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

Memorandum by National Housing Federation (HOU 35)

  The National Housing Federation represents nearly 1,400 independent, not for profit social housing providers in England. The Federation's members include housing associations, co-ops, trusts and stock transfer organisations, and they own and/or manage more than 1.8 million homes provided for affordable rent, supported housing and low cost home ownership, and deliver an increasingly diverse range of community and regeneration services. The large majority of the Federation's members are registered with the Housing Corporation. The Federation welcomes the opportunity to submit evidence to the Select Committee's Affordable Housing Inquiry.

  The Urban Affairs Sub Committee and the ODPM Select Committee are undertaking three major inquiries that are core to the future work of housing associations and housing providers generally. Whilst the inquiries are interlinked, there are clearly discrete issues that the Committee wishes to explore. Each issue is important and warrant the inquiry called, but the Federation believes that there are common policy themes that bond the three, which are as follows:

    —  housing and regeneration resources: a fair, rational and transparent allocation process;

    —  planning for mixed, balanced sustainable neighbourhoods; and

    —  decent neighbourhoods: management and renewal.

  In the text that follows, evidence is submitted on the specific questions asked, in the context of the broad themes set out above.

Whether the funds in the Spending Review 2002 will achieve the Decent Homes Standard by 2010

  The Federation supports the Government's objective of all social housing being of a decent standard by 2010. There is still some detail to be announced that will allow a better analysis of whether the Decent Homes Standard (DHS) will be achieved by 2010. Any such analysis should not obscure the need for further resources needed in future spending reviews. Increased resources to local authorities and housing associations will make the target more achievable, but there is not sufficient detail on how many non-decent homes actually exist, beyond the number estimated in the 1996 English House Condition Survey; where the non decent homes are; and the level of resources available to social landlords to deliver the decency standard.

  The Federation believes that the delivery of the DHS and broader house building objectives will depend on the following four factors:


  At the end of the last round of negotiations around the construction of the Housing Needs Index (HNI) and General Needs Index (GNI) it was agreed with the Government that a moratorium on further changes would be in force, pending more radical changes. As part of our response to the last consultation round (and also as part of our Spending Review 2002 submission), we proposed a set of radical changes, designed to deal with some of the perennial problems to do with the indices. The problems include:

    —  Lack of transparency in how HNI and GNI operate.

    —  The difficulty in balancing the allocation of resources between widely differing housing needs using a single set of indices.

    —  Stemming from the above, that invariably the "empirical" outputs of the HNI/GNI calculations are subject to political manipulation in order to get the "right" result.

  Our proposal is that resources available are placed into three "pots", each with a clear and different function, and based on identified policy priorities. The amount and balance of how much went into each pot would be a Ministerial decision, based on Government's assessment of the relative importance of each policy area. Once agreed, the funds would be distributed on a regional (at least) basis, using specific indicators and measures associated with the separate pots. This approach would solve all three problems noted above: there would be a clear and obvious relationship between identified needs and resources; the balance of resource allocation between needs would become a political decision, not a statistical side-effect; and post facto political manipulation would become unnecessary, as the political prioritisation process would have been overt from the start.

  The pots and their measuring indices that we propose are:

    —  A new supply housing fund: geared towards the provision of new affordable housing, for rent, for low-cost home ownership, for supported and specialist accommodation for vulnerable people, and for "intermediate" market initiatives.

    —  A social housing stock condition fund: geared towards the capital elements of major repairs (excluding those elements covered by the Major Repairs Allowance) and improvements to social housing stock.

    —  A regeneration fund: geared towards bringing housing resources (in tandem with other resources) to bear on the problems of low demand, abandonment and neighbourhood regeneration in deprived areas, using demolition, clearance, private sector improvement and area-based renewal among other tools.

  The construction of these three pots mirrors the three main housing priorities expressed by the current government, in the Housing Green paper and the subsequent Housing Policy Statement; the Public Service Agreement targets as set by the Spending Review 2000, incorporating the Decent Homes Standard; the New Commitment to Neighbourhood Renewal—National Strategy Action Plan; and in the Secretary of State's April announcements on regeneration and low demand, launching the Housing Market Renewal pathfinders. It incorporates the priorities identified in the Housing Corporation's National Investment Strategy for 2003-04 and their objectives for the ADP: the provision of new affordable housing, facilitating regeneration in the most deprived areas, and the provision of specialist accommodation for vulnerable people. Clearly, the ADP and HIP will have different levels of resources attached to each fund. Once the headline resources for each of these funds are established, they should then be distributed using substantially revised sets of indicators for each heading.

  The Federation believes that the introduction of the three pots approach will lead to a fairer, more rational and transparent approach to housing and regeneration resource allocation, and would call on the Government to introduce this for 2004-05 to distribute resources announced in the Spending Review 2002.


  The Government is committed to supporting council stock transfers to housing associations of up to 200,000 homes per year. Whilst the stock process continues in many places, there is some uncertainty about whether the stock transfer can be sustained in urban areas where:

    —  the housing does not meet the decency standard;

    —  major work and improvement costs are high; and

    —  a community regeneration approach is required in tandem with the housing investment.

  An assessment entitled Can the Ten Year Target for Council Housing be Achieved? commissioned by the Chartered Institute of Housing, carried out by Graham Moody suggested that the 2010 decent homes target—on the basis of resources announced in the Spending Review 2000—could not be met unless 1.5 million homes were transferred to new landlords with access to private sector resources. An updated assessment will be needed to consider the impact of the Spending Review 2002 resources, but the scale of private finance required to deliver the decent homes standard is clearly substantial, and beyond the reach of public finance available (under the Spending Review 2000).

  In order to facilitate transfer, adequate provision should be made for outstanding debt, including breakage costs for authorities transferring negative value stock. The Federation in its Spending Review submission recommended the creation of a dowry fund of up to £250 million per annum, and we look forward to its inclusion in the forthcoming Communities Plan.


  The Government estimate that between 280,000 and 600,000 housing association homes do not meet the decent homes standard. The recent Spending Review announcement however failed to announce additional resources for housing associations to help achieve the target. Housing associations do not hold substantial reserves for repair purposes, and the Government's programme of rent restructuring is limiting housing associations' ability to use rental income to undertake major repairs. The Federation is working in partnership with the Housing Corporation to ascertain the level of non-decent housing in the housing association sector. This work will involve organising seminars; issuing good practice publications; and undertaking in depth surveys in conjunction with housing associations to inform a register of decent standard data that is both robust and easy to maintain.

  In the Federation's Spending Review submission to the Treasury, a recommendation was made to create an Asset Management Fund, at a total cost of £2.17 billion. With housing associations' ability to raise private finance against the public subsidy, the Asset Management Grant fund could be limited to £70 million per annum over 10 years.


  VAT is a major additional and unnecessary expense to housing associations undertaking work to existing stock. Recent ODPM funded research on Fiscal policy options to promote affordable housing written by the Cambridge Centre for Housing and Planning Research supported the reduction of VAT on renovation work to housing association property to 5 per cent as means of increasing and improving the amount of affordable housing available. The Federation supports this proposal as a precursor to a reduction to zero—alongside the VAT rate for new build—to help increase and improve the quality of affordable housing provided by housing associations but also deliver the decent homes standard.

How spending of the new resources should be balanced between social housing and options for owner occupation for those who cannot afford to buy (inc Shared Ownership) and the mechanisms to be used for their distribution

  The Federation recommended in its Spending Review submission that to meet housing need, £1.7 billion additional funds be made available to help build an additional 40,000 new social homes annually above baseline production. This is in the context of research by Alan Holmans published by the NHF, TCPA (detailed in the Federation's earlier Affordable Housing Evidence) that forecast a need for between 80,000-85,000 additional affordable homes per year between 1996-2016. We recognised that this figure may prove politically difficult for the Government to accept, given competing priorities, and submitted a revised option that would create an additional 20,000 new social homes annually.

  We would stress that any longer term programme needs to be balanced between the requirements of key workers, some of whom may be able to afford low cost home ownership and sub market rents, and the continuing need for conventional rented housing.

  We would see the Challenge Fund announced for 2003-04 as a vehicle for this dual approach and would recommend that half the 4,000 units produced should be for key workers, with the other half for conventional housing.

  As regard to the core Approved Development Programme (excluding the Challenge Fund), we welcome the restoration of resources to northern and midlands regions and the additional £68 million on 2002-03 figures for 2003-04.

  Broadly speaking, we estimate that the core programme will build around 19,400 units. However, we would emphasise that even when the Challenge Fund and Approved Development Programme are put together, the total number of additional homes it will produce will not make a significant inroad into the need for 40,000 additional homes per annum we have identified.

  Shared ownership and other rented options involve the construction of additional units by housing associations. Other forms, such as Homebuy and the Starter Home Initiative involve financial assistance for key workers and others to buy a home in the private sector, which does not usually involve the construction of additional homes. Though these initiatives are cheaper per unit, they do not address the net deficit in affordable homes.

  The decision on how resources should be balanced should rely on a robust housing needs assessment that considers current demand for all tenures of housing within the local planning authority boundaries, and use those considerations to estimate future demand. There will be considerable local information available that will enable local authorities to gather in the relevant information, such as the local authority's housing register (which will include people in temporary accommodation), local land and house prices, key worker needs, etc.

  Regional agencies—principally Regional Planning Bodies—have a role to play in deciding the strategic regional needs for individual local authority areas and they must be considered accordingly. The Government's recent support for annual regional planning house building targets to be met is welcomed, but there must be similar support for the social and economic infrastructure that new communities need. This will be a crucial to the sustainability of the significant housing investment that the Government is committed to both in the strategic sites in the south and the housing market restructuring areas of the midlands and the north.

  Therefore, the balance should be primarily driven by the present and future local needs of an area, with attention given to regional priorities. However, research has shown that many housing needs assessments are not robust, and have failed to take account of the popularity of low cost home ownership schemes. Similarly, it is likely that assessments would not have taken into account the recent support for key worker accommodation. Striking the right balance will involve taking account of local needs as evidenced by the assessment, the strategic priorities of the funding agency—the Housing Corporation—and the ability of housing associations to identify sites for particular uses. Over-riding these factors should be a commitment to developing and sustaining mixed, balanced sustainable communities. Mixing tenures of new housing is a singularly important means to achieving this.

  In the context of the Spending Review announcement and focus on the four strategic sites in the South East, we have concerns that other areas of high demand will be neglected. The strategic sites may present problems of access for new communities, particularly for those who are unwilling to move from their familial, social and employment networks. We would recommend the inclusion of smaller scale development areas in a wider southern geography that relies more on existing infrastructure, as well as the longer-term strategic development of the proposed sites, with the associated infrastructure.

The role of planning obligations in providing affordable housing

  The Federation in partnership with other housing and planning organisations has submitted separate evidence to the Select Committee on the role of planning obligations in providing affordable housing.

The effectiveness of the HMRF in tackling housing needs in areas with low demand

  The Government is committed to a Housing Market Renewal Fund (HMRF) and has already identified and is funding nine pathfinder schemes' inception work in the midlands and the north. It is too early to evaluate how successful the HMRF approach is. However, the Federation believe that the following key factors will be instrumental for its success:

    —  Coordination of strategies, ensuring that all strategies for the area are effectively co-ordinated in order to maximise outcomes.

    —  Planning guidance, ensuring that decisions made by pathfinders dovetail with regional and local strategies for the relevant areas.

    —  Effective delivery vehicles with powers—or at least strong influence—on issues such as compulsory purchase orders, planning, highways.

    —  A strong focus on social outcomes, ensuring that socially excluded people benefit from the major investment that the housing market renewal approach will bring.

    —  Adequate resources—a minimum of £500 million over the next three years is required, together with a longer term commitment in future Spending Reviews.

How the quality of new affordable housing can be ensured and the poor design of previous house building programmes avoided

  New affordable housing provided by housing associations is of a high and durable standard. Proposed house building schemes that seek funding from the Housing Corporation are required to address the Scheme Design Standards set out, and periodically updated, by the Corporation. Issues concerning poor design and quality of new housing are being debated, because of the new emphasis on off site manufacturing (OSM) systems for new housing and the need to use land more efficiently via higher density housing.

  OSM systems for new housing do offer the opportunity for the quick delivery of new affordable housing. However, any proposed development will still need to be rigorously tested to ensure that it meets future tests of the decent homes standard, and will still be subject of the planning consent process. OSM should also be subject to lifetime costing criteria that will help determine whether the product represents value for money.

  On higher density housing, the Federation set out its views separately to the Transport, Local Government and the Regions Select Committee's Tall Buildings Inquiry. In summary, the Federation believes that tall buildings are not intrinsically good or bad forms of accommodation, but they do require:

    —  intensive housing management, which may require include a concierge and/or "supercaretaking" service;

    —  appropriate dwelling mix, appropriate occupation levels, with sensitive allocation policies that discourage households with children being allocated high rise housing;

    —  attractive and robust design; and

    —  popular locations with good connections to the transport infrastructure and other amenities.

  In the Federation's evidence, mention was made of work commissioned by the London Housing Federation to study how high density housing could work in London. Capital Gains: Making High Density Housing Work in London has since been published and highlighted four critical factors for success. Residents valued:

    —  Accessible and attractive locations with good transport links.

    —  Comparatively low occupancy levels and child densities.

    —  Effective onsite management of the development and its environs.

    —  Good housing design that addressed security; sound insulation; dwelling size; good quality open space; and, privacy.

  It is essential that adequate arrangements be made for appropriate management and maintenance of higher density housing, otherwise management problems that have characterised such developments in the past, will happen similarly to those of the future.

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