Examination of Witnesses (Question Numbers
146-159)
MR DAVID
ORR, MR
ANDY DOYLEND
AND MR
BRUCE MOORE
9 NOVEMBER 2009
Q146 Chair: Can I just start off, are
housing associations going to hit the 2010 deadline for decent
homes?
Mr Moore: Hanover already does
meet the Decent Homes Standard.
Mr Doylend: With one or two outriders
and stragglers, substantively yes.
Q147 Mr Slaughter: You have had an
easier job on the whole because with a lot of housing associations
the stock is newer and therefore it is not such a challenge as
bringing council stock up to scratch. I noticed the old housing
associations—Peabody and those whose stock dates from late
19th century or early 20th century—in order to meet standards
they are either selling off stock or raising money by other means.
What are the problems that RSLs are having in meeting Decent Homes?
Mr Orr: I think you are right
to say that in some respects it has been easier for housing associations
than for others because much of the stock is newer and built to
better quality as well and is better maintained during the lifetime
of that stock. The second batch, of course, housing associations
created as a result of LSVT where the objective was to create
a mechanism for investing to meet the Decent Homes Standard and
that process has worked; in the main it has delivered the promises
that were made. Then there are of course the older organisations,
many of whom have had to do a more fundamental restructuring of
their stock to be able to meet these standards. There is a kind
of complicated relationship between the cost of the works and
the rent that they are presently charged where particularly Peabody
but others of that kind of association have historically had lower
rents which has meant that they had less income to be able to
meet the Decent Homes Standard. As you know, there has been no
direct government subsidy for housing associations to meet the
Decent Homes Standard at all.
Q148 Mr Slaughter: Have most associations
had to put their rents up? Presumably that is something which,
given the relatively high rent that a lot of associations charge,
that presumably is unpopular with tenants.
Mr Orr: In the main housing association
rents have been controlled since 2001 as a result of the rent
convergence regime so there has been very little real flexibility
for housing associations to do that.
Q149 Mr Slaughter: How are they doing
it? Are they doing it by a combination of rent rises when they
can?
Mr Orr: They are doing it by a
combination of rent rises where they can but effective outside
management and from time to time that has involved a small proportion
of sales to be able to release some of the equity to allow the
investment in Decent Homes.
Q150 Mr Slaughter: With Peabody it
is up to ten per cent of stock[1],
and good quality stock at that. Is that something that you are
concerned about, which you have made representations about or
for which you think there should be alternatives?
Mr Orr: In respect of Peabody
I think they should have been allowed to put their rents up more
because they are below average and I think that would have allowed
them to do more without having to sell. I think there is a huge
amount of trapped equity in social housing generally, a point
that other of your witnesses have made, and I do think it is rational
for us to look at what a sensible asset management strategy should
look like and I do not think that an occasional sale is bad because
sometimes it does allow the release of equity to do good things
like meet the Decent Homes Standards or even stimulate additional
new build.
Q151 Mr Slaughter: An occasional
sale is different from selling ten per cent of your stock.
Mr Orr: I think Peabody would
not have wanted to sell ten per cent of their stock and they would
have preferred to have been allowed to put their rents up to an
average, one that was consistent with the average for the areas
they work in.
Q152 Mr Slaughter: Bearing that in
mind and that the definition of Decent Homes may change or may
expand, do you favour any change? Do you think it has gone as
far as it should go and do you wish it left to individual associations
to set their own criteria or do you wish to see more government
intervention?
Mr Orr: We would like to see the
Decent Homes Standard retained as an absolute minimum; we would
like to see more flexibility for individual associations to be
able to negotiate standards appropriate to those places in conjunction
with our tenants. I do think that that is consistent with an agenda
which is about engaging tenants far more in the decision making
about their homes and communities. So I think we are not in favour
of a recast centrally imposed Decent Homes standard partly because
so much of what we would have to talk about is about environmental
retrofitting and that is such a big issue that I think a kind
of recast Decent Homes standard is not the way to go about doing
that.
Q153 Chair: If it is not a standard
imposed by government across the piece, what would be the point
of having specifically enhanced Decent Homes standards negotiated
locally?
Mr Orr: My colleagues may want
to answer for their own organisations, but in brief there comes
a point where I think it is right that tenants should have a choice
for themselves about whether they would rather see the available
investment in improving the public realm and enhancing public
safety or having more kitchens and bathrooms. The difficulty about
a centrally imposed standard is that it takes away that local
determination.
Mr Moore: Just concurring with
what David said, I think having a base standard that everyone
should meet but then actually reflecting the differences. You
asked previous witnesses to explain what their plus factor is
on their Decent Homes and in effect what we are saying is that
Decent Homes as strictly construed is a very low standard and
each association, each council should be able to then determine
how much further they go according to their local circumstances
and according to the property type because what might work and
be a good cost effective solution on one property type may not
be as applicable for elsewhere or the type of tenant that lives
in that property as well, so different issues for an older person's
association in terms of frailty requirements et cetera may have
a different requirement to add onto that base standard. We still
strongly think there should be a base standard but then the scrutiny
should be: what and why are you applying those plus factors rather
than different plus factors?
Q154 Andrew George: To what extent
do you and the members of the Federation say that the Decent Homes
standard is diverting you from perhaps other objectives within
the organisation itself, whether it be overcrowding or dealing
with waiting lists and transfers and other issues which you may
consider more preferable priorities? Do you believe that the emphasis
on Decent Homes standards is not diverting you from those other
objectives?
Mr Doylend: Generally no. The
Decent Homes standards is such a level that actually most landlords
would want to maintain up to that standard as a minimum anyway.
Building on what my colleague has said, most of us have local
standards that we go well beyond so that local choice is already
there. Going forward, however, it is what is built into business
plans in perpetuity, and that is maintaining Decent Homes and
a bit above, compared to an imposed revised standard and how do
we pay for that.
Q155 Alison Seabeck: Hanover, you
run a co-payment scheme. I am reading it as you doing the basics
and where you want to enhance it you can agree with individual
tenants to do that rather than take David's approach that there
should be flexibility and everything should be blanket done across
a group of properties. How does that work and does it actually
produce equities or some tenants feeling that others are doing
better than they are?
Mr Moore: We are about to broaden
out our initial pilot of a co-payment approach. The co-payment
works on the basis that if we are still not satisfied in terms
of the replacement cycles for our kitchens and bathrooms it is
a priority for our tenants and a large number of our tenants are
already putting new kitchens or adaptations to their bathrooms
for themselves. Our view is that we should be helping and encouraging
others to do that. We are proposing that if somebody's bathroom
or kitchen is due to be replaced within five years we would meet
80 per cent of the cost, five to ten years, 60 per cent and ten
to 15 years 40 per cent to help meet and incentivise that process
of tenants who have resources putting those into play. However,
we are not saying that those who cannot afford to put their own
resources into play go without; we are still having a base standard
and each year we are reducing the wait for that replacement and
that will still carry on. For the whole of our tenants we are
reducing the wait but for those who have resources we think it
is right that we should incentivise those to do that. We have
a number of people who are moving into our properties who were
previously home owners and they clearly have assets of some form
and we think it is an important process to actually unlock some
of that equity which otherwise the sector does not see. That is
why we are doing it.
Q156 Alison Seabeck: How cost effective
is that? There has to be further bureaucracy for your administrative
staff in monitoring all this.
Mr Moore: We are thinking that
as an era of choice develops that rather than saying that this
estate needs everything to be done we look at each property, so
actually our asset management is at a per property and per resident
base rather than "this estate requires" and everything
is done. So that does not change that. We are trying to reduce
the bureaucracy involved in this process by saying that because
we are not meeting the full amount of cost actually our tenants
really do not do things to destroy their properties wilfully,
they actually probably put more value into the property than the
proportion we are sharing. We do not put too many burdens of bureaucracy
in their way. We are paying 80 per cent in a five year time gap
and certainly the kitchens and bathrooms I have seen improved
have been of a far higher standard than we would normally be putting
in.
Q157 Alison Seabeck: David, is this
a model that can be rolled out elsewhere to enhance Decent Homes?
Mr Orr: I think it is a very interesting
model and I think it could be, but not as a requirement. I think
it is one of these things where the best solutions are ones that
are worked up locally by individual organisations with their tenants.
It may well work very well for Hanover; it may well work for others.
However, there is an extremely important point here about the
relationship between rent in particular and then the heating and
energy costs. We are trapped in a system at present where it would
be possible to invest and improve the environmental quality of
some of our rented homes but all the costs at present falls on
the landlord although all of the benefits rest with the tenant.
There is no argument at all about the tenant having a benefit
from that, but it means that in practice we cannot access resources
that would allow that investment to happen.
Q158 Alison Seabeck: Have you done
any work with your tenants or has the NHF done any work on how
you might take that forward in terms of sharing some of that burden
of the tenants and the net gains?
Mr Orr: We have had some discussions
with tenants and some modelling of how that might work. Indeed
we commissioned a report which we referred to in our evidence
(and which the Committee is welcome to have copies of if it wishes)
about how some of that might work. There is evidence that tenants
accept the logic of saying that if you have a £5 a week energy
saving it is worth paying £3 a week to get that.
Q159 Mr Betts: We talked about doing
things locally that meet the circumstances, and equally we have
a national challenge on the emissions of CO2 and the whole issue
of climate change. Do you think therefore there ought to be a
mandatory national standard in terms of thermal efficiency of
properties which every organisation has to meet by a given date?
Mr Moore: I think we do, yes.
I think there should be a base standard but I think setting that
too high could actually perversely result in misapplied public
funds. There comes a point at which a certain type of property,
so if you take a single brick property that does not have a cavity
wall to be filled, et cetera, there is only so much you can do
to improve that property and going to hit an ever higher standard
on that property you can be paying a disproportionate amount to
do that. I think it is actually saying having a base standard
but beyond that it is about the scope for improvement and the
relative payback, as David was saying, on that investment and
is it worthwhile and how that can be shared. Otherwise what will
happen is that more and more properties will be simply saying
they cannot meet that standard, they cannot co-invest in it and
we will lose stock from the sector. I think there is a balance
to be struck.
Mr Orr: I think having a mandatory
standard is a sensible approach in theory providing there is a
proper understanding of how that mandatory standard will be paid
for. There is no point in imposing a standard which is unattainable
within a given rent envelope. We live in an environment where
government now controls the rents that housing associations charge;
if you have that rent that is the maximum of the income that you
have available, so unless we can find a sensible way of paying
for what would be quite significant investment costs then the
mandatory standard would be meaningless really. One of the advantages
of the Decent Homes standard is that it did create some very interesting
thinking about how meeting the standard might be paid for—the
LSVT programme, the introduction of ALMOs—and these have
contributed but there were costs to government associated with
doing that and there is no way that we are going to be able to
meet the retrofitting challenge without accepting that there will
need to be some investment by government.
Mr Doylend: If you just have a
standard for the sector what you will end up with, as my colleague
said, is properties just being sold from the sector. They still
exist; the problem does not go away. Then you get into the thorny
issue of do you have legislation that means it is for everyone,
is it the same for private sector or resold and how do you enforce
that? Somebody has already raised the point about leaseholders
not being able to afford some of these things; they certainly
will not be able to afford the retrofit. We have an experiment
going at the moment in Norfolk called Greening the Box where we
have a pair of semi-detached houses, one we have used a lot of
new modern green technology to reduce running costs and we have
very much focussed on that and we have reduced the carbon emissions;
next door we have done very much more bog standard, more insulation
rather than looking for solar panels and such like. We are in
the process now of monitoring which of those has lower running
costs, which has better carbon emissions. The shocking fact when
you look at the price of the two is that the one where you have
used modern technology is three or four times the price in terms
of retrofit.
1 Peabody submitted a memorandum to the Committee clarifying
that they have only sold 4% of their total stock. The full text
can be found in BDH 57. Back
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