Examination of Witnesses (Question Numbers
340-351)
MR SIMON
NICOL, MR
RICHARD HAND
AND MR
JAMES SPARROW
7 DECEMBER 2009
Q340 Mr Betts: The question is that,
clearly, the availability of finance for the future and the clear
ability of ALMOs and councils to be able to access finance and
have sufficient finance are important. The Housing Revenue Account
is seen as part of the reform of the current arrangements, which
is necessary, but then we are still going to be stuck with central
government controlling major repairs allowance and the suggestion
is that what they think is appropriate will not be sufficient.
Mr Sparrow: I totally agree with
you. The key point to make here is that you need to build in more
flexibility into the process. Coming back to the ability to perhaps
look at rents, the ability to not retain assets that are no longer
viable—the ability to do these things, as well as having
the major repairs allowance, is the only way in terms of creating
a viable future; but simply constraining things and saying, "you
cannot dispose of assets and you cannot change your rents and,
by the way, we are only giving you a limited amount of funds"
is going to make life extremely difficult.
Mr Hand: The absence of appropriate
funding levels is a significant demotivater for the sector. Whatever
the organisation, be it an RSL, a local authority or an arm's
length management organisation, they need sufficient funds to
be able to manage the assets appropriately—and that is the
big struggle. The HRA Subsidy Review is welcomed, certainly from
a Ridge & Partners perspective, but of course that is still
work in progress so we look forward to the outcome of that with
interest.
Q341 Sir Paul Beresford: You will
have noticed the newspapers tell us that there is a bit of a financial
difficulty in this country, so where will the money come from?
Mr Hand: It is a very good question!
It is a case of the mix, the blend, of both public and private-sector
finance. One of the traditional paths of that was allowing estate-based
transfer or whole-stock transfer, thus liberating a range of social
stock from the public purse. That is one avenue that is still
open, however increasingly difficult without confirmation about
the issues surrounding overhanging debt. So in terms of borrowing
and finance, I believe there is a future. However, it is about
striking the balance between availability of resources and the
requirements of the existing assets. It is all good and well investing
in new-build property; however, if we cannot maintain the existing
assets we will simply create a large catch-up or backlog programme
that will have to be dealt with through programmes such as Decent
Homes again in the future.
Q342 Sir Paul Beresford: What happens
in local authorities where the tenants are emphatic they want
to stay in their local authority?
Mr Hand: Then an option must be
found where those assets can be maintained at an appropriate standard.
Q343 Sir Paul Beresford: In other
words, you are just launching the question back in the air!
Mr Hand: Not being a financier,
but being a surveyor, I am not sure I can give you a detailed
answer to that. The man who can is sat behind you!
Sir Paul Beresford: I will ask him later.
Q344 Mr Betts: In terms of the major
repairs of assets being a factor, have you any ideas about what
the calculation should be, what the figure should be, to give
an uplift that would enable ALMOs and local authorities to maintain
their homes at a decent standard for the foreseeable future?
Mr Sparrow: Savills as an organisation
has done over a million surveys in the social housing sector across
the country in the last five years, so we have a reasonable feel
about the long-term costs of maintaining properties. All I would
say is that this is very much an average, but our average comes
out at about £1,000 per unit per annum for major works over
the long term.
Q345 Chair: How long is "the
long term"?
Mr Sparrow: Over a 30-year period.
I know this is a simplistic assessment, but broadly speaking that
is the feedback that comes back. That is to cover decency, to
cover statutory obligations, and it is also to cover maintenance
of the existing environment, because when we take a long-term
view we also take into account existing environment because we
cannot ignore it. In answer to the question, that is the sort
of level that we believe is required.
Q346 Mr Betts: How far away from
that are we in terms of the current arrangements, and what the
Government may be suggesting for the future?
Mr Sparrow: Well, that is being
looked at at the moment, is it not? I do not know what the current
figure is that is being discussed.
Q347 Mr Betts: The TSA has been consulting
recently about how it will be the new regulator for social housing.
It seems to be adopting what often is called a light touch to
regulation, trying to get an approach to the management of houses
where tenants and tenant associations are very much part of that
process in terms of flagging up where they see problems, and the
TSA responding. Do you think we need a more stringent enforcement
role than the TSA is currently suggesting?
Mr Hand: I think to a large extent
that exists, again through the Audit Commission and the review
of the asset management and resident involvement in particular,
which gives you a grading as an organisation that is toothless
apart from that. In the context of the TSA's recommendation I
think we would fully endorse and support that this should be a
resident and a tenant-led process. Of course, the 2004 stock options
appraisal process was entirely resident and tenant-led. From that
perspective I think it is about making sure that we maintain that
engagement. Do we need more hands-on and more stringent regulation?
I am not sure we do. With limited dealings with the TSA, one of
the things that I was quite astounded at, at the conference last
year, was the aggressive tone that was taken to landlords, suggesting
that they were not good enough and needed to pull their socks
up. That was a very general observation, which concerned me, as
an interested party, but a party outside of those particular organisations.
Yes, I think regulation is important but is it going to succeed
if it is overly restrictive? I am not sure it will.
Mr Nicol: I am not an expert in
the TSA, but I agree with the points you make, Richard.
Mr Sparrow: I will make two points
on that. I think for the TSA, to regulate the sector consistently,
it really needs consistent powers in its ability to do that across
all the organisations which it is regulating. That is the first
thing to say. The other point to make beyond this is that it is
a combination of both. We are talking about either a more stringent
monitoring or a lighter touch. Our view is that the organisations
that are performing well need a lighter touch, and the ones that
are not performing well need a much stronger intervention and
have the ability to do that at an early stage: in other words,
let the good organisations carry on doing what they are doing
and focus your resources in the right areas. I know that is easier
said than done, but I am saying that I do not think there is a
straightforward answer to the question of whether to do a lighter
touch or take a more stringent approach.
Q348 Chair: Most of what we have
talked about is in the social sector, where most people feel generally
the Decent Homes standard has worked. Can I just ask you about
the private sector? Do you think there should be a future Decent
Homes standard for the private rented or owner-occupied sector,
and if you do, what would be the point of it?
Mr Nicol: The Decent Homes Programme
has almost by default covered the private sector as well, but
in fact by 2010 something like 85 per cent of all non-decent homes
will be in the private sector because they have barely been touched
so far. They have almost been touched incidentally through energy-efficiency
programmes or by particular environmental health officers spotting
that a vulnerable person is living in a home with a health-and-safety
hazard; but there has not been a targeted approach towards the
private sector at all. We are left with this huge backlog of works
required within the private sector. Why do we need them? Again,
it is no use having a brilliant energy-efficient social sector
in good condition if people, particularly vulnerable people, are
living in poor conditions in the private sector. I do think the
standards need to apply to the private sector and be backed up
by policies and funding to do something about improving conditions
in the private sector.
Q349 Chair: Before the other two
come in, what sort of additional measures are needed in the private
sector to deliver an improvement in the number of decent homes?
Is it a combination of carrots and sticks or all sticks or what?
Mr Nicol: It is carrots and sticks.
You do not want to tell people in their own homes what to do,
particularly those people who are perceived to be able to afford
it. A lot can be done in terms of, for example, energy efficiency.
The great majority of hard-to-treat non-decent homes are in the
private sector. These are, for example, homes that have solid
walls, which are very difficult to insulate. People do not really
want to touch them. They are worried about the products on the
marketplace, the expense of the products, whether there are appropriate
builders and so forth who can install those measures. There are
not really incentives for people in the private sector who can
afford it to improve their own homes, and we do need to improve
the energy efficiency in the stock. Also, in terms of vulnerable
people, at the moment because of restricted funds environmental
health officers have been acting in a reactive way. If it comes
to their attention that someone is living in an unhealthy or unsafe
home and they are vulnerable, they will deal with it on a one-off
basis. However, there is no real proactive movement within urban
renewal departments of local authorities to go out there and identify
where the problems are and do something about them because they
know they have not got the funds to back that up. It is really
about funds to inform proactive work on the private sector and
also education and research to get those products that are currently
in the social housing sector, currently being tested, to be adopted
by people in their own homes.
Mr Hand: The difficulty with the
private sector is about overview and indeed enforcement. The minimum
standard at the moment is the housing health and safety rating
system. Beyond that it is very difficult to apply a Decent Homes
standard equivalent in the private sector. Who is going to enforce
it? Who is going to fund it? We are dealing with commercial market
pressures, and that will be quite tricky. Do I think that there
should be a higher standard other than the housing health and
safety rating system? Yes.
Q350 Chair: That is the way you drive
it up. Mr Sparrow?
Mr Sparrow: I have no other comments.
Q351 Chair: But you do not disagree?
Mr Sparrow: No, I agree with everything
that has been said.
Chair: Thank you very much indeed.
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