Written evidence submitted by the Affordable
Home Loan Network (AHLN)
Regeneration to enable growth: What Government is
doing in support of community-led regeneration:
— How
effective is the Government's approach to regeneration likely
to be? What benefits is the new approach likely to bring?
— In
particular:
— Will
it ensure that the progress made by past regeneration projects
is not lost and can, where appropriate, be built on?
— Will
it ensure that sufficient public funds are made available for
future major town and city regeneration projects as well as for
more localised projects?
— What
lessons should be learnt from past and existing regeneration projects
to apply to the Government's new approach?
— What
action should the Government be taking to attract money from (a)
public and (b) private sources into regeneration schemes?
1. Summary of Key points
— Our
submission is concerned with the Government's current approach
to funding vulnerable homeowners to complete repairs and improvement
to their homes and the consequence of low-income homeowner's inability
to bring their home to Decent Homes Standard. We would contend
that in order to make progress in community-led regeneration,
progress must be made within the private sector housing in terms
of vulnerable people living in decent homes.
— We
would suggest that Government removal of the Private Sector Renewal
budget will have detrimental effect on the ability of vulnerable
homeowners to achieve economic growth for themselves and their
communities and that the government is not doing enough to build
on the progress made to date in private sector renewal with decent
homes standard. The total removal of this budget line means all
the good work completed in this area cannot be built on.
— We
would propose that Government take a leading role in working with
Affordable Home Loan Network to leverage in Private sector investment
to allow the continuation of the good work of all the network
members. While all the members acknowledge the current economic
situation in relation to Government funding, it is important for
government to take a lead in attracting money from private sector.
Project Merlin or any agreement within government needs to be
visible to members to allow them to work with their representatives
to source money from both mutuals and commercial banking sector.
— We
will provide evidence of the good work and impact of the last
three years of public sector funding and the implication of member's
inability to continue the work with vulnerable homeowners in enabling
growth and achieving community -led regeneration.
2. Introduction
The Affordable Home Loan Network is a newly established
Special Interest Group by Local Government Association (LGA) our
role /task is to make direct representation to Government on issues
that directly impact on our special interest. The special interest
for the group is providing affordable home loans to vulnerable
homeowners to enable them to bring their homes to Decent Homes
Standard.
As a group we have the opportunity to present factual
information on Government policy that directly impacts on funding
for vulnerable homeowners living in non decent homes.
The work by all affordable home loan network members
has transformed the way public money is used by adopting the use
of loans rather than grants as a form of financial assistance
to help homeowners meet Decent Homes Standards. This changing
ethos from housing grant to housing loans has focused on asset
rich and cash poor vulnerable people and enabled more people to
benefit from housing repairs and Improvement to their homes. As
these loans are repaid into a revolving loan funds, this then
permits additional households to benefit from these funds.
All members offer equity release loan products or
low-cost loans designed to assist vulnerable home-owners with
the repair and improvement of their homes. With Independent Financial
Advisers to advise on the most appropriate loan product, Home
Improvement Agencies to schedule and supervise the building works
and additional safeguards to employ reliable and responsible building
contractors this is an invaluable and comprehensive service for
those unable to help themselves.
The range of services provided by AHLN members:
while detailed arrangements vary, members of the AHLN network
are part of a series of partnerships which usually comprise the
following elements. These are:
— improvement
and repairs expertise often contributed by local authorities and/or
Home Improvement Agencies (HIAs)—these agencies may identify
clients, draw up schedules of work and supervise the building
works whilst in operation;
— regulated
financial advisors, whose role it is to give independent financial
advice to clients regarding the choice of a loan product which
seems most appropriate to their needs in order to pay for the
works;
— a fund
management agency which administers the revolving loan fund—these
may be local authorities, eg Yorkshire and Humberside Home Loans
Service, or independent not-for-profit agencies, the Five Lamps
Organisation in the North-East;
— the
services of approved building contractors with considerable experience
of carrying out residential maintenance and repair works for elderly,
disabled or vulnerable households. HIAs may also carry out building
works themselves under the supervision of local authorities; and
— a range
of loan products available in order to provide choice to the home-owner
in meeting the costs of the works.
In addition to these "core" services, all
of the Partnerships offer advice and guidance to prospective clients.
In many cases this can result in a positive outcome for the client
by securing alternative sources of funds, (such as charitable
bodies), by giving practical support towards building works, (such
as the preparation of schedules of work), or by making referrals
for other forms of support. It is often difficult to measure the
impact of this kind of activity, but in one case in the North-East
where three local authorities have attempted to quantify the outcome,
an additional £60,000 of funds was invested in home repairs
and maintenance by prospective applicants themselves in the first
nine months of this financial year. This kind of outcome is likely
to be replicated across all the partnerships in the AHLN.
Some partnerships may also draw on additional areas
of expertise. The London Rebuilding Society, for example, works
with the most vulnerable, often elderly and disabled households,
or those with a long-term limiting illness. It works in partnership
with social services departments and other support agencies for
the elderly, eg Age UK and the Royal British Legion, which can
provide care and support to these households after the works have
been completed. Examples of other related services include the
North East Partnership where advice and guidance is given on skills
development and employability for young people.
In the South West, the Wessex Reinvestment Trust
also provides financial support for small business start-ups and
for community initiatives, such as community savings schemes and
affordable homes projects. Most partnerships also seek to provide
advice on welfare benefit entitlement as part of an income maximisation
strategy. In addition to the primary objective of assisting poor
and vulnerable households with help and support in repairing and
improving their homes, therefore, most if not all the partnerships
also contribute some "added value" to the local communities
they serve.
Geographical coverage: AHLN
members are organised on a regional basis and in the West Midlands,
Yorkshire and Humberside, and the South-West of England the service
provided by the West Midlands Kickstart Partnership, Yorkshire
and Humber Home Loans Service and Wessex Home Improvement Loans
includes the majority of local authorities in those regions. South
Coast Moneyline works in collaboration with 16 authorities in
the South of England; PUSH with seven authorities in South Hampshire
and the London Rebuilding Society with seven London Boroughs.
The North-East Home Loans Partnership works together with 12 local
authorities in the North-East region and the Borough of Oldham
is seeking to establish an agency to service the North-West where
a number of authorities currently offer a home repair and improvement
loans service. Together these agencies provide affordable home
loans services in almost every region and to 109 local authorities
across the country, including most of the major provincial cities.
The contribution of AHLN members: AHLN
members have made the following achievements:
— they
have assisted 4,891 households with completed loans to date.
The vast majority of these loans have been to bring poor housing
conditions up to the Decent Homes standard;
— they
have funded £64 million worth of loans at an average of over
£13,000 per loan; and
— a
further £10.6 million worth of investment has been approved
or comprises "work in progress".
At the same time, through the advice and guidance
given by these agencies, significant additional investment has
been generated from other sources of finance, eg from families
themselves, or from other agencies such as charitable bodies.
3. How effective is the Government's approach
to regeneration likely to be? What benefits is the new approach
likely to bring?
3.1 Will it ensure that the progress made
by past regeneration projects is not lost and can, where appropriate,
be built on?
Government invested over £1 billion of public
money in private sector housing renewal between 2008-09 to 2010-11.
During this period the current rate of public and private investment
in the owner-occupied stock was just about keeping pace with the
level of deterioration and given economic forecasts for the next
few years, these circumstances are likely to worsen.
Currently...
— 1.3
million "poor" home-owner households live in properties
that fail to meet current minimum housing standards;
— 766,000
owner-occupied households living in such poor housing conditions
have children under five years old;
— and
almost 150,000 elderly home-owners are residing in homes which
are excessively cold.
In recent years a wealth of research has been undertaken
on the impact of poor housing conditions on the health and welfare
of residents. This research evidence demonstrates that poor housing
conditions in general have been linked to increased levels of
limiting long-term illness, respiratory and infectious diseases,
accidents, psychological problems and perceived poor general health;
even to increased mortality.
In particular the health and well-being of the
young, the old and the poor are seriously jeopardised by the housing
standards in which they live.
Hence the renewal of owner-occupied homes for the
poor and vulnerable presents a critical challenge. It affords:
— the
greatest problem of scale in tackling poor housing conditions;
— poor
levels of energy efficiency;
— very
high overall carbon emissions levels; and
— high
(and increasing) costs as investment is deferred.
The implications of poor housing conditions for vulnerable
homeowners
Affordable Home Loan Network members have developed
in support of the private sector renewal agenda of local authorities
which has focused on "vulnerable households in non-decent
homes". Because a major part of their role has been in making
equity based loans, however, they have also prioritised home-owners
rather than private renters. Hence, this section will analyse
the impact of these poor housing conditions on "vulnerable"
home-owners—the poor, households with children and the elderly.
Poor households: there
are over 1.3 million "poor" households living in non-decent
homes in England and many of these households will be home-owners.
As the EHS (2008) makes clear these households suffer some of
the most serious housing problems. The poor "are much more
likely to live in homes in serious disrepair", with problems
of "serious condensation and mould" or in neighbourhoods
with the "worst upkeep problems". Almost 50% of households
in the lowest income quintile are also living in properties in
the three lowest residential energy-efficiency bands. Households
in this income group also accounted for 78% of all households
experiencing fuel poverty.
Poor ethnic minority households were particularly
vulnerable. According to the EHS (2008), "22% of poor ethnic
minorities were living in homes in disrepair, 15% in homes with
serious condensation and more than one in four (26%) in neighbourhoods
with worst upkeep problems". With the most limited financial
resources and living in some of the worst housing conditions,
this is the group which is most vulnerable to persistent problems
of ill health, social anxiety and depression. It is these households
who will suffer most if local budgets for private sector housing
renewal are withdrawn and make it impossible to achieve community-led
regeneration. They have scarce funds of their own, limited experience
of institutional loan finance, and by virtue of their "high
risk" postcode or poor credit-rating, very few would be able
to access commercial loans from "High Street" lenders.
As a consequence, it is precisely on these households
that the financial assistance of the Affordable Home Loan Network
membership is focussed. In addition to the advisory and supervisory
services provided by the AHLN Partnerships, most offer a range
of loan products which include an interest free equity loan requiring
no monthly repayments—absolutely essential in seeking to
help the very poorest households.
The impact of poor housing conditions on children's
health and well-being is especially important. Lisa Harker, a
specialist in children's development, observes that, "The
impact (of poor housing) on children's development is both immediate
and long-term; growing up in poor or overcrowded housing has been
found to have a lasting impact on a child's health and well-being
throughout their life" Children living in poor, damp or overcrowded
conditions are more likely than adults to experience respiratory
problems, to be at risk of infections, and to exacerbate psychological
problems. Housing conditions are also imperative to the safety
of a child and in 2001-02, the Child Accident Prevention Trust
estimated that almost 900,000 children under the age of 15 years
attended hospital and around 100 died, as a result of accidents
in the home.
Similarly, educational attainment is important in
subsequent years to economic well-being and those children whose
growth and educational development were impaired as a result of
poor housing conditions during childhood may experience an increased
risk of unemployment and/or working opportunities limited to low-paid
employment. Sparkes (1999), for example, found that adults with
low basic skills were five times as likely to be unemployed as
those with average skills.
This analysis suggests that intervention to improve
the housing conditions of households with children is likely to
have a double benefit, first on improving the immediate health
and well-being of family members; and second, on being an investment
for the future in improving the subsequent housing, health and
economic opportunities of the children. The needs of households
with young children are also a key concern of AHLN members and
hundreds of such households have been helped out of very poor
housing conditions over recent years.
3.2 What lessons should be learnt from past
and existing regeneration projects to apply to the Government's
new approach?
The potential social and economic costs of discontinuing
this embryonic "national" affordable home loans service
In the event that the current services provided by
AHLN members fail to attract the political and economic support
that they now need, there will naturally be economic and social
consequences. The social costs of a discontinued service are unquantifiable.
They will be borne, however, by the thousands of households all
over the country who will no longer receive the support they need,
or be able to access affordable loan finance, in order to embark
on the repair and improvement of their properties and regenerate
their community.
Some costs are quantifiable, however, and these include
the loss of potential savings to the National Health Service and
to society in general associated with the failure to tackle poor
housing conditions. They include the loss of jobs that will result
as a consequence of the decline in investment in housing repair
and maintenance and the impact on the environment of the failure
to reduce carbon emissions from largely old, owner occupied dwellings.
Roys et al have developed a methodology to calculate
the costs of medical treatment in the NHS arising from various
accidents in the home associated with poor housing conditions.
They have calculated an initial (and theoretical) estimate for
the total cost of poor housing. Using data from the English House
Condition Survey (2007) regarding the incidence of hazards in
the home, they argue that the current state of repair of the English
housing stock results in accidents, such as falls, burns and scalds,
carbon monoxide poisoning, etc, which costs the NHS over £600
million per year. From their methodology one can infer that had
the £75 million investment made by AHLN members been spent
in precisely the same way as advocated by Roys et al, then it
would have saved the NHS around £2.55 million per annum and
something like £6.375 million per annum in total costs to
the community. The latter involves a pay-back period for the initial
investment of about 12 years.
The loss of housing investment will also result in
a loss of jobs. This would not only involve those immediately
employed by AHLN members but most particularly those engaged in
the construction industry in the HIAs and the building contractors
who actually undertake the building work. HIAs in the West Midlands
are already planning redundancies and an exercise undertaken by
the North-East Partnership suggests that many of the small building
contractors currently used by the partnership are heavily dependent
on the business provided by them. According to "Construction
Skills", (part of the Construction Industry Training Board),
the loss of £1 million to the construction industry results
in the equivalent loss of 32 full-time jobs in the repair and
maintenance sector. Hence, if the £75 million investment
made by AHLN members is to be discontinued, then this would result
in the loss of the equivalent of 2,400 full-time jobs in the construction
industry.
The damage to the environment as a result of the
discontinuance of the investment can also be quantified. Using
figures from the EHS (2008), if 5,000 owner occupied properties
had all been improved to Energy Performance Certificate standards
then total carbon emissions would have been reduced by around
9,500 tonnes per year and the savings in fuel costs to those low-income
households would have been around £167 per year or £835,000
collectively.
These, then are some of the potential costs of discontinuing
the services of AHLN members:
— the
social costs associated with the burden of continuing poor housing
conditions will fall on thousands of the most vulnerable households
in our society;
— significant
potential long-term financial savings to the NHS and society more
generally will be lost;
— around
2,400 jobs will go in the construction sector; and
— carbon
emissions savings will be lost as well as the opportunity to reduce
fuel costs for low-income households.
3.3 Will it ensure that sufficient public
funds are made available for future major town and city regeneration
projects as well as for more localised projects?
Why should the government and other agencies continue
their support for members of the AHLN Network?
— To
enable continued access to affordable loan finance—in
circumstances where 1.3 million "poor" home-owners live
in conditions below the current minimum standard and in an environment
of growing financial exclusion, these vulnerable and low-income
home-owners will have very few alternative sources of finance
to enable them to repair and maintain their homes.
— Public
expenditure savings—improved housing
conditions for poor, vulnerable and elderly households will reduce
the demands on the NHS and other public services in the long-term.
— To
save local jobs—sustaining AHLN
member services will save at least 2,400 jobs in the construction
industry and other service industries.
— Improved
environmental conditions—energy
efficiency measures in the home will continue to reduce carbon
emissions and mean lower heating costs for some of the poorest
households.
— Greater
satisfaction, independence and security for the most vulnerable
households—this can continue to
be achieved through the targeting of improved housing conditions
on those most in need.
— Demographic
change will impose an even greater burden on health and public
services in the future—interventions
to maintain and improve housing standards now for the elderly
and disabled will ensure "that little bit of help" that
is necessary to ensure their continued independence for as long
as possible.
— Value
for money—partnership arrangements
involving many local authorities serviced by a single provider
of financial advice and fund management have secured significant
economies of scale and effort for those authorities.
— Added
value—the advice and guidance role
of these agencies has ensured the attraction of additional sources
of finance and resulted in higher numbers of repaired and improved
homes than the overall statistics reveal.
3.4 What action should the Government be taking
to attract money from (a) public and (b) private sources into
regeneration schemes?
In the final report of Communities and Local Government
Committee on Beyond Decent Homes—Fourth reports of Session
2009-10, the recommendation on funding was:
— "CLG
undertake or commission work to develop means of levering in private
finance for the improvement of private sector stock. The results
should be made widely available to local authorities, who should
be encouraged to develop schemes appropriate to their areas to
facilitate access to those funds".
— — Leverage—Affordable
Home Loan Network members continue to be faced with difficulty
in engaging with private financial institutions to attract money
from private source. Therefore government need to provide leverage
nationally especially with the Banks where government has a commercial
stake and work with the network to agreed the process to achieve
this objective. This process will ensure that the proposal for
government community-led regeneration will be achievable.
— — Sustainability—the
nature of these "revolving loan funds" means that a
limited injection of public capital on a "once and for all"
basis now will ensure their ability to attract private capital
and lay a sustainable financial foundation for the future.
— — The
Big Society—the role and function
of Affordable Home Loan Network members is compliant with the
priorities of the Coalition Government and lies at the heart of
community-led regeneration programmes which the government wishes
to pursue.
March 2011
APPENDIX
MEMBERS OF THE AFFORDABLE HOME LOANS NETWORK
THE WEST
MIDLANDS KICKSTART
PARTNERSHIP
The Partnership was established in September 2003
following the liberalisation of local authority powers for private
sector housing renewal under the Regulatory Reform Order of 2002.
It was set up by the seven "urban authorities" in the
West Midlands conurbation in response to the challenge of the
nature and scale of poor housing conditions within private sector
housing in the region. At that time the project was seen as a
pilot scheme with a particular emphasis on testing the market
for equity release loans amongst low-income and vulnerable home-owners
in order to undertake the repair and improvement of their homes.
The pilot scheme was largely successful in its implementation;
using public resources it made 375 equity release loans over three
years to the value of £6.424 million across all the participating
authorities. Hence the scheme was extended in 2008 to include
all housing authorities across the region who wished to become
involved. Currently there are 27 participating authorities covering
the vast majority of the population in the region. The Partnership
offers a range of financial products and with a small secretariat,
is administering a loan programme of approximately £20 million
during 2010-11. It operates in partnership with a fund management
agency, (which is regulated by the Financial Services Authority
(FSA) and works in collaboration with the Home Improvement Trust
(HIT) which provides private finance for specific types of loan.
Independent financial advice is provided via a panel of Independent
Financial Advisers (IFAs), and its improvement and repair programme
is delivered via local authority and other Home Improvement Agencies
(HIAs). It has a current loan book in excess of £30 million
with a further pipeline of over £6 million.
WESSEX REINVESTMENT
TRUST—WESSEX
HOME IMPROVEMENT
LOANS
The Trust was established in partnership with several
local authorities in the south-west region in 2004-05. It now
offers a range of financial services to the community through
Wessex Community Assets, small business loans and support via
the Fredericks Foundation, as well as a range of loans for home
improvement and repair through the Wessex Home Improvement Loan
Partnership (WHIL). The Partnership was initiated with a similar
remit to the WM Kickstart scheme, to assist low-income and vulnerable
home-owners with repairs and improvements to their homes. It was
established as a not-for-profit Community Development Finance
Institution (CDFI) and whilst it does not offer equity release
loans to home-owners, the interest rates on its loans, (as well
as the set-up costs), are subsidised by local authority partners.
WHIL is also regulated by the FSA. In recent years it has not
only expanded the number of local authorities with whom it works,
but also the range of loan products available and the type of
clientele it addresses. It currently receives financial support
from 19 authorities in the West Country and has a loan book of
about £3.9 million with a further £2.5 million of work
in progress.
SOUTH COAST
MONEYLINE
South Coast Moneyline describes itself as a sister
organisation to the Wessex Home Loans Partnership. It was established
in 2006 by the Portsmouth Area Regeneration Trust. Accordingly,
it was set up for similar reasons and offers a similar range of
loan products to those initially provided by WHIL. It is also
a not-for-profit agency whose products are subsidised by local
authority partners, although its rates are higher than those in
WHIL. It is currently working with 16 local authorities primarily,
as the name would suggest, along the south coast of England. As
with other AHLN members, it has experienced significant growth
over recent months and has a loan book of just over £1.1
million and a pipeline of £150k.
PARTNERSHIP FOR
URBAN SOUTH
HAMPSHIRE (PUSH)
Within the context of the wider partnership of local
authorities in South Hampshire to pursue "sustainable, economic-led
growth and regeneration", is the "PUSH 4 safer homes"
initiative. "PUSH 4 safer Homes" operates two partnerships
in the South Hampshire area. The first is in three local authorities
together with South Coast Moneyline (as mentioned above). The
second is a partnership of seven local authorities led by Southampton
City Council for the renewal of private sector homes in the remaining
South Hampshire authorities. The partnership was launched in January
2009 with funds of £8.4 million for expenditure on the repair
and improvement of private sector homes over a three-year period.
Under the scheme, loans are available for a variety of purposes
to low-income home-owners and to landlords for bringing empty
properties back into use or for serious hazards in high-risk rented
accommodation. The Partnership also includes local HIAs, landlords'
associations and an Energy Advice agency. It has a current loan
book of £5.3 million.
THE LONDON
REBUILDING SOCIETY—HOME
IMPROVEMENT SERVICES
London Rebuilding Society is a social enterprise
specialising in innovative forms of finance. It currently operates
in three different areas of activity; it provides loan finance
for small scale social enterprises in London; a Mutual Aid fund
for migrant communities providing credit and training; and a Home
Improvement Scheme helping vulnerable low-income home-owners to
renovate their homes through equity release loans. Its home improvement
activities have focussed very much on elderly and disabled people
and it often funds the difference between the DFG grant and the
ultimate costs of works. LRS also works in partnership with other
agencies such as AGE UK and the Royal British Legion to provide
support to clients after the work has been carried out. It has
completed 29 schemes in six London Boroughs amounting to almost
£2 million.
HOMES AND
LOANS SERVICE
(FORMERLY THE
YORKSHIRE AND
HUMBER REGIONAL
HOME LOANS
SERVICE)
This home loans agency has been operational since
2005. It provides home loans services to all of the twenty-one
local authorities in the Yorkshire and Humberside region and is
administered by Sheffield City Council. It was set up using funds
from the Government Regional Office with the intention of assisting
home-owners in need of assistance to repair or improve their homes,
either for health and safety reasons, for disabled adaptations,
or to meet decent homes standards. The main loan product is an
equity release loan, but uniquely with a cap on the annual rate
of growth of the loan for repayment purposes. The Homes and Loans
service also covers the cost of the set-up and administration
of the loans. Approximately £10.6 million has been invested
so far on equity-based home improvement loans and a further £5
million on relocation loans.
THE NORTH
EAST REGIONAL
HOME LOANS
PARTNERSHIP
This is the most recent of the regional agencies
to become operational. After much preparatory activity, the Partnership
was launched in April 2010 with the aim of aligning the way in
which local housing authorities in the region went about the process
of assisting low-income home-owners in three areas of activity,
to maintain and improve healthy living conditions in private sector
housing; to contribute to the regeneration of older residential
areas suffering from market vulnerability; and to encourage home-owners
to undertake work which will make their homes more energy efficient.
The Partnership now consists of 12 authorities with an initial
budget of £2.4 million to provide a range of loans and a
variety of types of grant assistance for these purposes. Since
its inauguration, the Partnership has relinquished the services
of Sunderland as lead authority and has moved into offices with
the Association of North East Councils (ANEC). It has also appointed
a loans administrator to handle the loans process. In recent months,
the Partnership has been approached to broaden the basis of its
work to include the administration of council mortgages, the re-use
of empty properties and the funding of renewable technologies
to improve energy efficiency in the home.
These are the key members of the recently established
Affordable Home Loans Network. There are, in addition, several
individual local authorities, such as Oldham, which are members
but are not part of a regional organisation, (but are seeking
to establish one), and those who are already members of one of
the regional consortia outlined above, (eg Hastings, Bristol and
Wolverhampton).
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