Memorandum by East of England Development
Agency (EEDA) (HOU 06)
1. HOW SPENDING
1.1 Investment in housing is an important
strategic tool in both economic growth and regeneration. Jobs,
housing, commuting and the environment are interrelated. The amount,
type, distribution and quality of affordable housing have a critical
role within the overall contribution of housing in meeting the
challenge of delivering the long term vision of creating sustainable,
socially mixed and balanced communities. That is, to ensure that
everyone has the opportunity of a decent home and the quality
of life that goes with it.
1.2 Affordable housing is a strategic, quality
of life infrastructure priority in the East of England. The Regional
Economic Strategy makes clear that an adequate supply of affordable
and high quality housing is essential to building sustainable
communities in our urban and rural areas, attracting and keeping
businesses and skilled individuals.
1.3 Affordable housing provision has been
insufficient to meet need in the East of England. Demand for social
rented housing outstrips supply. This has arisen because of inadequate
resources and the inability of house builders, developers and
housing providers to deliver affordable housing to meet different
needs. Growth in the RSL housing stock has not compensated for
losses following the Right to Buy scheme, and the overall reductions
in finance for new-build Local Authority housing.
1.4 The issue is how to increase the proportion
of housing that is affordable as well as the total, in ways that
address the objectives of delivering decent homes, social inclusion
and well-being in sustainable communities.
1.5 Historically, restricted funds focuses
resources on those in priority need. That related to households
unable to afford market priced housing who were in unsuitable
housing, or sharing a dwelling when they required to move to separate
accommodation, or homeless. Priority needs reflect low incomes
and key household characteristics. Many are in receipt of state
benefits and their housing and related costs, such as energy use
and transportation, represent a high share of their income. Historically,
priority needs have been met by publicly subsidised, social rented
1.6 Sustainable economic development, increasing
prosperity, promoting social inclusion supported by initiatives
to improve skills and deliver regeneration should enable more
households to afford to purchase or rent housing on the open market.
However, the future, long-term consequences of an ageing population
will impact on the demand for affordable housing. The problems
are likely to become more acute in the frail elderly and vulnerable
groups as their numbers grow. In the absence of sufficient capital,
owner-occupation is unlikely to be the primary solution to meet
Wider NeedsKey workers plus the intermediate
1.7 Housing need takes many forms, reflecting
the needs of the homeless, the elderly, the ethnic minority groups,
key public and private sector workers and lower paid workers in
all sectors. In the East of England the need for affordable housing
is wider than traditional priority need. Significant additional
resources will enable a wider range of needs to be addressed.
They are essential to overcome the problems faced by workers who
can't afford housing in areas of high prices, particularly for
owner-occupation. These cover households eligible for Key Worker
housing initiatives. It also includes a growing sector of people
in employment that fall between categories of need yet have insufficient
income to purchase or rent privately and are not eligible for
social housing or help with their housing costs.
Variation across the region
1.8 The region has a significant affordable
housing problem where households are priced out of the market
for owner occupation and where there is a lack of suitable alternative
affordable housing. The problem is extensive but not uniform across
the region. There is considerable diversity regarding supply and
relative affordability of housing as well as marked differences
in economic and employment opportunities. Understanding affordable
housing provision in the context of housing markets' dynamics
is essential due to significant variations in the structures of
regional and local housing markets. That includes the need to
avoid exacerbating problems of sales and lettings in areas of
1.9 In the East of England the affordable
housing problem is greatest in:
rural and coastal areas where the
demand for the lifestyle of "country living" and for
second or retirement homes raises house prices. This has an adverse
impact on social inclusion where residents of local communities
cannot afford the raised prices and are forced to move elsewhere
or continue in inappropriate housing. The focus of Government
planning policy on urban development is likely to limit the opportunities
for rural affordable housing;
economically buoyant areas experiencing
in-migration and high housing demand pressure that could jeopardise
their competitiveness eg in the south of the region with close
links to London and growth areas eg Cambridge.
1.10 In these economically buoyant areas,
pressure on the dwelling stock and housing land supply shows no
sign of diminishing. This results in high house prices leading
to more people who cannot afford to buy or rent near to where
they work needing affordable housing in spite of reasonable wage
levels. This applies pressure to the transport network. It is
an obstacle to the economic growth of the region through the adverse
impact on the labour market by causing difficulties in recruiting
and retaining staff, whether skilled workers or key public sector
employees. Recent house price inflation of 20 per cent has not
been matched by wage increases. It exacerbates the problem by
widening the affordability gap. Even major house building in these
areas is unlikely to reduce house prices down to a level that
becomes "affordable" to low and medium-waged workers.
1.11 House price reflects supply and demand,
including land cost, rather than simply housing quality. House
price inflation continues. The East of England has the third highest
prices in England. Average house prices in the region rose by
49 per cent from £94,700 in 1999 to £140,800 in the
second quarter of 2002, exacerbating the affordable housing problem.
CACI Ltd data for 2002 shows mean household income to be £28,200,
although the median is only £21,300. There are considerable
intra-region variations. The latest average price in Hertfordshire
is £192,000 compared to £98,700 in Luton (but still
significantly lower than in Greater London where the average is
currently £232,800). The southern part of the region (the
M11 corridor) has an average house price to average income ratio
1.12 In the Cambridge sub-region for example,
long-term house price inflation has been accompanied by shortages
of workers across a wide spectrum of industry sectors, notably
"key workers". They find even the cheapest homes beyond
their reach, unless they commute long distances, despite relatively
low interest rates and a stable economy. In addition to police,
nurses and teachers (such as those qualifying for the Starter
Home Initiative), other public sector workers who deliver essential
public services are also key workers.
1.13 An element of the enhanced resources
for affordable housing, should be identified specifically addressing
the issue of delivering affordable housing in the intermediate
housing market. Low cost home ownership mechanisms enable workers
in the intermediate market to afford local housing nearer to where
they work. It would widen the choice available for those aspiring
to home ownership, acting as a stepping-stone to access the main
housing market rather than more social rented housing. Extending
the Starter Homes Initiative will address part of the problem.
It is essential to widen the category of eligible workers to include
key private sector employees critical to the sectoral growth of
the buoyant areas.
1.14 However, the current Starter Home Initiative
is modest compared to demand pressure. There is a risk that significant
increase in the provision of loans, in a limited area will have
the unintended effect of driving up local house prices as workers
compete for housing.
1.15 Concentrating on the supply side subsidies
is another solution, where non-profit housing providers are the
main vehicles delivering affordable housing and the availability
of land at submarket prices is core to provision. However, whilst
solutions such as employer-involvement as potential partners for
community investment, provide land and develop shared-equity schemes
may be an option for the public sector, it is unlikely to be a
primary solution eg for high tech employers in the Cambridge area
(where there is a high incidence of small companies who are unlikely
to have major land holdings).
2. THE ROLE
2.1 Not all need will be achieved through
fiscal policy and public subsidy via the Housing Corporation and
Local Authorities. Planning obligations achieved through development
values will continue to provide key opportunities delivering high
quality affordable housing by securing financial contributions
through planning agreements with developers. It is essential that
planning powers and best practice guidance are used effectively
to deliver affordable housing within new private sector developments.
2.2 The level of need suggests that all
opportunities to deliver affordable housing should be explored.
However, care is needed to ensure that housing schemes remain
Use of S106 Agreements
2.3 On the supply side, these legal agreements
available under the Planning Act offer a key opportunity to seek
affordable housing as planning obligations from development subject
to national and local planning policies on housing need, district
and site targets, thresholds, and commutation. The scale of future
development in the region offers a key mechanism for significant
contributions to delivering affordable housing in sustainable
communities in sustainable locations. The use of, and associated
difficulties with, Section 106 agreements are well documented.
2.4 Providing affordable housing is a continuous
effort to speed up procedures to overcome delays from: conclusion
of planning agreements, impact of Government guidance, problems
of infrastructure deficiencies, and plan preparation. Whilst it
is essential for development to make appropriate contributions,
the benefit of reducing thresholds to broaden the number of contributing
schemes could be offset by the cost in time and resources in pursuing
relatively modest contributions from a larger number of small
schemes. Simplicity and certainty are the key to avoiding undue
delay and cost.
2.5 Current Government guidance makes clear
that there can be occasions when sites can be released for housing
as an exception to normal planning policy, to provide affordable
housing. Local Plans can include policy to enable such housing
within the local plan strategy for sustainable development. This
should only be in rural areas and such sites should be located
within or adjoining existing villages. It must meet proven local
need, should be secured on a long term base eg through S106 agreements
so it remains affordable in perpetuity, and not comprise a mix
of high quality and low cost housing.
3. WHETHER THE
3.1 The Government acknowledges that the
affordability gap is so large no one solution will bridge it.
Furthermore, the people in that gap are not a homogenous group.
It is seeking a step change in addressing the delivering affordable
housing (including homelessness). Solutions to the shortage of
affordable housing are to be sought in much wider ways than simply
looking for greater public subsidy. This means exploring many
other issues affecting delivery including funding, attracting
private finance, the use of public sector stock and land, and
encouraging industry and employers to respond to this challenge.
3.2 The sum announced in CSR2002 is substantial.
This will provide additional resources over the next three years
for affordable housing and new mechanisms for the strategic delivery
of housing. Strong and secure communities are a Key Priority Area.
The settlement provides for a substantial increase in investment
in affordable housing to rent and own in London and the South
East (including parts of the East of England). The ODPM has announced
increased provision of affordable key worker housing, including
the £200 million "Challenge Fund", to provide new
homes for rent and low cost sale in the South East of England.
3.3 New investment addresses regional housing
problems, dealing with the diverse effects of high prices and
shortages of suitable housing in areas of strong economic pressure.
Three of the four named growth areas, (Thames Gateway, Ashford,
Milton Keynes and the London/Stansted/Cambridge corridor) are
wholly or partly in this region and will have major impacts on
the scale, pattern and rate of growth and the availability of
3.4 When the DPM announces major housing
reform plans later this autumn/winter it will then be possible
to assess the impact for the region of bringing together existing
funding streams into a single non-ringfenced budget via a strong
regional housing bodyto better integrate decisions on housing,
economic development, planning and transport.
3.5 Other mechanisms will influence the
effectiveness of new funds to help deliver affordable housing
as part of an integrated strategy in the region notably :
The new role of English Partnerships
as a key delivery agency-centred on: ensuring effective co-ordination
of plans for key worker and affordable housing by working closely
with the Housing Corporation and other key agencies such as RDAs;
the new housing and planning involvement
for RDAs, strengthening their role as catalysts for regional economic
development via work with regional partners.
4. HOW THE
Density, design and quality
4.1 The quality of development is a critical
component of affordable housing provision if new stock is to be
sustainable, attractive and long lasting. More affordable housing
can be delivered by making higher density living acceptable and
enabling more dwellings to be built from a constrained land supply
through making better use of land by: building at higher densities;
using good design and quality building (including smaller dwellings,
use of airspace, efficient layouts). Reducing land cost per unit
also delivers more affordable housing from the providers' available
4.2 Affordability issues also impact on
sustainability. The future cost of living in property is affected
by what is built. Long-term affordability is therefore helped
by housing being high quality, resource and energy-efficient.
They are easier to maintain, need less repairs and are less costly
to heat thereby reducing the problems of fuel poverty for lower
income occupants. Lessons learnt from the experience of run-down
post-war housing estates highlight how important it is to make
living in affordable housing more attractive.
4.3 Sustainable development principles already
guide Housing Corporation development. These need to be extended
to affordable housing serving the intermediate market. The means
to deliver more sustainable, affordable housing should be pursued
for example by applying the Construction Task Force's recommendations.
4.4 Care should be taken in pursuing new
construction techniques opportunities to deliver affordable housing
more quickly for Housing Corporation-funded or other developments
to ensure that greater efficiency, better design and higher quality
of development is achieved. It is essential that the implementation
of the policy delivers quality affordable housing that avoids
storing up problems of poor build quality and design as experienced
in previous house-building programmes. Controls through finance,
covenants and other agreements with the land owner and housing
provider could be used to give greater certainty to the funder,
the developer and the occupier.
4.5 Planning policy and supplementary planning
guidance aimed at sustainability issues to raise the quality of
design, energy use/efficiency, management of water resources,
biodiversity, waste management and healthy environments will provide
key tools to encourage developers and occupiers to expect and
achieve long-lasting quality.