Memorandum by Department for Transport,
Local Government and the Regions (DTLR) (AFH 10)
It is clear that there is a shortage in affordable
housing in parts of England. This problem has been growing. It
is not just restricted to London and the home counties. For example,
the economic success of Cambridge has brought with it affordability
problems, and the attractions of towns such as Bath and Cheltenham
mean that house prices are beyond the means of an increasing proportion
of the population. And it is not confined to the cities and urban
areas. Indeed, the Rural White Paper, Our Countryside: the
Future, recognised the shortage of affordable housing in many
rural towns and villages.
Many of the issues we are now confronting are
a result of economic success. The Government's economic policies,
creating the right conditions for low interest rates, and avoiding
a return to "boom and bust", have ensured confidence
in the housing market. A strong economy has also produced significant
economic in-migration, which has put pressure on the housing market
particularly in London and the South East.
The Housing Policy Statement, The Way Forward
for Housing (December 2000), made clear the importance the
Government attaches to tackling a whole range of issues right
across the affordability agenda. Our objective is to give everyone
the opportunity of a decent home. This means access to affordable,
quality housing for those that cannot arrange their own accommodation.
The Government's interventions range from Housing Benefit through
to ensuring that social landlords deliver a good service to tenants.
The Way Forward for Housing sets out a comprehensive
policy to introduce more quality and choice across all tenures,
but especially for social housing. It outlines a number of key
measures to help us achieve our aim of delivering new affordable
housing where it is needed, and in forms which are more sustainable:
almost doubling investment in affordable
housing through the Housing Corporation in the three years to
ensuring that funds from the Housing
Corporation are distributed more in line with local and regional
priorities so that investment matches local needs;
applying the Construction Task Force's
recommendations and other new construction techniques to ensure
better design, higher quality, more efficient development and
lower costs; and
producing best practice guidance
for local authorities to encourage more effective use of planning
powers to provide affordable housing within new private developments.
We have made good progress. But the Government
is determined to respond to the growing concern over the shortage
of affordable accommodation. Although we have substantially increased
funding for the provision of additional affordable housing, there
is more to be done. We are currently working on a range of measures,
both short and long term, to ensure that more people have access
to a decent home.
Government cannot tackle the problem alone.
The responsibility is shared with local government and regional
bodies. Housebuilders and developers have a part to play too,
as do social and private landlords. And finally those who live
in shortage areas need to accept that housing their children,
their teachers and their nurses means building more homes. To
co-ordinate the contributions of the various partners, every region
has published a Regional Housing Statement; these will be developed
into Regional Housing Strategies over the coming months.
The term "affordable housing" is used
in different ways by different people. It sometimes refers to
social housing, sometimes to subsidised housing, and sometimes
includes unsubsidised housing at the lower end of the market.
There is no standard definition.
Clearly affordability relates both to the cost
of a home and the means of the household wishing to live there.
What is affordable will vary by area depending on the price of
housing and income levels locally.
For the purposes of securing affordable housing
through the planning system, affordable housing encompasses low-cost
market and subsidised housing, whether for rent or shared ownership.
Local authorities are expected to define in their local plans
what they consider to be affordable in the plan area, in terms
of the relationship between local income levels and house prices,
or rents for different types of households.
Their definition should include both social
housing, available to those on very low incomes, and intermediate
housing, for those who would not be eligible for social housing,
but nonetheless could not afford to buy or rent on the open market.
The Government does not produce national estimates
of the need for affordable housing, for the reasons given below.
But it is clear that this is a general problem in much of the
South of England, although concentrated in London and the South
East. For example, the ratio of the average house price paid by
first time buyers to key workers' average earnings is 4.47 in
London and the South East, compared to 2.80 in the rest of England.
However there are hotspots in other parts of the country, and
rural areas can be hard hit, especially where there is a high
incidence of second homes.
In determining housing requirements for their
regions, and in order to meet the full range of housing needs,
Regional Planning Bodies may need to estimate the future balance
between general market housing and affordable housing. Given the
wide variation in need between different parts of the country,
the Government believes that local authorities are best placed
to carry out local housing needs assessments. These assessments
are better able to consider the diversity of needs and priorities
at a local level and should be reflected in local authorities'
housing strategies, investment plans and in the implementation
of planning powers for affordable housing.
For these reasons the Government does not produce
its own assessments of the need for affordable housing.
The plans for the provision of additional affordable
housing should be made on the basis of robust local assessments
of needs. DTLR published guidance in 2000 to assist local authorities
in carrying out local housing needs assessments (Local Housing
Needs Assessment: A Guide to Good Practice). This was produced
by Heriot-Watt University and recommends a common framework for
basic calculations. It provides advice on the potential contribution
of a wide variety of research techniques and data sources and
discusses the strengths and weaknesses of survey-based approaches.
The scale of the problem, the limited number
of potential sites in some areas, and the fact that the problem
can cross local authority boundaries make it essential for local
authorities to work with regional housing authorities to identify
the most sensible solutions to problems in their sub-regions.
The growing sub-regional co-operation and the way this ties-in
with the Regional Housing Statements are essential to strengthening
the links between plans for the provision of additional affordable
housing and regional planning.
A good example of cross-local authority and
cross-regional working is the LAWN
initiative. Initially developed by 12 West and North London boroughs
to find ways of promoting inter-regional mobility, it has been
expanded to cover all London boroughs and any interested authorities
in the South East where there are "housing hotspots".
A LAWN project team has been set up to liaise with key partners,
to establish a property information database, and to promote good
practice. In addition, they will examine the potential to expand
the scheme for elderly tenants, and are looking at the potential
of offering private sector tenancies, as well as social housing,
as a choice for home-seekers. A number of London Boroughs have
started to re-house people through the scheme and, by March 2002,
over 120 households had been housed. The initiative is being run
on a transitional basis until March 2003, pending the introduction
of a new national scheme.
Much of the Committee's interest focuses on
the need for more affordable housing. But we need to ensure that
our existing stock of social housing is properly looked after
and that it offers decent housing conditions to tenants.
When this Government first came into office
in 1997, we inherited an estimated £19 billion backlog of
repairs and maintenance work in council housing. This reflected
significant under-investment over a number of years. Investment
in the existing council housing stock in 1997-98 was only around
half that of 10 years earlier in real terms.
We have set a target to bring all social housing
up to set standards of decency by 2010, and to reduce the number
of social tenants living in non-decent homes by one third between
April 2001 and March 2004, with most of the reduction taking place
in deprived areas.
This target has been backed-up by significant
increases in investment. For example, in 1997-98, planned central
government support for local authority housing capital investment
was £750 million. We have increased this year on year to
£1.9 billion in 2000-01, and to £2.6 billion in 2002-03
(excluding funding through the Private Finance Initiative and
through local authorities' own contributions).
We have also reformed the financial framework
for local authorities. We have introduced the Major Repairs Allowance
to give local authorities certainty that funds will be available
over the medium term to maintain their housing assets in sound
The Housing Corporation also fund from within
their Approved Development Programme allocation major repair work
to Registered Social Landlord stock. For 2001-02 the Housing Corporation
spent £39.7 million on works to Registered Social Landlord
stock. For 2002-03, the Corporation has made allocations of around
£50 million for such works.
We are also determined to improve the quality
of service that social tenants receive from their landlords. Under
our policies, tenants are participating more in the management
of their housing through, for example, Tenant Participation Compacts.
Under the Best Value regime, social landlords are required to
set targets for continuous improvement. Best Value is showing
real results; when inspectors flag-up concerns, social landlords
recognise they have to change their ways.
We are acutely aware that, in many housing hotspots,
in London and the South East especially, high demand for housing
means many people face difficulties in securing good quality housing
at an affordable price. A supply of good quality affordable housing
is essential in maintaining balanced and successful communities.
Delivering new affordable housing where it is needed, in more
sustainable forms, is one of our key priorities.
To make progress in tackling this issue, we
are increasing resources for housing generally, and for affordable
housing specifically. By 2003-04, central government support for
capital investment in housing will have risen to more than £4
billion compared with planned spending of £1.5 billion in
1997-98. Investment through the Housing Corporation will rise
to over £1.2 billion by 2003-04, almost double 2000-01 levels.
We are also concerned about the ability of key
workers to buy their own homes in areas where high house prices
are undermining staff recruitment and retention. £250 million
worth of funding has been provided through the Starter Home Initiative
to help 10,000 nurses, teachers, police and other key workers
buy their own homes in areas of high demand.
Future funding for affordable housing is being
considered as part of the Spending Review. One of the issues we
face is that the cost of providing affordable housing where it
is most needed is rising, as land prices go up. We are examining
ways to secure more affordable housing for less, but we are particularly
keen to see the private sector offering decent housing, whether
to rent or buy, at the lower end of the market.
In addition, we need to take a much more ambitious
and flexible approach to securing affordable housing through expanding
development opportunity and using more innovative approaches,
more housing in higher density, mixed
use schemes and through better use of space. For example, DTLR/Government
Office for London research has shown potential to create 2,000
new affordable homes a year in London by building above existing
single-storey high street locations, such as supermarkets;
a more vigorous approach to land
assembly, infrastructure and preparation both for major sites,
for example in the Thames Gateway, and for small infill sites
as proposed by the South East Economic Development Agency in its
Brownfield Land Assembly Trust proposals;
using modular construction to develop
high density quick build schemes for key workers, such as the
Peabody Trust development at Murray Grove, Hackney; and
using public sector land to secure
affordable housing with lower subsidy or through rental guarantees.
Government policy on securing affordable housing
through the planning system is set out in Planning Policy Guidance
note 3, Housing, and in Circular 6/98, Planning and
Affordable Housing. The policy states that a community's need
for affordable housing is a material consideration that may be
taken into account in preparing development plans and deciding
planning applications. Planning agreements are specified as one
means by which affordable housing can be secured through the planning
system. Such agreements usually require developers to provide
a proportion of affordable units on larger residential developments.
Under the current policy, local authorities
have secured permissions for approximately 30,000 affordable homes
over the last two years. But it is evident some local authorities
could do better. Some are failing to use current policy in a meaningful
way to secure affordable housing. Development plan policies can
be out-of-date and not show the necessary ambition, and where
policies are in place their effectiveness can be undermined by
delays in development control.
Improving the delivery of affordable housing
through the planning system is a major concern of the new tariff-based
approach to planning obligations set out in the Government's consultation
document Reforming planning obligations: delivering a fundamental
change, published in December last year. The consultation
document explains the Government's proposals to replace the present
system of negotiated planning obligations with a tariff set by
local authorities and for planning obligations to be used in a
positive way to help achieve its planning objectives including
the provision of affordable housing.
In particular, the Government believes planning
obligations should be used to deliver affordable housing in a
wider range of circumstances than allowed for under current policy.
It considers that local authorities should be able to seek a contribution
towards affordable housing, either in cash or in kind, from a
wide range of development proposals, including commercial schemes.
The Government considers that the planning system
has an important part to play in meeting a community's need for
affordable housing. But, even with the improvements set out in
the consultation document, this should be seen as contributing
to the supply of affordable housing provided through Government
subsidy to local authorities and the Housing Corporation and not
the full answer. A comprehensive approach is needed, using a package
As with all Government spending, decisions about
the balance of resources between competing priorities must be
made. The provision of social housing meets substantially different
objectives to the provision of low-cost home ownership schemes.
Social housing is designed to offer decent housing to those who
are in housing need and have difficulty in finding accommodation
in the private sector. Low cost home ownership schemes are designed
to help those on low incomes meet their aspirations of home ownership.
The balance between the two will vary at local level.
We are committed to both of these objectives.
In addition to providing social housing, in 2001-02, the Housing
Corporation provided £85.7 million on low cost home ownership
schemes, including Homebuy, which produced 3,481 completions.
For 2002-03, the Housing Corporation has allocated £113 million
to low cost home ownership schemes.
The Government is currently discussing the allocation
of funding for new affordable housing for rent and for low cost
home ownership with the Housing Corporation in the context of
SR2002. We commissioned research to look at the operation and
effectiveness of the existing low cost home ownership programme.
The study reported at the beginning of May and the findings, which
will help inform the future direction of the programme, are now
Although the majority of funds for new affordable
housing come through the Housing Corporation, local authorities
also fund a significant amount of new affordable housing, mainly
through Registered Social Landlords. They are currently spending
around £400 million a year on this.
The following products are available to assist
the intermediate market to buy:
Homebuy, which includes a 25 per
cent interest-free equity loan;
reduced purchase price, provided
through a developer's subsidy;
deposit lent by employer or built
up by a two year holiday from a pension scheme; and
equity share (Model by Freud Lemos,
financial consultants), where the individual pays a set rent,
together with an amount to represent the share of equity being
"purchased". In reality, no sale transaction occurs,
but the Registered Social Landlord becomes liable to repay the
market value of the equity stake as and when demanded.
We are giving consideration to additional options
for cheaper routes into home ownership. Various proposals have
been put forward, including:
the Welsh Homebuy which allows 50
per cent equity loan;
affordable Home Equity, 50 per cent
mortgage, 25 per cent interest-bearing loan, 25 per cent interest-free
equity loan; and
interest-free equity loan from employer
to top up conventional Homebuy.
This Government does not set regional housebuilding
targets. Annual rates of housing provision to be kept under regular
review are established through regional planning guidance and
the spatial strategy it sets out. In developing the strategy,
regional planning bodies may need to estimate the future balance
between market and affordable housing in order to address the
full range of needs in their regions. In deriving such estimates,
regional and sub-regional trends and factors which are likely
to influence local housing need should be identified and assessed.
The aim of regional planning guidance should be to provide advice
and information on those factors which local authorities should
take into account in preparing their plans, informed by local
housing need assessments.
PPG3 explains that the estimates for affordable
housing set out in regional planning guidance should be regarded
as indicative and should take into account links with regional
housing statements. These estimates provide a regional context
for local authorities in drawing up their housing strategies and
support the development of more strategic approaches to tackling
The Government's consultation document on reforming
planning obligations highlighted that the need for affordable
housing will often cross local authority administrative boundaries.
In such circumstances, Government would expect co-operation between
local authorities in tackling shortages of affordable housing.
The consultation therefore proposed that regional planning bodies
should identify affordable housing needs and priorities across
their regions, or parts of regions. In such circumstances the
affordable housing policies set out in local development plans
(or Frameworks) would be expected to be consistent with appropriate
We are on course to meet our target to reduce
the number of households living in social housing that does not
meet set standards of decency by one-third between 2001 and 2004.
The first round of local authority business plans produced last
year indicated that, on current plans, around 100 local authorities
were at risk of not meeting the 2010 target. Government Offices
have been working with these authorities, developing action plans
that set out what authorities need to do to get back on track.
In many cases, authorities need a better understanding of the
scale of the non-decent housing in their areas before they can
produce a business plan to tackle this. Others need to review
the options available to them, and take forward the one which
secures delivery. Where this involves transfer or the creation
of Arm's Length Management Organisations, the Community Housing
Task Force can help them through the process.
The Government has also set a target to provide
at least 100,000 new or improved homes for low cost renting or
ownership between April 2001 and March 2004. We are on course
to meet this targetin 2001-02, we provided around 30,000
affordable units of social housing for sale or rent towards this
The Government believes that good planning can
help to create and sustain mixed and inclusive communities which
offer a choice of housing and lifestyle. It expects local authorities
to plan to meet the housing requirements of the whole community,
including those in need of affordable housing. Local authorities
should assess and plan for the full range of needs across all
tenures in their area, bearing in mind affordable housing can
include low cost market as well as social housing. They should
encourage the development of mixed and balanced communities and
ensure that new housing developments help to secure a better social
mix by avoiding the creation of large areas of housing of similar
characteristics. The Government does not accept that different
types of housing and tenures make bad neighbours. It has therefore
set out in PPG3 the presumption that where affordable housing
is to be provided through the development of a housing site it
should be provided as part of the proposed development.
Better Places to Live, the companion
guide to PPG3 for designing new residential environments, provides
practical examples of how mixed neighbourhoods of people with
different ages and economic status and with different lifestyles
can provide a number of important community benefits. It underlines
that the creation of successful places is about much more than
visually attractive design.
The Housing Policy Statement, Quality and
Choice: A Decent Home For All, supports the aim of the creation
of mixed communities. Mixed communities were also a theme in the
Urban White Paper. We do not expect housing schemes funded with
Social Housing Grant to reinforce existing high concentrations
of social rented housing.
Additionally, where Social Housing Grant schemes
are outside such concentrations, we expect more opportunities
for mixes of tenure and income to be considered. We have asked
the Housing Corporation to monitor this.
The Housing Corporation, in setting its national
investment strategy for 2002-03, recognised the importance of
mixed communities. It is continuing in the assessment of bids
to consider whether schemes with more than 25 homes have sufficiently
considered mixed tenure. It is also promoting this policy within
local developed strategies that cover small schemes of less than
Housing policies, such as support for low-cost
home ownership schemes also support the development of mixed communities.
The Right to Buy in particular enables tenants who wish to become
owner-occupiers to remain in the community which they otherwise
might leave. And the Starter Home Initiative helps key workers
on modest incomes to buy a home in high price areas.
The Government's planning policies for housing
make clear its determination to meet the country's future housing
needs in the most sustainable way possible. The Government expects
priority to be given to re-using previously-developed sites in
urban areas, bringing empty homes back into use and converting
existing buildings, in preference to the development of greenfield
sites. It also expects to see higher densities achieved through
good design and layout in new development. The Government's intention
is to make the best use of urban brownfield sites before turning
to greenfield sites, but it does not rule out greenfield development.
The Government intends that everyone should
have the opportunity of a decent home. One of the roles of the
planning system is to ensure that new homes are provided in the
right place and at the right time, whether through new development
or the conversion of existing buildings. This is also important
to maintain the momentum of economic growth. Economic growth should
not be frustrated by a lack of homes for those wishing to take
up new employment opportunities. To promote sustainable development,
the need for economic growth has to be considered alongside social
and environmental factors.
The Government's policy, set out in PPG3, is
that local planning authorities should provide sufficient housing
land to meet the housing requirements of the whole community but
give priority to re-using previously-developed land within urban
areas, bringing empty homes back into use and converting existing
buildings, in preference to the development of greenfield sites.
The Government has set a national target that, by 2008, 60 per
cent of additional housing should be provided on previously-developed
land and through conversions of existing buildings. Regional planning
bodies and development plan authorities are expected to adopt
their own land recycling targets which contribute to attaining
the national and, as appropriate, regional target. Where greenfield
releases are anticipated they should be sequentially tested against
brownfield opportunities and set within a planning for housing
strategy that fully reflects PPG3 and integrates properly with
wider regeneration and housing strategies.
It is an essential feature of the "plan,
monitor and manage" approach that housing requirements, and
the ways in which they are to be met, should be kept under regular
review. The planned level of housing provision, and its distribution,
should be based on a clear set of policy objectives, linked to
measurable indicators of change. These indicators should be monitored
and reported in the Regional Planning Body's (RPB's) annual monitoring
report. Such monitoring should be the basis on which the RPB periodically
reviews and rolls forward its housing strategy. Reviews should
occur at least every five years, and sooner if the strategy is
not having the intended effects (for example if there are signs
of either under or over-provision of housing land).
Questions of cost need to be approached with
care. We recognise that a shortage of affordable housing will
impact on businesses and the economy. It can affect investment
decisions by companies and impact on labour mobility. However,
the economy in London and the South East, where the shortage of
affordable housing is most acute, continues to flourish. Indeed,
as noted earlier, the problems are the product of economic success.
The Government's primary concern is the housing
need of individuals. We are, for example, aware of the personal
cost to families in unsatisfactory temporary accommodation. This
is why we have introduced a £35 million programme to ensure
that, by 2004, no family with children has to stay in bed and
breakfast accommodation, other than in an emergency. And we are
bringing all social housing up to a decent standard.
As indicated above, the Government is taking
action to address concerns about staff recruitment and retention,
through the Starter Home Initiative and other low cost home ownership
12 Earnings figures taken from the New Earnings Survey,
which classifies people by where they work. The ratio compares
workplace-based earnings with residential house prices. Back
"London Authorities West and North", although the scheme
now encompasses other authorities in London and the South East. Back