Select Committee on Transport, Local Government and the Regions Minutes of Evidence


Examination of Witnesses (Questions 220 - 234)

TUESDAY 6 NOVEMBER 2001

MR PETE BAILEY AND MR EAMONN BOYLAN

  220. Do we really need a new Housing Renewal Programme in order to undertake the sort of programmes we have seen and the ones you have been talking about today?
  (Mr Boylan) I believe we do. Whether it is a separate fund or an additional resource available through a mainstream channel we are less exercised by. Our preference would be for a hypothecated fund to support renewal. The level of the problems you find is such that they simply outstrip by a quantum the resources available through mainstream programmes either from government funds or the housing corporation or initiatives such as the Neighbourhood Renewal Fund. In central Liverpool and central Manchester, the problem is of the order of gap funding required of about £400 million for these two cities.

  221. Presumably that goes for every other city in the country?
  (Mr Boylan) The problems of many other cities interface at different times in different ways. The housing market in Sheffield has characteristics which are very dissimilar to Liverpool and Manchester. The housing market dynamics are not the same.

Chairman

  222. Would that £400 million include taking away the terraced houses and replacing them?
  (Mr Boylan) Yes. It would also support a range of initiatives such as value indemnification to help promote the reprovision of new housing.

  223. Explain the value indemnification system.
  (Mr Boylan) It is something that we are exploring and are keen to try to develop. If we have a problem about lack of individual investment in areas and therefore maybe value decline in some areas, we want to create options, that may be dependent upon public funding in the first instance, but would get private insurers and other agencies to help create insurance policies for owner occupiers to take out to guarantee people against problems with property values. This has been used successfully in the United States and evidence from insurers at the moment is that they are keen to work in areas of new housing and less keen to work in areas of traditional housing.

Helen Jackson

  224. Is it just a bid for more resources or are you now saying there is something that needs special attention in the areas that we have been looking at?
  (Mr Boylan) It is a bid for more resources but it is also about understanding points of critical importance in the regions and sub-regionally, in the national economy. The dead weight that the declining residential areas place on the economic performance of major cities such as Manchester and Liverpool is something we have to take on board at a national level and in a national, strategic context. It is about helping to give some real meaning to the whole issue of the urban renaissance and the future of our cities.

Christine Russell

  225. The Empty Homes Agency argues that every local authority should prepare an empty homes strategy. We have been told over the last two days that different local authorities have different views on this. How do you see the advantages and limitations of your authority preparing an empty homes strategy?
  (Mr Bailey) I was involved in the Manchester original Empty Homes Strategy. One of the things that becomes apparent in areas like Manchester where there is a fall in demand is that an empty homes strategy is only a very small part of a much bigger picture, trying to develop techniques to bring individual empty properties back into use. The problem with a lot of empty homes strategies is that they have been developed within the Empty Homes Agency and they do not work in the North because they do not have any experience of dealing with the breadth of the problems that the north is facing.
  (Mr Boylan) We believe that local authorities should be producing local strategic plans and community plans that are comprehensive and far reaching and set out clearly how we will deal with the problem and how we will seek to manage the Empty Homes Strategy.[4]

  226. Earlier, Mrs Newing gave us a graphic example of negative equity. What measures do you feel should be introduced to tackle this problem in unpopular areas?
  (Mr Boylan) We would not make the case that negative equity should become a problem for the public purse. In most instances, it arises as a result of a cyclical market. In 1991, negative equity was a monumental problem. We need to put together a package of measures that can effectively make an offer to local people as quickly as possible. There are a number of ways in which we can do that. We can explore equity stakeholding so that people can move into new property at no cost.

Chairman

  227. There are two separate problems. There are those who are suffering from negative equity and those who fear to move into some of these areas because there is no guarantee that the property will hold its price.
  (Mr Boylan) Absolutely. We need to be in a position where we can go to somebody in one of these areas and have a better offer on the table than saying, "We have come to regenerate the area".[5]

  228. What about the private landlords moving into some of these areas? How much are they to blame for almost destroying some of these neighbourhoods?
  (Mr Bailey) It is a little too easy to always blame the private landlords. They are moving in because the capital values of the properties can easily be paid. That situation will allow landlords who want to exploit the housing benefit system to do so. That is not discussed often enough, the relationship between the housing benefit level and the capital values of properties within those areas.

  229. The rent officer is not doing his or her job?

  (Mr Bailey) It is difficult to assess the market levels when there is no market.

  230. If someone has bought a house for £4,000 and they are able to get social security to pay £80 a week for rent, is not something going wrong?
  (Mr Bailey) Yes, because the rent officer is unable to make an assessment of the true market rent.

  231. The market is four per cent, is it not?
  (Mr Bailey) The capital value of the property is but the rental value is not capable of being worked out. The rent officer is in the position of having to try to determine a market which is not there.
  (Mr Boylan) The impact of private landlords in areas like northern Manchester has been extremely serious. The issue about people making a reasonable return on their investment has been a very complex one but we have seen people make 140 or 150 per cent return in a single year on capital deployed by exploiting social security. There is a difficult challenge for the rent officer in this context. A more reasonable review of the rate of return could help in the longer term as part of the regional strategy.

  232. The danger is if there is total dependency on rent benefits, you are not encouraging people to get back into work in those areas, are you?
  (Mr Boylan) There is that danger but the reality is that people are accessing stable employment and their first action is to move. Where we artificially prop up capital values and levels, it does act as a disincentive.

  233. If we get economic regeneration in East Manchester, more people will move out of the area?
  (Mr Boylan) There is evidence to suggest and work done by CURS on the M62 corridor study suggesting that economic revitalisation within the urban centres has served to undermine the housing market in the areas surrounding those urban centres. The evidence of that in North and East Manchester is abundant. As people are accessing jobs many are moving out.

Dr Pugh

  234. Have you made any representations to the rent officer and the rent tribunals over this because it seems common sense that the retail value of property should be parallel to its capital value.
  (Mr Boylan) We tried; we failed; we gave in.

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





4   Note by witness: A strategy for empty homes in isolation is not helpful. Back

5   Note by witness: The immediate effect on the individual is the crystallisation of a significant debt. Back


 
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