5 Impact on Personal Finance
HOUSING
79. Housing costs peaked in the region in the
third quarter of 2007.[93]
Research by Shelter in March 2008 showed that across the South
West over 170,000 households were struggling to pay their mortgage
or rent, and 15,000 households were falling behind on their rent
or mortgage payments.[94]
There is a specific shortage of social housing in the South West.
New opportunities to encourage local authority building and more
resources to housing associations are to be welcomed. It is vital
that local authorities in the region respond to this to provide
appropriate units of accommodation.
80. Affordable housing supply has not kept pace
with demand. During 2007-08, the region only delivered 5,570 affordable
homes. This represents a shortfall of 4,430 on the draft Regional
Spatial Strategy target of 10,000 affordable homes a year and
is over 600 fewer affordable homes than the Government's recommended
annual average level of supply for the region.[95]
81. The drop in land values and the reduction
in private development has meant there are fewer opportunities
to leverage affordable housing from such developments. Housing
Associations have been selling fewer properties, the sales of
which would previously have funded social rented housing.[96]
At the same time, the credit crunch had exacerbated a reluctance
to lend to low-income families, meaning fewer families could access
the housing market even at the intermediate level and for shared
ownership.[97]
82. We were also told that younger people of
employment age were leaving the rural areas of the region because
of high house prices and the lack of affordable housing, and that
long term this would have disastrous consequences for rural communities.[98]
83. In 2008-09, 9,524 possession orders were
made in the region, an increase of 12% on 2007-08.[99]
At the beginning of April 2008, there were 161,353 households
on council housing waiting lists in the South West.[100]
84. The South West Regional Economic Task Group
has set up an Action Group on Housing and Infrastructure. The
Group is giving priority to several areas including constraints
within the region on mortgage lending, particularly with shared
ownership, and reducing the effect of the downturn on individuals
at risk of losing their home.
85. The Regional Minister pointed out that one
of the roles of the Action Group was to identify infrastructure
projects at risk of stalling because of the downturn and find
out what were the possible reasons for the project not continuing.
The relevant agencies involved were then brought together to discuss
whether the project could be "unblocked" with the necessary
co-operation between the relevant agencies. The Minister identified
several housing projects that had been unblocked in this way and
said
We are constantly on the lookout for any schemes
where there might be a problem or uncertainty because of—inevitably—the
economic climate, especially when it comes to private sector involvement,
to see what we can do, as public agencies, to help to move those
forward.[101]
The Government Office later provided details on further
schemes where progress had been made since 30 March.[102]
86. The Regional Minister had also met with the
South West Housing Initiative to discuss proposals to tackle barriers
to delivery and to take up issues raised with lenders about their
attitudes to low cost home ownership. [103]
87. We welcome the efforts that
the Action Group on Housing and Infrastructure has made with regard
to identifying and unblocking housing schemes that could increase
the availability of badly needed homes in the region, and also
provide much needed help for the local construction industry.
88. The problem of housing provision
in the region necessitates joint working, involving those in both
the private and public sector involved in construction and development,
local authorities, the third sector and the mortgage lenders.
We would urge the new Regional Minister to maintain his predecessor's
attention to this area.
The Mortgage rescue scheme
89. The Mortgage Rescue Scheme is aimed to helping
those at risk of losing their homes due to financial difficulty.
However, take-up has been low.[104]
Shelter told us that figures for the South West showed 348 households
have approached local authorities with mortgage difficulties since
the Mortgage Rescue Scheme's launch in January. Of these, 36 households
have applied for the scheme and so far no households have accepted
an offer through the scheme.[105]
The National Housing Federation told us they expected the take-up
to increase in time.[106]
90. Citizens Advice also pointed out there would
be a delay between businesses struggling, then unemployment rising
and a further delay before people see this impacting on their
rent, their housing and their mortgage. As such more people may
need to use the scheme in the future. [107]
91. However, we were told the majority of people
who have applied to local authorities in relation to mortgage
rescue schemes, and who are told that they are not eligible, are
referred on to other sources of advice. In this way, the people
who are at risk were accessing help on avoiding repossession that
they did not know about before they inquired for the mortgage
rescue scheme.[108]
92. In reaction to the increase in mortgage arrears
and repossessions the Government has tried to strengthen the financial
advice available to mortgagors. In May 2008, the Government announced
a series of measures to increase support for home owners. This
included £9 million additional funding for debt advice by
third sector organisations such as the Citizens Advice Bureau.
The Government has also said it would allow access to free legal
representation at county courts throughout England for households
at risk of repossession, strengthen the National Housing Advice
Service to provide a new comprehensive debt advice service, and
provide more specialist training for Citizen Advice Bureau staff
and local authorities on debt advice to help families improve
their financial management.[109]
93. We note the ambition of
the mortgage rescue scheme and the lack of take-up. We also note
the publicity relating to the scheme may have increased the number
of people approaching local authorities and advice centres for
assistance. In this regard it may have inadvertently helped direct
those at risk to a useful source of advice. We recommend that
the Government further monitor the effectiveness of the scheme.
It is too early to say if the scheme might be successful and recognise
that demand is likely to increase.
DEBT
94. Karen Stalbow from Shelter summarised the
effect on individuals, who may become vulnerable to financial
problems, because of the downturn
the process of indebtedness began prior to the recession.
What is happening within the recession is having further impact
on that … We are now in a position where people have overstretched
themselves financially. Their housing costs in relation to their
income over quite some period have put people in a precarious
position with their levels of debt. That is being exacerbated
by the risk of unemployment and the health stress associated with
being in debt.[110]
95. The importance of debt as an issue was reinforced
by figures provided by the Citizens Advice Bureau. The CAB received
565,664 client enquiries in the South West in 2008-09, which was
an increase of 10% on the previous year. While many clients presented
with more than one issue, the largest number of inquiries was
177,951 on debt.[111]
96. They also received 161,937 inquiries on benefits
and tax credits, 58,143 employment and 39,757 on housing. In addition
to these core areas, there were many other areas where the number
of enquiries rose more sharply in the South West than nationally
and many of these related to debt. For example, mortgage and secured
loan arrears enquiries up 54% (UK 49%), Payment Protection Insurance
enquiries were up 62% (37%), fuel debts/poverty enquiries were
up 25% (19%) and crisis loans and social fund enquiries were up
25% (11%).[112]
97. CAB told us that they are playing an active
role in helping people encountering problems relating to debt.
The Government had provided £1 million to CAB in the South
West (and £10 million nationally) to increase access to Citizens
Advice Bureaux by enabling them to stay open longer hours. The
funding covers the period February 2009 to March 2010.[113]
98. CAB had also received funding from the Financial
Inclusion Fund to recruit apprentices and train them for eight
or nine months to become financial inclusion advisers. CAB found
the financial inclusion fund was more flexible to demand than
LSC-funded work as a way of distributing resources and providing
debt advice and financial capability work.[114]
Helen Scadding from the CAB said there was a tendency to fund
the infrastructure rather than front line advice, and finding
sources of funding that could be delivered to front line advice
was becoming more difficult.[115]
99. However, we were told that individual Bureaux
were still being overwhelmed and clients were still experiencing
long waiting times. Advice UK, who run a network of advice centres,
also said they were operating at full capacity and receiving clients
referred from other overwhelmed advice centres.[116]
100. The CAB told us that it would be helpful
if local authorities undertook activities to increase the take-up
of benefits and tax credits in partnership with the voluntary
and community sector.[117]
SW Councils told us that beyond their core council services, they
are also offering a range of additional measures to help businesses
and people through the recession, such as encouraging the take
up of housing benefit, adopting a discretionary policy of no evictions
for rent arrears, extending time available to pay council tax
and rent, introducing support measures for people facing eviction,
providing support for debt counselling through the Citizens Advice
Bureaux and others, and support for credit unions.[118]
GOSW told us that they were using the local area agreement process
to encourage joined-up local responses to the downturn, and effective
recovery planning.[119]
101. We welcome the work that
local authorities and the third sector are doing to increase awareness
and take up of benefits and tax-credits. We recommend that the
Government Office work with local authorities, the third sector
and other partners, using local area agreements where possible,
to further encourage joint working and spread best practice.
102. We welcome the extra hours
funding that the Government has made available to the Citizens
Advice Bureau, and note the evidence from Citizens Advice Bureau
and AdviceUK relating to the demand on their services, their concern
over the difficulty of securing funding for front line services,
and that the additional hours funding expires in March 2010. We
recommend that the Government continue to provide adequate funding
for Citizens Advice Bureau.
103. We note that the repercussions
of the downturn on jobs, housing and family finances may not be
fully apparent yet. We recognise that it is preferable for those
at risk of getting into financial difficulty to gain advice relating
to benefits and financial management sooner rather than wait until
a crisis develops. We recommend that the Regional Minister works
to bring together with the voluntary sector, local authorities
and the SWRDA to ensure consistent and joined up sources of advice
relating to debt and financial management.
104. We also note that the South
West Economic Regional Task Group does not include any representative
from the third sector in its core membership. We recommend the
Regional Minister consider including such a representative on
the Task Group.
93 Q 91 Back
94
Ev 83, para 1.1 Back
95
Housing Investment in the regions: Regional Housing Pot 2008-11-Proposal
for Regional Allocations, 16 October 2007, CLG. Average annual
outputs recommended for the South West: 4,300 social rented homes,
1,900 low cost home ownership homes Back
96
Ev 83 Back
97
Q92 Back
98
Q 108 Back
99
Ev 83, para 1.1. Note-repossession orders do not automatically
mean the property was repossessed Back
100
Housing Strategy Statistical Appendix Data 2007-08, Communities
and Local Government, 2009 Back
101
Q 44 Back
102
Ev 50 Back
103
Membership includes Shelter, National Housing Federation, the
Home Builders Federation, the Confederation of British Industry,
the Chartered Institute of Housing and the Royal Town and Planning
Institute Back
104
As of 2 June, only two households nationally had completed the
Government mortgage-to-rent process. HC Deb 2 June 2009, col 153. Back
105
Ev 83 Back
106
Q 101 Back
107
Q 102 Back
108
Q 101 Back
109
HM Treasury, New scheme to help people at risk of repossession,
3 December 2008; See also www.nhas.org.uk/ Back
110
Q 99 Back
111
Ev 73 Back
112
Ev 73 Back
113
Ev 73 Back
114
Q 93 Back
115
Q 98 Back
116
Ev 86 Back
117
Ev 73 Back
118
Ev 62 Back
119
Ev 55 Back
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