Housing and Planning Bill Committee

Written evidence submitted by London Borough of Camden Council (HPB 118)

Housing and Planning Bill

1. Context: London’s housing crisis, made worse by this Bill

1.1 London is facing an unprecedented housing crisis. Camden Council is deeply concerned that the government’s Housing and Planning Bill, far from offering solutions, is likely to make it worse.

1.2 The Bill will affect all housing tenures, not just the social rented sector. It will reduce the availability of genuinely affordable homes, drive up rents, reduce our ability to build new homes and damage the sustainability of London’s socially mixed communities and its economy.

1.3 The Bill risks undermining aspiration, dis-incentivising work, stifling growth, and acting against the government’s parallel aim to reduce the social security bill and help people into work.

1.4 The combination of the Bill’s policies will see Camden’s residents priced out of their homes, and out of the local area. It will force people into the expensive private rented property or out of London completely, leaving employers struggling to access a workforce for lower and medium income roles. In September 2015, CBI’s business survey found 57% of respondents cited lack of housing as a barrier to recruiting entry level staff and 63% felt there was insufficient funding available for affordable housing. Camden Council is working with London School of Economics to further inform the debate around the economic impact in London.

1.5 The Bill risks increasing overcrowding for those with no option but to continue working in central London.

1.6 The Bill as it stands will also put barriers in the way of London arriving at its own solutions to meet its considerable housing need through devolution by imposing national solutions which simply do not add up in the capital.

1.7 We are further concerned that the measures will affect councils’ abilities to meet homelessness and temporary housing needs.

2. Context: Camden’s record on house building

2.1 The central London Borough of Camden comprises a world leading knowledge quarter, key cultural and medical facilities, a thriving business hub, and is home to a vibrant, socially mixed community.

2.2 Camden is a borough of mixed tenure; our residents are 1/3 owner occupiers, 1/3 social tenants and 1/3 private renters. The proportion of residents who rent privately rose by half between 2001 and 2011, due in large part to falling availability of affordable housing for purchase. Average house prices in Camden in October 2015 were £847,000, compared to £503,431 for London as a whole. The GLA borough median rent for a two bedroom property is £465pw.

2.3 The Council currently manages a stock profile of 22,000 rented housing dwellings. Plus 10,000 leasehold dwellings.

2.4 Camden is committed to playing our part to address the housing crisis with one of the biggest house building programmes in the capital, providing genuinely affordable homes and creating much-needed jobs and apprenticeships. Through our Community Investment Programme we’re:

· Building 3,050 new homes

· Investing £117m into 53 schools and children’s centres by 2016/2017

· Refurbishing homes through the Better Homes programme; 3000 this year – with £197m to be invested in over 13,000 homes in the next five years

3. Camden’s position on the key measures in the Bill

4. Starter Homes

4.1 WHAT WE THINK ABOUT THIS POLICY

· The high price limit in London (£450,000) will mean the Starter Homes policy offers few new housing options for households. Even with the proposed extension of ‘Help to Buy’ in the Comprehensive Spending Review, with Government loans of 40%, this will be unaffordable for many Camden families, requiring a minimum income of approximately £57,000 (£100,000 without Help to Buy) and a £22,500 deposit. Average incomes in Camden are £32,000.

· The duty to provide Starter Homes as part of new residential developments will significantly reduce the provision of affordable rented housing. The 20% discount from market value will impact the viability of residential schemes, reducing the provision of social-rented affordable units, and undermining Councils’ ability to secure genuinely affordable homes through planning policies.

· By displacing affordable homes for rent and shared ownership, the Starter Homes initiative risks fuelling more community opposition to housing proposals which could slow down house building rather than accelerating it.

· Exempting Starter Homes from Community Infrastructure Levy and other tariff-based contributions to general infrastructure pots will reduce the amount of funding for local infrastructure. Furthermore, delivery through the planning system will create significant new burdens on council planning teams, and so should be fully funded.

· Starter Homes will use public investment to keep the market rising and make it harder for those on median incomes to afford home ownership. The potential categorisation of £450,000 Starter Homes as ‘affordable’ creates a worrying precedent.

4.2 WHAT WE WOULD LIKE TO SEE CHANGED

• We seek the powers and flexibility to shape the supply of affordable housing to rent and shared ownership products in order to meet the varied needs and incomes of Camden households, in line with our local plan and the National Planning Policy Framework.

• We agree with the LGA that restrictions on re-sales and letting at open market value should be in perpetuity, e.g. the discount should be maintained – a model that already exists through Low Cost Home Ownership schemes run by many councils.

• We would support more targeted eligibility criteria (e.g. via income thresholds as the GLA use for intermediate products) to ensure the homes go where they are most needed.

• At the very least the product needs to house those working and living in London. So we would expect a UK residency requirement and use of home as permanent residency.

5. Right to Buy

5.1 WHAT WE THINK ABOUT THIS POLICY

· Extending Right to Buy (RTB) will exacerbate the housing crisis by reducing the stock of high quality, genuinely affordable, social housing. Any replacement homes will not, in a central London context, affordably meet housing need.

· According to data provided by Registered Providers (RPs) Camden estimates a loss of 130 homes a year under the proposals. This will likely be replicated across London, increasing pressure for suitable, affordable accommodation.

· In common with most local authorities, Camden was very disappointed with the deal reached between the National Housing Federation and government to voluntarily introduce RTB for their tenants, especially in the absence of fuller consultation with a wider group of stakeholders, or more detailed thought about how the policy would work.

5.2 WHAT WE WOULD LIKE TO SEE CHANGED

· We want alternative methods for funding the RTB extension to be explored, for example, bringing forward more public sector land, use of RP assets and shared equity vehicles. Our engagement with RPs indicates a desire for alternative funding even amongst those who voted for the deal. Peabody, for example, has raised the issue of a shared equity vehicle.

· We support the Bill being amended to ensure a commitment to maximum like-for-like replacement in appropriate local authority areas (minimum one for one). In Camden there is huge housing need and limited housing options available to meet that need, even at average income levels.

· Camden is concerned about the lack of protection against resale of the properties to owners who could let at market rent and, in particular, the potential for investment from buy-to-let landlords. If the properties were to become privately rented (as has been the case with over 30% of pr operties sold under RTB in local authorities ) this would work against the government’s stated ambition to achieve greater home ownership.

· Camden asks that the specific exemption of Co-Operatives and Alms-houses, as discussed by the NHF and government, be included in the Bill.

6. High Income Social Tenants: Mandatory Rents ("Pay to Stay")

6.1 WHAT WE THINK ABOUT THIS POLICY

· We are deeply concerned about the impact of this policy on lower income households.

· Affordable housing supply is vital to the workings of Camden businesses and a vibrant London economy. But market forces mean extremely high private rental values in Camden, unaffordable to many working households. Even a two earner household on the new living wage could be hit by the proposed £40,000 income threshold.

· In Camden, the median market rent for two bed property is £465pw, unaffordable for anyone earning £40,000. The table below shows that a couple with two children and combined income of £40,000 would be spending 69% of their income on rent for a two bed flat, far above assessments of the proportion of income which would classify a rent as affordable (30-40%). Income has to increase to over £60,000 for rent for a two bed to take up 50% or less of take home pay.

gross income pa

Take home pay for a single earner with 2 children

% of take home pay for 2B, median rent £465

Take home pay for couple, both earning

% of take home pay for 1B, median rent £355 for in Camden

Take home pay for couple, 2 earners, 2 children

% of take home pay for 2 bed, median rent £465 in Camden

% of take home pay for 3 bed, median rent £650 in Camden

40,000

582

80%

637

56%

676

69%

96%

50,000

698

66%

767

46%

807

58%

81%

60,000

810

57%

898

40%

937

50%

69%

70,000

921

50%

1020

35%

1060

44%

61%

80,000

1033

45%

1138

31%

1166

40%

56%

90,000

1145

41%

1256

28%

1261

37%

52%

100,000

1256

37%

1374

26%

1379

34%

47%

· The £40,000 cliff edge creates perverse incentives for people to refuse pay increases, take on extra hours or, in larger households, for additional family members to start work. Tenants at a recent consultation held by Camden indicated they would consider reducing their working hours in order to avoid being charged an unaffordable market rent, in turn decreasing the tax take and adding to skills shortages.

· Camden residents have said:

· The policy will force people to move or push young adults out of their family homes, with little alternatives for where to live

· It will reduce employment and growth, as people may need to lower their working hours to be able to afford to stay in their home

· People on higher salaries could pay more but the current policy is impractical and instead will force people out of their homes.

· Camden has gathered some case studies:

Claire’s story

Claire has lived in her home for 24 years and would ‘struggle to survive’ if this goes ahead. She agrees tenants earning high salaries could pay more but says: ‘The problem is, we live in Camden where housing is very expensive. The private flats across the road are worth over a million pound.’ Claire has two sons aged 21 and 24:

"Let’s say my sons decided to do an apprenticeship course or are in employment on a low income, it would have an impact on the overall household income. This may lead parents to asking their children - albeit young adults - to move out. This new policy would be putting people into a situation where you’re driving young adults out who are earning a small income. Then where would they live?"

Carolyn’s story

Carolyn is a teacher who has lived in Camden for 25 years. She worked out that by cutting her work to 3 days a week she would earn less than the £40,000 threshold, meaning she can remain in her home and community:

"I feel like people in my position who made principle decisions about not buying our flats or perhaps weren't in the position to buy their flats are being unfairly punished."

· The policy takes no account of household composition or differential impacts arising from either a single earner versus a two earner household in very different tax and benefits positions, or a household with outgoings linked to carrying responsibilities for a disabled child or adult.

6.2 WHAT WE WOULD LIKE TO SEE CHANGED

· Residents should not be put in a situation where they cannot afford the new rent or any other housing option. Income thresholds should be increased, e.g. set at a level where Starter Homes become affordable alternative for families, or aligned to the Mayor’s thresholds for intermediate housing (£71,000 for 1/2 bed properties and £85,000 for 3+ bed properties).

· To maintain genuine affordability for low income families rent increases should take into account the proportion of income spent on rent and be limited to 30-40% of income.

· We are strongly opposed to the implementation of a taper that introduces further means-testing through a scheme that Councils will be expected to administer at considerable cost to the public purse.

· We would like to see Councils being able to keep the additional income generated by increased rent for investment into housing in the local area. Councils such as Camden have a bigger development programme than many RPs so it makes sense to allow councils to retain the additional revenue.

· We are extremely concerned about the plight of pensioners with fixed incomes and inability to adapt to these changes.

7. High Value Voids

7.1 WHAT WE THINK ABOUT THIS POLICY

· Camden will have one of the highest proportions of high value voids in the country. Research commissioned this year by Camden and other London boroughs found that almost 40% of Camden’s stock would be classified as high value under thresholds proposed. The government should be very cautious about the unintended consequences of significantly reducing the supply of social housing in Inner London.

· Camden’s experience of RTB is that in many cases these properties are recycled into the private rented sector. One estimate from Inside Housing is that nationally 37% of RTB properties are in this sector. This proportion would be even higher if our high value voids were sold on the open market. The policy would almost certainly be counterproductive to home ownership in Camden, resulting in a larger private rented sector.

· In our view, Camden and Inner London’s economy is dynamic because it has a mix of low, middle and high income earners living within easy reach of their workplaces. Local employers have raised, with the Leader of Camden, their alarm about the potential impact of this policy on their workforce. The implementation of the policy must recognise that London is an exception to the rest of the country.

7.2 WHAT WE WOULD LIKE TO SEE CHANGED

· If the policy is to go ahead, there should be specific exemptions for authorities with large building programmes able to invest the levy in local building and more efficiently meet government house building targets.

· We are keen to work in partnership with Housing Associations to replace their RTB sales locally, essential to maintaining the tenure mix which underpins London’s economy. But the levy could stifle this kind of innovation.

· The large variations in property prices across London mean that the high value thresholds used for calculating the levy should be set at borough rather than regional level.

· Thresholds must be pegged to the housing market. A static threshold or one reviewed only periodically would see ever greater numbers of properties exceed the threshold in London’s rising market.

· Camden has a significant stock of housing for vulnerable people which should be exempted from high value status.

· New build properties should be exempted as this would remove the entire rationale for our regeneration programme – no sooner have we completed a property which we have invested in to meet local housing need than we would have to sell it to meet our levy payment.

· We are keen to see an exemption for properties subject to demolition orders. Regeneration and the construction of the HS2 line will result in a significant number of our properties becoming void and it makes no sense for these to be counted as high value since they are unsaleable.

· In the cases of units we hold a head lease on where there is a separate freeholder, we would not be able to sell properties becoming void due to our leasehold contractual obligations. This Bill places a duty on councils to consider selling and does not override our inability to dispose of properties where we do not own the freehold and could be obliged to return occupancy at the end of the lease. These units should be exempt from the calculation of the levy.

· Where we do hand back units, we are required to keep a stock of voids to meet our decant obligations which therefore could not be sold. We have contractual obligations to hand back leased buildings with vacant possession. This need for voids for good housing management should be taken into account in the calculation of the levy.

8. Planning

8.1 Self Build: The proposals on Self Build make little sense for a borough like Camden with no greenfield land and little available brownfield land; where the vast majority of new homes are flats; and land values make the delivery of serviced plots wholly unviable. The proposals will create an unnecessary administrative burden and seem likely to prevent the adoption of local plans in Central London.

8.2 Brownfield land register: While this could have positive impacts in some areas (for example where land ownership is unclear) it is difficult to see how this measure and the other planning reforms will deliver the level of new builds that the government are seeking without also countering practices in the private sector, for example land banking.

9. Private Rented Sector

9.1 We welcome the creation of a register of ‘rogue’ landlords and letting agents, particularly as it will allow data to be held on landlords who straddle borough boundaries. Maintaining the register must be properly resourced centrally without placing administrative burdens on authorities.

9.2 We welcome the streamlining on financial penalties regarding licensing schemes which will make it easier to achieve goals of improved conditions.

10. Conclusion

10.1 This Bill creates problems for Camden families and Camden businesses and presents a fetter to London’s future economic growth.

10.2 The solution is surely increased devolution so solutions can meet the London context.

December 2015

Prepared 8th December 2015