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

Examination of Witnesses (Questions 340-352)



  340. By future owners you mean when the property is sold on?
  (Mr Muir) When the property is sold on most local authorities do not have administrative arrangements in place to ensure that it is sold to the right person. They are not geared up to that.

  341. We are not actually producing many houses through 106 in the first place, are we?
  (Mr Muir) No.

  342. Why?
  (Mr Muir) I think the background to section 106 agreement needs robust housing needs surveys. The land needs to be available in the first place initially on the periphery of the village. But I think that you will find that one of the reasons that it is not coming forth is that anyone who is sitting on the periphery of a village with an area of land will retain that on the basis that it has some value for future development at some stage in the next life of the next local plan.

  343. Other parts of the country appear to be slightly better at properties produced, affordable housing, through the 106 agreement. Are you actually looking at other areas and seeing how they are doing it and trying to learn some lessons? Or are you just saying it does not work?
  (Mr Muir) I think the issue in somewhere like the Lake District National Park is that there are very few new build sites available because of the planning restrictions and the lack of availability of sites either brownfield or greenfield. So there are very few new build schemes coming up of any sort. Most of the movement is around the resale of existing properties. As we say, section 106 agreements do not apply to those. If we are to address the issue in some of the rural areas of such a large number of properties that are second homes, it is not going to be dealt with by increasing the supply in the very few sites that are available, and it is only through those new sites that section 106 agreements can be used.

Chris Grayling

  344. Can we talk a bit about the Housing Corporation. How do you think its funds could be better used, if at all?
  (Mr Muir) Firstly, each year they have a TCI grant rate regime which is incredibly complex.


  345. Can you just spell out the TCI grant regime.
  (Mr Muir) They have a system of Total Cost Indicators which says that in a particular part of the country for a particular type of property for a particular use there will be typical costs. That is the TCI. The grant rate is that using those same criteria again there will be a certain level of grant that Government puts into that property to achieve our social objectives of either rental or shared ownership. That system is incredibly complex. There must be hundred of thousands of different variations and there is very little local flexibility within the local regional offices on how to interpret that. So, for example, if we look at a rural property in an area like Grassmere one or two properties will make the difference to sustainability of that community. But the TCI grant rate system does not work if local field officers and Housing Corporations say, "Well it is only two properties out of our total regional allocation. If we can still prove value for money, let's give it what it needs to buy an existing property in Grassmere for that local family who would otherwise have to leave the community. Let's do it." I think there is that local discretion that is missing. I think we have come a long way down the bureaucratic line and the time has come perhaps to have a little bit more flexibility. I think the other key issue though, certainly for low cost home ownership, is that the Housing Corporation has not got a system that is working in most parts of the country at the moment. We need a much more flexible equity sharing arrangement. If that is what the Government wishes, to increase the amount of home ownership in relation to rented programme if that is what we chose to have then we need to have a much more flexible system than the Housing Corporation has currently got.

Chris Grayling

  346. Do you think the Housing Corporation has sufficient funds if you look at the needs in your own particular area?
  (Mr Darling) I think the rural target of 1,600 nationally this year and increasing in the years to come—I know it is the same as it was back in 1988—is a reasonable target to aim for and the funds are there to assist in the provision of those. But I will just restate the points that Mr Muir has made. I think you require the flexibility in those areas particularly in the hot spot areas of the rural parts of Northumberland and Cumbria which are being alluded to this morning to ensure that those minimal numbers (we are talking about single figure numbers but because they are single figure numbers they become more expensive). You have not got the economies of scale; you have to go in and compete against the local builder, national house builders in certain areas, the design which is in sympathy (which will invariably be stone and slate), it is away from the centres of population, additional transport costs for materials and labour. All of those need to be factored into the grant rate and the TCI rate to ensure that the rents are affordable bearing in mind the local income rents of those who are likely to rent those properties.

Clive Betts

  347. Looking at many of these rural areas—and I include smaller villages—is it effectively possible for anyone who grows up in that area to afford a home in the community they were brought up in? You have second homes, commuters coming in, and people retiring to those communities from outside. Can local authorities do more to actually help young people stay in their own communities?
  (Mr Robertson) In my area we do have villages where people sleep, they do not actually live, they commute to the town. My view is that the planning regime in terms of the planning green paper offers a great opportunity. The plan should be able to allocate land for social diversity, ie low cost homes, social housing. I think that is the way forward, otherwise how are we going to support the viability of some of our smaller villages who are struggling in terms of the post office, the school and the pub.
  (Mr Muir) Could I raise the issue of rent restructuring in this context. With rent restructuring the new Government arrangement to harmonise local authority and housing association rents under one system across the country, the rent which will be charged on a housing association or local authority property will be based on local incomes and the value of the property. What that means is that for a young person staying in their small rural community in a very high value low wage area, the rents are going to have to increase quite substantially. For example, we have a typical property in Thirlemere, just outside Keswick, which has currently got a rent of £44 a week. That rent will rise to about £87 a week under rent restructuring because of the high value of that property. For someone who is a young person in low paid employment they will not be able to afford that rent. The further problem is the housing benefit taper system is not flexible enough to allow someone to make the transition from being on benefit to being in employment in a smooth way.


  348. So you are saying that the restructuring is going to make the situation worse and actually low cost affordable housing is going to disappear even though in name it is going to remain?
  (Mr Muir) If it is rented and it is in the social sector and it is in a high value area then the rents will almost certainly rise and in come cases very considerably. The hot spots that we already have in terms of high value areas are going to be those where the social rent is extremely high as well. It is a further push on achieving sustainability. Certainly for someone currently on benefit it will become more difficult in a high value area for them to make the transition into low paid employment.

Mr Betts

  349. As I understand it, the Lake District National Park Authority has got what I think is called Local Only Market Housing Scheme. Should we be looking at more of those where, if low cost housing is provided in an area, there has to be a test that people can show a connection to that local community before they are allowed even to purchase a low cost home and even on resale there might be a condition that it can only be sold on to someone with a connection to that community. Should that be done more and why is it not being?
  (Mr Muir) That is the section 106 agreement argument again. I think it is used as effectively as it can be by the National Park at the moment. I think there are changes which could make it more effective in relation to existing properties.
  (Mr Darling) Can I just come back on a point that was made earlier about how do we ensure that we can provide affordable housing. I would urge caution on the brownfield sites requirements, quotas within rural districts because there are not that many brownfield sites in rural districts where local authorities or housing associations can compete with either local builders or national house builders because we have suffered that fate ourselves. We produced a scheme in a village, encouraged by the local authority. The day after we got planning permission the owner of that site said that he was not going to sell it to us, he was going to sell it to someone else for private speculative development.

  350. Is that because there were not proper conditions put on the planning permission presumably?
  (Mr Darling) Yes.

Ms King

  351. I just want to come back to rent restructuring. I know that although it is a great idea in theory, it is causing great anxiety in practice. I just wondered what proposals or proposed changes you would like to see to the current draft of proposals that the Government has put forward.
  (Mr Muir) There are three variables: there is the value of the property, the local average manual wage and the size of the property (the size of the property is a small factor in it). Taking Cumbria as an example there is an average manual wage (which is above the national average and that clearly is not the case in the rural areas), we have a large industrial work force in Barrow and we have the NFL which employs 6,500 people directly plus the associated industries and those significantly skew the county-wide average wage. If we had average wages that were based down on a district or a parish level we could then target the existing rent system—which has a lot of good points about it as you suggest—very closely to local afford ability. As it stands at the moment the main problems are in the areas where we have the very highest value and the very lowest wages in areas like the tourist hot spots, the National Parks (and it applies to all the National Parks in the country, I think).

  352. And in those areas what do you think will be the impact on affordable housing? It will reduce it, is what you are saying, but how great will the impact be?
  (Mr Muir) I think it is going to affect every rented property we have that meet those criteria being very high value and low wage. I think we will have more people who cannot move into employment and I think we will have more problems of affordability. The average cost of living in rural areas is probably round 30 per cent higher than in a comparable urban area. Everyone has to have two cars, childcare costs are higher, shopping costs are higher, everyone has to travel everywhere. The salaries are lower on average anyway. Also, much of it is seasonal and reliant on overtime. So, we have a particular problem with the sustainability already. To increase the rent on those same properties for those same people would have a cumulative and significant effect.

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

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