Memorandum from the Chartered Institute
of Housing (CIH) (BDH 32)
SUMMARY
1. If local authorities gain financial freedom
through the planned HRA reforms, this will help considerably in
finding the resources to maintain the local authority stock in
the future. Scottish authorities already do this to some extent
because of their greater freedom.
2. There is a range of risks to achieving the
DHS by 2010 and to completing the programme thereafter, mainly
related to planned cuts in expenditure. CLG should publish
a full assessment of progress towards DHS in its next annual report.
3. There is considerable support in the
housing profession for a more ambitious standard than the current
one, covering energy efficiency and other aspects. In particular,
there is a need for a detailed investment plan to make existing
houses energy efficient. Without this, the government's carbon
reduction targets are at risk.
4. In terms of institutional changes, we
make detailed proposals about the future of ALMOs and about the
ways in which borrowing rules affect investment in the social
housing stock.
5. CIH strongly supports the principles
of the government's HRA reforms, although we will be making detailed
comments on aspects of them.
6. There are considerable resource issues
around the achievement of the DHS in the private sector.
7. In achieving potential future standards,
the key issues in the social sector are proper investment for
carbon reduction, early HRA reform (for local authorities) and
rents policy.
8. There are already many examples of social
landlords taking action to achieve higher standards in their stock.
INTRODUCTION
CIH welcomes the opportunity to make a submission
to the Committee's Inquiry. CIH represents people working in housing
bodies throughout the UK and our evidence reflects the views of
our membership (through a specific survey for this submission).
The introduction of the decent homes programme in
the April 2000 housing green paper followed the publication
of the CIH report Council Housing—Financing the Future
in 1998, which identified the scale of the backlog of disrepair
work and called for a standard to be set and a ten-year target
to achieve it. CIH therefore warmly welcomed the setting of the
setting of the Decent Homes Standard (DHS) in 2000, and the subsequent
investment so as to achieve it across the social sector by 2010.
This submission concentrates on the social sector but has a short
concluding section on the private sector.
CIH Scotland and CIH Cymru have had similar
involvement in the respective Housing Quality Standards for Scotland
and Wales. In Northern Ireland, no separate standard was created
but the Northern Ireland Housing Executive aims to achieve the
DHS within its stock.
As the 2010 target date approaches in England,
CIH has also been arguing for local authority housing to have
more financial autonomy, and for ALMOs to be given a firm indication
of the government's long-term commitment to them. This has been
in part because we recognise that investment is needed beyond
the DHS, responding to a range of problems that still exist in
the social housing stock in many places.
1. What lessons can be learned from the decent
homes programme and equivalents in Scotland, Wales and Northern
Ireland?
The DHS is a minimum standard that is capable
of being applied across the social housing sector. The setting
of the standard, the ten-year target, the allocation of the resources
and the near achievement of the target can be regarded as a major
success story. Allied to it is the development from scratch of
arms length management organisations, which grew from nothing
in 2002 to become major delivery agents of the DHS across
half the council housing stock, as well as improving council housing
services more generally and involving tenants to a much greater
extent than previously.
In Scotland and Wales more ambitious standards were
set, with later target dates, but without the same targeted resources:
— In Wales, so far there are no overall
progress reports on achieving the WHQS, as individual social landlords
are responsible for monitoring progress. However, the recent increase
in stock transfers indicates that progress—though delayed—will
be made soon.
— In Scotland, the Scottish Housing Regulator
(SHR) reports that about 70,000 homes have now achieved the
SHQS, although this is slightly behind the target rate needed
to meet the target for over 600,000 social sector dwellings
by 2015. The SHR indicates that the largest source of funding
to achieve the SHQS is recycled right to buy receipts, as there
is no requirement to repay a proportion of receipts to the Treasury
as there is in England. Councils are also funding half of the
work by a combination of investment from rental income and prudential
borrowing—again, these are measures which are not available
to the same extent in England because of restrictions on Housing
Revenue Accounts (HRAs) that do not apply in Scotland.
There are two ways to look at this in terms
of "lessons" for England:
— Scottish authorities would argue that
the only choice available to them (other than stock transfer)
was to finance the necessary work themselves, from the proceeds
from sales and from rents. Practically all Scottish local authorities
no longer receive revenue subsidy for their HRAs (ie. they are
in a similar position to Scottish housing associations).
— In England, authorities with ALMOs have
been able to rely largely on central government subsidy to finance
the work needed; non-ALMO authorities which have retained their
stock have had access to supported capital expenditure and to
a lesser extent revenue contributions and the proportion of capital
receipts that they retain. However, Scottish experience shows
that if local authorities have more financial freedom, they can
themselves raise substantial funds to invest in their stock from
rents and from capital receipts.
Another contrast with England is that both the
Scottish and Welsh standards are more ambitious, including higher
levels of energy efficiency and, in the case of Wales, covering
other aspects such as the house being "located in an attractive
and safe environment". Welsh social landlords are expected
to establish a process of consultation to establish local targets—which
is a welcome recognition of the importance of taking account of
residents' views in setting standards.
2. Where targeted housing fails to reach
the Decent Homes criteria by 2010, how should this backlog be
addressed?
The current expectation in England is that 95%
of social housing will achieve the DHS by 2010. This expectation
was set out in the CLG's 2008 annual report, but there is
no update of this in the recent 2009 report. The latest report
says that the remaining non-decent homes made up 18% of the stock
as at 1 April 2008, and that further data will be available
in November or December 2009.
The main risks to achieving the 2010 target
are:
— ALMOs set up in later rounds not receiving
sufficient funds to meet the target by 2010, or having committed
funds withdrawn.
— ALMOs not achieving the two-star threshold
which triggers the necessary funding.
— Recent stock transfers, needing gap funding
from CLG, also being held back by lack of funds.
— Stock retaining authorities which have
to meet the target from their own resources, which may over-shoot
the target date, under-estimate the scale of remaining work or
set the target at deliberately low levels.
The National Federation of ALMOs (NFA) has estimated
the requirement for ALMO subsidy to complete DHS as £2.5 billion
for the three-year period 2010-11—2012-13 and £400 million
for beyond that.
Any shortfall against the DHS target in the
social sector could be addressed either by central government
funding or by local resources (particularly in the case of stock
retaining authorities). The major risk factors in the future availability
of central government resources to complete the decent homes programme
are:
— The fact that £250 million
of decent homes funding was brought forward in the Pre-Budget
Report (with a cut in funding after April 2010).
— Indications that decent homes funding
will be diverted or delayed because of targets for new build.
— The strong possibility of further spending
cuts from 2010.
To complete the programme in the remaining non-ALMO
stock, the outcome of the HRA review is also crucial (see below).
In CIH's view, it is beholden on CLG by its
next annual report, which will be in the target year, to make
a definitive assessment of progress against the target and put
forward proposals for addressing any shortfall, with a revised
completion target and identification of the income streams available
to complete the programme.
3. Should minimum acceptable social housing
standards be amended to take account of environmental standards,
fuel poverty and the estate?
CIH has canvassed opinion among its members
about the desirability and scope of any revised DHS and the results
are presented in Appendix A. There is some consensus on various
points about any new standard:
— Energy efficiency and fuel poverty measures
are seen as crucial (see below).
— The other main gaps are seen as environmental
measures in estates, common parts in flatted developments (eg
lifts) and security measures (eg controlled entry systems).
— There have been calls for local discretion
to add to the current standard and indeed this has often happened,
with landlords adopting what a local "decent homes plus"
standard.
— The current DHS has limitations, eg in
allowing excessive life expectancies for some building components.
Any new standard should be more stringent.
— The difficulty in moving to a new standard
nationally would be reaching agreement on measures which are likely
to vary according to location, type of housing stock and tenant
preferences (see earlier comment about experience in Wales). A
new standard is therefore likely to have to be flexible in some
aspects.
— Respondents to the survey felt that future
funding was a major obstacle to a more ambitious standard.
A sample of some specific suggestions made in
the survey is given in the box below.
SPECIFIC ITEMS
FOR INCLUSION
IN A
NEW STANDARD—SUGGESTED
BY HOUSING
PROFESSIONALS.
— internal elements such as internal doors
— showers as well as baths
— water metering and fitting of low consumption
water products in bathrooms
— addressing IT requirements for growing
families
— provision of recycling storage, especially
in flats
— higher standards of external lighting
— fire safety and passenger lift access
standards
— much higher insulation levels, eg thermal
cladding on solid wall properties
— renewable energy sources such as ground-sourced
and air-sourced heat pumps
— incentives for micro-generation of power
— minimum SAP levels depending on age of
property
— annual carbon reduction targets
— energy advice training for front line
staff
— use of timber from renewable/sustainable
forestry
— annual fuel poverty reduction targets
Source: CIH survey, 2009 (see Appendix A)
The key requirements in meeting flexible standards
that ensure that the stock remains attractive and lettable are
therefore to ensure that landlords have sufficient financial autonomy,
and have the capacity to generate spare resources to meet newly
arising needs and to respond to tenant demands.
3.1 Energy efficiency and fuel poverty
On energy efficiency and fuel poverty, the government
does of course have binding national targets which should translate
into specific sectoral targets, for example for social housing,
with appropriate timetables and consideration of resource needs.
However, there remains considerable uncertainty about targets
for the social sector and how they will be resourced. For example:
— The government's Heat and Energy Saving
Strategy, published in February, notes the achievement of the
DHS and that the sector is eligible for the Warm Homes programme
and CERT (Carbon Emissions Reduction Target). It says it is committed
to considering the investment needs of the existing social housing
stock in reducing emissions.
— The Low Carbon Transition Plan, published
in July, repeats this and adds that £84 million was
allocated in the Budget for cavity wall insulation in social housing.
Both documents say that:
"The Government will show leadership
by ensuring that social housing meets, and where possible exceeds,
the aims it is setting for all housing on energy efficiency and
low carbon energy."
Although the implication of government targets
is that carbon emissions from existing housing must be cut by
80% by 2050, insufficient work has been done to assess what this
means in terms of annual investment. To achieve the target, the
whole stock (public and private) needs to be transformed at a
rate of 500,000 units per year, starting now. Within this,
social stock needs to be dealt with at the rate of nearly 100,000 per
year (in England alone). Given the high cost per dwelling (in
the region of £15-20,000) it is clearly vital that a programme
is established and begins as soon as possible. Unless a programme
of this kind is begun soon, there is little prospect of the government
meeting its carbon reduction targets.
On the basis of Germany's experience in retrofitting
its housing stock, the Existing Homes Alliance estimates that
a major programme would require around £2 billion a
year over the period to 2050, half of it for social housing. This
could create up to 200,000 jobs and save the public purse
around £1 billion in benefit payments per year.
The Alliance has prepared a detailed analysis
of the options for investment in existing housing to achieve government
targets (available at www.existinghomesalliance.org/media/ExHA_Finance_Paper.pdf).
A detailed programme for the social housing stock is now needed,
assessing the extent to which it will require national resources
or could partly be paid for through existing programmes or (for
example) by increases in rents.
CIH believes that the government's transition
plan therefore requires a specific programme for social housing
with ten stages:
1. Translate the overall carbon reduction and
fuel poverty targets into stepped, annual targets for social housing.
2. Establish a robust baseline against which
progress can be measured.
3. Assess the main measures needed in the sector,
the main priority areas, obstacles likely to be faced, technical
assistance required.
4. Assess the investment required and what combination
of central and local resources is needed over what timescales,
taking account of existing programmes.
5. Plan for achieving the targets in both the
local authority and housing association sectors, showing the role
of existing programmes such as CERT and any new programmes needed
to achieve the planned investment at the required rate.
6. Implement appropriate finance mechanisms immediately.
7. Through the Tenant Services Authority, plan
to progressively raise standards so as to underpin the targets
set (eg by specifying that no social home should be let from 2020 onwards
which is below a "C" rating in terms of thermal efficiency).[35]
8. Take similar steps through the devolved administrations.
9. Monitor achievement on a regular basis, as
with decent homes, across the different administrations.
10. Compare achievement of the targets for the
social sector with those for housing as a whole, and with the
whole low carbon programme, and make necessary adjustments to
keep to the transition plan's targets for 2020 and 2050.
Unless there is a framework of this kind, it
is very difficult to see the large number of social landlords
taking action sufficiently quickly and on a big enough scale to
enable the 2020 target to be achieved.
4. Do the management organisations—councils,
including via ALMOs, and housing associations—need to change?
Will they have sufficient funds?
This is a wide-ranging question, and in response
CIH would like to concentrate on two aspects, the future of ALMOs
and the borrowing rules that apply to investment by social landlords.
(Issues concerning HRA reform are dealt with in response to the
next question.)
4.1 The Future of ALMOs
As the Committee is aware, ALMOs were established
following the April 2000 green paper, and were seen mainly
as a means of achieving the DHS. However, the Committee is also
aware that ALMOs have been extremely successful, not only delivering
the DHS but raising performance standards, achieving high levels
of tenant satisfaction and involving tenants in the management
of their homes. It is clear that ALMOs should have a long-term
future.
Both CIH and the NFA have argued that government
policy should recognise not only that it is worthwhile retaining
ALMOs, but that a policy of benign neglect towards those that
have finished their decent homes programmes will result in the
demise of many ALMOs. Indeed, at least two authorities with ALMOs
are already taking steps to transfer their stock, which would
mean these ALMOs becoming housing associations.
The government has belatedly recognised the
danger, and the recent consultation paper on council housing finance
contains assurances about ALMOs, and sets out a more "level
playing field" for councils to retain stock rather than transfer
it. Nevertheless, the risks remain.
As long ago as 2005 the CIH, along with
the NFA and HouseMark, published proposals to secure the future
of ALMOs in the report ALMOs—A new future for council
housing. This called for ALMOs to be able to operate self-sufficient
HRAs, and to be able to raise their own finance. (The NFA has
recently published a further report A Future for ALMOs—Within
local communities, which adds to these arguments.)
Self-sufficient HRAs are now a firm prospect,
with the government's recent proposals for reforming council housing
finance. However, it is vital that the reforms are carried forward
quickly if they are to be attractive to authorities which have
ALMOs and which are considering their future.
4.2 Borrowing rules and council housing investment
The second reform noted above is that ALMOs
should be able to raise their own finance. There are two routes
to this. The first, within present government policies about borrowing,
would be to enable authorities to change the management of their
ALMOs, so that there is no longer majority council control (indeed,
there could be majority tenant control, as is already the case
with one ALMO). This would enable ALMOs to be reclassified as
private sector (like housing associations) for accounting purposes,
and to borrow from commercial lenders without this counting as
public borrowing.
The second, more ambitious, change would be for the
government to reconsider its policy about how it measures public
borrowing, and come into line with the rest of Europe. At present,
public borrowing in the UK includes borrowing by the whole public
sector, taking in not just central and local government, but also
borrowing by "public corporations"—which include
all ALMOs, and also bodies like British Waterways Board and British
Nuclear Fuels.
However, the rest of Europe, and bodies such
as the OECD and IMF, use a narrower, "general government"
borrowing definition, which excludes public corporations. The
government could logically change to the more accepted definition,
thus freeing up public corporations to raise finance where this
can be supported by income. This would, incidentally, also benefit
council housing still retained by local authorities, as the ONS
has already classified this as "quasi-corporations"
which are also part of the public corporate sector, rather than
in the government sector. Local authorities and ALMOs would continue
to be bound by prudential borrowing rules, ie they would only
be able to borrow to the extent that they could meet the costs
from their income.
In the view of both CIH and the NFA, such a
change could offer sufficient incentive to authorities to retain
ALMOs and give them a longer-term role. It would enable ALMOs
to raise funds to address the wider environmental improvements
and energy efficiency issues discussed earlier.
Such a change would benefit council housing
as a whole, bringing it closer to having the financial advantages
enjoyed by housing associations. It would enable councils to fully
use the freedoms of self-financed HRAs, and in the CIH's view
is vital to enable authorities to address in future the continuing
challenges of maintaining and adding to their stock, and tackling
environmental issues.
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?
CIH strongly supports the planned reform of
council housing finance and is currently developing its submission
on the details of the government's proposals. There is widespread
support among housing professionals for these reforms. Some are
arguing that reform should proceed via a government write-off
of existing housing debt, allowing the rental income freed up
from interest payments to be invested in the stock. The headroom
could, in all but a few cases, meet the long-term needs of all
the stock and would provide a surplus to contribute to new house
building.
However, CIH believes that it is extremely unlikely
that the government will accept this case and write off up to
£17 billion of existing debt in the present public spending
climate. CIH therefore wants to see a settlement based on the
redistribution of debt, but done in a way which is fair and which
provides sufficient headroom for councils to address future needs
within their stock.
Unfortunately, the settlement calculation as
envisaged in the published government proposals could actually
result in more debt being issued out than there is currently
in the system. Whether by accident or design, the consequences
could be very significant. Some authorities could be worse off
in the short term. Authorities would have to take on debt levels
which could limit future headroom and therefore restrict future
investment in long-term sustainable communities.
While the government might want to limit future
borrowing by authorities, the stock must still be kept in good
condition and be attractive and lettable to potential tenants.
Saddling authorities with too much debt would have a similar effect
to that felt by a householder with a large mortgage who is confronted
by the need for urgent repairs, and cannot finance them.
On the other hand, if the current level
of debt (£17 billion) is redistributed in a fair way,
all authorities would be better off, begin to feel the positive
benefits of self-financing and could look forward to a sustainable
future for their housing stock.
6. How should the decent homes target for
private sector homes occupied by vulnerable people be taken forward?
It is difficult to do justice to this issue
in answering one question from the Committee, as it is a complicated
one. The basic problem which councils face in achieving the DHS
for vulnerable private sector households is lack of resources.
Few (if any) authorities now have major private sector housing
renewal programmes, as these (unlike council housing investment)
depend on revenue resources from the General Fund (ie from RSG
and from Council Tax) or on available Supported Capital Expenditure
(SCE) which is not required for DHS work in the public sector.
Resources under all of these headings have been limited in the
past few years, especially as renovation grants are now entirely
at local discretion (except for Disabled Facilities Grants). It
therefore seems unlikely that the backlog of 1.3 million
non-decent homes occupied by vulnerable households in the private
sector (as assessed in the English House Condition Survey 2006)
will be tackled quickly.
7. Are adequate arrangements in place for
the future regulation of minimum acceptable housing standards?
The results from our survey (Appendix A) suggest
the need for consultation on future standards and to start planning
for the period beyond achievement of the DHS. The implications
of the earlier sections of this evidence are that satisfactory
arrangements for future standards are not in place, particularly
in respect of carbon reduction targets.
In relation to investment in the council housing
stock, the crucial issue is achieving early implementation of
HRA reform. If this drags on for several years, it is likely that
stock will fall below existing standards, let alone meet
any new ones.
Finally, the availability of resources to all
social landlords depends most of all on the rents which they collect,
whose levels are currently governed by a policy on convergence
of rents across the social sector. There is a need to set out
a longer-term policy on rents, which preserves affordability but
also permits resources to be raised for investment in the stock.
8. Are there local examples of innovative
best practice with wider post-2010 applicability?
Previous mention was made of social landlords
who have adopted local standards that are higher than the DHS,
and which in many cases are based on consultations with tenants
so that the standard is not just one set by the government but
reflects local needs.
Many social landlords are also taking action themselves
on environmental issues. Some housing associations and some "three
star" local authorities/ALMOs have ambitious climate change
strategies which include addressing the carbon emissions from
their housing stock. One housing association—the Accord
Group in the West Midlands—estimates that 98% of its emissions
come from its housing, showing the crucial importance of the existing
stock.
There is a wider agenda of the choices that
should be available to tenants to receive different levels of
service from their landlord, with which CIH is engaged, but which
raises much bigger issues than can be dealt with here.
APPENDIX A
CIH "BEYOND DECENT HOMES" SURVEY
An online questionnaire was sent to a sample
of 425 individual housing professionals. A link to the questionnaire
was also distributed via the electronic CIH membership newsletter.
Survey results are based on 95 respondents (22% response
rate).
SUMMARY
— Overall, there is support for a new post-2010 standard.
Funding and the difficulty of agreeing on a national standard
are seen as the main stumbling blocks. — A potential new
standard should have a specific "green" focus—measures
addressing energy efficiency and fuel poverty.
— Overall there was a sense that those
elements not included in the current DHS should be picked up by
any potential successor.
— Standards should be more stringent (eg
shorter life expectancies for fittings/building components).
DETAILED SURVEY
RESULTS
— Just 49% have implemented (or are about
to) a standard exceeding the current DHS, the majority of which
have specifically addressed energy efficiency followed by exterior
environmental improvements, upgrading of both kitchens/bathrooms
as well as building components/fittings as required (even if they
are not part of the DHS). — Of the 61% who would like to
see a revised post-2010 standard, the majority (90%) think
that it should have a particular "green" focus.
— The lack of adequate funding is one of
the main reasons cited by those who would not like to see a post-2010 standard.
— Nearly three-quarters (73%) agreed that
if there was to be a post-2010 standard, it should have a
particular "green" focus. When asked about the specific
elements of a potential new standard, measures addressing energy
efficiency and fuel poverty topped the list in the case of almost
all respondents (93%), followed by measures addressing the wider
environment on an estate or common parts of flatted developments
(66% and 63% respectively) and measures addressing security of
the home (56%).
— Raising the necessary finance is perceived
to be the major challenge to implementing a post-2010 standard
(88%). Some respondents also noted the difficulties of implementing
the current DHS standard, let alone maintaining it. A number of
respondents raised the issue of allowing more flexibility in setting
rents as a means of raising money to meet a potential new standard.
For instance, whilst tenants would pay higher rents (in order
to fund energy efficiency work), they would make considerable
savings on their energy bills, outweighing the overall rent increase
(although increased rents would also affect housing benefit costs).
— The outcomes of the HRA review, allowing
LAs to borrow against their revenue stream was perceived to be
key if any new standard is to succeed. However, respondents also
believe that some government funding/grant aid is a prerequisite
for any post-2010 standard.
— Given local preferences/needs and a vastly
differing stock profile, over two-thirds (67%) feel that agreeing
on a national standard is another major stumbling block. Several
respondents suggested allowing more local flexibility in setting
a standard. For instance, housing providers could be allowed a
5-10% leeway in achieving standards or trade offs to meet specific
energy criteria. A number of respondents further believed that
determining standards should only be done in consultation with
tenants.
September 2009
35 This is broadly in line with the Energy Saving Trust's
advice to government to make it illegal to sell and rent properties
with an Energy Performance Certificate rating of F or G. Back
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