Examination of Witnesses (Question Numbers
323-339)
MR SIMON
NICOL, MR
RICHARD HAND
AND MR
JAMES SPARROW
7 DECEMBER 2009
Q323 Chair: Can I start questioning and
remind you that as there are three of you, please do not feel
obliged for each of you to answer every question, only if there
is something additional to add. Can I start by asking you of your
assessment of the size of the backlog of Decent Homes work in
the social sector after 2010?
Mr Hand: In terms of the assessment
of size, I think it is variable. In our experience and opinion,
we would have thought that something like 20 to 30 per cent of
the Decent Homes standard will not be fulfilled.
Q324 Chair: Is that based on inclusion
of homes which may have been decent five years ago and have fallen
out of it as they get older?
Mr Sparrow: I would concur with
that. Our view, based on all of our information, is that it would
be of the order of 20 or 25 per cent, and that is a combination
of where tenants have refused work that has been offered to them,
a combination of authorities and organisations that have a plan
to meet decency and have the funding in place to meet decency,
but it is purely a timing issue for them to deliver the programme;
and the final part of it is organisations that simply have not
had the funding or plan in place and therefore have not met decency
up until now.
Mr Nicol: Can I confirm what James
said there. We are talking about between 20 and 25 per cent of
the social housing stock still being non-decent in 2010, and that
is extrapolating information from the English Housing Survey,
which is the Government's standard for monitoring Decent Homes.
The problem has been that it started out making rapid progress
but that progress has slowed up for a few reasons. One is because
the easy, quick wins were done first, leaving us with the hard-to-make-decent
stock, but also, as the Decent Homes work has progressed, other
homes have fallen into non-decency, and these have largely not
been quantified by a lot of local authorities and social landlords;
they have assumed that the work they are doing is fixing the stock
whereas in fact there is stuff coming in at the other end, if
you like. It is why we have slowed down and why we could be somewhere
between 20 and 25 per cent of the stock. Again, that will be the
expensive work still left.
Q325 Chair: The next series of questions
will explore whether beyond 2010 we should be bringing other things
into the Decent Homes Programme, notwithstanding the fact that
there are 20 to 25 per cent that do not even meet the current
standard. Do you think a future standard should include a standard
for the estates or the environment of the neighbourhood, as well
as the homes themselves?
Mr Hand: I believe that it should.
However, I think that will be quite difficult to quantify. As
expressed in my written evidence, there is a vast difference between
a London borough, for example, and a shire district, so the estate
requirements in both are vastly different. Whilst laudable, there
may be better methods of introducing progress in estates and environmental
areas such as the initiative of carrot as opposed to stick in
terms of delivering enhanced budget for those that wish to apply
for it for appropriate schemes. Introducing it into the standard
could be quite difficult because of the disparity of the type
of stock that exists across the country.
Mr Sparrow: I agree certainly
with everything Richard has just said but there are just a couple
of things. I think we need to differentiate. There is a lot of
talk about the environment and environmental improvements and
the fact that it is not covered. I think there are two different
parts to this: there is the maintenance of the existing environment,
which is not covered in the Decent Homes standard but is something
that is measurable and could be incorporated into any standard
and could be delivered; and then there is the general view that
there is a great need for environmental improvements, which of
course are much more subject to interpretation and more difficult
to measure. We would say that that is critical, but you need to
differentiate the two. The general point I would make on that
is that we have done a lot of surveys in England, Scotland, Wales
and Northern Ireland, and certainly Northern Ireland is a very
good exemplar of very extensive work that has been undertaken
to the environment as a consequence of very clear social issues
historically, and therefore there was no choice but to do that
work. That work has been done to a very high standard. The net
result is that it has been very successful. It has been very costly
but it has been successful, and that is an example of why that
work should be incorporated into any standard.
Mr Nicol: Coming from our position
at the Building Research Establishment, where we monitor progress
against the standard, it would be very difficult to have measures
that can be monitored in relation to neighbourhoods; for example,
what is a neighbourhood; does the Decent Homes standard apply
to the private sector as well as to the public sector stock? We
would probably spend the first few years defining what a neighbourhood
was before we started setting out to measure something. Again,
agreeing with James, there is a lot of work going on on individual
social housing estates with tenants' groups and so forth, and
we think we should be working with tenants in individual situations
to determine their priorities and pump money into management,
maintenance and those issues that concern tenants, rather than
imposing a standard from on high that may not be applicable or
particularly useful to tenants on particular estates.
Q326 Mr Hands: Specifically about
energy efficiency, moving beyond pure environmental efficiency,
both Savills and BRE have submitted to us that you would like
to see energy efficiency included in any new Decent Homes standard.
Can you tell us what in your view is the most important reason
for including energy efficiency and do you think it could be achieved
by incorporating an SAP rating into the standard?
Mr Nicol: The answer to your last
question is "yes". I think the SAP rating is appropriate
to be incorporated within a standard. What that SAP rating should
be and how it might apply to different dwelling types would need
to be worked up; but, yes, a SAP of, say, something like 65 being
a target to aim for would be a good thing. The other way of measuring
it might be through the energy performance certificate bands,
and saying when you are doing renovation works you would hope
to achieve at least a C in certain dwelling types, or perhaps
B in others or D in others, depending upon their construction,
their age and so forth. I think that something based on SAP, the
energy performance certificate, is relevant. Why is energy important?
For a number of reasons: energy efficiency is the best indicator
of fuel poverty. We are not proposing that we should measure fuel
poverty as an indicator in Decent Homes because it incorporates
fuel prices and people's incomes, which are outside the control
of a local authority, of someone delivering the Decent Homes.
Energy efficiency itself is a good proxy of whether someone would
be able to afford to heat their home, so that is one reason. Meeting
our Kyoto—and perhaps Copenhagen—energy-efficiency
targets is very important, and obviously to do our bit for global
warming, to save the planet, making better use of existing resources.
Q327 Mr Hands: Is there any way of
estimating what cost might be involved in meeting an SAP of 65?
Mr Nicol: Yes, we can calculate
that from our existing statistics—obviously not off the
top of my head now, but we could go ahead. There are various—
Chair: How quickly would you be able
to calculate it, and could you let us have an estimate? Not now.
Q328 Mr Hands: Is it possible to
tell us what percentage of existing stock does not meet an SAP
of 65 for example, a rough guess?
Mr Nicol: Again, I would have
to refer to documentation but I can get that back to you, yes.[1]
Q329 Mr Hands: There must be a reason
why you chose a level of 65, for example. Presumably that is challenging
but not overwhelming.
Mr Nicol: I think 65 has been
quoted as an aspirational level for the existing housing stock,
but it would depend on the type of property. One of the problems
with the Decent Homes standard is that it is applied to all property
types. With some property types it has been easy to meet the Decent
Homes standard; with some property types it has been nigh on impossible.
It would have to be an appropriate rating for different types
of homes in the social housing stock. The 65 has been mentioned
as an aspirational average, if you like.
Q330 Mr Hands: By whom?
Mr Nicol: Good point! It may have
been by BRE or it may have been by others as well.
Mr Sparrow: I have three comments
on that, but I think we have covered it largely. Firstly, I think
continuing with the SAP rating is the right thing purely because
considerable information exists already about the SAP rating across
the country by authorities and housing associations, and therefore
you are off to a good start rather than changing it. The second
thing is that in terms of the ability to assess, whatever the
figure is, whether it is 65 or 75, local authorities and housing
associations do submit returns containing that information, and
therefore it should be quite readily available to assess what
that is. In terms of the cost, that is a difficult thing to assess
but could be done. All I would say is that one of the things,
in looking at a slightly more holistic approach, is potentially
looking at the ability to adjust rents as a consequence of doing
energy work. At the moment there is no ability to do that but
if, for example, it could be proved that by doing energy work
the cost of energy bills at the property go down by, say £5
a week; then you could say "we can possibly increase the
rent by £4 per week" and make some sort of adjustment
along those lines. At the moment there is no ability to do that,
but if one is looking at this, one needs to look at it in terms
of finances. If you do not do something like that, it is a pure
cost to do the work.
Mr Hand: I wholeheartedly support
the view that SAP should apply because that is exactly the recommendation
I gave in written evidence back in 2004. SAP is not a perfect
vehicle; there are flaws within the system, and I think making
sure that it fully takes account of new technology, which is starting
to catch out some of the calculation, is something that should
be reviewed very carefully. Also, I would say that the key reason
for including it within Decent Homes is that at the moment, apart
from the goodwill of the landlord, there is no financial benefit
to the landlord in making that investment; so additional support
through grant funding and the like is important too. In terms
of the approach to be adopted for SAP, I think it should be somewhere
in the range of 60-70; but importantly, across archetype bands
is the way to go.
Q331 Mr Hands: Across what bands?
Mr Hand: Across the different
types of property, because it will be virtually impossible to
improve some stock to those levels, so I think you must look at
the average of the stock as a whole and therefore consider the
SAP rating for a landlord's portfolio rather than set a very specific
standard. SAP was introduced of course in 2006 through the housing
health and safety rating system, whereby you would have a category
1 failure for a SAP rating of 35 or less, so that was a positive
step. However, at the same time, criterion D was reduced in terms
of its value, in our opinion, because of course partial heating
was then allowed, which I think was a retrograde step.
Q332 Mr Hands: Some witnesses have
raised with us questions about the quality of the data collected
for Decent Homes and for measuring progress, and the considerable
variance in the data. What do you think should be done if there
were to be a future set of criteria for improving the consistency
and reliability of data?
Mr Hand: I think there are two
issues. One perhaps is the quality of data. However, I think there
has been very clear guidance from Government in respect of landlords
continuing to push and maintain the quality of their asset intelligence
recommendations, for example from the Audit Commission, about
the validity and the age of stock condition data through the key
lines of enquiry process. There is no doubt that the quality of
data that has been collected can be variable and the only way
of appraising that is for that to be scrutinised more closely
during Audit Commission inspection, for example, or that type
of opportunity. I think also an area that I flagged within the
written submission was that it is not just the data that may be
at fault, but it is perhaps over-reliance on off-the-shelf computer
systems or other processing systems to calculate the output for
Decent Homes. Certainly our work has demonstrated a number of
variations in interpretation of the standard and the way in which
it can be calculated. The only way to avoid that in the future
is clear guidance about the modelling process for the data that
exists, getting rid of a lot of the inconsistency that was allowed
to occur back in 2000 and 2001.
Q333 Chair: Do the other two concur
with that?
Mr Sparrow: I totally concur with
that, but would just pick up on the interpretation issue. Interpretation
is a massive issue in terms of inconsistent information coming
back, and one key way of avoiding that or helping to avoid that
is to cut out as far as possible the interpretation issues within
the standard itself and streamline it and make it simple, so instead
of the examples where a property has to fail on two components
to fail overall or three components to fail overall—anything
like that that can be taken out, where it is a straight failure,
yes or no, would help the whole interpretation and consistency.
Q334 Mr Slaughter: How well do you
think that authorities, ALMOs, or whoever has undertaken the work,
have managed the process of financial asset management, and how
do you think that could be improved?
Mr Hand: From our perspective,
the quality of asset management has been variable. However, I
think the introduction of Decent Homes as a standard can be praised
because it has put a spotlight, a focus, on the need for effective
asset management. Because we are human, some are better than others
of course, so the quality does vary between client organisation.
Some, I believe, are doing very well, and others need to catch
up in terms of their approach to viable asset realisation and
the way in which they manage their stock. That can only be done
by continuing to apply the best practice requirements of the key
lines of enquiry regime, KLOE 3 in particular, which focuses upon
effective asset management—so knowing that it is monitored,
I think, is the best way.
Q335 Mr Slaughter: We have a quote
in our pack from Savills that says that 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 wide skill range. Is that coded
language for—
Mr Sparrow: It is!
Q336 Chair: Would you like to uncode
it?
Mr Sparrow: I will try and uncode
it. I think the point we were saying is that it is getting to
the source of the problem rather than simply saying that there
is a lack of asset management skills and financial skills in some
of these organisations. It is a question of why; and the reason
why, particularly in the local authority context, is that there
has been no incentive for them to do so. There has been no incentive
for local authorities to take a long-term view on retaining their
assets. In some cases in true asset management it is a question
of disposing of properties or getting rid of properties that are
no longer viable; but for some local authorities there is not
only not an incentivisation to do that, but there is actually
incentivisation to keep properties because by taking those properties
out there is a reduction in their MRA allowance and so on. Our
view is that only by building in the long-term incentives for
organisations to make true asset management decisions, and building
in some flexibility where they can perhaps dispose of properties
more easily, will the asset management skill base and the financial
skills follow through.
Mr Hand: And of course being allowed
to retain the capital receipts for those disposals.
Mr Nicol: I do not have any comment.
Q337 Mr Slaughter: Do you have any
comment on how they have managed the contract process so far?
That itself has been a big leap for authorities that have been
used to managing, as you say, on quite small make-do-and-mend
budgets, to suddenly be faced with quite large sums of capital
and longer programmes.
Mr Sparrow: Richard, I am sure,
will want to comment, but I would say that there has been a quantum
leap in terms of the ability to deliver large-scale programmes
or longer-term programmes, and the benefits associated with that
from the procurement perspective. What is now needed is the next
step, which is looking at the long-term viability of some of the
assets, particularly in some of the larger inner-city authorities
where there are question marks about the viability and whereby
possibly re-provisioning might be a more sensible option.
Mr Hand: I believe we have got
to the root of the subject, which is: is there sufficient finance
available to maintain the assets appropriately? I think the reason
that there have been some small programmes around in the past
is because that finance has not been available, so having liberated
that we have now had to catch up. It would be a great shame to
see that dip and drop to past levels; it needs to be maintained
at a point whereby we need not think about Decent Homes standards,
because if you are maintaining the stock well, you deliver that
standard automatically.
Q338 Mr Slaughter: Your organisations
have a vested interest, do they not, in advising and working for
local authorities in this area?
Mr Hand: I think we are there
to help and bring consistency to the sector, helping to plug some
of those gaps.
Q339 Mr Betts: It is the future and
what happens beyond Decent Homes. There is a major reform of the
HRA now, which has been flagged up as releasing local authorities
and ALMOs in particular to be able to shape and determine their
own future. But then other people flag up that it all really depends
on what that reform means, and particularly going forward like
the major repairs allowance; and is Government going to continue
to control that and therefore at what level is it updated on a
regular basis. Have you any concerns in that area and suggestions
about what we need to do?
Mr Sparrow: What was the specific
question you were asking?
1 Data from the 2007 English House Condition Survey
suggests that some 68% of social rented homes had a SAP of less
than 65, with three and a half years remaining of the Decent Homes
programme. Because of the design of some of these homes, it may
not be cost-effective to undertake works to achieve a SAP of 65
or more for all of these. However, it is estimated that it would
cost around £5 billion (at 2007 prices) to provide mainstream
insulation (loft, cavity wall and cylinder insulation upgrades)
and heating improvements (including new central heating systems,
and upgrading on old systems) which would reduce the proportion
of social rented homes with a SAP of less than 65 to around 27%. Back
|
