Examination of Witnesses (Questions 20-36)
MR NEIL SINDEN, MR HENRY OLIVER AND WILL HUTTON
WEDNESDAY 12 JUNE 2002
20. Will, can I ask you if you think that the Government are looking to the planning system to get the private sector to increase affordable housing? Do you think that is reasonable?
(Mr Hutton) Let us look at what the private sector say. In that sense it would be unreasonable not to listen to the private sector's requests and, if rational, act upon them. I do think those in the Planning Green Paper will, at the margin, increase the supply of affordable social housing. But I do think the planning system is, in my view, looking not the prime culprit here. I think the prime culprit, the two drivers of house price inflation in Britain are: one, income inequality, and two, our system of housing finance. I do not know whether the Committee is aware of it, but there is discussion of mortgages moving from 25 years to 50 years. The result of that will, of course, make monthly repayments of mortgages that much more affordable and will drive up the level of house prices. Actually, the single most interesting proposition that you could make is that 50 year mortgages are only available to key workers. That would probably do more to privilege them in the housing market and actually equip them to buy housing than any other measure you could propose at the moment.
21. If anyone wants to be working for 50 years, I am not queuing up to do that.
(Mr Hutton) The average mortgage is not repaid, of course. The average mortgage length, I think, is seven years. We take out 25 year mortgages and we sell our house and move on before repaying them. That would be the same with 50 year mortgages. I know it seems outrageous but that is where we are moving at the moment.
22. I want to move on to the 64 million dollar question here which in this case is the 1.7 billion question, which is the amount of money required to be invested into affordable housing to meet the shortfall. That is the estimate we have had from Shelter, for example. Do you agree with it?
(Mr Sinden) We have no reason to question that figure. The only thing I would say is that we recognise and welcome the increases in investment which this Government has been putting into the social housing sector over a period of the past four to five years. We believe, however, that levels of funding are still relatively low historically and that we do need a significant boost of that sort of magnitude in public funding of social housing provision
23. One of the things that has come back to me is that the number of houses built in the social housing sector has fallen quite substantially in the past five years, which would go against what you have just said.
(Mr Sinden) That may well be true in terms of the numbers built, but the funding levels have increased. The evidence is there.
24. Is it not houses that matter rather than funding levels?
(Mr Sinden) It certainly does and we need to look more closely at how funding levels relate to actual provision. One of the points I made earlier in response to a previous question was the issue of linking housing investment strategies more closely with planning strategies. At the moment we have two largely divorced systems which we believe is a nonsense. We need much closer strategic planning in terms of determining where that quantum of housing investment should go in the light of wider planning objectives at a regional and local level. We do not really have that at the moment. We would urge this Government and this Committee to look very closely at how that might be achieved.
25. It has been suggested to us that problems in the south-east particularly will solve themselves as prices rise then demand will lower. Do you think that is acceptable? I will ask Mr Hutton first.
(Mr Hutton) Acceptable or likely?
(Mr Hutton) I think the story of the last 25 years suggests that is wrong. House price inflation in the south-east has outstripped that in the rest of the country. The average level of house price in the south-east has trended upward. You can make a judgement like that at the moment about the housing market. The Bank of England has this problem. Outside the south-east house prices are looking reasonably valued against long-run earnings, trends and earnings and the relationship between earnings and affordability of house prices. That is not the case in the south-east. Frankly it is a dysfunctional market. This is where the Buy to Let market is most rampant. That itself has had a very significant impact on driving up house prices in the south-east. It means that the supply of houses for sale will fall away. What I suspect will happen is that when this bubble gets prickedwhich it willthere will be a sharp correction and then there will be stability and then it will come again. I honestly do not think that market forcesin inverted commaswill sort this problem.
27. Do you think that overheating in the south-east can be dealt with by better regional policy in other parts of the country?
(Mr Hutton) I think the south-east of England is probably, in Europe, the single region that is the biggest beneficiary of globalisation. I think that whether the south-east's booming airports, the number of students going to universities who come from foreign countries, whether it is multi-nationals re-locating here, whether it is the strength of financial services, this is part of Britain which benefits most from globalisation and it is the part of Europe that benefits most from globalisation. It would need a very aggressive regional policy indeed to address that. We are living in an extraordinary pressure-cooker. The kind of regional policy you would need would be a really smart regional policy, very unconventional, in that it would look to parallel the kinds of benefits the south-east has enjoyed from globalisation. So that the orthodox approach to regional development which is on transport investment and all the rest of it would need to be refocused. It is not obvious that the places like the north-west of England or the Midlands would benefit from globalisation to the extent of the south-east of England. It may be that it is a trick that is not reproducible in the rest of the country. I really think we are grappling with almost an intractable problem. I think that if we are going to get at itand I offer this to the Committee and if you want I will write a paper on it if you are interested in my going furtheris actually Britain's system of housing finance.
28. Do you think that stronger regional development agencies looking at developing region economies linked with directed elected regions affecting Government policy and European policy could make a difference?
(Mr Hutton) I think those would have an impact on regional development in Britain and to an extent they would, I think, level the playing field over a period of years. But you have to acknowledge it is a bet. My bet is that it would.
(Mr Oliver) Could I just quickly add to that given that there is perhaps a difference of opinion to some extent. A critical element of regional policy which has been perhaps ignored there is the environmental dimension. The CPRE strongly believes that although there arehave been and continue to beeconomic benefits to the south-east and London through globalisation, there are also major downsides in terms of environmental quality, loss of rural tranquillity and so on. A more even regional policyboth between regions and, let us not forget there are significant disparities within regions like the south-east themselvesis essential if we are actually going to get an environmentally sustainable solution to this problem.
29. Can I ask you both what your views are on the suggestion that a number of bodies have madelike the local government association for instancethat local planning authorities should be given the powers to allocate sites solely for affordable housing. What are your views on that? And also how is that consistent with creating mixed balanced communities?
(Mr Sinden) The CPRE would have concerns for that reason about this kind of proposal. But we would not throw it out of court. We believe that it does need to be looked at seriously. We are interested particularly in the idea that has been mentioned already, that the Countryside Agency is pursuing. Sites for social diversity in rural areas we think could overcome the problem of creating concentrations of affordable housing. Some of the problems we have seen with the large estates that were built in the 50's and 60's could be avoided by a mechanism which actually seeks to promote the provision of a mixed tenure/mixed type housing on particular sites. But we would not necessarily go down the line of sites solely for the provision of social or affordable housing.
30. Will Hutton?
(Mr Hutton) We have been talking in Britain about building mixed tenure cheek by jowl since the first World War, actually. There are examples in the 30's of attempts to do this which were wildly resisted by owner-occupiers for all the reasons that the Committee knows. I think the only resolution of this is a cultural and social acceptance of high density housing or high density living within which one can have pools of maybe social housing. Again, this is not new. We, as a country, have been with this problem since the 30's to my certain knowledge.
31. Can I ask you both about planned urban extensions? What are your views on that? I know the CPRE have been vociferous in their opposition to tagging a few houses onto the outskirts of existing urban development.
(Mr Oliver) We have actually been involved in positively promoting one or two greenfield urban extensions in the last few years, so our view has been that in certain circumstances where we accept the need for a certain amount of greenfield development in line with PGP3 on housing. We think that urban extensions may sometimes be the most sustainable option. We think it is very important that they should be urban rather than suburban and they should mix uses and mix tenures, and maximise people's ability to meet their needs without having to be mobile, especially having to be being mobile by car. But we have engaged with a number of people, with local authorities, developers and so on in trying to raise the quality of those things. We think there is a lot of potential.
32. Will Hutton, your recent article in the Observer when you were talking about resisting encroaching into the greenbelt and trying to find solutions on brownfield sites, I think you said that "The Minister, I detect, is readybut is his Government?" Do you think the fact that we now have a new minister coming in at scratch to this problem is going to actually weaken that position.
(Mr Hutton) You are now asking me to make a political judgement, so it comes with a health warning and should only be seen as my own personal assessment. I do think that Lord Falconer was really very determined to make the Government's targets on brownfield/greenfield work. I think he was prepared to resist the house-building lobby in its erosion of the greenbelt and I think he was prepared to take quite aggressive measures actually to support that position, even if it produced some protest from the House Builders' Federation. That was the way I read him, anyway. It is a new minister and we all know the changes. I would be surprised if the same results were shown. But I may be proved wrong.
33. Coming back to something which worries quite a lot of people, assuming that policy was pursued with vigour, in the 1960's the Government decided they wanted high densities on urban sites, they decided what they wanted to do, they insisted it was done then we got some pretty horrendous results in terms of the concrete jungles and the high rise blocks (many of which have now been demolished). Is there not a danger, if we go for high density building to get more houses on existing sites in urban areas, we are going to end up with similar results?
(Mr Hutton) I obviously agree with that; and I had a bee in my bonnet about it. I see no reason why the same standards of design and architectural excellence that we see in the best parts of private sector high density living cannot be used in social housing frankly. And the same standards of design and quality of materials and the rest of it. I do think that we have a large legacy in Britain of indifferently built social housing. Quite frankly, a lot of the conversions of Edwardian and Georgian housing is very poor as well, very poorly sound-proofed and I think this whole question of noise pollutionwhich is a big issue for many peopleis in part due to the fact they live in botched conversions with paper-thin walls and the whole question of the quality of design of what we live in, of how it is built and the standards to which it is built and the workmanship we require the people who work on itI would love to see the Committee open this up, maybe a second inquiryrelates to this issue.
34. How should the Government balance its resources for affordable housing between homeless people on the one hand and workers on the other?
(Mr Oliver) How do you define workers? I think there are dangers in any definition of what a key worker is in terms of excluding certain people or including people who should not be in there. However, having said that, I think what we need to do is look at it geographically. There are parts of the country where homelessness is the problem and housing key workers on the open market is not a significant problem. In those areas clearly tackling homelessness will be the priority, possibly the only thing that needs to be done. In places like London and the south-east, however, because of the state of the economy and the price of houses, there will be a need for affordable housing policy to try and provide social housing for people who, in other parts of the country, might be able to afford market housing. We completely accept that and we do not see there needs to be some sort of balance. Clearly homelessness is an urgent problem that needs to be addressed and so is the fact that the success of the economy in the south-east and London is dependent on key workers being able to afford to live here. I think we would also add to that in terms of the quality of design and urban renaissance, they are inter-dependent and that urban renaissance will not succeed if we do not have the highest quality social housing.
35. Mr Hutton, you did suggest to us that you would give us a note on 50 year mortgages. I am puzzled as to how that would help to bring the price down and therefore make houses more affordable. Rather than pursue that now, if you felt like handing us a note we would be very grateful.
(Mr Hutton) Can you give me just ten seconds.
36. Ten seconds, yes.
(Mr Hutton) I cannot do it in ten seconds, I will do it in bullet points. One of the key drivers of house price inflation is the affordability criteria used by banks and building societies of the people to whom they lend. Lending 100 per cent or 105 per cent mortgages on four times joint incomes against former days when you would have lent against three times one partner obviously has been a big, big influence in generating house price inflation. Superimpose on that the Buy to Let market, which is again financed by innovative housing finance institutions, then you have one of the principle drivers of this, which is availability of finance. All I was trying to say was that if the availability of finance is driving up the overall level of house prices and 50 year mortgages is going to drive up the overall level even further, you might want to privilege key sector workers. That is my argument. It is a bit of a tease but I wanted to change the focus of the inquiry just a wee bit.
Chairman: We are overrunning quite a bit. On that note can I thank you very much for your evidence. Could we have the next witness, please.