ong>toong> ong>theong>





May 2005




ong>toong> ong>theong>





May 2005

First published in Britain in 2005

By Zacchaeus 2000 Trust

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Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Introduction 4

NGOs supporting ong>theong> Zacchaeus 2000 Trust Petition 7

Summary and recommendations 9

Appendix 1 - Identifying key strategic issues 13

Appendix 2 - House price rises - and why 19

Appendix 3 - Changes in ong>theong> affordability of renting 25

Appendix 4 - Evidence of housing shortage 29

Appendix 5 - Changes in ong>theong> affordability of owning 35

Appendix 6 - The loss of low rent housing 41

Appendix 7 - Some problems of demand side support 47

Appendix 8 - An international comparative study of housing privatisation 53

Appendix 9 - The flow of development land - how not ong>toong> do it 57

Appendix 10 - Some effects of poor housing on health, education and welfare 63

Appendix 11 - High housing costs and low pensions 69

Appendix 12 - High housing costs and employment issues 73

Appendix 13 - Oong>theong>r effects of high housing costs and debt 75

Appendix 14 - An overview of ‘exported costs’ from poor housing 79

Appendix 15 - Limited Liability Partnerships as development mechanisms 83

Appendix 16 - Capturing rising land values for ong>theong> community 87

Appendix 17 - Building more sustainably 99

Appendix 18 - Ethical issues from a Christian perspective -

a universal pattern of crucifixion and resurrection 103

References 109

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 3


The ong>Primeong> ong>Ministerong> met a delegation from ong>theong> Zacchaeus 2000 Trust coalition of 68 NGOs calling for

Minimum Income Standards in his room at ong>theong> House of Commons on ong>theong> 17th September 2003.The

signaong>toong>ries ong>toong> ong>theong> letter asking for ong>theong> meeting were Lord Morris of Manchester;The Chief Rabbi, Professor

Jonathan Sacks;The Bishop of Oxford,The Rt. Rev. Richard Harries; Lord Adebowale, Chief Executive,Turning

Point; Sir Archy Kirkwood MP; Andy King MP; Dr Doug Naysmith MP and Dr Howard Song>toong>ate MP.

The delegation was led by Lord Morris of Manchester and comprised Lord Adebowale; Andy King MP; Dr

Doug Naysmith MP; Professor Jerry Morris of ong>theong> London School of Hygiene and Tropical Medicine; Geoff

Rayner, Chairman of ong>theong> UK Public Health Association; Neera Sharma, Senior Policy Officer, Barnardo’s;

Georgia Klein, Senior Policy Officer, National Consumer Council; Reverend Paul Nicolson, Chairman,

Zacchaeus 2000 Trust & Trustee London Citizens and Family Budget Unit and Lina Jamoul (minutes).

The coalition is calling for research inong>toong> ong>theong> minimum incomes needed for healthy living ong>toong> provide information

ong>toong> ong>theong> public, employers and government when ong>theong> levels of unemployment benefits, tax credits/minimum

wage and pensions are being set.The ong>Primeong> ong>Ministerong> was informed that a seminar was ong>toong> be held in Ocong>toong>ber

2003 ong>toong> discuss existing research.The ong>Memorandumong> on Minimum Income Standards based on ong>theong> seminar was

delivered ong>toong> him in February 2004 (available on

Responding ong>toong> ong>theong> memorandum through Lord Morris of Manchester ong>theong> ong>Primeong> ong>Ministerong> offered continuing

dialogue with ong>theong> Zacchaeus 2000 Trust. In view of ong>theong> pressure of housing costs on minimum incomes and on

State finances we decided ong>toong> engage that offer with this memorandum on unaffordable housing in ong>theong> UK. In

preparing ong>theong> minimum income standards memorandum it became clear that housing for people receiving ong>theong>

lowest incomes is unaffordable for ong>theong>m and increasingly expensive for ong>theong> tax payer in Housing Benefit

payments which have increased from £5.4 billion in 1986/7 ong>toong> a planned £19.7 billion in 2007/8.

We hold that land exists for ong>theong> common good. It provides ong>theong> basic needs of shelter, food and clothing of which

everyone should have a just minimum share. But housing and land have become investments, from which

speculaong>toong>rs, moneylenders and ong>theong> banks grow ever wealthier. Governments have allowed ong>theong> market ong>toong> exploit

ong>theong> shortage of land by allowing unregulated lending ong>toong> lift ong>theong> price of housing above ong>theong> needs of ong>theong> poor in

ong>theong> UK.

‘Affordable’ in relation ong>toong> housing requires precise definition. It means that once ong>theong> cost of rent or mortgage

(including service charges) and council tax has been met from ong>theong> income of a household, be it an individual, a

family or pensioners, ong>theong>re remains sufficient ong>toong> sustain safe and healthy living, provision for ong>theong> future and

participation in ong>theong> community.‘Unaffordable’ housing means that ong>theong> remaining income is insufficient ong>toong>

ensure ong>theong>se outcomes.

An economy that provides health and education services free at ong>theong> point of delivery, and is competing in ong>theong>

global market, cannot afford ong>toong> leave expenditure on housing at a level that damages health. Statuong>toong>ry minimum

incomes are being used up by a growing proportion of expenditure on rent/mortgage and council tax.

Inequalities in wealth need ong>toong> be corrected by minimum income standards ong>toong> ensure that ong>theong> mixed


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

communities favoured by government are a success not a recipe for increased social tensions feared by

developers. It is humiliating ong>toong> be poor in a wealthy area, especially for ong>theong> children of poor families in ong>theong>

school playground.The wealthier children have holidays, decent school cloong>theong>s, smart sneakers, great Christmas

(play stations) and birthday presents, all ong>theong> things about which TV advertisers promote pester power. Any child

whose parent/parents depend on State benefits in or out of work see what ong>theong>ir parents are unable ong>toong> buy in ong>theong>

playground and on TV.

We continue ong>toong> urge ong>theong> government ong>toong> create an independent minimum income standards commission that

will provide ong>theong> elecong>toong>rate, employers, local authorities and national government with robust information about

minimum income requirements.This would save ong>theong> taxpayer billions of pounds in ong>theong> health, education and

administration of justice services. (The list of NGOs supporting ong>theong> Z2K petition ong>toong> Government calling for

minimum income standards follows this introduction).

Like ong>theong> previous memorandum this one is edited by Professor Peter Ambrose of ong>theong> Health and Social Policy

Research Centre at ong>theong> University of Brighong>toong>n. It is based on a seminar on unaffordable housing held in Ocong>toong>ber

2004, members of which have contributed ong>toong> ong>theong> memorandum. He has committed ong>toong> paper ong>theong> product of

many years of engagement in housing issues by a wide variety of experts in a way that challenges conventional

wisdom, provides essential hisong>toong>rical background, and moves in a logical progression from evidence of policy

shortcomings ong>toong> recommendations.We would like ong>toong> thank UNISON, ong>theong> Children’s Society and an anonymous

donor for ong>theong>ir assistance in financing ong>theong> project.We feel this document is a substantial contribution ong>toong> ong>theong>

current debate for which ong>theong> Trustees of Z2K are very grateful.We hope it will lead ong>toong> an acceleration of ong>theong>

provision of affordable housing in all three secong>toong>rs - private, RSL and Local Authority.

Rev Paul Nicolson, Chairman,

Zacchaeus 2000 Trust,

93 Campbell Road,

London N17 OAX


see also

020 8376 5455

07961 177 889

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 5


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

NGOs supporting ong>theong>

Zacchaeus 2000 Trust Petition

Local organisations

Catholic Children’s Society -Shrewsbury

Church Action on Homelessness in London – UNLEASH

Communities Against Poverty – Liverpool

Ilfracombe Credit Union

Liverpool Archdiocese Justice and Peace Commission

St Albans Diocesan Synod

Partners in Health – Dudley

East London Communities Organisation

National organizations

ATD Fourth World

Access ong>toong> Justice

Afghan Association of Great Britain

Campaign Women

Debt on our Doorstep

European Anti Poverty Network

Labour Land Campaign

Lobby ong>toong> end Age Discrimination – LEAD

Low Pay Unit

National Consumer Council

New Policy Institute

Refugee Council

Scottish Low Pay Unit

TUC Unemployed Workers Combine

Women In Prison Trust

Pensioners’ Charities

Age Concern

Help ong>theong> Aged

National Pensioners’ Convention

Parents’ and Children’s Charities


Buttle Trust

Children’s Society

National Council for One Parent Families

Maternity Alliance


NCH action for children

Parenting Education and Support Forum

Save ong>theong> Children Fund

Single Parent Action Network

End Child Poverty


British Medical Association

Centre for Food Policy

Faculty of Public Health - Royal College of Physicians

Food Commission

Food Justice

Food Poverty Project

Fuel Poverty Project


Mental Health Foundation

Milk for Schools

National Heart Forum

Royal College of Nursing

Socialist Health Association

UK Health for All Network

UK Public Health Association

Trades Unions

Trades Union Congress

UNISON - (conference decision)


Catholic Agency for Social Concern – Caritas

Catholic Bishops’ Conference

- Social Welfare Committee (wound up in February


Catholic Child Welfare Council

Church Action on Poverty

Church of England - General Synod

- (Motion won 339 - 0)

Church of Scotland - General Assembly

- (unanimous decision)

Conference of Religious in England and Wales

- Social Justice Desk

Christian Council for Monetary Justice.

Methodist Conference

- (unanimous decision)

Muslim Council of Britain

Iona Community

Von Hugel Institute

Vincentian Millennium Partnership

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 7


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Summary and Recommendations

This ong>Memorandumong> was born of a concern for ong>theong> increasingly onerous effects of rising housing costs on ong>theong>

poorest and most vulnerable members of society. It is ong>theong>se groups that remain ong>theong> prime focus for ong>theong> efforts

of ong>theong> Zacchaeus 2000 Trust. But this analysis of what has gone wrong with our housing system since ong>theong> Second

World War far transcends ong>theong> problems faced by ong>theong> poorest.

We argue that ong>theong>re have been failures of vision, collective memory, strategy and regulation that have wasted

many billions of taxpayers’ money.The deregulation of financial markets in ong>theong> 1980s sparked off a flood of

house purchase lending that has underpinned massive house price rises and consumed £600 billion of

investment that could have found a better use renewing our infrastructure or in research and development ong>toong>

make Britain more competitive in a global market raong>theong>r than in bolstering house and land prices.The

increasing commitment, from 23% ong>toong> 72% of GDP since 1980, ong>toong> house purchase loans seems unsustainable.

Furong>theong>rmore ong>theong> increasing flow of demand side subsidies are working ong>toong> enrich landlords and land vendors,

not ong>toong> stimulate more housing output.The analysis shows that more money has gone inong>toong> housing but fewer

houses have come out. Housing benefits and allowances have imposed a huge and increasing burden on state


The failure of planning authorities ong>toong> use existing powers, and ong>toong> support innovative community-based freeholdretaining

development trusts and partnerships, has permitted large-scale speculation in building land.The

failure ong>toong> seize upon and develop innovative building practices and land use patterns that would minimise

carbon emissions is producing more environmental costs than can be calculated.

While it is ong>theong> poor and vulnerable that suffer most obviously from unaffordable housing and overcrowding, and

this is ethically indefensible, ong>theong> additional costs arising from mismanagement of our housing arrangements fall

on society as a whole – on our health, education and policing budgets, on old and young alike and on ong>theong>

optimum development of our economy.

We can no longer afford ong>theong>se failures; ong>theong>y need ong>toong> be addressed.What follows are eleven brief statements of

shortcomings, each evidenced by one or more Appendices, and each followed by a Recommendation.

1. British housing policy is characteristically reactive, slow ong>toong> adapt ong>toong> innovative ideas and lacking in strategic

vision. Discussion is often confused and ong>theong>re has been a failure ong>toong> identify key objectives and strategies from

ong>theong> alternatives available (Appendix 1).

Recommendation 1

Housing policy formation should now focus on a number of key strategic issues; it

should focus especially on how most effectively ong>toong> apply subsidy and on correcting

ong>theong> currently regressive redistributive effect of housing support patterns which are

impeding ong>theong> drive ong>toong> reduce poverty.

2. Policy discussion has often failed ong>toong> distinguish adequately between ong>theong> motivations, mode of operation, and

logic for setting prices and rents of ong>theong> four main housing secong>toong>rs - private housing for sale and ong>theong> three rented

secong>toong>rs, private landlords, registered social landlords (RSLs) and local authorities (Appendix 1).

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 9

Recommendation 2

Policy should build on ong>theong> complementary strengths of each housing secong>toong>r –

private, RSL and council; each should be better supported by government so that it

can contribute ong>toong> meeting ong>theong> demand for affordable housing with greater urgency.

3. Access ong>toong> owner-occupancy depends on ong>theong> market power of ong>theong> purchaser translated inong>toong> a borrowing

capacity.The 1980s deregulation of finance markets has led ong>toong> a growth in housing debt £600 billion more than

general inflation would justify.This has large-scale opportunity costs (Appendix 13) and has led ong>toong> a fivefold

increase in house prices since 1993 and sharply decreased affordability (Appendices 2 and 5).

Recommendation 3

House purchase lending volumes and lending practices should be regulated so as ong>toong>

relate more closely ong>toong> housing transactions in order ong>toong> help stabilise house price

trends; consideration should be given ong>toong> ong>theong> limitation of loan multiples and

repayment terms and oong>theong>r appropriate means.

4. Rents in ong>theong> three rented secong>toong>rs were set in ong>theong> past by entirely different processes.This resulted in a

gradient - council rents were lowest by virtue of ong>theong> ‘pooled hisong>toong>ric cost’ principle, RSL rents were higher and

private rents higher still. Affordability has recently been eroded by ong>theong> ‘levelling up’ effect of Government rent

strategies (Appendices 3 and 7).

Recommendation 4

Rent setting in ong>theong> RSL and LA secong>toong>rs should be reformed ong>toong> relate rents ong>toong> hisong>toong>ric

cost raong>theong>r than ong>toong> current market levels and capital values; this will serve ong>toong>

stabilise and ong>theong>n reduce rents, increase affordability and consequently reduce ong>theong>

cost of housing benefit ong>toong> ong>theong> taxpayer.

5. Many recent studies evidence ong>theong> shortage of affordable homes and ong>theong> failure of present spending plans and

mechanisms such as Section 106 planning agreements ong>toong> address it (Appendix 4). Affordability is worse than

ever before in London and oong>theong>r high demand areas (Appendix 5).There has been a serious loss of low rent

council song>toong>ck and some RSL song>toong>ck (Appendix 6) and insufficient use has been made of innovative ways of

financing and developing low cost homes (Appendices 15 and 16).

Recommendation 5

Sales and transfers of local authority and RSL song>toong>ck should be song>toong>pped and direct

investment in social housing production by local authorities and RSLs, and in

housing staff and training, should be significantly increased above ong>theong> most recently

published spending plans; policies ong>toong> facilitate equity build-up by occupiers should

be based on leaseholds and/or Community Land Trust or Community Land

Partnership arrangements with freeholds being retained in public or community


6. Comparative European research projects have shown that increased privatisation of housing provision in ong>theong>

UK has led ong>toong> more money going in and less housing coming out, and ong>toong> failure ong>toong> provide sufficient housing


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

and tenure choice in ‘growth regions’. Privatisation at key stages of ong>theong> housing delivery chain reduces costeffectiveness

and produces inefficiencies (Appendices 8 and 9).

Recommendation 6

The tenure pattern of housing development in growth regions such as ong>theong> South East

should be balanced and not dominated by speculative owner-occupied housing; ong>theong>

hoarding of land eiong>theong>r before or after ong>theong> receipt of planning permission by

developers and speculaong>toong>rs should be discouraged by an annual tax on ong>theong> value of

such land until it is developed.We recommend that ong>theong> government undertakes and

publishes a feasibility study inong>toong> ong>theong> implementation of a Land Value Tax on all land.

7. Present land supply and planning arrangements are failing ong>toong> facilitate sufficient development, especially of

low cost housing, and ong>theong>y permit land speculation; this produces delays and siphons off investment which

should be directed at improving construction technologies and efficiency (Appendices 9 and 16).

Recommendation 7

Local authorities should be better supported and resourced ong>toong> use compulsory

purchase powers ong>toong> acquire sites before development consent is granted and ong>theong>re

should be a stronger programme of support for Community Land Trusts and

Community Land Partnerships ong>toong> capture land value increases arising from

development, retain freeholds for future community use and operate as locally

responsive developers.

8.There is an almost complete lack of information on ong>theong> nature and size of ong>theong> evident public costs, especially

ong>toong> ong>theong> NHS, generated by poor and unaffordable housing and overcrowding; this information is a pre-requisite

for making cost-effective decisions about ong>theong> level of housing investment (Appendices 10, 11, 12, 13 and 14).

Recommendation 8

Government sponsored research programmes should be initiated ong>toong> assess ong>theong> costs

ong>toong> ong>theong> taxpayer generated by poor and unaffordable housing in ong>theong> following areas:

i. health, education and oong>theong>r welfare outcomes

ii. private pension provision

iii. economic development and labour mobility

9. Current legal forms and institutional practices are not sufficiently flexible ong>toong> facilitate ong>theong> production of more

affordable housing ong>toong> meet ong>theong> size of demand quickly enough (Appendices 15 and 16).

Recommendation 9

Innovative legal forms, financing mechanisms and modes of development and equity

holding should be vigorously promoted as a means of producing more low cost

housing at a faster rate

10. Conventional forms of development and construction take ong>toong>o little account of carbon emission levels and

add ong>toong> ong>theong> difficulties of reaching ong>theong> Kyoong>toong> Proong>toong>col emission targets (Appendix 17).

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 11

Recommendation 10

Increased resources should be put inong>toong> developing and evaluating carbon-neutral

forms of construction and development and inong>toong> encouraging patterns of land use

that reduce movement, food miles and energy consumption

11. Current levels of unaffordability bear down most heavily on those least able ong>toong> cope; ong>theong>y are ethically

indefensible (Appendix 18).

Recommendation 11

Statuong>toong>ry minimum incomes are under pressure from ever rising housing costs.The

oppressive nature of ong>theong> present housing regime leads ong>toong> stress and ill health for

many households receiving incomes below government and independently

determined poverty thresholds.This injustice should be more fully recognised and

taken inong>toong> account in policy related ong>toong> ong>theong> provision of adequate minimum incomes,

both in and out of work


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Confused discussion

Appendix 1 -

Identifying key strategic issues

(Peter Ambrose)

Discussion of housing issues in ong>theong> UK, wheong>theong>r at ong>theong> policy or popular level, is bedevilled by a lack of

understanding of ong>theong> key acong>toong>rs and processes at work, misdiagnoses of ong>theong> problems, misplaced media

emphases and lack of clarity about objectives.There is a pervasive tendency ong>toong> equate ‘ong>theong> housing problem’

with ‘homelessness’ and this contributes ong>toong> a failure ong>toong> develop a more holistic identification of problems at a

systemic level. Discussions of ‘privatisation’ reveal more about ideologies than about sound economic

management. As a result UK housing policy has rarely moved from crisis management mode ong>toong> any longer-term

strategic approach,

This appendix presents an internationally accepted analytical framework that helps ong>toong> identify ong>theong> key strategic

issues facing housing policy makers.

The analytical framework















Private capital











Estate agents

and letting















and Co-ops










and Co-ops




Co-ops and


























etc and


























Peter Ambrose

Health & Social Policy research Centre

University of Brighong>toong>n, Brighong>toong>n, England

Jan 2005

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 13

The shaded boxes along ong>theong> botong>toong>m of ong>theong> diagram identify ong>theong> five process stages in ong>theong> production and use of

any housing unit in a ‘developed’ economy.

Stage 1 is Promotion (ong>theong> decision ong>toong> produce a housing unit)

Stage 2 is Financing (finding ong>theong> money ong>toong> produce it)

Stage 3 is Construction (building ong>theong> unit)

Stage 4 is Allocation (allocating and reallocating it ong>toong> a user)

Stage 5 is Management in Use (maintaining and managing ong>theong> unit during its lifetime)

At ong>theong> end of Stage 5 is End of Life when ong>theong> useful life of ong>theong> unit ends and it is subject ong>toong> closure and/or

demolition.The rate of closure (or perhaps redundancy) of housing units, nationally, regionally and locally,

sends ‘feedback’ signals ong>toong> Government departments and via ong>theong>m ong>toong> ong>theong> institutions that promote new

housebuilding and so ong>theong> process begins again.

In ong>theong> case of ‘self-build’ housing (and for much of human hisong>toong>ry) several of ong>theong> stages, possibly all of ong>theong>m,

have been carried out by one person or household. Much more frequently in modern industrialised societies,

and particularly in ong>theong> UK, ong>theong> stages have become segmented and carried out by specialist institutions.To this

extent control over housing provision has been almost ong>toong>tally expropriated from ong>theong> user and vested in large

institutions, both public and private, against which opposition is necessarily individual raong>theong>r than collective.

The planning, regulation and funding support for housing in ong>theong> UK are ultimately responsibilities of

Government (ong>theong> box along ong>theong> ong>toong>p of ong>theong> diagram). But ong>theong>se interventions are complex and mediated through

an institutional framework that has evolved over several centuries.The institutions fall inong>toong> three main secong>toong>rs,

or sets of acong>toong>rs (ong>theong> three rows of fives boxes in ong>theong> middle of ong>theong> diagram and labelled on ong>theong> left).These

secong>toong>rs are ong>theong> Private Secong>toong>r, ong>theong> RSL Secong>toong>r and ong>theong> Council Secong>toong>r.

Motivational distinctions

There are vitally significant motivational distinctions between ong>theong>se sets of acong>toong>rs in that ong>theong> Private Secong>toong>r is

profit-driven, ong>theong> Council Secong>toong>r is public-service driven and ong>theong> RSL secong>toong>r is driven by a hybrid of charitable

and commercial motivations.

Conventional wisdom glosses over ong>theong>se motivational distinctions.There is an expectation that ong>theong> Private

Secong>toong>r can be driven partly by public-service considerations when such a belief is contrary ong>toong> ong>theong> statuong>toong>ry

responsibilities of Boards of Direcong>toong>rs ong>toong> place shareholders’ interests above all oong>theong>rs.

Where does responsibility lie

Our central argument is that in ong>theong> highly sensitive issue of housing ong>theong> recent increase in ong>theong> ratio of profitdriven

ong>toong> public service motivations and activity has produced regressively redistributive effects that are leading

ong>toong> pervasively costly social, welfare and economic consequences. It is not appropriate ong>toong> place ‘blame’ for this

on profit-driven institutions since ong>theong>y are simply acting in accordance with company law and commercial

practice.The ultimate responsibility ong>toong> ensure an appropriate mix of motivations and activity in ong>theong> housing

secong>toong>r so as ong>toong> serve ong>theong> needs of all members of society lies with Government.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

The housing secong>toong>rs explained

Private Secong>toong>r

The Private Secong>toong>r players (boxes 1P ong>toong> 5P and at ong>theong> Financing stage ong>theong> crucially important box 2PCM) work

ong>toong> a profit-seeking logic in ong>theong> context of statuong>toong>ry regulation and support from Government. Led by feedback

signals about national, regional and local supply/demand balances, guided by national and regional development

strategies devised by Government and within ong>theong> framework of local land use planning provisions ong>theong>y develop

new housing promotion strategies (1P) ong>toong> gain competitive advantage.To finance construction ong>theong>y use a

combination of ong>theong>ir own capital (2P) plus loans from ong>theong> Private Capital Market (2PCM).The extent ong>toong> which

ong>theong>y depend on loans as distinct from ong>theong>ir own capital is expressed as ong>theong>ir ‘gearing’.

They carry out ong>theong> construction work ong>theong>mselves (3P) and work with estate agents and letting agents ong>toong> market

ong>theong> units (4P) for ong>theong> highest achievable price or rent. Subsequently ong>theong> units are periodically re-marketed by

ong>theong> same set of agents. Allocation and reallocation in this secong>toong>r is market-led and access depends on ong>theong>

economic status and/or borrowing capacity of potential users. Access ong>toong> ong>theong>se units by those on lower incomes

will be strictly limited (and necessarily bolstered by state-funded benefits).

The maintenance in use of ong>theong> properties (5P) is ong>theong> responsibility of ong>theong> landlord, if ong>theong> property is rented, or

ong>theong> owner-occupier; in both cases using ong>theong> market-priced services of private contracong>toong>rs. In ong>theong> case of owneroccupiers

whose means may have diminished with age, proper maintenance may well be unaffordable and

conditions may deteriorate.

The overall effect in this secong>toong>r is that ong>theong> wide and increasing inequalities in household incomes and wealth

evident in ong>theong> UK are reflected precisely in terms of inequalities in access ong>toong> housing.

Registered Social Landlord Secong>toong>r

The Registered Social Landlord (RSL) Secong>toong>r is more complex both in structure, hisong>toong>ry and motivation.The

provision of housing by voluntary and philanthropic bodies dates back ong>toong> early medieval times (ong>theong> foundation

date of ong>theong> oldest registered housing association was 1235) and providers have included church bodies, unions,

working men’s associations and enlightened employers such as Titus Salt, Bourneville and Rowntree.They have

sought ong>toong> produce affordable housing of decent standard for acceptable groups of ong>theong> poor (but only rarely ong>theong>

very poorest). Currently ong>theong>re are over 2000 ‘housing associations’ registered with ong>theong> Housing Corporation

and operating as developers in ong>theong> secong>toong>r although repeated take-overs has produced an increasing concentration

in ong>theong> pattern of housing development and song>toong>ck. Now about 90% of ong>theong> RSL song>toong>ck of about 1.45 million

homes is in ong>theong> ownership of ong>theong> largest 200 associations.

The housing produced in this secong>toong>r has been classed ong>toong>geong>theong>r with council housing and designated as ‘social

housing’ and sometimes as ‘affordable housing’ by recent governments.These descriptions are analytically

flawed.‘Affordable’ means different things in different parts of ong>theong> country – which is why a more precise

definition is offered in ong>theong> Introduction.They tend also ong>toong> gloss over some important characteristics of ong>theong> RSL

secong>toong>r. For example although activity is notionally ‘not for profit’ many housing associations operating in ong>theong>

secong>toong>r have become increasingly entrepreneurial in ong>theong>ir asset management, lettings and rent-setting policies

(Pawson 2004).

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 15

RSLs have no direct elecong>toong>ral accountability ong>toong> local populations since ong>theong>ir Boards are normally an appointed

mix of independent people selected for relevant skills, tenants, and perhaps some local councillors and

executives of ong>theong> association raong>theong>r than candidates elected by universal suffrage. Finally (as Appendix 3 will

show) ong>theong> logic behind rent-setting has been very different in ong>theong> two secong>toong>rs. Consequently RSL rents have

characteristically been much higher than council rents although ong>theong>re has been recent convergence as a

conscious matter of policy.

In this secong>toong>r ong>theong> pattern of promotion of new developments (1R) and ong>theong> financing and regulation of housing

produced (2R) is overseen in England by ong>theong> Housing Corporation, a non-Departmental public body sponsored

by ong>theong> Office of ong>theong> Deputy ong>Primeong> ong>Ministerong>. It is funded by ong>theong> Treasury and by loan finance raised on ong>theong>

private capital market (2PCM). It ong>theong>n funds RSLs by means of Social Housing Grant ong>toong> develop and maintain

housing under ong>theong>ir Approved Development Programme.

The construction of units in this secong>toong>r (3R) is carried out by private secong>toong>r house-builders seeking competitive

rates of profit and ong>theong> allocation and reallocation of ong>theong> units (4R) is determined, by local agreement, partly by

ong>theong> RSL itself and partly by ong>theong> local housing authority in which it is operating.The management in use stage

(5R) is primarily ong>theong> responsibility of ong>theong> landlord RSL using private secong>toong>r contracong>toong>rs.

Under ong>theong> Housing Act 2004 a new pilot programme will make Housing Corporation funding available for ong>theong>

first time ong>toong> ‘unregistered’ developers (Housing Corporation 2004). Private secong>toong>r builders will acquire up ong>toong>

£3.8 billion of subsidy from ong>theong> Corporation ong>toong> build ‘affordable homes’ over ong>theong> two years ong>toong> April 2006.

Council Secong>toong>r

The Council Secong>toong>r is conceptually more straightforward. Local authorities have had powers ong>toong> provide and

manage housing since ong>theong> late nineteenth century as part of ong>theong> array of powers that arose from ong>theong> public

health and political fears evident following mass urbanisation from about 1830 onward.These powers did not

become obligaong>toong>ry and a source of large-scale provision until ong>theong> impetus provided by post-war needs, first

(briefly) after 1918 and ong>theong>n after 1945. In both periods ong>theong> housing drive was partly a response ong>toong> fears of

political instability. But it is noteworthy that in ong>theong> earlier period ong>theong> country’s first ong>Ministerong> of Health

(Chrisong>toong>pher Addison, who was medically qualified) had argued for more housing subsidy on ong>theong> evidence from

a study he had commissioned from ong>theong> Registrar General on ong>theong> cost of dealing with tuberculosis - a disease

clearly related ong>toong> housing standards (for an account see Ambrose 1994, chapter 6).

The local housing authority acts as ong>theong> promoter (1C) and funder (2C) of development.The funding stream has

been ong>theong> subject of a long sequence of alternately more and less generous subsidy arrangements (ong>theong> difference

is usually detectable from ong>theong> quality of ong>theong> housing produced).There has for most of ong>theong> time been a

combination of central government funding inong>toong> a Housing Revenue Account and funding from ong>theong> authority

itself via ong>theong> rent stream.The central support has often taken ong>theong> form of an annual payment per unit built ong>toong>

cover ong>theong> interest on ong>theong> loan taken out ong>toong> build it and in addition some access ong>toong> a ‘public works’ source of submarket

cost capital.

In recent decades ong>theong>re have been significant shifts in ong>theong> source of public funding. Local housing authorities

have lost ong>theong> preferential treatment ong>theong>y received at one time from ong>theong> Public Works Loan Board and have

become more dependent on ong>theong> private capital market (2PCM).This has materially increased ong>theong>ir development


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

costs since ong>theong>se are very sensitive ong>toong> changes in ong>theong> quantity of loan finance available and ong>theong> terms on which it


The construction of council owned housing (3C) and its maintenance (5C), formerly often carried out by local

authority building organisations, has in recent times been carried out almost entirely by private building

contracong>toong>rs. Allocation and reallocation (4C) has been on ong>theong> basis of need and according ong>toong> arrangements

determined by each authority, normally taking ong>theong> form of a ‘waiting list’ with individual weightings reflecting

ong>theong> level and type of need. In many areas of severe housing pressure virtually all allocations are ong>toong> households

that are statuong>toong>rily homeless and/or in some kind of emergency need. Given that much council song>toong>ck is still in

ong>theong> form of ‘estates’ this means that households with severe difficulties tend ong>toong> be housed in close proximity ong>toong>

each oong>theong>r.This is in sharp contrast ong>toong> ong>theong> situation during much of ong>theong> 1920s ong>toong> 1950s when council housing

served more general needs and produced socially mixed communities.

Sensitivity ong>toong> privatisation is differential by stage

From this analysis it is clear that ong>theong> effects ‘privatisation’ might have on ong>theong> capability of lower income people

ong>toong> access housing depend very much on which of ong>theong> five stages are made more subject ong>toong> market forces.

Patterns of new housing promotion (Stage 1) necessarily reflect a public and collective process of planning at

various levels.The balance of financing (Stage 2) has moved in favour of private capital sources, with adverse

effects on ong>theong> terms on which development capital can be accessed. Construction (Stage 3) and maintenance in

use (Stage 5) have hisong>toong>rically been almost entirely ong>theong> province of private contracong>toong>rs.

Allocation (Stage 4) is ong>theong> most sensitive stage in terms of affordability.There is a clear distinction between

access governed by market power and access governed by need.The balance has moved sharply ong>toong>wards access

by market power in recent decades, both because of ong>theong> changing pattern of production and because of ong>theong>

movements of existing song>toong>ck from ong>theong> council secong>toong>r ong>toong> ong>theong> oong>theong>r two secong>toong>rs.This has had seriously adverse

effects on affordability for lower income households and has been a facong>toong>r leading ong>toong> a pattern of costly

consequences outlined elsewhere in this ong>Memorandumong>. It has also placed increasing burdens on ong>theong> benefit and

allowance payments that help poorer households meet housing costs.

The key strategic issues

From ong>theong> diagram it is possible ong>toong> identify ong>theong> key issues that need ong>toong> be considered and continually reconsidered

if housing policy is ong>toong> have a strategic, raong>theong>r than just a crisis-management, dimension.

1.What proportion of ong>toong>tal public expenditure should be allocated for housing support

(i.e. down line 2)

2. Of this allocation what should be ong>theong> division between 2P, 2R and 2C - in oong>theong>r

words how should ong>theong> ong>toong>tal housing spend be distributed between ong>theong> three secong>toong>rs

- and why this distribution

3.What proportion of investment funds reaching Boxes 2R and 2C should come from

public expenditure programmes and borrowing sources and what proportion from

ong>theong> Private Capital Market (2PCM)

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 17

4. Of ong>theong> ong>toong>tal funds reaching Box 2 (Financing) what proportion should go along

route A (ong>toong> subsidise housing production), what along route B (ong>toong> support

consumption in ong>theong> form of housing benefit or purchaser support) and what along

route C (ong>toong> keep existing song>toong>ck in repair)

5. For ong>theong> existing song>toong>ck of housing should ong>theong> ratio of access by market power ong>toong>

access by need be changed by transfers of song>toong>ck between ong>theong> three secong>toong>rs (Boxes 4P,

4R and 4C)

6.To what extent should ong>theong> agencies responsible for ong>theong> development and

management of non-market housing be democratically accountable and how should

accountability best be achieved

7. Should ong>theong> overall impact of housing support be redistributively progressive,

regressive or neutral

In ong>theong> past most of ong>theong>se questions have been determined reactively in ong>theong> light of budgetary or elecong>toong>ral

expediency raong>theong>r than by any more clearly thought out process.This ong>Memorandumong> argues that short-term

expediency has produced outcomes that are heavily cost-ineffective in ong>theong> use of public funds and ethically

indefensible. A more strategic approach should now be adopted.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 2 -

House price rises - and why

(Peter Ambrose)

‘If property prices rise more than in proportion ong>toong> incomes ong>theong>n, given ong>theong> unequal distribution of

property ownership, ong>theong>re will be an increase in ong>theong> degree of income and wealth inequality...The

distribution of wealth, unless offsetting forces are put in motion, will move secularly in favour of ong>theong>

owners of property.’

B. Corry, Economists and ong>theong> Housing Problem, Shelter 1972

‘In London, ong>theong> child of home-owning parents stands ong>toong> inherit around £250,000 on average.The

classmate whose family rents stands ong>toong> inherit nothing.The housing market is making inequality

wider and furong>theong>r impeding social mobility.’

Alan Milburn speech on ‘Social Mobility and Social Justice’, 22 November 2004

The politics of home ownership

Home ownership in Britain has a particular hisong>toong>ry.The value of mass owner-occupancy as a ‘bulwark against

bolshevism’ had been argued explicitly in Parliament following ong>theong> 1917 Russian Revolution and ong>theong> 1926

General Strike (Bellman 1928). In ong>theong> 1930s Neville Chamberlain made ong>theong> point that:

‘...every fruit tree planted [in a newly acquired garden] converted a potential revolutionary inong>toong> a

contented citizen.’ (Feiling 1946)

The 1930s was marked by a massive growth in building society lending ong>toong> facilitate this trend - from a ong>toong>tal debt

outstanding of £120 million in 1924 ong>toong> £636 million in 1937 (Bowley 1945).

Following ong>theong> heavy emphasis on building council homes by ong>theong> post-1945 Labour Government, and ong>theong>

successor Conservative administrations till ong>theong> late 1950s, it was ong>theong> 1964 Labour Government in its White

Paper The Housing Programme 1965 ong>toong> 1970 that advanced home ownership as a ‘normal’ tenure and part of a

‘long-term social advance’, ong>toong> quote ong>theong> White Paper.Within a decade ong>theong> political implications were once again

spelled out by ong>theong> Secretary General of ong>theong> Building Societies Association when he made ong>theong> point in ong>theong> mid-

1970s that owner-occupancy was now ong>theong> majority tenure and that ‘The greater proportion of owner-occupiers

ong>theong> less likely were extreme measures ong>toong> prevail’ (quoted in Ambrose 1976). He might have added that from

that point on no General Election could be won on any programme that appeared ong>toong> harm ong>theong> interests of


‘Price rise equals good’

Housing is ong>theong> only ubiquiong>toong>usly used commodity where price rises are universally and uncritically welcomed as

a good sign.The owner’s personal calculation is almost always about ong>theong> rising paper value of ong>theong> property not

about ong>theong> rising proportion of lifetime earnings given over ong>toong> buying it, ong>theong> rising level of debt involved and ong>theong>

effects that debt will have on oong>theong>r aspects of life.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 19

Similarly in urban regeneration schemes house price rises are seen as an indicaong>toong>r of ‘success’ although every

price rise makes it that much more difficult for non-owning local residents ong>toong> access ownership. More generally

in discussions of ong>theong> economy ong>theong> headline ‘Good news - housing market recovers’ simply means prices are

rising again with implied benefits for existing owner-occupiers. Economic benefits are also deemed ong>toong> come out

of increased spending deriving from equity withdrawal - while perversely ong>theong> rising level of ong>toong>tal debt gives rise

ong>toong> worried comment.

It is vital ong>toong> re-examine this piece of conventional wisdom as it seems clear that ong>theong> ‘taken for granted’ that

rising prices equals good is in fact a highly partial interpretation of meaning by ong>theong> more prosperous members

of society (owners) against ong>theong> interests of ong>theong> less prosperous (non-owners).

Reasons underlying house price inflation

1. Financial deregulation in ong>theong> 1980s

The Thatcher administrations of ong>theong> 1980s introduced a number of measures ong>toong> deregulate and liberalise

financial services and institutions.This formed part of a move in many western economies ong>toong>wards

deregulation. In 1981 many restrictions on bank lending were abolished, in 1983 building societies were

allowed ong>toong> borrow from ong>theong> money market and in 1986 ong>theong> Building Societies Act introduced a more selfregulaong>toong>ry

regime. Regulation was reduced on matters such as reserve ratios, interest rates, down payments and

so on. Significant changes, including trends ong>toong>wards de-mutualisation, also occurred within ong>theong> building society

secong>toong>r itself (Cook, Deakin and Hughes 2001).

Deregulation led ong>toong> increased competition in ong>theong> home loans market, more house purchase lending from ong>theong>

clearing banks and ong>theong> vigorous selling of endowment-linked mortgages, ong>theong> vast majority of which have

subsequently under-performed. It is estimated that over 60% of ong>theong> 11 million endowment policies will not

cover ong>theong> full debt on maturity (

2. The growth of house purchase lending

One of ong>theong> outcomes of ong>theong> new deregulaong>toong>ry regime was a rapid growth in house purchase lending and thus in

ong>theong> effective demand for houses. As Baddeley (2004) points out:

‘The increasing availability of mortgage finance will encourage self-propelling increases in house

prices: ong>theong> demand for residential investment will increase as liquidity builds up in mortgage

markets and more mortgage financing becomes available on increasingly favourable terms.’

Since ong>theong> supply of both new and second-hand houses in ong>theong> market is relatively inelastic it is inevitable that

increases in demand will have an effect on prices.The explosive growth in ong>toong>tal house purchase debt

between1980 and 2003 is shown in Table 1.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Table 1 - The growth in house purchase debt 1980-2003

Sources:Wilcox (2004) Tables 17d and 45 and

The growth of ong>toong>tal House Purchase Debt is set out in ong>theong> second column.This has been approximately

corrected in ong>theong> third column ong>toong> allow for ong>theong> growth in ong>theong> number of owner-occupied units since 1980 since

clearly ong>theong> debt outstanding might have been expected ong>toong> increase given this facong>toong>r alone.The actual level of

House Purchase Debt is in ong>theong> fourth column and ong>theong> amount by which this exceeds ong>theong> RPI related figure is

shown in ong>theong> fifth column.The final column shows that as a proportion of GDP ong>theong> HPD has risen from 23% ong>toong>

72% in 23 years.

In 2003 HPD was £593 billion more than would have been ong>theong> case had lending grown in line with retail prices.

It is perfectly reasonable ong>toong> assume that had house purchase lending grown roughly in line with oong>theong>r prices, or

with ong>theong> number of properties coming onong>toong> ong>theong> market year by year, ong>theong>n house prices would also have

remained roughly in line with oong>theong>r prices. In that case earnings growth would have outstripped both general

and house price indices, thus producing real gains in living standards.

The reality has been quite different because ong>theong> explosion in lending has massively increased effective demand

and pushed up prices.The future seems set ong>toong> produce more of ong>theong> same.The Council of Mortgage Lenders

Market Briefing dated December 2004 forecasts a ong>toong>tal outstanding housing debt of around £1,100 billion in

2007 (compared ong>toong> about £774 billion in 2003). Unsurprisingly ong>theong> CML expect continuing house price rises,

although at lower rates than in ong>theong> past decade.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 21

3. Increases in ong>theong> lending multiple

As will be shown in Appendix 5 house purchase lending, and ong>theong>refore house prices, has risen much faster than

earnings for some decades and especially in ong>theong> last decade. One facilitating facong>toong>r has been ong>theong> increase in ong>theong>

multiple of loan made ong>toong> ong>theong> current income of ong>theong> applicant or joint applicants (part of ong>theong> ‘increasingly

favourable terms’ referred ong>toong> in ong>theong> Baddeley quote above).The higher this multiple ong>theong> higher ong>theong> house price

that can be afforded by ong>theong> purchaser in relation ong>toong> current income (but of course ong>theong> higher ong>theong> debt incurred).

Table 2 shows ong>theong> multiple has increased considerably since 1984 - by 42% for first time buyers and 39% for

movers.This has enabled house price levels ong>toong> rise disproportionately more than incomes and on ong>theong> basis of ong>theong>

increase in credit granted. Beyond a certain point increases in this multiple are likely ong>toong> be unsustainable by a

significant proportion of borrowers, especially if interest rates rise or personal circumstances change.

Table 2 - Changes in lending multiples

29 2.83

Source: Council of Mortgage Lenders website

Anoong>theong>r notable feature is ong>theong> sharp swing over ong>theong> past decade in ong>theong> balance of loans away from first time

buyers and ong>toong>wards existing owner-occupier movers.This supports ong>theong> general understanding of ong>theong> increasing

difficulties faced by those seeking ong>toong> access home ownership.The CML Market Briefing forecasts a modest

recovery in ong>theong> first time buyer proportion but only ong>toong> 34% by 2007.

4. Government incentives ong>toong> purchasers and owners

Mortgage Interest Tax Relief which was costing ong>theong> Exchequer £6 ong>toong> £8 billion per year in ong>theong> early 1990s is

now much reduced ong>toong> £1.6 billion in 1999/2000 (Wilcox 2004,Table 105). But ong>toong> offset this ong>theong> value of

Capital Gains Tax Relief ong>toong> owner-occupiers has risen over tenfold since 1996/97.This has been a burden on

ong>theong> national economy.The net gain ong>toong> ong>theong> Exchequer from Stamp Duty and Inheritance Tax offset by Capital

Gains Tax Relief has fallen from £1.39 billion in 1999/2000 ong>toong> £0.55 billion in 2002/03 (ibid,Table 1.2.3). In

addition Housing Benefit which now costs £12.6 billion annually in Great Britain (ibid,Table 114) is largely a

subsidy via rents ong>toong> landlords and, argues ong>theong> Henry George Foundation (Lloyd 2004):

‘... a furong>theong>r source of house price pressure, pumping public money inong>toong> an already overheated



Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

They also argue:

‘ is futile ong>toong> improve affordability by increasing salaries or subsidising home buying...While

each individual home buying grant - such as those under ong>theong> Starter Homes Initiative - may help ong>theong>

recipient enter ong>theong> housing market, ong>theong> combined effect of such grants is ong>toong> push ong>theong> market up

furong>theong>r, making entry even harder for ong>theong> next grant recipient.’

The link ong>toong> income and wealth inequality

The most recent edition of Social Trends (National Statistics 2005) presents evidence of ong>theong> persistence of income

inequality in ong>theong> UK. Between 1994/5 and 2002/3 ong>theong> real disposable incomes at ong>theong> 90th decile and at ong>theong>

10th decile grew at much ong>theong> same rate leaving ong>theong> degree of inequality unchanged (Figure 5.13). International

comparisons show that ong>theong> UK has ong>theong> fifth highest proportion of children living in poor households of fifteen

EU countries (Table 5.21). Meanwhile ong>theong> incomes of ong>theong> ong>toong>p 1% of earners grew fastest of all. In ong>theong> 2002/3

ong>theong> ong>toong>p decile had 28% of ong>toong>tal income and ong>theong> botong>toong>m decile 3% (Figure 5.14).

The Government has introduced many anti-poverty measures ong>toong> supplement low incomes for families and

pensioners since 1997, ong>theong> year in which ong>theong> numbers of children in households under ong>theong> poverty threshold

peaked. But inequality may well depend as much on ong>theong> relative size of necessary outgoings as on adjustments of

income.The proportion of income devoted ong>toong> housing costs tends ong>toong> rise ong>toong>wards ong>theong> botong>toong>m of ong>theong> income

scale and this may well indicate that ong>theong> lack of affordable housing is a facong>toong>r in ong>theong> persistence of inequality.

Regressivity in housing support and Council Tax costs may be a facong>toong>r partially negating ong>theong> income-related

anti-poverty measures (see Strategic Issue 7 in Appendix 1).

It also seems clear that ong>theong> Corry quote at ong>theong> beginning of this Appendix was correct and that ong>theong> housing

market as it stands is an effective device for channelling wealth away from those who do not have it inong>toong> ong>theong>

hands of those who do, in oong>theong>r words it has a systemically regressive effect.This may help ong>toong> explain why ong>theong>

share of ong>toong>tal wealth held by ong>theong> most wealthy 10% has risen from 52% in 1996 ong>toong> 56% in 2002 and why ong>theong>

poorer half ong>theong> population own only 6% of ong>theong> ong>toong>tal wealth (National Statistics 2005,Table 5.25).

Structural reform depends on an admission that ong>theong> housing market as it exists is inefficient, iniquiong>toong>us and

ultimately unsustainable. It is necessary ong>toong> song>toong>p tinkering with ong>theong> edges of ong>theong> market and tackle ong>theong>

fundamental issues raised in Appendix 1. In particular it must be recognised that ong>toong> make housing more

affordable house prices have ong>toong> come down, or at least be stabilised, in relation ong>toong> incomes.

The political barriers ong>toong> reform

All recent governments have shown ong>theong>mselves ong>toong> be wary of ong>theong> perceived elecong>toong>ral sensitivities of ong>theong> wealthy

homeowners of middle England. In particular, negative equity is seen ong>toong> be unacceptable in any form. However,

ong>theong> consequences of this position are unsustainable. For negative equity ong>toong> be avoided, homeowners must be

effectively subsidised in perpetuity.The current assumption appears ong>toong> be that homeowners have a right ong>toong>

profit from rising prices but no corresponding duty ong>toong> carry ong>theong> risk of a price fall.This also implies that

current owners have a right perpetually ong>toong> extract wealth from first-time buyers, that speculaong>toong>rs on ong>theong>

housing market have a right ong>toong> keep all ong>theong>ir winnings and a right also ong>toong> state compensation if ong>theong>y lose. It is

hard ong>toong> imagine how any oong>theong>r group demanding such a settlement would be treated.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 23

There may be some inconsistency in public attitudes.The British Social Attitudes Survey reported in ong>theong> latest

Social Trends (Table 5.15) indicates that 78% of all adults of 18+ think that ong>theong> gap between high and low

incomes is ‘ong>toong>o large’. But this gap is probably not related in ong>theong> public mind ong>toong> housing policies and practices.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 3 - Changes in ong>theong>

affordability of renting

The relationship between incomes and rents

(Peter Ambrose)

Over ong>theong> past century ong>theong> degree of correspondence between income range profiles on ong>theong> one hand and ong>theong>

spread of housing access costs on ong>theong> oong>theong>r has weakened. It was found in ong>theong> Central Stepney SRB regeneration

‘health gain’ study (Ambrose 2000) that ong>theong> inhabitants of ong>theong> streets undergoing redevelopment in ong>theong> mid

1990s were, a century earlier, engaged in a wide variety of occupations, no doubt with widely varying rates of

pay and levels of job security (1901 Census data).The Charles Booth poverty map of 1889 shows a wide range

of housing standards in ong>theong> area (from his Category 3 ong>toong> Category 6 in a seven category scheme). Clearly if

one’s income went up or down with a change of job ong>theong>re was housing of a wide range of quality (and ong>theong>refore

rents) that could be accessed locally – perhaps by means of a ‘moonlight flit’. By ong>theong> mid 1990s not only had ong>theong>

local employment market collapsed (only 10.5% of ong>theong> sample population in this area were in full-time

employment in 1996) but ong>theong> housing choice was virtually limited ong>toong> local authority housing. Given ong>theong> rising

trends in local authority rents an increasing dependence on Housing Benefit was inevitable.

Generalising this situation over a similar hundred year timescale it was found by Glennerster et al. (2004,Table

6) that rent as a proportion of expenditure for ong>theong> poorest fifth of ong>theong> population had risen from 18% ong>toong> 28%,

although allowing for housing support payments ong>theong> net cost for ong>theong> poorest was 6% of expenditure. In many

cases this net cost has ong>toong> be found from ong>theong> already inadequate income support payment.They conclude that

‘…while ong>theong> quality of housing has improved enormously ong>theong> variation in its cost has greatly increased.’

Rent-setting principles

The three main rental tenure groups formerly had sharply differing sets of processes for determining rents:

1 - Local authority rents

The main facong>toong>r producing relatively low rents for council housing over many decades was not ong>theong> subsidy from

central government but ong>theong> arrangements by which rents were averaged or ‘hisong>toong>rically pooled’ across ong>theong> song>toong>ck

of an authority.

Given, say, an eighty year life for a property ong>theong> interest and loan repayment costs of any unit decay in real

terms over time with inflation and ong>theong>n end along>toong>geong>theong>r when ong>theong> loan is fully repaid after perhaps thirty years.

For ong>theong> remaining years of its life, which may well be fifty years or more if ong>theong> housing is properly built and

maintained, ong>theong> property attracts only management and maintenance costs but continues ong>toong> produce rents that

can rise with inflation. Given a local authority with a song>toong>ck with a wide spread of building dates ong>theong> average rent

charged across ong>theong> song>toong>ck could be much lower than if ong>theong> rent has ong>toong> reflect current or recent building costs and

debt servicing or has ong>toong> be related ong>toong> market rents or current capital values in ong>theong> area.

This ‘pooled hisong>toong>ric cost’ principle appears ong>theong> soundest way ong>toong> produce decent standard housing at affordable

rents but it does depend on:

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 25

(a) producing units of a quality such that ong>theong>ir life will long outlast ong>theong> period of debt servicing and

(b) keeping ong>theong> older song>toong>ck more or less intact so that ong>theong> costs of recent additions can be averaged

with ong>theong> hisong>toong>ric costs of earlier units ong>toong> produce an affordable average rent across ong>theong> song>toong>ck.

The costly technological errors of ong>theong> ‘high rise’ era, ong>theong> ‘right ong>toong> buy’ and transfer policies of recent decades,

ong>theong> partial withdrawal of central subsidy and ong>theong> policies forcing local authorities ong>toong> rely increasingly on ong>theong>

private capital market for funds (2PCM in Appendix 1) have all worked ong>toong> erode ong>theong> characteristic low rents of

ong>theong> council secong>toong>r.

2 - RSLs

Rents in this secong>toong>r were previously set ong>toong> reflect ong>theong> capital and running costs development by development.

The costs were partly offset by government grant via ong>theong> Housing Corporation, but ong>theong>y were not averaged

with older song>toong>ck in ong>theong> ownership of ong>theong> same landlord. So ong>theong> ‘hisong>toong>ric’ element of cost-pooling across units of

widely varying age was absent and rent profiles were consequently higher than council rent profiles for similar


3 - Private secong>toong>r rents

Rents for private secong>toong>r lettings have been and are set largely ong>toong> achieve a competitive rate of net annual return

on a particular property in ong>theong> light of its current capital value and ong>theong> ruling interest rate for investments of

comparable risk.There need be no logical connection ong>toong> building costs (ong>theong> property may well be 100 or more

years old) or ong>toong> any requirement ong>toong> average rents over a song>toong>ck.

Recent rent re-structuring in ong>theong> LA and RSL secong>toong>rs

The new rent-setting principles set out in 2001 (Guide ong>toong> Social Rent Reforms, Department of ong>theong> Environment,

Transport and ong>theong> Regions) and 2003 (A Guide ong>toong> Social Rent Reforms in ong>theong> Local Authority Secong>toong>r, Office of ong>theong>

Deputy ong>Primeong> ong>Ministerong>) lead ong>toong> ong>theong> application of ong>theong> same formula ong>toong> both ong>theong> local authority and RSL secong>toong>rs.

The details are complicated but in essence ong>theong> weekly rent is based 70% on ong>theong> average rent for ong>theong> secong>toong>r (LA

or RSL) multiplied by a facong>toong>r relating local earnings ong>toong> national and ong>theong>n multiplied again by a bedroom

weighting facong>toong>r ong>toong> reflect ong>theong> size of ong>theong> unit.The oong>theong>r 30% is based on ong>theong> average rent for ong>theong> secong>toong>r

multiplied by a relative property value facong>toong>r.

The intention is ong>toong> move ong>toong> ong>theong>se rent levels over a ten year period in equal annual steps with a limit on real

terms annual increases of 1.0% in ong>theong> LA secong>toong>r and 0.5% in ong>theong> RSL secong>toong>r.Where high capital values produce

excessively high rent levels a cap is applied on ong>theong> annual rate of increase.The Government’s intention is for LA

and RSL rents, which were markedly different before ong>theong> strategy was introduced, ong>toong> converge over ong>theong> period.

The intention was ong>toong> hold a three year review of how ong>theong> system is working so as ong>toong> feed inong>toong> ong>theong> setting of

rents in 2005/06 but ong>theong> review has not yet reported.

Rents by secong>toong>r

These different rent-setting mechanisms have in ong>theong> past produced a clear ‘rent gradient’ - council rents have


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

normally been lowest, ong>theong>n RSL rents ong>theong>n private rents.Weekly rents in 2003 as a proportion of average male

earnings were (Wilcox 2004,Table 72):

Local authority 13.3%

RSL 15.3%

Private (in 2000) 22.2%

Local authority rents for comparable properties are still lower than RSL target rents in all regions of England by

a margin of typically 15-20% (Wilcox 2004,Table 74). But ong>theong> differential between council and RSL rents is

narrowing. From 1980 ong>toong> 2003 ong>theong> percentage of average male earnings taken by rent rose differentially in ong>theong>

three rental secong>toong>rs (Wilcox 2004,Table 72):

Local authority 93%

Housing association fair rents/assured rents 37%

Private ‘fair rents’/market rents (ong>toong> 2000 only) 122%

In absolute terms average rent levels have risen sharply in all three tenure groups since 1980 (Wilcox 2004,

Table 72, not corrected for inflation):

Local authority +666%

Housing association fair rents/assured rents +464%

Private ‘fair rents’/market rents (ong>toong> 2000 only) +685%

With ong>theong> narrowing of ong>theong> differential and ong>theong> sharp rises in local authority rents ong>theong> availability of decent

quality housing at rent levels affordable by ong>theong> very poorest is falling sharply with obvious consequences for


The non-match of rents ong>toong> incomes

Given ong>theong> trends ong>toong>wards widening income inequalities and ong>theong> severe reduction of state financial support ong>toong>

develop lower rent song>toong>ck ong>toong> match lower end incomes ong>theong>re is a growing structural problem of non-match

between household incomes and housing availability.This is especially evident in ‘high demand’ housing areas.

This structural problem is at present being dealt with by an ever-increasing reliance on Housing Benefit

payments plus increasing dependence on high cost and socially damaging emergency solutions.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 27


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Recent under-investment

Appendix 4 -

Evidence of housing shortage

(Peter Ambrose and Robina Rafferty of Housing Justice)

The present shortage on affordable housing stems partly from a recent hisong>toong>ry of under-investment in low rent

housing compared ong>toong> ong>theong> pre-Thatcher period and even ong>theong> last pre-New Labour year (all data is from Wilcox


• The 2003 UK housing completion figure for local authority housing was 286 and for housing

associations 17,993 making a ong>toong>tal of 18,279 ‘social housing’ homes; in 1980 ong>theong> figure was

110,012 and in 1996 it was 34,705 (Table 19l)

• Government housing expenditure in 2000/1 was only 1.2% of all public spending compared ong>toong>

6.1% in 1980/81 and 1.8% in 1995/96 (Table 15a)

Housing capital investment in England by local authorities and ong>theong> Housing Corporation has fallen

from £8.28 billion in 1980/81 ong>toong> £4.32 billion in 1995/96 and ong>toong> £3.58 billion in 2000/01 (all at

2000/01 prices) (Table 62b)

• RSLs’ gross investment fell from £4.27 billion in 1992/93 ong>toong> £2.19 billion in 2001/02 and even

ong>theong> boosted plans for 2004/05 will bring ong>theong> investment ong>toong> only 71% of ong>theong> 1992/92 figure: ong>theong>

expenditure plans for 2004/05 depend on borrowing over £1.0 billion from private secong>toong>r sources

(Table 59)

• UK housing investment as % of GDP is little over half that of Germany, Neong>theong>rlands and Italy and

at 3.2% is ong>theong> second lowest of thirteen comparable countries; ong>theong> only lower figure is Sweden

which is very well housed (Table 8)

These data all relate ong>toong> Strategic Issue 1 in Appendix 1.

The Barker Review and responses

The Barker Review (Barker 2004) drew attention ong>toong> ong>theong> annual rise in house prices of approaching 8% over ong>theong>

same period (1995-2001) that private housebuilding declined by 11%.The Review argued that ong>toong> bring ong>theong>

annual rate of price increase down ong>toong> ong>theong> EU average of 1.1% per year an additional output of 120,000 private

secong>toong>r homes would be required.The Review called for much faster release of land for building so as ong>toong> stabilise

prices.The Royal Institution of Chartered Surveyors supported ong>theong> general recommendation for an increased

housing output and put ong>theong> requirement at 250,000 homes per year.

The Campaign ong>toong> Protect Rural England and oong>theong>r bodies with an interest in rural protection take ong>theong> view that

it is not land supply limitations that are ong>theong> main facong>toong>r in ong>theong> rapid price increases.With ong>theong> World Wildlife

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 29

Fund ong>theong>y stress that simply increasing ong>theong> overall supply will not deliver sufficient affordable or ecologically

sustainable housing.The response from ong>theong> Henry George Foundation (Lloyd 2004) also ong>toong>ok issue with ong>theong>

notion of a supply side solution, suggested that population projections may be over-estimated, drew attention ong>toong>

geographical imbalances and pointed out that even if output is rapidly increased 99% of homes will be existing,

not newly produced, ones. It argued that excessive demand based on ong>theong> growing levels of mortgage debt

evidenced in Appendix 2, and bolstered by expectations about furong>theong>r price rises, is ong>theong> key inflationary force:

‘More than any oong>theong>r goods, ong>theong> price of houses represents not what people can afford ong>toong> pay, but

what ong>theong>y can be persuaded ong>toong> borrow.’

Vigor and Robinson (2005) have drawn attention ong>toong> ong>theong> strong demographic driver provided by ong>theong> projected

population and household growth in ong>theong> South East up ong>toong> at least 2021.They also argue that:

‘…it is not clear that ong>theong> Barker Review’s arguments that significantly increased housing supply is

an appropriate way ong>toong> address affordability needs…more public spending will be required ong>toong> meet

ong>theong> increased affordable housing output…’

Oong>theong>r estimates of social housing need

Estimates of ong>theong> need for additional ‘social housing’ depend very heavily on assumptions made about future

household growth, household size, type and likely income, life expectancy, rates of in- and out-migration,

affordability in ong>theong> private secong>toong>r and a number of oong>theong>r variables that are difficult ong>toong> predict.The Barker

Review argued that an increase in ong>theong> supply of social housing of ong>theong> order of 17,000 homes per year is required

over ong>theong> next ten years with an additional 23,000 per year required if inroads are ong>toong> be made inong>toong> existing

shortfalls.This is widely regarded by campaigning organisations such as Housing Justice as an under-estimate of


In ong>theong> recent past (2001/02 ong>toong> 2003/04) although ong>theong> amount of Government investment in social housing has

increased ong>theong> output has continued ong>toong> fall, partly as a result of ong>theong> need ong>toong> spend on existing song>toong>ck and because

of land costs (see also ong>theong> comparative case study in Appendix 9).There is also ong>theong> requirement ong>toong> spend in ong>theong>

order of £19 billion ong>toong> ensure that all social housing meets ong>theong> ‘decent homes standard’ (DHS) by 2010.

The Comprehensive Spending Review 2005-2008 provides for a 50% increase in ong>theong> social housing budget.The

spend is ong>toong> be £1.3 billion more in 2007/8 compared ong>toong> 2004/5.This is expected ong>toong> produce perhaps 10,000

additional social homes per year, a fraction of ong>theong> Barker Review recommendations.There is ong>toong> be emphasis on

development in ong>theong> Thames Gateway east of London, Ashford, Milong>toong>n Keynes and ong>theong> M11 corridor ong>toong>wards

Cambridge.The first of ong>theong>se may raise some land release difficulties since a report from ong>theong> Association of

British Insurers (Making Communities Sustainable, February 2005) and work by Every and Foley (2005) has

already drawn attention ong>toong> ong>theong> undesirability of building on floodplains in ong>theong> Thames Gateway and elsewhere.

A recently updated Shelter report (Holmans, et al. 2004) carries out an assessment of expected changes in ong>theong>

population and ong>theong> number of households between 2001 and 2011, divides ong>theong> growth in need between ong>theong>

market and social secong>toong>rs, takes account of existing unmet need and allows for ong>theong> necessary replacement of

existing unsuitable song>toong>ck. It concludes that ong>theong>re will be an annual requirement overall for 206,000 new homes

each year ong>toong> 2011 ong>toong> meet newly arising need.This ong>toong>tal is divided as follows:


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

139,000 per year in ong>theong> market secong>toong>r

67,000 per year in ong>theong> social secong>toong>r

In addition ong>toong> reduce ong>theong> current backlog of unmet need by 50% over a 15 year period would require an

additional 22,000 social homes per year.The ong>toong>tal annual requirement for additional social housing according ong>toong>

ong>theong> Shelter calculations is ong>theong>refore 89,000 per year.This is well over twice ong>theong> Barker Review recommendation

and considerably in excess of any rate of output within ong>theong> Government’s declared spending intentions.

Holmans et al. (2004) estimate that only up ong>toong> 2,500 of this annual requirement can be provided through

‘planning gain’ and without ong>theong> use of Social Housing Grant.They estimate that at best only 34,000 social

housing homes can be provided annually at current rates of spend.They consider that an additional £6.7 billion

of annual investment would be required ong>toong> meet newly arising need and ong>theong> backlog of need for social housing.

This figure appears very large in relation ong>toong> ong>theong> Comprehensive Spending Review intentions, ong>toong> ong>theong> figures

announced in ong>theong> latest ODPM document (ODPM 2005) and ong>toong> any likely Government programme since it is

about twice ong>theong> amount of ong>theong> spend in 2000/01 (Wilcox 2004,Table 62b). On ong>theong> oong>theong>r hand it is small

compared ong>toong> ong>theong> annual growth in ong>theong> ong>toong>tal lent each year ong>toong> finance ong>theong> purchase of owner-occupied housing

(about £43 billion per year - see Appendix 2).

Bramley (2005) in a detailed analysis of housing need, argues that ong>theong> Barker Review underestimates overall

social housing need and has over-netted ong>theong> relative lack of shortage in ong>theong> north against ong>theong> pressing needs in

ong>theong> South East.

The situation in London

The Draft London Housing Strategy for 2005 ong>toong> 2016 was produced for consultation by ong>theong> London Housing

Board in November 2004. It pointed out that ong>toong>tal completions for 2003 were just over 20,000 of which only

about half were ‘affordable’.The situation is urgent in that 36% of Londoners are living in non-decent homes,

72% of ong>theong>m in ong>theong> private secong>toong>r.The average stay for people in temporary accommodation is two and a half

years, 4,000 people in this kind of accommodation have support needs and ong>theong> ‘hidden homeless’ in London

includes about 20,000 asylum seekers.

The Draft Strategy argues that ong>theong>re is a shortfall of 10,400 homes per year compared ong>toong> current production

rates and that 30-35,000 new homes per year are needed for ong>theong> next ten years, 66% of ong>theong>m ong>toong> be


Information is available on ong>theong> extent of substandard housing in ong>theong> owner-occupied secong>toong>r.There are an

estimated 9,877 unfit owner-occupied homes in ong>theong> Borough of Newham alone (London Borough of Newham

2002/03) and in ong>theong> Forest Gate area 41% of privately owned homes are likely ong>toong> be unfit within five years.

Poorly maintained housing affects ong>theong> elderly most seriously and unsafe stairways and inadequate lighting can be

a major cause of falls. It has been estimated that hip fractures caused by falls costs ong>theong> NHS nearly £726 million

per year (Parrott 2000).

One indicaong>toong>r of increasing shortage

One outcome of ong>theong> under-investment in social rented housing is that ong>theong> number of households accepted as

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 31

homeless by local authorities (itself an under-indication of need) and homeless households in temporary

accommodation in England has risen as follows:

1980 1996 2003

Accepted as homeless 60,400 113,590 137,220

In temporary accommodation 4,710 51,690 118,350

(Wilcox 2004,Tables 90 and 91)

At current and proposed future rates of spend on affordable housing it seems inevitable that ong>theong>se figures will

continue ong>toong> rise.

Have Section 106 planning agreements produced enough

A recent project funded by ong>theong> Joseph Rowntree Foundation has examined ong>theong> extent ong>toong> which Section 106

planning agreements, which use ong>theong> granting of a planning consent ong>toong> secure a proportion of ‘affordable’

housing from private secong>toong>r developers, have been successful in providing sufficient low cost output (Monk et

al. 2005).They looked especially at ong>theong> issue of wheong>theong>r increasing output using planning agreements was at ong>theong>

expense of oong>theong>r forms of provision.

The research found that ong>theong> number of affordable homes produced under Government Housing Investment

Programmes (HIPs) fell from 45,000 ong>toong> 29,000 over ong>theong> period 2000/01 ong>toong> 2002/03 and that it was becoming

increasingly difficult for social landlords ong>toong> secure sites for development oong>theong>r than via ong>theong> Section 106 route.

The proportion of provision under Section 106 was found ong>toong> be increasing although 75% of ong>theong>se completions

still required some Social Housing Grant (SHG).The negotiation of ong>theong> partnership agreements is very costly in

time and money and some agreements take up ong>toong> four years ong>toong> negotiate. In addition while ong>theong> number of

Section 106 planning consents for affordable housing was rising quite steeply up ong>toong> 2002/03 ong>theong> number of

actual completions was rising much more slowly. Of those completed in 2002/03 91% were dependent on

SHG or oong>theong>r form of public funding.

In 2003 ong>theong> Government proposed putting in place an optional planning charge that applicants may pay ong>toong> ong>theong>

planning authority instead of getting inong>toong> a Section 106 negotiation.The survey of housing associations and local

authorities carried out by ong>theong> project produced generally negative reactions ong>toong> ong>theong> planning charge proposal

because it would make it more difficult ong>toong> gain access ong>toong> land and would inhibit ong>theong> building of mixed tenure

types on ong>theong> same site.

The key message from ong>theong> project was that housing associations are finding it increasingly difficult ong>toong> develop

housing through non-Section 106 means and are ong>theong>refore more dependent on provision that occurs as a byproduct

of market-led activity. In relation ong>toong> ong>theong> estimates of social housing need set out earlier (i.e. up ong>toong>

89,000 homes per year) ong>theong> present, and apparent future, level of affordable output via both Section 106 and

non-Section 106 means is ong>toong>tally inadequate. In ong>theong> light of this and oong>theong>r evidence Vigor and Robinson (2005)

argue that:

‘Section 106 …cannot be relied upon ong>toong> deliver ong>theong> increased social housing required.’

Overall ong>theong> Section 106 mechanism is a weak one compared ong>toong> development by a local authority using


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Compulsory Purchase powers ong>toong> acquire sites and working perhaps in partnership with a Community Land

Trust ong>toong> provide elements of common ownership. Much stronger and more innovative supply mechanisms will

be required if ong>theong> affordability problem is ong>toong> be seriously addressed.

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Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 5 - Changes in ong>theong>

affordability of owning

(Peter Ambrose)

There are a number of hisong>toong>rical indices of house price changes and all tell much ong>theong> same song>toong>ry.The

Nationwide hisong>toong>rical index shows an approximately eighty-fold growth in ong>theong> UK current all-house price index

from ong>theong> end of 1952 (average price £1,891 = 100.0) ong>toong> ong>theong> end of 2004 (average price £153,778):

All houses 8,132.1

New houses 7,711.3

Modern houses 7,575.3

Older houses 9,880.4

These figures need ong>toong> be compared ong>toong> rises in earnings.The Nationwide average gross earnings index dates only

from 1970.The changes in ong>theong> gross earnings index and ong>theong> all-house house price index since ong>theong>n are:

Gross earnings index x 18.7

House price index x 34.5

Thus house prices have risen at nearly twice ong>theong> rate of earnings over ong>theong> past 35 years.

Affordability changes since 1993

Much of this divergence between ong>theong> two indices has occurred during ong>theong> eleven years since 1993 when house

prices have outpaced earnings by a facong>toong>r of over five:

1993-2004 change in gross earnings index +59.1%

1993-2004 change in house price index +306.8%

The same Nationwide source provides a series on ong>theong> ratio of house prices ong>toong> gross annual earnings. For much

of ong>theong> period since 1953 this has ranged between about 2.5 and 4.0. In periods of sharp house price inflation,

for example in 1972-3 and 1988-90, ong>theong> index moved up very close ong>toong> 5.0. Since ong>theong> second quarter of 2003

ong>theong> index has been above 5.0 and it song>toong>od at 5.95 at ong>theong> end of 2004. For London in particular ong>theong> index has

been mostly in ong>theong> range 3.0 ong>toong> 4.5, reached over 6.0 briefly in ong>theong> 1988/89 period of inflation and has been

over 6.0 for ong>theong> ten quarters up ong>toong> ong>theong> end of 2004. Housing affordability is ong>theong>refore worse in London than at

any previous time.

The ratio of mortgage cost ong>toong> incomes devised by Wilcox (Wilcox 2004,Table 2.3.2) calculates ong>theong> proportion

of average incomes for all working households required ong>toong> access an average first-time buyer home.This

proportion for ong>theong> whole of ong>theong> UK has worsened from 12.5% ong>toong> 16.1% over ong>theong> ten years and from 13.3% ong>toong>

19.0% for London - a worsening of nearly 43% in affordability over a decade.

The Barker Review (Barker 2004) noted that only 37% of new households could afford ong>toong> buy in 2002

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 35

compared ong>toong> 46% in ong>theong> late 1980s. Similarly ODPM statistics (ODPM 2004) show that ong>theong> proportion of first

time buyers aged under 25 has fallen from 25% in 1993 ong>toong> 16% in 2003 and that ong>theong> proportion of first time

buyers paying in excess of £100,000 has risen from 6% ong>toong> 46% over ong>theong> same period. Clearly affordability for

this group has diminished sharply.

The latest ODPM document (ODPM 2005) seeks ong>toong> address this issue with a First Time Buyers Initiative.The

intention is ong>toong> provide 15,000 new homes for first time buyers up ong>toong> 2010 on land ong>toong> be provided by English

Partnerships from former NHS and oong>theong>r public sources. Half will be for ‘key service workers’.The homes will

be sold at construction cost plus and ong>theong>re will be provision for occupiers ong>toong> acquire equity shares.The

landowners will have first refusal on resale.

The same document announces a Design for Manufacture competition ong>toong> build up ong>toong> 1,000 homes on English

Partnerships land for a target cost of £60,000,‘without sacrificing quality’ and with a view ong>toong> mainstreaming

‘high quality modern developments for volume developments’.This has been interpreted in some quarters as

meaning homes will be available for £60,000 but unless firm steps are taken ong>toong> ensure that resale prices are

cost-related and rise only in relation ong>toong> general inflation, raong>theong>r than behaving in ong>theong> same way as ong>theong> general

run of house prices, any affordability gain will be short-lived.

Regional variations in affordability

The current regional variations in affordability are evident from ong>theong> latest Joseph Rowntree Foundation data

(Joseph Rowntree Foundation 2004).This compares ong>theong> local price of two and three bedroom houses with ong>theong>

gross income of households that include working people aged 20 ong>toong> 39.The ratios are:

England 4.11

London 4.69

South West 4.66

South East 4.61

East of England 4.27

West Midlands 3.80

Of ong>theong> 10 local authorities with ong>theong> highest ratios, five are in ong>theong> South West, two (Westminster and Brent) in

London and three (Chichester, Adur and Lewes) in ong>theong> South East. All ong>theong>se except Lewes have a ratio over 6.0.

It should be noted that ong>theong> mortgage ratio of loan approved ong>toong> income for a multi-earner household is rarely

over 3.5. On this evidence access ong>toong> home ownership is difficult, if not impossible, for first time buying

households of this type in very large areas of England.

The area with ong>theong> lowest ratio, 1.97, is Sedgefield.

Affordability and take-home pay

Affordability can also be measured in terms of ong>theong> percentage of take-home pay required for mortgage

repayments.The Nationwide series of this indicaong>toong>r runs from Quarter 1 of 1985 (index = 100). For ong>theong> UK as

a whole this index rose inong>toong> ong>theong> 150s during ong>theong> 1989 house price inflation but was running in ong>theong> 50s and 60s


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

for much of ong>theong> mid-1990s. It has now risen again and at ong>theong> end of 2004 song>toong>od at 107.4.

Given ong>theong> unprecedented rise in house price levels it may seem surprising that affordability, in terms of takehome

pay used ong>toong> pay ong>theong> mortgage, should have remained relatively low in ong>theong> early 2000s.The explanation

probably lies in a combination of facong>toong>rs - hisong>toong>rically low interest rates,‘low-start’ mortgage products and

lengong>theong>ned repayment terms are all possible facong>toong>rs that reduce ong>theong> month by month impact of expending

higher capital sums on house purchase. Clearly ong>theong>re are dangers here if interest rates rise and/or disruptive life

events such as unemployment, disability or relationship break-up occur during ong>theong> extended repayment period.

Summary - earnings, retail prices and house prices since 1952

Figure 1 shows ong>theong> movements in gross earnings, consumer prices and house prices since 1952.The gross

earnings and house prices data are derived from ong>theong> Nationwide website and ong>theong> consumer price data from

ong>theong> Economic Hisong>toong>ry Resources site All three series have been reduced ong>toong>

1952=1.00. It is possible ong>toong> take issue with ong>theong> particular measures used and no doubt changes in definitions

over half a century have produced some inaccuracies. But ong>theong> main features of ong>theong> comparative movements in

ong>theong> three indices are clearly discernable.


Figure 1 - Earnings, Prices and House Prices 1952-2004



House price index

Average earnings index

Consumer price index








1960 1970 1980 1990 2000

Until about 1970 ong>theong> three indices remained in close ong>toong>uch and grew only very slowly. From about that year

ong>theong>re has been a growing divergence between ong>theong> consumer price index and ong>theong> oong>theong>r two. Earnings have risen

much faster than consumer prices until ong>theong>y now stand at about three times ong>theong> prices index.This reflects ong>theong>

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 37

approximately threefold rise in real earnings and living standards that has occurred since ong>theong> second world war

and primarily since about 1970.

The house price index has behaved in a much more volatile fashion. It remained in close ong>toong>uch with ong>theong> earnings

index until about 1987. Since ong>theong>n it first rose faster than earnings, ong>theong>n fell back ong>toong> well below ong>theong> earnings

index by ong>theong> mid 1990s ong>theong>n rose more steeply than earnings until finally since 2002 it has risen ong>toong> nearly 84

compared ong>toong> ong>theong> earnings index of about 55 (1952=1.00).Why should this be And why in particular should

house prices get so out of ong>toong>uch with earnings

Total housing debt and house prices

The relationship since 1980 between changes in ong>theong> ong>toong>tal amount lent ong>toong> purchasers of houses, ong>theong> ong>toong>tal song>toong>ck of

owner occupied housing, house prices, consumer prices and earnings is shown in Figure 2.This reproduces

some information from ong>theong> previous graph covering ong>theong> period since 1952.


Figure 2 - Housing debt, house prices, owner-occupancy song>toong>ck, consumer prices and

earnings 1980-2004




Housing debt outstanding index

House price index

Consumer price index

Average earnings index

Owner-occupied song>toong>ck index







Average earnings have risen since 1980 raong>theong>r faster than ong>theong> Consumer Price Index, reflecting a rise in real

living standards. Housing debt has been rising much faster than both ong>theong>se indices throughout ong>theong> post-1980

period while ong>theong> song>toong>ck of owner occupied housing rose from index 1.0 ong>toong> 1.21.The sharp rise in lending in ong>theong>

1980s appears ong>toong> have produced ong>theong> house price boom in ong>theong> late 1980s after which prices fell back gently till


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

1992 (although ong>theong> fall was anything but gentle for ong>theong> many thousands of home owners repossessed during this

period). All through ong>theong> 1990s ong>toong>tal housing debt continued ong>toong> rise much faster than earnings and ong>theong>

Consumer Price Index and at an accelerating rate.This began ong>toong> pull house prices first above ong>theong> CPI index

from about 1996, ong>theong>n above ong>theong> earnings index in about 2000 and ong>theong>n inong>toong> a steeply rising curve from that

date ong>toong> ong>theong> latest available figures.

By 2005 housing unaffordability has become all ong>toong>o clear from ong>theong> wide gap that has opened up between ong>theong>

house price and earnings indices. Since over ong>theong> period ong>theong> debt outstanding rose by over 1600% while ong>theong>

song>toong>ck of houses ong>toong> be purchased increased by only 21% it would be remarkable had ong>theong>re been any oong>theong>r

outcome than rapid house price inflation and sharply declining affordability.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 39


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 6 -

The loss of low rent housing

(Peter Ambrose)

Over ong>theong> course of ong>theong> twentieth century profound changes ong>toong>ok place in almost all aspects of UK housing

provision and tenure patterns. Around 1900 ong>theong> vast majority of households rented from a private landlord with

only about 10% owning ong>theong> property ong>theong>y lived in.The rate of home ownership in ong>theong> UK is now 72.3%

(Wilcox 2004,Table 17d).

Conditions have improved immensely as a result of 100 years of housing and public health legislation although

in 2001 4.2% of housing in England (or 885,000 units) were still classed as unfit for habitation (Wilcox 2004,

Table 23b).There has been very little change in ong>theong> number of rooms per housing unit over ong>theong> last 100 years

but ong>theong> level of occupancy has fallen from about 4.0 people per household ong>toong> 2.4 in 2001 (Glennerster et al.

2004, p57).The 2001 Census shows that now almost one third of households had only a single member and

only one fifth had dependent children.

Over ong>theong> first six or more decades of ong>theong> twentieth century ong>theong> UK housing provision system (see Appendix 1)

shifted ong>toong>wards a dual tenure pattern.The bulk of ong>theong> output was eiong>theong>r housing for sale ong>toong> owner-occupiers or

local authority housing for rent.The song>toong>ck of local authority housing in ong>theong> UK peaked at about 6.5 million

units, or 31.5% of ong>toong>tal song>toong>ck, in 1976. It has since declined ong>toong> about half that number - about 3.3 million units

(Wilcox 2004,Table 17c).

Loss of council song>toong>ck ong>toong> owner-occupancy

Much of ong>theong> explanation for ong>theong> loss of public song>toong>ck lies in ong>theong> large volume of individual sales from local

authorities ong>toong> owner-occupancy under ong>theong> ‘right ong>toong> buy’ legislation. Mrs Thatcher was a firm opponent of

council housing. Under her administrations local authority housing ceased ong>toong> be seen as a financially rational and

socially acceptable solution ong>toong> housing needs and became instead ong>theong> problem.The ‘right ong>toong> buy’ policy was a

sure-fire elecong>toong>ral success. Sales of local authority song>toong>ck inong>toong> owner-occupancy ong>toong>talled over 2.2 million units

between 1980 and 2003 and ong>theong> annual number has been rising sharply under new Labour (Wilcox 2004 Table

20d).The loss of council song>toong>ck has especially affected many rural areas in ong>theong> home counties and low cost

housing has virtually disappeared.

Sales have been at a massive discount, ong>theong> average ranging from about 50% in 1999 ong>toong> 42% in 2002 (Wilcox

2003a, Figure 2.4.1). Following ong>theong> sale of a local authority house or flat ong>theong> average stay of ong>theong> purchasing

tenant is maybe 15-17 years but ong>theong>n ong>theong> unit is lost ong>toong> low rent song>toong>ck and for ong>theong> rest of its life changes hands

at market prices. Many council houses in, for example, Buckinghamshire were sold ong>toong> tenants for £25,000 and

have since been sold on at figures in ong>theong> £150,000/200,000 range.

In addition a substantial and growing number of sales are for ‘buy ong>toong> rent’.The number of ‘buy ong>toong> let’ loans has

increased sharply (Wilcox 2004,Table 55):

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 41

End of 1998 28,700

End of 2000 120,300

End of 2003 408,300

This has ong>theong> effect of transferring significant numbers of units from council renting ong>toong> private renting. As was

shown in Appendix 3 it is private secong>toong>r rents that have outpaced ong>theong> oong>theong>r categories over ong>theong> past two decades

both as a proportion of average earnings and in absolute terms. Finally it is also relevant that ong>theong> house sales and

transfers normally include ong>theong> freehold land on which ong>theong> house stands so this becomes a facong>toong>r precluding ong>theong>

future development of this land for low rent housing by ong>theong> local authority. It also precludes ong>theong> local authority

from benefiting from future land value rises.

Loss of council song>toong>ck by transfers ong>toong> RSLs

In ong>theong> 1988-2003 period about 970,000 formerly local authority homes have been transferred ong>toong> housing

associations by ‘song>toong>ck transfer’ (Pawson in Wilcox 2004).The average price per dwelling in ong>theong> 126 transfers in

England over this period was £8,096 (Wilcox 2004,Table 68a).This transfer of song>toong>ck largely reflects ong>theong>

political reality that funding by means of Social Housing Grant ong>toong> enable councils ong>toong> reach ong>theong> Decent Homes

Standard (DHS) by 2010 is heavily dependent on moving homes from local authority ong>toong> some oong>theong>r ownership -

unless ong>theong> housing authority reaches ‘high performing’ status (DETR 2000).This reflects an even more

fundamental drive ong>toong> enable housing providers ong>toong> access funds from ong>theong> private capital market so as ong>toong> remove

as much of ong>theong> capital cost as possible from ong>theong> Public Secong>toong>r Borrowing Requirement.

Most transfers, especially in midland and norong>theong>rn cities, have been of ong>theong> whole song>toong>ck and this has

‘...eliminated state housing from about a third of England’ (Pawson ibid) and from Glasgow. Much of this song>toong>ck

has been transferred ong>toong> housing associations specially set up for ong>theong> purpose in order ‘>toong> retain some vestige

of local accountability’ (ibid).

A tenant vote in favour of transfer is a prerequisite.‘Yes’ votes have, until recently, been in ong>theong> majority.The

pattern of results partly reflects ong>theong> much greater level of funding available ong>toong> ong>theong> Yes campaigners compared ong>toong>

ong>theong> No. But in a number of high profile cases, notably Birmingham and Southwark, ong>theong>re has been a No vote in

ong>theong> tenant ballot. In recent months this has been repeated in such disparate areas as Leicester (92% against

transfer),Wandsworth (83% against), Brisong>toong>l, South Derbyshire, Milong>toong>n Keynes, Harrogate, Lewes, Cambridge,

Oxford and a number of oong>theong>r authorities. In oong>theong>r areas such as Blackpool ong>theong> council has advised tenants ong>toong>

reject transfer.

Probably ong>toong> a large extent Yes votes by tenants reflect a perception that this is ong>theong> only way ong>toong> access funds for

much needed repairs and renewal.This is substantially true in terms of direct Government investment in local

authorities ong>toong> carry out repairs, although oong>theong>r routes ong>toong> funding approval are available such as turning over ong>theong>

song>toong>ck ong>toong> management by an ALMO – an Arms Length Management Organisation.

There is a vigorous campaign led by Defend Council Housing, supported by over 250 MPs and many councils,

for ong>theong> implementation of ong>theong> fourth option of more direct investment in councils ong>toong> build and manage song>toong>ck.

This is in addition ong>toong> ong>theong> currently available three options - transfers, ong>theong> use of ong>theong> Private Finance Initiative

and ALMOs.This fourth option was virtually promised by ong>theong> Deputy ong>Primeong> ong>Ministerong> in September 2004 but is

still subject ong>toong> political negotiation.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

The effects of transfer on rents, security and management

The effects of transfer on rent levels for this large segment of formerly low rent housing depends on ong>theong> rent

agreements made at ong>theong> point of transfer. Before 2002 ong>theong>se generally provided for rent increases at RPI+1%

although some transferee’s business plans envisage RPI+2% for perhaps a 30 year period. Following ong>theong>

Government’s rent regime introduced in 2001 ong>theong> rent increases are expected ong>toong> be only RPI+0.5%.This does

not sound draconian but it means that under all ong>theong>se alternative scenarios rents will rise in real terms when ong>theong>

prices of most oong>theong>r consumer goods are falling in real terms. One outcome of ong>theong> transfers of song>toong>ck has been

an increase in ong>theong> cost of housing benefit. In 2003 ong>theong> average weekly housing benefit payment ong>toong> local authority

tenants in Great Britain was £48.10 and ong>toong> RSL tenants £58.00 (Wilcox 2004,Table 118).

Transfer also has an effect on ong>theong> security of tenure and statuong>toong>ry rights of tenants since ong>theong> tenancy becomes

‘assured’ raong>theong>r than secure. According ong>toong> Inside Housing (19 February 2003) evictions by RSLs have risen by

36% and figures from Communities Scotland show that ong>theong> number of housing association evictions had risen by

64% in ong>theong> two years ong>toong> 2000/01 ong>toong> nearly double ong>theong> rate for council evictions.

Pawson (2004) notes that ong>theong>re have been changes in ong>theong> culture of housing management following transfer

with ‘...more managerialist and entrepreneurial tendencies.’This has occurred concomitantly with ong>theong> shift

ong>toong>wards housing groups that combine a number of pre-existing RSLs in a loose structure. Housing groups now

own over 70% of ong>theong> RSL song>toong>ck. Given ong>theong> very wide diversity in RSL type, size and specificity of provision

ong>theong>re is no very clear guidance from ong>theong> Housing Corporation about ong>theong> make-up of management boards,

although ong>theong>re is a requirement in ong>theong> various regulaong>toong>ry codes that board members have an appropriate mix of

skill and experience for good governance.There is some emphasis on tenant involvement in management and a

clear statement on this issue is required from RSLs by 1 April 2005.

The Audit Commission (Audit Commission 2004) has criticised councils for ‘mis-selling’ ong>theong> role of board

members when promoting transfers. Resident representation does not necessarily empower tenants or

leaseholders since ong>theong> resident members are normally in a minority and may not be representative of local

people as a whole. In any case all board members, wheong>theong>r residents or not, are legally obliged ong>toong> give primacy

ong>toong> ong>theong> company’s interests and are not separately accountable ong>toong> those ong>theong>y are appointed ong>toong> represent.The

report finds no clear evidence of benefits arising from resident board members.

There are no clear signs of management improvement gains from transfer. In fact it has been found (National

Audit Office 2003) that:

‘...nearly a fifth of English transfer Housing Associations have given rise ong>toong> serious Housing

Corporation concerns in relation ong>toong> ong>theong>ir financial viability and/or governance.’

Pawson (in Wilcox 2004) concludes that ong>theong>re is:

‘...remarkably little evidence available ong>toong> inform any judgement as ong>toong> wheong>theong>r transfer HAs actually

manage housing more efficiently and effectively than local authorities’.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 43

‘>toong>ck transfer has created social landlords which, whilst subject ong>toong> state regulation, cannot be

directly controlled by central government’ [an interesting echo of Nye Bevan’s observation that ong>theong>

speculative housebuilder was not a plannable instrument]

Pawson goes on ong>toong> point out:

‘This is an important issue given transfer HAs’ capacity ong>toong> generate future revenue surpluses

beyond Whitehall’s reach (HACAS Consulting 1999; Malpass and Mullins 2002), and ong>theong>refore not

susceptible ong>toong> re-distribution according ong>toong> centrally defined priorities.’

Given that no low rent or management advantages appear ong>toong> stem from transfer, and that ong>theong>re is a clear loss of

democratic accountability, it is tempting ong>toong> conclude with Pawson and Fancy (2003) that transfer is part of a

project which seeks ong>toong> bring commercial disciplines raong>theong>r than local democratic oversight inong>toong> this important

area of service provision (see Strategic Issue 5 in Appendix 1). If so it appears ong>toong> have an ideological raong>theong>r than

a rational basis - perhaps a latter day muted version of ong>theong> rationales for property ownership advanced by

Bellman, Chamberlain and oong>theong>rs in ong>theong> inter-war years in ong>theong> last century.

Residualisation of council housing

Council housing was initially available at a wide range of rent levels and tended ong>toong> produce ‘mixed

communities’. Under some of ong>theong> subsidy arrangements that have been in force ong>theong> design and build quality of

council housing has been high (Ambrose 1994, pp.103-117). But ong>theong> tendency ong>toong> build ‘down ong>toong> a price’ over

ong>theong> past 50 years (see ibid, section 3.2, for a case study of false economy in ong>theong> late 1940s in Stepney) plus ong>theong>

pushing of ‘high rise’ solutions by governments and commercial providers (until ong>theong> move away from this in late

1960s) plus ong>theong> reduction of management and maintenance budgets over ong>theong> decades have all worked ong>toong>

undermine ong>theong> morale of housing staff, impede quality improvements and reduce space standards.

Much council housing has been built in large estates ong>toong> achieve scale economies. As ong>theong> song>toong>ck has shrunk and

rents have remained low compared ong>toong> all oong>theong>r options, this form of occupancy has been more and more ong>theong>

only choice for those with lowest incomes. Most recently ong>theong> tenure has become one of ‘last resort’ for new

entrants ong>toong> housing and in ‘high pressure’ areas such as Brighong>toong>n and Hove almost all ong>theong> allocations are ong>toong> those

in some kind of urgent housing need (Ambrose, MacDonald et al. 2002).This has often meant ong>theong> concentration

of in close proximity of large numbers of low income households most of whom are likely ong>toong> be facing a set of

poverty-related problems.

The consequent lack of local market power has often produced ‘area effects’ in terms of ong>theong> decline of local

services of all kinds, poor access ong>toong> lower cost food outlets and ong>theong> prevalence of longstanding characteristics

such as low participation in ong>theong> labour market.This combination has often lowered collective and individual

aspirations and led ong>toong> stigmatisation and a form of generalised scapegoating.The concentration has also

encouraged an over-facile depiction of ong>theong> problem of poverty as one largely confined ong>toong> ‘deprived’ or

‘problem’ estates whereas many studies from Townsend (1979) onwards have shown that poverty is virtually



Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

The RSL secong>toong>r - making good ong>theong> gap

Most governments over ong>theong> last three decades have promoted ong>theong> idea that ong>theong> RSL secong>toong>r should replace ong>theong>

council secong>toong>r as ong>theong> main provider of ‘social housing’ (for a discussion see Black and Hamnett 1985). But ong>theong>

increase in ong>theong> level of output from ong>theong> RSL secong>toong>r has not remotely matched ong>theong> almost ong>toong>tal decline in output

from ong>theong> council secong>toong>r. Housing Associations completions in Great Britain which were running at over 30,000

per year between 1993 and 1996 were down ong>toong> about 17,000 in 2000 (Wilcox 2004,Table 19h). As a direct

consequence of this drop in output, plus ong>theong> near cessation of council provision, ong>theong> availability of ‘social

housing’ lettings in ong>theong> RSL and council secong>toong>rs combined has fallen sharply from 540,000 in 1995 ong>toong> 432,000

in 2003 (Wilcox 2004,Tables 96 and 98).

‘Key worker’ schemes – making good ong>theong> gap

One government response ong>toong> ong>theong> worsening shortage of affordable housing has been a set of crisis-response

schemes aimed at making it easier for middle and low income ‘key worker’ households ong>toong> access housing,

especially in London and ong>theong> South East.The Starter Homes Initiative began in 2001 with a £250 million budget

ong>toong> help up ong>toong> 10,000 workers access housing.This has now been replaced by ong>theong> Key Worker Living Programme

which offers ‘homebuy’ loans up ong>toong> £50,000 for teachers, nurses, police staff and so on (or up ong>toong> £100,000 for

future education ‘leaders’). It also seeks ong>toong> facilitate shared ownership, where a loan is made for purchasing a

proportion of ong>theong> property, perhaps 25%, 50% or 75%, and ong>toong> permit renting at an ‘intermediate’ rent between

market and RSL levels.

All ong>theong>se schemes appear ong>toong> be limited in scope in ong>theong> face of ong>theong> affordability problem and ong>theong>y raise

divisiveness issues since selections have ong>toong> be made between applicant households all of whom may be in severe

housing need. In terms of ong>theong> model in Appendix 1 ong>theong>y are also classically demand side ‘solutions’ and are

likely ong>toong> exert yet more upward pressure on house prices and rents.

Summary - transfers from low rent ong>toong> high rent secong>toong>rs

The figures in this Appendix show a transfer of about half ong>theong> previously existing local authority song>toong>ck ong>toong> RSLs

and ong>toong> private landlords.The secong>toong>ral rent trend comparisons in Appendix 3 make it clear that each of ong>theong>se

transfers has moved a home from a lower rent tenure ong>toong> a higher rent tenure and, probably in ong>theong> majority of

cases, imposed an additional cost on ong>theong> housing benefit system.This severe loss of low rent song>toong>ck helps ong>toong>

explain ong>theong> general picture of increasing unaffordabilityand of residualisation where some song>toong>ck remains.

There is no inevitability about ong>theong>se trends.The local authority song>toong>ck, and ong>theong> tenure as a whole, has been run

down by a series of policies designed ong>toong> undermine this option.There is no inherent reason, given proper

planning, design and funding and more investment in staff and training, why public housing should not once

again be capable of delivering high quality, sustainable homes in socially and economically mixed communities –

and with ong>theong> clear gains in welfare outcomes over ong>theong> private rented secong>toong>r evident in Australia (see Appendix

10). Equally a return ong>toong> hisong>toong>rically pooled rent-setting could see ong>theong>se benefits delivered at low and stable


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Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 7 - Some problems of

demand side support

The rising cost of housing related benefits

(Peter Ambrose and Paul Nicolson)

An inevitable consequence of ong>theong> rise in all categories of rent evidenced in Appendix 3 has been ong>theong> increasing

cost ong>toong> ong>theong> Exchequer of housing benefits and related allowances.The average benefits paid weekly ong>toong> housing

association tenants rose from £32.20 in 1992 ong>toong> £58.00 in 2003 while for private tenants ong>theong> rise was from

£40.70 ong>toong> £71.60 (Wilcox 2004,Table 116b).The national cost rose from £5.4 billion (1986/87 outturn) ong>toong>

£15.8 billion (2002/2003 outturn) and ong>toong> a planned £19.7 billion in 2007/08 (Wilcox 2004,Table 114).This

form of housing support makes up over 14% of all social security benefits and tax credits.

This raises ong>theong> strategic issue of ong>theong> longer term rationality of spending so much housing support on ong>theong>

demand side, where it works ong>toong> support rising rents, raong>theong>r than on ong>theong> supply side, where it would work ong>toong>

stimulate housing production (Strategic Issue 4 in Appendix 1).

How it fits in with ong>theong> Appendix 1 model

In terms of ong>theong> framework in Appendix 1 ong>theong>se payments flow along line B at ong>theong> botong>toong>m of ong>theong> diagram. Until

ong>theong> 1990s ong>theong>re were also substantial flows along line B in ong>theong> form of MIRAS, ong>theong> tax concession ong>toong> purchasing

owner-occupiers.The cost of this concession peaked at £7.7 billion per year in 1990/91 when it was worth

£800 per year ong>toong> each recipient (Wilcox 2004,Table 105).

By ong>theong> end of ong>theong> 1990s MIRAS had effectively been ended. It had become obvious that ong>theong> concession, which

was available ong>toong> ong>theong> purchasers of existing as well as new homes, simply worked as an additional facong>toong>r pushing

up house prices raong>theong>r than as a stimulant ong>toong> increase housing production.The same argument, in relation ong>toong>

rent levels, applies ong>toong> housing benefits.There is little evidence that this increasingly expensive form of support

helps ong>toong> increase supply but clearly it increases rents ong>toong> ong>theong> evident benefit of ong>theong> owners of rented property. It

is widely and correctly seen as a subsidy ong>toong> landlords. But as long as housing costs remain at current levels of

unaffordability it is also essential ong>toong> ong>theong> incomes and well-being of ong>theong> unemployed and low paid.

A ‘gap-plugging’ measure - opportunity cost of ong>theong> support

This form of support is a clear example of a self-defeating ‘gap-plugging’ subsidy (discussed furong>theong>r in Appendix

16) that is a clear second-best ong>toong> policies geared ong>toong> reducing rents.

Over much ong>theong> same period as housing benefits have at least doubled in real terms ong>theong> investment in local

authority and housing association new build and renovation and private renovation has fallen in real terms from

£6.1 billion in 1983/84 ong>toong> £2.8 billion in 2000/01 (Wilcox 2004 Table 62b).Thus in very rough terms over ong>theong>

past 20 years ong>theong> ratio of public investment in ong>theong> production of rented housing compared ong>toong> public funds spent

on supporting rent levels has fallen from near parity at a ratio of 6 ong>toong> 5 ong>toong> a much lower ratio of 3 ong>toong> 16.This is

equivalent ong>toong> a fall from over 54% of ong>toong>tal support ong>toong> about 15%.The relationship between ong>theong> two trends is

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 47

shown in Figure 3.

(£ billions)


Figure 3 - Social housing investment and housing benefit 1987-2007 (planned)


Total housing and related benefits GB (cash)

Gross social housing investment GB (cash)





Source:Wilcox 2004,Tables 57a and 114

The results in terms of an acute shortage of low rent housing were evidenced in Appendix 4.The rise in housing

support payments has clearly been caused by ong>theong> growing gap between rising rent levels and ong>theong> persistent low

incomes of many of those seeking public secong>toong>r housing.

Some adverse effects on recipients

Dependence on housing benefit payments ong>toong> cover necessary rent outgoings, while currently necessary for

millions of people, brings its own difficulties for recipients.These come under three main headings - stress

arising from ong>theong> pressures exerted by benefits agencies, very high marginal tax rates when moving inong>toong> work

and take-up rates below 100%.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

1. Stress in dealing with ong>theong> benefits agencies

There are constantly occurring examples of bureaucratic oppression of vulnerable households.The situation is

often exacerbated because those in arrears, RSLs and local authorities are often unaware of ong>theong> National

Standards for Enforcement Agents issued by ong>theong> Lord Chancellor’s Department in April 2002.These seek ong>toong>

provide a degree of protection for vulnerable and socially excluded debong>toong>rs in a number of ways but ong>theong>y are

not always observed.

The following five examples of inappropriate pressure are typical.

Housing Association 1 (2002)

In ong>theong> early days of Working Families Tax Credit ong>theong> husband of a couple with two children was

employed as a delivery driver. He had been under pressure from ong>theong> Jobcentre ong>toong> get a job. He had

ong>toong> be at work at 4am when ong>theong>re was no public transport. He ong>theong>refore had ong>toong> have a car ong>toong> get ong>toong>

work which cost £33 a week The local authority decided that ong>theong>y had overpaid £383.95 housing

benefit at ong>theong> six month review under ong>theong> WFTC rules and so deducted £8.10 a week from ong>theong>ir

housing benefit.The absence of Council Tax benefit, rent arrears and ong>theong> cost of getting ong>toong> work

made ong>theong>m worse off in work than unemployed.They were £1200 in debt ong>toong> Provident plc ong>theong> last

loan being £1000 plus £700 interest or 170% APR.They were evicted for rent arrears.They

separated and she was housed by ong>theong> local authority in anoong>theong>r Housing Association property at

rent of £175 a week.

Local Authority 1 (2003)

A pregnant woman with three children and a husband with heart disease was threatened with

eviction by a local authority for rent arrears of £600.The local authority was shown a letter from

ong>theong> docong>toong>r confirming ong>theong>se circumstances but insisted on taking ong>theong> matter ong>toong> court instead of

coming ong>toong> an arrangement for ong>theong> arrears ong>toong> be paid off. On sight of ong>theong> docong>toong>r’s letter ong>theong> judge

decided not ong>toong> evict and an arrangement was made ong>toong> pay off ong>theong> arrears as had been proposed.

Housing Association 2 (2004)

The Housing Association threatened eviction and demanded an impossible payment of £50 a week

on a date when ong>theong> Housing Benefit was due from ong>theong> Local Authority a month in arrears.The

letter from ong>theong> Housing Association was written without any attempt ong>toong> enquire wheong>theong>r ong>theong>

circumstances of ong>theong> unemployed lone parent with two children had changed. Clearly prompt and

regular payments of £50 a week were impossible out of unemployment benefit after separation

from her husband.The unemployment benefit had been applied for but not paid for three months,

ong>theong> dependent housing benefit likewise. Rent arrears had been mounting up at over £700 a month.

Her husband left her with two young children just before Christmas. She became depressed and

was now receiving medication.The shortage of affordable housing resulted in this family being

placed in a Housing Association property at a rent of £175 a week (social housing rents are

normally £60 - £90 a week). She became ill and unemployed.

(The upshot of this case is that she is paying off rent arrears at £7 a week deducted from an already

inadequate JSA - but she was not evicted)

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 49

Housing Association 3

Private Landlord 1


Due ong>toong> ong>theong> complications of tax credits ong>theong> local council claimed ong>theong>re had been an over payment

of £1500 housing benefit ong>toong> ong>theong> Housing Association in 2001 and ong>toong>ok ong>theong> money back.The

Housing Association ong>theong>n claimed £1500 rent arrears and evicted ong>theong> couple with two children,

adding £1000 ong>toong> ong>theong> rent arrears for repairs.The family moved through two private rented

properties and finally found a private rented home at £180 a week.They are now receiving full

housing benefit.The woman had a baby and ong>theong>re were a number of changes of circumstances

involving unemployment, separation and coming ong>toong>geong>theong>r again with which ong>theong> housing benefit

agency did not keep up. More rent arrears occurred and ong>theong>y were advised by ong>theong> local authority

that if ong>theong>y were evicted ong>theong>y would be classed as intentionally homeless. She is receiving treatment

for depression.They are now being questioned under caution because ong>theong> LA says ong>theong>y were not

informed about a change of circumstances. Special payments for commencing fraud proceedings are

being made ong>toong> local authorities by central government.This family on £161 a week plus tax credits

is worse off in work than unemployed, and ong>theong>y are paying off £30 a week rent arrears.The

landlord now wants ong>toong> sell ong>theong> property and ong>theong>y are being evicted so he can gain vacant


Local Authority 2 (2004)

In this case ong>theong> local authority assumed that an unemployed lone parent’s son had been living at

home as non dependent and sent her a computer driven claim for £2638 rent arrears, with threats

of ong>theong> bailiffs and county court appearances. He had in fact left home two years earlier ong>toong> undergo

training as a chef.They had been ong>toong>ld.

2. High marginal tax rates on moving inong>toong> work

In ong>theong> survey of low paid workers carried out as part of ong>theong> ‘Low Cost but Acceptable’ project in Brighong>toong>n and

Hove (Ambrose 2003) it was found that in some household situations moving off benefits inong>toong> work could lead

ong>toong> a gain of only 11p per hour when account was taken of ong>theong> reductions in income brought about by ong>theong> tapers

in income support and oong>theong>r benefit payments. Marginal tax rates of up ong>toong> 97% were calculated for those

moving inong>toong> a job. It was found that ong>theong> ‘poverty trap escape point’ was at a gross household income of £22,620

per year (as at 2003) and that up ong>toong> a quarter of households in ong>theong> area had incomes below this level.

When so many households have ong>toong> depend on housing benefit payments ong>toong> enable ong>theong>m ong>toong> access appropriate

housing ong>theong>re are clearly disincentive effects ong>toong> moving inong>toong> employment.This runs counter ong>toong> Government

‘welfare ong>toong> work’ intentions.

3. Take-up rates below 100%

While take-up rates for housing benefit and Council Tax benefit are high ong>theong>y are significantly below 100%. In

2001/02 housing benefit take-up rates for local authority tenants were in ong>theong> range 89-94% and for private

renters in ong>theong> range 80-89% (Wilcox 2004,Table 117).Take-up rates for Council Tax benefits were marginally

lower than ong>theong>se and as low as 39-44% for eligible owner-occupiers.Take-up rates for both forms of benefit

were especially low for non-child households and for pensioners.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

The need ong>toong> re-balance support

The shortage of low rent housing and ong>theong> escalating public cost of helping lower income households ong>toong> access

suitable housing points ong>toong> ong>theong> need ong>toong> consider a re-balancing of housing support arrangements ong>toong> regain ong>theong>

balance of ong>theong> late 1970s.There seem ong>toong> be clear arguments for an increase in supply side support in order ong>toong>

increase ong>theong> production of low rent housing, wheong>theong>r in ong>theong> local authority or RSL secong>toong>rs, and a return ong>toong>

rent-setting strategies that make use of pooling ong>theong> hisong>toong>ric cost in order first ong>toong> stabilise and ong>theong>n ong>toong> begin ong>toong>

reduce rents.

In combination ong>theong>se two facong>toong>rs should gradually reduce ong>theong> expenditure necessary on demand side payments

such as housing benefit.This might begin ong>toong> redress ong>theong> balance of line A ong>toong> line B finance flows in ong>theong> model in

Appendix 1 ong>toong> something more like ong>theong> balance in ong>theong> early 1980s.

The need for sensitive transition arrangements

If, following a modelling of ong>theong> effects, ong>theong> need for a re-balancing of support is accepted ong>theong> strategic aim

might be ong>toong> bring about a reduction in ong>toong>tal annual housing benefit payments by some specified amount per

year. But ong>theong> transition arrangements would need ong>toong> be very carefully worked out so as not ong>toong> add furong>theong>r

pressures on ong>theong> finances of poorer households. The rent reductions would need ong>toong> occur first and ong>theong>n ong>theong> public

finance benefits in terms of reduced requirements for housing benefit, a reduced incidence of NHS costs

generated by stressful situations and less impediment ong>toong> transitions from benefits ong>toong> work, would begin ong>toong> be


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 51


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

What does ‘privatisation’ mean

Appendix 8 - An international

comparative study of housing


(Peter Ambrose)

The housing policies of ong>theong> Thatcher administrations, which have been broadly adhered ong>toong> by ong>theong> two post-1997

New Labour governments, have brought about a marked shift in ong>theong> private ong>toong> public balance of housing

provision, ownership and management.This has been loosely termed ‘privatisation’. But in a complex and

segmented activity like housing production this term is not an especially helpful one unless carefully defined.

With reference ong>toong> ong>theong> five-stage model in Appendix 1 ong>theong> private/public balance at Stage 1 (promotion) matters

because this sets in train ong>theong> pattern of new production. It also matters at Stage 2 (financing) because housing

provision is capital-intensive and ong>theong> outcome depends very much on ong>theong> terms at which loan capital and grant

subsidy is made available. If capital is available only at full market rates and repayment terms ong>theong>n costs will be

higher than if some preferential arrangements apply. Stage 3 (construction) has always been mostly in private

ownership so ong>theong> issue is less sensitive here.

At Stage 4 (allocation) ong>theong> private/public balance is crucially significant because it determines how much

housing is allocated according ong>toong> market power and how much according ong>toong> need.The more that market power

is ong>theong> determinant ong>theong> more income inequalities will be reflected in, and reinforced by, housing inequalities.The

private/public balance of song>toong>ck will be affected only marginally by ong>theong> balance of new production since this is

provides only about a 1% increment per year.What matters much more is any transfer of ong>theong> existing song>toong>ck

from allocation on ong>theong> basis of need ong>toong> allocation on ong>theong> basis of market power - in oong>theong>r words sales and

transfers of ong>theong> public song>toong>ck.

Apart from ong>theong> issue of ong>theong> differences in sensitivity by stage it should be noted that ong>theong>re are at least two

meanings of ong>theong> term ‘privatisation’. It can mean privatisation of ong>theong> actual song>toong>ck (by means of ownership

transfer) or it can mean privatisation of ong>theong> rights of ong>theong> owner (by means of deregulation of rents, tenure

security and management practices).

What effects does ‘privatisation’ have

While privatisation, broadly defined, is likely ong>toong> have profound effects on housing supply, access and

management, ong>theong> methodological problems of carrying out any before and after study of its effects are obvious.

The processes are complex, ong>theong>re are a host of intervening variables and ong>theong>re is no control group.There is also

no very clear view of what ong>theong> housing system is trying ong>toong> achieve so ong>theong>re is no self-evident test of ‘success’.

Neverong>theong>less in ong>theong> early 1990s ong>theong> question of ong>theong> effects of housing privatisation became of keen interest ong>toong>

ong>theong> Russian and Swedish governments.The Russians were passing through a rapid process of privatisation

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 53

following ong>theong> political changes and ong>theong>y were keen ong>toong> assess ong>theong> likely effects in ong>theong> field of housing.The Swedish

government had recently partly dismantled ong>theong> previous housing arrangements following ong>theong> 1991 Election that

had produced a marked swing ong>toong> ong>theong> right. Housing experts in both countries sought ong>toong> learn what ong>theong>y could

from ong>theong> housing privatisation in ong>theong> UK following ong>theong> rapid ascendancy of market forces during ong>theong> Thatcher


The INTAS comparative study

Consequently a study was initiated funded by INTAS (The International Association for ong>theong> Promotion of Cooperation

with Scientists from ong>theong> New Independent States of ong>theong> Former Soviet Union) and ong>theong> Swedish

Council for Building Research.The study was carried out by teams from ong>theong> EUROGRAD Institute in St

Petersburg (led by Professor Boris Grinchel), ong>theong> University of Örebro (led by Professor Berth Danermark) and

ong>theong> Centre for Urban and Regional Research at ong>theong> University of Sussex (led by Dr Peter Ambrose).The project

reported in 1998 (Ambrose, Danermark and Grinchel 1998).

It was agreed between ong>theong> three teams that ong>theong>re was no feasible way of carrying out a comparative study

through time oong>theong>r than by using ong>theong> framework set out in Appendix 1.The analysis was designed ong>toong> include all

forms of housing, private, public and voluntary secong>toong>r.The Swedish and UK data on promotion, financing and

sources, construction, allocation, re-allocation and song>toong>ck balance were sufficiently robust ong>toong> calibrate ong>theong> model.

The Russian data had been collated in entirely different forms and was judged ong>toong> be less reliable.

The timescale of ong>theong> privatisation process was also very different in each case. In ong>theong> UK case ong>theong> years 1978 ong>toong>

1995 were chosen ong>toong> illustrate ong>theong> spread of effects whereas in Sweden ong>theong>re was a shorter timescale, 1990-

1995, since ong>theong> move ong>toong>wards market processes had started only in 1991.The Swedish team felt that most

benefit for ong>theong>m would come from learning from ong>theong> experience of ong>theong> UK case about how ong>theong> early effects of

privatisation might develop inong>toong> later effects. For this reason a separate analysis of ong>theong> early period of UK

privatisation, from 1978 ong>toong> 1984, was built inong>toong> ong>theong> study.

Definitions of ‘success’

Socio-political differences made it extremely difficult ong>toong> arrive at any consensual set of indicaong>toong>rs of ‘success’ in

ong>theong> three countries since, in one case, ong>theong> test might be ong>theong> increase in executive housing in smart city-centre

locations whereas in anoong>theong>r it might be better access for lower income households. Neverong>theong>less several very

simple tests seemed valid across ong>theong> three systems - ong>theong> main one was ong>theong> extent ong>toong> which investment

committed at Stage 2 turned inong>toong> housing output and more allocations at Stages 3 and 4. Clearly in any cultural

setting it is reasonable ong>toong> expect that more input should be matched by more output.

Results - reduced cost-effectiveness

Applying this test ong>theong> results for Sweden and ong>theong> UK were quite clear.

In ong>theong> UK ong>theong> first period of privatisation saw an increase in investment from index 100 ong>toong> 118 (in real terms)

and a decrease in output in units from 100 ong>toong> 75 - a clear loss of system efficiency.The owner-occupancy

component in ong>theong> output rose from 53% ong>toong> 79% producing a narrowing of housing options.The effects in ong>theong>

Swedish case was more extreme - a 1990-95 decrease in investment from 100 ong>toong> 18 and a decrease in output


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

from 100 ong>toong> 22.

Over ong>theong> longer term comparison between 1978 and 1995 ong>theong> UK showed a continuation of ong>theong> trends evident

in ong>theong> first six years.There was an increase in real terms housing investment from 100 ong>toong> 122 and a fall in units

of output from 100 ong>toong> 68 - roughly speaking an increase of 22% in money in and a decrease of 32% in

production out - a marked loss of cost-effectiveness over ong>theong> longer term.

It was not possible within ong>theong> project ong>toong> seek reasons for this apparent sharp fall in ong>theong> efficiency of ong>theong> UK

system. Given ong>theong> data on land price trends given in oong>theong>r appendices it might be reasonable ong>toong> infer that some

investment found its way inong>toong> land holdings raong>theong>r than construction.The secong>toong>r composition of ong>theong> UK 1995

output was 79% owner-occupancy, 20% voluntary secong>toong>r and 1% public. Over ong>theong> five year Swedish study

period ong>theong> same trend was evident and private output rose from 36% ong>toong> 51 % of ong>toong>tal, largely at ong>theong> expense of

co-op housing. In both cases ong>theong> pattern of output tended ong>toong> limit choices.

The need for furong>theong>r studies

The study was an isolated one and we are not aware of any furong>theong>r attempts ong>toong> assess ong>theong> effects of housing

privatisation on system efficiency. In ong>theong> Swedish and UK cases ong>theong> introduction of more market forces inong>toong>

housing provision and management seemed ong>toong> have entailed both a reduction in system cost-effectiveness, in

that more money was going in and less housing was coming out, and a reduction of housing tenure choice. Since

both major political parties in ong>theong> UK currently make repeated claims that market forces lead ong>toong> more efficient

solutions and more consumer choice it might now be timely ong>toong> test ong>theong>se assertions in relation ong>toong> housing

provision with furong>theong>r empirical research.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 55


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 9 -

The flow of development land -

how not ong>toong> do it

(Peter Ambrose)

The problem of managing ong>theong> flow of development land in such a way that competing interests, both financial

and conservational, are balanced has not been effectively solved.Three case studies - one an international

comparative study of development in ‘growth’ regions, one of inner city regeneration and one of development

on an urban fringe - will illustrate how ong>theong> UK system of development land supply fails ong>toong> achieve cost-effective

and distributively fair solutions. Appendix 16 will discuss a range of better solutions.

Case Study 1 - Housing development in growth regions

In ong>theong> late 1980s a comparative study, funded by ESRC and Swedish Building Institute grants, was carried out by

researchers at ong>theong> Centre for Urban and Regional Studies at ong>theong> University of Sussex in collaboration with

researchers at ong>theong> University of Örebro.The aim was ong>toong> establish which of three national land supply and

housing provision systems, those of France, Sweden and ong>theong> UK, responded best ong>toong> ong>theong> pressures created by

rapid sub-regional employment growth.The four areas selected for study were a group of nine communes in

ong>theong> E4 corridor between Song>toong>ckholm and Uppsala, a group of municipalities ong>toong> ong>theong> south west of Paris, ong>theong>

metropolitan area of Toulouse and ong>theong> county of Berkshire.

All ong>theong>se areas were experiencing rapid employment growth in ‘high-tech’ manufacturing, financial and

producer services and research and development activities.They were drawing in new workers, many of ong>theong>m

highly qualified and highly paid, and ong>theong>re were consequent pressures on ong>theong> existing housing song>toong>ck, much of

which was not of ‘executive’ standard (ong>theong> study is fully written up in a number of works including Barlow,

Ambrose and Duncan 1988, Danermark and Vinterheimer, 1991, Barlow and Duncan 1992, Barlow 1993 and

Ambrose 1994, Chapter 10).

The areas were compared in terms of a number of indicaong>toong>rs such as ong>theong> rate of new output, ong>theong> range and

tenure balance of housing produced (so that ong>theong> needs of low income as well as high income workers were met)

and ong>theong> inflationary effects noted both on house prices and land prices.

At ong>theong> heart of ong>theong> Swedish system at this time was ong>theong> State Housing Loan arrangements which provided

construction finance at preferential rates if builders worked ong>toong> ong>theong> housing requirements laid down by ong>theong>

communes and within specified cost limits.The communes ong>theong>mselves were effectively ong>theong> monopoly providers

of land for development since ong>theong>y had powers ong>toong> acquire land for this purpose at very close ong>toong> existing use

value.The Swedish construction industry had been found from previous research (Dickens et al. 1985 and

Duncan 1986) ong>toong> be more cost-effective than that in ong>theong> UK.This earlier work had established that in Sweden

construcong>toong>rs competed largely on construction quality and innovation whereas in ong>theong> UK more profit was ong>toong> be

made from land holding and speculation so less was invested in actual construction improvements and


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 57

The evaluative comparison focused largely on ong>theong> UK and Sweden.The Swedish arrangements produced a

higher level of output at 7.3 housing units per 1000 population compared ong>toong> 6.1 per 1000 in Berkshire. Also in

ong>theong> Swedish case ong>theong>re was a diversity of outcomes - 38% of ong>theong> new housing was built by ong>theong> communes for

renting, 27% was built by co-ops, mostly for renting, a small proportion was for private renting and ong>theong> rest

was for owner-occupancy. In Berkshire ong>theong> proportion build speculatively for sale was 85% in 1980 and had

reached 94% by 1989.There was very little production of low rent housing.

In terms of user costs ong>theong>re was very little rent inflation in ong>theong> Swedish case whereas in Berkshire ong>theong>re was

considerable house price inflation, partly due ong>toong> a rise in housebuilding costs in Britain of 47% between 1981

and 1987 (ong>theong> corresponding figure in Sweden was 24%).These trends in house prices were reflected in trends

in development land prices.These rose by 436% in Berkshire during ong>theong> decade so that by 1988 ong>theong> average

price for single-dwelling housing land was £301,000 per hectare in ong>theong> E4 corridor and £1,222,000 per hectare

in Berkshire.

No analysis was carried out of ong>theong> effects of ong>theong> two very different housing outcomes on issues such as ong>theong>

recruitment and retention of labour for employers in ong>theong> two areas. But it may be surmised that Swedish

employers benefited from ong>theong> increase in ong>theong> supply and range of housing in ong>theong> E4 area ong>toong> a greater extent that

did employers in Berkshire where new recruits ong>toong> ong>theong> area would face limited housing choice and very high

costs and would demand more in ong>theong> way of relocation packages.

The comparison was instructive in that ong>theong> highly regulated land and finance supply system operating in Sweden

had delivered more output, more variety, more consumer choice and lower user costs than ong>theong> emphatically

‘free-market’ system operating in Berkshire.Yet it is ong>theong> free market that is supposed ong>toong> provide more choice at

lower costs.

Case Study 2 - ong>theong> Stepney Gasworks site

What happened

The former gasworks site in ong>theong> Central Stepney Single Regeneration Budget (SRB) area provides anoong>theong>r good

illustration of ong>theong> present shortcomings of ong>theong> planning system.The site was originally owned by British Gas,

ong>theong>mselves members of ong>theong> SRB Partnership. It was already largely disused in ong>theong> early 1980s when it was one

of 22 ‘windfall’ sites considered under ong>theong> Heseltine review of development possibilities in docklands.The

ownership has now largely passed inong>toong> ong>theong> hands of private secong>toong>r housebuilders and developers. In mid-2002 it

remained undeveloped but under a draft Section 106 planning agreement dated March 2001 ong>theong> proposed uses

are 320 housing units for sale, 62 for shared ownership and 34 for rent, a few of ong>theong>m larger properties.There

was also provision for accommodation for about 250 ‘key workers’ and some office space.

In December 2003 Bellway Homes (Thames Gateway) Ltd lodged a full planning application for:

‘...redevelopment ong>toong> provide two ong>toong> six song>toong>rey buildings comprising 532 residential units, including

96 affordable housing units and 119 key worker units, 2110 sq. m. for business use (Class B1) and

community use (Class D1) with associated access, open space, landscaping and car parking.’

In February 2004 Bellway made a furong>theong>r application ong>toong> carry out remedial engineering work ong>toong> render ong>theong> site


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

fit for residential and non-residential purposes.The application was accompanied by an Environmental Impact

Assessment submitted under ong>theong> provisions of ong>theong> Town and Country Planning (Environmental Impact

Assessment) Regulations 1999.This latter application has been approved and ong>theong> development application is

under consideration. It will be subject ong>toong> a furong>theong>r Section 106 Agreement and ong>theong> approval, due ong>toong> ong>theong> size of

ong>theong> development, of The Mayor of London’s office.

There appears ong>toong> be no mechanism ong>toong> control ong>theong> prices at which ong>theong> housing for sale will become available and

subsequently change hands (in an area with a desperate shortage of low cost accommodation).There has also

been a delay of approaching thirty years in bringing in any development ong>toong> replace ong>theong> redundant gasworks and

a site with key significance ong>toong> ong>theong> regeneration has remained neutralized for that period.

What could have happened

There is an alternative scenario that would have served a wider range of interests. As ong>theong> site was coming ong>toong> ong>theong>

end of its previous use sometime in ong>theong> 1970s ong>theong> Borough of Tower Hamlets could have been preparing a

Compulsory Purchase Order. Given that ong>theong> site was heavily contaminated, that it was zoned as ‘industrial

land’, and ong>theong> Council as planning authority could have made it clear that ong>theong>re was no current intention ong>toong> rezone

it, ong>theong> financial offer might well have been ‘existing use value’.This would have been effectively at zero or

even at a negative value ong>toong> reflect ong>theong> investment necessary by ong>theong> purchaser ong>toong> prepare ong>theong> site for

redevelopment (legally ong>theong> responsibility of ong>theong> polluter).

Following acquisition by ong>theong> Council wide consultation could have taken place with local residents and oong>theong>r

interests ong>toong> determine a Development Plan with an optimum pattern of uses ong>toong> meet local needs (similar ong>toong> a

Swedish commune housing plan).This could have been translated inong>toong> a new zoning with a mix of residential

and oong>theong>r uses. It could hardly have been argued by ong>theong> gas company who had been bought out by ong>theong> CPO that

ong>theong> Council had a re-zoning intention all along.The matter had not at that time been subject ong>toong> public

consultation or a Plan prepared. Once it had been, ong>theong> Council would have been acting in its proper capacity as

guardian of ong>theong> long term public interest. In any event no Council can speak definitively of ong>theong> land use

decisions ong>toong> be made by successor administrations since land use zonings will change ong>toong> reflect changing needs.

Had any action brought against ong>theong> Council been successful ong>theong> clear effect would have been ong>toong> advantage ong>theong>

interests of gas company shareholders (whose prime business was presumably ong>theong> production of gas not long

term speculative land profits) over ong>theong> interests of several thousand poorer members of ong>theong> local community. It

would appear difficult ong>toong> defend this outcome on moral or even legal grounds.

The Council would ong>theong>n have proceeded ong>toong> manage ong>theong> redevelopment of ong>theong> site while retaining ong>theong> entire

freehold.Within ong>theong> housing component, an optimum pattern of residential unit sizes and types (including some

special needs housing) could have been specified given ong>theong> known needs of ong>theong> area.This need not have

precluded ong>theong> inclusion of a small amount of executive housing for leasehold sale along ong>theong> canal ong>toong> help balance

ong>theong> finances (and ong>toong> deliver ong>theong> claimed advantages of ‘tenure diversification’). Some of ong>theong> land could have been

leased out ong>toong> housing associations ong>toong> diversify ong>theong> design and management style of ong>theong> housing.The Council and

RSLs could ong>theong>n have invited tenders for ong>theong> construction contracts.The contracts could have been set ong>toong> ensure

an attractive rate of profit for ong>theong> construcong>toong>rs.

The housing units could ong>theong>n have been allocated for renting by ong>theong> Council and ong>theong> oong>theong>r landlords, or in some

cases sold leasehold, according ong>toong> local needs.The rents could have been arrived at in ong>theong> light of construction

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 59

costs (which would have included no or very little land costs).The prices at which ong>theong> Council sold could have

been set at a level simply ong>toong> give ong>theong>m a reasonable premium over ong>theong> construction cost (since again ong>theong>re was

no land cost ong>toong> be covered in ong>theong> prices).This would have meant prices way below local market levels.To

maintain ong>theong> pool of low cost housing through time ong>theong> sale agreement could have specified that on every resale

ong>theong> Council had ong>theong> right of first refusal at ong>theong> original sale price updated by ong>theong> retail price index.

Almost all interests would have been served.The original vendors would have got reasonable value, given that at

ong>theong> time of sale ong>theong>re was no prospect of future development of ong>theong> site for a more lucrative use.The

construcong>toong>rs would have got contracts giving an attractive rate of profit and ong>theong>y would have had a flow of

business without ong>theong> initial problem of looking for sites ong>toong> build on.The Council would have acquired valuable

freehold land as collateral and ong>theong> advantage of long-term control over future redevelopment rights.There

would have been a good increment ong>toong> ong>theong> public song>toong>ck of housing for rent and some homes for sale and

subsequent resale at sub-market prices.This would have assisted both those locally on low incomes and

incoming lower paid workers who might be needed by ong>theong> local economy (ong>theong>re are several hospitals and many

schools in ong>theong> area).

In addition ong>theong> decant process would have been much less disruptive and costly since it would have been

possible ong>toong> begin ong>toong> provide new housing for people ong>toong> move inong>toong> as ong>theong>ir previous homes were demolished.

This would have meant single moves raong>theong>r than double moves.There would have been a set of non-housing

uses in line with ong>theong> consultation process about ong>theong> needs of ong>theong> area.The leases for ong>theong>se could have included

ground rent reviews ong>toong> reflect rising rack rents.These would have provided furong>theong>r income ong>toong> finance ong>theong>

scheme. And finally one might have expected ong>theong> whole acquisition and construction process ong>toong> have been

carried out by ong>theong> mid ong>toong> late 1980s - twenty years ago.

Why didn’t it happen

It is instructive ong>toong> speculate why this scenario did not happen.Would British Gas as original owners (and signedup

partners in ong>theong> regeneration) have been in no position ong>toong> fulfill ong>theong>ir responsibility ong>toong> de-contaminate ong>theong>

site, or ong>toong> accept a negative price that might reflect that responsibility Would Government (in ong>theong> early

Thatcher years) have simply blocked public acquisition Would no construcong>toong>rs have been found ong>toong> bid for ong>theong>

contracts on ong>theong>se terms Would ong>theong> Council simply not have had ong>theong> expertise, political will and/or capacity ong>toong>

carry through ong>theong> scheme Or would something else have got in ong>theong> way Certainly had an annual land value tax

related ong>toong> ong>theong> newly zoned use been in place ong>theong> site would not have laid idle for so long whoever ong>theong> owner.

Regardless of why things did not happen in this way it seems at least arguable that it would have been better for

local affordability if ong>theong>y had - and ong>theong> overall effect would have been progressively redistributive.

Case Study 3 - How house prices bid up land prices

In this case study a medium sized housebuilder heard that ong>theong> owner of 1.2 acres of farmland near one of his

existing developments was considering selling.The value of ong>theong> land in agricultural use was about £2,500.The

vendor had already obtained outline planning consent for 10 semi-detached houses on ong>theong> site.The housebuilder

needed ong>toong> arrive at a bid price for ong>theong> land that would be acceptable ong>toong> ong>theong> vendor in a competitive market.

From his assessment of ong>theong> local housing market and employment trends ong>theong> housebuilder estimateed ong>theong> selling


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

price for ong>theong> completed houses at £275,000 each. From discussions with a quantity surveyor he estimateed ong>theong>

building cost at £100,000 per house. He allowed also for design fees, overheads and interest charges. He set a

required profit of 15% on ong>theong> net sales value.

The upper limit of ong>theong> bid for ong>theong> site was calculated:

Sale value of ong>theong> 10 houses £2,750,000

Less selling costs @ 3% 82,500


Net sale income 2,667,500


Construction costs for 10 houses 1,000,000

Design fees @ 10% of costs 100,000

Overheads and office costs 100,000

Bank finance costs 80,000

Profit @ 15% of net sale income 400,125


Total costs 1,680,125


Available ong>toong> bid for site (1.2 acres) £987,375


In this case ong>theong> site was bought for this figure and all ong>theong> houses were completed ong>toong> schedule and sold within six

months of completion. Subsequent ong>toong> ong>theong> land sale ong>theong> local planning authority allowed 12 houses ong>toong> be built on

ong>theong> site, with a consequent benefit ong>toong> ong>theong> profit taken from ong>theong> scheme.

The bid price for ong>theong> land was sensitive ong>toong> expectations about ong>theong> selling price of ong>theong> houses. If ong>theong> sale value

estimate had been £300,000 per house, and oong>theong>r costs and profit rate required had remained ong>theong> same, ong>theong>

land bid would have been £1,194,500. Had ong>theong> expectation been £250,000 per house ong>theong> bid would have been

£881,250. In any of ong>theong>se cases ong>theong> vendor would have realised a considerable capital gain over ong>theong> agricultural

value of £2,500.

Clearly rising expectations about house prices, based partly on expectations about lower interest rates and/or

higher lending multiples for borrowers, will feed through ong>toong> upward pressures on land prices.This makes land

an attractive option for invesong>toong>rs, wheong>theong>r ong>theong>y ong>theong>mselves are planning housing development or not, since ong>theong>

ultimate facong>toong>r creating rising value is society’s need for more housing and oong>theong>r forms of development. Given

ong>theong> nature of ong>theong> unknowns at ong>theong> point of land purchase, ong>theong> wide swings in value and ong>theong> possible need ong>toong>

‘play’ a market which is markedly cyclical in ong>theong> short term it is more accurate ong>toong> describe many dealings in

land as ‘speculation’ raong>theong>r ong>theong>n ‘investment’.

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Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 10 - Some effects of poor

housing on health, education and


(Peter Ambrose and Sian Griffiths of ong>theong> Royal College of Physicians)

The link between poor housing conditions and health status has been documented at least since ong>theong> reports of

ong>theong> 1845 Royal Commission on ong>theong> Sanitary State of Large Towns and Populous Districts. Research in London

in 1892 and Glasgow in 1901 showed a clear positive relationship between overcrowding and death rates.

Chrisong>toong>pher Addison, ong>Ministerong> of Health in ong>theong> early 1920s and himself a docong>toong>r had no doubts that poor

conditions and overcrowding increased vulnerability ong>toong> ill-health and that ong>theong> ill-health cost a lot of money. He

set ong>theong> Registrar General ong>theong> task of calculating ong>theong> public cost of various manifestations of ill-health which he

regarded as a direct outcome of poor housing conditions and high room densities.These included ong>theong> increased

incidence of TB, ong>theong> generally poor health of children in elementary schools and ong>theong> levels of preventable

sickness in ong>theong> workforce (Addison 1922).The Registrar General came up with some estimates of ong>theong>se

‘exported costs’ (over £42 million annually in 1921 values for a partial set of costs). Addison's strategy ong>toong> use

ong>theong>se findings as an argument for furong>theong>r housing investment resources from ong>theong> Treasury, in accordance with

ong>theong> ‘Homes fit for heroes’ election cry, was cut short by his prompt dismissal from office by Lloyd George.

Socio-economic status, housing and health

Appendix 12 of ong>theong> ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> on Minimum Income Standards included a review of some of

ong>theong> salient academic literature on ong>theong> link between housing and health since ong>theong> 1980 Black Report Inequalities

in Health.The housing quality that can be accessed is closely related ong>toong> socio-economic status. Many recent

studies cited in ong>theong> previous ong>Memorandumong>, notably Marmot et al. (1991), Syme (1994), Airey et al. (1999),

Coleman (1999), Graham ed. 2000), Attanasio and Emerson (2001), Gravelle and Sutong>toong>n (2001) and Jefferis et

al. (2002), have explored ong>theong> link between poor socio-economic status and poor health and educational status.

According ong>toong> Sandel et al. (1999), a deficit of adequate housing has resulted in 21,000 American children having

stunted growth and more than 120,000 being anaemic.They also report that 77% of children in ong>theong>ir study

with chronic conditions such as asthma need improvements ong>toong> ong>theong>ir home as part of ong>theong>ir treatment.

The Acheson Report An Independent Inquiry inong>toong> Inequalities and Health (1998) and ong>theong> annual Health Surveys for

England, produced by ong>theong> Department of Health, are among ong>theong> official publications highlighting ong>theong> link.

Acheson stressed ong>theong> need ong>toong> address facong>toong>rs outside ong>theong> NHS, and some of his recommendations called for

measures ong>toong> reduce poverty and improve education and housing.

An annotated literature review has discussed a number of studies linking poor housing and living conditions not

only with poor health but also with negative ‘outcomes’ in education and with higher rates of crime

experienced (Ambrose, Barlow et al. 1996). An earlier set of essays (Burridge and Ormandy eds. 1993) has also

reported on a wide range of adverse health effects. A recent publication from Shelter (Shelter 2004) has drawn

attention specifically ong>toong> ong>theong> effects of poor housing on children. It points out ong>theong> one in twelve children are

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 63

more prone ong>toong> asthma, bronchitis and tuberculosis as a result of poor housing.

While ong>theong>re is no doubt about ong>theong> linkage between poor housing and poor health ong>theong> research required ong>toong>

demonstrate ong>theong> effects is not easy ong>toong> carry out. A recent discussion of work on urban regeneration and health

(Popay 2001) has drawn attention ong>toong> ong>theong> urgent need ong>toong> move ong>toong>wards a better resourced and systematic

research drive on this issue. A subsequent review (Thomson et al. 2002) has found that while ong>theong>re are many

thousands of studies linking housing improvement ong>toong> health gain only a handful have offered robust evidence

about a ‘before and after renewal’ benefit.

One of ong>theong>se was ong>theong> study of ong>theong> ‘health gain’ that accompanied ong>theong> redevelopment of some very poor housing

under ong>theong> Central Stepney SRB Regeneration in an area of east London between 1995 and 2001 (Ambrose

2002).This study demonstrated that following housing improvement and ong>theong> drastic reduction of ong>theong>

overcrowding (ong>theong>re had been 1.43 people per habitable room) ong>theong>re was a reduction in ong>theong> incidence of selfreported

illness days from 37 per hundred person/days ong>toong> 5 per hundred. A round of interviews with over 50

health and oong>theong>r professionals working in ong>theong> area confirmed ong>theong> views of residents that ong>theong>ir state of health was

closely related ong>toong> ong>theong> housing conditions.The most commonly self-reported forms of illness, both ‘before’ and

‘after’, were coughs and colds, aches and pains, asthmatic conditions, digestive disorders and depression.The

study demonstrated sharp falls in costs generated both for ong>theong> NHS and for police services as a result of ong>theong>

housing improvement.

The effects of ong>theong> renewal were not all positive. A follow-up project demonstrated that ong>theong> effect of housing

improvement and ong>theong> transfer of ong>theong> housing ong>toong> RSLs was an increase in weekly living costs (primarily rent and

Council Tax) of approximately 27%.This had led ong>toong> increased debt and reduced expenditure on health-related

items such as food, clothing and recreational activity (Ambrose and MacDonald 2001).

Indoor cold and health

Poverty and poor housing conditions are frequently associated with low indoor temperatures.There has been

much research on ong>theong> effects on health of low temperatures in ong>theong> home since ong>theong> pioneering assessment of ong>theong>

cost of indoor cold (Boardman 1991). Rudge (2001) has been active in developing a methodology ong>toong> assess ong>theong>

cost-effectiveness of investment in warmer homes. Baker (2001) from ong>theong> Centre for Sustainable Energy has

produced a review of evidence linking living in a fuel poor home with increased risk of illness.This shows in

particular a strong association between indoor cold and increased risk of strokes, heart attacks and respiraong>toong>ry

illness. Evidence is also reviewed on ong>theong> impact of cold stress causing cardiovascular strain, ong>theong> increased

incidence of dust mites in poorly ventilated homes affecting asthma and eczema, particularly in children, and

ong>theong> effect on mental and physical health of ong>theong> presence of damp and mould growth in ong>theong> home.

The relationship between inadequate indoor heating and excess winter deaths has been extensively studied (for

example Eurowinter Group 1997). Similarly Wilkinson and colleagues (Wilkinson et al. 2001) concluded that

ong>theong>re is an excess of about 40,000 deaths each winter compared ong>toong> ong>theong> death rate in non-winter months. In

particular ong>theong>re is a 23% excess of deaths from heart attacks and strokes. Indoor temperatures below 16°

centigrade are a particular risk and are most likely ong>toong> affect old and poorly heated housing with low income

residents. In 37% of lowest income quartile homes ong>theong> indoor hall temperature was likely ong>toong> fall below 16°

when it was below 5° outside.The authors conclude that ong>theong>re is


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

‘...a credible chain of causation which links poor housing and poverty ong>toong> low indoor temperatures

ong>toong> cold-related deaths.’

Given ong>theong> link between poor housing conditions and ong>theong> incidence of asthma, it is relevant ong>toong> see what some of

ong>theong> social and economic consequences of this disease might be. According ong>toong> ong>theong> Office of Health Economics

(1999) asthma is reported ong>toong> have accounted for 328,000 hospital day beds in England in 1994-5 and ong>toong> have

cost ong>theong> NHS £730 million in 1995-6. Brandon (2002) cites a report finding that in ong>theong> United States 14 million

days of school are missed each year due ong>toong> asthma.

The link ong>toong> poor nutrition, health and behaviour

Since both food and housing are non-substitutable essentials for life it is intuitively evident that ong>theong> more ong>theong>

incomes of poor households are given over ong>toong> housing costs ong>theong> less will be available for sound nutrition,

especially when, as noted in Appendix 3, housing costs in excess of Housing Benefit may need ong>toong> be found from

income support payments.This relationship was evidenced in a direct way in ong>theong> Stepney area regeneration

study when it was found ong>theong> one of ong>theong> consequences of ong>theong> 27% increase in housing costs following ong>theong>

transfer ong>toong> RSL landlords was a reduction of expenditure on food (Ambrose and MacDonald 2001).

More recently a study was carried out on 24 low paid workers in Brighong>toong>n and Hove earning considerably

below ong>theong> ‘Low Cost but Acceptable’ level calculated in ong>theong> light of local living costs (Ambrose 2003).The

living costs faced by ong>theong>se households were powerfully inflated by local private secong>toong>r rental costs since only six

of ong>theong> sample had been able ong>toong> access local authority housing, virtually restricted ong>toong> those in emergency need in

ong>theong> Brighong>toong>n area.Very few of those interviewed could afford ong>theong> variety of diet ong>theong>y would have liked,

particularly in relation ong>toong> ong>theong> ‘five a day’ recommendation of fruit and vegetables. Only ten of ong>theong> sample

(which had an average age of 37) were members of a final salary pension scheme.

A study by Gesch et al. (2002) on 231 young adult males in a British prison found that dietary supplements had

a strong positive effect on behaviour standards:

‘The experimental, placebo-controlled, double-blind methodology has demonstrated that

supplementing prisoners’ diets with physiological dosages of vitamins, minerals and essential fatty

acids caused a reduction in antisocial behaviour ong>toong> a remarkable degree. It is not advocated that

nutrition is ong>theong> only cause of antisocial behaviour but ong>theong> difference in outcome between ong>theong> active

and placebo groups could not be explained by ethnic or social facong>toong>rs, as ong>theong>y were controlled for

by ong>theong> randomised design.’

In addition Dowler and colleagues have written much about ong>theong> relationship between poverty and poor

nutrition and about ‘food deserts’ – areas of poor access ong>toong> ong>theong> lower food prices and greater variety of

offerings found in supermarkets (Dowler, 2001, Dowler et al. 2001, Dowler and Finer 2003).

The link ong>toong> low birth weight

Poor nutritional standards and environmental conditions and low incomes are intimately related ong>toong> ong>theong> risk of

low birth weight babies.The incidence of low birth weight in ong>theong> UK is ong>theong> highest in western Europe. It has

shown little if any decrease since ong>theong> 1950s and a slight increase since ong>theong> mid-1990s (reply dated 25 July 2004

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 65

ong>toong> a Parliamentary Question from Lord Morris of Manchester ong>toong> ong>theong> Department of Health, Column WA 161).

It is as bad as in ong>theong> United States and not much better than in Romania or Bulgaria (UNICEF/WHO Estimates

of ong>theong> Incidence of Low Birthweight, 2000). In some inner-city areas ong>theong> rate is in ong>theong> ‘third world’ range of 11-

14% of live births (Barking and Havering NHS 2004).

Work by Crawford and colleagues in east London and elsewhere over many years has shown ong>theong> links between

poor nutrition, low birthweight and various effects for ong>theong> brain and for vascular and immune systems (see for

example Crawford et al. 1997 and Doyle et al. 1999). It has also shown a trans-generational effect in that a

woman with low birthweight had a one in three chance of herself producing low birthweight babies so ong>theong>

effects of poverty and poor nutrition may take a generations ong>toong> work out.

Numerous studies cited in Appendix 12 of ong>theong> ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> on Minimum Income Standards

showed a clear connection between socio-economic status, poor nutrition and low birth weight. Oong>theong>r studies

cited, carried out in Canada, New York and London, showed links between low birth weight, poor physical and

cognitive development and lower subsequent achievement levels at school and university.

The link ong>toong> education

A recent report from ong>theong> Australian Housing and Urban Research Institute (Phibbs and Young 2005) has

explored ong>theong> link between movement inong>toong> improved housing conditions in assisted public housing in Brisbane

and Sydney and a number of positive ‘non-shelter’ outcomes.The study, which reviews a wide range of

literature, was carried out ong>toong> assist in ong>theong> development of a whole-of-government cost/benefit analysis of ong>theong>

value of housing assistance.

The populations had previously been housed mainly in private secong>toong>r renting, often sharing accommodation.

There had been a pattern of negative conditions, overcrowding, transience and changes of school. Following ong>theong>

move ong>theong> surveys indicated that ong>theong>re was more money ong>toong> spend on food, more room ong>toong> prepare it and

ong>theong>refore less reliance on pre-packaged food, greater tenure security, less mobility and better neighbourhood

safety. Light users of Medicare services tended ong>toong> become slightly heavier users but ong>theong>re was a much reduced

usage by previously heavy users, especially in relation ong>toong> stress-related conditions.

From ong>theong> survey carried out in Brisbane ong>theong> clearest benefits of ong>theong> move ong>toong> public housing lay in educational

outcomes.There was access ong>toong> better schools, less transience and school moves, more space ong>toong> do homework

(private space raong>theong>r than ong>theong> kitchen table), more chance ong>toong> play outside in private spaces and less noise and

parental tensions. In terms of ong>theong> children’s Subject Performance at school after ong>theong> move 53% of respondents

indicated that it was better than previously, 7% that it was worse and 40% ong>theong> same. Interviews with teachers

confirmed that a reduction in moves and disruption was especially beneficial for ong>theong> children.


The considerable literature linking poverty, and poor and unaffordable housing, with a number of adverse

birthweight, developmental, behavioural, morbidity, mortality and educational outcomes clearly establishes that

ong>theong> provision of adequate and safe accommodation at an affordable cost is a matter that far transcends ong>theong> field

of housing policy-making, especially when ong>theong> lifetime costs of ong>theong>se adverse outcomes are taken inong>toong> account.

The policy and cost implications evident ong>toong> Addison in ong>theong> early 1920s (see Appendix 1) appear ong>toong> have been


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

lost sight of in ong>theong> UK if not in Australia.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 67


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 11 - High housing costs

and low pensions

Some recent evidence

(Peter Ambrose and Toby Lloyd of ong>theong> London Rebuilding Society)

It is intuitively plausible that high housing costs will furong>theong>r reduce ong>theong> capacity of poorer households ong>toong> invest

in personal pension arrangements. In ong>theong> 2003 study of 24 workers in Brighong>toong>n and Hove earning substantially

below ong>theong> Low Cost but Acceptable level (Ambrose 2003) it was found that only 10 were members of a final

salary-related pension scheme. In this sample eight of ong>theong>se were local government workers who are fortunate

in being able ong>toong> benefit from an excellent occupational pension scheme.The remaining 14 in ong>theong> sample (whose

average age was 37) were not in a position ong>toong> make provision for ong>theong>ir retirement although several said, when

asked how ong>theong>y would spend additional income, that such provision would be a high priority.

The Pensions Commission

The recent preliminary report from ong>theong> Pensions Commission (Pensions Commission 2004) makes ong>theong>se points

(page xi):

‘Given present trends many people will face ‘inadequate’ pensions in retirement, unless ong>theong>y have

large non-pension assets or are intending ong>toong> retire much later than current retirees...Our estimates

suggest that around 9 million people may be under-saving, some by a small amount, some severely.’

It is evident that many homeowners may be increasingly dependent on ong>theong>ir housing assets ong>toong> provide ong>theong>n with

a pension in some form. In a recent survey 46% of homeowners expected ong>toong> access ong>theong> equity in ong>theong>ir home ong>toong>

fund ong>theong>ir retirement (Smith 2004). But ong>theong>re are many uncertainties here, not least ong>theong> poor value for money

of many equity release schemes currently on offer.The Commission’s report points out (ibid, page xii):

‘While ong>theong> liquidation of housing assets during retirement will likely remain limited in scope, ong>theong>

inheritance of housing assets by people who already own a house may play an increasing role in

retirement provision for many people. But house ownership does not provide a sufficient solution

ong>toong> ong>theong> problem of pension provision given (i) uncertainty over future house prices; (ii) oong>theong>r

potential claims on housing wealth such as long-term care; and (iii) ong>theong> fact that housing wealth is

not significantly higher among those with least pension rights.’

This, like ong>theong> point about ‘under-saving’, seems ong>toong> under-state ong>theong> problem. Given ong>theong> scale of ong>theong> pensions

shortfall and ong>theong> amount of housing wealth that has accumulated among ong>theong> elderly, ong>theong> regressive distributional

consequences of increased reliance on inherited property wealth are extremely serious.While some stand ong>toong>

inherit substantial assets, ong>theong> number of people with no assets at all has doubled over ong>theong> past 20 years (Wilcox

2003b). A very high proportion of ong>theong> poorest households have a housing wealth of zero so this route ong>toong> a postretirement

income simply does not exist for ong>theong>m. Of ong>theong> 25 people in deep consumer debt interviewed in ong>theong>

recent Brighong>toong>n and Hastings study of debt as an impediment ong>toong> moving inong>toong> work (Ambrose and Cunningham

2004) only one was a homeowner.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 69

A sclerotic market

Young people face chronic affordability problems, while ong>theong> elderly find it difficult ong>toong> utilise ong>theong>ir asset wealth

ong>toong> improve ong>theong>ir quality of life.Those who benefit from inherited property are those that need it least and ong>theong>

benefit will be at ong>theong> time ong>theong>y need it least.This inefficient pattern of wealth redistribution is worsening.The

housing market is becoming increasingly sclerotic: ong>theong> recent house price boom was ong>theong> first that was not

accompanied by increased market activity. In fact, as prices rose during ong>theong> late nineties, market turnover fell

from its long run average of 8.6% ong>toong> 7.3% and is predicted ong>toong> fall furong>theong>r and remain low for ong>theong> foreseeable

future (FPD Savills Residential Property Focus,Vol. 4 2004).

There is a strong tendency ong>toong> misread housing market signals in this area. Recent research has shown that ong>theong>

emphasis on providing more smaller homes is based on a misguided interpretation of behaviour in ong>theong> market.

Demand for smaller homes has been strong, and this is assumed ong>toong> be due ong>toong> smaller household sizes. But at ong>theong>

same time ong>theong> number of rooms per household has been increasing in all but ong>theong> most expensive areas,

suggesting that people are buying smaller homes because ong>theong>y cannot afford anything else, not because that is

what ong>theong>y want.This bodes ill for ong>theong> Government’s long-term growth strategy, as residents in ong>theong> new

developments will not stay long if ong>theong>y cannot realise ong>theong>ir aspirations (King and Hayden 2005).

This projected increase in overcrowding at one end of ong>theong> market is already matched at ong>theong> oong>theong>r by under

occupation, currently effecting 36% of households (Housing Statistics 2004, ODPM).That under occupation and

overcrowding can co-exist is powerful evidence of an inefficient and sclerotic market.The implication is that

this misallocation of equity will worsen over time as more and more housing wealth accumulates in ong>theong> growing

elderly part of ong>theong> population and fewer larger homes are built.

Equity release issues

Financial markets should provide solutions ong>toong> this problem, but so far have only worsened it. A highly

competitive mortgage market has simply helped push prices up furong>theong>r, and widen ong>theong> ratio between values and

earnings. But at ong>theong> same time it is widely recognised that ong>theong> equity release secong>toong>r has failed ong>toong> respond ong>toong>

demand at ong>theong> oong>theong>r end of ong>theong> market.The secong>toong>r is currently worth only £1.1bn, compared ong>toong> a estimated

potential market of £100bn (Anderson 2004). Despite projections of growth in ong>theong> secong>toong>r, none of ong>theong> large

banks offer equity release and just two lenders – Norwich Union and Norong>theong>rn Rock – make up 80% of ong>theong>

market. Equity release also has a bad name amongst consumers following mis-selling scandals in ong>theong> late


Major lenders are reluctant ong>toong> enter an uncertain market with a bad reputation without substantial state

subsidies or guarantees - which suggests that ong>theong> traditional mortgage debt approach is not ong>theong> best way ong>toong>

liberate stagnant housing equity.

There is an obvious synergy between ong>theong> needs of equity rich, cash poor elderly people and young working

families unable ong>toong> access housing wealth, but financial institutions are failing ong>toong> clear ong>theong> market.What is

evidently needed is a more holistic approach ong>toong> equity that would make housing wealth more flexible and ong>theong>

market more responsive. Encouraging older people ong>toong> release equity and reinvesting it at ong>theong> botong>toong>m of ong>theong>

equity lifecycle would bring benefits at both ends of ong>theong> market, allowing people ong>toong> save more easily and access

housing more affordably.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Such a policy shift would fit well with recent moves ong>toong>wards asset based welfare such as ong>theong> introduction of

Child Trust Funds (CTFs) and ong>theong> Savings Gateway. It is ong>theong>refore regrettable that Treasury rules specifically

exclude ong>theong> investment of Child Trust Fund money in housing, because this is ong>theong> first attempt ong>toong> achieve

universal asset ownership. If ong>theong> natural link between housing equity and CTF money can be made, coming

generations will avoid ong>theong> wealth gap that afflicts ong>toong>day’s older people.

Poverty and pensions

The Pensions Commission report makes only an oblique reference ong>toong> ong>theong> fairly evident point that many of ong>theong>

poorest with no housing assets would find it extremely difficult ong>toong> make provision for ong>theong>mselves since housing

costs are already eating inong>toong> inadequate income support level incomes (page 159):

‘For low income house renters we assume that ong>theong> higher percentage of income replaced by ong>theong>

government (as a result of housing benefit) fully offsets ong>theong> higher replacement rate needed ong>toong>

cover rent expenditure, (i.e. we have assumed no difference in required savings between

homeowners and renters).This is an over-generous assumption used for reasons of modelling

simplicity. In fact housing benefit does not always fully offset ong>theong> costs of renting.We may ong>theong>refore

underestimate ong>theong> number of under-savers among low income renters.’

This is an understatement of ong>theong> problem. It was pointed out in Appendix 3 that ong>theong> net cost of housing for ong>theong>

poorest has been estimated as 6% of ong>theong>ir expenditure (Glennerster et al. 2004). It appears that this issue of ong>theong>

impact of higher housing costs on pensions provision has so far neiong>theong>r been sufficiently researched nor

sufficiently considered by ong>theong> Pensions Commission.

Furong>theong>r barriers ong>toong> participation in voluntary pensions schemes are posed by ong>theong> complexity of ong>theong> decisionmaking

involved (Pensions Commission 2004, page xii):

‘There are however big barriers ong>toong> ong>theong> success of a voluntary pension saving system, some inherent

ong>toong> any pension system, some specific ong>toong> ong>theong> UK. Most people do not make rational decisions about

long-term savings without encouragement and advice. But ong>theong> cost of advice, and of regulating ong>toong>

ensure that it is good advice, in itself significantly reduces ong>theong> return on saving, particularly for low

earners. Reductions in Yield arising from providers’ charges can absorb 20-30% of an individual’s

pension saving, even though ong>theong>y have fallen ong>toong> a level where provision ong>toong> lower income groups is

unprofitable.This poses a fundamental question: in principle can a voluntary market for pensions

work for low income, low premium cusong>toong>mers’

This last question is key and perhaps under-emphasised.The move away from an adequate state pension funded

out of taxation began in ong>theong> 1960s under a Wilson government.The principle of relating ong>theong> state pension ong>toong>

earnings has been lost and its value in real terms has been declining. It appears that this trend will continue and

that ong>theong>re will be growing dependence on investment-related private pensions in one form or anoong>theong>r, many of

ong>theong>m reliant on individual initiative.The returns from such forms of pension provision are obviously less reliable

than statuong>toong>rily determined payments, geared ong>toong> adequacy needs, paid out of general taxation.

The combination of rising housing costs, felt disproportionately by those in poorer households, increasing

dependence on privately arranged pension provision and a sharp divide between asset-rich homeowners and

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 71

enters with no housing assets seems destined ong>toong> lead ong>toong> sharp increases in post-retirement inequality. Increased

housing costs ong>theong>refore seem ong>toong> be one mechanism for prolonging inong>toong> ong>theong> future, and exacerbating, current



Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 12 - High housing costs

and employment issues

(Peter Ambrose)

A recent MORI poll of more than 2000 people for Shelter found that 71% agreed that Britain was in ong>theong> middle

of a housing crisis. No doubt much of this response reflects worries about wheong>theong>r or not house prices will fall

and/or concerns about ong>theong> extent of homelessness and rough sleepers.

These are serious matters but ong>theong>re are more systemic issues relating ong>toong> ong>theong> effects of high housing costs on ong>theong>

workings of ong>theong> national economy and sub-regional economies. Some of ong>theong>se have already been referred ong>toong> in

Appendix 9.The high cost of a non-substitutable commodity such as housing is likely ong>toong> find its way inong>toong> higher

pay claims. Similarly employers in high housing cost areas may well have ong>toong> offer higher wages and relocation

packages ong>toong> attract key workers. Having attracted ong>theong> workers ong>theong>y may experience retention problems as

employees find ong>theong> housing costs unsupportable on ong>theong>ir incomes. A high rate of staff turnover imposes its own

costs. Equally from ong>theong> employees’ viewpoint ong>theong> highly differentiated housing costs in ong>theong> UK can act as a

serious impediment ong>toong> job mobility. Sufficient affordable housing is ong>theong>refore a necessary item of infrastructure

ong>toong> underpin ong>theong> efficient functioning of ong>theong> economy.

The latest housing discussion paper from ong>theong> ODPM (ODPM 2005) recognises this problem and proposes a

MoveUK scheme which will ‘...offer social housing tenants and jobseekers greater choice about where ong>theong>y live

and work’.The service is however designed ong>toong> be simply an on-line information service about job vacancies and

housing opportunities in oong>theong>r parts of ong>theong> country.This will extend ong>theong> information available ong>toong> those seeking

ong>toong> move for employment reasons but unless differential housing costs are also addressed it may make little

practical difference ong>toong> ong>theong> options open ong>toong> movers. In any case ong>theong> scheme presumes universal access ong>toong> a

computer and capability ong>toong> use it on ong>theong> part of a population whose means of communication may be limited ong>toong>

a ‘pay as you go’ mobile phone.

The ‘More and Better Homes’ Campaign

This concern about housing costs and labour mobility has recently found expression in a new campaign, ong>theong>

Campaign for More and Better Homes.This was initiated early in 2005 by an alliance of unprecedented breadth

including Unison, ong>theong> Confederation of British Industry, Shelter, ong>theong> National Housing Federation,The Town and

Country Planning Association, CABE and two of Britain’s largest housebuilders,Wilson Bowden and George

Wimpey.The Campaign is urging ong>theong> South East of England Regional Assembly ong>toong> recognise ong>theong> acute shortage

of housing in ong>theong> south east and ong>toong> increase significantly ong>theong> number of homes built in ong>theong> light of both market

demand and social need.

Given that ‘...our housing system continues ong>toong> provide so inadequately for so many of our citizens’ one of ong>theong>

aims of ong>theong> Campaign is:

‘>toong> change ong>theong> terms of ong>theong> debate and deliver a better deal on housing for ong>theong> nation.’

The Campaign points out that house price inflation in ong>theong> UK is more than twice as high as in ong>theong> rest of

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 73

Europe, and that ong>theong> average deposit for a first time buyer has increased from £4,800 in 1996 ong>toong> £26,800 in

2003 (Social Exclusion Unit 2004). Reflecting ong>theong> feedback from many employers and members ong>theong> campaign

draws attention especially ong>toong> ong>theong> widespread evidence that ong>theong> affordability problem creates severe difficulties

for ong>theong> recruitment and retention of staff, especially ‘key’ public secong>toong>r workers in many areas.

Referring ong>toong> housing output ong>theong> Campaign points out that in ong>theong> ten years 1993-2002 ong>theong> output of new homes

was 12.5% lower than in ong>theong> preceding ten years 1983-1992. It argues that:

‘...lower rates of housebuilding constrain economic growth and high housing costs have a negative

impact on business location decisions, competitiveness and labour-market mobility.’

The Campaign accepts ong>theong> general Barker Review line that housing supply ‘ a key ong>toong>ol for improving market

affordability and in meeting ong>theong> needs of a rising population and economic growth.’

This emphasis on housing supply, decent standards and affordability as a key prerequisite for economic growth

and labour market efficiency is one that has been advanced for some time by housing specialists. But it has only

now been taken up by powerful voices representing both employers and employees making common cause with

a housing charity, and with design, architectural, planning and housebuilding interests.This convergence of a

broad set of perspectives is illustrated by ong>theong> explicit emphasis on both demand and need and by reference in ong>theong>

Campaign’s press releases ong>toong> evidence such as ong>theong> doubling of ong>theong> number of households in temporary

accommodation over ong>theong> period 1995 ong>toong> 2003.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 13 - Oong>theong>r effects of high

housing costs and debt

(Peter Ambrose)

Apart from ong>theong> effects on house price levels ong>theong> massive rise in ong>theong> ong>toong>tal housing debt outstanding (Appendix 2)

has a number of oong>theong>r consequences, some of ong>theong>m clearly adverse.

1. Risk of repossession

Inability ong>toong> continue servicing a housing debt can lead ong>toong> calamiong>toong>us outcomes if ong>theong> property is repossessed. If

it is subsequently sold by ong>theong> crediong>toong>rs for less than ong>theong> loan outstanding ong>theong> occupiers not only lose ong>theong>ir home,

ong>theong>y also remain in debt.

Repossessions rose ong>toong> very high levels in ong>theong> early 1990s (75,540 in 1991) but have since fallen considerably

(7,630 in 2003 - Wilcox 2004,Table 51). Both this figure and ong>theong> sharp reduction in ong>theong> extent of mortgage

arrears probably reflect ong>theong> hisong>toong>rically low interest rates of ong>theong> early 2000s. Neverong>theong>less court actions entered

for mortgage repossessions have shown little sign of decline over ong>theong> period 2000-2004 (ibid,Table 52). Of ong>theong>

ong>toong>tal Court Orders made for repossession in 2003, 29.1% were in London and ong>theong> South East (ibid,Table 53f).

In ong>theong>se areas average weekly mortgage repayments including endowment payments in 2002/3 were £138.60

and £133.34 respectively compared ong>toong> a UK average of £97.41 (ibid,Table 50).

2. Thinking holistically - some oong>theong>r economic, political and social consequences

There is a wide range of oong>theong>r consequences of rapidly rising house prices, massively increased mortgage

indebtedness and ong>theong> consequent heavy calls on household income.These may well be felt especially in ong>theong> early

years of ong>theong> mortgage.These effects, while intuitively evident, have in most cases not been subjected ong>toong>

systematic research:

Effects on land values - as was seen in Appendix 9, ong>theong> rising prices of newly developed houses

feeds through ong>toong> inflate development land value, with consequent implications for ong>theong> buyers of

land for ‘social’ purposes.

Effects on private secong>toong>r rents - private landlords are seeking ong>toong> gain a competitive rate of

return on ong>theong> capital value of ong>theong>ir assets so ong>theong> higher capital values go ong>theong> higher ong>theong> rent ong>theong>y

will seek.

Effects on labour mobility - ong>theong> lack of affordable housing in ‘high demand’ areas reduces

labour mobility and causes additional difficulties for employers who seek ong>toong> attract and retain

workers in lower paid jobs (Appendix 12).

Effects on ong>theong> power of organised labour - ong>theong> relationship between high levels of mortgage

indebtedness and workers’ potential and propensity ong>toong> take industrial action has been recognized

since at least ong>theong> 1920s: ong>theong> commitment ong>toong> mortgage repayments is ong>theong> most frequently stated

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 75

eason for not joining a strike.

Effects on fertility rates - ong>theong> more ong>theong> income of second earners in a household is taken inong>toong>

ong>theong> loan calculation ong>theong> more it is likely that couples will put back ong>theong> age of having a first child and

perhaps furong>theong>r children.The number of live births per 1000 women in ong>theong> UK has changed as


1981 2002

All ages 62.1 54.3

20-24 106.8 68.2

25-29 130.4 91.3

30-34 69.5 89.8

35-39 22.4 42.8

Source: Social Trends 34, 2004,Table 2.16

Fertility rates are down in ong>toong>tal and are sharply down in ong>theong> under 29 age groups. But in 2002

women in ong>theong>ir early 30s produced far more babies than in 1981 and for those in ong>theong>ir late 30s

fertility has almost doubled.This pattern is no doubt ong>theong> product of a number of facong>toong>rs and it is

differential by socio-economic group. Increased and longer participation in ong>theong> labour market,

often related ong>toong> ong>theong> servicing of a mortgage, may well be one of ong>theong> facong>toong>rs affecting ong>theong> fertility of

those in socio-economic groups able ong>toong> access a mortgage loan. Given ong>theong> possible incidence of

more complications for older moong>theong>rs ong>theong>re may well be implications for NHS costs arising from

ong>theong>se changing patterns.

Effects on family life - ong>theong> continuance of both parents in work following ong>theong> birth of a child,

which may be necessary when both incomes have been calculated inong>toong> ong>theong> mortgage multiple, may

have a range of effects. Some may be judged positive and some negative.Very often ong>theong> requirement

that two incomes continue may close down preference options about patterns of parental care and

increase ong>theong> need for bought in childcare.

Effects on oong>theong>r spending - it is axiomatic that ong>theong> higher ong>theong> proportion of lifetime earnings

devoted ong>toong> property purchase ong>theong> lower ong>theong> proportion available for oong>theong>r forms of spending.The

shift is ong>toong>wards capital spending and away from revenue spending at ong>theong> household level.

Complications when life goes wrong - higher loan multiples and longer lending periods mean

increased exposure ong>toong> risks when household finances are disrupted by frequently occurring facong>toong>rs

such as relationship breakdown, redundancy, poor health or disability. Increase stress may be felt

not only when ong>theong>se events occur but also in ong>theong> period when ong>theong>y are clearly on ong>theong> horizon.

Effects on ong>theong> quality of life of older parents - in ong>theong> latest burst of house price inflation

since ong>theong> later 1990s it is clear at least anecdotally that many older parents are making use of ong>theong>ir

own capital ong>toong> help children in ong>theong>ir 20s and 30s ong>toong> get on ong>theong> ‘property ladder’.This issue appears

ong>toong> have been little researched so its precise extent and effects are not known although one survey

carried out in 2004 by MORI for ong>theong> Joseph Rowntree Foundation found that parents now expect

ong>toong> contribute on average £17,000 ong>toong> help ong>theong>ir children get onong>toong> ong>theong> property ladder.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

3. Equity withdrawal and increased consumer debt

Steeply rising house values have given more ‘headroom’ for owners ong>toong> borrow for oong>theong>r purposes. It has been

pointed out by Wilcox (2004, Section 2) that ong>theong> recent rise in house prices has permitted record levels of

equity withdrawal.This rose from £45.6 billion in 2002 ong>toong> £60.8 billion in 2003. It amounted ong>toong> 8.77% of all

consumer spending (ibid,Table 7), a much higher proportion than that reached in ong>theong> house price boom of ong>theong>

late 1980s. As ong>theong> previous appendix made clear ong>theong>re is considerable scope for increase in this proportion.

This has a number of effects on ong>theong> economy and ong>theong> society. It clearly contributes ong>toong> economic growth and

indirectly ong>toong> employment levels. But equally it has an inflationary effect and has been one reason behind ong>theong> five

increases in ong>theong> Bank of England base rate since Ocong>toong>ber 2003. Increased spending is conventionally seen as an

unmitigated economic benefit. But at a time of deep concern about ong>theong> social and cultural implications of very

high borrowing levels, especially when ong>theong> debt is incurred by more vulnerable borrowers,‘economic growth’

may well not be ong>theong> prime indicaong>toong>r by which ong>theong> health, morality and cohesion of a society will be judged.

4. Constraints on use of ong>theong> interest rate as a cyclical regulaong>toong>r

Governments of all political colours have in ong>theong> past used ong>theong> base rate as a regulaong>toong>r eiong>theong>r ong>toong> lift ong>theong> economy

out of recession or ong>toong> dampen down an overheated economy.The facility with which base rate can be adjusted

up or down is significantly restricted when ong>theong> financial viability of millions of heavily indebted households is

put at risk by upward movements in mortgage interest rates. As General Elections loom ong>theong> setting of ong>theong>

interest rate may well have more ong>toong> do with elecong>toong>ral calculation than with economic judgement.

5. Opportunity cost of this investment pattern

It was shown in Appendix 2 that ong>theong> amount of house purchase lending in ong>theong> deregulated regime over ong>theong> past

23 years has been almost £600 billion more than might have been expected had lending risen in line with

general consumer prices.The housing debt outstanding has risen from 23% ong>toong> 72% of GDP.This vast lending

flow has been used ong>toong> inflate house prices when it could alternatively have been invested in public infrastructure

(schools, roads, hospitals, etc.) or in more productive ways such as ong>theong> modernisation and better capitalisation

of UK industry, ong>theong> research and development of new inventions and so on. It is also instructive ong>toong> compare this

£600 billion figure with ong>theong> estimated one-off £19 billion now required ong>toong> bring all social housing ong>toong> a decent


The modelling of alternative investment flows over ong>theong> past quarter century would be a complex task but

intuitively ong>theong>re seems little ong>toong> be said for ong>theong> way in which house purchase lending has come ong>toong> dominate ong>theong>

use of investment funds in ong>theong> economy.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 77


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 14 - An overview of

‘exported costs’ from poor housing

Poor quality living conditions and ‘exported costs’

(Peter Ambrose)

The interface between living conditions and welfare outcomes is a complex one and it needs ong>toong> be accepted that

it is futile ong>toong> search for simple ‘cause/effect’ relationships. Neverong>theong>less evidence gaong>theong>red from many studies

shows clear patterns of association between poor conditions - for example cold, damp, infestation, noise, poor

air quality and overcrowding - and an increased incidence of ill health.Wheong>theong>r ong>theong>se conditions derive from

inadequate housing standard regulations, poor construction, poor maintenance, aspects of ‘lifestyle’ (as has been

argued) or some combination of all ong>theong>se is not ong>theong> immediate issue.

It is obvious that an increased incidence of ill-health must increase costs for health services which are already

under increasing strain in Britain and oong>theong>r European Union countries as a result of various facong>toong>rs including

ageing populations (see ong>theong> comprehensive collection of essays edited by Burridge and Ormandy, 1993 and ong>theong>

pioneering work on ong>theong> health costs costs issue by Boardman, 1991, Carr-Hill et al., 1993, Lawson, 1997 and

Crawford 1997 and colleagues).The issue is broader than this since poor living conditions can be expected ong>toong>

generate additional costs not only ong>toong> health services but also ong>toong> oong>theong>r key service providers.These include:

ong>theong> education service (because children in poor and overcrowded conditions cannot learn as


ong>theong> police and judicial services (because poor housing and environmental design and construction

is associated with a higher incidence of some crimes)

ong>theong> emergency services (because poor housing conditions and ‘secondary heating’ increase

accident and fire risks)

ong>theong> energy supply services (because poorly designed housing uses excess energy and produces

ecological damage).

Over three hundred research studies examining ong>theong>se issues were reviewed as an early part of ong>theong> Costeffectiveness

in Housing Investment (CEHI) programme of work at Sussex University (Ambrose, Barlow, et al.,

1997). It was evident that poor living conditions implied additional costs for a wide range of service providers.

The CEHI team termed ong>theong>se costs ‘exported costs’ because ong>theong>y are generated by under-investment in one

secong>toong>r (housing in this case) and ong>theong>n ‘exported’ ong>toong> oong>theong>rs.

A matrix of exported costs

One of ong>theong> products of ong>theong> series of empirical studies carried out by ong>theong> CEHI team was ong>theong> gradual

development of a more thoroughly worked out matrix of cost categories and headings where ong>theong> volume of

costs felt was likely ong>toong> be affected ong>toong> some degree by ong>theong> quality of ong>theong> living environment.This systematisation

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 79

is regarded as an essential step along ong>theong> path ong>toong> fuller quantification. For reasons given earlier ong>theong>re is no

assertion here of direct causal relationships between living conditions on ong>theong> one hand and health and oong>theong>r

outcomes on ong>theong> oong>theong>r. Instead it is argued that systematic and ong>toong> a degree predictable patterns of association exist

between ong>theong> quality of ong>theong> built environment and ong>theong> health status and oong>theong>r cost-generating outcomes


The health and oong>theong>r costs that could well be exacerbated by poor living conditions can be categorised in at

least four ways as follows:

1. Capital Costs versus Revenue Costs

2. Personal Costs felt on ong>theong> personal finances of individual residents versus External Costs felt by service

providers of one kind or anoong>theong>r (although some of ong>theong> latter no doubt work through ong>toong> ong>theong> individual in ong>theong>

form of higher taxes).

3. Systemic Costs that impact regularly, and sometimes imperceptibly as life is lived versus Formalised

Costs felt in more visible and formalised ways such as in ong>theong> annual bid for funds by a healthcare or oong>theong>r

service whose funding formula recognises ong>theong> high cost of service delivery in run-down areas. Such Formalised

Costs might impact in ong>theong> form of special responses ong>toong> situations where ong>theong> state of run-down needs ong>toong> be

addressed via expenditure on special Government programmes such as ong>theong> Single Regeneration Budget or New

Deal for Communities.

4. Degree of measurability - costs can be ordered in terms of ong>theong>ir susceptibility ong>toong> accurate measurement.

The categories adopted here are:




Hard - costs that can be precisely quantified

Medium - costs that one can see a way of quantifying given better data

Non-quantifiable - costs that clearly exist but are currently non- quantifiable

A matrix of this nature not only provides a framework for ong>theong> task of estimating some of ong>theong> ong>toong>tal costs incurred

but it also prompts questions which require furong>theong>r examination, for example:

- how is ong>theong> cost of poor living conditions distributed between residents and service providing agencies

- of those felt by ong>theong> latter, which agencies bear most costs

- which agencies might ong>theong>refore save most as a result of increased investment in housing

- which costs are currently poorly recorded or measured

- how do revenue costs and capital costs compare in terms of ‘weight’

- what forms of increased investment in better housing might most reduce both ‘costs-in-use’ and

exported costs

By identifying a range of more measurable costs (H), ong>theong> matrix also gives some guidance concerning ong>theong> most

promising ways ong>toong> continue ong>theong> task of evaluating exported costs.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

A matrix of costs whose levels can be related ong>toong> poor living conditions



Systemic - Capital high annual loss of asset value high annual loss of asset value

if property owned (H)

if property rented (H)

Systemic - Revenue poor physical health (H ong>toong> M) higher Health Service costs (H ong>toong> NQ)

poor mental health (M ong>toong> NQ) ditong>toong>

social isolation (NQ)

higher care services costs (M)

high home fuel bills (H)

high building heating costs (H)

high insurance premiums (H) high insurance payments (H)

uninsured contents losses (M)

spending on security devices (H) spending on building security (H)

living with repairs needed (NQ) high housing maintenance costs (H)

under-achievement at school (NQ) extra costs on school budgets (H)

homework classes at school (H)

loss of future earnings (M)

loss of talents ong>toong> society (NQ)

personal insecurity (NQ) high policing costs (H ong>toong> M)

more accidents (M)

high emergency services costs (H)

poor ‘hygiene’ conditions (NQ) high Environmental Health costs (H)

costs of moving (M)

disruption ong>toong> service providers (M)

adopting self-harming habits (M) special health-care responses (H)

Formalised - Capital

Formalised - Revenue

Government and EU area

renewal programmes (H)

‘Statements of need’ (H)

Police funding formula (H)

Fire and Ambulance services

funding formulae (H)

The ‘10%’ question

As part of discussions ong>toong> assess ong>theong> success of ong>theong> Hackney Central Estates Initiative in ong>theong> late 1990s focus

groups were arranged ong>toong> which ong>theong> providers of key services - health, police, education, housing, etc. - were

invited.The question was put:

‘If you could have a 10% increase in your budget next year which could be spent only on anoong>theong>r

service raong>theong>r than your own, which service would you choose with a view ong>toong> making your own

operations more effective’

At ong>theong> reporting back sessions increased housing expenditure was ong>theong> most frequent answer.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 81


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 15 - Limited Liability

Partnerships as development


(Chris Cook of Partnership Consulting)

Property Rights

Property ownership rights - wheong>theong>r over land, financial assets, intellectual property - have evolved in ong>theong> West

inong>toong> two mutually exclusive absolute categories. In ong>theong> UK, ong>theong> Law of Property Act 1925 gave us freehold

(permanent) and leasehold (temporary) for a defined term.

However, ong>theong> unique flexibility of ong>theong> UK legal system has allowed anoong>theong>r body of Law - Trust Law or ‘Equity’

- ong>toong> develop over a thousand years or more and permitting rights of use of land ong>toong> augment ong>theong>se bare tenure

rights provided by statute ong>theong>reby reflecting reality more flexibly and equitably.The result is a minefield, which

we are able ong>toong> navigate only with expert legal assistance.

However, as ong>theong> Scots verdict of ‘not proven’ illustrates (as opposed ong>toong> eiong>theong>r ‘guilty’ or ‘not guilty’), we need

not deal in absolutes. So it is that a new form of indefinite property right is now emerging based upon a new

relationship encompassing both rights of use and rights of ownership in a simple common framework.

This ‘Co-ownership’ property right arises out of ong>theong> new possibility of a partnership between ong>theong> ‘owner’ and

ong>theong> ‘user’ of property where ong>theong> property is owned in common by ong>theong> partnership.The ‘User’ member ong>theong>n

pays an agreed ‘Capital Rental’ ong>toong> ong>theong> ‘Owner’ member for ong>theong> indefinite term for which he uses ong>theong> property.

This development in both ong>theong> ownership of, and investment in, Land and property is one of ong>theong> unintended

consequences of a recent innovation in UK Partnership Law.

The UK Limited Liability Partnership

On 6 April 2001 a new legal entity, ong>theong> Limited Liability Partnership (LLP), came inong>toong> effect in order ong>toong> protect

professional partnerships from ong>theong> consequences of ong>theong>ir own negligence.

Confusingly, an LLP is not legally a partnership. It is, however - like a company - a corporate body with a

continuing legal existence independent of its members. Also, as with a limited liability company, you cannot

lose more than you invest in an LLP.

Unlike a company ong>theong>re is no requirement for a ong>Memorandumong> of Incorporation or Articles of Association. It is

also not subject ong>toong> ong>theong> body of legislation governing ong>theong> relationship between invesong>toong>rs and oong>theong>r stakeholders,

and particularly ong>theong> direcong>toong>rs who act as ong>theong>ir agents in managing ong>theong> company.

The ‘LLP agreement’ between members is ong>toong>tally flexible. It need not even be in writing, since simple

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 83

provisions based upon partnership law apply by way of default. Let us consider how this new legal ong>toong>ol may be

applied in respect of ong>theong> investment in, and ownership and occupation of, land and property.

The Community Land Partnership (CLP)

A Community Land Partnership has four Members:


(a) a Trustee Member - which holds ong>theong> freehold of ong>theong> Land in perpetuity on behalf of ong>theong>


(b) an Occupier Member - which consists of ong>theong> community of individuals and/or enterprises

which occupy ong>theong> land and ong>theong> property on it

(b) an Invesong>toong>r Member - which consists of ong>theong> consortium of individuals and enterprises who

invest money and/or money’s worth (such as ong>theong> value of ong>theong> land) in ong>theong> CLP

(d) a Developer/Operaong>toong>r Member, which provides development expertise and manages ong>theong>

CLP once ong>theong> development is complete.

1. One example would be a reasonably high profile project - ong>theong> London Olympics.The Invesong>toong>rs will be

pension funds who are invited ong>toong> invest in building high quality and energy efficient homes ong>toong> be used as ong>theong>

Olympic Village.Their young members will ong>theong>n be invited ong>toong> occupy ong>theong>se properties after ong>theong> Olympics are

over by paying an inflation-linked rental set at an initial level sufficient ong>toong> provide a reasonable return on capital.

The participating pension fund ong>theong>refore acquires a simple property-backed and inflation-linked rental stream

perfectly suited ong>toong> match its long-term liabilities.

For ong>theong> Occupiers ong>theong>re is an indefinite right of occupation for as long as ong>theong>y pay ong>theong> ‘Capital Rental’.They

may choose not ong>toong> pay in cash but raong>theong>r ong>toong> transfer ‘equity shares’ instead from savings made previously. If an

Occupier pays rentals ahead of ong>theong> due date ong>theong>n she/he auong>toong>matically becomes an Invesong>toong>r.

The Community retains ownership of ong>theong> Land and ong>theong> Developer/Operaong>toong>r obtains a reasonable reward in

respect of ong>theong> delivery and maintenance of a high quality and energy efficient Olympic Village.The outcome is

that that instead of ong>theong> council tax-payer funding ong>theong> Olympic ‘Legacy’, ong>theong> Legacy funds ong>theong> Olympics.

2. By way of furong>theong>r example a Community Land Partnership may acquire a piece of land on which is ong>toong> be

built a school, a hospital or a new bridge. A reasonable ‘capital rental’ is agreed for ong>theong> use of ong>theong> property and

ong>theong> CLP is divided inong>toong> ‘n’ths’ which consist of proportional shares in ong>theong> rental revenues. Again, such propertybacked

revenue shares are ideal for ethical investment at a local level and are a close match for ong>theong> requirement

of pension funds for assets yielding long term and inflation-linked revenue streams.

3. Anoong>theong>r example is a small housing development of seven properties.Two of ong>theong> buildings will be converted

inong>toong> three units of 1-bed each while ong>theong> oong>theong>r five properties will be converted inong>toong> five 1-bed units on ong>theong>

ground floor with five 2-bed units on ong>theong> two floors above. In addition ong>toong> this space ong>theong>re will be common


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

space and facilities at ground level. In all this produces accommodation for, say, 20 people in eleven 1-bed flats

and five 2-bed flats. Ground source heating and oong>theong>r energy-efficient features would be installed.

(a) Finance

Each of ong>theong> seven plots is worth £100,000 and ong>theong> current value of ong>theong> buildings is 2x£125,000 and

5x£100,000.The rebuilding cost is £70,000 per building or £490,000 so ong>theong> ong>toong>tal cost of ong>theong> scheme, allowing

£10,000 contingencies, is £1,950,000.The local council contributes £500,000 for a 50% partnership in ong>theong>

land value (£350,000) and a 20% partnership interest in ong>theong> buildings (£150,000).The remaining £1,450,000 is

contributed by an Invesong>toong>r Member seeking an initial 3% return or £43,500 per year. Divided between ong>theong> 20

occupiers members this is £2,175 each or just under £42 per week.This would be inflation-linked and would

ong>theong>refore provide a real asset-based return of 3% ong>toong> ong>theong> invesong>toong>r regardless of movement in interest rates.

Any rental above this figure paid by an occupying member would enable her/him ong>toong> acquire Equity Shares in

ong>theong> property and in so doing ong>toong> reduce ong>theong> rental due in ong>theong> future, ong>toong> take a rental holiday or ong>toong> build up


(b) Fair Shares and Land Rental Units

In addition ong>toong> ong>theong> building rental members would pay a Land Rental under ong>theong> Community Land Partnership

agreement.This Land Rental constitutes a pre-distributive mechanism internal ong>toong> ong>theong> CLP and utilising two

separate parameters - Income and Land Use.

(i) Income Pooling

Assume a contribution ong>toong> a ‘pool’ of 5% of income.

5 members on £50 per week state benefits pay in ong>toong>tal £12.50

5 members on £100 per week pay in ong>toong>tal 25.00

5 members on £150 per week pay in ong>toong>tal 37.50

5 members on £200 per week pay in ong>toong>tal 50.00

The outcome is a levy of £125 per week which is ong>theong>n divided between ong>theong> 20 members giving a

dividend of £6.25 each.This could give a net rebate ong>toong> those on less than £125 per week and a net

contribution by those earning more.The effect is for ong>theong> income component of land rentals ong>toong>

cross-subsidise ong>theong> building rentals for those least able ong>toong> afford ong>theong>m.The contribution rate could

be higher or lower than 5%.

(ii) Land Use Pooling

The land occupied by ong>theong> CLP members would be assessed using Land Rental Units (LRUs). In ong>theong>

example five properties each occupy three units of land while ong>theong> oong>theong>r two are bigger and occupy

five units - a ong>toong>tal of 25 LRUs The members agree a value payable per LRU by ong>theong> occupants of

each property inong>toong> a pool. Again net value transfers (payments or receipts) result from those having

most land use per person ong>toong> those having least.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 85

Members could decide ong>toong> retain value in ong>theong> pool ong>toong> subsidise members in adverse circumstances

and ong>theong>re could be transfers in terms of ‘money’s worth’, for example services raong>theong>r than cash.

The effect is similar ong>toong> a form of land-backed community currency.The methodology is in line with

that of ong>theong> Land Value Tax proposed by Henry George and oong>theong>rs.

It is worth noting that this ‘Capital Partnership’ mechanism has been in use - albeit in proong>toong>type form - in ong>theong>

commercial world for over two years. For instance, in late 2002 ong>theong> Hilong>toong>n group entered inong>toong> a 27 year

revenue sharing agreement with a development finance consortium which invested £350m in an LLP vehicle

which acquired 10 UK hotels.There was no mortgage or interest and neiong>theong>r was ong>theong>re a ‘sale and leaseback’ of

ong>theong> freehold.

Encouraging sustainable development

Existing modes of development encourage, even mandate, sociopathic behaviour on ong>theong> part of property

developers. Land is acquired and developed with borrowed money secured by a mortgage on ong>theong> property.The

developer is motivated ong>toong> develop as quickly as possible and as cheaply as possible with no real regard for ong>theong>

long-term consequences in terms of ong>theong> energy efficiency and ‘liveability’ of ong>theong> project beyond that which he is

mandated ong>toong> provide.

The CLP model is entirely different.The developer does not buy and sell ong>theong> land but instead acquires shares in

ong>theong> revenues which will flow over time from its successful and sustainable development and operation.The

more energy efficient ong>theong> development, and ong>theong> better ong>theong> quality, ong>theong> less money is necessary ong>toong> pay for repairs

and for heating and ong>theong> higher ong>theong> rental value will ong>theong>refore be.


We see in ong>theong> new LLP legal form an innovative mechanism enabling new solutions ong>toong> be provided in respect of

ong>theong> problems set out elsewhere in this ong>Memorandumong>.Through ong>theong> concept of ‘co-ownership’, and ong>theong> ‘assetbased

finance’ which flows from it, we see ong>theong> possibility of a truly sustainable development model where it is

in ong>theong> interests of developers ong>toong> develop property that is energy efficient and sustainable raong>theong>r than ong>theong> reverse.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 16 - Capturing rising land

values for ong>theong> community

Some fundamentals about land

(Peter Ambrose and Toby Lloyd of ong>theong> London Rebuilding Society)

Four fundamentals need ong>toong> be borne in mind when considering ong>theong> land issue:

1. ‘Buy land my boy, ong>theong>y’ve song>toong>pped making it’.This advice from Mark Twain is more or less

literally true give or take changes in sea level, land reclamation schemes (such as those of Charles I

in ong>theong> Fens) and marina developments (for example ong>theong> Brighong>toong>n Marina issue in ong>theong> 1970s which

was more about ong>theong> development land ong>toong> be created, and how much ong>theong> council could be induced

ong>toong> pay for ong>theong> infrastructure, than about sailing).

2. The value of land about ong>toong> be developed is determined by ong>theong> expected revenue flow or capital

gain from ong>theong> completed development, less ong>theong> construction cost. Since what and how much can be

developed is determined by development consents, it is ong>theong> planning system that, quite literally,

writes ong>theong> land value map.

3. The value of ong>theong> site (or ong>theong> completed development) can be powerfully affected by ong>theong> actions

of external forces, for example by ong>theong> construction of a transport facility or an urban renewal

scheme (positive effects) or ong>theong> siting of a sewage works or new airport runway (negative effects).

Beneficial effects brought about by ong>theong>se external facong>toong>rs give rise ong>toong> ‘betterment’ and ong>theong> reverse

is sometimes termed ‘worsenment’. It seems entirely reasonable ong>toong> tax ong>theong> former, so long as ong>theong>

tax is not added ong>toong> prices, and pay compensation from public funds for ong>theong> latter.

4. The value of a site can be established definitively only when it changes hands on ong>theong> free market

or when some public body sets its value in a forced sale or compulsory purchase situation.The

value of all oong>theong>r land, wheong>theong>r currently built on or not, can only be estimated or imputed.This

imputed value may well include some ‘hope value’ where ong>theong> site is very likely ong>toong> be approved for

development. It may also include some ‘floating value’ when it is in an area (such as a green belt)

where ong>theong>re is an expectation that sites of this general type will come up for development but it is

not yet clear which one. If ong>theong> site is already built on its value can be estimated fairly accurately by

imagining ong>theong> destruction of ong>theong> building upon it.The site is ong>theong>n worth ong>theong> market value of a

similar replacement building less ong>theong> construction cost of replacement.

The three case examples in Appendix 9, and ong>theong> evidence of several oong>theong>r appendices, have shown that ong>theong> UK

development system has failed ong>toong> ensure sufficient affordable housing.This is largely because ong>theong> regulaong>toong>ry

interventions have been ong>toong>o weak eiong>theong>r ong>toong> capture ong>theong> rise in land value for ong>theong> community, broadly defined, or

ong>toong> condition outcomes that include sufficient housing at access cost levels ong>toong> match ong>theong> range of earnings.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 87

The size of land value gains

The gain in land value when a site becomes available for a higher revenue use is spectacular.Typically ong>theong> value

might increase from about £5,000 per hectare in agricultural use ong>toong> £2 million or more for housing

development. Much higher figures can be reached for retail or office uses. At ong>theong> height of ong>theong> London

Docklands boom land values for commercial developments reached around £50 million per hectare.

This raises ong>theong> complex issue of how best ong>toong> distribute ong>theong>se immense gains in value, how ong>toong> balance legitimate

competing interests in a situation where power is unequally distributed and, in ong>theong> context of this

ong>Memorandumong>, how ong>toong> ensure ong>theong> best possible supply of affordable housing.

What a land flow system needs ong>toong> accomplish

Appendix 9 illustrated some of ong>theong> serious failings of ong>theong> present land flow arrangements in three case study

situations - one of rapid urban growth in Berkshire, one of ‘brownfield’ regeneration in east London and one of

a small housebuilder in ong>theong> home counties. It was shown how present practices make land coming up for

development more an attractive area of speculation and less a necessary input inong>toong> ong>theong> production of ong>theong> built


This enables us ong>toong> specify more precisely what a reformed land flow system should ideally be capable of

achieving. It should:

• facilitate an economically required and socially appropriate pattern of development in both

greenfield and brownfield situations

• produce ong>theong> solutions at ong>theong> required volumes

• be able ong>toong> acquire ong>theong> freehold land necessary at existing use value even from unwilling vendors

• deal equitably with reasonable claims for compensation for lost future development rights from

unwilling vendors

• eradicate ong>theong> possibility of speculation in land

• have ong>theong> power ong>toong> influence ong>theong> access rents and prices of ong>theong> housing element in ong>theong>

development so as ong>toong> ensure a spread of access costs and tenure types

• be able ong>toong> bring about this development ong>toong> a specified time frame

• incentivise private secong>toong>r developers ong>toong> carry out ong>theong> development in a secure economic

environment for ong>theong>m

• make full use of energy conservation practices both in terms of environmentally sustainable land

use patterns and higher energy efficiency standards for new building

• retain ong>theong> land values created by ong>theong> development for ong>theong> benefit of some combination of ong>theong> local

community and ong>theong> nation

• retain ong>theong> long term interest in ong>theong> land in some form of council or oong>theong>r common ownership ong>toong>

safeguard future common interests

• be democratically accountable both locally and nationally

• command broad political assent so as ong>toong> be acceptable ong>toong> successive governments

• be generally comprehensible so as ong>toong> command popular support and ong>toong> engage local communities

in ong>theong> process


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

There have been a number of policy interventions aimed at achieving ong>theong>se ends.

The 1941/1947 planning system

Wartime origins

The post-war system has been ong>theong> most comprehensive attempt ong>toong> deal with ong>theong>se issues. It was initiated in ong>theong>

depths of ong>theong> second world war as part of a morale-boosting offer ong>toong> a population suffering from heavy enemy

bombing. In January 1941 a deputation of seven civic leaders led by ong>theong> Mayor of Coventry requested a meeting

with Sir John Reith, minister responsible for reconstruction, ong>toong> seek information about ong>theong> nature of post-war

redevelopment regimes. Somewhat rashly he assured ong>theong>m that ong>theong>ir cities would be fully compensated and that

reconstruction would not be impeded by land speculation.

Reith ong>theong>n asked a small expert group headed by Augustus Uthwatt, Q.C. ong>toong> produce a report ong>toong> guide postwar

planning.Their Interim Report (Uthwatt 1941) contained radical proposals which need ong>toong> be seen in ong>theong>

context of a time when it appeared unlikely that ong>theong>re would be any ‘post-war’.There was ong>toong> be a Central

Planning Agency, provision for all land outside ong>theong> cities ong>toong> be acquired compulsorily by public authorities at 31

March 1939 values and ong>theong>n leased out for development while land developed within cities was ong>toong> be subject ong>toong>

a 75% betterment levy (see Parker 1985 for a cogent discussion).

An aggrieved commentaong>toong>r in ong>theong> Estates Gazette (31 May 1941, p.582) made ong>theong> point that ong>theong>se proposals

‘...strike at ong>theong> very root of ong>theong> principle of private enterprise in property’

and property interests brought pressure ong>toong> bear on ong>theong> government. Not surprisingly, as ong>theong> war progressed, ong>theong>

proposals were watered down first by ong>theong> Uthwatt group’s Final Report (Uthwatt 1942), ong>theong>n in ong>theong> June 1944

White Paper (The Control of Land Use) and finally in ong>theong> 1947 Town and Country Planning Act.This ‘long retreat’

is discussed in Ambrose (1986).

The 1947 Act when it emerged effectively brought inong>toong> public control not ong>theong> ownership of land but ong>theong> right ong>toong>

develop it - a very different thing. For those who could prove that ong>theong>re was unrealised gain from future

development on ong>theong> day ong>theong> Act came inong>toong> force a sum of £300 million was set aside for compensation. For all

oong>theong>r landowners ong>theong>re was ong>toong> be no compensation for lost future development rights because it was held that it

is society as a whole, and its need for new development, that creates development values. Under ong>theong> Act

‘floating value’ became fixed value by ong>theong> pattern of development consents granted.

Some weaknesses of land use control interventions

The main power of ong>theong> planning system is ong>theong> granting or withholding of planning consent as and when

developers choose ong>toong> bring individual sites forward. Planners ong>theong>refore write land value inong>toong> market existence -

but ong>theong>y do not create that value. Land value is ong>theong> value of one particular location over anoong>theong>r, which is eiong>theong>r

created by nature or by ong>theong> actions of ong>theong> whole community, past and present. As such, land value is by nature a

public good that is captured by private landowners, subject ong>toong> ong>theong> constraints of planning permission.

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For this reason, economists from Adam Smith onwards have recognised that increases in land value are a natural

source of public revenue. At present, agreements under Section 106 of ong>theong> Planning Act (which is replaced by

Section 46 of ong>theong> new Act this year) are used ong>toong> capture some of ong>theong> ‘betterment’ created by ong>theong> granting of

planning permission, by forcing developers ong>toong> make a cash or in kind contribution ong>toong> ong>theong> local authority.

Planning consent for housing developments is generally granted on condition that a certain proportion of ong>theong>

houses built are ‘affordable’ - in London ong>theong> Mayor’s target is 50%.

But both planning consent and Section 106 are extremely blunt instruments for guiding land use, because ong>theong>y

focus entirely on ong>theong> moment of development. Recent reforms of ong>theong> planning system (Planning and

Compulsory Purchase Act 2004) do little ong>toong> change this. Although forward planning is now based on wider

spatial strategies, ong>theong> system is still incapable of dealing adequately with ong>theong> dynamic nature of land markets.

Similarly, ong>theong> Planning Gain Supplement (PGS) proposed by ong>theong> Barker Review will operate only at ong>theong> moment

planning permission is granted. Ultimately ong>theong>se approaches add ong>toong> building costs and deter development, and

ong>theong>refore increase ong>theong> cost of both new build and existing housing. On three separate occasions since ong>theong> second

world war Labour governments have attempted ong>toong> capture planning gain through one-off taxes: each has failed

and been repealed by ong>theong> next Conservative government.

Anoong>theong>r limitation is that most property - and especially housing - does not get redeveloped very often, and so

ong>theong> planning system can only influence ong>theong> housing market at ong>theong> margin.Whatever contributions developers

are forced ong>toong> make are one-off events that have no lasting impact on affordability. Once houses have been built

ong>theong>y will continue ong>toong> exist for decades and it is not easy ong>toong> put in place mechanisms for controlling ong>theong>ir future

prices or for capturing future socially-created increases in land values.This is a serious omission, and a major

cause of ong>theong> affordability crisis. Ironically, this problem is worsened by sustained economic growth - ong>theong> extra

value created by growth is channelled inong>toong> an unconstrained housing market, meaning that housing costs rise

faster than wages and ong>theong> benefits of growth accrue disproportionately ong>toong> land owners.

The 1947 Act has conditioned all subsequent planning acts. Its development control powers, and ong>theong> ‘greenbelt’

legislation, have proved very successful in keeping ong>theong> urban and rural landscapes looking better than ong>theong>y

oong>theong>rwise would. But it has been very weak in positively bringing about a preferred pattern of development, ong>toong>

a required timescale and in influencing ong>theong> price and rent at which housing becomes available.

Oong>theong>r public policy effects on land development

Public policy directly influences ong>theong> flow of development land most obviously through ong>theong> planning system, but

also through government sale or purchase of land (including compulsory purchase); ong>theong> development (or not) of

publicly owned land; ong>theong> location of public agencies; investment in all types of public infrastructure and

services; and ong>theong> taxation system. More subtly, economic policies that effect growth, interest rates, employment

and ong>theong> environment will all effect people’s motivation ong>toong> develop land or buy property, as will social policies

that influence ong>theong> quality of neighbourhoods.

Modern land use policy has generally failed ong>toong> consider ong>theong>se multiple influences in ong>theong> round, leading ong>toong>

adverse selection and unintended consequences.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Economic growth and rising land values

The dynamic relationship between growth and ong>theong> land market was first identified in ong>theong> nineteenth century by

David Ricardo and developed by Henry George.Today it has obvious negative effects on housing affordability,

wealth distribution, social justice and intergenerational equity. Ultimately it leads ong>toong> economic sclerosis as

labour market immobility, ong>theong> misallocation of investment funds and ong>theong> squeezing of non-landowning

enterprises destroy ong>theong> efficiency gains of ong>theong> growth period, forcing ong>theong> economy inong>toong> anoong>theong>r down turn. As

prices rise beyond ong>theong> means of many people, social housing becomes increasingly residual and a growing

intermediate secong>toong>r of low-middle income working households find ong>theong>mselves unable ong>toong> access housing at all.

In this context, direct housing subsidies intended ong>toong> promote affordability act as a furong>theong>r boost ong>toong> ong>theong> market,

meaning that ever greater subsidy is needed for ong>theong> next generation of workers unable ong>toong> afford a home.

Similarly, affordable housing requirements, Section 106 agreements and ong>theong> proposed Planning Gain

Supplement (PGS) all fail ong>toong> tackle ong>theong> underlying causes of unsustainable land and housing price inflation (GLA

2001, Barlow et al. 2002). Planning control will always be necessary, and ong>theong>re may be a role for one-off

interventions like PGS, but we also need a means of capturing socially-created rises in value for ong>theong> community

and locking in any subsidy so that affordable housing remains affordable.

The potential of current planning powers

Despite ong>theong> limitations noted, ong>theong> Stepney Gasworks case in Appendix 9 has shown ong>theong>re appears ong>toong> be no

decisive reason why ong>theong> removal of land speculation, and ong>theong> ensuring of desirable outcomes ong>toong> a prescribed

timescale, cannot be achieved under existing planning legislation. It appears ong>toong> have been habitual practice and

lack of political will, raong>theong>r than a lack of legal powers, that has limited an equitable apportionment of ong>theong> land

value gain arising from this development. For a wide range of reasons local authorities have been in ong>theong> position

of granting valuable development consents after sites have been acquired by private developers raong>theong>r than

ong>theong>mselves acquiring (or holding) ong>theong> sites before granting ong>theong> consent that generates ong>theong> value.

Community Land Trusts (CLTs) as one way forward

As argued elsewhere, and in Recommendation 5, ong>theong> simplest way of maintaining affordability, preserving ong>theong>

value of subsidy and safeguarding future redevelopment opportunities would be ong>toong> keep a substantial proportion

of housing in public ownership and ong>toong> initiate a renewed public housing development programme. But at

present ong>theong>re is little political appetite for a return ong>toong> council house provision. In addition ong>theong>re is always ong>theong>

danger that future governments may again resort ong>toong> ong>theong> short-term expedient of selling off publicly owned

housing cheaply for elecong>toong>ral advantage.

A way forward ong>toong> complement oong>theong>r forms of public provision is now being presented by ong>theong> initiation and

development of some variant of ong>theong> ‘community land trust’ idea. As shown in Appendix 15 this can be

combined with new legal forms and financing mechanisms.

Community Land Trusts (CLTs) were developed in ong>theong> US by Bob Swann in ong>theong> 1960s. Swann was inspired by

Henry George’s idea that land was fundamentally different from ong>theong> oong>theong>r two facong>toong>rs of production (labour and

capital) and should be treated differently in ong>theong> economy. He believed people should certainly be able ong>toong> own

ong>theong>ir homes, but that ong>theong> land underneath ong>theong>m belonged ong>toong> ong>theong> community by right.

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In ong>theong> United States CLTs have been used extensively not only ong>toong> provide affordable housing but also ong>toong> serve as

environmental conservation trusts.There are around 130 CLTs in ong>theong> US, in both rural and urban areas, ranging

from small neighbourhoods ong>toong> entire ong>toong>wns.The largest, Burlingong>toong>n CLT in Vermont, now provides over 600

affordable housing units, both owner occupied and rented, and has 2,500 members. A recent study of all resales

in Burlingong>toong>n CLT showed that 74% of those selling had bought in ong>theong> private market, implying that preserving

affordability with a restrictive resale formula had not lead ong>toong> ong>theong> residualisation of CLT housing (Davis and

Demetrowitz 2003).

Separating ong>theong> land value rises from ong>theong> buildings

The key point of a CLT is ong>toong> separate out ong>theong> two elements in any development - ong>theong> land and ong>theong> buildings

placed upon it.The land is a natural resource and it is entirely equitable that those living in ong>theong> vicinity should

have long-term rights over its ownership and use analogous ong>toong> those held over ‘commons’ in ong>theong> feudal system.

It is also reasonable that increments in value of ong>theong> site deriving from public investment should be retained for

communal benefit.The buildings placed upon it from time ong>toong> time, on ong>theong> oong>theong>r hand, are ong>theong> product of

investment by a variety of interests (who may be in ong>theong> private, voluntary or statuong>toong>ry secong>toong>r) and it is

legitimate for those interests ong>toong> wish ong>toong> see a return on ong>theong>ir investment over ong>theong> useful life of ong>theong> building.

A CLT implements ong>theong>se distinctions.The site is acquired freehold by a trust or perhaps a neighbourhood or

parish council having ong>theong> long term interests of ong>theong> local community as a priority. It is acquired by means of

market purchase, donation or transfer of public land. It is effectively removed from ong>theong> market for ever.

Housing can ong>theong>n be built on ong>theong> land for ong>theong> construction cost alone. Individuals, co-operatives or housing

associations can rent ong>theong>se houses or buy ong>theong>m on leasehold, often for a 99 year term in ong>theong> first instance.The

revenue stream, in ong>theong> form of lease payments or rents, is used ong>toong> service ong>theong> original loan ong>toong> acquire ong>theong> land

and ong>toong> cover building costs and ong>theong>n ong>toong> feed back inong>toong> ong>theong> trust or council for furong>theong>r development on ong>theong> same


When a homeowner chooses ong>toong> sell, ong>theong> CLT eiong>theong>r buys ong>theong> property itself or specifies ong>theong> price at which it

can be sold.This prevents ong>theong> spiralling price rises that make houses unaffordable.The precise resale price

formula adopted varies widely between CLTs, but most attempt ong>toong> give ong>theong> homeowner some of ong>theong> benefit

from capital appreciation while preserving affordability relative ong>toong> local income levels.

While clearly ad hoc in nature this set of ideas offers flexibility and clear advantages in several key respects:

• a more equitable distribution of ong>theong> gain in site values resulting from consent ong>toong> develop

• much closer involvement of ong>theong> local community in ensuring that developments meet ong>theong> needs

of ong>theong>ir area; CLTs are democratic organisations designed ong>toong> represent all local stakeholders, not

just residents.

ong>theong> retention of ong>theong> freehold, and thus a permanent interest in ong>theong> site undergoing development,

so as ong>toong> control both new use and future redevelopment potential

• any subsidy that goes ong>toong> acquire ong>theong> land is effectively locked in, meaning that more subsidy is not

required for ong>theong> next generation


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

• trust law is used ong>toong> remove ong>theong> land from ong>theong> market in perpetuity and ong>toong> prevent future

members of ong>theong> CLT from ‘carpet-bagging’ or selling ong>theong> land at market rates in return for a oneoff

windfall gain

• residents can still own ong>theong>ir homes and see ong>theong>ir equity rise in value over time, but restricted

resale conditions mean ong>theong>y cannot make ong>theong> huge capital gains possible in ong>theong> mainstream market.

The CLT idea is a way of equitably and efficiently balancing ong>theong> various interests involved and of capturing land

value gains for ong>theong> community in perpetuity.

The range of CLTs and what ong>theong>y can do

Over ong>theong> last two or more decades a wide range of initiatives have occurred under ong>theong> general CLT heading.

There are examples in at least ong>theong> United States, Norway, Brazil, Denmark, Poland and ong>theong> four home

countries.The issue was ong>theong> subject of ong>theong> Joseph Rowntree Foundation Land Enquiry (Joseph Rowntree

Foundation 2002). Oong>theong>r key documents have been produced by ong>theong> Burlingong>toong>n Community Land Trust (Davis

and Demetrowitz 2003), Greater London Council (GLA 2004), CDS Co-operatives (New Economics

Foundation 2004) and The Countryside Agency (The Countryside Agency 2005). An umbrella body,The

Development Trusts Association, was founded in 1992.

An early example in England was Letchworth Garden City.This used ong>theong> co-operative land development system

devised by Ebenezer Howard and is still operating on ong>theong> same lines ong>toong>day. Oong>theong>r CLTs are currently in

operation in Song>toong>nesfield (Oxfordshire), ong>theong> Isle of Gigha in ong>theong> Hebrides, where some small rural communities

have managed ong>toong> buy ong>theong> estates of feudal landlords and place ong>theong>m in trust, High Bickingong>toong>n (Devon), Meden

Valley (Leicestershire), Norong>toong>n Radsong>toong>ck (Somerset), Stroud (Gloucestershire) and elsewhere. As is evident

most of ong>theong>se are small-scale examples in villages or small ong>toong>wns.They are directed ong>toong>wards producing limited

amounts of housing which is more affordable because ong>theong> land costs have been removed, retaining key village

services and/or generating workspace or community facilities.

In an urban context CDS Co-operatives are working on some pilot projects in several London boroughs. Given

that in 2003 ong>theong> average London house price was x12 ong>theong> wage of a bus driver and x11 ong>theong> wage of a nurse,

ong>theong>se schemes are aimed primarily at extending ong>theong> ‘home ownership ladder’ furong>theong>r down ong>theong> income scale

raong>theong>r than providing housing for ong>theong> very poorest.The key element is that ong>theong> land remains in ong>theong> permanent

ownership of ong>theong> CLT, ong>theong> housing is leased ong>toong> housing providers and ong>theong> basis is mutual home ownership and

ong>theong> build up of equity shares (Conaty et al. 2002).The payment for leases is set ong>toong> be about 35% of ong>theong>

occupier’s income and is geared ong>toong> rise as her or his income rises.Those on higher incomes are ong>theong>refore

funding more units of equity in ong>theong> scheme. Leavers take away about 90% of ong>theong> growth in value of ong>theong> house

or flat leaving a sum ong>toong> be reinvested in furong>theong>r development.The scheme is aimed especially at providing

affordable housing for key workers and has won ong>theong> public support of ong>theong> Mayor of London and ong>theong> GLA.

The nature of ong>theong> subsidy - long term not one-off

It is significant that in ong>theong> United States, where ong>theong> CLT idea has been more widely implemented, it is city

governments who are getting behind ong>theong> development of CLTs. Since ong>theong> late 1970s ong>theong>re has been a sharp

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 93

decline in Federal support for housing. Prices and rents have moved up much faster than incomes and an

‘affordability gap’ has been ong>theong> result. Demand side subsidies have been applied ong>toong> plug ong>theong> gap between what

people can afford and what ong>theong>y need ong>toong> pay for housing. But city governments are among those that have

realised that ong>theong> subsidy necessary ong>toong> fill ong>theong> gap is getting larger and consequently more expensive on public

finances. By promoting CLTs, which effectively take ong>theong> land costs out of housing, ong>theong> subsidy has a permanent

raong>theong>r than a self-defeating transiong>toong>ry effect.

Future forms of social organisation and ownership - Walterong>toong>n and Elgin Community Homes (WECH)

In 2000,WECH was judged by ong>theong> World Health Organisation ong>toong> be among ong>theong> ong>toong>p three projects in ong>theong> world

for successfully empowering residents and improving ong>theong>ir health.WECH is acknowledged by ong>theong> leading UK

experts ong>toong> be at ong>theong> cutting edge of resident controlled housing and ong>toong> be a model for delivering both

affordability and social capital.

The WECH initiative began in 1985 among a number of residents in an area of Paddingong>toong>n. Most of ong>theong> housing

song>toong>ck was over 100 years old, but it also included two 1960s ong>toong>wer blocks.The Vicong>toong>rian houses had few

amenities, leaked and were damp.The ong>toong>wer blocks were riddled with asbesong>toong>s.The landlords,Westminster City

Council, were seeking ong>toong> evict residents and sell ong>theong> song>toong>ck for conversion inong>toong> luxury premises.

The residents campaigned ong>toong> save ong>theong>ir homes and formed a Trust ong>toong> buy ong>theong> song>toong>ck. In 1992 ong>theong>y assumed

ownership under ong>theong> law obliging local authorities ong>toong> dispose of tenanted song>toong>ck if a buyer, approved by ong>theong>

Housing Corporation, made an application.WECH was founded as a Community Based Housing Association

and registered with ong>theong> Housing Corporation. It began ong>toong> renovate and manage ong>theong> 660 homes in a fully

participative way.While 23% of ong>theong> properties are leasehold,WECH retains ong>theong> freehold.

The Board is almost entirely resident-based, with expert input, and rents are set so as ong>toong> cover management and

maintenance and ong>toong> safeguard ong>theong> future of ong>theong> song>toong>ck.There is no relationship at all between rent setting and ong>theong>

capital values of ong>theong> properties.This produces some of ong>theong> lowest rents in ong>theong> South East (ranging from £53 per

week for a one bed flat ong>toong> £111 per week for a five bedroom house) and delivers ong>theong> highest quality homes,

management and maintenance.WECH uses around thirty homes ong>toong> house homeless households in a high quality

social and housing environment and it is this income which is expected ong>toong> provide for expansion.

A key element in ong>theong> organisation is ong>theong> highly participative management style and ong>theong> provision of supportive

services.This produces social conditions with demonstrably effective health promotional effects (evidenced in

Ambrose 1996).There is evidence of dramatic extensions ong>toong> ong>theong> longevity of older and at risk individuals.The

explanation for this appears ong>toong> be ong>theong> organisation’s emphasis on an asset-based, internally-focused, relationshipdriven

model of management.

The residents now view ong>theong>mselves as a family raong>theong>r than a community. In a sense everyone lives under one

roof owned collectively by WECH and 12% of ong>theong> households are related ong>toong> one oong>theong>r in ong>theong> form of co-located

family networks.

The emergence of a large family from a community based housing association is a remarkable and challenging

sociological development. It offers exciting possibilities for public policy – a mechanism for improvement that

is older than song>toong>ne ong>toong>ols. It also suggests that humankind’s most resilient, yet sorely tested, form of social


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

organisationong>theong> family – far from being dead is able ong>toong> thrive in some surprising institutional forms.

Recent UK Government statement on CLTs

In his speech ong>toong> ong>theong> Labour Party conference in 2004, John Prescott announced his intention ong>toong> use government

owned land ong>toong> build houses, but using a CLT approach ong>toong> avoid what he called ‘an asset giveaway.’These houses

would be sold ong>toong> key workers and oong>theong>rs at ong>theong> bricks and mortar cost, but ong>theong> land itself would be kept in

trust ong>toong> prevent ong>theong> initial subsidy being lost ong>toong> ong>theong> market and ong>toong> keep ong>theong> cost of ong>theong> houses down.The ODPM

is now developing ong>theong> details of this scheme

This initiative is ong>toong> be welcomed but ong>theong> CLT approach has ong>theong> potential ong>toong> be applied far more widely than ong>toong> a

few surplus government sites. By separating ong>theong> land from ong>theong> buildings, CLTs allow people ong>toong> own ong>theong>re own

home without depriving ong>theong> rest of ong>theong> community or future generations of community-created value.

Fiscal reform as a way forward

CLTs are generally most applicable ong>toong> new build developments: although it is possible ong>toong> assemble existing

housing inong>toong> a CLT, it is more difficult and expensive. As 99% of ong>theong> housing supply consists of ong>theong> existing

song>toong>ck this is a serious omission. Any fundamental solution ong>toong> ong>theong> housing problem must tackle ong>theong> ongoing

dysfunctionality of ong>theong> market in second hand houses.

The vast majority (80%) of ong>theong> housing song>toong>ck is privately owned - and 70% is owner occupied. As land for

private housing is far more valuable than most oong>theong>r land categories, and land prices are driven by house prices,

reforming ong>theong> disong>toong>rted land market is impossible without tackling ong>theong> broader problem of inflated house

prices.The only currently available public policy ong>toong>ols than can have a sustainable impact on ong>theong> price of ong>theong>

existing private housing song>toong>ck are interest rates, benefits and ong>theong> tax system.

The first of ong>theong>se is an extremely blunt instrument that has in any case been handed ong>toong> ong>theong> independent

Monetary Policy Commission. House prices have boomed dramatically since ong>theong>y were given control of ong>theong>

interest rate. So far, MPC policy has strongly favoured maintaining house prices in ong>theong> interest of current

owners over promoting affordability for non-owners.

Benefits ong>toong> homeowners have been reformed ong>toong> reduce ong>theong> worst inflationary effects by ong>theong> abolition of MIRAS

and of mandaong>toong>ry urban renewal grants. But many new government programmes repeat ong>theong>se mistakes by

pumping more money inong>toong> an overheated market. Despite attempts ong>toong> promote intermediate housing schemes

like Shared Ownership, by far ong>theong> most popular scheme has been Homebuy, in which key workers receive up ong>toong>

25% of ong>theong> price as help ong>toong> buy ong>theong>ir own house in ong>theong> private market. It is also intended ong>toong> extend ong>theong> current

Right ong>toong> Buy and Right ong>toong> Acquire ong>toong> a furong>theong>r 300,000 tenants (ODPM 2005).This form of demand side

support effectively raises ong>theong> price of housing furong>theong>r as more money chases ong>theong> limited number of existing

homes (and repeats ong>theong> self-defeating experience of programmes in ong>theong> US aimed at funding ‘ong>theong> affordability

gap’). Housing benefit is also counterproductive: nearly £16 billion was handed ong>toong> landlords in 2004/5,

increasing yields and so pushing up land prices (Wilcox 2004,Table 114, see also Appendix 7).

Even more perversely ong>theong> tax system provides huge incentives ong>toong> homeownership, which fuels ong>theong> speculative

pressures that drive up prices.The cost of Capital Gains Tax exemption more than outweighs Exchequer gains

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 95

from stamp duty and council tax (Lloyd 2004). At present ong>theong>re is a negative user cost of owning housing that

inevitably encourages speculative behaviour.This adds ong>toong> ong>theong> destructive confusion between a home as a place ong>toong>

live and a house as a speculative capital investment.

Rebalancing ong>theong> tax system ong>toong> end ong>theong> perverse incentives ong>toong> land holding and hoarding and encourage ong>theong>

productive and sustainable use of land would do more ong>toong> address ong>theong> problems of ong>theong> land market than anything

else. By extension, it would have a positive effect on ong>theong> affordability crisis.

The benefits of a land value tax

Beyond ong>theong> various supply-side solutions that have been proposed, it is clear that some demand-side measures

need serious considerations. It is essential ong>toong> reform ong>theong> tax system ong>toong> remove ong>theong> disong>toong>rting incentives ong>toong>

landownership that drive up prices.The most effective and efficient way ong>toong> do this would be ong>toong> develop an

annual tax on land values consistent with ong>theong> evolution of policy on council tax reform. It has long been noted

that taxes on land rents have ong>theong> least disong>toong>rtionary effect.Working ong>toong>wards ong>theong> combining of current property

taxes with a genuine land tax would ong>theong>refore enable ong>theong> housing market ong>toong> function more efficiently.

It has long been noted that taxes on land rents have ong>theong> least disong>toong>rtionary effect. Replacing ong>theong> current

property taxes with a genuine land tax would ong>theong>refore enable ong>theong> housing market ong>toong> function more efficiently.

An annual charge levied on ong>theong> unimproved site value of landholdings would also address most of ong>theong> issues

raised by ong>theong> Barker Review. It would remove ong>theong> incentive ong>toong> hold underused land and encourage its release

inong>toong> ong>theong> market for more productive use. It would increase ong>theong> cost of landholding, ong>theong>reby removing ong>theong>

potential ong>toong> make supernormal profits from speculating in property. It would rebalance ong>theong> tax burden, ending

ong>theong> perverse tax advantages of landowners over occupiers.

All ong>theong>se effects would, in turn, reduce ong>theong> speculative pressures on land prices, which would decrease ong>theong>

volatility of ong>theong> housing market dramatically and would ultimately lead ong>toong> lower house prices in general.Taxing

land values makes land cheaper ong>toong> buy but more expensive ong>toong> hold.This would encourage a more liquid market

and greater allocative efficiency.

A recent article on this issue (Huhne 2005) concedes that ong>theong>re are formidable practical and political difficulties

in ong>theong> way of implementing site value taxation but also argues that such a measure would address ong>theong> root of ong>theong>

landflow and land speculation difficulties. A sensible way forward, advanced as Recommendation 6, would be

for ong>theong> Government ong>toong> undertake a feasibility study of ong>theong> practicalities and of ong>theong> benefits ong>toong> be derived from

taxing site values.

Previous development taxes

Although ong>theong>re have been repeated attempts ong>toong> capture land rents for ong>theong> public purse, ong>theong>y have all been

seriously flawed.This is widely interpreted as a sign that land rent cannot be captured. But in fact ong>theong> hisong>toong>ry of

failure represents merely ong>theong> overly complex, confused and compromised nature of ong>theong> particular legislation


The three attempts at land taxes by Labour governments since 1945 have all targeted ong>theong> profits made by


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

developers at ong>theong> point of sale or of planning permission being granted.This simply added a furong>theong>r incentive ong>toong> hold

land raong>theong>r than ong>toong> release or develop it.These measures cannot be considered genuine taxes on land rents.

Raong>theong>r ong>theong>y are taxes on development. Development taxes discourage development.This is counterproductive

and places furong>theong>r pressure on developers who are already severely squeezed between high land prices and

government interventions.

A true land value tax would be levied annually on ong>theong> unimproved value alone.This would have ong>theong> opposite effect

of previous development taxes, and would stimulate ong>theong> construction market by making housing cheaper ong>toong>

build and developers less risk averse.


Significant reforms in well-established political systems are usually impeded by some combination of three


• lack of new ideas (ong>theong> thoughts have not yet been thought)

• inertia and ong>theong> power of conventional wisdom (things are done ong>theong> way ong>theong>y are done)

ong>theong> balance of power is against ong>theong>m (ong>theong> reforms offend more interests than ong>theong>y please)

There is an additional barrier in ong>theong> form of a lack of collective memory amongst civil servants and politicians

alike. No one in Government has ong>theong> clarity of vision on ong>theong> land issue of Uthwatt in 1941 or on ong>theong> health and

housing issue of Addison in ong>theong> early 1920s (Appendix 1).

In this context ong>theong> prospects may now be promising for some fundamental reform of land supply and housing

provision practices in ong>theong> UK, especially in relation ong>toong> CLTs.The ideas go back at least 100 years and are being

implemented in many countries around ong>theong> world.The thoughts are being thought by both housing suppliers

and development participants as existing practices are revealed ong>toong> be increasingly unable ong>toong> cope. Such is ong>theong>

flow of innovative ideas and discussion that ong>theong>re are some signs of a break-down of inertia in key institutions

such as long-term funders, ong>theong> Housing Corporation, English Partnerships, ong>theong> Treasury and ong>theong> ODPM.

The key change may be ong>theong> real balance of power and interest among ong>theong> various participants ong>toong> ong>theong>

development process. It seems highly significant in ong>theong> United States that it is some city governments that are

now firmly behind ong>theong> CLT and mutual housing provision arrangements.This is primarily because ong>theong>y are

aware that public support arrangements ong>toong> plug ong>theong> affordability gap are becoming ever less cost-effective.

Eiong>theong>r more and more is spent on ong>theong>m ong>toong> keep pace with ong>theong> ‘affordability gap’ or else ong>theong> spending on ong>theong>m is

cut and ong>theong> problem manifestly gets worse.This seems ong>toong> be a very accurate characterisation of ong>theong> lasting

predominance of demand side subsidy in ong>theong> British case. More and more is spent on Housing Benefit and tax

concessions ong>toong> owner-occupancy.This may well be having some ameliorative effect on housing conditions but

not really on housing supply. It also has ong>theong> well-recognised side effect of exacerbating inequality.

It may well be that ong>theong> real balance of interests is now moving in favour of reform.When listing who is in favour

of escalating land and house prices and who is against, ong>theong> balance is becoming more evident.Those in favour of

present high prices appear ong>toong> be a narrow group of interests comprising land speculaong>toong>rs, ong>theong> house purchase

lending industry, some vendors of land for development (but by no means all) and all those interests that live off

a percentage of values.Those against include ong>theong> vast majority of employers (lower housing costs mean less

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 97

upward wage pressure and fewer recruitment problems hence ong>theong> More and Better Homes campaign for a stronger

supply side response discussed in Appendix 12), ong>theong> Government (support payments get more and more

expensive and less effective), city and local government (high housing costs are a disincentive ong>toong> location and

impede local economic development) and even perhaps many housebuilders (for whom playing ong>theong> land market

may be an unhelpful complication).The latter group seems collectively more weighty than ong>theong> former.

That leaves people at large as an interest group.The conventional wisdom is that escalating house prices suit

ong>theong>m well, once ong>theong>y have achieved a ‘foot on ong>theong> ladder’. But ong>theong> issue is habitually perceived in terms of

growth of unrealised paper value not of growth in ong>theong> proportion of lifetime earnings committed ong>toong> ownership.

There is also increasing unease amongst homeowners about wheong>theong>r ong>theong> habitual instabilities in house prices

will cause negative equity ong>toong> strike again. Some are concerned with ong>theong> felt obligation ong>toong> help finance ong>theong>ir

grown up children as ong>theong>y seek ong>toong> buy a suitable home. For oong>theong>rs ong>theong>re is concern about ong>theong> manifest

unfairness of denying large proportions of ong>theong> poor ong>theong> standard of housing and tenure security enjoyed by

those who are not poor.These facong>toong>rs probably all contribute ong>toong> ong>theong> finding that 71% of people feel we have a

housing crisis (Appendix 12).

Present arrangements are creaking and reforming ideas are being advanced and implemented by an articulate

group of enthusiasts. It will be interesting ong>toong> see how ong>theong> realpolitik works out over ong>theong> coming years and



Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 17 -

Building more sustainably

(Peter Ambrose and Bill Dunster of BedZED)

The Kyoong>toong> Proong>toong>col

In March 2005 ong>theong> Government announced that whereas ong>theong> intention was ong>toong> reduce CO2 emissions by 20% by

2010 compared ong>toong> ong>theong> 1990 level, current projections show that ong>theong> reduction will be by only 13% on 1990.

This is just within ong>theong> Kyoong>toong> Proong>toong>col target but well outside ong>theong> Government’s own target. New data showed

that 2003 CO2 emissions actually rose by 2.2% compared ong>toong> 2002. Elliott Morley, ong>theong> environment minister,

expressed disappointment at ong>theong> increase. He said:

‘We are committed ong>toong> our national targets.We shall succeed in our response ong>toong> climate change.We

cannot afford ong>toong> fail.’

Unfortunately current building practices point ong>toong>wards failure. A recent report (ong>Primeong> ong>Ministerong>’s Strategy Unit

2005) has found that ong>theong> UK housing song>toong>ck is among ong>theong> least energy-efficient in Europe and is 31% worse that

ong>theong> EU-15 average.

Given ong>theong> current and future problems posed by carbon emissions ong>theong>re is a vital need ong>toong> build in ways that will

help ong>toong> promote carbon neutral developments.This will empower people ong>toong> make a difference ong>toong> important

global issues through ong>theong>ir choice of home and workplace and at ong>theong> same time improve ong>theong>ir quality of life.

This need is recognised in ong>theong> latest housing policy document from ong>theong> ODPM (ODPM 2005) in a ‘code for

sustainable building’ ong>toong> be developed and tested by ong>theong> end of 2005 and implemented in a number of areas from


Current lack of sustainable development

A normal developer makes between 10 and 30 % profit on a new development. Most developers make more

profit from land acquisition and planning gain than in ong>theong> actual construction and delivery of new homes.The

volume house builders can build almost anything and sell it without difficulty in ong>theong> South East because demand

is so much greater than supply. Fossil fuel derived energy is still very cheap and fuel cost saving is not a major

purchasing criterion.

Legislation requiring increased energy efficiency is increasing but progress is slow due ong>toong> effective lobbying

from ong>theong> industry and building material suppliers. For ong>theong>se reasons ong>theong>re are few exemplary sustainable

developments from ong>theong> private secong>toong>r.There is also little incentive ong>toong> take rigorous sustainable development

criteria seriously as ong>theong> Government can introduce ong>theong> legislative stick only when ong>theong> carrot has proved

ineffectual. In addition recent planning guidance in ong>theong> form of PPG3 allows dramatically higher densities

equating ong>toong> substantial increased planning gain without requesting any compensation ong>toong> ong>theong> community and

local authority.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 99

So is ong>theong>re a way forward

The development process at present is ong>toong>o complex and expensive with far ong>toong>o many consultants, blurred

responsibilities and protracted time scales. Environmental innovation is seen as yet anoong>theong>r unnecessary risk that

can be avoided.

One developer (BedZED, www.zedfacong>toong> has approached sustainable development from a completely

different viewpoint.They have asked how can we minimise ong>theong> environmental impact of new construction using

simple modifications of existing well-proven products assembled in an innovative way.Working with a number

of environmental consultants ong>theong>y have developed a strategy and design techniques that make it possible ong>toong>

reduce ong>theong> heat and power requirements of high density mixed use development ong>toong> ong>theong> point where it can be

economically met by renewable energy sources.

Working in partnership with a number of local authorities and RSLs ong>theong> developers have designed a number of

standard homes from 1-bed live/work studios ong>toong> 4-bed ong>toong>wnhouses.

A carbon neutral specification for both new build and renovation is inevitably more expensive whilst at

demonstration stage - for ong>theong> same reasons that a proong>toong>type car costs far more than a mass production model.

The developers have ong>theong>refore worked with many materials suppliers ong>toong> ensure that previously one off

specifications become standard products with excellent environmental performance at a defined cost with

volume purchasing agreements already negotiated.

The developer’s final product is a range of standard house types with known cost, programme, density, amenity

and environmental performance. By being able accurately ong>toong> define ong>theong> cost of a carbon neutral specification at

ong>theong> planning stage, ong>theong> developers are able ong>toong> carbon trade with local authorities as part of Section 106

agreements.This involves requesting increased density ong>toong> generate additional profit ong>toong> offset ong>theong> additional

construction costs of ong>theong> super green specification in ong>theong> early stages of ong>theong> programme.This will change as ong>theong>

products supply chain achieves sufficient volume ong>toong> move away from proong>toong>type status ong>toong> achieve reasonable

economies of scale.

Patterns of energy use

A typical UK family’s annual carbon emissions are approximately a third for heating and powering ong>theong>ir home, a

third for food miles with ong>theong> average UK meal travelling a ong>toong>tal of over 2000 miles from farm ong>toong> dinner plate

and a third for private car use and commuting.The average UK wage earner produces several ong>toong>nnes of CO2

per year getting ong>toong> work and congestion means that ong>theong> average speed in London is now 12 mph.

There is no point in producing energy efficient buildings if transport and food miles are not addressed.This is

why ong>theong> developers, working with ong>theong> BioRegional Development Group, have tried ong>toong> design ong>theong> lifestyle

before ong>theong> buildings. In some developments each home has been allocated enough space ong>toong> grow up ong>toong> 50 % of

ong>theong> fresh vegetable and fruit requirements from late Spring ong>toong> Autumn. All ong>theong> developer’s homes have

convenient bike song>toong>rage for two or three bikes and many have workspace designed in ong>toong> help reduce commuting


BioRegional have researched ong>theong> ecological footprint and associated carbon reductions with each of ong>theong>se low


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

impact lifestyle activities.Wherever possible each ecologically sensitive development will include a farm shop

song>toong>cking locally produced organic food delivered by solar electric vans, a car pool incorporating a mixture of

electric and LPG vehicles, a telecommuting centre for workspace, a combined heat and power plant run off

urban tree waste, community composting schemes and on site childcare and shared sports facilities.Wherever

possible all ong>theong> above activities will be powered by renewable energy generated on site making ong>theong> carbon

emissions savings for ong>theong> lifestyle initiatives as significant as those achieved by ong>theong> infrastructure.These can be

quantified for carbon trading purposes.

Land requirements

The standard house type produced by ong>theong> developers can achieve around 100 homes per hectare with 3.5

habitable rooms per home.This makes it possible ong>toong> meet ong>theong> demand for around 4 million new homes by 2016

without substantial loss of agricultural land. By showing how high density urban renewal can be reconciled with

high amenity - almost every home has a garden, a conservaong>toong>ry and carbon neutrality - ong>theong> developers believe

that for ong>theong> first time ong>theong> public can be offered a more sustainable lifestyle at ong>theong> same time as improving ong>theong>

overall quality of life for most people.This is an important step for ong>theong> green movement as it replaces ong>theong>

concept that green means self-denial and tries ong>toong> refocus public attention on ong>theong> dysfunctionality and waste

integral in a typical suburban conventional lifestyle.

Creating a new market requires new ways of developing sites

The development process incorporates a number of innovative components.The experience is that ong>theong>re is a

strong public demand for ong>theong> concept with sales achieving between 10 and 30 % premiums over ong>theong> products of

conventional volume house-builders in ong>theong> locality.The innovative processes include:

1.The consultants act as ong>theong> developer, and ong>theong> normal developers profit is re invested in ong>theong>

carbon neutral specification.The consultants request only industry standard fees.

2.The overall profit from ong>theong> development goes ong>toong> ong>theong> landowner - often a local authority.This

enables ong>theong> authority ong>toong> realise carbon neutral development on its own land and this could be a way

of showing ong>theong> private secong>toong>r what is possible.

3.The developer and ong>theong> landowner act as a partnership or joint venture.This means ong>theong> developer

can avoid ong>theong> bank loan charges normally incurred by land purchase. Again this saving is reinvested

in ong>theong> carbon neutral specification.

4.The developers produce a multi disciplinary design service backed up by ong>theong> consultants.

5. A proven range of standard house types is available for most sites - however one off designs will

be appropriate for some locations.The more standard house types that can be used, ong>theong> lower ong>theong>

design consultancy fees.

6.The developers market ong>theong> new homes and workplaces using both conventional techniques and

ong>theong> web - with ong>theong> objective of pre-selling all homes before construction is started.

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 101

7. A show flat already exists ong>toong> provide a quality indicaong>toong>r for potential purchasers.

8.With presales achieved ong>theong> developers negotiates loans ong>toong> fund construction from ong>theong> wide range

of ethical investment companies.

9.The developer’s supply chain ensures that ong>theong> innovative component costs are fixed and

construction costs can be accurately predicted with an agreed programme.

10. A project manager is responsible for construction management.

The developers believe that this type of ‘joined up thinking’ will deliver ong>theong> kind of step change in

environmental performance needed for ong>theong> UK ong>toong> meet its carbon emission reductions.The UK replaces its

urban fabric at 1.5 % per year.This means that if appropriate steps are taken ong>theong> UK built environment could be

carbon neutral by ong>theong> start of ong>theong> next century.


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Appendix 18 - Ethical issues from a

Christian perspective - a universal

pattern of crucifixion and resurrection

Cultural change

(Paul Nicolson)

In Who Runs this Place (2004) Anthony Sampson reflects on ong>theong> changes that have taken place since 1965 (when

he wrote ong>theong> Anaong>toong>my of Britain):

‘Most people of great wealth show a remarkable lack of interest in using ong>theong>ir money ong>toong> improve

ong>theong> lives of oong>theong>rs. Above all ong>theong>y feel much less need ong>toong> account for ong>theong>ir wealth, wheong>theong>r ong>toong>

society, ong>toong> governments or ong>toong> God.Their attitudes and values are not seriously challenged by

politicians, by academics or ong>theong> media, who have become more dependent on ong>theong>m.The respect

now shown for wealth and money making, raong>theong>r than for professional conduct and moral values,

has been ong>theong> most fundamental change in Britain over four decades.’

That seems like a challenge ong>toong> respond ong>toong> as a Christian.This memorandum on housing has shown how ong>theong>

unregulated free market in money lending has been a big facong>toong>r in lifting house and land prices.These costs eat

inong>toong> ong>theong> already low incomes of ong>theong> poor and create a massive bill in housing benefit for ong>theong> taxpayer. It is ong>theong>

powerful wealthy and ong>theong> moneylenders that have grown ever richer at ong>theong> same time, ever more distant from

poverty and powerlessness in Britain.

Faith in ong>theong> City

Poverty is worse now than it was in 1985 when ong>theong> Faith in ong>theong> City report was published by ong>theong> Church of


• The number of people with incomes under 60% of ong>theong> median, ong>theong> government poverty

threshold, increased from 1979 ong>toong> peak in 1997 but has not returned ong>toong> even 1985 levels.

• The number of households accepted as homeless doubled from 60,400 in 1980 ong>toong> 137,220 in


• Low birthweights increased from 6.6% of live births in 1973 ong>toong> 8% in 2004, ong>theong>re are Third

World rates at 11% - 14% of live births in some inner city areas. Low birthweight can lead ong>toong>

mental and physical ill health throughout life.The bill in ong>theong> health service for psychiatric disorders

and mental illness is now running at £12.5 billion (Wanless report).There are financial savings ong>toong>

be made from ending poverty.

• The expectation of life of ong>theong> manual worker is 7.5 years shorter than that of professional


• The Home Office reports that survival is ong>theong> ‘overriding motivation’ for off street prostitution.

• No British government has undertaken official research inong>toong> ong>theong> minimum incomes needed for

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 103

healthy living.

Poverty happens under ong>theong> surface. It is largely unseen and unheard by comfortable Britain. It is oppression by

laws that threaten prison for council tax arrears and ong>theong> truancy of a child. It means eviction for rent arrears

against inadequate incomes, or reduces incomes ong>toong> zero for weeks merely for failing ong>toong> turn up at an interview

at a jobcentre or as an asylum seeker failing ong>toong> report arrival in ong>theong> UK at ong>theong> right time; it is exploitation by

door-ong>toong>-door money lenders at up ong>toong> and over 300% APR.

The pattern of crucifixion

A Christian faith is rooted in ong>theong> crucifixion of Jesus. For us he is ong>theong> personification of love. He was aware that

his radical interpretation of ong>theong> need for human beings ong>toong> live by love and justice was seen as subversive by ong>theong>

power brokers of his time and that, for political reasons, ong>theong>re could only by one end ong>toong> his life.The cross was

ong>theong> normal way of disposing of troublemakers in a despotic State, as ong>toong>rture and execution are ong>toong>day. He refused

ong>toong> proclaim a call ong>toong> arms ong>toong> defend himself and his cause.That would have been inconsistent.What happened is


He has a meal with his friends

Judas betrays him for 30 pieces of silver

He is arrested in ong>theong> garden of Gethsemane

He is taken ong>toong> ong>theong> religious court before ong>theong> Chief Priest and refuses ong>toong> answer ong>theong> charges, false

witnesses come forward

Peter denies he is a supporter of Jesus, but weeps when he remembers

Jesus is taken ong>toong> ong>theong> secular court before Pilate, ong>theong> crowd is persuaded ong>toong> call for his crucifixion by

ong>theong> Chief Priest

Pilate has him flogged and ong>toong>rtured by ong>theong> Soldiers and sends him ong>toong> ong>theong> cross

He forgives ong>theong>m all before he dies - he says ‘They don’t know what ong>theong>y are doing’

This is a universal and repeating pattern of events that has nothing whatever ong>toong> do with ong>theong> race or nationality of

ong>theong> people who ong>toong>ok part ong>theong>n or still take part in similar events. It is that pattern of oppressive human

behaviour that has inspired Christians ever since ong>toong> side with ong>theong> poorest and ong>theong> powerless and hold ong>theong>m up as

a mirror ong>toong> society in general and ong>theong> powerful in particular in every generation.

That is what I shall now attempt ong>toong> do realising that a reflection in a mirror is never that whole picture.The

objects and persons reflected hide much behind ong>theong>m, in ong>theong>ir hearts and minds, that cannot be seen in ong>theong>

mirror. Any attempt ong>toong> depict ong>theong>m runs ong>theong> risk of producing a caricature or even a carong>toong>on. I aim ong>toong> do it in

ong>theong> spirit of Christian leadership described by Henri Nouwen:

‘Dealing with burning issues without being rooted in a deep personal relationship with God easily

leads ong>toong> divisiveness because, before we know it, our sense of self is caught up in our opinion about

a given subject. But when we are securely rooted in personal intimacy with ong>theong> source of life, it

will be possible ong>toong> remain flexible without being relativistic, convinced without being rigid, willing

ong>toong> confront without being offensive, gentle and forgiving without being soft, and true witnesses

without being manipulative.’


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Mr ‘Watson

In 2002 ong>theong> Local Government Ombudsman reported ong>theong> case of Mr ‘Watson’ (not his real name), a single,

semi-literate adult lived alone in Southwark. Jobcentreplus had mistakenly ong>toong>ld Southwark Council that ong>theong>y

had cancelled his Job Seekers Allowance (JSA).That song>toong>pped housing and council tax benefits, creating a debit in

his accounts and triggering ong>theong> blind, computer driven enforcement.Threats of eviction for rent arrears were

not far off.

JSA was £53.05 a week after rent and council tax. (Increased ong>toong> £54.65 in April 2003; £55.65 in 2004 and

£56.20 in 2005).The London School of Hygiene and Tropical Medicine and ong>theong> Family Budget Unit have shown

that a national minimum income for healthy living for a single adult needs ong>toong> be £91 a week, but £125 in

London and £131 if buying locally raong>theong>r than in a super market.

On 12th January 2001 CSL, Southwark’s out sourced agent collecting council tax, sent Mr.Watson a summons

for unpaid council tax of £235.10 plus costs, for a hearing on 9th February 2001.The summons contains ong>theong>

following threats, in bold type and highlighted.Thousands are dispatched daily:

‘If a liability order is granted ong>theong> council will be able ong>toong> take one or more of ong>theong>

following actions: Instruct bailiffs ong>toong> take your goods ong>toong> settle your debt - this can

include your car.You will be liable ong>toong> pay ong>theong> bailiff ’s costs, which could

substantially increase ong>theong> debt. Instruct your employer ong>toong> deduct payments from

your salary or wages. Deduct money straight from your jobseekers allowance or

income support. Make you bankrupt. Make a charging order against your home.

Have you committed ong>toong> prison’.

His sister-in-law called on him. His body was hanging in his flat.The police found ong>theong> summons with him, paper

littered with rough calculations and a note:

‘Dear ... I at ong>toong> do this I am in so much in Detr good By for ever Love......’

Millions of threats of eviction for rent or prison for council tax arrears are generated by computer and

dispatched daily by officials of local authorities, and housing associations, and soliciong>toong>rs for private landlords ong>toong>

vulnerable households.

After ong>theong> issue had been raised with ong>theong> Secretary of State for Work and Pensions in a Parliamentary Question

he sent ong>theong> case ong>toong> ong>theong> head of Jobcentreplus who administered ong>theong> benefit of £53.05, and who wrote me an

apologetic letter. I replied it was not his fault.

A universal pattern

The universal pattern of ong>theong> crucifixion is ong>toong> be found in Mr Watson’s case. It happens inadvertently. Journalists,

politicians, ong>theong> city and local government officials do not set out ong>toong> crush hope out of ong>theong> lives of ong>theong> poor in

ong>theong> UK.They are simply getting on with ong>theong>ir job maintaining ong>theong> structures of society, as were ong>theong> officials in

ong>theong> arrest, trial, ong>toong>rture and crucifixion of Jesus.They are blind ong>toong> ong>theong> painful consequences of ong>theong>ir actions or

inactions. In ong>theong> parable of ong>theong> sheep and ong>theong> goats (Matong>theong>w 25) this blindness is found in ong>theong> question:

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 105

‘When was it that we saw you hungry, thirsty, an alien, naked, ill or in prison

and did nothing for you’

A blindness recognised from ong>theong> Cross when he said “Forgive ong>theong>m, ong>theong>y don't know what ong>theong>y are doing”, Jesus

had placed himself among ong>theong> habitually oppressed before he entered ong>theong> sufferings of ong>theong> crucified.

The Ediong>toong>rs

The Chief Priests in Mr Watson’s case can be found behind ong>theong> ediong>toong>rial desks of ong>theong> powerful tabloid press

persuading ong>theong> crowd that everyone receiving benefits from a lone parent ong>toong> an asylum seeker are ripping us

off, fraudulent, idle or work shy.The conclusion reached by Elaine Kempson of Brisong>toong>l University and Sue

Middleong>toong>n of Loughborough at an ESRC seminar was that:

‘In general low income people manage ong>theong>ir finances with care, skill and resourcefulness but no

money management strategy can be sustained if income is ong>toong>o low ong>toong> make ends meet.’

Andrew Marr has written in My Trade:

‘After ong>theong> problems of trust, ong>theong>re are, just as serious, problems of ong>toong>ne - above all exaggeration.

The tabloids pretend ong>toong> quiver and shock about ong>theong> absolutely normal.We wring ong>theong> facts ong>toong> get

ong>theong> biggest emotional impact.’

The Politicians

Mr.Watson’s benefit was half ong>theong> minimum income needed for healthy living established in research at ong>theong>

Family Budget Unit and ong>theong> London School of Hygiene and Tropical Medicine because politicians have adopted

ong>theong> position that it is very difficult, if not impossible, ong>toong> increase it and remain in power. Politicians have found

ong>theong> principles of economic justice drowned by ong>theong> exaggerations of ong>theong> tabloid press. Like Pilate ong>theong>ir need is ong>toong>

retain political power from ong>theong> support of a largely hostile, distrusting or apaong>theong>tic population.

The Wealthy

The pressure from ong>theong> wealthy for ong>theong> reduction of taxation, or an increase in ong>theong>ir share of ong>theong> national or

global wealth, puts ong>theong>m in ong>theong> role of Judas, claiming ong>theong> thirty pieces of silver ong>toong> betray ong>theong>ir fellow citizens,

who are abandoned ong>toong> ong>theong> courts that enforce ong>theong>ir high-interest unrepayable debts against inadequate statuong>toong>ry

minimum incomes with threats of eviction and prison.

Writing in ong>theong> Spectaong>toong>r on ong>theong> 12 March 2005 Stanislas Yassukovich, a former chairman of ong>theong> Securities

Association and deputy chairman of ong>theong> International Song>toong>ck Exchange commented:

‘The City cannot prosper in moral isolation from ong>theong> general public. Unless it rediscovers ong>theong>

difference between right and wrong - as a concept separate from technical compliance with written

rules - it risks damaging ong>theong> entire economic system on which its prosperity depends.’


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

It is not enough merely ong>toong> comply with company law that puts ong>theong> shareholders first and that leaves ong>theong> lowest

paid workers without a pension, holiday or sick pay on a minimum wage below ong>theong> poverty threshold and

enables ong>theong> shareholders of wealthy companies ong>toong> profit from ong>theong> subsidy provided by taxpayers in tax credits,

housing and council tax benefits.

The Local Authorities

The blunt instrument of ong>theong> hammer can be found as a computer under ong>theong> fingers of ong>theong> local government

officials, who are ong>theong> Soldiers.They have no option but ong>toong> send out on behalf of councils impersonal letters of

enforcement that are ong>toong>tally blind ong>toong> ong>theong> circumstances of ong>theong> vulnerable constituents ong>toong> whom ong>theong>y are


Mr.Watson, semi-literate living alone, committed suicide. His is a very extreme example of vulnerability. But

ong>theong> pattern of crucifixion is repeated daily. I rarely go ong>toong> court in support of a family threatened with eviction

without a letter from ong>theong>ir docong>toong>r saying ong>theong> moong>theong>r is being treated for depression. I have listened ong>toong> ong>theong> tears

of a lone parent who, in addition ong>toong> ong>theong> threats of eviction and court appearances for rent arrears and threats by

ong>theong> bailiffs of prison for council tax arrears had been fined for ong>theong> truancy of a son with emotional and

behavioural difficulties.We won all ong>theong> appeals for her and she was acquitted on ong>theong> truancy charge, which

removed ong>theong> stress until ong>theong> next time.

Conclusion - ong>theong> light shines in ong>theong> darkness

Jesus allowed himself ong>toong> be tried, convicted and crucified ong>toong> point ong>toong> a better way of ordering society than

allowing ong>theong> powerful a free rein ong>toong> trample on ong>theong> powerless. In many ways, despite ong>theong> appalling descent inong>toong>

chaos by ong>theong> Christian Churches at some all ong>toong>o obvious times in our hisong>toong>ry, that message has been realistically

applied by very many of his followers. Our benign influence in his name breaths through ong>theong> work of many

charities and such great statements of principle as ong>theong> American Constitution and ong>theong> Universal Declaration of

Human Rights devised by ong>theong> United Nations in ong>theong> aftermath two cruel world wars.

Capitalism and ong>theong> free market, however, are morally neutral. It is ong>theong> practice of ong>theong>m by fallible people that

produces both benign and malignant consequences. A comparison between Al Capone and Joseph Rowntree

makes ong>theong> point.

The powerbrokers of ong>theong> national and global economy have yet ong>toong> show that ong>theong>ir skill at creating wealth can be

matched by ong>theong> sense ong>toong> ensure its just distribution.The House of Lords report on ong>theong> Global economy quoted

ong>theong> White Paper on globalisation - Eliminating World Poverty: Making Globalisation Work for ong>theong> Poor. It is stated that

wheong>theong>r globalisation works well or works badly will depend on policy intervention:

‘Managed wisely, ong>theong> new wealth being created by globalisation creates ong>theong> opportunity ong>toong> lift

millions of ong>theong> world's poorest people out of ong>theong>ir poverty. Managed badly and it could lead ong>toong>

ong>theong>ir furong>theong>r marginalisation and impoverishment. Neiong>theong>r outcome is predetermined; it depends

on ong>theong> policy choices adopted by governments, international institutions, ong>theong> private secong>toong>r and

civil society.’

All those powerbrokers should take note of ong>theong> observations of Anthony Sampson, Andrew Marr and

Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 107

StanislasYassukovich, quoted earlier in this Appendix, even if ong>theong>y reject this reflection from ong>theong> Christian Faith.

For Christians ong>theong> Resurrection, in which ong>theong> shackles of death are broken, has a dynamic energy that can be

seen in ong>theong> efforts made ong>toong> break ong>theong> shackles of poverty.The fruits of ong>theong> Resurrection are made known not

only on a spiritual level but also on a practical level, when an unemployed person finds employment, when ong>theong>

poor are enabled ong>toong> rise above poverty, or when someone finds affordable housing which will enable ong>theong>m and

ong>theong>ir families ong>toong> live a decent life, ong>theong> sick are cared for and ong>theong> prisoners visited.We tend ong>toong> dwell ong>toong>o long on

how purposes of ong>theong> love shown ong>toong> us by Jesus are marred by human and structural failure but proclaim less

often ong>theong> power of that love ong>toong> effect change, ong>toong> break shackles and our responsibility ong>toong> work with it.We have

ong>toong> try ong>toong> realise ong>theong> peace and justice of ong>theong> Kingdom of God as much as is humanly possible here and now.

Among journalists, politicians, civil servants, wealthy employers, in ong>theong> city and in ong>theong> local authorities, ong>theong>re

are minds that worry, voices that speak, and people who act ong>toong> relieve ong>theong> oppression of ong>theong> poor in ong>theong> UK. In

everyone engaged inadvertently in a blind act of oppression ong>theong>re is a spirit of compassion ready ong>toong> emerge.That

spirit is by no means dead in ong>theong> United Kingdom but ong>theong> forces we combat become ever more impersonal,

oppressive and detached.

(Rev. Paul Nicolson is Chairman of ong>theong> Zacchaeus 2000 Trust (020 8376 5455, 07961 177 889,, website

He first attended court ong>toong> support an unemployed lone moong>theong>r with one child, who had been shoplifting, when he was at Theological

College in 1967. She was a cleaner in a local hospital receiving poverty wages. She was given a conditional discharge, fainted, hit her head

on ong>theong> dock and was taken ong>toong> hospital. Since ong>theong>n, following a gang fight that involved a murder, he was founder manager of ong>theong> Stevenage

Youth Workshop, designed ong>toong> occupy ong>theong> young men involved in ong>theong> gang after ong>theong>ir return from Borstal; he regularly visited ong>theong> Finnemore

Wood Youth Detention Centre when he moved ong>toong> a parish in Buckinghamshire; he has visited prisoners in Rochester Borstal,Wormwood

Scrubs and Penong>toong>nville and been Chairman of a project designed ong>toong> recover homeless addicts in High Wycombe.

He has also been involved in national campaigns against ong>theong> closed shop and ong>theong> Poll Tax on ong>theong> grounds of ong>theong>ir injustice ong>toong> vulnerable

households. He was a worker priest for 16 years in industrial relations first in ong>theong> Central Personnel Department of ICI and ong>theong>n a General

Secretary of ong>theong> Confederation of Employee Organizations. He was elected Independent District Councillor for ong>theong> Kimpong>toong>n Ward of ong>theong>

North Herts District Council and served on ong>theong> planning committee from 1979 ong>toong> 1982.

He co-founded ong>theong> Zacchaeus 2000 Trust with three Barristers, an accountant and a worker priest as trustees. Archbishop Runcie was ong>theong>

founding Patron with Chris Moss SJ and Professor John Griffith. It has had a contract with Wycombe Magistrates Court since 1997 ong>toong> help

fine defaulters fill in ong>theong>ir means statements at ong>theong> enforcement court on Wednesday mornings. He trains McKenzie Friends and works

hands on with impoverished households in debt in London since he moved ong>toong> Tottenham in 1999).


Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


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Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005

Zacchaeus 2000 Trust

Significant cause of debt in ong>theong> UK is ong>theong> inadequacy of statuong>toong>ry minimum

incomes for people in work, unemployed or pensioners. The Zacchaeus 2000

Trust provides and trains volunteer advocates for people who are facing

draconian enforcement of rent and council tax arrears against ong>theong> inadequate

minimum wage, unemployment benefits, tax credits, and state pensions, or who

are being exploited by door-ong>toong>-door lenders at up ong>toong> and over 300% APR.

We are petitioning ong>theong> government for independent and transparent research

inong>toong> ong>theong> minimum incomes needed for healthy living with ong>theong> support of 68 Non

Governmental Organisations with 10 million members, who include ong>theong> BMA,

ong>theong> Royal College of Nursing, ong>theong> Faculty of Public Health at ong>theong> Royal College

of Physicians and ong>theong> UK Public Health Association.

In addition ong>theong> General Synod of ong>theong> Church of England, The Methodist

Conference, ong>theong> General Assembly of ong>theong> Church of Scotland and UNISON have

unanimous conference decisions supporting ong>theong> petition. The list also includes

The Catholic Agency for Social Concern, ong>theong> Muslim Council of Great Britain,

ong>theong> Children’s and ong>theong> Pensioners’ Charities and ong>theong> National Consumer Council.

We are a Christian Trust committed by our constitution ong>toong> work with people of

good will of all faiths and of none.

Rev Paul Nicolson



93 Campbell Road,

London N17 0BF

tel: 020 8376 5455 · mobile: 07961 177 889



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