Examination of Witnesses (Questions 36-64)
DAVID LUNTS
AND ANDREW
MELVILLE
22 MARCH 2010
Andrew Melville: I am Andrew Melville,
Head of Planning and Housing at the Government Office for London.
David Lunts: I am David Lunts.
I am the London Regional Director of the Homes and Communities
Agency.
Q36 Chair: Just picking up where
we finished in the previous evidence session, and looking at this
disconnect between levels of housing need in London, particularly.
It is a general problem and it's very concentrated in some areas.
Just starting with this issue of overcrowding, do you think it
is acceptable that there are boroughs, including my own, where
if you were waiting for a family-sized home the average wait would
be 11 years?
David Lunts: No, I don't. Clearly,
as your questioning in the previous session illustrates, the balance
of need and availability is obviously not evenly spread across
London. These are issues that we're having to deal with on a daily
and weekly basis. The point that Steve Howlett made to you is
right; we are seeking to increase the proportion of family units
that we fund, and it has increased quite substantially over the
last two or three years. We are now very close to the 42% target
that the Mayor has currently set for social rent. I have to say
that for the intermediate housing we fund, it is much more difficult,
and we are struggling to get anything much beyond 8% at the moment.
But other factors come into play as well. For instance, there
are efforts to look at what we can do on a sub-regional basis,
and discussions are obviously going on at the moment between the
GLA and boroughs about possibly looking even beyond sub-regions
so that we can extend the nomination arrangements.
Q37 Chair: On sub-regional nominations,
it would be interesting to have some figures. In the past, when
I have asked my own borough about the number of nominations that
it had in the sub-regions, they tended to come in under 10, because
a lot of outer-London boroughs normally do little scams, such
as designating all their stock as disability housing so that nobody
gets a look in. Do you have up to date figures for the number
of nomination rights that each borough has with its partners in
sub-regional partnerships?
David Lunts: We do, but I am afraid
I haven't got them here today.
Q38 Chair: Is that something you
could drop us a note about?
David Lunts: It is something I
could drop you a note on. Obviously, the figures are kept by the
sub-regional partnerships at the moment, but it is something we
have a keen interest in, going forward.
Q39 Chair: Again on overcrowding,
I listened to what Steve Howlett said about other solutions, including
things such as deconversions and extensions. Do you feel you have
the right kind of information and the right kind of partnerships
for RSL and borough work in funding that? There is a lot of potential
to do that work, but the numbers are, frankly, derisory. Is it
something that you are taking seriously and that you could put
more resources into?
David Lunts: It is something that
we are doing a lot of work on at the moment. We have to bear it
in mind that when the HCA was set up 15 or 16 months ago, we were
set up with the inherited programmes and targets that came from
our predecessor bodies. Since then, we have been operating with
the targets that were set as part of the 2008-11 programme round.
That has been supplemented more recently with new initiatives
such as Kickstart and local authority new build. But, broadly,
the way we invest has to fit within the inherited programme regimes.
That means that we are under considerable pressure to deliver
targets in terms of not only the numbers of numerical units, but
the amount of grant per unit of accommodation that we fund. One
thing that I am quite keen to explore is whether there may be
some merit, particularly in London, in looking a bit more at the
amount of grant per person in a household that we support. The
unit of accommodation tends to drive one a bit more towards more
units for less money—so, smaller units; whereas what we
want to do is increasingly to fund at an optimum level—given
the amount of money we may have—the right outcomes for the
right number of households and the right number of people. That
sort of thinking is important. The other point I would make is
that going forward, and certainly in terms of a new spending round,
the agency and most of the boroughs we have talked to have made
no secret of the fact that it would be useful perhaps to find
a little more flexibility to respond to local circumstances. In
boroughs such as Westminster, for instance, deconversion programmes
obviously have quite an important place—potentially. In
some other boroughs, where there is much greater land supply,
that is perhaps less of an issue. So going forward, we would welcome
a bit more flexibility.
Q40 Chair: Mr Melville, looking
again at some of these issues, in particular the pressure that
local authorities are under to achieve the 50% reduction in temporary
accommodation, it seems from the Government's own figures that
the overwhelming majority of households that have been diverted
from making a homelessness application are simply placed in the
private rented sector. Does it cause you any concern that all
we are doing is taking people out of the heading marked "temporary
accommodation" and putting them under the heading marked
"private rented accommodation" and paying housing benefit
at that level?
Andrew Melville: The key thing
is that their housing needs are being met. The way in which they
are met will depend on what is currently available. The private
rented sector clearly has a part to play in meeting those needs.
The fact is that not enough affordable housing is being produced
to meet all the requirements, and boroughs have to do the best
they can with what is available.
Q41 Chair: Does it worry you that
if rents are £400 a week we are putting people in a sector
where we are guaranteeing them worklessness?
Andrew Melville: There is a consultation
currently being done on housing benefit. One of the main aims
of that consultation is to try to avoid precisely that—i.e.,
to try to provide support that will continue to support people
when they get a job. Obviously the decisions still have to be
taken on that, but it is one of the main aims of that consultation.
Q42 Jeremy Corbyn: Don't you think
you have a responsibility as part of the wider public remit to
make strong representations about the ludicrous levels of private
rented accommodation in London and the costs? The Chair mentioned
£400 a week. I am sure that all of us round this table could
top that. We consign people to a life of worklessness and huge
profits to a private landlord for often disgusting and inadequate
accommodation. We are not helping anybody in this.
Andrew Melville: There is clearly
no excuse for private landlords providing poor quality accommodation
for high rents. Part of the purpose of the review is to have a
look, particularly at the most expensive areas, to see if there
is a better way to handle the use of housing benefit in those
areas. It is well known that there are certain areas where nobody
in a job could afford to rent a house other than with large amounts
of housing benefit. The Government are very aware of that and
are seeking to improve the situation. It is not an easy thing
to do, but one of the key areas where we can help is by continuing
the pressure to build more housing, particularly more affordable
housing, which will help to reduce these practices.
Q43 Chair: Wouldn't limiting housing
benefit to people in the more expensive areas, who are often in
that accommodation because there is no social housing, simply
reinforce the tendency to push poor people into poor communities?
Andrew Melville: That's precisely
the concern. If we simply cut out certain areas we will find that
the existing poverty is concentrated, and that is the last thing
that the Government want. Equally, there is a need to get good
value for the public money that is going in. In the longer term,
the answer must be to provide more housing so that those needs
can be met. It will not necessarily be possible to meet every
need in every small part of London, but looking at London as a
whole that is what we must try to do.
Q44 Chair: Just on that point,
would you accept, looking at my own central London borough, that
29 units in a year of family sized accommodation is inadequate.
Andrew Melville: No, that is clearly
not adequate. The targets that both the previous Mayor and the
current Mayor have proposed on family housing—42% for social
housing and increasing up to 16% for intermediate housing—are
strongly supported by the Government.
Q45 Chair: Have the Government
had a reply from the Mayor to the letter sent by John Healey about
the disconnect between the Government's housing strategy and the
Mayor's latest housing strategy?
Andrew Melville: We haven't had
a detailed response from the Mayor. In relation to the London
Plan, where many of these same issues came up, there will be an
examination in public of the policies in that plan which starts
on 28 June. A number of these issues will be coming up in a public
examination. The Government have raised a number of issues there:
for example, the split of social and intermediate housing and
the Mayor's proposal to change that to 60:40. I must stress that
50% affordable housing target remains the target at the moment
and will remain until there is a new London plan in place. The
proposal to replace that with a numerical target is something
that the Government want to look at very carefully, and also the
income limit on intermediate housing. Those are three issues that
the Government want to explore in detail, and understand the evidence
and see whether that is the right way to go.
Q46 Chair: Would your expectation
be that given the scale of housing need in London, the London
Plan should be consistent with the Government's housing strategy?
Andrew Melville: The Government
have made it clear in their comments on both the housing strategy
and the London Plan that they want the Mayor to be ambitious in
seeking to tackle affordable housing. They have some concerns
about the reduction from a 50% target to a 13,200 numerical target,
which is equivalent to around 40% or 38%, depending on how you
measure it. They want to explore that in more detail, and if it
is possible to do more, they would like more to be done. Obviously
the Government do not want to set targets that are completely
unrealistic. We need to look at the evidence and see whether it
is possible to do more.
Q47 Mr Slaughter: I sniffed with
the previous panel some spectating, combined with a bit of hand
wringing as well. Do you not think with your respective roles
that what you should be doing is pushing as far as possible for
affordable housing to be delivered across London, in so far as
that is feasible? We have heard the example of Peabody selling
off units. They often get singled out because they are quite prominent,
but lots of local authorities and other housing associations are
doing that as well. Others are demolishing properties or looking
for redevelopment schemes that do not have similar proportions.
If that is all going on, far from things getting better, they
will get worse due to the direct actions of social landlords.
Equally, as far as the HCA is concerned, do you monitor how aggressively
authorities are bidding for money? Some authorities don't seem
to be willing to take up what is on offer from the Government
for a new build scheme, or bid for HCA money for development costs.
Don't you think you should be doing more to encourage them, or
to blow the whistle on authorities that aren't doing that?
David Lunts: Certainly, we are
very ambitious for the delivery of affordable housing in London,
and I think what we've tried to do over the last year or so is
not only lead by example, but develop some new approaches and
new investment models to try and encourage more of that to happen.
For instance, we are spending a great deal of time with boroughs
at the moment to encourage and cajole them to think about how
they are handling their own assets, and in particular their land.
There is quite a strong message from us now that we will not expect
to be investing heavily in boroughs where land and other assets
are not brought into play as part of the solution for accelerating
the pace of delivery and improving the quality of outcomes. That
is important in the current market, because without the public
sector playing as a team, if you like, it is difficult to get
the RSL sector or the private sector to do so as well. We are
all conscious that we are going to get quizzed on value for money
even more closely than we are now. In addition, based on 15 months
of the HCA's existence, my experience of the vast majority of
boroughs is that there is a good deal of enthusiasm and support
for our approach. Most boroughs are keen to attract our investment.
I would say that there is often a high degree of interest in tailoring
that investment, as I've already suggested, to a certain set of
outcomes. We're very clear that it has to include the delivery
of affordable housing, and that includes social rented housing.
In the vast majority of cases, that's not a difficult discussion—we're
doing what we can.
Q48 Mr Slaughter: You say that
most boroughs are co-operating. Are you finding that some aren't?
David Lunts: I think there are
possibly a few boroughs that are a little slower than others.
Q49 Mr Slaughter: Would you like
to name them?
David Lunts: Not particularly,
no.
Q50 Mr Slaughter: The point is—wouldn't
that be a good thing to do? I won't use a current example from
the HCA, but I will go back to your predecessor, the Housing Corporation.
I remember having discussions with the Housing Corporation about
housing in Fulham, for example, where it was returning large sums
of money that had already been successfully bid for. It was saying
that there was too much affordable housing in the area, or handing
back affordable units already negotiated to developers because
they weren't wanted. That sort of behaviour flies entirely in
the face of what all witnesses have said they are trying to achieve.
Should you not be more whistle-blowing, or clearer about your
expectations, or do you simply see yourself as having funds available
for those who want them?
David Lunts: My experience is
not that boroughs have been pushing us to take any investment
back from schemes that we have indicated we wish to put our money
into. There have certainly been one or two cases of boroughs giving
us a steer, and that schemes that have been bid for through Kickstart
haven't been strongly supported. I have to say that in most cases
we agree with them, because they are poorly designed or inappropriate
and frankly need to be recast, but in the main that has not been
an issue. The way we choose to approach the matter is to undertake
what we call the single conversation discussion with each borough.
The single conversation is designed to be a strategic level, followed
by an operational level, discussion and agreement, borough by
borough, that looks at how the boroughs will deliver the targets
that they've been set, how they will use their assets with our
investment, how other players will be brought into play, whether
the London Development Agency or TFL, depending on local circumstances,
and then how we can shape a programme together with more clarity
than in recent years about what we will undertake to do in the
short, medium and longer terms. The response to that has been
overwhelmingly positive. We have draft local investment plans
from virtually all London boroughs. What we will be doing over
the next few months—this is obviously dependent on decisions
in spending reviews and so on—is distilling them down and
cementing them into local investment agreements. I promise that
each will be a detailed account of how each borough will work
with us and with the Mayor to deliver their affordable housing
targets.
Q51 Mr Slaughter: And that information
about what boroughs have bid for and what they've been successful
in is published, is it?
David Lunts: It will be.
Q52 Mr Slaughter: When will we
hear about the next tranche?
David Lunts: We have said that
we expect all boroughs to have concluded those discussions and
have agreements that will be sanctioned by us and their cabinets
by the end of the calendar year.
Q53 Mr Slaughter: But do we know
at the moment what the bids for the current cycle are, and how
much the boroughs are requesting from the HCA?
David Lunts: No, we don't, because
we haven't got to the point where we've distilled it down in every
case to hard numbers against hard schemes. It's an emerging picture.
We have a clear view in some boroughs, because some boroughs are
clear about their priorities, and we are clear about the schemes
that we can fund. In others, it is less clear, but the process
will have to go through the summer, autumn and possibly the early
winter because I don't want to put the HCA's name to an agreement
until we've got some clarity about levels of resources from next
April onwards.
Andrew Melville: Do you want me
to add anything?
Chair: Yes, please.
Andrew Melville: You asked about
delivery, and perhaps I could mention two aspects of that before
coming on to an issue about policy. On delivery, one area that
we've already touched on is use of public sector land, and Ministers
have been clear that they want a more proactive approach. They've
raised that with the Mayor, and work is going on to try to bring
land forward more actively. A second area in terms of delivery
is that the Government have negotiated local area agreements with
boroughs—19 have an overall target for housing, and 22 have
an affordable housing target. Those are targets that the boroughs
have signed up to for delivery in the current three-year period,
and we are coming towards the end of the second year at the moment.
In terms of policy, the Government keep a close eye on the local
development frameworks and core strategies that have been produced
by boroughs. Certainly we will raise issues if we have concerns
about a particular borough's proposals, and we will feed that
to the panel that conducts the examinations if we think a borough
is not following Government policy.
Q54 Mr Slaughter: When would you
do that, and have you done that so far?
Andrew Melville: We have raised
issues about housing with all the boroughs that are going forward
to try to clarify policies. I know that you are particularly interested
in Hammersmith and Fulham. It has said in one of its consultation
documents on the core strategies that it is looking for the majority
of new housing in the borough to be intermediate housing. We are
asking questions about that because obviously there is a need
for social housing as well. That is an issue we want to continue
to keep an eye on.
Q55 Clive Efford: Can you tell
us about single conversation agreements? Do the HCA and GOL work
together on them and on negotiating the agreements with local
authorities?
David Lunts: Yes, we do and we
will continue to do so. There are two stages. One is to sit down
with the borough and get to the point where there is what we call
a local investment plan. The plan is a fairly high-level document
that deals with the points I have already referenced: how are
the various targets going to be handled at borough level, how
are our respective assets going to be played in and how is the
borough concerned going to take some ownership and responsibility
for delivering and so forth? That will then be translated into
a local investment agreement—so we go from plan to agreement—which
will have to depend on greater clarity about where we will stand
in the new financial year from 2011-12 onwards. Our interest in
that is not only to have it as an arrangement or agreement between
the agency and the borough, but to have input from the GLA, the
LDA where they are investors, Transport for London, the Government
Office for London and so forth. It is a multi-agency agreement
even though it is primarily about housing and regeneration.
Q56 Clive Efford: Do you intend
to set targets for local authorities to try to stretch them as
part of the agreements?
David Lunts: We are at the moment
working within the parameters set by the Mayor's affordable housing
targets and the local area agreement targets. We will certainly
want to flesh those out. I am also conscious that the Mayor's
targets only run to 2011-12. There is a question about what happens
to them beyond that. We will certainly want to see that our agreements
are performance driven. The agreements will not just say, "We'll
fund this," and then just sit there. The idea is that they
will be performance-managed over a three, four or five-year period.
The short answer is yes, we will want targets.
Q57 Clive Efford: How will they
be determined? You have the Government on one side and the Mayor
on the other, but where do you draw the line over who takes precedence?
David Lunts: The Mayor's housing
strategy requires the Government to sanction it. At the moment,
as Andrew has already explained, there are some issues where the
current Government have said to the Mayor that they want to test
some of the things through the London plan review process, because
that is happening over the summer. I anticipate that by the autumn
or early winter we will all be clear about the basis on which
the Mayor's housing strategy and the various other policies that
support housing delivery in London are to be taken forward. We
will need to operate within the parameters set by the Mayor's
London plan and the Mayor's housing strategy. In addition to that,
you are quite right—there will always be a requirement for
us to respond to, and operate within, the broad parameters of
national policy. But the arrangements in the GLA Act are such
that that should be relatively straightforward, because the Mayor
and the Government have to agree the basis on which his statutory
strategies—whether it is housing or the London plan—are
eventually agreed.
Andrew Melville: May I just add
to that? The Mayor's London plan and the boroughs' core strategies
set long-term planning policies, including housing targets. They
will set what needs to be achieved over the next 10 years and
more. Within any particular shorter period, you then need to look
at the amount of money available and set short-term funding targets.
There are two sets of targets. First, what are we trying to achieve
in the long term? Secondly, what can be achieved in the immediate
period with the money available?
Q58 Jeremy Corbyn: Very quickly,
I am looking at the figures for section 106 and affordable housing
developments. The proportion of build achieved from section 106
compared to affordable is very low. Do you have any concerns about
the operation of section 106 agreements?
Andrew Melville: I will correct
that if it is wrong. These figures in the table that was in the
memorandum relate to section 106-provided housing that didn't
have grant. You are quite right that the proportion of housing
provided without grant was reduced significantly from 1,560 homes
in 2006-07 to 580 last year. That is simply a reflection of the
way the market has gone in recent years. We are obviously concerned
about the economic situation and the fact that it is having an
impact on what developers can afford to pay. In the long term,
the answer to this is not to drop affordable housing from the
requirements, but to have flexible requirements that take account
of what can be afforded.
Q59 Jeremy Corbyn: May I interrupt
you? The reason why I asked the question is that I am concerned
that developers come up with a lot of what can only be described
as sob stories to local authorities about how they can't do X,
Y and Z under section 106. Too often, local authorities either
believe them or allow them to pay instead of building. The losers
are always the poorest people and those in need. In your assessment
of this, I just wondered whether we should be a bit tougher in
the operation of section 106.
Andrew Melville: I think we are
reasonably tough. Certainly in the cases that we see, which tend
to be the larger and more complex ones, we normally expect to
see a viability assessment, which is normally done independently.
We also normally expect that, wherever possible, housing should
be provided on site. That is part of the general approach. It
is not always possible to provide it all on site, but that is
certainly what we are looking for, and it is also what the GLA
is looking for in its policies.
David Lunts: I have dug the figures
out. The figures that Andrew is quoting are the delivery of affordable
housing through section 106 that are basically grant free. It
is interesting year on year. I have the quarter two figures for
this year compared with last year, and the proportion of affordable
schemes that we are funding through section 106—we often
continue to fund section 106 schemes—has dropped from 64%
rent to 12%. On low-cost home ownership, intermediate housing
has dropped from 50% to 11%. So you can see that there is a complete
collapse of section 106 schemes coming through.
Q60 Mr Slaughter: I am going to
use an example from my own experience. I monitor the planning
committees of both my local authorities every three or four weeks.
I noted these trends very strongly. First, section 106 agreements
are now pretty derisory in terms of what they are asking for.
Secondly, even when section 106 agreements have been given, the
previous provision for affordable housing is now being renegotiated
so that the money is going to the other form of housing. Thirdly,
the schemes that had been given planning permission are now coming
back with the affordable housing or section 106 agreement removed.
All of those trends again move towards a decline in the number
of affordable housing units being constructed. Is that something
that you are aware of? Is it something we can do anything about,
and is there any DCLG guidance that would suggest that the planning
authorities had taken the wrong course?
Andrew Melville: In terms of renegotiating
section 106 agreements, the guidance that applies to determining
applications in the first place will still apply, so authorities
should still be looking to maximise the amount of affordable housing
to meet needs. Obviously, if there's a strong viability case that
a scheme won't go ahead if they have to provide the amount originally
negotiated, the Government are keen that we don't see a complete
halt to house building, so a realistic reassessment of what can
be afforded is fine. If there's any evidence that authorities
or developers are misusing that to do less than they could afford
to do—
Q61 Mr Slaughter: It's not the
developers who are misusing it, although they may be the beneficiaries.
It's the local authorities that are misusing it. Would you be
concerned if a local authority was saying to a developer, "Oh,
you remember you promised us 60 units of affordable housing. We
don't really need those any more. We'll still have the money or
a cash sum in lieu, but we'll spend it on something else"?
Andrew Melville: We would be concerned
if authorities were saying that there was no need for affordable
housing, because there cannot be many places in London where that
could be true, given the overwhelming needs. Obviously, that's
a separate issue from whether a scheme can or cannot afford to
pay for affordable housing. We wouldn't want schemes to be halted
by insisting on unrealistic requirements.
Q62 Mr Slaughter: But if there's
no viability study or the developer has done a viability study
that hasn't been challenged by the local authority, who is to
say whether it's reasonable? If you got consent for a scheme with,
say, 20% affordable housing a year ago and you now go back and
say, "We'd like that to go through planning again, but we'd
like 2% affordable housing now because in the current market conditions,
we don't think we can afford that, and here's our expert who says
that's true," should authorities be renegotiating that?
Andrew Melville: I don't know
whether David wants to comment on how this is happening with grant-funded
schemes, but certainly if we were aware of a scheme, we would
expect to see a revised viability assessment in those circumstances,
with an independent check, so that it is not just the word of
the developer but something that is subject to an independent
check.
David Lunts: Certainly we ask
quite searching questions of RSL partners who have an allocation
for grant—the vast majority of section 106 schemes still
need grant—and who then hand it back because they say that
the scheme is not going ahead or, even worse, it's going ahead
without any affordable housing. We would ask quite searching questions
about that. Andrew is right about the viability point. One of
the things that we're doing at the moment is reviewing, together
with the GLA, the basis on which viability testing is done, because
one of the difficulties at the moment is there are different systems
and it's all too easy for people to get confused or be played
off. We will go forward with a single revised viability tool that
can deal with the new circumstances. The other thing I'd say is
that our strong advice to boroughs—quite a number of them
are taking it—is that if a scheme is not viable with its
current section 106 agreement, our recommendation is that on an
open-book basis, if section 106 agreements are to be revised to
deliver a scheme that otherwise won't start, that viability should
be reviewed and redone on an annual basis. It's not the case,
for instance, that an applicant or a developer can in effect remove
their section 106 obligations, bank the site, wait for better
times and then have a scheme that no longer has the section 106
obligations it should have.
Q63 Mr Slaughter: Is there DCLG
guidance on that issue?
Andrew Melville: There is DCLG
guidance on seeking affordable housing in the first place. I'll
need to talk to the DCLG about whether there is guidance on revising
the section 106s.
Q64 Mr Slaughter: We've gone over
our time, but I'd be grateful if you could do that, Mr Melville,
and let me and other members of the Committee know whether that
is the case. Mr Lunts, in so far as you have current data available
for the amount of grant that is going into boroughs, could you
let us have a copy of that information?
David Lunts: Yes, certainly.
Chair: Thank you very much to both of
you. Mr Lunts, you'll let us have that and also a note on out-of-borough
nominations.
David Lunts: Yes.
Chair: Thank you.
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