Memorandum by Shelter (HOU 23)
Shelter is a national campaigning charity that
provides practical support and innovative services to over 100,000
homeless and badly housed people every year. We submitted written
and oral evidence to the inquiry into affordable housing held
by the Urban Affairs sub-committee earlier this year. We welcome
the opportunity to submit evidence to this inquiry and, in particular,
its focus on the resources delivered in the Government's recent
Spending Review. This submission primarily focuses on this issue.
Shelter welcomes the new resources for housing
announced in the Spending Review and recent statements from ministers
indicating that housing, and in particular increasing the supply
of affordable housing, is now a key priority for the Government.
We strongly support the Deputy Prime Minister's call for a "step
change" in housing policy and hope that this inquiry will
help generate consensus around now many affordable homes are needed
and the policies required to deliver them.
In our previous submission, we set out a detailed
estimate of the need for affordable housing. This was based on
extensive research carried out for Shelter by the Centre for Housing
and Planning Research at the University of Cambridge. This research
found that an estimated 83,000-99,000 new affordable homes are
required each year to meet current and future need. We estimated
that this would require additional capital investment of £1.7
billion per year over and above the £1.4 billion set out
for 2003-04 in Spending Review 2000 (SR 2000).
Based on the plans set out in SR 2000, our previous
submission estimated that output from all sources would increase
to 46,000 in 2003-04.
This figure will remain more or less unchanged following Lord
Rooker's recent announcement concerning the level of funding that
will be provided through the Approved Development Programme (ADP)
This year's Spending Review (SR2002) set out
an increase in capital investment for housing of £1.4 billion
by 2005-06. It is not possible to produce reliable estimates for
output beyond 2003-04 as the detail of how these additional resources
will be allocated has not yet been announced. In addition to providing
new affordable housing, they will be used to fund a Housing Market
Renewal Fund to tackle low demand in areas of the North and Midlands
and to finance arms length management companies (ALMOs) to assist
local authorities in meeting the Government's target that all
social housing should be of a decent standard by 2010.
To provide a purely indicative estimate of output
in 2005-06, we have speculated that around £900 million of
these new resources will be available for the provision of new
affordable housing. This is based on speculative estimates that,
for example, £300 million will be earmarked for housing market
renewal and £200 million for ALMOs.
The new resources will be divided between the
ADP and the Starter Homes Initiative (SHI). Using the £900
million figure, and based on a speculative split of £700
million for the ADP and £200 million for SHI, this could
provide around 16,000
additional affordable homes in 2005-06 bringing total output up
to around 62,000.
These projections are summarised in the table below.
Based on this indicative estimate, there would be an estimated
shortfall of 21,000-37,000 units against the 83,000-99,000 affordable
homes we estimate are required each year to meet need. Although
it is not possible to provide a more reliable estimate until the
detail of how the new resources will be allocated is known, these
estimates at least give some indication of the likely extent of
the continuing shortfall in the provision of affordable homes,
despite a significant and very welcome injection of public funding.
Shelter supports the Government's proposals for maximising
the supply of affordable housing by improving the planning system
(see below), promoting innovative construction techniques and
making institutional changes. These measures could help to reduce
the shortfall without recourse to public funds. However, if the
shortfall is to be met fully, and if the "step change"
called for by the Deputy Prime Minister is to be delivered, additional
policy reforms must also be made.
In addition to reforming the planning framework, there are
two policy areas in particular where Shelter believes a real difference
could be made without significantly increasing public expenditure:
the private rented sector and the Right to Buy.
If any area of housing policy in need of a "step change"
it is the private rented sector (PRS). Currently, around 500,000
people in housing need are accommodated in the PRS. Our research
indicates that around 10,000 potentially "affordable"
homes are in effect being lost due to the failure of the sector
to cater effectively for those in need, primarily as a result
of the inefficiency of the Housing Benefit system. Shelter believes
that policy changes could enable the PRS to play a significantly
enhanced role, both in providing housing for those in need and
for so-called "key" workers.
In our submission to the Urban Affairs sub-committee earlier
this year, we highlighted the report of a commission established
by Shelter with the support of the Joseph Rowntree Foundation.
The commission included representatives from landlords and tenants
organisations, as well as a range of other interests. It reached
a high degree of consensus about the measures needed to improve
standards and supply in the PRS and recommended that the Government
develops a new strategy to modernise the sector.
The commission recommended a package of proposals designed
to promote a more modern, consumerist approach to the PRS including:
A new tax transparent vehicle to encourage institutional
investment in the sector.
Tax credits to encourage landlords to provide
accommodation at sub-market rents for defined periods.
Shelter believes that, between them, these two measures would
open up a significant new source of supply of intermediate market
housing, suitable for key workers and others on moderate incomes
who are unable to afford owner-occupation.
The report also includes proposals to:
Improve the Housing Benefit system by improving
administration, simplifying the system of non-dependant deductions,
reforming the current system of rent restrictions and moving away
from the current verification framework to focus on large scale
Introduce a new concept of "fit and proper"
landlords backed up by a statutory code of practice with tenants,
as consumers, in a position to challenge poor standards.
As well as helping increase supply, we believe these measures
would mark an important break with the sector's image of poor
physical and management standards.
When we presented oral evidence to the Urban Affairs sub
committee earlier in the year, a significant proportion of our
session was spent discussing the impact of the Right to Buy on
the supply of affordable housing. Since then, we have published
a new report which sets out what we believe is a compelling case
for reforming the scheme:
It is exacerbating the shortage of affordable
The high public expenditure costs associated with
the scheme are an inefficient use of public funds.
It is increasingly concentrating the lowest income
households in the least popular housing, undermining the Government's
social inclusion, opportunity and neighbourhood renewal agendas.
As has been widely reported in the media, there
is growing evidence that the scheme is being unacceptably exploited.
Twenty years ago, a parliamentary select committee concluded
that "the effect of council house sales on the numbers of
new lettings and transfers available in the local authority sector
will be substantial".
As the Committee correctly predicted, the cumulative impact of
the scheme on the supply of lettings has indeed been significant.
Our report estimates that, as a result of sales under the Right
to Buy, by 2005-06 around 4,000 fewer lettings per year will be
made by local authorities in London and the South East alone than
is the case currently.
The cumulative loss of lettings in these areas over the period
of 2005-06 can be estimated at more than 13,000 and the cost of
building new affordable housing to compensate for this at over
Although reforming the Right to Buy would not, on its own,
be enough to tackle the shortfall in the supply of affordable
housing, it could have a significant impact on the supply of lettings,
particularly in areas where shortages are most severe. We believe
it must therefore be part of the equation for increasing the supply
of affordable homes and delivering the "step change"
called for by the Deputy Prime Minister. We recommend the following:
Temporary withdrawal of the discounts available
under the scheme in London and the South East and other areas
of severe shortage, with an option for individual authorities
to apply for the discounts to be withdrawn in their areas.
A comprehensive policy review with the aim of
identifying the most effective way of enabling tenants to accumulate
assets without reducing the supply of affordable housing.
Specific measures to stop the scheme being abused.
Whether the funds in the Comprehensive Spending Review will
achieve the Government's target of a decent home for everyone
Shelter is aware of concerns raised about whether the Governement's
target that all social housing should be of a decent standard
by 2010 will be met. The research carried out for us by the University
of Cambridge indicated that the target was on course to be met
provided that transfers continued at a rate of 200,000 per annum.
Since then, a number of high profile rejections of large scale
voluntary transfers have taken place. Shelter supports the extension
of the availability of ALMOs to more local authorities and the
proposed relaxation of the local authority borrowing regime. Beyond
that, we are not in a position to comment in detail on whether
the target will be met.
How spending of the new resources should be balanced between
social housing and options for owner occupation for those who
cannot afford to buy (including shared ownership) and the mechanisms
to be used for their distribution.
As we have already set out, despite a significant injection
of resources in SR 2002, Government spending plans are likely
to fall some way short of meeting need. It is therefore vital
that these resources are effectively targeted.
A great deal of attention has recently been focused on the
shortage of affordable accommodation for owner occupation by "key"
workers. Whilst Shelter supports efforts to assist this group,
this must not be at the expense of those most in need. There are
currently more than 80,000 homeless households living in temporary
accommodationa record. At the same time, there are over
1 million households on council waiting lists and in excess of
half a million households who are officially overcrowded. To achieve
the "step change" called for by the Deputy Prime Minister
and to meet the Government's objective that everyone should have
the opportunity of a decent home, the allocation of resources
must prioritise those most in need.
We are not aware of any research that attempts to match the
income of people who are homeless or in housing need and the relative
costs of affordable rents, low cost home ownership, and "starter
homes" programmes. Of course the vast majority of homeless
households need homes at affordable rents. We recommend that work
is undertaken into this issue. In the meantime we recommend that
the Housing Corporation programme should achieve an 80 per cent/20
per cent split in outputs between rent and low cost home ownership.
The role of planning obligations in providing affordable housing
The Deputy Prime Minister's announcement following the recent
consultation on planning obligations made it clear that the proposed
"tariff" scheme is not being taken forward. This leaves
the onus on the policy framework set out PPG3 (Housing) and section
106 agreements to deliver additional affordable housing.
Shelter believes that the primary objective of the planning
system should be to promote sustainable development. The supply
of affordable housing is central to this and the planning framework
should therefore incorporate a clear emphasis on maximising the
provision of affordable homes.
The current framework does have the potential to deliver
significantly more in this respect. However, recent research carried
out by Cambridge and Sheffield Universities reveals that many
local authorities are struggling to maximise the benefits it provides
and that, in many instances, the system is not delivering any
additional affordable housing at all. All too often, capital subsidy
(in the form of Social Housing Grant) is simply being diverted
from one site to another. For example, subsidy is often removed
from sites where exclusively social housing was to be built and
instead spent on sites where a section 106 agreement is in place,
with the result that there is no increase in the number of quality
of homes provided.
As we set out above, in light of the continuing shortfall
in the number of affordable homes, we believe it is essential
that policy reforms are made to boost supply. To maximise the
contribution of the planning system, we recommend the following:
Firstly, the ODPM's policy statements, contained in PPG3
and Circular 06/98, should be amended as follows:
They should distinguish much more clearly between
Government policy and good practice.
There should be no prescription of the size of
development below which a contribution of affordable housing should
not be sought.
Local authorities should be able to specify that
housing is either (i) for rent or a form of low cost home ownership
provided by a registered social landlord; or (ii) available at
a discount against market prices with a mechanism to ensure that
the discount will remain in place for future occupiers of the
Secondly, planners should be encouraged to determine the
contribution to be secured for affordable housing from individual
sites according to:
An assessment of local housing needs.
A financial appraisal of the site, taking specific
accounts of (i) the difference in the value of the land before
and after development; (ii) the costs of developing the site;
and (iii) the costs of other planning gain that is being sought
from the site.
This contribution will be expressed in terms of its financial
value. Planners should then secure the affordable housing in the
form of actual units on the site in question (this should be the
preferred option), or in the form of a financial contribution
towards development elsewhere (this may be more appropriate for
This approach requires that planners develop a better understanding
of the development process and, in particular, development finance.
They will need to be trained accordingly. We welcome the announcement
in the Spending Review of additional resources for the planning
system and recommend that some of these resources are used in
this way. We also recommend that planners work more closely with
colleagues within local authority estate management and valuation
departments, or call on private sector expertise.
Finally, in order to boost understanding and support for
the system of planning gain, we recommend that local authorities
should put in place robust systems that record:
all planning obligations secured "on paper"
during the process of negotiation for planning permission;
a yearly update of the actual delivery of these
in the case of financial contributions, exactly
how the money was spent.
A separate submission to the inquiry on behalf of the Chartered
Institute of Housing, the National Housing Federation, the Local
Government Association, the Royal Town Planning Institute and
Shelter on the specific issue of planning obligations expands
on these points.
The effectiveness of the Housing Market Renewal Fund in tackling
housing needs in areas with low demand
Shelter is aware of growing concern about the problems associated
with low demand for housing, particularly in some areas of the
North and Midlands. We agree that these problems can have a very
severe impact on individuals and communities and it is important
that they are addressed. Along with many other organisations,
we have long argued that housing policy should be flexible enough
to address the very different housing problems that exist in different
parts of the country. Clearly, in London and much of southern
England, the priority is to increase the supply of affordable
housing. In many parts of the North and Midlands, the priority
is to regenerate areas suffering from low demand.
It is important that efforts to tackle low demand do so in
a sustainable way. Building new housing may not, on its own, be
the solution and there have been too many examples in the past
of new developments being built only to then lie largely empty.
Equally, the impact of measures to demolish abandoned or poor
quality property in one area will be affected by planning decisions
to approve new development elsewhere.
There is much still to be learnt about the nature of housing
markets and the links with other interventions such as land use
planning, neighbourhood management and economic regeneration.
We therefore recommend investing in a better understanding of
these issues, to inform the investment in regeneration of housing
How the quality of new affordable housing can be ensured and
the poor design of previous housebuilding programmes avoided
Good design is imperative in building homes that people want
to live in and in creating sustainable communities. There is no
reason why social housing should not be built to a high standard
and, indeed, there are numerous examples of where this has been
It is estimated that resources provided through the ADP, the
Starter Homes Initiative and the Safer Communities Supported Housing
Fund will provide an output of 29,500 units. An estimated 16,400
units will be provided via grants from local authorities, by registered
social landlords without subsidy and through the planning system. Back
This additional provision assumes an 80/20 split in ADP funding
for housing for rent and sale and uses average unit costs of £71,930
for rent and £36,391 for sale for an area which includes
London and the South East, the South West, the East of England
and the West and East Midlands. This also includes an estimated
inflation rate of 2.25 per cent per annum for three years. Back
This figure assumes that the number of units provided through
other mechanisms, namely those other than ADP and SHI programmes,
remains constant. Back
Private renting: A new settlement, Shelter, May 2002. Back
A recent report published by the ODPM Fiscal policy options to
promote affordable housing makes a similar recommendation and
argues that, if linked to measures to increase land supply, this
could significantly increase the supply of affordable housing. Back
This proposal is compatible with the proposals set out to reform
landlord and tenant law in the recent consultation by the Law
Commission Renting Homes 1: Status and Security. Back
Time for a change: Reforming the Right to Buy, Shelter, September
Second report from the Environment Committee 1980-81: Council
House Sales. Back
This calculation is based on current rates of sale and turnover
of stock. Back