Examination of Witnesses(Questions 420-436)|
WEDNESDAY 30 OCTOBER 2002
420. We have been told by other witnesses particularly
from housing associations and local authorities that your funding
regime maximises the number of units and leads to skimping on
quality. Do you agree and, if so, what changes might there be?
(Mr Hadden) No, we do not agree. We think our scheme
development standards set minimum standards which associations
are expected to meet or beat and, if you talked to house builders,
they would tell everybody that our standards are too high. So,
it depends to whom you talk.
(Dr Perry) We do have a debate with the house builders
who quite often say, "Why is it that housing associations
do not just buy our standard products? That way they could get
them cheaper and we could actually produce more of them."
Part of the reason is that social rented housing is not the subject
of home improvementspeople do not move in and add a conservatory.
Also, the occupancy rate in social housing is often quite high
because, for reasons you will understand, housing associations
do not like to see under- occupation for social housing whereas,
in the owner occupied sector, there is quite often technical under
421. How do you make sure that lifetime costs
of homes are taken into account in your funding regime?
(Mr Hadden) We do not at the moment. At the moment,
our regime is based on upfront capital cost subsidies. It is something
we are conscious of and we are due to have discussions with some
researchers and other bodies looking at this area. It is a complicated
area. We do not know where this is going to lead us but it is
on our agenda.
(Dr Perry) We are very keen to do it especially for
people on lower incomes because the actual costs of living in
a home, the utility costs and heating, lighting and whatever,
are quite important to them and are a big proportion of their
income, so we think we have a vested interest in trying to minimise
the costs of occupation of our homes. So, we are very keen on
422. Mr Clelland was just pursuing the question
of high density homes. They often require higher management costs.
How are these reflected in the funding allocations to associations?
(Mr Hadden) First of all, I am not sure whether the
premise is right, whether it does increase costs. I think associations
have standards that we expect them to meet in terms of managing
housing association properties and they can spread their costs
over the whole stock.
423. Surely if you go for a high density, you
have to put in lifts and things like that.
(Mr Hadden) It depends what clients you are selling
424. Once you put the lifts in, keeping them
clean and sweet is quite a cost, is it not?
(Dr Perry) For lifts, our grant system has extra in
it for height. So, if you build a multi-storey building that needs
lifts, then the costs do allow for that.
425. That is not quite the question that Chris
Mole was asking you. The question he was asking you was about
management and service costs of those once they are in place.
(Dr Perry) That must be for the association to determine.
We do not give grants for management. They are an independent
social business; they work out what their costs need to be. In
a high density scheme, they will have done their calculations
of what their management costs will be per unit and built those
into their long-term arrangement.
426. But you are the regulator, so you have
to work out whether they are having reasonable service charges
or whether those service charges are excessive and whether those
service charges are actually being spent on making facilities
much better for the tenants or whether in fact they are just high
(Dr Perry) I am not clear, Chairman. Social tenants
do not pay service charges, they pay a rent.
427. A proportion of that rent is for those
services, is it not?
(Dr Perry) Yes, it is.
428. Just to finish off, a number of the submissions
to the Committee have complained that TCIs do not take account
of the true development costs in their area particularly where
land values are high. How can you make total cost indicators more
(Mr Hadden) Total cost indicators are an amalgam of
build costs and land values and inevitably for any particular
local authority area are an average and therefore there are high
cost parts of local authorities and low cost parts of local authorities
and trying to accommodate that is very difficult. We start with
an average, there is some flexibility. We can approve up to 130
per cent of TCI and we review the TCI levels every year in conjunction
with the Department and other bodies.
429. The National Housing Federation and others
have suggested that housing associations do not have the resources
to meet the decent homes standard because of a lack of funds.
Is this right and is it a matter of worry for you?
(Dr Perry) No. I am surprised they said that because
we are monitoring the situation very closely and, at present,
we have no reason to think that the housing association sector
will not meet the decent homes standard by 2010. A lot of the
stock is newer than conventional council stock and standards of
maintenance have traditionally been higher. So we think that is
not going to be a problem.
(Mr Hadden) There may be an issue that, through the
approved development programme, we only have a very small amount
of money available to fund major repairs and that may be what
they are getting at. The reason why we only have a very small
amount to fund major repairs is because we are trying to meet
the targets set for us by Government in terms of the new homes
430. So, if you wanted to improve that amount
spent on maintenanceand the figures we have are about one
per cent of the fund, about £50 million spent on that . .
(Mr Hadden) That is correct.
431. Would you now be pressing, in view of what
you have just said, for this amount to be increased?
(Mr Hadden) Not necessarily because, as Dr Perry said,
most associations are on target to meet the decent homes standard.
432. So you are content that that is sufficient
(Dr Perry) It would be nice to have more resources.
Essentiallyand this goes back to Mr Mole's question about
TCIswe are in a rationing situation. We have the resources
which the Government make available, we have the targets which
the Government set for us and basically we try and balance the
resources against the targets and TCIs are part of that rationing
mechanism rather than some completely objective measure of how
much it really costs to build a house.
433. So you are not prepared to go to the Government
and say that you have this rationing system which just does not
meet the need?
(Mr Hadden) As part of our submission for the spending
review, we did say that we could spend more money on major repairs
because there is a demand there, but we have to balance up the
different needs in terms of the need for producing new homes as
well as providing
434. That is true but do you exercise your own
judgment on the relative priority in that, if you came to the
conclusion that it was a priority to spend more money on maintenance,
would you go to the Government and say so and therefore ask for
(Dr Perry) Yes, we certainly would. The "decent
homes" standard is a very high priority for the Government.
If we felt that the sector that we regulate did not meet that
target, yes, we would go to the Government and tell them.
435. When the Select Committee looked at the
new towns inquiry, we went to Telford and we were lobbied very
hard by a stock transfer company, but they were very short of
resources to bring most of the transferred stock up to the "decent
homes" standard. Now you would be able to let them have a
lot more money.
(Dr Perry) No. In Telford, having received new town
housing stock with some unconventional building methods in the
past, they have a particular problem that we recognise and we
are working with them to try to do something about it.
436. Telford is one example. When we went round
almost all the new towns we found that they all have that problem.
(Dr Perry) It is something that relates to new towns,
but for the majority of housing associations around the country,
we do not think, on the evidence that we have, that that is an
issue at the moment.
Chairman: On that note I thank you for your