Examination of Witnesses (Questions 520-539)|
WEDNESDAY 12 DECEMBER 2001
520. Do you have any plans to set up any further
housing regeneration companies?
(Mr Hadden) Yes indeed, there are others outside the
pilot. The purpose of the pilot is specifically to carry out the
evaluation of them. We have not stopped others being formed where
that was felt appropriate, where other players in the area felt
that was the appropriate thing to do.
521. On the current allocations that the Housing
Corporation has, do you feel you can turn round problems caused
by the declining demand by 2010?
(Dr Perry) No is the short answer. We may be developing
the tools by which we can do it but essentially at the moment
we have relatively slender funding behind those tools. I think
it would be rash to say that with current funding we can do anything
more than demonstrate that solutions are possible, but we could
not develop them and deliver those solutions.
522. What changes in funding would you like
to see to enable you to do this?
(Dr Perry) It is a difficult one to answer because
in one sense the amount of money that you could use is infinite.
On the other hand, as experience from past regeneration programmes
has shown, if you throw too much money at the problem too early
you do not actually solve things. We are talking about still being
at the stage, not just within the Corporation but if you like
in the policy community generally, of defining the problem, trying
to get some kind of scalability of the size of the problem, looking
at the tools that work and then implementing those in areas that
seem the most promising. That is not dodging the answer because
it could be billions, and certainly others outside have said billions,
but in the real world a few hundred million to start with over
a three year period would not be a bad beginning.
523. Have you made any submissions of what kind
of funding you want or the way in which the funding should be
(Dr Perry) We have not put a precise figure on the
amount that we could use because, being realistic, the Government
as a whole has to take a view on the resources. What we are focussing
on at the moment is the promise of the new tools, the ones that
Mr Hadden spoke about: the housing regeneration companies and
the various schemes we have for purchasing, repair and then resale
and rent. We think those are promising tools, and if we had more
resource we could do more of it in the areas where we are piloting
and more of it in other areas as well. We are actually relatively
comfortable that we are starting to know the sorts of things that
we could do and the resource that can be put into it but it is
in a sense entirely a political decision.
524. Is there a problem with the current formula
for determining how much funding you get?
(Dr Perry) I do not think our funding is on a formula
in that the Government tells us how much we will get. There certainly
is an issue at the moment that the way our targets are set by
the Department and the Treasury focuses almost exclusively on
new build and we are in discussions at official level about trying
to find ways in which our activity can be scored in ways that
relate more closely to the stabilisation of neighbourhoods rather
than just new build.
525. At one stage the Corporation did make representations
about funding based on homelessness criteria rather than on the
importance of regeneration. Does that still apply?
(Dr Perry) Not specifically. Perhaps I can ask Mr
Hadden if he can help on that.
(Mr Hadden) The Housing Corporation is one party involved
in reviewing the housing needs index which is the formula which
is used to divide up the money that we do get from government
between regions. Within that there is a balance to be struck between
the need for new dwellings, the need for regeneration and the
need for special needs accommodation. We are involved in looking
at how those indices are made up and are talking to the other
parties involved in those discussions. At the end of the day they
are political decisions in terms of the weightings that are applied
to the different types of activity.
526. You have told us that you do not have the
solution to low demand and you do not think the problems can be
solved by 2010. How far are you allowing some of the housing associations
the flexibility so that they can start to come up with solutions?
How far are your performance indicators and your monitoring proving
a straitjacket which stops them coming up with the sort of innovation
which means that they could be finding solutions if you cannot?
(Dr Perry) I think, Chairman, with respect, what I
said in reply to Mrs Ellman's question was that with current resources
we could not solve the problem.
527. So you know what to do?
(Dr Perry) Yes. We are starting to get a feel for
some of the kinds of things that work but at the moment we are
not resourced nor, given the early stage of the of the policy
process would we expect at this moment to be resourced, to
528. So you think you could do it yourselves
but if you do not get the money could some of the housing associations
do it if you were not too prescriptive about the way that they
(Dr Perry) First may I say that we certainly could
not do it ourselves. This has got to be done in partnership between
regional, sub-regional and local agencies, local government, housing
corporation, RDAs and others. There is no way that any one agency
could do this by itself. At the moment we do not think that associations
are precluded from being innovative in this. In fact we are encouraging
them to be innovative. As a regulator we have to watch the extent
to which they spread their activities and the extent to which
they are entering into areas of risk which they have not necessarily
accounted for and done a risk management plan for, but if they
have gone into the area of work in regeneration or low demand
which they can fund from resources other than ours and which is
consistent with prudent fiscal management, we would be standing
529. Stock transfer is very much the flavour
of the month at present. Very often they are being proposed in
areas where a property needs quite a lot spending on it but also
where demand is probably low or falling. What measures are you
taking, what techniques are you using, to ensure that the organisations
that are created as a result of stock transfers are actually viable
and stable in the long term?
(Dr Perry) Before a stock transfer association can
be registered as a housing association its business plan gets
quite a going over from our stock transfer unit and indeed before
that they will have spoken to the community housing task force
in the department and indeed their lenders. What we are seeing
now is that a number of the proposals coming forward for registration
involve quite a lot of demolition and certainly we would look
askance at a proposed new association in an area with low demand
which was coming across and saying, "although we have got
a lot of voids we are confident that we can fill them all up by
next week". There has to be an element of demolition, of
re-modelling, and certainly, for example, in the Sunderland stock
transfer, which is the biggest one to date, there is a fair amount
of that involved in the business plan. Therefore it is being funded
by the debt that they are raising.
530. So you have to have a good business plan
for the future but the reality is that life is not predictable.
We have been round areas where decisions were made on the best
information five years ago to put a lot of investment in, and
five years down the line it has been wasted because the situation
has changed and demand has fallen further than was predicted.
If that happens how good are your regulatory systems to come in
and recognise that situation and respond to it? In the past there
have been examples of very small housing associations that have
got into difficulties and they have been taken over as a way of
solving that particular problem, but if you have an organisation
with 30,000 houses in that situation how are you going to cope
(Dr Perry) In the last year we have instituted a system
called lead regulation where every association with more than
250 homes now has what you might call a specific account officer
or account manager in the Corporation and that lead regulator
is in relatively frequent touch with them, and in fact with the
biggest associations in very frequent touch, sees all their board
papers, understands the thinking that is going on in their corporate
planning system and, most importantly, we do have quite stringent
requirements on risk management, on the identification of risks
and for a stock transfer association in an area of low demand
a sudden falling off in demand and potential abandonment must
be one of the risks which figure highly in their thinking and
for which they must have a contingency plan.
531. What sort of contingency plan would that
be expected to be? Do you have a contingency plan yourself if
in the end an organisation says to you, "We cannot sort this
out any more. We are in financial difficulties"?
(Dr Perry) We have to be quite careful because we
are the regulator and not shadow directors of the company, so
it is not for us to propose or even have up our sleeves specific
solutions to the problems faced by specific associations. Essentially,
as independent bodies they are supposed to work through their
problems within our regulatory framework. It would be again not
conceivable that we would be doing this in a bilateral relationship
with the association but we would want the local authority, the
previous owner of the housing, other agencies sitting down with
us and working through a recovery strategy if that was what was
532. In practice in the past where small associations
got into difficulty the Housing Corporation behind the scenes
has often engineered solutions. You would have to find some way
out, would you not?
(Dr Perry) Oh, clearly we would. What I am saying
honestly is that we do not have a plan B up our sleeve for what
happens at the moment if a big stock transfer association suddenly
faces a collapse in demand because some of these associations
have come into our sector so recently that they are still in a
stage of attracting new tenants because of the huge improvement
programmes that are going on in their areas. What you are seeing
in parts of the country is genuine choice being exercised by social
housing tenants who are switching landlords as they perceive the
attractions of one landlord over another, so some of the new stock
transfer associations are in quite a good position.
533. But you have a very strong interest in
making sure that none of the housing associations goes broke,
have you not, because it would damage the borrowing powers of
(Dr Perry) That is absolutely true and, touch wood,
no housing association has ever gone broke yet.
534. But you must be increasingly worried about
the risk that some of them are taking in some of these areas for
(Dr Perry) I would not say we are increasingly worried.
Clearly we constantly monitor the situation. We are aware that
a number of associations who have large holdings in low demand
areas need to develop strategies for coping with that. Most of
them are talking to us on a regular basis. We have an extensive
network of regional offices so we have got staff pretty close
to the ground. It would be a foolish association that kept its
problems to itself and did not come and talk to us.
535. They can come and talk to you but can you
come up with solutions for them?
(Dr Perry) In the past we have. Clearly it depends
on the scale of the problem but most of the big associations working
in Northern England have good governance arrangements. They have
set up risk management arrangements as required by us and so they
will be developing a coping strategy. For example, in Liverpool
there are associations with a number of empty properties but they
are working together with the City Council and ourselves and other
agencies to bring forward a strategy for the central area of Liverpool,
so they are being proactive rather than just sitting back and
waiting for it.
536. So in fact their other tenants are having
to carry the debt burden of the empty properties; is that right?
(Dr Perry) Unless Mr Hadden corrects me and says we
have got some other ways of arranging the debt, clearly the association's
main income is its rental income and if there are empty properties
in one area then the finances of the whole organisation have to
537. Is that not a bit unfair on those people
who are already in a street with a fair number of empty properties
in it, that in effect in their rents they are paying for those
(Dr Perry) For any individual association you might
or might not be able to make that statement because depending
on the level of reserves that an association has got, depending
on whether it can access regeneration funding through the European
funds or SRB or whatever, they have got other sources of income.
In general it has to be the case that the whole body of the tenants
is something that an association has to look out for.
538. How much effective liaison is there between
regional development agencies, government offices and the Housing
(Dr Perry) There is very good liaison between the
Housing Corporation's offices and government offices. We are very
close to them. With the RDAs it varies across the country depending
on the salience with which a particular RDA would view housing.
For example, we have very close relations in your own region in
the north west with the North West Development Agency's Chairman
and its Chief Executive. In London we have good links with the
London Development Agency and I suppose it is fair to say that
the relationship is developing in other parts of the country.
539. Where is it really bad?
(Dr Perry) It is not really bad anywhere. I would
define bad as where they did not want to talk to us and we were
being rude to each other. What we have is differing levels of
interest. I would say that in terms of what RDAs should do about
housing it is a personal view of mine that they need to understand
the importance of housing and labour markets for their economic
strategy but I am not sure I would want to see them getting sucked
into the details of local neighbourhood strategies for housing
because I think their value, their contribution to their regions
is the economic strategies that they draw up.