Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Minutes of Evidence


Examination of Witnesses(Questions 300-316)

MR MICK GAHAGAN AND MR HENRY CLEARY

TUESDAY 22 OCTOBER 2002

Mr O'Brien

  300. What are you doing to meet the proposal for alternative funding for developing social housing and social projects, other than public grants?
  (Mr Gahagan) We have been looking at the area of private finance. What we tend to find is that private finance will be sufficient to fund some types of affordable housing but it is extremely difficult to get it to fund social housing. If you are looking at low-cost home ownership or sub-market renting, 20 or 30 per cent below market rent levels, a private sector partner can do that but with the concession of section 106 or (sometimes) free land. When you then go on to the more expensive product of social housing it is quite difficult. There is one group that we are talking to, Asset Trust, who have some proposals in relation to that, but they are quite complex and those discussions are on-going.

  301. Section 106 has been referred to once or twice in your contribution but we have a report which has been published by the Rowntree Association where it says that it needs overhauling and then there has to be clarification on a number of issues. Thus section 106 is not the scheme that would help to meet the social funding for social housing, so what are the alternatives?
  (Mr Gahagan) Just to pick up what Henry said earlier. We are looking at Section 106 first to improve the guidance and the way that works, but I think there is only a narrow range of alternatives in broad terms. There is either subsidy through something like the Approved Development Programme or Local Authority Social Housing Grant scheme, or there are the fiscal measures which Henry mentioned earlier, which Cambridge University looked at. They have various problems associated with them, particularly the dead wood costs, but again there are no free lunches on this. There is quite a narrow range of options available given the costs involved.

  302. In the South East where there is demand for housing one can understand that private finance may be accepted but in areas like mine where there is low demand for housing and where social housing has been demolished because there is such low demand, there is very little incentive for private finance to be introduced in that area, so we have to look at the different regions. Are you looking at regions like the North East and the North West where we have a social problem in housing development and housing provision and in meeting the ten-year programme? What recommendations are you making there?
  (Mr Gahagan) There are a number of issues there. Can I just say I would hate to pretend that there was a single housing market in this country. It is very clear there are different ones within regions as well as between regions and therefore different policies are needed in different areas. The Deputy Prime Minister was very clear that he was not cutting back on the sums of money that went to regions like the North East and North West through the Approved Development Programme. There is the issue about the extent to which new social housing is needed and a lot of money needs to go into improving the existing stock as well as providing new stock. In some places—parts of Newcastle for example—there is a surplus of social stock but, again, it is the same problem; there has got to be payoff for the developer, for the investor.

  303. Is it the same problem that the Minister for Local Government advised the Committee of when we took evidence from him that "giving collectively the right number of tenants who agree to go to transfer so that that stream of money from the private sector can be brought on; the right number of tenants voting to go to wholly owned companies . . ."? In other words, the Minister for Local Government told us at a previous inquiry that private money would be affordable if tenants voted to transfer their stock to some other organisation and it is a lottery. That does not help people in the North East, that does not help my constituents. What I want to know from your organisation is are you looking at this situation and what are you doing about it?
  (Mr Gahagan) The Minister there was talking about transfer, which is transferring existing stock rather than provision of new stock, and the arguments around transfer have been well rehearsed this morning as well as in other places. I think the answer is the same as I gave earlier, that I do not think ministers want to rule out anything at the moment around the provision of new stock especially in areas of acute pressure, but at the end of the day—

  304. The Minister for Local Government was ruling out further funding for them.
  (Mr Gahagan) He was saying, as ministers have said before, that the focus is on transfer of private money and also on arms' length management organisations.

Chairman

  305. Can I press you first of all on last week's announcement about Housing Benefit. How far were you consulted about that?
  (Mr Gahagan) Yes, we were.

  306. What did you press for?
  (Mr Gahagan) That is an unfair question. You would need to ask my Minister that.

  307. Can you tell us the things that you pressed for that you achieved?
  (Mr Gahagan) Is that not the same question in another form?

  308. No, it is a different question. All right, let me put it very specifically. You heard the question earlier about service charges and whether they qualified for Housing Benefit, has that problem been sorted out or not?
  (Mr Gahagan) We very much hope that it has. I heard John Perry, I think it was, mention earlier the issue around the Supporting People Housing Benefit interface which is, I think, a most difficult one. We very much hope that that has been sorted out now. I do not want to sound complacent because I think this is a very real issue which we need to keep our eye on over the next six months because it is implemented on 1 April.

  309. Is it not fairly fundamental that if you look back over a lot of the housing in the 1960s that failed, it did not fail because of the original way in which it was built, it failed because of the failure of maintenance and service charges to look after it, so people being able to pay service charges is quite important if we are going to avoid the mistakes of the 1960s, is it not?
  (Mr Gahagan) It also failed just basic management and maintenance. There is a management and maintenance allowance that is paid through the rent, not through Housing Benefit, and that is pretty key for local authorities in their management of the stock. That was increased in the 2000 Spending Review.

  310. Brownfield sites. You have got this register now in place but how soon is the register actually going to have the reasons why sites cannot be developed or things that have to be done to make building possible on those sites?
  (Mr Cleary) If I may, Chairman, I will come in on this one. The register is part of a new remit to English Partnerships which the DPM announced earlier this summer. It is part of speeding up the supply of land release. What it will hopefully deliver is both a role for the better use of these sites, in other words the way in which they are developed, but also it will encourage people, as you say, to put them on the market and to speed up their release. To strengthen that there is discussion now ongoing within the Department on how public sector land within Government can contribute to that, so we are talking to Treasury and to other government departments about how they actually speed up their processes.

  311. South East England Development Agency told us about the problem, that they were trying to get funding in place to put together small bits of brownfield land. What is your Department, your section, doing to help them get that funding in place to take that initiative forward?
  (Mr Cleary) We support that initiative, we think it is a very—

  312. When you say you support it, you are paying for it?
  (Mr Cleary) Our Department probably pays the largest single element in the RDA budgets but, as you know, RDA sponsorship and overall budgetary control is a matter for DTI. We are parties to the discussion but obviously there is also a sense in which the RDA itself needs to establish what its priorities are within the areas that it has freedom. There is an ongoing discussion there about priorities.

  313. Over the last nine months what were your real achievements?
  (Mr Cleary) I think the thing that impressed me was, first of all, land supply itself is not a problem, there is plenty of site space. If you look at things like the Airspace Project, which shows what you can achieve by building up and over, there is not a problem of physical space. There may be for houses with gardens but not for apartments. The second point is that increasingly partners are coming together recognising what the problems are. Many of the witnesses that you have heard have actually agreed on the process problems that we have got with negotiation of the agreements with developers, how we need to speed those up and how you could improve the way in which people work together. I think the third thing is that people are now adopting new approaches if you look at the interest in modular construction, offsite fabrication, but also a wider range of housing interventions. There is one other thing I would add and that is I think everybody now recognises that you cannot solve affordable housing simply by looking at affordable housing instruments, you have to look at overall housing supply, and that is the central point that the DPM made at the start of his statement.

  314. In spite of all that we are achieving about 50 per cent of the target that we actually need of new build.
  (Mr Cleary) I think we all recognise that we are way short of where we need to be and it is not something that you can turn around instantly. Developments on average take a period of three years, the very largest take perhaps up to seven years, so it is going to take time.

  315. We were running downhill, were we not, the numbers of new build each year were declining. Do you think that we are actually going to turn the corner?
  (Mr Cleary) I think that is something the DPM will want to address in his statement.

  Chairman: I am not asking you what the DPM will be addressing, I am asking you for an opinion.

Mr Streeter

  316. Give us a pledge.
  (Mr Cleary) I think we should, yes. I believe we will.

  Chairman: On that note, can I thank you very much for your evidence.





 
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