Select Committee on Transport, Local Government and the Regions Memoranda


Memorandum by Unison (AFH 64)

1.  INTRODUCTION

  UNISON is the biggest trade union in Britain with 1.3 million members. We represent people who work in public services, in voluntary organisations and in private companies providing services to the public.

  UNISON organises workers in the areas of general enquiry of the Committee. We are the largest union in the social housing sector, which includes Local Authority and Housing Associations. We have high membership in some occupations, which have been designated "key workers", primarily, nurses, health workers and social workers.

  We also represent some of the poorest paid workers in the UK, cleaners, catering staff, porters, classroom assistants and carers all of whom are key workers in their own right and also essential to helping the Government deliver world class public services.

  UNISON very much welcomes the recognition by Government and the Select Committee of the important issue of Affordable Housing. We believe that the provision of affordable housing is an essential prerequisite for a decent and productive society.

  Housing can become the central platform by which the Government can improve health services, raise educational standards and tackle poverty and inequality. Housing is a critical issue for UNISON, we believe that without addressing the issues surrounding affordable housing, Government will find it hard to improve public services.

  The primary interest must be to ensure that all workers have access to decent affordable housing in the location of their choosing. There are serious concerns for the health and safety of employees forced to travel great distances to work because the housing market is excluding their efficient participation in the labour markets.

SUMMARY OF THE ISSUES IN THE AFFORDABLE HOUSING DEBATE

    —  The country's current house building programme is at its lowest since 1924.

    —  Poor investment in housing leads to poor supply and pushes up housing costs for citizens.

    —  High housing costs leads to benefit dependency and social exclusion creating "exported costs" to other Government budgets such as health, education and policing.

    —  Demand side solutions such as the Key Worker scheme can push up housing costs and exclude other essential workers such as cleaners, caterers, classroom assistants and nursing students.

    —  There are good grounds for arguing that sufficient, good quality, affordable housing in the right areas is in fact a key cost-saving element of infrastructure for the efficient working of the economy.

    —  Local authorities are uniquely placed to begin a revival of affordable housing. They have a strategic role in assessing housing need. They now need to be given additional borrowing powers to improve their own stock and commence a rebuilding programme to ease regional affordability issues.

2.  THE DEFINITION OF "AFFORDABLE"

  The definition of affordable has in effect two meanings and spills into the wider debate about wage levels and regional differences. Firstly the issue is about the affordability in the current housing markets and its relation to income. Are income levels sufficient to provide housing and keep people out of poverty? Or secondly could housing be provided at cost levels appropriate to incomes?

  Affordability must be defined in relation to ability to pay and include provision to remove the benefits trap. It must also take account of regional disparities—what is affordable in the North East is not affordable in the South East. There should be discussions about a formula based on the real cost of living, which would determine what is affordable.

  There has been some academic and practical work around minimum income standards which has been supported by UNISON. Commissioned work from the Family Budget Unit estimated that a lone parent with two children would need a disposable income of £272 a week to sustain a "low cost but acceptable" standard of living in East London. A family with two parents working, one full time and one part-time, would need to earn £322 a week.

  If these families were to live without means tested benefits each adult would need to earn £6.30 an hour (see Family Budget Unit, 2001).

  We would ask the Committee to consider a caveat to these figures in that the households that were portrayed in the study are more fortunate than many. All are assumed to be in good health, none had debt problems and each received all the social security benefits to which they are entitled. The children walk or cycle to school and the local authority housing which they rent meets recognised standards.

  Housing Association and private tenants pay higher rents than those assumed here. Owners have mortgages, insurance and external maintenance costs to pay. Rural households increasingly need a car.

  The table below reveals the percentage cost of housing to each household budget used in the study, taking the average rent of the area for a three-bed, terraced, local authority dwelling at £79.03 and qualification for benefits.
VariablesTwo earners 38.5 + 17 hours
One earner 38.5
hours week
One earner 17
hours week
No earner
Cost of housing£79.03 £79.03£79.03 £79.03
Percentage of rent to income24.5 2829.731.2


  Income of course determines affordability and low pay is a serious problem in areas such as East London. Commissioned UNISON research uncovered wages as low as £3.75 an hour for cleaning buses with ISS Stagecoach, £4 an hour for cleaning offices with OCS at Canary Wharf and £4.05 an hour for cleaning Whipps Cross Hospital with ISS Mediclean.

  Moreover, the research reveals that the majority of staff working for private contractors who are not protected by TUPE have minimal rates of overtime pay, no London Weighting, sick pay, bonuses, pension or compassionate leave. Low pay is not just an area for the private sector either, many workers who we consider to be Key to public sector reform are employed by local authorities and health authorities on low pay.

  In Local Government over 260,000 of our members on grades 4 and 5 earn below £5 an hour (2000 workforce data) and over two thirds workforce earn less than £14,559, the Council of Europe decency threshold, which is £7.37 an hour; 884,000 local authority staff fall below this threshold.

  It is worth noting that the Government has recognised and moved some way to dealing with low pay in the NHS, with the recent pay settlement of 6.3 per cent for the lowest paid. This contrasts sharply with a 3 per cent offer to local authority staff.

  London is an area that is symbolic of the social polarisation that now blights cities across the country where the rich and poor work side by side. Yet our society could not function without the support of public services and their servants and the labour of thousands of cleaners, caterers, porters, security guards and carers and yet they receive very little respect or reward.

3.  THE SCALE AND LOCATION OF THE DEMAND FOR AFFORDABLE HOUSING; THE ADEQUACY OF THE EXISTING SUPPLY AND THE AMOUNT OF RESOURCES AVAILABLE

  Housing demand has wide and varied patterns across cities, regions and rural areas. UNISON believes that the demand for good quality affordable housing is extensive and widespread no matter the area.

  However, local and regional housing are always determined by national policies and spending priorities, therefore it is helpful to consider the more general housing context from a national and historical perspective. What becomes clear very quickly is that we have failed to maintain or indeed improve investment in housing production.

  Despite mounting evidence that decent housing underpins health, educational attainment and social well being we have singularly failed as a society to address the issue. The evidence contained below is from (Second Best Value, Professor Peter Ambrose, 2002: the Health and Social Policy Research Centre, University of Brighton).

Housing investment and output

  UK all-sector housing output in 2000 was the lowest since 1924 (with the exception of the war years).

  Local authority housing output in England in 2000 was only 45 per cent of that in 1994, see Appendix 1.

  Housing association housing output in England in 2000 was only 57 per cent of that in 1994 and even the boosted plans for 2003-04 will produce only half the output of 1992-93.

  Housing associations' gross investment expenditure fell from £3.65 billion in 1993 to an estimated £1,68 billion in 2001.

  Gross real terms capital housing investment in England has fallen from £8.6 billion in 1984 to £3.1 billion in 1999.

  Government housing expenditure has fallen sharply since the early 1990s and in 2000/1 was only 1.1 per cent of all Government spending (compared to 2.6 per cent in 1992-93).

  Household growth has outpaced housing units growth by 59,000 per year over the past five years; whereas in 1981 there was an excess of housing units over households of 4.1 per cent there is now an overall deficit.

  Single Regeneration Budgets (SRB) are not delivering on housing production, taking all SRB areas together, Round 1-4 housing completions total fewer than 61,000 against a forecast of 308,000 for Rounds 1-5

International comparisons

  UK housing investment as per cent of GDP is little over half that of Germany, Netherlands, and Italy and stands at 3.3 per cent, the lowest among 13 comparable countries.

  Recent research (Stephens et al. 2002) found that Britain experiences higher levels of poverty and inequality than six comparator European nations.

  During the 1990s Britain had the smallest social housing building programme of the seven nations reviewed (ibid).

  British housing was more polarised by tenure than that of the other nations and the social sector more residualised (ibid).

  A higher proportion of British social housing tenants were on housing benefit compared to the other countries and this meant that the effects of the poverty trap were more marked (ibid).

  The proportion of unfit stock (8 per cent) is the second highest among 13 comparable countries and our stock is exceptionally old.

Loss of "affordable" stock

  Between 1986 and 2000 nearly 973,000 units of public and RSL housing were sold and only 385,000 new ones produced

The privatisation of finance

  Parallel with the reduction of public grant levels has been an increase in the privatisation of funding for social housing—the volume of lending by financial institutions to RSLs for social housing in England has increased from £100 million in 1988-89 to £800 million in 1999-2000 (or from 9.0 per cent of RSL's gross investment to 45.7 per cent).

  As an example, private financial institutions contributed £44.4 million (36 per cent) towards the funding of the £122 million Central Stepney SRB housing programme and it has been estimated that the investment produces a return of some £80 million over 25 years.

  This has been a profitable investment with high levels of safety as much of it is "underwritten" by rents subsidised by Housing Benefit. The cost of private finance for social housing development appears to be higher in Britain than elsewhere in Europe (Stephens et al 2002).

The failure of "planning obligations"

  Recent research shows that the number of "affordable" housing units resulting from "planning obligations" arrangements is far fewer than claimed or expected (Whitehead et al 2000, GLA 2001).

Rising housing costs

  The ratio of rents to average male incomes has worsened (for RSLs from 12.4 per cent in 1988 to 16.9 per cent in 2000).

  In the UK housing costs (both prices and rents) have outstripped the RPI, and UNISON would argue wages and earnings, many times over since the 1920s and especially since the early 1970s.

  Capital-value related rent-setting systems being implemented by Government, Local Authorities and Housing Associations are likely to exacerbate these effects in high demand areas and produce increased social polarisation.

  Only a significant and sustained increase in housing supply above current levels can and will deliver a solution to the question of affordable housing.

4.  ROLE OF LOCAL AUTHORITIES

  UNISON believes that local authorities are uniquely placed to begin a revival of affordable housing. Local authorities now have a strategic role in assessing housing need, they now need to be given additional borrowing powers to improve their own stock and commence a rebuilding programme to ease regional affordability issues.

  The proportion of housing stock in England owned and managed by local authorities which peaked at just under 30 per cent in the late 70s early 80s in now under 15 per cent. The chief reasons for the decline in ownership have been the right to buy and large scale voluntary transfers.

  Local authorities have built and managed properties for those unable or unwilling to compete in other market orientated housing sectors. Local authorities were able to develop homes with affordable rents because they pooled costs to arrive at average rents.

  Authorities arrived at a rent profile for their stock in any given year, not through housing revenue account subsidy, but by averaging the total debt and running costs over their whole stock of units. In addition local authorities have had access to loan funding from the Public Works Loan Board at slightly sub-market rates and sometimes on longer repayments. These are the factors that worked to keep rents at lower levels.

  UNISON argues that with investment in staff, modern management techniques and improved tenant participation, local authorities will provide one of the solutions in the quest for affordable housing.

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

  UNISON is fundamentally concerned that the question of affordable housing is related to supply. As the figures above show, our house building programme has ground almost to a halt. UNISON believes that while schemes such as The Starter Home Initiative (SHI) may appear popular it is a temporary but ultimately flawed approach for a number of reasons.

  Firstly it is aimed at dealing with assisting the reforms and improvement targets for the health service, education and policing. It does not address the question of other essential workers such as cleaners, catering staff, nursing students and other support workers.

  Secondly such demand side solutions can make the matter worse; to increase the amount of buyers in the market place without improving supply will drive up the price of housing. Government initiatives have only sought to tackle the problem from how to help people afford housing, they have not focused on how to create more affordable housing.

  UNISON believes that the Government needs to acknowledge that demand side solutions are a temporary measure to the current crisis and that greater incentives for other groups not currently in the "Key Worker" category need to be developed.

6.  CONCLUSION

  Under-investment in housing over a long period has generated a wide range of problems with severe cost consequences. The generation of massive but currently unmeasured "exported costs", eg poorer health, educational attainment, increased crime, (See Ambrose, p 2002), to the providers of health, educational, police and other services.

  Housing shortages and high costs are complicating the recruitment and retention of lower paid staff and inhibiting local and national economic growth (a point repeatedly made by private sector employers and the CBI—see for example Confederation of British Industry 2001).

  There is danger of a further deepening of the labour shortage crisis in our public services, thus preventing reform. If wages are not going to increase significantly then rents, Council Tax, water charges, childcare and transport costs need to come down—otherwise many families will remain exposed to health risks, trapped on benefits, unable to take up work and will continue to be socially and economically excluded.

  In view of all the demonstrable cost consequences of under-investing in housing, (Ambrose, p 2002), there are good grounds for arguing that sufficient, good quality, affordable housing in the right areas is in fact a key cost-saving element of infrastructure for the efficient working of the economy.

  This is why UNISON says the nation can afford to prioritise Housing Investment and we believe the Government has the ability to significantly increase the level of housing capital investment by local authorities.

  The Government introduced some key changes to the way it manages the economy. The Golden Rule: borrow only for (net) investment and Sustainable Investment: net debt less than 40 per cent of GDP.

  The Golden Rule is being met comfortably at present and Net public debt is also set to fall steadily below 40 per cent of GDP. The Chancellor could increase Public Sector Net Debt for housing production while still being within the Golden Rule and housing investment obviously need not appear in one year but could be phased and applied according to need and demand.


 
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