Written evidence submitted by the Pro-Housing
Alliance
The rationale behind each immediate and strategic
recommendation is in the Appendix beginning on page 5.
A. RECOMMENDATIONS
FOR IMMEDIATE
ACTION
1. Increase the supply of affordable housing
in all tenures
Enhanced supply and access to housing that people
can afford without increasing the risk of debt is essential, and
an increased supply of housing regardless of tenure, especially
low rent housing with adequate security, should be a priority
(see the letters to The Times and Daily Telegraph in Appendix
4). Housing should be seen as a national asset.
2. The recent set of housing benefit cuts
should not be implemented
The current proposals to cut housing benefit will
cause severe hardship and have adverse mental and physical health
effects associated with debt, poverty and enforced relocations.
They will increase health risks from crowding and lack of space
in accommodation.
Instead of cutting housing benefit the high benefit
bill should be reduced over time by reducing scarcity by means
of increased housing output, better use of the existing stock
and the targeting of empty homes in high demand areas.
3. Define in statute both "affordable
housing", using local evidence, and "overcrowded"
"Affordability" needs to be clearly defined
to avoid loose and misleading use of the term. Evidence-based
housing affordability figures should be calculated for local areas
using the Housing Affordability Standard (HAS) methodology developed
by the Zacchaeus 2000 Trust and Citizens UK in 2008, based on
Minimum Income Standards (MIS) methodology. Housing that does
not meet this standard should not be designated as "affordable".
A statutory evidence-based definition of the term should be available
to assist the courts.
Equally there should be a statutory definition of
"overcrowded" appropriate to modern housing aspirations
and the need to protect health and welfare.
4. Assess the redistributive effects of housing
support
Over many decades those able to access home ownership
have been advantaged in both revenue and capital terms over tenants
in all rented categories. This has had clear regressive effects
on both income and wealth distributions since those initially
wealthy have received most benefit.
Resources should be provided to carry out an analysis
to assess the net wealth and income redistributive effects of
current and past housing support programmes, both in terms of
direct support and in fiscal terms.
5. Calculate the health cost and other costs
arising from housing policy malfunction, develop a strategy to
tackle the high levels of "non-decency" in all tenures
and adopt a "business model" approach
The Cabinet Office should follow the example of DECC
in commissioning research to monetise some of the additional costs
to the taxpayer in relation to health, education, the administration
of justice and other services deriving from poor and unaffordable
housing with particular emphasis on the private sector which has
largely been forgotten.
In particular, in consultation with the Treasury,
the DCLG should develop a housing strategy to ensure that all
vulnerable households live in homes which meet the 10-year old
"decent homes" standard. Special consideration should
be given to the increasing number of frail elderly and disabled
people living independently in the community.
Recent research studies using a "business model"
approach have suggested that there would be a significant revenue
return on increased investment in housing.
6. Support means to increase the role of residents
in housing production and management
In consultation with local and national residents'
organisations, develop the role and empowerment of residents in
new housing developments and in the management of existing rented
housing in both the private and social sectors.
7. Develop a better business environment for
the housing construction industry
— (a) In
consultation with the construction industry develop programmes
and mechanisms that will more effectively incentivise housing
producers and give greater confidence for long-term investment
in housebuilding.
— (b) Reinstate
the financial support provided through the private sector renewal
budget1 which is used mainly to carry out minor
adaptations and repairs to the homes of vulnerable older and disabled
people.
In 2010-11 the central government budget was £317
million, in 2011-12 it is zero. The removal of this funding after
more than 60 years will annually affect more than 300,000 vulnerable
mainly elderly or disabled households leaving them in properties
which are frequently cold, in disrepair and unsuitable for their
needs.
8. Devise reforms for the land supply system
and land taxation
An independent expert committee should be established
to:
— (a) Examine
the benefits of a land value tax as a replacement for other taxes
and reclaim for the public purse some of the increased value arising
from public investment; and
— (b) As
part of the "Big Society" develop means of promoting
Community Land Trusts and similar mutually controlled approaches
to housing development. A properly capitalised "Big Society
Bank" should be used to support and fund CLTs and other social
enterprise schemes.
B. STRATEGIC
RECOMMENDATIONS
1. Bring the relationship between earnings
and housing costs more into line with historic norms
Housing costs to residents have risen much faster
than earnings over recent decades and this has entailed an increased
reliance on housing benefit payments. This trend should be gradually
reversed by ensuring that housing costs rise more slowly than
earnings so that the evolving price/rent profile of the total
stock, and the stock in specific areas, matches the evolving profile
of earnings without the need for means-tested benefits which are
expensive and impede the transition into work.
2. Rebalance the supply/demand support pattern
Public spending to support housing should be directed
primarily to stimulating new output and making better use of existing
stock (including empty properties and land) not to stimulating
the price/rent levels of stock overall.
In particular the sharply increased spend on Housing
Benefit over recent decades (from about £5 billion to over
£20 billion) is wasteful of public resources, especially
since a proportion goes untaxed to overseas landlords and has
very little effect on increasing housing supply.
3. Reduce house price and rent instabilities
Develop effective regulation over lending volumes
to address the factors permitting the recurrent surges in house
purchase credit that are the main underlying reasons for the damaging
instabilities in house prices and rents, and the supra-inflationary
rise in housing costs.
This issue should be approached in the context of
the huge and diverse public costs generated by housing unaffordability
and price/rent instabilities.
APPENDIX
STATEMENTS OF RATIONALE
The Alliance Position; high quality and healthy housing
is essential infrastructure:
(1) Rationale: We argue that
enough decent affordable housing is a pre-condition for societal
health and wellbeing, educational achievement, economic development
and the proper care of all age groups.
(2) The Marmot Review argues
that tackling health inequalities "involves tackling social
inequalities':
…the distribution of health and well-being needs
to be understood in relation to a range of factors that interact
in complex ways. These factors include whether you live in a decent
house" (Marmot 2010).
(3) The Housing Health and
Safety Rating System statutory guidance says:
"…any dwelling should provide adequate
protection from all potential hazards prevailing in the local
external environment and that any residential premises should
provide a safe and healthy environment for any potential occupier
or visitor" (HHSRS guidance 2006).
(4) The needs of occupants
vary and it is essential with an ageing population that homes
are suitably adapted to allow people to live independently with
dignity and in comfort.
(5) Housing policy should
be predicated equally on considerations of social justice and
economic efficiency. The policies of at least the last 30 years
have signally failed on both counts with resultant huge, but unmeasured,
economic costs and widespread hardship for more vulnerable people.
(6) The Alliance believes
that there is a strong and growing case that housing policy malfunction
in all its manifestations costs a lot more than the economy can
afford. Equally it believes that some aspects of the system are
totally unjust and are causing mental stress, physical ill-health
and consequent public costs on a widespread scale.
(7) Present policies have
no clear set of aims against which success can be measured. They
are not making sense in terms of cost-effectiveness in the use
of scarce public funding, in terms of facilitating labour migration
and the functioning of the economy, or in terms of natural justice.
(8) Any housing policy or
strategy should be tested against its ability to deliver in all
these respects.
RATIONALE FOR
RECOMMENDATIONS FOR
ACTION NOW
1. Increase the supply of housing in all tenures
(9) Rationale: the all-pervasive
ideologically-led emphasis on owner-occupancy as the only tenure
form worth promoting is dysfunctional to the economy. If the "homes
as pensions" idea replaces proper pension provision about
30% of the population can't self-provide, which constitutes a
clear injustice. There is no logical relationship between the
proportion of home ownership and general welfare. In Switzerland
the ownership rate is 30%, in Bangladesh nearly 100% and in the
former German Democratic Republic it was about 50%.
(10) There should be no policy
preference for owner-occupancy tenure over rented tenures based
on the need for rising values as a source of equity to fund future
welfare needs. A dwelling should be to provide a healthy and secure
environment in which to establish a home—it should not be
seen as "investment". If excessive inflation is generally
regarded as undesirable the same should apply to housing.
(11) It is also necessary
to take account of the effect of necessary demolitions. If homes
are assumed to have a life of 100 years the rate of build for
replacement purposes alone is about 210,000 per year.
2. The recent set of housing benefit cuts
should not be implemented
(12) Rationale: The present
proposals to cut housing benefit are producing widespread costs
stemming from increased hardship and the adverse mental and physical
health effects associated with poverty and increased debt. They
fail to recognise the pressure on the weekly cost of food and
fuel from climate change and other global influences. They will
lead to "enforced moves" and the resultant disruption
to lifestyles and children's education, an increase in overcrowding
and they are inducing a reduction of household spend on other
health-protective items such as a healthy diet and domestic fuel.
(13) No reductions in housing
benefit should be implemented until other measures have ensured
increased housing supply and a gradual fall in housing costs and
thus a reduced call on housing support payments.
3. Define in statute both "affordable
housing", using local evidence, and "overcrowded"
(14) Rationale: The current
use of the term "affordable housing" (for example in
relation to s.106 agreements) is misleading and unjustified unless
the local housing cost level has been checked against local incomes
and other costs required for an adequate lifestyle. This can readily
be done using established Minimum Income Standard (MIS) methodology
and with regard to the Minimum Income for Healthy Living. Evidence-based
housing affordability figures should be calculated for local areas
using the Housing Affordability Standard (HAS) methodology developed
by the Zacchaeus 2000 Trust and Citizens UK. Housing that does
not meet this standard should not be designated as "affordable".
A statutory evidence-based definition of the term should be available
to assist the courts in determining individual cases.
(15) The statutory overcrowding
standard dates from a 1935 Act and was carried over largely unchanged
in the 1985 Housing Act. It is totally ill-suited to modern aspirations.
In one recent case a family with two adults and eight children
living in a three bedroom home, one a box room, were deemed to
be only marginally overcrowded under this legislation. Such a
standard is clearly not fit for purpose.
4. Assess the redistributive effects of housing
support
(16) Rationale: The persistence,
and worsening, of wealth/income/health inequalities (Joseph Rowntree
Foundation 2010, Marmot et al, 2010) is often viewed with
surprise because there have been many "anti-poverty"
programmes in recent decades which have been designed to reduce
or resolve them.
(17) But there are clear
indications that the housing support and fiscal advantage available
to all owner-occupiers (including those with mortgage paid off)
has for some time been more per household than the subsidy to
"social tenants". The government has also been abstracting
billions from Local Authority rent accounts for some time (Wilcox
and Pawson 2011), so in effect this is a reverse subsidy since
these tenants are generally worse off to start with.
(18) In addition "better
off" areas normally offer a better range of public services
and commercial services of all kinds than "deprived"
areas so the regressive effects are self-perpetuating over generations
in both environmental and financial terms.
(19) It is at least plausible
that the net effect is that the housing support pattern is redistributing
wealth and income "upwards" faster than the "poverty"
programmes are redistributing them "downwards". The
research to establish the truth or otherwise of this contention
has not been carried out.
5. Calculate the health cost and other costs
arising from housing policy malfunction, develop a strategy to
tackle the high levels of "non-decency" in all tenures
and adopt a "business model" approach
(20) Rationale: The full
range of costs arising from housing that is unaffordable, in poor
condition, overcrowded, insecure and inadequately heated or in
any other way not appropriate for purpose should be identified
and assessed as a guide to what level of housing investment would
be most cost-effective in the use of public funds. We see no point
in the government spending ever-increasing amounts on the NHS
to reduce health inequalities while failing to recognise the impact
of poor, overcrowded, insecure and inadequately heated housing
on health and wellbeing outcomes (Marmot et al, 2010, Shelter
2006). The reduction of these damaging conditions would enable
the NHS spend to be used more effectively, for example in more
preventative programmes.
(21) The Marmot Review stressed
the environmental and social determinants of health outcomes.
The national and international literature on the "exported
costs" generated by poor housing has been growing steadily
since the early 1990s when the extent of cost savings arising
from housing renewal was demonstrated in the Stepney "Health
Gain" study (Ambrose, 2000). In the last two years there
have been reports from the Building Research Establishment (Davidson
et al, 2010), Circle Anglia (Circle Anglia 2010) and Ecorys
(Friedman, 2010) each separately putting a figure of something
like £1 billion to £2.5 billion annually on the costs
of bad housing—but all working on a different aspect.
(22) Following the same logic
the DECC is commissioning a study to quantify and monetise the
health benefits from improving the energy and thermal efficiency
arising from programmes such as Warm Front and the Warm Homes
Discount.
(23) An additional risk factor
to health and wellbeing is the lack of security in the private
rented sector and the proposed reduction of security in the local
authority sector. An Australian study has found that an increase
in housing security is correlated with improved achievement and
behaviour by children (Phibbs and Young 2005). Conversely a study
in Wandsworth has found that overcrowding is an inhibiting factor
to children's capacity to perform well at school and can be associated
with adverse behavioural consequences (Ambrose and Farrell, 2009).
The indications are that an improvement in housing conditions
and security would lead to a more cost-effective use of educational
investment and to reduced stress on both teachers and learners.
(24) Putting these studies
together, all of which make very conservative assumptions, it
is reasonable to believe that the annual cost of poor housing
could be £5 billion, £7 billion or more. This is enough
to pay the annual interest on borrowings in the order of £100
billion—more than enough to put all existing housing in
good order and fund the housing drive being proposed by the Alliance
to solve current supply problems.
(25) The Alliance therefore
urges a "business model" approach and a priority research
programme to assess the full range of "exported costs"
from poor housing. If "UK plc" doesn't know what bad
housing is costing it is difficult to see how rational decisions
be made about the most cost-effective level of housing investment
so as to eradicate the costly conditions.
6. Support means to increase the role of residents
in housing production and management
(26) Rationale: The report
on the benefits associated with an empowering housing management
regime in an area of Paddington (Ambrose and Stone, 2010) showed
that improved health and wellbeing outcomes can be achieved by
a sensitive and empowering style of housing management. Since
the home is so central to many other aspects of life, and can
materially improve or detract from health and welfare, it is obvious
that serious thought should be given to furthering management
regimes that need not be excessively costly but which are likely
to lead to enhanced wellbeing outcomes.
(27) These management practices
do not arise by chance but by conscious policy decisions made
by local authorities and RSLs which need to be supported by central
government programmes, funding and advice. This is exactly the
kind of support that can be offered by bodies such as the Tenants
Services Authority and the National Tenants Voice which were recently
abolished. These organisations, or others fulfilling the same
function, should be put in place and properly resourced.
7. Develop a better business environment for
housing producers
(28) Rationale: The house
building industry has been facing a very difficult and unstable
set of operating conditions as peaks in the mortgage flow are
succeeded by a sharp downturn in lending and a failure in demand
for their products.
(29) In addition uncertainties
about how the infrastructure costs will be allocated between them
and the local authority is not conducive to an environment for
confident investment by builders or for innovating in construction
technologies or management practices. Our house building industry
is well behind that of others (for example Japan) in these respects.
(30) National and local building
targets should be worked out on the basis of projected housing
needs, the supply of development land should be ensured by intervention
by the local authority if necessary, the arrangements for infrastructural
cost sharing should be clearly agreed and the aggregate flow of
mortgage and construction funding guaranteed at a level to provide
a buoyant and sustained market for housing producers.
8. Reform the land supply system and land
taxation
(31) Rationale: the additional
land value conferred on land zoned for development is something
like x100, or maybe even x1,000, depending on the use and amount
of development approved. Similarly land rises massively in value
as a result of publicly funded infrastructure (mass transit links,
etc).
(32) All attempts to tax
this gain since 1945 have failed, often from lack of consultation
with land development interests, but it can be done in a number
of ways. Local authorities could exercise acquisition policies
so as to become the monopoly providers of development land (as
previously in Sweden—Ambrose 1994) thus themselves benefitting
from the increment in value due to zoning for a higher use. There
could be a low tax % levied annually on the value of zoned but
undeveloped land since there is something like 110,000 housing
sites in London with consent but not yet built on (London Land
Report, December 2010). In addition there could be some tax
levied on the "betterment" deriving from public investment
in infrastructure. Such a combination of land taxes could produce
sufficient revenue to replace Council Tax and Business Rates and/or
other taxes levied on productive activities.
(33) In terms of development
mechanisms there are proven and effective ways of taking the rising
value of developed land into public or community ownership whilst
allowing either public or private leasehold development to take
place. Variants of the Community Land Trust (CLT) model are widely
used in the USA (see for example Davis and Stokes 2010) and their
use could be scaled up here.
RATIONALE FOR
STRATEGIC RECOMMENDATIONS
1. Bring the relationship between earnings
and housing costs more into line with historic norms
(34) Rationale: The Housing
Minister has recently stressed the need for housing to be more
widely affordable. Historically it has normally been easier for
all income groups to find housing opportunities that match their
widely divergent incomes. The problem now is that the profile
of housing costs is truncated towards the lower end while disparities
in income have increased. So access to suitable housing for lower
income groups depends, increasingly, on means-tested housing benefit
payments. This dependence has serious inherent problems.
(35) The solution, which
may take a decade or more, is for private and social rental growth
to be controlled at less than earnings inflation, for mortgage
lending to be regulated such that house prices also rise slower
than earnings and for the supply/demand support pattern to be
rebalanced (see next point).
2. Rebalance the supply/demand support pattern
(36) Rationale: Housing support
can be applied to the supply side by incentives to constructors,
(direct subsidy, easier land supply arrangements, the provision
of a safe investment horizon, etc) or to housing users
(in the form of MITR, other fiscal advantage such as exemption
for capital gains and Schedule A tax and Housing Benefit and Allowances,
etc). In 1980 the ratio of the first to the second was 80:20,
now it is 20:80 and the cost of housing benefit has risen to £20-25
billion a year. A lot of this is going untaxed to landlords outside
the UK and an estimated £3.5 billion of it going to neglectful
landlords who have profited from the lax regulation of buy-to-let.
(37) The overall effect of
demand side support to users is to inflate the prices/rents of
existing homes without having much impact on supply—the
effect of supply side support to producers is to stimulate new
output which in time can stabilise prices and rents.
(38) In addition, since 90%
of the existing stock will still be here in 30 years time, a higher
proportion of support should go to making the existing housing
healthier and safer. In addition, according to the Empty Homes
Agency there were over 726,000 homes empty at the end of 2009.
One estimate (Audit Commission, 2009) is that if only one in 20
of empty homes were brought back into use there would be a saving
of £500 million annually on the cost of dealing with homelessness.
3. Reduce house price/rent instabilities
(39) Rationale: A similar
aim has been set out recently in statements by the Housing Minister.
It is essential to be clear where high prices and rents actually
derive from. They don't reflect original construction costs otherwise
one could buy a mid C19th house for the £150 it cost to build
in 1850. Despite arguments to the contrary they don't normally
reflect land costs as the amount bid for new housing development
sites is normally arrived at by the "residual" calculation
which starts with the expected sale price of the new housing produced.
This in turn largely depends on the house purchase credit flow
available or anticipated.
(40) From the early 1980s
deregulation of finance markets up to 2007 the credit flow increased
explosively as lenders moved into more and more "sub-prime"
areas of lending in a competitive race for profits. Over the period
1980 to 2006 (when it reached £1 trillion) the total amount
of house purchase debt outstanding was about £800 billion
more than it would have been had mortgage lending risen with inflation
over that period (see Appendices 2 and 5 of Zacchaeus 2000 Trust
2005).
(41) This carries with it
huge opportunity costs. This £800 billion could have been
applied to modernising our infrastructure, building our hospitals
and schools, funding R and D for our industries and to many other
economically productive purposes. Instead it went to elevating
house prices and increasing the paper wealth of those who can
access owner-occupancy. This is as wrong economically as it is
ethically. Rough calculations show that had house purchase lending
grown at the rate of general inflation post-1980 the average house
price in 2005 would have been £60,000 (Ambrose, 2005).
(42) It follows that to address
the problem effectively there needs to be more careful regulation
of aggregate lending flows in relation to the volume of housing
transactions. In recent decades the lenders as a group appear
to have been more powerful than the Chancellor, the Bank of England
and the FSA, the tripartite regulation system.
(43) Rents in the PR sector
are partly linked to rises in capital values as landlords seek
a competitive return on funds invested or they reflect what the
local market will bear. Local authority rents, which formerly
could be kept low by the "pooled historic cost" mechanism
have been, since about 2000, linked partly to house values in
the area. Thus rent levels in all sectors are linked to rapid
inflation in house prices.
April 2011
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