Select Committee on Transport, Local Government and the Regions Memoranda


Memorandum by North East Housing Forum (AFH 13)

INTRODUCTION

  This document is submitted to the select committee on behalf of the North East Housing Forum. The Forum represents the views of housing providers in the North East of England, and membership comprises local authorities, registered social landlords and representatives of the Chartered Institute of Housing, the Council for Mortgage Lenders, the House Builders Federation, the Local Government Association, the National Housing Federation, the North East Council for Tenants and Residents and the Northern Housing Consortium. A number of our members will be submitting their own views to the committee, based on the detailed experience and understanding arising from their own work based activities. This submission is intended to give a broader regional perspective.

CONTEXT

  The North East of England is a diverse and beautiful region, stretching from Berwick in the North to Teesside in the South. Over half the region is rural, incorporating two national parks (Northumberland and part of the Border forest park) The North Pennines and the Northumberland coast are designated as Areas of Outstanding Natural Beauty. The region has a vibrant history, being home to Hadrians Wall and legacies of early Christianity—Holy island on Lindisfarne and the castle and cathedral of mediaeval Durham, which are both World Heritage sites.

AFFORDABLE HOUSING

  Whilst there may be a perception that low property values and low demand in parts of the region make affordability less of an issue in the North East, this is not the case in some "hotspots".

  The North East Regional Housing Statement talks about the housing market as follows:

    "The structure of the housing market in the North East has distinctive characteristics, including the lowest level of owner occupation of any English region (63 per cent) a relatively small private rental sector (8 per cent) and relatively high levels of social rented housing. This is especially true in areas previously dominated by traditional manufacturing and mining.

    House prices are significantly lower than the national average, but there are considerable differences within the region. Prices in older urban areas eg parts of Tyne and Wear and Teesside are very low, while average house prices in semi urban areas in Northumberland and Durham are relatively high."

  The need for affordable housing in the North East can be categorised as follows:

    —  provision of affordable homes for households on relatively low incomes living in high cost areas, where the maintenance of balanced and mixed communities is threatened by high housing costs (for example in parts of Newcastle and Durham);

    —  providing affordable homes in high cost but relatively low income rural or semi-rural areas where housing markets are driven by demand from commuters into the urban areas (for example in Tynedale). Again, balanced and mixed communities are increasingly difficult to sustain. The particular issues faced in rural settlements should be recognised as expensive and difficult to resolve.

DEFINITION OF AFFORDABLE HOUSING

  Affordable housing can be in any tenure. The relationship between income and housing costs is the crucial issue. A household is deemed as living in unaffordable housing if its housing costs are greater than 30 per cent of its net equivalent household income (which takes into account the number of people the income has to support) and net equivalent income is less than £763 per month.

WHERE IS AFFORDABLE HOUSING NEEDED?

  By definition, affordable housing is required everywhere, but it is in areas where the mismatch between housing needs and households' ability to meet the cost of fulfilling those needs is greatest that the need for clear strategies for intervention to achieve sufficient affordable housing is crucial to the sustainability of balanced communities.

  Firstly, there are areas where economic success, high employment and increasing earnings have fuelled rising house prices.

  Parts of Newcastle and Durham fall into this category.

  The problems in these areas are essentially identical to the much-publicised issues facing other prosperous parts of the country, including the South East of England. While most benefit from the rising tide of prosperity, there are inevitably some households whose income does not keep up with the rest of the community—the economically inactive or those on low wages. However, these areas are likely to have lost a proportion of their social housing stock through Right to Buy sales, and they have longer waiting lists for what remains. Investment in new provision of affordable housing, whether for rent, sale or shared ownership, has failed to match the decline in the social housing stock.

  The second category already mentioned where affordability is an issue in the North East region is mainly rural areas where the market is driven by commuters or purchasers coming from outside the local employment market.

  Examples of communities where this problem is in evidence are parts of Northumberland (Tynedale, Castle Morpeth) and parts of County Durham and Teesdale.

  A lack of affordable housing makes the achievement or maintenance of balanced, mixed communities ever more difficult. If there are no local services and poor transport facilities then people, particularly young adults, are likely to move away. This has had the effect in some rural areas of making some rural villages simply places to live, rather than to work, and house mainly better off households. Where jobs do exist they are mainly low paid service industries where employers struggle to fill vacancies. This major social change may now be irreversible in some areas.

SCALE AND LOCATION OF DEMAND FOR AFFORDABLE HOUSING

  The North East Housing Forum has commissioned a study of the housing markets in the North East from the Centre for Urban and Regional Studies, University of Birmingham.

  Unfortunately, the study will not be completed in time to submit detailed evidence by the deadline date required.

  However, some key points, which have already been identified, can be summarised as follows;

  This study is concerned primarily with low and changing demand, rather than with problems of affordability which represent the opposite end of the spectrum, but it is useful to look at this in order to emphasise the problems faced by those districts where there is excessive demand rather than market weakness in the private sector.

  A discussion of house prices shows contrasts between districts and within districts which are indicative of high levels of demand for private housing parts of Northumberland, County Durham and smaller areas within the former Tyne and Wear and Teesside areas.

  Table 2.16 below introduces district level data on incomes and earnings and relates this to house prices to produce indicators of affordability.

  There are a number of limitations to the data. Earnings data is drawn from the New Earnings Survey and excludes those not in employment. It is also data at individual rather than household level. Inland Revenue data refers to those paying tax. The indicators in the table are expressed as ratios showing the relative affordability of housing between districts rather than measuring absolute affordability—such as the proportion of households unable to afford to buy. Three indicators are shown in the table:

    —  the ratio of the average dwelling price in 2000 to the annual average gross earnings;

    —  the ratio of the average dwelling price in 2000 to the annual gross earnings level of the most poorly paid 10 per cent of the workforce; and

    —  the ratio of the average dwelling price in 2000 to mean income from Inland Revenue data.

Table 2.16

INDICATORS OF AFFORDABILITY (CENTRE FOR URBAN AND REGIONAL STUDIES)
New Earnings survey 2000 Inl Rev 1999-2000 Affordability Ratios
Ave gross weekly earnings10% earning less than: Ave Dwelling price 2000Mean income Ave price 2000 to annual ave gross Ave price 2000 to annual earnings lowest Ave price 2000 to mean
District(£) (£)(£) (£)earnings 10%income
Castle Morpeth376.4196.0 115,41220,0005.9 11.35.8
Darlington UA336.4167.7 62,95615,0003.6 7.24.2
Newcastle upon Tyne390.4 200.072,29618,100 3.67.04.0
Durham375.0192.8 68,57317,9003.5 6.83.8
Derwentside321.5172.9 54,97716,5003.3 6.13.3
North Tyneside356.6176.0 61,53915,5003.3 6.74.0
Stockton-on-Tees UA382.5 186.165,06015,700 3.36.74.1
Hartlepool UA341.0185.6 53,36516,3003.0 5.53.3
South Tyneside361.1182.2 56,51615,6003.0 6.03.6
Sunderland353.6189.9 54,43116,1003.0 5.53.4
Gateshead370.7191.2 55,19914,1002.9 5.63.9
Sedgefield342.5197.0 50,42118,3002.8 4.92.8
Middlesbrough UA368.0 187.250,16915,800 2.65.23.2
Easington335.7179.1 43,20113,5002.5 4.63.2
Redcar and Cleveland UA425.0 206.054,57116,300 2.55.13.3
Chester-le-StreetNANA 67,28516,600NA NA4.1
AlnwickNANA 84,86118,600NA NA4.6
Berwick-upon-TweedNANA 72,50316,800NA NA4.3
Blyth ValleyNANA 54,63214,900NA NA3.7
TeesdaleNANA 74,76414,300NA NA5.2
TynedaleNANA 98,63618,200NA NA5.4
WansbeckNANA 49,66314,200NA NA3.5
Wear ValleyNANA 53,36015,400NA NA3.5


  Source: Dataspring, University of Cambridge. Sorted on ratio of average price 2000 to annual ave gross earnings.

  The picture which emerges is reasonably consistent across all three indicators where data is available. Castle Morpeth demonstrates significantly higher earnings-income/price ratios (and hence greater affordability problems) than any other authority in the region.

  Tynedale, Teesdale, Alnwick and Berwick also have significant problems but unfortunately data for these areas is only available on one indicator. Darlington , Newcastle and Durham also appear to have affordability problems. In most of the remaining districts, ratios between earnings and prices are significantly lower. It is not possible from this data to estimate the proportions of households which could afford house purchase—this depends on many other factors including the distribution of income and the supply of lower cost property. However, the table provides an indication that in some parts of the region there are likely to be significant affordability problems compounded by the relatively small size of the social rented sector in some of these districts.


 
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