Memorandum by National Housing Federation
The National Housing Federation represents nearly
1,400 independent, not for profit social housing providers in
England. The Federation's members include housing associations,
co-ops, trusts and stock transfer organisations, and they own
and/or manage more than 1.8 million homes provided for affordable
rent, supported housing and low cost home ownership, and deliver
an increasingly diverse range of community and regeneration services.
The large majority of the Federation's members are registered
with the Housing Corporation. The Federation welcomes the opportunity
to give evidence to the Sub-committee's Affordable Housing Inquiry.
The Government needs to improve tax incentives
to use brownfield land to avoid undue pressure on Greenfield sites.
Their use should only be permitted when better and more sustainable
use of existing land and resources are first fully researched
and exhausted. The lack of fiscal incentives and disincentives
for brownfield and green field development respectively, represents
a major gap in the Government's fiscal approach to urban regeneration
and a continuing missed opportunity. In this scenario, the Federation
believes that 83,000 new affordable housing units are required
annually up to 2016 in order to meet future housing need.
Resources available for the affordable housing
needed (and acknowledged by respective Regional Planning Guidance)
are well below that being delivered. Inconsistent administration
of the S106 planning obligation process is failing to maximise
affordable housing through the planning system. We are also concerned
that the proposed tariff regime may dilute local planning authorities'
commitment to affordable housing through this increasingly vital
route in high demand areas.
There needs to be greater co-ordination and
integration between local, regional and national agencies to generate
mutually agreed outcomes. The recently published Regions White
Paper may be the stepping-stone to improving co-ordination and
integration, providing adequate resources are part of the equation.
Current approaches to definitions of affordability
are crude, and rely on sub-market (renting) costs as a proxy of
affordability, but this does not necessarily lead to an increase
in the supply of affordable housing. The test of housing affordability
must consider more than a crude rent to income ration. Other factors
such as household income; regional earnings; and the supply costs
of housing regardless of tenure should be considered.
The Federation supports the Government's plan
to make all social housing decent by 2010, with an interim target
of a third achieved in the most deprived wards by 2004. However,
issue of interim and final Decent Homes Standard Guidance was
a year and 18 months respectively after the original Spending
Review Target was announced, making it difficult for social landlordslocal
authority and housing associationto resource and undertake
the works required in the most deprived areas by March 2004.
Working from the most recent household projections
Alan Holmans in Housing Demand and Need in England 1996-2016
concluded that over the 20 year period to 2016, there is an annual
requirement for some 82,500 new affordable dwellings to meet the
housing need of households unable to secure unassisted accommodation
in the private sector. Of that figure, he concluded that some
50,000 dwellings are required each year in the southern regions.
NEWLY ARISING HOUSING DEMAND AND NEED, 1996
TO 2016 TOTALS OVER 20 YEARS (THOUSANDS)
Owner Occupation and
|Net increase in households||3,547
|Increase in secondary residences||100
|Net increase in vacant dwellings||165
|Adjustment for sales to sitting tenants
|Net increase in housing stock||3,812
|New provision to offset demolitions and other losses
|New provision demanded and needed||4,552
|Annual average new provision demanded and needed
Source: Calculation from Housing demand and need in England
1996-16, A Holmans, National Housing Federation, and Town and
Country Planning Association. Table reproduced from Housing Finance
Review 2001-02, S Wilcox, Chartered Institute of Housing and Council
of Mortgage Lenders.
Whilst demand for housing is highest in the south, there
is still strong housing demand across all nine regions.
HOUSING DEMAND IN ENGLAND 1996-16: NEW BUILDING AND CONVERSIONS
REQUIRED PER YEAR TO PROVIDE FOR NEWLY ARISING HOUSING NEED
Private Rented HB
|Yorkshire and Humber||11,000
Whilst such demographic modellingprojecting forward
current household and housing market relationshipscannot
provide a guide to the year on year cyclical fluctuations in homelessness
and housing need, these robust conclusions are a reminder that
current policies are insufficient to cope with housing needs over
the medium term, and thus inherently prone to crisis in the peak
years of housing market cycles.
The DTLR's Housing Statistics Postcard January 2002,
new house building completions for 2000-01 totalled 135,000. Of
this figure, 17,000 were completed by housing associations. This
represents 59 per cent of the total annual amount estimated by
Holmans. Less than 25 per cent of the amount estimated by Holmans
was for affordable housing. Since the postcard, the Joseph Rowntree
Foundation recently published a report Britain's Housing in
2022More shortages and homelessness? (March 2002) which
estimated a housing shortage of one million homes by 2022 if remedial
action was not taken.
Measuring future demand for housing is innately a complex
task and there are other factors that make it difficult to estimate
on a crude demographic basis. Trends such as international and
domestic migration; an ageing population; smaller household formation;
council and large scale voluntary transfer right to buys, second
home ownership are predictable to different degrees, and the plethora
of statistics and opinions reflect this uncertainty.
The Federation supports the Government's target of 60 per
cent of new housing development on brownfield sites by 2008. However,
there needs to be greater recognition that this should be an aggregated
target, given some regionsLondon and the North West for
examplewill (and should) be able to exceed this target,
whilst others may fall short of it.
As a general point, the Federation does not believe that
there is enough integration between Regional Housing Statements,
Regional Planning Guidance, and Regional Economic Strategies.
There needs to be better use of Urban Capacity Studies, the National
Land Use Database, empty homes generally, and more effective administration
of the planning system to deliver more affordable housing. The
Federation has previously called for Government Regional Offices
to be given specific power and responsibility to ensure that regional
economic, housing and planning strategies are fully co-ordinated
and linked to the neighbourhood renewal strategies of local strategic
partnerships. There is still a need for this change to take place.
The existing supply of affordable and private housing is
not currently adequate and resources for affordable housing through
the Housing Corporation's Approved Development Programme need
to be increased substantially. The Federation in its Spending
Review 2002 Submission called for £2.35 billion of resources
to help deliver an extra 20,000 general needs units (in addition
to that planned) plus support for temporary social housing and
intermediate housing programmes. Government estimates that 56,000
homes for general needs for rent and 8,700 for low cost home ownership
will be delivered over the 2001-04 Spending Review Period. This
averages 21,500 units per annum through the ADP process. In addition,
a possible 7,500 units can be expected through the Local Authority
Social Housing Grant programme (on the basis of outputs achieved
in 2000-01 and 2001-02), but this will depend on resource availability
which may be affected by the changes proposed by the Local Government
On the broader issues of resource allocation, the Federation
as part of its Spending Review 2002 submission proposed a set
of radical changes to the process. These were designed to deal
with some of the problems associated with the use of Housing Needs
(HNI) and General Needs Indices (GNI) in the allocation process.
The current problems include:
a lack of transparency in how HNI and GNI operate;
a difficulty in balancing the allocation of resources
between widely differing housing needs using a single set of indices;
stemming from the above, that invariably the "empirical"
outputs of the HNI/GNI calculations are subject to administrative
adjustment in order to get the "right" result.
Our proposal is that resources available are placed into
three "pots", each with a clear and different function,
and based on priorities, identified by Ministers. The amount and
balance of how much went into each pot would be a political decision,
based on the Government's assessment of the relative importance
of each policy area. Once agreed, the funds would be distributed
on a regional (at least) basis, using specific indicators and
measures associated with the separate pots. This approach would
solve all three problems noted above: there would be a clear and
obvious relationship between identified needs and resources; the
balance of resource allocation between needs would become a political
decision, not a statistical side-effect; and post facto adjustments
would become unnecessary, as the prioritisation process would
have been overt from the start.
The pots and their measuring indices are:
a new supply housing fund: geared towards the
provision of new affordable housing, for rent (including supported
housing), for low-cost home ownership, and for other intermediate
a social housing stock condition fund: geared
towards the capital elements for major repairs (excluding those
elements covered by the Major Repairs Allowance) and improvements
to social housing stock; and
a regeneration fund: geared towards bringing housing
resources (in tandem with other resources) to bear on the problems
of low demand, abandonment and neighbourhood regeneration in deprived
areas, using demolition, clearance, private sector improvement
and area-based renewal among other tools.
Whilst a sustained new housebuilding and conversion of existing
buildings programme is going to be the major remedy to the current
housing shortage, it is important the government pay heed to the
problem of empty homes, particularly in the private sector. The
Government's response to the Select Committee's Empty Homes Inquiry
indicated that they were respective to the principle of compulsory
leasing and the Federation hopes this develops into a proposal.
Whilst the Federation recognises that there is increased
pressure on planning bodies to release Greenfield land for housing
development (as Britain's housing in 2022 suggests), it is not
clear that enough effort has been put into facilitating the urban
renaissance vision set out in the Government's Urban White Paper,
and the Urban Task Force Report that preceded it. One single recommendation
that the Task Force madeharmonisation of VAT on new build
and refurbishment/conversion costshas yet to be implemented.
Due to lack of Government action on this issue, a national policy
exists to prefer redeveloping existing buildings on brownfield
sites, with a fiscal policy that offers a strong financial incentive
to do precisely the opposite.
The Federation is also concerned that pressure to build on
Greenfield sites will pay insufficient attention to other factors
that will contribute to the scheme's sustainability, such as provision
of health, transport, leisure, educational services. This will
have an obvious knock-on cost to the taxpayer that needs to be
allowed for when considering the overall cost of any proposed
New affordable housing facilitated by S106 Agreements (1990
Town and Country Planning Act) has become a vital source of affordable
housing supplied through the planning system. Developers are required
to provide affordable housing on schemes over 25 units (15 in
inner London) and the "rule of thumb" affordable proportion
is 25 per cent of the development. This will vary according to
housing need and the existence (and regular updating) of a robust
housing needs assessment. The current system provides the basis
for ensuring new developments have a wider benefit for the locality.
Whilst the Federation welcomed the proposed tariff based system
set out in the Government's Planning Obligations consultation
paper, we also expressed that the affordable housing element of
new schemes may be diluted in favour of other, albeit worthy,
community benefits. It remains important that any affordable housing
requirement sought is underpinned by a robust and regularly updated
housing needs assessment from the local authority, and a consistent
and transparent approach to the negotiation process itself. As
recent research commissioned by the DTLR has shown Delivering
Affordable Housing through Planning Policy (2002), this is
plainly not the case. The Federation supports the Government's
view that the planning system is not used effectively enough to
secure affordable housing. But we are concerned that any good
practice that may emerge from this report will be subsumed within
a changeover to the planning tariff regime that may be less housing-orientated
than the current one. The Federation is also concerned that housing
shortages that are impacting on "key workers" are blurring
local definitions of affordable housing. We accept that accommodating
health, education and police key workers will be increasingly
vital for local public service delivery. However, we are concerned
that developers may take a view that key worker accommodation
can be the affordable housing required through S106 schemes.
The Federation believes that that general needs rented, low
cost home ownership and key worker accommodation is required (depending
on such need evidenced by a housing needs assessment), but the
distinction between the three should not be blurred. As a model
example, the Federation supports the Mayor of London's strategy
to achieve 35 per cent general needs housing and 15 per cent for
intermediate housing, eg sub-market rented and low cost home ownership
housing, for key workers and other workers unable or unwilling
to buy or rent in the private sector.
The advent of key worker accommodation and the longer established
low cost home ownership schemes run by housing associations provide
the ingredientsalong with private sector housingto
develop mixed, balanced sustainable communities. This is a core
theme of PPG3 and is reflected in recently updated RPGs.
Developing housing associations are also facing a critical
problem with regard to rising land values, which are affecting
the financial viability of schemes in high value areas. The benchmark
limits set by the Housing CorporationTotal Cost Indicators
(TCIs)do not generally allow for public subsidy to be paid
on schemes that exceed 110 per cent of the respective TCIs. This
is creating an incentive to deliver in lower land value areas,
which may not be in the places where demand for social housing
is most acute.
The eight Regional Planning Guidance (RPGs) documents are
at various stages of currency. For example, the North East RPG
is currently under review since it was published in 1993, as is
the North West's, last published in 1996. The housing elements
of the more recent RPGs do offer a measured understanding of the
need for affordable housing with some recognition of the need
for mixed, balanced sustainable communities as required by PPG3.
However, it is unclear how these sound principles are being translated
into practice, and how implementation will be monitored. Of more
concern, it is unclear how the affordable housing targets are
likely to be met given the resources available, and the processes
The amount of housing required annually in each of the RPGs
is as follows:
TABLE SHOWING ESTIMATED ADP OUTPUTS FOR 2002-03, AND RPG
ESTIMATES OF ANNUAL HOUSING AND AFFORDABLE HOUSING REQUIRED
|Region||RPG Total Target
Target (including with
in RPG Total)
|Towards the London Plan Initial Proposals*
|Draft RPG1North East||5,000-6,000
|Draft RPG11West Midlands||To be determined
||To be determined||2,248
|RPG12Yorkshire and Humber||14,765
|Draft RPG13North West**||14,300
* Based on 50 per cent private housing; 35 per cent for
social renting; 15 per cent for intermediate housing for people
on moderate income (subject to an economic impact assessment.
** Draft RPG Target of 357,000 during 1996-21, 30 per
cent of which should be affordable.
In nearly all the regions, there is a major shortfall in
the amount of affordable housing being supplied with Housing Corporation
resources. The amount of housing is likely to be increased marginally
through schemes funded with Local Authority Social Housing Grantcirca
7,000 nationallyand in regions where owner occupation and
private renting is affordable. As land and house prices rise faster
than earnings nationally, more people will be excluded from the
The housing affordability debate has traditionally focused
on accommodation in the social rented sector, and not enough on
all tenures in the housing market. House price rises (and falls)
has brought this issue into sharp focus. Recent public policy
has focused on the affordability of social housing, most recently
concluding with the Government's policy statements in the Housing
Green Paper (April 2000) and the subsequent paper The Way Forward
for Housing (December 2000). The Federation has sought to
persuade the Government of the need for a clear definition of
affordability since the introduction of the (then) new financial
regime following the 1988 Housing Act. The need for a clearer
definition of housing affordability has now become time-critical.
On the affordability of buying a home in the private sector,
the Federation published a report in August 2001 showing that
in over half of all English counties outside of London, an income
of over £30,000 a year is needed to buy an average priced
home. The regional figures show that whilst London and the South
East have some of the most expensive housing, the problem is not
confined solely to those areas: to buy an average priced home
in Herefordshire an income of nearly £37,000 is needed. In
the East Riding of Yorkshire, an income of over £24,000 was
needed. In 18 English counties, to buy a home with a 95 per cent
mortgage (borrowing three times annual income), a household needed
to earn over £40,000.
The report highlighted that spiralling house prices were
taking many homes out of the reach of first time buyers, and that
it was not just a southern phenomenon: many areas in the midlands
and the north are facing the same problem. The recent CURS report
on Yorkshire and Humberside: Changing Housing Markets and Urban
Regeneration highlighted high land and house prices in former
North Yorkshire, Harrogate, York, North Leeds and Western Sheffield,
East Riding of Yorkshire despite low demand problems elsewhere
in the region.
A written answer to a parliamentary question from the Minister
for Housing highlighted the ambiguities between the social and
planning definitions of affordability:
Social housing normally refers to subsidised housing provided
by local authorities of registered social landlords for rent.
For the purposes of securing affordable housing through the planning
system, affordable housing encompasses low-cost market and subsidised
housing, whether for rent for shared ownership, that will be available
to people who cannot afford to rent or buy houses generally available
on the market. Local authorities are expected to define in their
local plans what they consider to be affordable in the plan areas,
in terms of the relationship between local income levels and house
prices or rents for different type of households.
Sally Keeble MP, Parliamentary under Secretary of State,
10 May 2002.
The rising cost of purchasing a home in the private sector
is increasing pressure for more affordable homes for social and
intermediate rent and low cost home ownership, and it is therefore
crucial that affordable housing delivered through the planning
system is maximised. The Government, as highlighted above, regards
affordability in two scenariossubsidised (with social housing
grant) and non-subsidised housing (through the planning system).
Housing associations are usually the delivery agents in both scenarios,
despite the confusion involved with differing definitions of affordability.
The Federation with the Chartered Institute of Housing and
the Local Government Association published Evaluating housing
affordability (1999), a paper commissioned to consider the
rent setting options for the social housing sector that were being
considered by the Government for the Housing Green Paper. Written
by Freeman, Holmans and Whitehead, the research made the following
allowing for the Working Families Tax Credit regime,
housing costs have to be treated separately if tenants are to
have an adequate standard of living overall;
it would be inappropriate to base the assessment
of affordability on a single measure, especially one, which takes
no direct account of income levels of household type. The rent
to income ratio, in particular, is too simplistic without additional
the residual income method is too interlinked
with the wider social security system to give interpretable results,
except for those who are free of housing benefit. This means that
under the present regime, although not under one where tenants
pay part of the rent, the most appropriate approach is to evaluate
residual income at the point where zero benefit is achieved.
If a new system of benefits is to be introduced, the most
effective way forward will be to monitor all three measures that
reflect different aspects of affordability:
the income at which the household becomes free
of benefit consistently.
In attempting to measure affordability at a local level,
the following measures are the most important:
the rents which leave the employed household free
of housing benefit;
the residual income at that point for relevant
household types and property sizes; and
the rent to income ratios at that point for relevant
household types and property sizes.
One of the underlying tenets of the Governent's approach
to restructuring social housing rents charged by housing associations
is that they are, on average, currently affordable, being 30 per
cent to 40 per cent lower than private sector rents. The role
of rent restructuring, originally proposed in the Government's
Housing Green Paper was not to lower or raise the overall rent
role, but to re-distribute different rents accordingly to more
rational criteria than the historical factors that currently determined
rent levels. The Federation was concerned that this rather broad
understanding of affordability should not be allowed to lead to
anomalies whereby excessively high (and low) rents were generated.
This would have been the case had relative capital values played
a large role in determining rent levels.
One measure of the quality of affordable housing is the recently
finalised DTLR Decent Homes Standard (DHS). It relies on four
elements. A house is decent if it:
meets the current statutory minimum standard for
is in a reasonable state of repair;
has reaonably modern facilities and services;
provides a reasonable degree of thermal comfort.
The DTLR estimate that 1.7 million homes1.1 million
in the local authority sector, and 600,000 homes in the housing
association sectorare of a non-decent standard. These estimates
are drawn from the 1996 English House Condition Survey (EHCS),
which is due to be superseded by the 2001 EHCS due for publication
later this year.
On the statutory minimum standard element (as defined by
S604 of the Housing Act, amended by the 1989 Local Government
and Housing Act) of the DHS, the housing association sector had
the lowest proportion of unfit homes at 3.8 per cent. This compares
favourably with 6.8 per cent for local authority stock, 5.4 per
cent for owner occupied dwellings, and 17.9 per cent for private
rented accommodation. The remaining criteria all rely on definitions
that rely on "reasonable" interpretations of the quality
of various elements (or characteristics) of the homes in question.
The sample of all 20.4 million homes in England was 28,5000.012
per centand the sample of social housing was proportionately
smaller than that of the owner-occupied sector. Appreciating that
a larger sample might be financially prohibitive, the Federation
is not confident that the 1.7 million non-decent homes estimates
reflects the whole picture. But the Federation anticipates better
information from 2001 EHCS and at the annual surveys that are
to follow, compared to the previous five-yearly approach.
The Government has a target of raising all social housing
to the Decent Homes Standard (DHS) by 2010, with a third achieved
in the most deprived wards by March 2004. This formed one of the
Public Service Agreements in the Spending Review 2000. The Federation
does not believe that the 2004 target is achievable for practical
and financial reasons, and achieving the 2010 target will be dependent
on a clearer policy position from the Government on the process
and funding mechanism(s) to be adopted to achieve the DHS.
There was some further consultation on the thermal comfort
element of the standard, which delayed the final definition and
guidance for implementation being published in March 2002. Whilst
this delay has not prevented local authorities and housing associations
preparing for DHS implementation, it certainly has not helped
the process either.
Regarding the 2010 target, a clearer position from the Government
would be helpful on how the DHS is to be funded and delivered.
Whilst the Government set out its support for a stock transfer
programme of 200,000 units per year in the Housing Green Paper
(April 2000), the Government have since announced proposals for
greater financial flexibility for local authorities to borrow
for repair and improvement purposes, if the Housing Revenue Account
can service the debt repayments. The Local Government White Paper
Strong Local LeadershipQuality Public Services anticipates
a new financial regime in place by April 2004, legislation permitting.
The Federation supports greater for choice for local authorities
and its residents on future housing options, but this new proposal
may delay investment that will achieve the DHS as local authorities
await details of the new regime. In retrospect, it would appear
that the Government announced the DHS Implementation Plan without
a robust delivery strategy to support it.
The Federation in its Spending Review 2002 submission (with
the Chartered Institute of Housing and Local Government Association)
called for an asset management fund for housing associations to
be created of £70 million per annum to help housing association
stock reach the DHS standard. This estimate may need to be revised
in due course due to the Government's increased estimate of non-decent
homes in the sector from 280,000 to 600,000 units. The submission
also recommended a new funding stream of up to £250 million
a year to resource stock transfers, particularly in urban areas
where stock often has substantial outstanding debt and breakage
costs. Such housing often accommodates socially excluded people,
many of whom will be from black and minority ethnic communities.
For the success of the DHS to be fully maximised and sustained,
a comprehensive community regeneration programme should be considered
in tandem with the housing investment approach. Urban stock transfer
organisations are proving themselves succsssful in meeting commuity
needs in a responsive and effective fashion.
The impact of the continuing shortfall of affordable housing
across all tenures is now well documented. It is not an issue
that is confined to London and the South East and should be recognised
as a national probelm. The focus in the media has been on key
workers, but the impact of the shortfall will be felt by all sectors
of the economy. Government action taken to date may address some
of the most severe symptoms, but major action is required across
the board to address the problem in a strategic and sustained
way. The Federation's Spending Review 2002 submission (with the
Local Government Association and the Chartered Institute of Housing)
offers the means to achieving that.