Examination of Witnesses (Questions 348
- 359)
TUESDAY 4 DECEMBER 2007
Professor Christine Whitehead, Ms Helen Williams,
Mr Mike Hardy and Mr Adam Sampson
Q348 Lord Wakeham:
Good afternoon and thank you very much for coming along to give
us some of your time to answer some of our questions. First of
all, can I say that I am very grateful to you for the written
evidence that you have given and you are perfectly entitled to
assume that the Committee has read your written evidence and therefore
there is no point in repeating it? I say that because we have
three lots of witnesses this afternoon, which means that we are
a bit more pushed for time that we normally are. I am always told
to say to you and to remind ourselves that it is highly desirable
that you speak up and speak relatively slowly so that we get an
accurate account of what you are going to say to us. I will ask
you first of all whether you are happy to go straight into the
questions or whether you want to say anything as a preliminary
statement. You are happy to go straight into the questions? As
this is being televised I wonder if you could introduce yourselves
before we start.
Mr Sampson: Adam Sampson. I am Chief Executive
of Shelter.
Professor Whitehead: Christine Whitehead, Department
of Economics, LSE.
Ms Williams: Helen Williams, National Housing
Federation and the membership body of Housing Associations.
Mr Hardy: Mike Hardy, Managing Director of Longhurst
Homes.
Q349 Lord Wakeham:
If I could start by asking you: what role does immigration play
in the increase in household formation in the United Kingdom,
in the short term and in the long term?
Professor Whitehead: I think I had better start
on that. Immigration is clearly one of the areas where there is
most uncertainty about the projections of households. The work
which Alan Holmans and I did last year, produced on a slightly
difference basis from the Office of National Statistics by taking
as our base no net migration rather than zero, which means a difference
in household composition, suggested that over the next 15 or 20
years we were talking about 25% of the additional household formation
being associated with immigration. The new population statistics
which came out about a month ago do not have household formation
figures associated with them as yet, but it would suggest probably
that that figure might have gone from 25 to 28%. Obviously it
is very different regionally and in London in particular, where
taking that net household formation figure, it comes out at over
two-thirds. But given the inflows and outflows to London, it is
still the fact that the indigenous population is having more children,
which is pushing up the outcome.
Q350 Lord Vallance of Tummel:
Do you have any specific estimates for how immigration has affected
house prices and rents in the UK, particularly at the lower end
of the market? And again if you could distinguish between the
regions that would be helpful.
Professor Whitehead: I do not think that we
can directly say that immigration causes it; they are part of
housing demand. In general, migrants, like for like, demand less
housing than the indigenous population and the ones that demand
more housing or in the upper end, which are the ones that come
from rich countries and are relatively well paid, tend to turn
over relatively quickly. That group of households will start demanding
less housing than an equivalent indigenous person, but they will
leave before they get to the point where they look exactly like
the others, if that makes sense. We did our analysis in relation
to types of country, richer asylum-seeking countries and poorer
countries and the definition is in this book, of which you have
had a copy[9].
Those form poorer countries tend to stay longer but they also
tend, until they have been here for about 15 to 20 years, to demand
less housing than the indigenous population; they become like
the indigenous population in around 15 to 20 years. So it takes
a while. How much effect do they have? Obviously they are increasing
the number but not as much as an equivalent indigenous person
does. At the top end of the market, which of course is changing
rapidly at the moment and is difficult to assess, there is very
clearly an impact of international demand. Some part of that is
from migrants, some part of that is from people who are domiciled
abroad and some part of that is from corporate investment where
no individuals may be involved. So at the top end of the market,
migration is affecting it but it, is part of a much broader story
of increased investment demand of one sort or another. At the
bottom end of the market, which is what you particularly asked
about, the evidence which has come as a great surprise to us,
and where I think we very much want to hear what the qualitative
impact is, is that private rents have not been rising to anything
like the extent that we would have expected, even though inward
migration has been increasing, and that is particularly true in
London. So private rents have fundamentally stabilised in real
terms—that is being a little careless—in the new century,
whilst of course house prices have been going through the roof.
That says that the pressure from migrants is not increasing demand
as much as we might have expected. What we do not know and we
cannot know given the data is what the quality of the housing
is that is being provided or indeed how many people are living
in it. So there are issues associated with overcrowding, with
poor standards, which may mean that the real price is higher,
but there is no significant evidence of massive pressure in the
private rental sector.
Q351 Lord Wakeham:
I should have said at the beginning—and that sounded a very
comprehensive answer—if anybody wants to add anything, please
feel free to do so.
Ms Williams: Some of the evidence, certainly
anecdotally, is that the effects are different in different markets,
so for example in some areas new migrants have taken up accommodation
vacated by students because perhaps in that area new-build accommodation
has been made available to students. In some of the housing market
renewal areas where there has historically been low demand, it
has given a boost to demand in those areas, and as Christine said
there is also evidence that rather than consuming more housing
it is actually a case of people being more overcrowded in houses
and hence why there has not been a straightforward relationship
with pressure on rents.
Mr Hardy: I would add, coming from a rural area,
that most of the pressure on rents and the house prices comes
from inward migration from within the country from one part to
the rural locations, rather than from immigration, because there
is no evidence on the ground that either house prices or private
rents have increased. But to echo what Christine said, there is
still evidence of significant use of private sector accommodation
for houses in multiple occupation, for which people will pay quite
a high price in sharing a room with other people—up to potentially
16 in one place.
Q352 Lord Layard:
What has happened to the house prices of the letting accommodation?
If that has gone up, then in some sense these people who are occupying
the rental accommodation are contributing to the rise in house
prices.
Professor Whitehead: Certainly the investment
demand for housing has gone up and to that extent prices have
gone up. The investment demand is partially caused by people thinking
that they can get adequate returns and some of that comes from
migrants, but obviously the housing market, particularly in Britain,
is a private sector market—it is not owned and let in a
clearly separate way. In some other countries the rented accommodation
is very separate from the owner occupied accommodation, but not
in Britain. So the pressure is coming from people who wish to
own. It is also coming from buy to let, and buy to let is very
much a right-across-the-board story.
Mr Sampson: I think that is right. Broadly speaking,
on private renting the story is that inward migration has supported
the private rented market in two respects. First of all, it has
propped it up by giving to a large number of people who are willing
to rent in fairly appalling conditions in some areas which were
otherwise heading downwards. Secondly, there has been inward migration
of capital to prop up increasingly a buy-to-let market and what
we have seen is foreign investment in, particularly, for example,
new build one- and two-bedroom city centre flats, some of which
have actually remained empty. But also foreign capital has come
into some areas, for example the new-build property in London.
So there are areas in the East End of London which were built
as owner-occupied family housing, which have been bought up and
are being let to multiple occupants on private lets, many of those
foreign-investment owned.
Professor Whitehead: To get to the point which
you asked about long term in this context, the situation currently
is not in equilibrium. It is very clear that you are not making
a rate of return on your rents as such, so the fact that the private
rental sector has done the job over the last few years does not
necessarily mean that it will go on doing the job over the next
ten.
Q353 Lord Wakeham:
Unless they can get more rent?
Professor Whitehead: Yes.
Q354 Lord Lawson of Blaby:
Or they do not expect to get a return from the rent; their thinking
is that to a large extent they are going to get it from capital
appreciation. That is what squares the circle.
Mr Sampson: That is right.
Professor Whitehead: The whole thing is being
squared by expectations and if the expectations are proved to
be incorrect—as I am sure you have been hearing in another
context—then life looks a little unkind.
Q355 Lord Sheldon:
Looking at social housing, the allocation is based on needs. How
has the recent increase in immigration affected social housing
among low-income groups in the United Kingdom? How do you expect
demand for social housing, from particularly Eastern European
migrants, to develop in the future?
Ms Williams: I have looked at the current picture
in housing association property. You may know that about 70% of
people who are housed by housing associations come through nominations
through local authorities, and other people's through referrals
from other agencies and direct waiting lists. So when I looked
at the position last year, for 2006-07 4.8% of the lettings as
a whole went to non-UK nationals—that is people who identified
themselves as that, so some of those people will have been in
the country for a number of years. Looking at new migrants, in
particular from the A8 accession countries, that was 1.1% of the
new lettings. So currently the numbers of new migrants accessing
social housing are not large—last year it was 1,101 lettings
out of a total of over 108,000.
Q356 Lord Sheldon:
Has it been increasing over the past few years?
Ms Williams: Yes, but the numbers are still
currently low. If we look to the future what we might expect is
that applications from new migrants might be expected to increase
as more new migrants become eligible for housing. You may know
that there are current restricted rights of access to social housing
for people from the A8 accession countries. But it is difficult
to predict what that future pattern will be, partly because new
migrants have had particular restrictions on their right of access
to housing and assistance which other groups have not had historically,
and also when you look at to what extent people would want to
settle and to put down roots here and their current tenure choices
in the way in which they have taken up private rented accommodation,
so it is difficult to predict what that will be in the future.
Q357 Lord Paul:
The written evidence from the National Housing Federation suggests
that many migrants are living in overcrowded properties in a poor
state of repair, and that is mainly in the private rented sector.
Do the housing conditions of migrants differ from those of British
nationals with comparative incomes? Is there a significant variation
across different migrant groups and, if so, why do you think this
is?
Ms Williams: I think we are all in accordance
that what the NHF has cited and what has emerged out of the Joseph
Rowntree Foundation fairly recently is a reasonably accurate picture.
Certainly one of the reasons why the influx of migrants has not
had such a deleterious effect on housing availability as it might
have done is that they have been absorbed in greater densities
within existing private rented property. So we now do have a phenomenon
in many of our towns and some of our rural areas of densely overcrowded
migrant workers. Some of those will be in tied accommodation—and
I am sure that Mike will talk about this in a bit—but many
migrant workers too choose to occupy, so far as we can tell, severely
overcrowded accommodation. I think we would suggest that there
are broadly two different groups of migrants arriving. One is
a group that is intending to settle here permanently and therefore
their aspirations are to occupy similar housing conditions to
everybody else. The other is a group who regard themselves as
being short term interim residents, whose business model—for
want of a better expression—is to maximise their profit
from their experience in this country and send as much of their
money home as they possibly can. Under those circumstances they
are willing to tolerate quite appalling housing conditions because
that means the rents are very low.
Mr Hardy: It is still a relatively short term
phenomena. I think everything is relative. Rents, for sharing
a room in one of those houses in multiple occupation, are nowadays
in the region of £60 to £65, so that is still taking
a fair amount of somebody's net disposal income. From the rural
evidence there is increasing use made of houses for that use,
for multiple occupation, and when people do, when they stay for
any length of time and aspire to stay longer, they will look to
move on from the accommodation.
Mr Sampson: There are negative impacts plainly
of allowing that type of overcrowding to exist, even leaving aside
the fact that some people will choose to occupy in those ways.
Plainly, massive increase in the population density in particular
geographical areas has effects. It has effects on neighbours,
it has effects on neighbourhoods, it has effects on localised
house prices, and it also has effects on demand on services in
a particular area. There are also issues such as fire risk, health
risk and so on and so forth, which go beyond the needs of the
immediate occupants. Plainly, local authorities do, under the
2004 Housing Act, have a duty to regulate houses in multiple occupancy,
but in many cases they have neither the resources nor, in some
cases, the ability to do that very effectively.
Mr Hardy: And certainly that is borne out in
our experience in the rural locations.
Q358 Lord Turner:
Can I ask for one clarification? You said that big increases in
the population density in particular areas might have a localised
impact in house prices. Were you meaning positive because eventually
it does spill over to an economic effect, or negative because
the neighbourhood has become less desirable? Which way round did
you mean it?
Mr Sampson: I meant immediately in a negative
way. What you can have is individual areas which are seen as less
desirable immediately to people, although in the medium term you
might see a positive impact because of increasing economic wealth.
Professor Whitehead: I think in that context
that some of the work we did on population mobility as opposed
to migration did suggest that migrants were having a very positive
effect on neighbourhoods and even more broadly on schools, as
well of course as putting pressure on house prices. This was a
London-based study and there were a number of very positive discussions
about the benefits of the migrant populations in these areas.
Q359 Lord Layard:
Can I ask you about tied accommodation? What proportion of migrants,
compared with British nationals, live in tied accommodation and
how does that vary across the economic sectors and geographic
regions? And how do the costs and the conditions of tied accommodation
differ from other rented accommodation?
Ms Williams: I do not think we have a national
picture on that because the data are not available. There is some
kind of local anecdotal data that we can provide on that but nationally
we do know the picture.
Mr Sampson: There is the TUC survey of 2005-06
that finds 31% of those surveyed were living in accommodation
which was found to belong to and be provided by their employers.
So there is some survey evidence.
Mr Hardy: In the south Lincolnshire area, 31%
of migrant workers are in some form of accommodation tied to employment
and I think there is perhaps the distinction in terms of terminology
there that is worth emphasising. Tied accommodation in the old
traditional sense would perhaps have been accommodation provided
with farm worker cottages, for instance, whereas here we are talking
about accommodation with a tie to the way in which the person
obtains their employment. In south Lincolnshire, for instance,
gangmasters will be the route by which people find work and they
will have links to accommodation. So there is a link between the
accommodation in which people live and the job, and that is more
accommodation tied to employment than tied to accommodation.
Professor Whitehead: I think in that context
it is important because the traditional data and statistics are
linked to zero rent tied accommodation or nominal rent tied accommodation.
There is no suggestion in this context that there is any nominal
nature of a rent; it is private sector accommodation that is found
for them by the employer, which is a very different story.
Mr Hardy: But can be actually owned by people
that the employer knows.
Professor Whitehead: Can be, yes. It has elements
of the Truck Acts involved in it.
Mr Sampson: There is a further distinction.
Traditional tied accommodation tends to be geographically very
close to where people work, whereas what we are describing here
is types of accommodation that might be geographically quite remote
from where people work. So, for example, if you are picking lettuces
in the Sussex strip, which is just south of Chichester, the chances
are you will not actually live in Chichester. You will probably
live in Littlehampton, which is where there is quite a lot of
private renting available, and your gangmaster will provide the
accommodation between the two. So it is not very often local to
the precise area in which people work, and that means that you
have a disjunction between where the economic benefits might be
found on one level and where some of the costs might be incurred
on another.
9 Note by witness: London School of Economics,
"The Impact of Recent Immigration on the London Economy"
(July 2007) Back
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