to do this. Cross subsidy (between properties for sale and social rented) is no longer a real option, and there is a real danger that if we do not revisit the basic principles of how the subsidy system works, many Housing Associations will be unable to keep developing. Discussions are already ongoing in the region to identify new ways of working, ensuring that Housing Associations, and indeed ALMOs, are well placed to continue to work with Local Authorities to meet the strategic housing need in the region.

 

10.ousing There is also the likelihood that by bringing forward monies from later years we will see reduced budgets for affordable housing in 2010/11. The concern here is that this could be seen as a knee jerk reaction to assist in meeting the targets set out in the Housing Green Paper, which will leave us with a reduced allocation at a later stage when perhaps the economic climate will be more conducive to an increase in house building targets.

 

10. Support for the most critical regeneration areas: We welcome this acknowledgment that regeneration schemes are an important part of the overall aim to ensure a fair housing market for all, and this will be of particular importance to this region. As a region we will be working closely with the Homes and Communities Agency and the Regional Development Agency to identify these critical areas in the North West Region. To enable us to do this both realistically and effectively however we need to understand the finer detail. To date there appears to have been no more than an initial statement around 'working with the Regional Development Agencies to support the most critical regeneration schemes with the most potential to transform their communities'.

 

11. A great deal of time and investment has already been put into regeneration in the region, particularly in housing market renewal areas. These areas have seen investment through acquisition and clearance which in turn has enabled both new house building and crucial improvements in private sector stock. It is crucial at this time that this investment is not undermined, indeed we need to build on this to ensure the long term regeneration and sustainability of these areas.

 

12. £200million to purchase unsold stock from housebuilders for affordable homes: This measure is certainly very welcomed, and at a time when house prices are falling, and developers are eager to broker deals where a considerable number of properties can be bought up at a significantly reduced price, this offers some very real opportunities to increase the supply particularly of social rented homes. The main concern that we have is around the 'clearing house' approach, and specifically that this is managed on a national basis. A press release from Communities and Local Government on 16 July 2008 confirmed that more funding could be made available 'should the properties be in the right place, at the right price and offering good standards'. It is the place element of this statement where we have concerns. There is a danger that the price will dictate rather than place, and if large amounts of public monies are to be spent in this way then it is crucial that the properties meet both local and regional priorities and need. We do not believe that this can be achieved through a national approach, and hope that with the regional focus of the Homes & Communities Agency a more strategic approach can be adopted, which will ensure that this initiative does indeed provide us with properties of a sufficiently high quality in the right places.

 

13. New proposals to tackle rural housing shortages: We welcome these announcements in recognition of the specific problems facing rural areas. The North West is a very diverse region, of which our rural communities are a key component. The proposals have not as yet been considered in terms of regional impact, however our Regional Affordable Housing Group will be looking at this in more detail over the coming weeks and months.

 

14. Access to Lending: Mortgage products now on offer have greatly reduced over recent months, with the need now for larger deposits to access the best deals available. Responses to help alleviate the increasing cost of borrowing have included reductions in the Bank of England base rate, however many lenders are failing to pass these cuts on to customers. More needs to be done to ensure that these measures do indeed benefit borrowers, and we would question whether the Governments should be doing more to force this issue, particularly as they now have public money staked in the industry. Indeed the Government should consider how they can use this part nationalisation of banks to support the access to funding for both buyers and developers.

 

15. Data/evidence: Whilst it is still early days in terms of gathering data, there is strong evidence emerging as to the impact the credit crunch is having on housing both in this region and across the rest of the Country. Members in the North West are reporting a significant slow down in new developments, with instances where there has been a total shut down on some sites. House sales have almost ground to a halt in many areas, although there are still some areas reporting activity at the top end of the market. The value of properties continues to fall, and whilst this has made more properties affordable, it has left many with real problems of negative equity. Additional evidence also emerging is around the mounting pressures on both local authorities and housing providers as they deal with increasing number of homeless applications, and a rise in mortgage and rent arrears.

 

16. This mixture of statistical and anecdotal evidence supports the need for continued investment in the housing market to ensure that we meet our local, regional and national aspirations. As a region we continue to gather evidence on what is a constantly changing situation and will use this to support our approach to the housing markets in the region. We are happy to provide the Committee with any supplementary evidence that we are collecting to support the inquiry.

 

17. General approach: We welcome the recognition by Government of the serious impact that the economic climate is having on the housing market. In the North West we are developing a Housing Strategy for the region based around a growing economy, therefore we also recognise the severity of the situation if we are to meet our long term priorities and aspiration. To support this we believe that our strategies and actions must respond to the economic climate in the short, medium and long term. Whilst it is crucial that we do not lose sight of our long term ambitions, either nationally or regionally, this must be realistically managed initially over the next 12 months, and then the following period until we come out of this economic down turn. This must include looking at the role the existing stock has to play as part of the overall package of measures. We should also take this opportunity to consider how we have got to the current position, and what measures need to be put in place in the long term to prevent this happening again.

 

 

19. Whilst we have voiced some concerns around the impact of individual measures, we do accept that these need to be considered as part of a wider package, and as a region we remain committed to developing new ways of delivery that will add to this package of measures. We welcome any opportunities for sharing our approach with Government as these develop.

 

20. Conclusion: We would once again reiterate that we welcome the Governments commitment to providing the resources and tools to address the current housing market conditions. It is crucial that that Government stands strongly by this commitment, housing need has not disappeared because of the credit crunch, and indeed in many cases this has been exacerbated. We do believe that there is stronger role for the regions to play which would ensure that we do not just continue to build new homes and provide new social housing, but also that they are in the right place to meet the strategic aims at both a local and regional level.

 

October 2008