UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 60-iHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFORECOMMUNITIES AND LOCAL GOVERNMENT COMMITTEECouncil
Chamber, Town Hall,
BEYOND DECENT HOMES
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This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935 |
Oral Evidence
Taken before the Communities and Local Government Committee
on
Members present
Dr Phyllis Starkey, in the Chair
John Cummings
Alison Seabeck
Mr Neil Turner
________________
Witnesses: Ms Alison Inman, Chair, and Ms Gwyneth Taylor, Policy Director, National Federation of ALMOs, and Mr Paul Tanney, Chief Executive, East Durham Homes, gave evidence.
Q258 Chair: Can I welcome you to this evidence session of the Select Committee? We are operating courtesy of Stockport Council in their magnificent Council Chamber. We have two witnesses from the National Federation of ALMOs and one from East Durham Homes. Please do not feel obliged to both answer the same questions if you agree with each other because we have a number of questions that we want to get through. If I could start with the first one, which is addressed to the National Federation in the first instance, I would like to ask you about the remaining non-decent homes managed by ALMOs across the country and what you believe are the barriers to those remaining non-decent homes being brought up to the minimum standard after 2010.
Ms Taylor: The first problem is the general insecurity about the future of the Decent Homes programme. Not only are a number of Round 6s unclear about when or even if they will get their funding once they achieve two stars, but also all of the Rounds 3 to 5 ALMOs were in 2006 asked by CLG to re-profile their Decent Homes programme to go beyond 2010 and many of them have done that, so there are a number of ALMOs who are also concerned about what happens after the current CSR period because their current funding only goes up to 2011. That is the immediate issue in terms of funding. Longer term there is the issue about sustainment of Decent Homes funding post-2010 for those ALMOs and local authorities that have achieved it and that is very much dependent upon the outcome of the finance review and what resources might be made available to enable that to happen. Certainly the current major repairs allowance will not achieve sustainment of Decent Homes, even once backlogs have been met, and some of the early round ALMOs are already in danger of falling back out of decency again, having achieved Decent Homes once already.
Q259 Chair: Can I follow up that last point you made about some of the homes that are currently decent falling out of decency? Is that a reflection of the standard being too low or is it a reflection of the work not having been done to a sufficiently high standard in the first place?
Ms Taylor: It is neither. It is a reflection of the fact that the Decent Homes standard involves a certain time period element so that year on year new homes will fall out of decency if they are not previously addressed through the major repairs programme. The original aim of the Decent Homes programme was to fund the backlog and then future properties would not fall out of decency because the major repairs allowance would achieve that. The Government's own review has proved conclusively that the major repairs allowance would need to be dramatically increased, by at least 43 per cent overall but in individual circumstances probably by a significant amount more, in order to sustain Decent Homes longer term. What you also need to bear in mind is that the very fact that properties are being managed by ALMOs is because they are managing the most intractable stock. If local authorities had been able to manage decency within their existing resources they probably would not have gone down the ALMO route or the LSVT route. It is a particular concentration of the most difficult stock and it is a time related element as well.
Ms Inman: Obviously, a lot of houses that were built post-war were often built to a much higher standard than houses that were built in the sixties and seventies and those houses are now reaching non-decency because of how long it is since they were built. If I may just state the obvious, Decent Homes is not an end game; it is the beginning of a process.
Q260 Chair: Mr Tanner, can you give us an insight from your position at East Durham Homes into the current state of your housing stock and how much progress you think you are going to be able to make after 2010?
Mr Tanney: At the moment we are running at just under 90 per cent non-decency and that is largely historical in terms of the fact that there has not been the money to invest in this stock, plus there has obviously been some poor quality stock in there. What we are doing with the funds that we have at the moment is that we are concentrating on elemental replacement which is being done in consultation with our customers so that we address the worst elements, things like making sure that rewires are done, they are not urgently needed for health and safety but they are done on a programmed basis, and central heating is done on a programmed basis so that you get better value for money. In terms of moving forward, we are totally reliant on Decent Homes funding to achieve the Decent Homes standard. There is no way the local authority funding regime, either currently or the proposed regime that is out to consultation, could fund Decent Homes standard without an additional Decent Homes funding element.
Q261 Chair: I think it is difficult for us outside to understand quite why your area has such a huge proportion of non-decent homes still. Can you give us a bit of an insight?
Mr Tanney: I think historically the council was wedded to charging low rents, which meant that there were not sufficient funds to invest in the stock. The investment that has taken place has often been spread very thinly or has been concentrated on Peterlee New Town, which is part of our stock, a sixties new town, some of it with more traditional flat roofs, lots of problems there, so historically there has not been a lot of money to invest and it has either been spread too thinly or has had to be used to rectify problems within the Peterlee stock. Where we are currently is that we have been replacing individual elements, as I said, rewire programmes, doors and windows programmes, central heating programmes, so that we address the worst elements for tenants instead of being able to address a smaller number of properties doing the full decency package. What we have been able to do is address those worst elements in the first two years and this year we have been able to begin to turn to full decency packages and 42 per cent of this year's programme has kick-started our full Decent Homes programme. Because we have now got two stars as well we have received an initial allocation for the remainder of this year of ALMO funding of £4.9 million and clearly that is going towards full Decent Homes packages. We have consulted with our tenants and we are doing the three worst areas first, so we are investing in the Decent Homes packages as of now with the new Decent Homes funding.
Q262 Chair: What proportion of your homes do you think will be non-decent by the end of 2010?
Mr Tanney: Unfortunately, I am not able to answer that because we have not agreed what funding we are going to get from the Homes and Communities Agency for 2010/2011, so right at this stage I do not know what funding I am going to have from 1 April next year, even though we have got two stars.
Q263 Chair: The £4.9 million - how much of a reduction in your non-decent homes will that deliver?
Mr Tanney: The £4.9 million allows us to do 255 homes up to the full Decent Homes standard by 31 March next year. That will then bring us down to around 84 per cent non-decency.
Q264 Alison
Seabeck: We have heard a lot today going round
Ms Inman: There are several elements to that, one of which is carrots and sticks; sticks do not work on their own. We have standards linked to investment, so in order to access the Decent Homes funding ALMOs had to reach two stars, so already we are committed to improvement. Often ALMOs, when they started, were not even at zero stars. The point was made earlier that these organisations were not performing well in many cases, so there has been rapid improvement, and obviously the better the organisation the better the programme is going to be. As well as that it is about the way that tenants have been involved. Tenants have driven the implementation of Decent Homes within communities served by an ALMO.
Q265 Alison Seabeck: So therefore tenant involvement is something which a new build scheme would have much more difficulty in accessing because you are bringing new people into an area perhaps with less commitment or less history in that area. Would you say that is important?
Ms Inman: First of all, there was a ballot of all tenants and tenants voted positively for that option, part of that being because tenants are on the boards of ALMOs and tenants are setting the agenda. Tenants have been saying what sort of a Decent Homes implementation they want within their areas, so they have been involved in choosing the specifications and choosing contractors, and so already that gives a real uplift to an area instead of just being on the receiving end.
Ms Taylor: I think there are a number of factors that have made the ALMO sector really work in that regard. The focus, which has been very much on getting the carrot of the funding, has been huge, not only getting the money, but if you are a chief executive of an ALMO which does not get its two stars you are quite often out of a job.
Q266 Alison Seabeck: It focuses the mind!
Ms Taylor: It certainly does, and often the board as well. The tenant engagement has been enormous. I have worked in local authority housing for nearly 35 years and I have never seen such a tremendous change in approach, and I do not think I can state too much the tenant role in being able to identify what is wanted and needed locally. ALMOs also work specifically within the local community. They work for one local authority, they are paid by that local authority, they have got to deliver the priorities, so they are very much focused. They know the community, they are out there on the ground working with them, and I think all of that has helped. In addition, we are gaining from the best bits of both the local authority and the housing association sectors. We have that strong link with the local authority but we also have the much more businesslike and effective board structures of the housing associations which enable decisions to be made much more quickly than in a more bureaucratic organisation, so it is a range of different things which has led to the success of the movement.
Mr Tanney: Can I give you an example of that? At the inspection in 2007 East Durham Homes got no stars by the Audit Commission in relation to its customer involvement. At the inspection in July we got three stars in terms of customer involvement. It is not just involvement in Decent Homes. We have involved customers right from the beginning in establishing what our role and purpose are, what our strategic objectives are as a company. They are involved in all our service reviews. They monitor the way our service is delivered and myself and the Chair are called to account by our customer services panel, the Housing Partnership. Every quarter we are called to attend and have to be prepared to answer questions on anything that is worrying our customers. That real accountability is a very positive thing both from our customers' point of view but also for ourselves because it keeps us on our toes and makes sure we deliver what our customers want.
Q267 Alison Seabeck: So it is a key driver for outcomes?
Mr Tanney: Yes.
Q268 Alison
Seabeck: Can I move on to fuel poverty and energy
efficiency? I know,
Mr Tanney: We are quite lucky. We have worked very closely with the district council of Easington and now Durham County Council to make sure that we maximise our input in terms of cavity wall insulation and additional loft and top-up insulation, and our customers have said that this is a major priority for them in terms of reducing their carbon footprint. The number one priority for our customers was to try and get double glazing into the properties to assist with that, and we have been running programmes, which I have already mentioned, for central heating and improved energy efficiency, so we have tried to tie in what existing resources are available. From our point of view we also need to make sure that we are not just looking at existing resources but also what is the future. I think that comes as part of Decent Homes 2; there is going to be a Decent Homes 2, rather than Decent Homes 1, where we have to get the properties up to the Decent Homes standard.
Q269 Alison Seabeck: You are talking about alternative and supplementary fuel sources?
Mr Tanney: Yes.
Q270 Alison Seabeck: What do you have in mind, given the nature of your properties in Easington? What would work for you there?
Mr Tanney: I think we have to do a lot more work around them. We are about to start a pilot on solar panels with ten properties. That is a joint pilot with the council but I would like to do some more work around ground source heat pumps and air heat pumps as well to see if they would work in our area. I think though that that has to be very much phase two. We have to address getting the properties insulated and getting as many energy efficient boilers and systems in place as we can at this stage.
Q271 Alison Seabeck: Can I ask generally how the ALMO sector is looking at a new Decent Homes standard, what comes next and how that better links into existing government programmes and government targets, energy efficiency, for example?
Ms Inman: What we have had up to now with Decent Homes is an internal specification, so it has looked at where people are living, inside their homes. I think mark two has got to move on to looking at communities; it has got to be looking at communal areas within flats; it has got to be looking at estates. People are developing a pride in their homes.
Q272 Alison Seabeck: Community heating systems, retro-fitting of community heating?
Ms Inman: One of our biggest problems is managing tower blocks, for example, the communal areas, the lifts, and all the rest of it. One of our members is installing a wind turbine on the top of a block of flats. If you have got flats, and there are so many down sides with them, one of the positives is that there is an awful lot of wind up there, so if we can move on to looking at things like that within phase two I think that will be really exciting.
Ms Taylor: I think you will find that most of the early round ALMOs that are finished or close to finishing are actively working on issues about environmental improvements, but again we are getting -----
Q273 Chair: Can I just stop you? When you talk about environmental improvements do you mean improvements to the environment around the buildings or do you mean energy efficiency?
Ms Taylor: I actually mean both, but in this particular context, if we look at energy efficiency, we do have quite a lot of ALMOs exploring new techniques, things like ground source heat pumps and the kinds of issues that Paul has already mentioned. However, again, because of the intractable nature of the stock a lot of these are quite expensive to deliver, particularly on some of the non-traditional build and the high rise dwellings, and so there is an issue about investment capacity.
Q274 Alison Seabeck: I will move on to the TSA which has had a fairly positive welcome in the evidence we have received. Do you think there is anything missing from the proposed national regulatory framework, and, if so, what?
Ms Inman: It is a good start. It is setting basic standards. I think the devil will be in the detail. We are excited at the thought of local standards, and obviously that fits well with the ALMO model where tenants -----
Q275 Alison Seabeck: Before you go on can you give me some examples when you talk about the possible benefits for local standards? What do you mean by that, just so it is on the record? What do you see happening?
Mr Tanney: From my point of view the TSA standards are welcome in terms of forming a basic minimum but something that is missing for an ALMO that has got to two stars, from reading them over the week and bearing in mind the consultation document has just come out, is that they do not appear to be overly aspirational and they are therefore reliant on the establishment of local standards. The best example is that most of us in the ALMO world and housing associations themselves have agreed with their own customers a slight variation over and above the Decent Homes standard. The Decent Homes standard itself is fairly basic, so we, with our customers, have agreed a slightly higher standard. I suppose that is the most obvious example that relates to the main focus of this inquiry. For ourselves that includes an extra row of tiles and a focal point fire in the living room, which would generally be an electric focal point fire, so there the standard is slightly above the basic Decent Homes standard that we ourselves have agreed.
Q276 Alison Seabeck: So when you do your rewiring you hard-wire smoke alarms while you are doing it?
Mr Tanney: That is another good example.
Q277 John Cummings: Very briefly, Mr Tanney, can you indicate to the Committee what the department needs to in the short term in order for us to move towards tackling the immense backlog of homes in the area which do not reach decent standards?
Mr Tanney: From my point of view what it needs to do is guarantee Decent Homes funding over the next four to five years, not just for East Durham Homes but for all those ALMOs that have not achieved decent standards. Even with the new proposals for self-financing of the housing revenue accounts we will not be able to achieve decency in the modelling work we have done without there being separate Decent Homes grant funding. The thing the department can do is try to get that funding secured. The stop-start nature of the existing programme means that I was not able to answer a simple question about where would our decency be next year because I do not yet know what my funding is. The impact that has in terms of local job creation with our partners who are going to deliver the programme is considerable, so we are not getting the regeneration benefits in terms of job creation and investment that we should be because my partners are saying, "We cannot take the premises on until we know what we are going to get". We in East Durham Homes under our revised structure were going to create a trainee surveyor's post. We cannot do things like that until we know we have got continuity of funding, so it has a big impact in terms of jobs and the added benefits that that brings, but also we need continuity to deliver to people who are living in homes and paying their rent.
Q278 John Cummings: On a more general note, can you indicate to the Committee why ALMOs have "outperformed RSLs and retained stock" authorities?
Mr Tanney: I think we would all want to jump in here, to be perfectly honest. It is partly carrot and stick. Gwyneth pointed out that ALMO chief executives do not have jobs if they do not get two stars, but it is really about the whole nature of the way we are developing our services. I indicated how involved our customers are. What it means is that when we are delivering services they are the types of services that our customers want in the way that our customers want them, and that is reflected when the Audit Commission come in and see that we are delivering efficient, effective services. We are also free from the council, we are standing at a distance from the council, so some of the changes I have been able to implement quite quickly. Because we are stand alone and I report to a board I have been able to do some changes quite quickly to make improvements happen. I will give you the easiest example. Our call contact centre is open from eight in the morning till eight at night plus from eight till 12 on a Saturday. We have been able to invest in a customer relations management system, we have scripting in the contact centre so that the consistency is there, and that was done just through local consultation with the union within our organisation and then went to the board. If I had had to take that through the council it would have taken a lot longer to implement.
Chair: I am anxious about the time and I would quite like to move on to the funding questions. We can come back to this one if we have the time.
Q279 Mr
Turner: We have heard from
Ms Inman: From our research most of the ALMO sector, were the HRA reforms to be brought in with certain other tweaking, would become viable and self-sustaining. Not everybody is going to be but the vast majority of our authorities would be. Certainly one of the things that we have been able to do is consult a lot with our tenants on this and our tenants want the reforms to the HRA. They find it very difficult to understand why they are paying rent and then that rent is going somewhere else. They did suggest that maybe that should happen with mortgages as well, so maybe if you are paying a mortgage some of it will go off your house but the rest of it will go off Mr Cummings's house. It is unsustainable, it is daft. The system as proposed in the review would work for most of the sector. There are going to be problems. There is some stock out there that is so much in need of massive investment that there will still issues to be dealt with, but on the whole we are exceedingly positive about it, are we not?
Ms Taylor: We are. I would also make the point that the proposals have directly come from the original work we did jointly with the Chartered Institute of Housing and HouseMark in 2005 which then led to self-financing case studies and then persuaded CLG what everybody else had been saying for ten years, that the current subsidy system does not work. I think you have to split it down into several key areas. One is the backlog. That is what the Decent Homes funding programme was aimed to address and still needs to do. There is still quite a considerable backlog left to be achieved. That will need additional resource. The aim of the Decent Homes programme was that, having addressed that backlog, the subsidy system would allow you to sustain Decent Homes. It clearly currently does not; the Government's own research shows that, but we do believe that, provided a number of factors are okay, such as the amount of debt that is redistributed and that there are not significant changes in terms of rent policy or interest rates, for the vast majority, once the backlog has been addressed, the self-financing system will allow councils to have a sensible and locally appropriate approach that will also enable them to sustain Decent Homes. There will be a very small number of authorities with significantly intractable stock that may need some additional support but it will be quite small and therefore much more manageable. We are certainly very keen for the Government to go ahead with the proposals as soon as possible so that local authorities can finally have a stable financial regime that is not only transparent to tenants but will enable them to plan long term and have efficient programmes for the future. Currently, a system where you have no idea each year what your income is going to be simply does not allow that kind of proper programming.
Q280 Chair: Mr Tanney?
Mr Tanney: Can I just confirm that the modelling we have done in East Durham Homes with the county of Durham is that if you put aside the Decent Homes funding and separate that out so that you fund the Decent Homes separately then, with the caveat Gwyneth talked about in terms of the redistribution of debts and the uplift in the MRA and also reasonable estimates in terms of interest rates, our model would be generally sustainable under the new regime. Under the existing regime we are going to have to look again fairly quickly even if Decent Homes funding continues over the next five years.
Q281 Mr Turner: The Federation has been fairly critical of the department about the stop-start nature of the ALMO funding. I wonder if you could give us some examples of the effects of that, and also whether or not you think the money has been well spent broadly and whether we have had value for money.
Ms Taylor: Generally, the stop-start
makes it very difficult to achieve an efficient, economical programme. If I may give you specific examples, in June
2006 local authorities were invited to apply for Round 6. Given a deadline of July, that was basically
six weeks to put in bids. They were told
they would get approvals in September/October, which they finally received in
March 2008. Two of those ALMOs still
have not had their bids approved, so they were held back 18 months. In January this year the HCA announced that
it wanted to bring forward ALMO funding to the tune of £100 million. ALMOs were invited to apply to bring forward
funding and a £100 million programme of brought-forward funding was announced
in March. In July CLG then announced it
was deferring £150 million worth of Decent Homes funding. Three weeks later in August it announced £87
million worth of funding for cavity wall insulation. A large amount of that had actually gone to
local authorities with ALMOs but, while a very welcome programme, one has to
say it was not a programme where commitments had been made to tenants or where
local authorities had been for years working very hard with their tenants and
their ALMOs to get up to the Decent Homes programme. Similarly, in 2006 all Round
Mr Tanney: I can give a couple of examples, very briefly. We were meant to get over £9 million, once we achieved two stars, for the remainder of this year. That was the previous agreement. We have actually got £4.9 million. I have had to withdraw our published programme which had been agreed with the tenants, based on what I had previously agreed with the CLG, and I have had to write to every tenant explaining what the current position is. I am pleased we are getting funding but it is still only for this year half of what was previously agreed. The impact of that is a couple of letters I have had this week from tenants - one who still has not got full central heating in her house and she is asking when is it going to get done, and another who was complaining that we have not done anything to her property for over 26 years. Again, where does that now fit within the programme? They are real examples.
Q282 Mr Turner: The Tenant Support Agency is going to have a regulatory job to do on housing. Local authorities have clearly got the Audit Commission and the various indicators, both national and local, on that. How do you see those two interacting and whether or not there is possible conflict within them?
Ms Taylor: The devil is going to be in the detail, is it not, and that clearly is something where everybody is aware of the potential tensions there. For many ALMOs they will still be subject to the Audit Commission Decent Homes inspection regime. CLG has made it clear that as long as the Decent Homes programme continues they will want to do that, and, of course, ALMOs are not directly regulated by the TSA because it is the landlord that is regulated. We very much support the idea of cross-domain regulation and having a single regulator. We are a bit concerned that there is the potential for falling between the gaps and tensions among the group. It would be dramatically difficult for us if, for example, we had three bodies - the council, the Audit Commission and the TSA, all telling ALMOs to do different things. If they are all telling ALMOs to do the same things that is not a problem, but if they all say different things that is a real issue and that is something we are going to need to work to. Nevertheless, we are very committed to cross-domain regulation. We would like to see the TSA perhaps being a little stronger on aspiration and also on support. One of the advantages as a sector that we have had that perhaps other sectors have not had is that we have had a funding regime which has not been competitive; it has been purely based on achieving a certain level of performance. That has enabled ALMOs to share experiences with each other in a way that perhaps has not been possible for the housing association sector, particularly when they were being driven down a very development-orientated, competitive, business-type route, and also there are no real incentives for traditional local authorities. We would like to see much more within the TSA about incentives and support rather than penalties and punishments for organisations that might be struggling.
Mr Tanney: Again, if I can just give one quick example of how we have benefited, we had an improvement board and we benefited from having a three-star ALMO just up the road and their chief executive was on our improvement board. He offered challenge and suggestions and helped us to get from where we were to where we are now, and that was really useful because we were not in competition with that ALMO.
Chair: Can I thank you very much indeed and we will move on to the next witnesses.
Witnesses: Mr Richard Jones, Secretary, and Mr Mark Butterworth, Director, Residential Landlords Association, gave evidence.
Q283 Chair: Can I welcome you to this evidence session of the Committee. Do not feel the need for both of you to speak on every point unless there are additional points you want to make.
Mr Butterworth: We speak with the same voice.
Q284 Chair: Excellent! Obviously a Stalinist method of control! We are now talking about the private sector and I think we have already felt from evidence that we have got thus far that the Decent Homes programme has worked much less effectively within the private sector than it has in the social sector. Can you give your views on whether you think that setting the target for vulnerable households in the private sector has achieved anything at all?
Mr Jones: I think not. It has had little or no impact. The target has been down-valued as time has gone on in any event; it is no longer officially the same quality of target, if I can term it that way, as it was before. Our experience is that local authorities are essentially operating on a reactive basis. They receive a complaint or they receive an application for a grant and they have to concentrate their efforts on that. HMO and selective licensing have also had a massive impact in terms of resources.
Mr Butterworth: I would also like to point out that the "vulnerable" tag has expanded quite widely and covers all those in receipt of working family tax credits, et cetera, which covers quite a big median income scale, and we think the term has possibly, as Richard has pointed out, become devalued because it has become so wide. Also, previous witnesses have alluded to the big transfer of low income families from the social sector into the private rented sector and they acknowledge within the report that there has been a big transfer of people from this sector and low income households are probably struggling to fund their homes, having gone into owner occupation.
Q285 Chair: Can I pick up the point that Mr Jones made about HMO regulations and selective licensing? Are you saying that that in itself has not delivered more decent homes because the private rented sector is possibly the worst sector for non-decent homes?
Mr Jones: Our view of mandatory HMO licensing is that it has brought into regulation, by and large unnecessarily, whole swathes of student and young professional type accommodation. It has ended up as a self-feeding, self-serving bureaucracy and that has distracted local authorities from the real task of dealing with homes that are not fit.
Q286 Chair: Do you think that local authorities have been using the money from the regional housing pot at all in the private sector?
Mr Jones: That is a question we cannot really answer. We do not necessarily have the experience of how the funding pots are managed but we do not see any evidence of that on the ground by and large.
Q287 Chair: Finally, how about monitoring the target of Decent Homes in the private sector? Do you have a comment on that?
Mr Butterworth: We were having a long discussion about this before we came in because we appreciate the difficulties involved with this. The private rented sector is generally older stock but better located than social housing. It has clearly suffered from a lack of investment because a lot of money has gone into social housing and the amount of grant monies that went in in the 1980s when housing was subject to a subsidy was about a billion pounds. If you inflation-proof that to now and bear in mind that the investment into property is one eighth of that and none of that is going into the private rented sector, there is this huge disparity in resources. When you are looking at decent homes, if the property is staying in the rented sector the outcome is the same: it is a better property, so ring-fencing the private rented sector from any funds is rather counter-productive. That makes life a little bit more awkward and, as Richard has pointed out, there has been a huge amount of input and time wasting that has gone on with licensing. There are also the difficulties with HHSRS, which is okay as an academic exercise but one of the practical responses into the private rented sector is that the councils are under a duty to respond to Category 1 hazards and that is what they are looking at, but they have got 29 categories to look at when they go in a property.
Q288 Chair: That is the point that we would like to pursue, that and others.
Mr Jones: May I just come back, please, on one point on the monitoring? I think it is very difficult in practice for local authorities to monitor the impact of Decent Homes in relation to the private rented sector or the private sector generally because properties can move in and out, individuals can move in and out, and certainly, talking to local authority officials, they find it very hard to come up with any meaningful way of monitoring that.
Mr Butterworth: The discussion we had earlier, for it to result in some meaningful or tangible improvement, was about perhaps a use of EPCs before any work and again afterwards because it is the only simple, cost effective measure by which you could gather some information on improvements and it does not matter which sector or who has done it: if there is an improvement it is a result.
Q289 Alison Seabeck: You talk in your evidence about the contrast between the Housing Act 2004 and the fact that you felt that was particularly inflexible in what it was demanding of you, and now the new Housing Health and Safety Rating System which you think is too much risk based. Clearly, neither system finds favour. What sort of system would you like to see introduced in terms of what needs to be done for private sector landlords?
Mr Jones: I hope we summarised it in our evidence. The preference, talking to landlords generally, is that they wish to be told by and large what to do as long as they feel it is reasonable and cost effective and as long as there is a facility to go back and have a meaningful discussion with the authority about alternative ways because there is often more than one way of achieving a result and the landlord knows the property often better than the enforcement officer. What we need to do, I think, is to try and find somewhere in between and we have suggested in our evidence a form of guidance. We have worked very closely with LACORS in producing the fire safety standard because until that document was produced everyone was completely at sea. The existing fire safety guidance for sleeping accommodation was far more applicable to hotels and larger buildings. That exercise means that for a normal risk in a typical type of property there are now some standards laid down that will effectively deem compliance not just with HHSRS but licence conditions and the Fire Safety Order where that is applicable. That has been a massively helpful piece of work and what we are suggesting is taking that forward. Another area where I personally work with Hull City Council is in trying to produce some guidance in terms of excess cold. That is quite a difficult exercise and that really needs to be taken forward. Falls are another area where one can have some straightforward guidance because landlords do not understand the complexities of HHSRS. I think often local authority enforcement officials are still very nervous of this untried scheme but if you can have some guidance that is reasonably flexible that would help answer that particular problem.
Q290 Alison Seabeck: It is interesting you talked about cold because there are some very clear arguments around cold homes, but it is not clear enough for your members to be able to carry forward and make the necessary changes and improvements to their properties.
Mr Butterworth: We would like to think that our members are generally decent landlords and compliant and will not need targeting. I would just like to make the point that there are only 1,600 environmental health officers in the country. They have a huge workload to carry out and we feel that licensing has placed huge burdens on them and taken them away from checking on the lower end of the sector where they need to engage with the poorer properties that do tenants a disservice, do property in general a disserve and landlords in particular by giving them a bad reputation. Our proposal for this is accreditation whereby landlords agree to aspire to a set of standards which they sign up to, they become self-regulating and agree with these. The quid pro quo for this would be that landlords would be taken out of the licensing network because they have shown that they do know what they are doing; they have undertaken some training and they are willing to provide decent standards. This allows much more effective targeting of local authority resources to everybody's benefit and takes a lot of the burden of unnecessary cost of administration off the largely compliant bulk of the market.
Q291 Alison Seabeck: When you talk about "the largely compliant bulk of the market", what sort of percentage would you put on that within your sector?
Mr Butterworth: I suppose the easiest way to monitor that is that various things have been done that indicate an over 90 per cent satisfaction ratio from tenants with their property. It is very high and therefore a lot of people are happy with their rented accommodation, and particularly if they are in a decent property or a more modern property I do not think we need concern ourselves with checking it for cold or for any of the Category 1, 2 or other hazards under HHSRS. It is clearly the poorer property stock that, although it may be well located, needs to be monitored more carefully.
Q292 Alison Seabeck: And those are the properties that are often the coldest, the most damp, the less thermally efficient, and yet you have concerns about some of the thermal efficiency standards. You think they are too demanding. Any comment on that?
Mr Jones: I do not think we said they were too demanding. I think we were looking at the issue of flexibility.
Q293 Alison Seabeck: It is described as problematic in cost terms as well.
Mr Jones: Cost is a significant factor, as always. It is the resources, because if you have a smaller, older property (which by definition is more difficult to treat) and you are receiving an average rent then the capital cost involved in upgrading that property means there is really no discernible benefit to the landlord frequently because the benefit of cheaper electricity bills will fall to the tenant, so it is going to take a long time for the market to differentiate between properties that have been treated and those that have not, and therefore you have got considerable capital cost relative to the return on the property. That is the important thing.
Q294 Alison Seabeck: Have you done any work with tenants' organisations to look at whether or not some sort of co-payment arrangement might be something you could pursue, because, as you say, the tenant is potentially a net beneficiary, but also you avoid things like condensation and everything else that goes with that.
Mr Butterworth: When these things have raised
their head with various other committees or in
Q295 Chair: So are you suggesting doing it through the utilities?
Mr Butterworth: I think that is the only fair way. We have picked up on this at length as well. It is back to resources: how are resources best harnessed. There is no point in isolating bits of property here and there or using the private rented sector, which is only one eighth of the property in the country, when your big carbon reduction targets are going to come from owner occupied. If you put private rented property in with owner occupied and have improvements available to the whole sector rather than just concentrating all subsidies in the social sector, it is really irrelevant for the end result. If you are looking for results you are looking for carbon reductions and it does not matter which sector it goes into providing you get the carbon reductions at the end of the day.
Q296 Alison Seabeck: Would not a landlord though benefit if there was some sort of system that could flag up that his or her property was particularly energy efficient and therefore bills were really low and that you had almost a rating system? Of course, you should have an energy rating anyway, but is that not a selling point and therefore you put more on your rent for this?
Mr Butterworth: This strikes close to home
because I personally build property for sale for new as well and I know from
the market that people have no interest whatsoever in paying for energy. It is something they are very unwilling to
do. If we look at
Q297 Mr Turner: Just going back to the accreditation scheme that you were talking about, can you tell us what barriers you think there are to setting that up?
Mr Butterworth: We have a scheme.
Mr Jones: Local authorities have had these various accreditation schemes for some time. The problem is filling in the gaps, and we are working to address this at the moment; we are in the process of launching our own accreditation scheme. Also, we are finding increasingly that local authorities which have been operating these schemes for some time are facing insufficient resource problems but, more importantly, see themselves as conflicted in the sense that they are the regulatory authority as well as the authority that is trying to help the private rented sector. I think many of them would feel more comfortable if there was some distance between themselves and the administration of these schemes, albeit they would continue to play an important part in helping facilitate the schemes. That is the first point to make. The second point is that local authorities at the moment are only able to offer limited concessions for membership of the schemes. It may be taking what is otherwise trade refuse to the local tip and being able to dump it without having to pay charges or car parking, all very small-scale stuff, useful but small scale. What we are suggesting is a much more radical move whereby effectively you could move the compliant landlord, who would be pre-vetted, out of the local authority control into an accreditation scheme. Accreditation schemes in themselves would need to be approved and accredited and we are working with ANOC who are looking at this whole issue to get a basic standard of accreditation schemes so as to ensure general confidence in them. Particularly if accredited landlords were to be taken out of things like HMO and selective licensing were the way forward, that would give a massive opportunity for a move over to much more self-regulation.
Q298 Mr Turner: You said in your evidence that enforcement activities are concentrated on compliant landlords. Can you give us some evidence of that? Can you not only give us some evidence but also say why you think that should be?
Mr Butterworth: Inevitably, the softest targets are those that are semi-compliant because they tick the most boxes and are the people who show the most results. Rented housing is governed by 80 Acts of Parliament and many of these have become redundant because the powers are not used and most of the powers they have under the 2004 Housing Act were already in existence so were just re-packaged. There was a big political will for this but it has provided very little benefit, so now you have got large numbers of licences issued, which has become an end in itself, and effectively so far licensing is just a fine on landlords who are pretty well compliant anyway. It is making no inroads into the non-compliant and the poorer properties, which is a source of great angst to the decent landlords who have signed up and paid the fees and a source of great amusement to those who pay nothing and cock a snoop as per normal. They are a very small minority, I hasten to add, but they are more difficult to engage and that is where efforts should be concentrated.
Q299 Chair: Do you have hard and fast documentary evidence that that is so? Can you demonstrate in certain areas that there has been no improvement as a result of licensing in the worst HMOs?
Mr Jones: Yes, I can answer that,
although it is a developing field. It is
very interesting that the Government have so far not published the Building
Research Establishment's research in this area even though they have been
pressed to do so. I am based in
Q300 Chair: That would be very helpful.
Mr Jones: ----- is that prior to the
introduction of HMO licensing
Q301 Mr Turner: In a similar vein, again in your evidence you said that the Housing Health and Safety Rating System "has not been enforced even-handedly". I wonder if you could give us a bit more detail on that, and again say why you think that is so?
Mr Jones: I think this is in relation to the owner occupier sector.
Q302 Mr Turner: Yes.
Mr Jones: Can I give you another
example of where this has happened? I do
quite a bit of work with Hull City Council and, very sensibly, instead of going
down the selective licensing route,
Mr Butterworth: There is also the difference between the social sector and the private rented sector where a local authority cannot issue notices to itself but it can for everybody else, and also the social sector does not get prosecuted for Category 2 hazards like the private rented sector does. On the accreditation point, we have tried very hard with accreditation and many doors are beginning to open but one of the biggest ones is an approved code of conduct which we spent a lot of time and effort on, but the predecessor to the CLG could not get any political will to accept a sensible code of conduct which has been a major kick in the teeth for a very useful scheme so far.
Chair: Thank you both very much
indeed. Mr Jones, it would be very helpful
if afterwards you were able to drop us a note with the specific details about
the
Witness: Professor Tony Crook, Professor of
Housing Studies,
Q303 Chair: Can I welcome you, Professor Crook. You have been sitting through the previous session, I think, so you have heard quite a lot of the discussion already about the private rented sector, but I would like to start with asking you whether you think that just to set a target for decent homes in the private sector influences the behaviour of private sector landlords or not.
Professor Crook: Chair, I will answer your
question indirectly if I may because I have not done any work on that, as I
made clear to your team. The key issue
is the question of incentives. The work
that I and my colleague, Peter Kemp at
Q304 Chair:
It
is, and, just before I hand over to my colleague Neil, can I explore slightly
more what you said about effectively the binary nature of the market, the
retired
Professor Crook: It was an example.
Q305 Chair: The other sector you said was landlords who basically buy the properties as investments. If a property is extremely energy inefficient is it still a good investment? I suppose if it is next to a tube station it could be, or are there three sectors, is what I am asking? Is there a third sector which is ropey properties where there is nevertheless a market and where you can still get a return?
Professor Crook: There is probably a one per cent maximum market right at the bottom of the market in difficult circumstances, often in northern towns where landlords may be farming housing benefit, but it is a very small part of the sector and I was not referring to that in my binary division. We looked and ran technically some regression analysis on a database of 300,000 market rents from the Rent Service and the only variables which come up are location and size. Let me make a caveat to that. That is for one and two bedroom accommodation. When you look at three and four bedroom accommodation, which is more suitable for larger households, which might be groups of students but it does include households with families, other variables come into the equation and they include crime rates and key stage two results. There is a hint there that with the growth of families in the private rented sector people are looking for neighbourhood quality as revealed by school quality and crime rates, but in the vast majority people are looking for nearness to work. In fact, rents decrease the first 100 metres from a tube station then rise rapidly afterwards, which is probably telling you something about the nature of the immediate environment around the tube station.
Q306 Mr Turner: You have probably answered all the questions I was going to ask you so I will skip the first one and go on to the second one. What kinds of incentives do you think landlords would need in order to invest? Would tax relief on improvement work be an incentive that would work?
Professor Crook: What we have observed in the
data is that where conditions are good landlords continue to invest, and I
think there is a kind of stewardship attitude that we are talking about
here. In other words, it is not wholly
economic man or woman making the decision, but landlords owning property
believe it should be maintained and will tend to invest over and above that
which is necessary. At the top end of
the market landlords who invest in that way can probably achieve capital gains
as well. I think at the bottom end of
the market, and when I say "the bottom end of the market" I am talking about
the market where conditions are poor and probably energy efficiency is low, the
German system is interesting. Your
previous witnesses referred to that, I thought quite helpfully, because there
is a system of regulation in
Q307 Chair: Can you just explain that a bit more clearly and then come back to your line of argument?
Professor Crook: Rents in
Q308 Chair: Sorry; I deviated you.
Professor Crook: Mr Turner, you asked me what incentives landlords respond to.
Q309 Mr Turner: Yes, whether or not tax relief would be an incentive to carry out work.
Professor Crook: If we are talking about conditions at "the bottom end", probably in areas of houses in multiple occupation, probably areas where the tenants may be vulnerable, what incentives do landlords need? Probably good enforcement action with the availability of grant. It is interesting, if you look back in the past, that where local authorities have had success, and this is an enormously difficult area, as your previous witnesses have intimated, is that where they have taken enforcement action and they have had the grant support to follow that up things have happened. However, there is every disincentive for landlords to invest in the sense that if they invest the rents probably will not go up dramatically, and in the kinds of areas we are probably all referring to that you will be aware of in your constituencies, capital gains may not increase significantly, so if you like there is every incentive just to continue to take the income because the tenants will continue to pay, yet the social argument for investing must be high, both in terms of the health and safety of the tenants and in terms of the wider neighbourhood impact. I think the change in the financial regime has probably made it more difficult for local authorities to do this because they cannot. You referred earlier, Chair, to the regional housing pot and I do not have the data on that, but, of course, there are competing claims that local authorities have.
Q310 Mr Turner: There has been a big call for, for instance, no VAT on house improvements, et cetera. I take it from what you are saying that you think that would be a blunt instrument and that a targeted grant system would be more effective in raising standards.
Professor Crook: Correct. I am not saying that would not be unhelpful.
Q311 Mr Turner: But if you have got a pot of money then it would be better to have a grant system?
Professor Crook: Yes, allied, if I may say, Mr Turner, with the fact that there is a strong case for arguing that many of these circumstances continue to prevail because of the shortage of affordable housing. Many of the low income vulnerable people may be better off in the social sector. I am not principally saying registered social landlords but private landlords who operate under HCA grant who are looking for longer term circumstances. Many landlords in those circumstances perform a valuable function as sort of quasi-social workers by providing the difficult accommodation which is lowish cost for them.
Q312 Mr Turner: That is interesting and it brings us on to the next question. Do you think that increased competition within the lower end of the sector would also improve standards?
Professor Crook: As an economist, in principle
I ought to say yes to that, ought I not?
I forget which minister it was, in one of the many attempts to try and
increase City of London investment in the sector via housing investment trusts,
real estate investment trusts, who talked about getting in the good money to
drive out the bad, and in a sense that ought to be right, and that could
include competition from the social sector as well, which often gives quality
accommodation on reasonably secure terms, not indefinite security, providing
people who at the moment have nowhere else to go and find it very
difficult. There are big regional
contrasts here. The situation in
Q313 John Cummings: Is lack of knowledge or standards or stock condition by landlords a persuasive reason for low standards?
Professor Crook: I am not sure about "persuasive reason". However, the evidence is quite compelling, not just the evidence that Professor Kemp and I have but in other surveys too. We have, by the way, just completed the parallel to the Rugg Review for the Scottish Government. In terms of landlords who have been recently attracted into the sector, the vast majority of the stock is owned by new landlords. I emphasise my last point - the vast majority of the stock is owned by new landlords, many of whom have come into the sector attracted by the possibility of short-term capital gains and that has been very clear in the last few years. Many of them approach property saying, "It is like owning your own house. I know how to do this", but are not aware of their responsibilities as landlords and have found it difficult, though there are exceptions, to find good managing agents, and many of them either do not have an awareness of their rights or of their tenants' obligations and find it very difficult to find out about standards. The Scottish registration system, if I may say so, in answering a question which you have not asked me, has not addressed that problem adequately. I appreciate that that is a matter for a devolved administration, of course, not for yourselves.
Q314 Chair: What is the Scottish registration system, briefly?
Professor Crook: Briefly, yes. With limited exceptions, all landlords are required to register themselves and their property. They have to pass a "fit and proper person" test which is basically not having a criminal conviction, and they pay to be registered. All the evidence suggests that the register is not complete. You might not expect this, but there are some landlords who perhaps would not bother to register. Landlords say this is an increased burden on them and they only wish the local authorities - and we found this very interesting in our evidence - were chasing the bad landlords "because they are tarring the brush of all of us", and felt that - and this is in our report to the Scottish Government and your advisers can find it on the Scottish Government website - this was a proposition that might have been used much better.
Q315 Alison
Seabeck: I am going to link that to regulation of
managing agents and what is being looked at here because that links into some
of the proposals we have just been talking about. Do you feel there is a role for regulation of
managing agents in
Professor Crook: Yes, in principle, because there needs to be a good redress system. I say that because it is the one area of consumer protection which is missing and it seems to me ought to be completed.
Q316 Alison Seabeck: Do you think there is scope within that for enabling that form of regulation to help drive Decent Homes standards improvements as well?
Professor Crook: You have talked about the managing agents. I do not know whether the question is more general.
Q317 Alison Seabeck: This is slightly more general, whether or not we could use a system of regulation to drive and indicate standards.
Professor Crook: I am happy to answer the more
general question; forgive me for seeking clarification. My view is one of advice rather than
particularly answering the question. I
am not trying to evade it. I think we
need to be clear why we want this. Is it
in order to collect a database so we can follow up? If so, how can we be sure that everybody will
register? The Scottish evidence is quite
clear here, and I am not blaming anybody in
Q318 Alison Seabeck: It is just that we have not been able to see it yet, if it is with the BRE still, the evidence you were talking about on HMOs is still with the BRE, I think.
Professor Crook: But if the landlords owning
the worst properties have reasons for not registering the question is, how do
you do that? Local authorities are quite
capable - I suspect there are some in the public gallery - of using IT systems,
subject to the Data Protection Act, to work out where these are. The fundamental problem is a lack of
resources. Your previous witnesses, and
I read it last night on your website, said that there are 1,600 environmental
health officers; it is a compellingly low figure. The work I did, which was published in a
journal called Policy and Politics,
which your advisers can look at, looking at the experience of environmental
health officers in trying to enforce standards in houses in multiple occupation
showed that it is fundamentally difficult, first, to find them, and, secondly,
tenants will not necessarily welcome them coming in and enforcing because they
will be concerned, if not about retaliatory action, that their rents might go
up as a consequence. In other words, we
have a domain there where the tenants are actively seeking low standards. There are some interesting issues about A8
migrants here and it provides a potential moral, if not legal, conflict of
interest for local authorities which I have discussed with some chief
executives. A8 migrants have come here
not intending to stay. You will know
about this. They are quite happy to live
in quite appalling accommodation because they can repatriate their income to
Q319 Chair: Can I press you on that? One could see that there would be several purposes. One might be improving fire safety. One of the reasons why the HMO registration, as I understand it, was targeted at three storey and above is that that is where most of the fire deaths occur.
Professor Crook: And that was why it was made mandatory.
Q320 Chair: Indeed, yes, so you would have fire safety where you could argue that the fact that people do not mind living in a property where they might be burnt to a crisp is not something one would go along with.
Professor Crook: No, and you might say there is a clear public interest in that.
Q321 Chair: Indeed. The other one could be to do with a commitment to reduce greenhouse gas emissions, the need therefore to improve the housing stock. If those were the two - fire safety and energy efficiency, then as regards the private sector would there be any point in including the notion of whether the tenant was vulnerable or not, or should it simply relate to the property?
Professor Crook: Economists have a word, "externalities", which gets trotted out from time to time. In other words, there is a wider impact on other people. Yes, in other words, there is a reason for requiring those to be registered and licensed because there is a spin-off impact on the rest of society. It is not just health and danger to the inhabitants; it is health and danger to other people. If in principle you had a register which dealt with that and you had well resourced enforcement systems and you had grant action then it might work, because I do not think the tenants will necessarily pay more in the knowledge that their electricity bills are going to be lower.
Q322 Chair: Okay. That is probably quite a useful positive point at which to stop. Thank you very much, Professor Crook.
Professor Crook: Not at all.