HC 1652 Communities and Local Government CommitteeWritten submission from Northampton Borough Council

Thank you for the opportunity to respond to the review of Financing of new housing supply. Whilst we appreciate the current economic climate and the need to reduce the Nation’s debt, we are also concerned for how the Housing Market is going to recover and once again start the process of providing much needed homes for households on Council’s waiting lists and those households who can not afford to become an owner occupier at the moment and are therefore relying on the private rented market.

This has obvious knock on effects for our proposed new duties to discharge homeless customers in the private rented sector, as rental prices will inevitably rise due to the demand from the would be newly created owner occupiers in any normal recovery cycle of an economic cycle.

Attached to this covering letter is our Memorandum on some of the issues you have asked to comment on, and we hope you find our comments useful.

I would be happy to discuss any of the points we have raised.

1. What the role is of state lending or investment, as opposed to grant funding, and the appropriate balance between them?

Each of these can play a role in different circumstances. Lending or Investment, with the opportunity of recycling that investment has to be a serious consideration, especially the way the Housing Market is going. Some sort of deferred payment “Build now Pay later” seems to be a realistic proposal currently. There will still be a need for Grant to a certain extent, but if this continues to be linked to Affordable Rent, we are not sure how sustainable this maybe longer term.

2. What the role is of public sector in providing support in kind—for example land or guarantees—as opposed to cash, and what the barriers are to this happening?

Northampton Borough Council Housing Department already have a good working relationship with its Private Registered Providers (PRP). On several occasions now we have made good use of our PRP Framework to offer land at Nominal Value to enable the delivery of new affordable homes. The barriers to providing General fund land at nominal value in the future will depend on the economic circumstances It may be the case that deferred capital receipts are applied to schemes going forward to enable the development to take off initially.

3. How long-term private finance, especially from large financial institutions, could be brought into the private and social rented sectors, and what the barriers are to that happening?

Northampton Borough Council Housing Strategy team are currently exploring ideas with several private sector organisations who have pension backed investment to invest in the residential market. Given the changes to the Affordable Homes programme for 2011–2015, the affordable rent model has placed constraints on how new development can be funded through Section 106 schemes. Current discussions are focussed on how private investment can be used to fund these developments, which in Northampton provide the majority of new affordable housing supply. The only concern or barriers at the moment are most investment models are linked to the Affordable Rent (80% market rent) tenure. This is a concern for Northampton as gradually over time we will see the social rented stock diminish through PRP partners re-let conversions and our own stock through the RTB.

A study we commissioned recently to look at the impact of affordable rent on Northampton, illustrated that for most of our customers on the housing register, affordable rent as a tenure is not affordable. With almost 70% of our housing register on some form of means tested benefit, this is a worry.

4. How the reform of the council Housing Revenue Account system might enable more funding to be made available for housing supply?

Northampton Borough Council welcome the freedoms and flexibilities that emanate out of the HRA Reform. Still dependant on final confirmation of the debt settlement later this year, the current 30 year HRA Business Plan forecasts sufficient headroom after the first five years to be able to provide funding for additional new build dwellings, which is a real ambition of the Council. However recent announcements on the RTB and increased discounts could impact on the business plan in a negative manner, and therefore the headroom we think we might have might not be there should recent announcements go ahead.

5. How effective the Government’s “Affordable Rent” proposals are likely to be in increasing the funds available for new housing supply, and how sustainable this might be over the medium to long term?

As stated previously, affordable rent as a tenure does not work for those on the housing register in Northampton, however we realise that this is a form of tenure that can be utilised by other customers and are therefore supporting it. In terms of whether it will yield sufficient funds to be able to fund future development is very much dependant on the numbers to be delivered over the next four years. Currently PRP rents in Northampton are approximately between 72–75% of Open Market Rent, therefore there is not a huge uplift to benefit from. Given we are predicting to only have 100 affordable homes delivered every year for the next three years, and on average 200–300 PRP lets a year, there is not sufficient numbers to raise the level of funding you would require to build the same level of units year on year, without additional subsidy from either the PRP’s themselves, local authorities or government grant.

October 2011

Prepared 1st May 2012