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



Examination of Witnesses (Questions 160-179)

MR TIM WILLIAMS, MR ROB SCOTT AND MR CARL POWELL

TUESDAY 25 JUNE 2002

  160. Young people? Elderly people?
  (Mr Williams) No, very adequate provision for older people, but obviously identifying smaller units in order to encourage down-sizing to make best use of existing stock is an important housing management task, both for us and the registered social landlords. It is being imaginative, making sure that the developments are attractive, well-located so that people are encouraged and want to move to smaller accommodation, so that we can make the best possible use of existing stock.
  (Mr Powell) I hate to get involved in a bidding war, but our housing prices average 410,000 per unit. Similarly, we have 100,000 dwellings at Westminster. Our housing needs survey shows we have a shortage of just under 2,300. To put that into context, over the last five years we have had the fastest residential growth rate of any local authority in the country; 20 per cent we have achieved over the last five years, and we have only managed to create an additional 1,500 units. That is 300 units per annum, hence the argument we put earlier that it is not simply planning that is going to deal with affordable housing; it is money through the housing corporation as well. The planning mechanism has its part to play but it is complementary to getting resources into affordable housing.

Ms King

  161. I would like to ask you about the right to buy, whether it is an issue for you and what changes you think should be made.
  (Mr Williams) I think it is less of an issue than it was a few years ago, with the introduction of a maximum discount entitlement, but I think it does sit oddly with the maximum discount in terms of right to acquire for registered social landlords. I think there needs to be a policy articulation as to why it is different, and frankly, it is quite difficult to justify. So you are comparing a 38,000 maximum discount entitlement to a 16,000 discount entitlement, and certainly our view would be that that should be brought in line with the right to acquire, obviously with the obligation to recycle whatever receipt results.

  162. How does it compare to your cash incentive schemes?
  (Mr Williams) Our cash incentive schemes are quite generous, but they do not make the sort of contribution we would like.

Chairman

  163. What do you call "quite generous"? Would I be impressed?
  (Mr Williams) They are of the order of 10,000.

Ms King

  164. You said it was not so much of an issue with the maximum discount entitlement down. You will be aware of the figures from Shelter and other organisations showing that in London last year 11,000 social housing units were lost through the right to buy, yet only 4,000 were built. Keeping that in mind, you still do not think any radical changes are required?
  (Mr Williams) I think the issue is: would those properties be available to the social housing market in a reasonable timescale? The answer is probably not. They would have trickled on as people had moved or died, and therefore they would have remained the benefit of secure tenancies until either the person was encouraged to move to smaller accommodation or indeed died and it came on to the letting market, but even then there are rights of succession in terms of other occupiers of the premises and so on. There is not a direct relationship.

  165. How does that stack up? If you take Tower Hamlets, for example, we lose 1,000 units a year. We have 26,000. That means in 26 years' time we will not have a single unit of social housing left. Surely it has to be a major issue.
  (Mr Williams) It is a major issue in terms of pace and scale, and it is also a major issue in terms of the nature of receipt. The difficulty is, is it the answer to the total problem? My judgment is that it may make a marginal difference, but it would not make a significant difference to the scale of the problem that we are addressing.

Mr Betts

  166. Is there not something wrong with a situation where we are trying to address a problem of affordable housing, whether it be by providing houses to rent that people can afford or subsidising houses that people can buy at a price they can afford, and it only helps one group of people, because people who rent can then buy the property and that is lost to other people who want to rent, and the people who get a subsidy towards a house they buy eventually sell that house on the open market at a market value and other people in a similar position will not be able to buy in the future?
  (Mr Williams) There is an issue, and again, in our written material to the Committee we major significantly on the issue of affordability in perpetuity. There is an issue, either through a new use class order or through different forms of housing tenure, to ensure that if, for example, public agencies, be it local authorities, health authorities, anybody else, have made land available for affordable housing units that in actual fact they want to be satisfied that the discount element or the public subsidy element is not just going to the first occupier. Whether, as I say, one deals with that through a new use class or one deals with it through a new form of housing tenure, it is a significant issue. There is no doubt about that.

Mrs Ellman

  167. What problems do the very high average house prices cause? What implications do they have for people who are not on very high incomes?
  (Mr Powell) I claim the prize for the highest house prices, so I shall lead on that. We have a dual problem. Clearly, there is the obvious problem that high land and property prices do in fact create a scarcity and greater financial pressure in terms of delivering affordable housing. Conversely, the revenues generated by higher prices also provide an opportunity in terms of accessing a greater contribution from developers. So it is a double-edged sword. Perhaps the far more significant issue in the affordable housing debate over house prices that your question raises is the question of key worker accommodation. It is the polarisation of the housing stock where through social housing one is able to an extent to cater for demand in an area of high land values. You then end up with the middle ground being lost, particularly with regard to key workers, and this is the emerging area that in Westminster we are finding most difficult to cope with, either through shared ownership or through actually making a proportion of the affordable housing stock available to key workers at a time when there is not sufficient social housing. We have recently introduced a clear policy statement once again in our UDP and in our Planning Guidance Notes where a fixed percentage of the affordable housing target will be put aside for key workers. So we are looking at moving on both fronts, albeit that we are not adequately dealing with either.

  168. What specific problems have been caused? Are there particular groups of workers where there have been difficulties with retention?
  (Mr Powell) As far as key working, for us the core staff that we are experiencing difficulty with tend to be public sector workers, NHS staff in particular, where we have acute and primary facilities; education staff—teaching in central London has been very severely hit by the problems; police housing—and of course, this is all set to the backdrop where large corporate bodies, whether public or private, seem to be withdrawing from the housing provision market. If you look at the big department stores on Oxford Street that were built at the turn of the last century, every one of those department stores, from Selfridge's right on down, were originally built with hostel accmmodation for staff. If you were working in central London, your private employer provided accommodation. The banks used to do it. Gradually that is all being sold off. We are seeing exactly the same thing happening with the Metropolitan Police at the moment. The family silverware is being sold. We are having section houses sold out from under the Metropolitan Police, and that is contributing to this key worker shortage. Policing is a very real worry for us in the centre of London.
  (Mr Williams) There are four elements from our perspective. The first is in relation to homelessness, and the very significant rise in bed and breakfast costs, with a 130-odd per cent increase over the last four years, a 63 per cent increase over the last two years, and increasing difficulty in terms of physically securing temporary accommodation. The second issue relates, as has been said by Carl Powell, to key workers. The LGA last Friday issued a press release and a report in terms of the crisis relating to key workers and affordable housing, and particularly identified issues in Surrey relating to police and education. Vacancy rates in Social Services, for example, are between 20-30 per cent and vacancy rates in schools are approaching 20 per cent, and there is the question of turnover, which causes a great deal more dislocation. This also does constrain the public sector's ability, whether it is health, police or local authority services, to respond to the Government's wish to see better public services. As to the third area, I think we have very significant, evidence albeit only anecdotal evidence at this stage in relation to companies' views about restraining either job creation or more investment because of the difficulties of recruiting. The difficulties of recruiting do result in quite absurd travel to work patterns. There is a typical travel time of an hour and a half moving from some lower cost areas in deepest Hampshire, for example, which is hugely dislocating. I suppose the fourth issue—and it was something in the housing field in London that we dealt with in the Seventies and Eighties—was the impact on the rise in concealed households and all the tensions and difficulties that creates. We do not have the detail yet from the 2001 census, but we suspect from what we have had so far in terms of some limited housing need material that that has risen very significantly.

Ms King

  169. If you give key workers a subsidy, does that not just increase demand?
  (Mr Powell) Precisely. There is an enormous socio-economic debate which relates to the earlier question about whether you need to maintain housing stock. There will always be needy in society. The debate is: do you stimulate supply or do you stimulate demand? Historically, in the UK, we stimulated supply, and that has not always left the means of production in efficient hands. We have seen the failures of municipal house building in the Sixties and Seventies. It just does not work for local authorities to get involved wholesale in building houses. You will always have to look to the individual. So rather than subsidising bricks and mortar, we would suggest there is a very strong argument for accepting that in perpetuity you will have to subsidise the individual on a needy basis.

Sir Paul Beresford

  170. You have touched at some length on key workers. One of the problems with the definition of key workers is it is a public sector definition to help the public sector. The private sector has exactly the same problems which you are touching on, which really means that the key workers target is misplaced and is only hitting half of the problem
  (Mr Williams) Our publication, Housing to underpin economic success, which your clerk has had, deliberately addresses that issue and does not attempt to narrow it to public sector provision, because there are key issues in terms of supply, wealth creation, company expansion and so on, and it does strike us that that cannot be ignored in any policy framework.

  Chairman: Is it not possible for local authorities in areas of high demand to move some of their services, which can be provided in parts of the country where there is low demand, and to encourage some companies to move some of those services? This Committee looked at the whole question of empty housing in other parts of the country. Are you satisfied that as local authorities, with your own services, and encouraging others, you are moving enough away from areas where they do not need to be?

Sir Paul Beresford

  171. In answering that, can you comment on the prospect of this government doing the same thing.
  (Mr Powell) I should apologise to my better half, because I have been talking in my sleep for the last three months, because the major project in Westminster I have been working on is in fact an initiative called our Customer Service Initiative, which is to look at doing precisely that. We are looking over the next ten years at whether we can take what is already a very extensively out-sourced organisation and move a significant proportion of the staffing outside of London. For us in central London that works, because our work force does not tend to be drawn from within the local community, and so moving those jobs to a different part of the country does not have a local environmental impact. We would obviously look to deal with that, and I think that most of the government agencies which are based in the centre of London, if those jobs were to move into more economic locations, accompanied by changes in working practice, which is the reason we are doing it—this is not simply a matter of looking for cheaper accommodation but to fundamentally re-engineer the way you deliver services to raise the quality of service delivery, to move into a call centre customer relations and an extensive IT culture, where you are able to provide a better service, free-ing yourself from the handicap of being in the town centre—is a good move. I think Sir Paul's point on definitions of key workers is very well made. Our definition, as one of the few local authorities to actually put a written definition into our Local Plan, does not restrict itself to public sector workers; the private sector does have a role to play.

  Chairman: I am going to have to cut you off there. That seems a helpful answer.

Ms King

  172. I am sorry we do not have time for me to disagree with what you said. I do not think you can buck the market. I will move on to the intermediate housing market and ask you what proportion of money should be spent on the one hand to meet low-cost housing general needs and on the other to meet the intermediate market housing needs?
  (Mr Williams) Seeking simple definitions like that is to miss the point. If, for example, one looks at intermediate housing in relation to mixed tenure or equity share, for example, the key issue there is the entry level and affordabilty threshold. Is it 50 per cent equity entry? Is it 20 per cent equity entry? Is there a rental element for the balance, or is the rental element foregone or abated? All those issues determine absolutely fundamentally those that can actually take those opportunities. Therefore, in a sense you have to answer that question first of all. If equity share options are radical and attractive and have a low entry point with a low residual cost to the occupier in terms of a rent or other licence fee, at one level it could equate to 30 or 40 per cent of the total market—I am talking about in our area—but if you are very restrictive in terms of the level of entry, say at 50 per cent with full market rent on the residual 50 per cent, it does not actually help many.

  173. Talking of helping many, do you think you could provide an intermediate housing market whereby someone on an average income, for example, in Tower Hamlets—that is 12,000—would be able to partake in a part-rent, part-buy or shared ownership scheme? Is that on the horizon anywhere?
  (Mr Williams) I think it could and should be. If the funder for the remaining element of the equity is willing to take a long-term view, and you look at house prices, say, for the whole of the post-war period, in any short-term period somebody might have caught a cold, but in the long term, as an investment instrument, it is quite attractive, and therefore entry levels at, say, 20 per cent equity, which would work in the scenario that you paint, are credible. The question is whether in fact there is a willingness there.

  Ms King: What role do you think local authorities should be playing in providing affordable housing? It is a broad question.

Chairman

  174. Some new council houses?
  (Mr Powell) I think that is a fairly unconvincing approach which time has proven does not succeed. We would suggest clear planning policies which encourage partnership, working with the private sector whilst supporting the public sector, those planning policies of actually being confident that you understand where the marketplace is—and I agree with your point; you cannot buck the market in fact, and having made a living in merchant banking before I came to my current job, we do understand that and those are the principles that we apply to making sure that we maximise and extract from the planning process and negotiations, whether it is for density or new housing, as much as we can for the community as a whole. But at the end of the day, as we demonstrate and I think all of the evidence you have heard demonstrates, the housing crisis facing us with regard to social need cannot be solved simply through the planning system. More government resourcing needs to be pumped into the Housing Corporation. In whatever form that takes, whether it is intermediate or affordable housing, additional resources have to be put into the system.
  (Mr Williams) This is not all directed at government and changes to government. Clearly, local authorities need to be sharper and better in what they do. There is quite a bit more to be done. This is not pointing the finger at others; it is actually looking at the whole of the supply chain in relation to this.

  175. Finally, can I just ask you about the potential in Thames Gateway. Does North Kent and Thameside need special arrangements to get land released?
  (Mr Scott) Some people think so and others do not.

Chairman

  176. What do you think?
  (Mr Scott) It would not particularly help the part of the Gateway that I know about, which is Dartford, where property values are quite strong, and there do not seem to be any absolute barriers to development coming forward, but I did say earlier that all of our planning negotiations are predicated on a very conservative view of what the development out-turns will be. The advantage of having something like a regeneration company instead of that is that you can actually take the out-turn profits from the development and re-invest them into the area again, and in that way you get much more value for money compared with the very modest schemes that we can broker under the current arrangements.

Mrs Ellman

  177. What are the problems in releasing brownfield sites for development?
  (Mr Williams) Many and varied. I think the first is something that we touched upon earlier, and that is existing use value and the various practical constraints of bringing sites forward, whether that is in relation to infrastructure requirements or utility diversions, and again, costs associated with brownfield sites in urban areas are frankly often prohibitive. The third issue is that very often, in our area particularly, 30 per cent of those sites would typically be below 15 units. How can an appropriate 106 or community benefit be extracted from those sorts of schemes? The simple reality at the moment is they cannot, so the opportunities there are lost to a significant element of the supply.

  178. How could this situation be assisted? Could Housing Corporation funds do anything?
  (Mr Williams) I think at the moment certainly the Housing Corporation and the total cost indicator regime that is operated, certainly in Surrey, is hugely disadvantageous, and it requires public agencies to make land available not at say the typical, traditional 30 per cent discount but it requires them to make them available at 50-65 per cent discounts to achieve the TCI and associated thresholds. That is a big disincentive, particularly where those public agencies, be they health authorities, police authorities or local authorities, are requiring those receipts very often to underpin their capital programmes elsewhere.
  (Mr Scott) In Thames Gateway, obviously the problem is the same as it is anywhere else. Brownfield sites are very expensive to develop. If they are very big, the costs are also very unpredictable. Certainly I think SEEDA has a role in trying to iron out some of the very difficult cash flow problems that arise when you are trying to take on projects that may have a 10-15 year timescale, with all sorts of uncertainties and unknowns buried away, waiting to be found during that time.

Mr Betts

  179. I have a point on the planning process. One of the issues is on the section 106 agreements. They are often different between local authorities, negotiations go on for a long time, and it is not clear at the beginning what is going to be required. Do you think there can be a greater degree of clarity in that process so that developers are clear at the beginning what is going to be expected of them? Secondly, as the Green Paper proposes, if we move towards a tariff system, is that a way of getting a contribution from developers?
  (Mr Powell) We certainly support conceptually the general thrust, with some reservations about the detail, of moving towards a tariff system. Anything that creates greater certainty in the marketplace has to be an advantage to speeding up the totally unacceptable delays the existing system delivers. It is no bad thing to overhaul the system for the sake of overhauling it. It has been this way for 50 years. We would certainly support that. The point that we would make though is that we must not confuse the 106 system with the affordable housing issue. Affordable housing is outside of the section 106 gain regime, although affordable housing is secured using a 106 agreement. Affordable housing relates to achieving a mix of units which is consistent with positive planning. Our great worry is that government may get confused in the rush to simplify tariffs, lump affordable housing in, and whereas at the moment we sit down and negotiate and get affordable housing and a section 106 gain, you may end up getting only one or the other and do not end up maximising the gains coming back out.

 


 
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