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

Memorandum by Surrey County Council (HOU 18)


  1.  This submission is made by Surrey County Council. The County Council fully endorses the evidence submitted by the Surrey Local Government Association (SLGA) on behalf of the 11 borough and district councils and the County Council, to both the previous Transport, Local Government and the Regions Committee's inquiry, and to the current inquiry. The County Council's submission builds on that evidence and addresses some of the specific questions raised in relation to the Comprehensive Spending Review 2002 (CSR).


  2.  Surrey plays a crucial role in the economic success of the south east region, London and ultimately the UK. The county is a significant generator of economic wealth in its own right, being home to many national and international companies as well as the regional administrative centre. At the same time, it provides a significant part of the workforce and expertise required to ensure that London remains a World City. If the economic growth in Surrey is restricted, this will impact adversely on the economy of the region, London and the wider national economy.

  3.  In terms of housing, market demand in the county remains strong. In part this is due to the area's economic success and its proximity to London and the UK's premier airports at Heathrow and Gatwick. House price inflation in Surrey has exceeded that in the south east and many parts of London. The average house now costs £246,572[7], compared with £232,830 in Greater London and £168,111 in the south east. Even though incomes are above the average for the region, it still requires seven times the average income to purchase the average house in the county. For many key workers the problem is even more severe. A firefighter, for example, earning around £22,000 per annum would require over 11 times their income to purchase the average house.

  4.  The high cost of housing is widely seen as a major factor in problems of recruitment and retention within Surrey, high rates of staff turnover and increased traffic congestion as people commute longer distances from lower cost housing areas. Research carried out for the SLGA by the University of Cambridge has shown particular problems within the public sector, lower paid occupations in the private sector and amongst some professional groups who recruit nationally. This research was published in the SLGA's key worker housing strategy "Housing to Underpin Economic Success", a copy of which was submitted to the earlier Affordable Housing inquiry.

  5.  Within Surrey County Council itself, there is growing evidence that the cost of housing is affecting recruitment and retention, with potential knock-on effects for service delivery. Within Education, for example, at June 2002, there were 349 full time teacher vacancies, in addition to 56 part time vacancies and eight head teacher vacancies. The table below shows how this impacts on full time staff turnover:


20.2 per cent
19.5 per cent
All Shires
12.8 per cent
14.4 per cent
All London
16.4 per cent
15.5 per cent
All LEAs
12.7 per cent
12.8 per cent

  5.  Within other services, problems are also acute. For example, within Fire and Rescue, 169 firefighters (27 per cent of the total workforce) commute to work because they are unable to afford accommodation within the Operational Area. Eighty-six firefighters (at March 2002) were actively looking to transfer or leave the service due to housing costs.

  6.  Problems within the county are made all the more acute by its close proximity to Greater London and the increasing pay differentials between public services in London and those in Surrey. For example, Metropolitan Police Officers receive a London allowance which is £4,000 higher than the equivalent for Surrey officers, as well as being entitled to free public transport in and around the Capital.


How spending of the new resources should be balanced between social housing and options for owner occupation for those who cannot afford to buy and the mechanism to be used for their distribution.


  8.  Surrey County Council believes that the basis for the allocation of the additional resources should be the level of identified housing need, for both social rented housing and owner occupation (including the needs of key workers) in a particular area.

  9.  There have been suggestions that a significant proportion of the additional resources will be directed to the four regional growth areas (Ashford, Thames Gateway, Milton Keynes and Stansted) identified in Regional Planning Guidance for the South East and the subject of the Deputy Prime Minister's announcement in July. Whilst these areas may provide opportunities through the supply of land for affordable housing, the County Council strongly believes that the availability of land should be a secondary consideration to the overall level of need for affordable housing in an area. The provision of significant numbers of new affordable houses (whether social rented or owner occupied) in these areas will do nothing to address the needs within Surrey, which have to be addressed if the economy is to continue to prosper.


  10.  Within Surrey there is a real need for additional affordable housing, both social rented and owner occupied. In the context of the limited additional funding available and the growing level of need amongst low to middle income earners, the County Council believes that a significant proportion of the additional funding should be directed towards low cost home ownership options. By their very nature, these are more likely to address the needs of the key worker sector, who are not generally catered for within existing funding mechanisms. However, it is important that this is seen as additional to the existing social rented funding streams which, themselves need to be increased to more accurately reflect housing and land price inflation.

  11.  The need for home ownership options covers both new build accommodation and existing mechanisms for providing housing utilising the existing housing stock, particularly the Starter Home Initiative (SHI) and locally operated Do-It-Yourself Shared Ownership schemes. The need for additional funding for such initiatives is evidenced by the scale and rate of take up of SHI within Surrey. Surrey has received the highest allocation of funding for any shire county outside of London, sufficient to assist 491 key workers, and has seen probably the fastest rate of take up of the scheme. Since its inception in September 2001, 121 applicants have either completed or exchanged contracts on houses and a further 126 are in the process of identifying and buying property.

  12.  However, despite the current success of the SHI, signs are emerging that the level of funding available (currently approximately £20,000 per worker) may not be sufficient to ensure delivery over the remaining years of the scheme. The rate of take up of the SHI has been slower amongst lower income groups, such as nurses, and with house prices rising at well above the rate of inflation or the rate of wage increases, it is likely that other groups will have difficulty in the future, unless funding is increased.

  13.  In making the case for increased funding, the County Council believes that the Government must also address the following issues:

    —  The definition of a key worker. The SHI has a very restricted definition of a key worker, being largely limited to health workers, teachers and police officers. Although Surrey has been successful in attracting additional funding to help a small number of social workers and firefighters, there remain many public sector employees, who are key to the delivery of public services, together with workers who are contractually linked to the public sector and quasi public sector staff, eg transport workers, who have been largely excluded from the scheme. If additional funding is to be put into SHI, the County Council believes that the regulations governing the scheme should be amended to allow much greater local discretion as to the key workers who will benefit, the overall income levels at which workers are eligible and much greater flexibility to switch funding between employee groups in response to needs and/or take up.

    —  Issues of retention in perpetuity. A fundamental requirement for increased funding of home ownership options must be the ability to retain any public subsidy input into the schemes in perpetuity, ie the housing must remain low cost for the initial and all subsequent occupiers. This will necessitate changes to the current regulations surrounding staircasing to full ownership and, potentially, changes to the operation of the Right to Buy legislation. The County Council awaits with interest the results of the current research commissioned by the ODPM into the operation of Right to Buy.

    —  Allocation mechanisms within the Housing Corporation, particularly the TCI framework. The current TCI framework is inflexible and does not allow RSLs and local authorities within Surrey to best meet needs for affordable and key worker housing. Cost limits in Surrey need to be increased to at least match those in London, given that house and land prices in Surrey are often greater than those in the Capital. There also needs to be a system of in year reviews to allow changes in TCIs in the course of a year to reflect rapidly changing local circumstances.

  14.  The ODPM has recently published the findings of research carried out into potential fiscal measures to increase the supply of affordable housing[9]. This paper considers six potential fiscal policy options which could increase the supply of affordable housing, drawing on experience in the UK and abroad:

    —  Tax incentives for the construction of affordable housing.

    —  Government assistance to purchasers in high cost areas.

    —  Savings schemes for first time buyers.

    —  Policies to increase employer involvement.

    —  Providing affordable housing on non-residential land.

    —  VAT reduction on the renovation of affordable housing.

  15.  The County Council believes that the concepts raised in this research paper require more detailed consideration and that decisions on the allocation of funding arising out of the CSR should take on board the messages in the paper. In particular, the County Council believes that there is real merit in looking at further assistance to help key workers purchase homes in high cost areas such as Surrey, through an extension of funding for the SHI or through alternative mechanisms, such as those suggested in the research paper. For its part, the County Council is actively looking at what actions it can take as an employer to address the needs of its own staff, through recruitment and retention packages and, possibly through new build schemes for key workers on surplus land or within surplus property.


  16.  Within Surrey, the high cost of both land and housing and the cost restrictions imposed by TCI levels, mean that Registered Social Landlords and local authorities are unable to compete with the private sector for land. Consequently, the bulk of new affordable and key worker housing in the county is being delivered through the planning system via S106 agreements (planning obligations).

  17.  As a matter of principle, the County Council believes that the planning system should not be the primary means of delivery of affordable housing. The provision of a decent home for all requires sufficient investment from Government to ensure that needs can be met without relying on subsidy from the private sector. With rising concern in urban areas about the lack of adequate social and community infrastructure and the need for improvements to public transport infrastructure, there are increasing demands for funding from S106 agreements which often squeezes out the requirement for affordable housing. Increased funding is important to enable the provision of such housing. However, the County Council recognises that the level of resources required to meet needs, outside the planning system, are not likely to be forthcoming. In this context, important changes are required in the operation of planning obligations to increase the supply of affordable housing through this route.

  18.  In many ways, the changes required mirror many of the suggestions made by the Government in the Planning Green Paper, through the proposal for planning tariffs. Although this proposal is not being pursued, a number of elements of the proposals should still be incorporated into revised guidance for planning obligations, particularly:

    —  Removal of the site size thresholds for affordable housing set out in Circular 6/98. These limit the sites on which new affordable housing can be provided. In Surrey, for example, over the past two years, 58 per cent of new housing has been provided on sites under 25 units or one hectare in size. Reducing the thresholds to the level suggested in the Green Paper (approximately two units or more) would significantly increase the opportunities to provide affordable housing in Surrey.

    —  The requirement for commercial development to contribute towards the provision of affordable and key worker housing. New commercial development often has an impact on the local housing market in an area, particularly the need for key workers, but it is difficult to require such development to provide any affordable housing. A specific requirement for such development to contribute to affordable housing would again increase the funds and/or land available.


  19.  The issue of the provision of affordable and key worker housing is of crucial importance to the County Council and Surrey as a whole. In turns this impacts upon the ability of the county to contribute to regional and national economic success. To ensure the continued success of the Surrey economy and the successful delivery of local services within the county, increased funding for affordable and key worker housing schemes as part of the increases announced in the CSR, is essential.

7   Source: Land Registry, April-June 2001. Back

8   Source: Employers' Organisation. Back

9   Fiscal Policy Options to Promote Affordable Housing, Housing Research Summary No. 168, 2002. Back

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