Select Committee on Transport, Local Government and the Regions Memoranda


Memorandum by The Housing Foundation (AFH 01)

THE DEFINITION OF "AFFORDABLE"

  I do not attempt to seek a definition of affordability for rented housing, although a definition that is realistic is desperately needed. The Housing Foundation seeks to provide affordable housing for sale on a secured shared equity basis, which is protected in perpetuity. Our internal working definition is to provide quality homes for sale, the total outlay of which, mortgage and rent combined, is at least £20.00 per week less than renting a similar property in the private sector market. We would also subscribe to a definition such as—the provision of a quality new home the total cost of which is available to those living and working in a given area and which is affordable to those on average wages for the area. We would use a multiple of 3.1 times the earnings of the major earner in the family. We are able to achieve these objectives in Devon and Cornwall and have schemes in Shrewsbury and the South East which also comply. We sell as near as possible to 60 per cent of market value.

THE SCALE AND LOCATION OF THE DEMAND FOR AFFORDABLE HOUSING

  In the four years we have been engaged in our work it has become increasingly apparent that there is a very substantial demand in every town and village we have investigated. We are led by need and are approached by various bodies, usually Parish Councils, seeking our solutions. Our yard stick is that in areas where a decent three bedroom terraced or semi-detached home costs in excess of £85,000, there will be a definable and provable need for homes costing about £50,000 which can be afforded by those on earnings of about £17,000 per annum. We establish need by the simple expediency of advertising in local newspapers for those with genuine and provable local connections who are earning salaries which make the proposed homes affordable. We seek to ensure that those applying really can afford the properties, as we are very anxious to ensure that buyers are not over extended. It is of interest to note that local need surveys, conducted by Local Authorities and upon which they tend to rely, do not accurately reflect need, as those we identify rarely respond to surveys which they wrongly interpret as seeking only those wanting housing to rent.

  Those that we identify and who qualify on the various grounds imposed by differing local authorities—if only we could persuade Government to produce a standard Section 106 agreement—are usually those who fall into key worker categories—Teachers, Police Officers, Nurses etc who can rarely afford local house prices. We just hope the inquiry is really aware of the serious need and are not relying on information from Local Authorities who do seem intent on minimising the need.

THE QUALITY OF AFFORDABLE HOUSING

  We subscribe unreservedly to producing homes of the highest quality and use the best available specification from the major house builders with NHBC guarantees. We are aware of the higher specification often employed by Housing Associations—this we calculate as adding about £5,500 to the cost of the average house. Housing Associations with their subsidised regime are better able to afford this, but the addition of such a sum to our homes would often render them unaffordable. Our homes are to the standard of normal housing for sale and at the top end of that range, but "U" values etc may be less. Where our homes are still affordable with the additional cost, we are happy to increase the specification.

THE ADEQUACY OF THE EXISTING SUPPLY AND THE AMOUNT OF RESOURCES AVAILABLE

  Clearly the current availability of homes that are affordable is woefully inadequate. The reliance on Section 106 provisions on major developments, even at the higher rate of 30 per cent, is only providing fairly insignificant numbers of homes and these are almost entirely purchased by Housing Associations and used as rented homes. There remains the unknown numbers of key workers etc who currently have no alternative but to rent in the private sector at often prohibitive cost and who would be very unlikely to accrue sufficient need points to qualify for subsidised rented accommodation through Local Authorities or Housing Associations.

  We constantly lobby Local Authorities seeking their approval to Section 106 requirements to be fulfilled by shared equity housing for sale. There is usually severe resistance to this, even though we are at pains to point out that those we seek to house will inevitably seek subsidised accommodation or be forced into over priced private rented accommodation if the Section 106 homes are not available at heavily discounted figures to purchase. Our research clearly indicates a very substantial demand by key workers and those on only average earnings to purchase subsidised housing.

  There is a clear limit to the resources from the public purse available to Housing Associations to provide for the proven need and the necessity of Housing Associations to agree the purchase of 106 land, subject to the availability of HAG in the next round of grant application causes immense frustrations with the mainstream house builders who spend an inordinate amount of time endeavouring to arrange a satisfactory way of dealing with the social housing part of the Section 106 agreement on their developments. The model which the Housing Foundation uses provides the homes at an affordable price and we seek no public funding whatsoever for our developments.

  House builders, somewhat reluctantly, are prepared to sell completed homes to the Housing Foundation at about 60 per cent of market value if it gives them certainty on sites where, as is usually the case, they have to provide the social/affordable homes before occupation of their mainstream housing. Local Authorities must be encouraged to accept subsidised housing for sale as fulfilling the aspirations inherent in their often too restrictive Section 106 agreements.

THE EXTENT TO WHICH PLANNING GAIN CAN FUND THE LEVEL OF AFFORDABLE HOUSING REQUIRED

  It is difficult to justify the current situation which makes overnight multimillionaires of land owners by the simple granting of a planning permission and even the current imposition of up to a third of the homes being allocated for social/affordable use does little to mitigate against the enormous profits made by the land owners. The practice in some areas whereby the land owners pay a capital sum towards social housing elsewhere should be strenuously resisted, as it rarely appears that the receipt from the land owners actually finds its way into social housing projects. There are additional costs imposed on developers such as various infrastructure contributions and developers do of course deduct such costs from land values.

  It is clear that land values are by far the largest factor in current new house prices and planning gain does make a major contribution to the availability of some affordable homes, but it currently achieves too little, added to which the current practice of creating an enclave of social housing on the worst part of the site should be discouraged. All homes on a development should surely be "pepper potted" to avoid the present situation. House builders will resist such treatment, but a standard Section 106 agreement common to all areas which house builders knew in advance would be imposed, would be of tremendous assistance. At the moment it is astounding the degree of variation which exists and it is this uncertainty which creates much of the resistance by house builders to the principle of Section 106 agreements.

HOW RESOURCES SHOULD BE BALANCED BETWEEN SOCIAL HOUSING AND OPTIONS FOR OWNER OCCUPATION FOR THOSE WHO CANNOT AFFORD TO BUY (INCLUDING SHARED OWNERSHIP) AND WHETHER ANY ADDITIONAL MECHANISMS ARE REQUIRED TO BRING FORWARD SHARED OWNERSHIP-TYPE SCHEMES

  I have, to some extent, answered this in my previous observations, but there are some fairly obvious points I would wish to raise:

    (1)  Section 106 agreements on mainstream developments should recognise the vital contribution which shared equity housing for sale could make. At present Local Authorities are rarely prepared to accept any proportion of the Section 106 allocation of social housing to be available for subsidised sale.

    (2)  Section 106 restrictions on those qualifying to purchase shared ownership homes are far too restrictive. Whilst we support the imposition of restrictions to ensure they are only available to genuine local buyers, we experience, for example, Local Authorities who insist that those on a six-month secured shorthold tenancy do not qualify, which is clearly wrong. Whilst we also support the cascade limiting sales to those living in various parishes, it is so rigid in some cases that it is quite impossible to secure mortgages. There needs to be an agreement whereby in cases of repossession sales to qualifying people should be extended to those living within the District Council area. This relaxation would negate 80 per cent of the problems we experience with lenders.

  The Housing Foundation specialises in acquiring land with a view to implementing the exception policy in PPG3. This applies to rural villages, but discussions with DEFRA indicate that they view rural towns as having the same needs and that PPG3 should equally apply. Convincing Local Authorities of that is quite another matter and it is very clear that those who drafted PPG3 and its amendments did not appreciate the severe restrictions which would be imposed and the resistance which we would experience from Local Authorities. We buy land for exception policy housing at about £40,000 per acre and one does not have to be a genius to produce affordable housing on land at that price. We sell the houses virtually at cost to ensure they are within reach of most young couples on average incomes and we then charge a rental of just 2.5 per cent of the value of the retained equity and whilst this increases annually at the rate of inflation, it is not recalculated upwards on subsequent sales.

  Our lease, which enshrines all of our objectives is readily accepted by all Local Authorities when eventually they accept the principles of co-operating in our efforts to obtain planning permission. Local Authorities are just not prepared to be proactive in this regard and we estimate it takes us over two years from site identification to the receipt of planning permission. In the meantime we have to spend a great deal of money on planning fees, architects, surveys, overheads etc with the accruing interest. Whilst we will never seek public money for our schemes, we do feel we are entitled to support from Local Authorities for our endeavours.

WHETHER TARGETS IN REGIONAL PLANNING GUIDANCE ARE APPROPRIATE

  In our experience Regional Planning Guidance is more often used as a reason not to support our efforts in that there is rarely any mention of sites that might be suitable for exception policy housing. Planning Guidance concentrates on general guidance and apart from the assumption of Section 106 provisions on general housing sites, we see little support or recognition of the needs which we identify.

WHETHER TARGETS ON DECENT AND AFFORDABLE HOUSING WILL BE MET BY CENTRAL AND LOCAL GOVERNMENT

  It is difficult to recognise what are the targets. We believe that Central Government has to rely upon the information coming through from Local Government and we can see no evidence that Local Authorities do seek to recognise the actual need. Their surveys are probably reasonably accurate with reference to those seeking rented housing, but there is a total lack of recognition of the enormous frustration of those seeking to purchase decent and affordable housing in almost every area. A great deal of our work is in Devon and Cornwall and as an example, here in St Ives the District Council survey indicated five people seeking to buy affordable housing. Our advertisements produced 180 families in good local employment living in over priced and often inadequate rented housing—clearly, many of these families are key workers who will eventually move and live in areas where housing is more affordable. In St Ives over 30 per cent of the homes are only available as holiday lets, clearly something has to be done and urgently. A breakdown in society is becoming a reality.

WHETHER CURRENT POLICIES AND PRACTICES ARE LEADING TO THE CREATION OF MIXED COMMUNITIES

  Current policies do not lead to the creation of mixed communities. Section 106 requirements are fulfilled by house builders allocating a proportion of the site for the required social housing on the least advantageous part of the site. If they could afford to build a wall around those homes they would do so. To some extent we have a sympathy with their perception of the problems social housing can create and feel that there is not sufficient control or discussion on this. Housing Associations, usually the owners of such accommodation, do not in general assure compliance of good neighbourly behaviour and whilst it is true that there are often problems with owner occupiers too, the perception of developers causes their opposition to any form of social housing on the sites.

  Housing of varying tenures can and should be "pepper potted" over a site and if this were insisted on by planners, most developers and purchasers would come to accept it eventually. Even a cursory look at developments in most areas will reveal developers catering for the better off and with building land worth over half a million pounds an acre, who can blame them. Central Government has either to introduce ways of reducing land values or ensure that there is sufficient land released to enable market forces to keep down cost. If genuinely mixed communities are to be a reality, then this can only be achieved with regulation on reasonably priced land.

WHETHER MORE GREEN FIELD DEVELOPMENT IS NEEDED TO MEET HOUSING NEED

  Very obviously more green field land must be released to meet housing need and a recognition of what could be achieved by widening exception policies is critical. Land owners of land outside the normal development boundaries fully recognise that should planning be granted, it will be restricted to the extent that values are considerably less. As I have indicated, we are able to purchase such land at £40,000 per acre and, compared to a value of £2,000 per acre for agricultural use, it becomes very attractive to the land owners, provided it is made clear that homes built on their land are not available for general open market sale. The issue of green field sites is emotionally charged, but insufficient consideration is given to sub-standard land agriculturally even if such land may not be ideally located.

THE COST TO INDIVIDUALS, BUSINESSES AND THE ECONOMY RESULTING FROM ANY SHORTFALL IN THE PROVISION OF DECENT, AFFORDABLE HOUSING

  It would be easy to write volumes on this but there are some obvious points that need to be considered:

    (1)  In many locations young families clearly cannot afford to purchase a suitable home. These include obvious key workers such as Police, Nurses, Firemen, Social Workers etc as well as those in less obvious jobs such as those providing local services in shops, local industry, farming etc. If they cannot afford a home they will simply move to other areas. In West Sussex, for example, there are over 100 job vacancies in County Hall which cannot be filled due to the applicants not being able to afford local house prices. The eventual consequences of such a situation are not pleasant to consider.

    (2)  Clearly there are obvious implications for local economies if the labour force cannot find suitable and affordable housing. It might have benefits in areas where housing is affordable, but in our experience in the West Country those areas are very few and far between. I believe we have already reached crisis point in the housing situation and yet PPG3 could provide the answer if Government were to give clear direction to Local Authorities to support the initiatives. We have demonstrated that these schemes work, houses are available which are affordable, they are protected in perpetuity, they are good and decent homes, but they just are not happening due to the lack of support experienced with most Local Authorities who refuse to be proactive, seeming much more anxious to erect barriers than to recognise the urgent need which exists.


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 1 July 2002