Memorandum-to-the-Prime-Minister-on-Unaffordable-Housing

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The housing sec<strong>to</strong>rs explained Private Sec<strong>to</strong>r The Private Sec<strong>to</strong>r players (boxes 1P <strong>to</strong> 5P and at <strong>the</strong> Financing stage <strong>the</strong> crucially important box 2PCM) work <strong>to</strong> a profit-seeking logic in <strong>the</strong> context of statu<strong>to</strong>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 <strong>the</strong> framework of local land use planning provisions <strong>the</strong>y develop new housing promotion strategies (1P) <strong>to</strong> gain competitive advantage.To finance construction <strong>the</strong>y use a combination of <strong>the</strong>ir own capital (2P) plus loans from <strong>the</strong> Private Capital Market (2PCM).The extent <strong>to</strong> which <strong>the</strong>y depend on loans as distinct from <strong>the</strong>ir own capital is expressed as <strong>the</strong>ir ‘gearing’. They carry out <strong>the</strong> construction work <strong>the</strong>mselves (3P) and work with estate agents and letting agents <strong>to</strong> market <strong>the</strong> units (4P) for <strong>the</strong> highest achievable price or rent. Subsequently <strong>the</strong> units are periodically re-marketed by <strong>the</strong> same set of agents. Allocation and reallocation in this sec<strong>to</strong>r is market-led and access depends on <strong>the</strong> economic status and/or borrowing capacity of potential users. Access <strong>to</strong> <strong>the</strong>se units by those on lower incomes will be strictly limited (and necessarily bolstered by state-funded benefits). The maintenance in use of <strong>the</strong> properties (5P) is <strong>the</strong> responsibility of <strong>the</strong> landlord, if <strong>the</strong> property is rented, or <strong>the</strong> owner-occupier; in both cases using <strong>the</strong> market-priced services of private contrac<strong>to</strong>rs. In <strong>the</strong> 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 sec<strong>to</strong>r is that <strong>the</strong> wide and increasing inequalities in household incomes and wealth evident in <strong>the</strong> UK are reflected precisely in terms of inequalities in access <strong>to</strong> housing. Registered Social Landlord Sec<strong>to</strong>r The Registered Social Landlord (RSL) Sec<strong>to</strong>r is more complex both in structure, his<strong>to</strong>ry and motivation.The provision of housing by voluntary and philanthropic bodies dates back <strong>to</strong> early medieval times (<strong>the</strong> foundation date of <strong>the</strong> 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 <strong>to</strong> produce affordable housing of decent standard for acceptable groups of <strong>the</strong> poor (but only rarely <strong>the</strong> very poorest). Currently <strong>the</strong>re are over 2000 ‘housing associations’ registered with <strong>the</strong> Housing Corporation and operating as developers in <strong>the</strong> sec<strong>to</strong>r although repeated take-overs has produced an increasing concentration in <strong>the</strong> pattern of housing development and s<strong>to</strong>ck. Now about 90% of <strong>the</strong> RSL s<strong>to</strong>ck of about 1.45 million homes is in <strong>the</strong> ownership of <strong>the</strong> largest 200 associations. The housing produced in this sec<strong>to</strong>r has been classed <strong>to</strong>ge<strong>the</strong>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 <strong>the</strong> country – which is why a more precise definition is offered in <strong>the</strong> Introduction.They tend also <strong>to</strong> gloss over some important characteristics of <strong>the</strong> RSL sec<strong>to</strong>r. For example although activity is notionally ‘not for profit’ many housing associations operating in <strong>the</strong> sec<strong>to</strong>r have become increasingly entrepreneurial in <strong>the</strong>ir asset management, lettings and rent-setting policies (Pawson 2004). Zacchaeus 2000 Trust - <strong>Memorandum</strong> <strong>to</strong> <strong>the</strong> <strong>Prime</strong> <strong>Minister</strong> - May 2005 15
RSLs have no direct elec<strong>to</strong>ral accountability <strong>to</strong> local populations since <strong>the</strong>ir Boards are normally an appointed mix of independent people selected for relevant skills, tenants, and perhaps some local councillors and executives of <strong>the</strong> association ra<strong>the</strong>r than candidates elected by universal suffrage. Finally (as Appendix 3 will show) <strong>the</strong> logic behind rent-setting has been very different in <strong>the</strong> two sec<strong>to</strong>rs. Consequently RSL rents have characteristically been much higher than council rents although <strong>the</strong>re has been recent convergence as a conscious matter of policy. In this sec<strong>to</strong>r <strong>the</strong> pattern of promotion of new developments (1R) and <strong>the</strong> financing and regulation of housing produced (2R) is overseen in England by <strong>the</strong> Housing Corporation, a non-Departmental public body sponsored by <strong>the</strong> Office of <strong>the</strong> Deputy <strong>Prime</strong> <strong>Minister</strong>. It is funded by <strong>the</strong> Treasury and by loan finance raised on <strong>the</strong> private capital market (2PCM). It <strong>the</strong>n funds RSLs by means of Social Housing Grant <strong>to</strong> develop and maintain housing under <strong>the</strong>ir Approved Development Programme. The construction of units in this sec<strong>to</strong>r (3R) is carried out by private sec<strong>to</strong>r house-builders seeking competitive rates of profit and <strong>the</strong> allocation and reallocation of <strong>the</strong> units (4R) is determined, by local agreement, partly by <strong>the</strong> RSL itself and partly by <strong>the</strong> local housing authority in which it is operating.The management in use stage (5R) is primarily <strong>the</strong> responsibility of <strong>the</strong> landlord RSL using private sec<strong>to</strong>r contrac<strong>to</strong>rs. Under <strong>the</strong> Housing Act 2004 a new pilot programme will make Housing Corporation funding available for <strong>the</strong> first time <strong>to</strong> ‘unregistered’ developers (Housing Corporation 2004). Private sec<strong>to</strong>r builders will acquire up <strong>to</strong> £3.8 billion of subsidy from <strong>the</strong> Corporation <strong>to</strong> build ‘affordable homes’ over <strong>the</strong> two years <strong>to</strong> April 2006. Council Sec<strong>to</strong>r The Council Sec<strong>to</strong>r is conceptually more straightforward. Local authorities have had powers <strong>to</strong> provide and manage housing since <strong>the</strong> late nineteenth century as part of <strong>the</strong> array of powers that arose from <strong>the</strong> public health and political fears evident following mass urbanisation from about 1830 onward.These powers did not become obliga<strong>to</strong>ry and a source of large-scale provision until <strong>the</strong> impetus provided by post-war needs, first (briefly) after 1918 and <strong>the</strong>n after 1945. In both periods <strong>the</strong> housing drive was partly a response <strong>to</strong> fears of political instability. But it is noteworthy that in <strong>the</strong> earlier period <strong>the</strong> country’s first <strong>Minister</strong> of Health (Chris<strong>to</strong>pher Addison, who was medically qualified) had argued for more housing subsidy on <strong>the</strong> evidence from a study he had commissioned from <strong>the</strong> Registrar General on <strong>the</strong> cost of dealing with tuberculosis - a disease clearly related <strong>to</strong> housing standards (for an account see Ambrose 1994, chapter 6). The local housing authority acts as <strong>the</strong> promoter (1C) and funder (2C) of development.The funding stream has been <strong>the</strong> subject of a long sequence of alternately more and less generous subsidy arrangements (<strong>the</strong> difference is usually detectable from <strong>the</strong> quality of <strong>the</strong> housing produced).There has for most of <strong>the</strong> time been a combination of central government funding in<strong>to</strong> a Housing Revenue Account and funding from <strong>the</strong> authority itself via <strong>the</strong> rent stream.The central support has often taken <strong>the</strong> form of an annual payment per unit built <strong>to</strong> cover <strong>the</strong> interest on <strong>the</strong> loan taken out <strong>to</strong> build it and in addition some access <strong>to</strong> a ‘public works’ source of submarket cost capital. In recent decades <strong>the</strong>re have been significant shifts in <strong>the</strong> source of public funding. Local housing authorities have lost <strong>the</strong> preferential treatment <strong>the</strong>y received at one time from <strong>the</strong> Public Works Loan Board and have become more dependent on <strong>the</strong> private capital market (2PCM).This has materially increased <strong>the</strong>ir development 16 Zacchaeus 2000 Trust - <strong>Memorandum</strong> <strong>to</strong> <strong>the</strong> <strong>Prime</strong> <strong>Minister</strong> - May 2005
Page 1 and 2: Z2K ZACCHAEUS 2000 MEMORANDUM <stro
Page 3 and 4: First published in Britain in 2005
Page 5 and 6: Introduction The Prime</str
Page 7 and 8: 6 Zacchaeus 2000 Trust - Me
Page 9 and 10: 8 Zacchaeus 2000 Trust - Me
Page 11 and 12: Recommendation 2 Policy should buil
Page 13 and 14: Recommendation 10 Increased resourc
Page 15: The shaded boxes along the<
Page 19 and 20: 4. Of the
Page 21 and 22: Similarly in urban regeneration sch
Page 23 and 24: 3. Increases in the</strong
Page 25 and 26: There may be some inconsistency in
Page 27 and 28: (a) producing units of a quality su
Page 29 and 30: 28 Zacchaeus 2000 Trust - M
Page 31 and 32: Fund they stress t
Page 33 and 34: homeless by local authorities (itse
Page 37 and 38: compared to 46% in
Page 39 and 40: approximately threefold rise in rea
Page 43 and 44: End of 1998 28,700 End of 2000 120,
Page 45 and 46: ‘...stock transf
Page 49 and 50: shown in Figure 3. (£ billions) 25
Page 51 and 52: Housing Association 3 Private Landl
Page 55 and 56: following the poli
Page 59 and 60: The evaluative comparison focused l
Page 61 and 62: costs (which would have included no
Page 65 and 66: more prone to asth
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to a Parliamentary
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68 Zacchaeus 2000 Trust - M
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A sclerotic market Young people fac
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enters with no housing assets seems
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Europe, and that the</stron
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eason for not joining a strike. Eff
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is regarded as an essential step al
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provisions based upon partnership l
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Members could decide to</st
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The size of land value gains The ga
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For this reason, economists from Ad
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In the United Stat
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decline in Federal support for hous
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from stamp duty and council tax (Ll
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upward wage pressure and fewer recr
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So is there a way
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7. A show flat already exists <stro
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healthy living. Poverty happens und
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‘When was it that we saw you hung
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StanislasYassukovich, quoted earlie
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Bowley, M. (1945) Housing and <stro
Page 113 and 114:
Phibbs, P. and Young, P. (2005) Hou
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Memorandum-to-the-Prime-Minister-on-Unaffordable-Housing

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