Examination of Witnesses(Questions 300-316)|
TUESDAY 22 OCTOBER 2002
300. What are you doing to meet the proposal
for alternative funding for developing social housing and social
projects, other than public grants?
(Mr Gahagan) We have been looking at the area of private
finance. What we tend to find is that private finance will be
sufficient to fund some types of affordable housing but it is
extremely difficult to get it to fund social housing. If you are
looking at low-cost home ownership or sub-market renting, 20 or
30 per cent below market rent levels, a private sector partner
can do that but with the concession of section 106 or (sometimes)
free land. When you then go on to the more expensive product of
social housing it is quite difficult. There is one group that
we are talking to, Asset Trust, who have some proposals in relation
to that, but they are quite complex and those discussions are
301. Section 106 has been referred to once or
twice in your contribution but we have a report which has been
published by the Rowntree Association where it says that it needs
overhauling and then there has to be clarification on a number
of issues. Thus section 106 is not the scheme that would help
to meet the social funding for social housing, so what are the
(Mr Gahagan) Just to pick up what Henry said earlier.
We are looking at Section 106 first to improve the guidance and
the way that works, but I think there is only a narrow range of
alternatives in broad terms. There is either subsidy through something
like the Approved Development Programme or Local Authority Social
Housing Grant scheme, or there are the fiscal measures which Henry
mentioned earlier, which Cambridge University looked at. They
have various problems associated with them, particularly the dead
wood costs, but again there are no free lunches on this. There
is quite a narrow range of options available given the costs involved.
302. In the South East where there is demand
for housing one can understand that private finance may be accepted
but in areas like mine where there is low demand for housing and
where social housing has been demolished because there is such
low demand, there is very little incentive for private finance
to be introduced in that area, so we have to look at the different
regions. Are you looking at regions like the North East and the
North West where we have a social problem in housing development
and housing provision and in meeting the ten-year programme? What
recommendations are you making there?
(Mr Gahagan) There are a number of issues there. Can
I just say I would hate to pretend that there was a single housing
market in this country. It is very clear there are different ones
within regions as well as between regions and therefore different
policies are needed in different areas. The Deputy Prime Minister
was very clear that he was not cutting back on the sums of money
that went to regions like the North East and North West through
the Approved Development Programme. There is the issue about the
extent to which new social housing is needed and a lot of money
needs to go into improving the existing stock as well as providing
new stock. In some placesparts of Newcastle for examplethere
is a surplus of social stock but, again, it is the same problem;
there has got to be payoff for the developer, for the investor.
303. Is it the same problem that the Minister
for Local Government advised the Committee of when we took evidence
from him that "giving collectively the right number of tenants
who agree to go to transfer so that that stream of money from
the private sector can be brought on; the right number of tenants
voting to go to wholly owned companies . . ."? In other words,
the Minister for Local Government told us at a previous inquiry
that private money would be affordable if tenants voted to transfer
their stock to some other organisation and it is a lottery. That
does not help people in the North East, that does not help my
constituents. What I want to know from your organisation is are
you looking at this situation and what are you doing about it?
(Mr Gahagan) The Minister there was talking about
transfer, which is transferring existing stock rather than provision
of new stock, and the arguments around transfer have been well
rehearsed this morning as well as in other places. I think the
answer is the same as I gave earlier, that I do not think ministers
want to rule out anything at the moment around the provision of
new stock especially in areas of acute pressure, but at the end
of the day
304. The Minister for Local Government was ruling
out further funding for them.
(Mr Gahagan) He was saying, as ministers have said
before, that the focus is on transfer of private money and also
on arms' length management organisations.
305. Can I press you first of all on last week's
announcement about Housing Benefit. How far were you consulted
(Mr Gahagan) Yes, we were.
306. What did you press for?
(Mr Gahagan) That is an unfair question. You would
need to ask my Minister that.
307. Can you tell us the things that you pressed
for that you achieved?
(Mr Gahagan) Is that not the same question in another
308. No, it is a different question. All right,
let me put it very specifically. You heard the question earlier
about service charges and whether they qualified for Housing Benefit,
has that problem been sorted out or not?
(Mr Gahagan) We very much hope that it has. I heard
John Perry, I think it was, mention earlier the issue around the
Supporting People Housing Benefit interface which is, I think,
a most difficult one. We very much hope that that has been sorted
out now. I do not want to sound complacent because I think this
is a very real issue which we need to keep our eye on over the
next six months because it is implemented on 1 April.
309. Is it not fairly fundamental that if you
look back over a lot of the housing in the 1960s that failed,
it did not fail because of the original way in which it was built,
it failed because of the failure of maintenance and service charges
to look after it, so people being able to pay service charges
is quite important if we are going to avoid the mistakes of the
1960s, is it not?
(Mr Gahagan) It also failed just basic management
and maintenance. There is a management and maintenance allowance
that is paid through the rent, not through Housing Benefit, and
that is pretty key for local authorities in their management of
the stock. That was increased in the 2000 Spending Review.
310. Brownfield sites. You have got this register
now in place but how soon is the register actually going to have
the reasons why sites cannot be developed or things that have
to be done to make building possible on those sites?
(Mr Cleary) If I may, Chairman, I will come in on
this one. The register is part of a new remit to English Partnerships
which the DPM announced earlier this summer. It is part of speeding
up the supply of land release. What it will hopefully deliver
is both a role for the better use of these sites, in other words
the way in which they are developed, but also it will encourage
people, as you say, to put them on the market and to speed up
their release. To strengthen that there is discussion now ongoing
within the Department on how public sector land within Government
can contribute to that, so we are talking to Treasury and to other
government departments about how they actually speed up their
311. South East England Development Agency told
us about the problem, that they were trying to get funding in
place to put together small bits of brownfield land. What is your
Department, your section, doing to help them get that funding
in place to take that initiative forward?
(Mr Cleary) We support that initiative, we think it
is a very
312. When you say you support it, you are paying
(Mr Cleary) Our Department probably pays the largest
single element in the RDA budgets but, as you know, RDA sponsorship
and overall budgetary control is a matter for DTI. We are parties
to the discussion but obviously there is also a sense in which
the RDA itself needs to establish what its priorities are within
the areas that it has freedom. There is an ongoing discussion
there about priorities.
313. Over the last nine months what were your
(Mr Cleary) I think the thing that impressed me was,
first of all, land supply itself is not a problem, there is plenty
of site space. If you look at things like the Airspace Project,
which shows what you can achieve by building up and over, there
is not a problem of physical space. There may be for houses with
gardens but not for apartments. The second point is that increasingly
partners are coming together recognising what the problems are.
Many of the witnesses that you have heard have actually agreed
on the process problems that we have got with negotiation of the
agreements with developers, how we need to speed those up and
how you could improve the way in which people work together. I
think the third thing is that people are now adopting new approaches
if you look at the interest in modular construction, offsite fabrication,
but also a wider range of housing interventions. There is one
other thing I would add and that is I think everybody now recognises
that you cannot solve affordable housing simply by looking at
affordable housing instruments, you have to look at overall housing
supply, and that is the central point that the DPM made at the
start of his statement.
314. In spite of all that we are achieving about
50 per cent of the target that we actually need of new build.
(Mr Cleary) I think we all recognise that we are way
short of where we need to be and it is not something that you
can turn around instantly. Developments on average take a period
of three years, the very largest take perhaps up to seven years,
so it is going to take time.
315. We were running downhill, were we not,
the numbers of new build each year were declining. Do you think
that we are actually going to turn the corner?
(Mr Cleary) I think that is something the DPM will
want to address in his statement.
Chairman: I am not asking you what the DPM will
be addressing, I am asking you for an opinion.
316. Give us a pledge.
(Mr Cleary) I think we should, yes. I believe we will.
Chairman: On that note, can I thank you very
much for your evidence.