Memorandum to the Prime Minister on Unaffordable Housing

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Memorandum to the Prime Minister on Unaffordable Housing

Z2KZACCHAEUS 2000MEMORANDUMong>toong> ong>theong>PRIME MINISTERonUNAFFORDABLEHOUSINGMay 2005


Z2KZACCHAEUS 2000MEMORANDUMong>toong> ong>theong>PRIME MINISTERonUNAFFORDABLEHOUSINGMay 2005


First published in Britain in 2005By Zacchaeus 2000 TrustRegistered Charity No 1062221Printed and supported bywww.unison.co.ukAll rights reservedCopyright Zacchaeus 2000 TrustISBN0-9546779-2-7Designed and Typeset bywww.piranha.co.ukPrice £15 - including postage in ong>theong> UKAll orders ong>toong>:Inkwell, 713 Seven Sisters Road, London N15 5JTPlease make cheques payable ong>toong> Zacchaeus 2000 Trust.2Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


ContentsIntroduction 4NGOs supporting ong>theong> Zacchaeus 2000 Trust Petition 7Summary and recommendations 9Appendix 1 - Identifying key strategic issues 13Appendix 2 - House price rises - and why 19Appendix 3 - Changes in ong>theong> affordability of renting 25Appendix 4 - Evidence of housing shortage 29Appendix 5 - Changes in ong>theong> affordability of owning 35Appendix 6 - The loss of low rent housing 41Appendix 7 - Some problems of demand side support 47Appendix 8 - An international comparative study of housing privatisation 53Appendix 9 - The flow of development land - how not ong>toong> do it 57Appendix 10 - Some effects of poor housing on health, education and welfare 63Appendix 11 - High housing costs and low pensions 69Appendix 12 - High housing costs and employment issues 73Appendix 13 - Oong>theong>r effects of high housing costs and debt 75Appendix 14 - An overview of ‘exported costs’ from poor housing 79Appendix 15 - Limited Liability Partnerships as development mechanisms 83Appendix 16 - Capturing rising land values for ong>theong> community 87Appendix 17 - Building more sustainably 99Appendix 18 - Ethical issues from a Christian perspective -a universal pattern of crucifixion and resurrection 103References 109Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 3


IntroductionThe ong>Primeong> ong>Ministerong> met a delegation from ong>theong> Zacchaeus 2000 Trust coalition of 68 NGOs calling forMinimum Income Standards in his room at ong>theong> House of Commons on ong>theong> 17th September 2003.Thesignaong>toong>ries ong>toong> ong>theong> letter asking for ong>theong> meeting were Lord Morris of Manchester;The Chief Rabbi, ProfessorJonathan Sacks;The Bishop of Oxford,The Rt. Rev. Richard Harries; Lord Adebowale, Chief Executive,TurningPoint; 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; DrDoug Naysmith MP; Professor Jerry Morris of ong>theong> London School of Hygiene and Tropical Medicine; GeoffRayner, 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 informationong>toong> ong>theong> public, employers and government when ong>theong> levels of unemployment benefits, tax credits/minimumwage and pensions are being set.The ong>Primeong> ong>Ministerong> was informed that a seminar was ong>toong> be held in Ocong>toong>ber2003 ong>toong> discuss existing research.The ong>Memorandumong> on Minimum Income Standards based on ong>theong> seminar wasdelivered ong>toong> him in February 2004 (available on www.z2k.org).Responding ong>toong> ong>theong> memorandum through Lord Morris of Manchester ong>theong> ong>Primeong> ong>Ministerong> offered continuingdialogue with ong>theong> Zacchaeus 2000 Trust. In view of ong>theong> pressure of housing costs on minimum incomes and onState finances we decided ong>toong> engage that offer with this memorandum on unaffordable housing in ong>theong> UK. Inpreparing 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 Benefitpayments 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 whicheveryone should have a just minimum share. But housing and land have become investments, from whichspeculaong>toong>rs, moneylenders and ong>theong> banks grow ever wealthier. Governments have allowed ong>theong> market ong>toong> exploitong>theong> shortage of land by allowing unregulated lending ong>toong> lift ong>theong> price of housing above ong>theong> needs of ong>theong> poor inong>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, afamily or pensioners, ong>theong>re remains sufficient ong>toong> sustain safe and healthy living, provision for ong>theong> future andparticipation 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 minimumincomes 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> mixed4Zacchaeus 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 bydevelopers. 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 childwhose 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 thatwill provide ong>theong> elecong>toong>rate, employers, local authorities and national government with robust information aboutminimum income requirements.This would save ong>theong> taxpayer billions of pounds in ong>theong> health, education andadministration of justice services. (The list of NGOs supporting ong>theong> Z2K petition ong>toong> Government calling forminimum income standards follows this introduction).Like ong>theong> previous memorandum this one is edited by Professor Peter Ambrose of ong>theong> Health and Social PolicyResearch Centre at ong>theong> University of Brighong>toong>n. It is based on a seminar on unaffordable housing held in Ocong>toong>ber2004, members of which have contributed ong>toong> ong>theong> memorandum. He has committed ong>toong> paper ong>theong> product ofmany years of engagement in housing issues by a wide variety of experts in a way that challenges conventionalwisdom, provides essential hisong>toong>rical background, and moves in a logical progression from evidence of policyshortcomings ong>toong> recommendations.We would like ong>toong> thank UNISON, ong>theong> Children’s Society and an anonymousdonor 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 OAXwebsite www.z2k.orgsee also www.peanuts4benefits.co.uk020 8376 545507961 177 889Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 5


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NGOs supporting ong>theong>Zacchaeus 2000 Trust PetitionLocal organisationsCatholic Children’s Society -ShrewsburyChurch Action on Homelessness in London – UNLEASHCommunities Against Poverty – LiverpoolIlfracombe Credit UnionLiverpool Archdiocese Justice and Peace CommissionSt Albans Diocesan SynodPartners in Health – DudleyEast London Communities OrganisationNational organizationsATD Fourth WorldAccess ong>toong> JusticeAfghan Association of Great BritainCampaign WomenDebt on our DoorstepEuropean Anti Poverty NetworkLabour Land CampaignLobby ong>toong> end Age Discrimination – LEADLow Pay UnitNational Consumer CouncilNew Policy InstituteRefugee CouncilScottish Low Pay UnitTUC Unemployed Workers CombineWomen In Prison TrustPensioners’ CharitiesAge ConcernHelp ong>theong> AgedNational Pensioners’ ConventionParents’ and Children’s CharitiesBarnardosButtle TrustChildren’s SocietyNational Council for One Parent FamiliesMaternity AllianceNSPCCNCH action for childrenParenting Education and Support ForumSave ong>theong> Children FundSingle Parent Action NetworkEnd Child PovertyHealthBritish Medical AssociationCentre for Food PolicyFaculty of Public Health - Royal College of PhysiciansFood CommissionFood JusticeFood Poverty ProjectFuel Poverty ProjectMencapMental Health FoundationMilk for SchoolsNational Heart ForumRoyal College of NursingSocialist Health AssociationUK Health for All NetworkUK Public Health AssociationTrades UnionsTrades Union CongressUNISON - (conference decision)FaithCatholic Agency for Social Concern – CaritasCatholic Bishops’ Conference- Social Welfare Committee (wound up in February2002)Catholic Child Welfare CouncilChurch Action on PovertyChurch of England - General Synod- (Motion won 339 - 0)Church of Scotland - General Assembly- (unanimous decision)Conference of Religious in England and Wales- Social Justice DeskChristian Council for Monetary Justice.Methodist Conference- (unanimous decision)Muslim Council of BritainIona CommunityVon Hugel InstituteVincentian Millennium PartnershipZacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 7


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Summary and RecommendationsThis 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> effortsof ong>theong> Zacchaeus 2000 Trust. But this analysis of what has gone wrong with our housing system since ong>theong> SecondWorld 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 wastedmany billions of taxpayers’ money.The deregulation of financial markets in ong>theong> 1980s sparked off a flood ofhouse purchase lending that has underpinned massive house price rises and consumed £600 billion ofinvestment 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.Theincreasing 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 fewerhouses have come out. Housing benefits and allowances have imposed a huge and increasing burden on statefinances.The failure of planning authorities ong>toong> use existing powers, and ong>toong> support innovative community-based freeholdretainingdevelopment trusts and partnerships, has permitted large-scale speculation in building land.Thefailure ong>toong> seize upon and develop innovative building practices and land use patterns that would minimisecarbon 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, andthis is ethically indefensible, ong>theong> additional costs arising from mismanagement of our housing arrangements fallon 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 ofshortcomings, 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 strategicvision. Discussion is often confused and ong>theong>re has been a failure ong>toong> identify key objectives and strategies fromong>theong> alternatives available (Appendix 1).Recommendation 1Housing policy formation should now focus on a number of key strategic issues; itshould focus especially on how most effectively ong>toong> apply subsidy and on correctingong>theong> currently regressive redistributive effect of housing support patterns which areimpeding ong>theong> drive ong>toong> reduce poverty.2. Policy discussion has often failed ong>toong> distinguish adequately between ong>theong> motivations, mode of operation, andlogic for setting prices and rents of ong>theong> four main housing secong>toong>rs - private housing for sale and ong>theong> three rentedsecong>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 10Increased resources should be put inong>toong> developing and evaluating carbon-neutralforms of construction and development and inong>toong> encouraging patterns of land usethat reduce movement, food miles and energy consumption11. Current levels of unaffordability bear down most heavily on those least able ong>toong> cope; ong>theong>y are ethicallyindefensible (Appendix 18).Recommendation 11Statuong>toong>ry minimum incomes are under pressure from ever rising housing costs.Theoppressive nature of ong>theong> present housing regime leads ong>toong> stress and ill health formany households receiving incomes below government and independentlydetermined poverty thresholds.This injustice should be more fully recognised andtaken inong>toong> account in policy related ong>toong> ong>theong> provision of adequate minimum incomes,both in and out of work12Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Confused discussionAppendix 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 ofunderstanding of ong>theong> key acong>toong>rs and processes at work, misdiagnoses of ong>theong> problems, misplaced mediaemphases 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 asystemic level. Discussions of ‘privatisation’ reveal more about ideologies than about sound economicmanagement. As a result UK housing policy has rarely moved from crisis management mode ong>toong> any longer-termstrategic approach,This appendix presents an internationally accepted analytical framework that helps ong>toong> identify ong>theong> key strategicissues facing housing policy makers.The analytical frameworkHOUSING PROVISION IN THE UKSTATE PLANNING, REGULATION AND SUPPORT FOR HOUSING PROVISIONACPRIVATESECTOR(commercialmotivation)11PCommercialhousebuilders22PCMPrivate capitalmarket2PHousebuilderscapital33PCommercialcontracong>toong>rs44PEstate agentsand lettingagents55PCommercialcontracong>toong>rsTORSLSECTOR(social/commercialmotivation)1RHousingAssociationsand Co-ops2RHousingCorporation3RCommercialcontracong>toong>rs4RHousingAssociationsand Co-ops5RHousingAssociationsCo-ops andcontracong>toong>rsRSCOUNCILSECTOR(socialmotivation)1CLocalAuthoritiesetc2CLocalAuthoritiesetc3CCommercialcontracong>toong>rs4CLocalAuthoritiesetc5CLocalAuthoritiesetc andcontracong>toong>rsPRO CESSFIVE STAGESIN HOUSINGPROVISIONAND USE1PROMOTION2FINANCINGA3CONSTRUCTION(SUPPLY)4ALLOCATION(DEMAND)5MANAGEMENTIN USEEND OF LIFEC BFEEDBACK OF DEMAND/SUPPLY INDICATORSPeter AmbroseHealth & Social Policy research CentreUniversity of Brighong>toong>n, Brighong>toong>n, EnglandJan 2005Zacchaeus 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 ofany 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/ordemolition.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 newhousebuilding 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 thisextent control over housing provision has been almost ong>toong>tally expropriated from ong>theong> user and vested in largeinstitutions, 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 ofGovernment (ong>theong> box along ong>theong> ong>toong>p of ong>theong> diagram). But ong>theong>se interventions are complex and mediated throughan 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).Thesesecong>toong>rs are ong>theong> Private Secong>toong>r, ong>theong> RSL Secong>toong>r and ong>theong> Council Secong>toong>r.Motivational distinctionsThere are vitally significant motivational distinctions between ong>theong>se sets of acong>toong>rs in that ong>theong> Private Secong>toong>r isprofit-driven, ong>theong> Council Secong>toong>r is public-service driven and ong>theong> RSL secong>toong>r is driven by a hybrid of charitableand commercial motivations.Conventional wisdom glosses over ong>theong>se motivational distinctions.There is an expectation that ong>theong> PrivateSecong>toong>r can be driven partly by public-service considerations when such a belief is contrary ong>toong> ong>theong> statuong>toong>ryresponsibilities 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 profitdrivenong>toong> public service motivations and activity has produced regressively redistributive effects that are leadingong>toong> pervasively costly social, welfare and economic consequences. It is not appropriate ong>toong> place ‘blame’ for thison profit-driven institutions since ong>theong>y are simply acting in accordance with company law and commercialpractice.The ultimate responsibility ong>toong> ensure an appropriate mix of motivations and activity in ong>theong> housingsecong>toong>r so as ong>toong> serve ong>theong> needs of all members of society lies with Government.14Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


The housing secong>toong>rs explainedPrivate Secong>toong>rThe Private Secong>toong>r players (boxes 1P ong>toong> 5P and at ong>theong> Financing stage ong>theong> crucially important box 2PCM) workong>toong> a profit-seeking logic in ong>theong> context of statuong>toong>ry regulation and support from Government. Led by feedbacksignals about national, regional and local supply/demand balances, guided by national and regional developmentstrategies devised by Government and within ong>theong> framework of local land use planning provisions ong>theong>y developnew housing promotion strategies (1P) ong>toong> gain competitive advantage.To finance construction ong>theong>y use acombination of ong>theong>ir own capital (2P) plus loans from ong>theong> Private Capital Market (2PCM).The extent ong>toong> whichong>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> marketong>theong> units (4P) for ong>theong> highest achievable price or rent. Subsequently ong>theong> units are periodically re-marketed byong>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 incomeswill 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, orong>theong> owner-occupier; in both cases using ong>theong> market-priced services of private contracong>toong>rs. In ong>theong> case of owneroccupierswhose means may have diminished with age, proper maintenance may well be unaffordable andconditions may deteriorate.The overall effect in this secong>toong>r is that ong>theong> wide and increasing inequalities in household incomes and wealong>theong>vident in ong>theong> UK are reflected precisely in terms of inequalities in access ong>toong> housing.Registered Social Landlord Secong>toong>rThe Registered Social Landlord (RSL) Secong>toong>r is more complex both in structure, hisong>toong>ry and motivation.Theprovision of housing by voluntary and philanthropic bodies dates back ong>toong> early medieval times (ong>theong> foundationdate 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 havesought 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 Corporationand operating as developers in ong>theong> secong>toong>r although repeated take-overs has produced an increasing concentrationin ong>theong> pattern of housing development and song>toong>ck. Now about 90% of ong>theong> RSL song>toong>ck of about 1.45 millionhomes 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 ‘socialhousing’ and sometimes as ‘affordable housing’ by recent governments.These descriptions are analyticallyflawed.‘Affordable’ means different things in different parts of ong>theong> country – which is why a more precisedefinition is offered in ong>theong> Introduction.They tend also ong>toong> gloss over some important characteristics of ong>theong> RSLsecong>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 appointedmix of independent people selected for relevant skills, tenants, and perhaps some local councillors andexecutives of ong>theong> association raong>theong>r than candidates elected by universal suffrage. Finally (as Appendix 3 willshow) ong>theong> logic behind rent-setting has been very different in ong>theong> two secong>toong>rs. Consequently RSL rents havecharacteristically been much higher than council rents although ong>theong>re has been recent convergence as aconscious matter of policy.In this secong>toong>r ong>theong> pattern of promotion of new developments (1R) and ong>theong> financing and regulation of housingproduced (2R) is overseen in England by ong>theong> Housing Corporation, a non-Departmental public body sponsoredby 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 maintainhousing 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 competitiverates of profit and ong>theong> allocation and reallocation of ong>theong> units (4R) is determined, by local agreement, partly byong>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>rThe Council Secong>toong>r is conceptually more straightforward. Local authorities have had powers ong>toong> provide andmanage housing since ong>theong> late nineteenth century as part of ong>theong> array of powers that arose from ong>theong> publichealth and political fears evident following mass urbanisation from about 1830 onward.These powers did notbecome 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 ofpolitical 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 froma study he had commissioned from ong>theong> Registrar General on ong>theong> cost of dealing with tuberculosis - a diseaseclearly 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 hasbeen ong>theong> subject of a long sequence of alternately more and less generous subsidy arrangements (ong>theong> differenceis usually detectable from ong>theong> quality of ong>theong> housing produced).There has for most of ong>theong> time been acombination of central government funding inong>toong> a Housing Revenue Account and funding from ong>theong> authorityitself 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 submarketcost capital.In recent decades ong>theong>re have been significant shifts in ong>theong> source of public funding. Local housing authoritieshave lost ong>theong> preferential treatment ong>theong>y received at one time from ong>theong> Public Works Loan Board and havebecome more dependent on ong>theong> private capital market (2PCM).This has materially increased ong>theong>ir development16Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Similarly in urban regeneration schemes house price rises are seen as an indicaong>toong>r of ‘success’ although everyprice rise makes it that much more difficult for non-owning local residents ong>toong> access ownership. More generallyin discussions of ong>theong> economy ong>theong> headline ‘Good news - housing market recovers’ simply means prices arerising again with implied benefits for existing owner-occupiers. Economic benefits are also deemed ong>toong> come ouong>toong>f increased spending deriving from equity withdrawal - while perversely ong>theong> rising level of ong>toong>tal debt gives riseong>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’ thatrising prices equals good is in fact a highly partial interpretation of meaning by ong>theong> more prosperous membersof society (owners) against ong>theong> interests of ong>theong> less prosperous (non-owners).Reasons underlying house price inflation1. Financial deregulation in ong>theong> 1980sThe Thatcher administrations of ong>theong> 1980s introduced a number of measures ong>toong> deregulate and liberalisefinancial services and institutions.This formed part of a move in many western economies ong>toong>wardsderegulation. In 1981 many restrictions on bank lending were abolished, in 1983 building societies wereallowed ong>toong> borrow from ong>theong> money market and in 1986 ong>theong> Building Societies Act introduced a more selfregulaong>toong>ryregime. Regulation was reduced on matters such as reserve ratios, interest rates, down payments andso on. Significant changes, including trends ong>toong>wards de-mutualisation, also occurred within ong>theong> building societysecong>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 havesubsequently under-performed. It is estimated that over 60% of ong>theong> 11 million endowment policies will notcover ong>theong> full debt on maturity (http://www.uk-endowment-mortgages.com).2. The growth of house purchase lendingOne of ong>theong> outcomes of ong>theong> new deregulaong>toong>ry regime was a rapid growth in house purchase lending and thus inong>theong> effective demand for houses. As Baddeley (2004) points out:‘The increasing availability of mortgage finance will encourage self-propelling increases in houseprices: ong>theong> demand for residential investment will increase as liquidity builds up in mortgagemarkets 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 thatincreases in demand will have an effect on prices.The explosive growth in ong>toong>tal house purchase debtbetween1980 and 2003 is shown in Table 1.20Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Table 1 - The growth in house purchase debt 1980-2003Sources:Wilcox (2004) Tables 17d and 45 andwww.ex.ac.uk/RDavies/arian/current/howmuch.htmlThe growth of ong>toong>tal House Purchase Debt is set out in ong>theong> second column.This has been approximatelycorrected in ong>theong> third column ong>toong> allow for ong>theong> growth in ong>theong> number of owner-occupied units since 1980 sinceclearly ong>theong> debt outstanding might have been expected ong>toong> increase given this facong>toong>r alone.The actual level ofHouse Purchase Debt is in ong>theong> fourth column and ong>theong> amount by which this exceeds ong>theong> RPI related figure isshown 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, orwith ong>theong> number of properties coming onong>toong> ong>theong> market year by year, ong>theong>n house prices would also haveremained roughly in line with oong>theong>r prices. In that case earnings growth would have outstripped both generaland 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 demandand pushed up prices.The future seems set ong>toong> produce more of ong>theong> same.The Council of Mortgage LendersMarket Briefing dated December 2004 forecasts a ong>toong>tal outstanding housing debt of around £1,100 billion in2007 (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 multipleAs will be shown in Appendix 5 house purchase lending, and ong>theong>refore house prices, has risen much faster thanearnings 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> ‘increasinglyfavourable terms’ referred ong>toong> in ong>theong> Baddeley quote above).The higher this multiple ong>theong> higher ong>theong> house pricethat 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% formovers.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 asignificant proportion of borrowers, especially if interest rates rise or personal circumstances change.Table 2 - Changes in lending multiples29 2.83Source: Council of Mortgage Lenders website www.cml.org.ukAnoong>theong>r notable feature is ong>theong> sharp swing over ong>theong> past decade in ong>theong> balance of loans away from first timebuyers and ong>toong>wards existing owner-occupier movers.This supports ong>theong> general understanding of ong>theong> increasingdifficulties faced by those seeking ong>toong> access home ownership.The CML Market Briefing forecasts a modestrecovery in ong>theong> first time buyer proportion but only ong>toong> 34% by 2007.4. Government incentives ong>toong> purchasers and ownersMortgage Interest Tax Relief which was costing ong>theong> Exchequer £6 ong>toong> £8 billion per year in ong>theong> early 1990s isnow much reduced ong>toong> £1.6 billion in 1999/2000 (Wilcox 2004,Table 105). But ong>toong> offset this ong>theong> value ofCapital Gains Tax Relief ong>toong> owner-occupiers has risen over tenfold since 1996/97.This has been a burden onong>theong> national economy.The net gain ong>toong> ong>theong> Exchequer from Stamp Duty and Inheritance Tax offset by CapitalGains Tax Relief has fallen from £1.39 billion in 1999/2000 ong>toong> £0.55 billion in 2002/03 (ibid,Table 1.2.3). Inaddition Housing Benefit which now costs £12.6 billion annually in Great Britain (ibid,Table 114) is largely asubsidy 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 overheatedmarket.’22Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


They also argue:‘...it is futile ong>toong> improve affordability by increasing salaries or subsidising home buying...Whileeach 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 upfurong>theong>r, making entry even harder for ong>theong> next grant recipient.’The link ong>toong> income and wealth inequalityThe most recent edition of Social Trends (National Statistics 2005) presents evidence of ong>theong> persistence of incomeinequality 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). Internationalcomparisons show that ong>theong> UK has ong>theong> fifth highest proportion of children living in poor households of fifteenEU countries (Table 5.21). Meanwhile ong>theong> incomes of ong>theong> ong>toong>p 1% of earners grew fastest of all. In ong>theong> 2002/3ong>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 andpensioners since 1997, ong>theong> year in which ong>theong> numbers of children in households under ong>theong> poverty thresholdpeaked. But inequality may well depend as much on ong>theong> relative size of necessary outgoings as on adjustments ofincome.The proportion of income devoted ong>toong> housing costs tends ong>toong> rise ong>toong>wards ong>theong> botong>toong>m of ong>theong> incomescale 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-relatedanti-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> housingmarket 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 andultimately 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 moreaffordable house prices have ong>toong> come down, or at least be stabilised, in relation ong>toong> incomes.The political barriers ong>toong> reformAll recent governments have shown ong>theong>mselves ong>toong> be wary of ong>theong> perceived elecong>toong>ral sensitivities of ong>theong> wealthyhomeowners 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 beeffectively 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 thatcurrent 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 ishard 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> latestSocial Trends (Table 5.15) indicates that 78% of all adults of 18+ think that ong>theong> gap between high and lowincomes is ‘ong>toong>o large’. But this gap is probably not related in ong>theong> public mind ong>toong> housing policies and practices.24Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 3 - Changes in ong>theong>affordability of rentingThe 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> mid1990s were, a century earlier, engaged in a wide variety of occupations, no doubt with widely varying rates ofpay and levels of job security (1901 Census data).The Charles Booth poverty map of 1889 shows a wide rangeof housing standards in ong>theong> area (from his Category 3 ong>toong> Category 6 in a seven category scheme). Clearly ifone’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>reforerents) 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-timeemployment in 1996) but ong>theong> housing choice was virtually limited ong>toong> local authority housing. Given ong>theong> risingtrends 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,Table6) 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 manycases 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 principlesThe three main rental tenure groups formerly had sharply differing sets of processes for determining rents:1 - Local authority rentsThe main facong>toong>r producing relatively low rents for council housing over many decades was not ong>theong> subsidy fromcentral government but ong>theong> arrangements by which rents were averaged or ‘hisong>toong>rically pooled’ across ong>theong> song>toong>ckof an authority.Given, say, an eighty year life for a property ong>theong> interest and loan repayment costs of any unit decay in realterms 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 andmaintained, ong>theong> property attracts only management and maintenance costs but continues ong>toong> produce rents thatcan rise with inflation. Given a local authority with a song>toong>ck with a wide spread of building dates ong>theong> average rentcharged across ong>theong> song>toong>ck could be much lower than if ong>theong> rent has ong>toong> reflect current or recent building costs anddebt 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 affordablerents 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 averagedwith 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 ofong>theong> council secong>toong>r.2 - RSLsRents 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 averagedwith 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 ofwidely varying age was absent and rent profiles were consequently higher than council rent profiles for similarproperties.3 - Private secong>toong>r rentsRents for private secong>toong>r lettings have been and are set largely ong>toong> achieve a competitive rate of net annual returnon a particular property in ong>theong> light of its current capital value and ong>theong> ruling interest rate for investments ofcomparable risk.There need be no logical connection ong>toong> building costs (ong>theong> property may well be 100 or moreyears 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>rsThe 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 (LAor RSL) multiplied by a facong>toong>r relating local earnings ong>toong> national and ong>theong>n multiplied again by a bedroomweighting 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>rmultiplied 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 realterms 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 produceexcessively high rent levels a cap is applied on ong>theong> annual rate of increase.The Government’s intention is for LAand 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 ofrents in 2005/06 but ong>theong> review has not yet reported.Rents by secong>toong>rThese different rent-setting mechanisms have in ong>theong> past produced a clear ‘rent gradient’ - council rents have26Zacchaeus 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 maleearnings 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 bya margin of typically 15-20% (Wilcox 2004,Table 74). But ong>theong> differential between council and RSL rents isnarrowing. 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 decentquality housing at rent levels affordable by ong>theong> very poorest is falling sharply with obvious consequences foraffordability.The non-match of rents ong>toong> incomesGiven 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-matchbetween 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 Benefitpayments 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


28Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Recent under-investmentAppendix 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 renthousing compared ong>toong> ong>theong> pre-Thatcher period and even ong>theong> last pre-New Labour year (all data is from Wilcox2004):• The 2003 UK housing completion figure for local authority housing was 286 and for housingassociations 17,993 making a ong>toong>tal of 18,279 ‘social housing’ homes; in 1980 ong>theong> figure was110,012 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 fallenfrom £8.28 billion in 1980/81 ong>toong> £4.32 billion in 1995/96 and ong>toong> £3.58 billion in 2000/01 (all at2000/01 prices) (Table 62b)• RSLs’ gross investment fell from £4.27 billion in 1992/93 ong>toong> £2.19 billion in 2001/02 and evenong>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 andat 3.2% is ong>theong> second lowest of thirteen comparable countries; ong>theong> only lower figure is Swedenwhich is very well housed (Table 8)These data all relate ong>toong> Strategic Issue 1 in Appendix 1.The Barker Review and responsesThe 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 privatesecong>toong>r homes would be required.The Review called for much faster release of land for building so as ong>toong> stabiliseprices.The Royal Institution of Chartered Surveyors supported ong>theong> general recommendation for an increasedhousing 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 thatit is not land supply limitations that are ong>theong> main facong>toong>r in ong>theong> rapid price increases.With ong>theong> World WildlifeZacchaeus 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 ecologicallysustainable 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 debtevidenced 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, butwhat 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> projectedpopulation 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 isan appropriate way ong>toong> address affordability needs…more public spending will be required ong>toong> meetong>theong> increased affordable housing output…’Oong>theong>r estimates of social housing needEstimates of ong>theong> need for additional ‘social housing’ depend very heavily on assumptions made about futurehousehold 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 BarkerReview argued that an increase in ong>theong> supply of social housing of ong>theong> order of 17,000 homes per year is requiredover ong>theong> next ten years with an additional 23,000 per year required if inroads are ong>toong> be made inong>toong> existingshortfalls.This is widely regarded by campaigning organisations such as Housing Justice as an under-estimate ofneed.In ong>theong> recent past (2001/02 ong>toong> 2003/04) although ong>theong> amount of Government investment in social housing hasincreased 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 becauseof 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.Thespend is ong>toong> be £1.3 billion more in 2007/8 compared ong>toong> 2004/5.This is expected ong>toong> produce perhaps 10,000additional social homes per year, a fraction of ong>theong> Barker Review recommendations.There is ong>toong> be emphasis ondevelopment in ong>theong> Thames Gateway east of London, Ashford, Milong>toong>n Keynes and ong>theong> M11 corridor ong>toong>wardsCambridge.The first of ong>theong>se may raise some land release difficulties since a report from ong>theong> Association ofBritish Insurers (Making Communities Sustainable, February 2005) and work by Every and Foley (2005) hasalready 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 ofexisting unsuitable song>toong>ck. It concludes that ong>theong>re will be an annual requirement overall for 206,000 new homeseach year ong>toong> 2011 ong>toong> meet newly arising need.This ong>toong>tal is divided as follows:30Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


139,000 per year in ong>theong> market secong>toong>r67,000 per year in ong>theong> social secong>toong>rIn addition ong>toong> reduce ong>theong> current backlog of unmet need by 50% over a 15 year period would require anadditional 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 recommendationand 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 socialhousing homes can be provided annually at current rates of spend.They consider that an additional £6.7 billionof 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> figuresannounced in ong>theong> latest ODPM document (ODPM 2005) and ong>toong> any likely Government programme since it isabout twice ong>theong> amount of ong>theong> spend in 2000/01 (Wilcox 2004,Table 62b). On ong>theong> oong>theong>r hand it is smallcompared 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 overallsocial housing need and has over-netted ong>theong> relative lack of shortage in ong>theong> north against ong>theong> pressing needs inong>theong> South East.The situation in LondonThe Draft London Housing Strategy for 2005 ong>toong> 2016 was produced for consultation by ong>theong> London HousingBoard in November 2004. It pointed out that ong>toong>tal completions for 2003 were just over 20,000 of which onlyabout 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 halfyears, 4,000 people in this kind of accommodation have support needs and ong>theong> ‘hidden homeless’ in Londonincludes 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 productionrates 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‘affordable’.Information is available on ong>theong> extent of substandard housing in ong>theong> owner-occupied secong>toong>r.There are anestimated 9,877 unfit owner-occupied homes in ong>theong> Borough of Newham alone (London Borough of Newham2002/03) 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 bea major cause of falls. It has been estimated that hip fractures caused by falls costs ong>theong> NHS nearly £726 millionper year (Parrott 2000).One indicaong>toong>r of increasing shortageOne outcome of ong>theong> under-investment in social rented housing is that ong>theong> number of households accepted asZacchaeus 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 temporaryaccommodation in England has risen as follows:1980 1996 2003Accepted as homeless 60,400 113,590 137,220In 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 willcontinue 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 106planning 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 etal. 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 InvestmentProgrammes (HIPs) fell from 45,000 ong>toong> 29,000 over ong>theong> period 2000/01 ong>toong> 2002/03 and that it was becomingincreasingly 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 completionsstill required some Social Housing Grant (SHG).The negotiation of ong>theong> partnership agreements is very costly intime and money and some agreements take up ong>toong> four years ong>toong> negotiate. In addition while ong>theong> number ofSection 106 planning consents for affordable housing was rising quite steeply up ong>toong> 2002/03 ong>theong> number ofactual completions was rising much more slowly. Of those completed in 2002/03 91% were dependent onSHG 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 localauthorities carried out by ong>theong> project produced generally negative reactions ong>toong> ong>theong> planning charge proposalbecause it would make it more difficult ong>toong> gain access ong>toong> land and would inhibit ong>theong> building of mixed tenuretypes on ong>theong> same site.The key message from ong>theong> project was that housing associations are finding it increasingly difficult ong>toong> develophousing through non-Section 106 means and are ong>theong>refore more dependent on provision that occurs as a byproducong>toong>f 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 andnon-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 using32Zacchaeus 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 LandTrust ong>toong> provide elements of common ownership. Much stronger and more innovative supply mechanisms willbe required if ong>theong> affordability problem is ong>toong> be seriously addressed.Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 33


34Zacchaeus 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.TheNationwide hisong>toong>rical index shows an approximately eighty-fold growth in ong>theong> UK current all-house price indexfrom ong>theong> end of 1952 (average price £1,891 = 100.0) ong>toong> ong>theong> end of 2004 (average price £153,778):All houses 8,132.1New houses 7,711.3Modern houses 7,575.3Older houses 9,880.4These figures need ong>toong> be compared ong>toong> rises in earnings.The Nationwide average gross earnings index dates onlyfrom 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 18.7House price index x 34.5Thus house prices have risen at nearly twice ong>theong> rate of earnings over ong>theong> past 35 years.Affordability changes since 1993Much of this divergence between ong>theong> two indices has occurred during ong>theong> eleven years since 1993 when houseprices 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 muchof 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 2003ong>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 hasbeen 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 beenover 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 atany previous time.The ratio of mortgage cost ong>toong> incomes devised by Wilcox (Wilcox 2004,Table 2.3.2) calculates ong>theong> proportionof average incomes for all working households required ong>toong> access an average first-time buyer home.Thisproportion 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 2002Zacchaeus 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 firsttime buyers aged under 25 has fallen from 25% in 1993 ong>toong> 16% in 2003 and that ong>theong> proportion of first timebuyers paying in excess of £100,000 has risen from 6% ong>toong> 46% over ong>theong> same period. Clearly affordability forthis group has diminished sharply.The latest ODPM document (ODPM 2005) seeks ong>toong> address this issue with a First Time Buyers Initiative.Theintention is ong>toong> provide 15,000 new homes for first time buyers up ong>toong> 2010 on land ong>toong> be provided by EnglishPartnerships from former NHS and oong>theong>r public sources. Half will be for ‘key service workers’.The homes willbe sold at construction cost plus and ong>theong>re will be provision for occupiers ong>toong> acquire equity shares.Thelandowners 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 EnglishPartnerships 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 asmeaning homes will be available for £60,000 but unless firm steps are taken ong>toong> ensure that resale prices arecost-related and rise only in relation ong>toong> general inflation, raong>theong>r than behaving in ong>theong> same way as ong>theong> generalrun of house prices, any affordability gain will be short-lived.Regional variations in affordabilityThe 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 4.11London 4.69South West 4.66South East 4.61East of England 4.27West Midlands 3.80Of ong>theong> 10 local authorities with ong>theong> highest ratios, five are in ong>theong> South West, two (Westminster and Brent) inLondon 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 rarelyover 3.5. On this evidence access ong>toong> home ownership is difficult, if not impossible, for first time buyinghouseholds of this type in very large areas of England.The area with ong>theong> lowest ratio, 1.97, is Sedgefield.Affordability and take-home payAffordability can also be measured in terms of ong>theong> percentage of take-home pay required for mortgagerepayments.The Nationwide series of this indicaong>toong>r runs from Quarter 1 of 1985 (index = 100). For ong>theong> UK asa whole this index rose inong>toong> ong>theong> 150s during ong>theong> 1989 house price inflation but was running in ong>theong> 50s and 60s36Zacchaeus 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 takehomepay used ong>toong> pay ong>theong> mortgage, should have remained relatively low in ong>theong> early 2000s.The explanationprobably lies in a combination of facong>toong>rs - hisong>toong>rically low interest rates,‘low-start’ mortgage products andlengong>theong>ned repayment terms are all possible facong>toong>rs that reduce ong>theong> month by month impact of expendinghigher capital sums on house purchase. Clearly ong>theong>re are dangers here if interest rates rise and/or disruptive lifeevents such as unemployment, disability or relationship break-up occur during ong>theong> extended repayment period.Summary - earnings, retail prices and house prices since 1952Figure 1 shows ong>theong> movements in gross earnings, consumer prices and house prices since 1952.The grossearnings and house prices data are derived from ong>theong> Nationwide websitewww.nationwide.co.uk/hpi/downloads/UK_house_price_since_1952.xls and ong>theong> consumer price data fromong>theong> Economic Hisong>toong>ry Resources site www.eh.net/hmit/ukearncpi. 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 definitionsover half a century have produced some inaccuracies. But ong>theong> main features of ong>theong> comparative movements inong>theong> three indices are clearly discernable.80Figure 1 - Earnings, Prices and House Prices 1952-20047060House price indexAverage earnings indexConsumer price index5040302010019531960 1970 1980 1990 2000Until about 1970 ong>theong> three indices remained in close ong>toong>uch and grew only very slowly. From about that yearong>theong>re has been a growing divergence between ong>theong> consumer price index and ong>theong> oong>theong>r two. Earnings have risenmuch 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 warand 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> earningsindex until about 1987. Since ong>theong>n it first rose faster than earnings, ong>theong>n fell back ong>toong> well below ong>theong> earningsindex by ong>theong> mid 1990s ong>theong>n rose more steeply than earnings until finally since 2002 it has risen ong>toong> nearly 84compared ong>toong> ong>theong> earnings index of about 55 (1952=1.00).Why should this be? And why in particular shouldhouse prices get so out of ong>toong>uch with earnings?Total housing debt and house pricesThe 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 ofowner occupied housing, house prices, consumer prices and earnings is shown in Figure 2.This reproducessome information from ong>theong> previous graph covering ong>theong> period since 1952.18Figure 2 - Housing debt, house prices, owner-occupancy song>toong>ck, consumer prices andearnings 1980-2004161412Housing debt outstanding indexHouse price indexConsumer price indexAverage earnings indexOwner-occupied song>toong>ck index1086420Average earnings have risen since 1980 raong>theong>r faster than ong>theong> Consumer Price Index, reflecting a rise in realliving standards. Housing debt has been rising much faster than both ong>theong>se indices throughout ong>theong> post-1980period 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 till38Zacchaeus 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 thisperiod). 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 indexfrom about 1996, ong>theong>n above ong>theong> earnings index in about 2000 and ong>theong>n inong>toong> a steeply rising curve from thatdate 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>routcome 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


40Zacchaeus 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 housingprovision and tenure patterns. Around 1900 ong>theong> vast majority of households rented from a private landlord withonly 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 althoughin 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 yearsbut 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 andonly 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 orlocal authority housing for rent.The song>toong>ck of local authority housing in ong>theong> UK peaked at about 6.5 millionunits, 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-occupancyMuch of ong>theong> explanation for ong>theong> loss of public song>toong>ck lies in ong>theong> large volume of individual sales from localauthorities ong>toong> owner-occupancy under ong>theong> ‘right ong>toong> buy’ legislation. Mrs Thatcher was a firm opponent ofcouncil housing. Under her administrations local authority housing ceased ong>toong> be seen as a financially rational andsocially acceptable solution ong>toong> housing needs and became instead ong>theong> problem.The ‘right ong>toong> buy’ policy was asure-fire elecong>toong>ral success. Sales of local authority song>toong>ck inong>toong> owner-occupancy ong>toong>talled over 2.2 million unitsbetween 1980 and 2003 and ong>theong> annual number has been rising sharply under new Labour (Wilcox 2004 Table20d).The loss of council song>toong>ck has especially affected many rural areas in ong>theong> home counties and low costhousing has virtually disappeared.Sales have been at a massive discount, ong>theong> average ranging from about 50% in 1999 ong>toong> 42% in 2002 (Wilcox2003a, Figure 2.4.1). Following ong>theong> sale of a local authority house or flat ong>theong> average stay of ong>theong> purchasingtenant 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 handsat market prices. Many council houses in, for example, Buckinghamshire were sold ong>toong> tenants for £25,000 andhave 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 hasincreased sharply (Wilcox 2004,Table 55):Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 41


End of 1998 28,700End of 2000 120,300End of 2003 408,300This has ong>theong> effect of transferring significant numbers of units from council renting ong>toong> private renting. As wasshown in Appendix 3 it is private secong>toong>r rents that have outpaced ong>theong> oong>theong>r categories over ong>theong> past two decadesboth as a proportion of average earnings and in absolute terms. Finally it is also relevant that ong>theong> house sales andtransfers 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 authorityfrom benefiting from future land value rises.Loss of council song>toong>ck by transfers ong>toong> RSLsIn ong>theong> 1988-2003 period about 970,000 formerly local authority homes have been transferred ong>toong> housingassociations by ‘song>toong>ck transfer’ (Pawson in Wilcox 2004).The average price per dwelling in ong>theong> 126 transfers inEngland 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 HomesStandard (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 morefundamental drive ong>toong> enable housing providers ong>toong> access funds from ong>theong> private capital market so as ong>toong> removeas 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>ckhas been transferred ong>toong> housing associations specially set up for ong>theong> purpose in order ‘...ong>toong> retain some vestigeof local accountability’ (ibid).A tenant vote in favour of transfer is a prerequisite.‘Yes’ votes have, until recently, been in ong>theong> majority.Thepattern 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 inong>theong> tenant ballot. In recent months this has been repeated in such disparate areas as Leicester (92% againsttransfer),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 formuch needed repairs and renewal.This is substantially true in terms of direct Government investment in localauthorities 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 Initiativeand ALMOs.This fourth option was virtually promised by ong>theong> Deputy ong>Primeong> ong>Ministerong> in September 2004 but isstill subject ong>toong> political negotiation.42Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


The effects of transfer on rents, security and managementThe effects of transfer on rent levels for this large segment of formerly low rent housing depends on ong>theong> rentagreements 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 doesnot 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 beenan increase in ong>theong> cost of housing benefit. In 2003 ong>theong> average weekly housing benefit payment ong>toong> local authoritytenants 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 by36% and figures from Communities Scotland show that ong>theong> number of housing association evictions had risen by64% 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 transferwith ‘...more managerialist and entrepreneurial tendencies.’This has occurred concomitantly with ong>theong> shiftong>toong>wards housing groups that combine a number of pre-existing RSLs in a loose structure. Housing groups nowown over 70% of ong>theong> RSL song>toong>ck. Given ong>theong> very wide diversity in RSL type, size and specificity of provisionong>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 ofskill and experience for good governance.There is some emphasis on tenant involvement in management and aclear 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 boardmembers when promoting transfers. Resident representation does not necessarily empower tenants orleaseholders since ong>theong> resident members are normally in a minority and may not be representative of localpeople as a whole. In any case all board members, wheong>theong>r residents or not, are legally obliged ong>toong> give primacyong>toong> ong>theong> company’s interests and are not separately accountable ong>toong> those ong>theong>y are appointed ong>toong> represent.Thereport 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 (NationalAudit Office 2003) that:‘...nearly a fifth of English transfer Housing Associations have given rise ong>toong> serious HousingCorporation 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 actuallymanage housing more efficiently and effectively than local authorities’.Furong>theong>rmore:Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 43


‘...song>toong>ck transfer has created social landlords which, whilst subject ong>toong> state regulation, cannot bedirectly 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 surplusesbeyond Whitehall’s reach (HACAS Consulting 1999; Malpass and Mullins 2002), and ong>theong>refore notsusceptible 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 ofdemocratic accountability, it is tempting ong>toong> conclude with Pawson and Fancy (2003) that transfer is part of aproject which seeks ong>toong> bring commercial disciplines raong>theong>r than local democratic oversight inong>toong> this importantarea of service provision (see Strategic Issue 5 in Appendix 1). If so it appears ong>toong> have an ideological raong>theong>r thana rational basis - perhaps a latter day muted version of ong>theong> rationales for property ownership advanced byBellman, Chamberlain and oong>theong>rs in ong>theong> inter-war years in ong>theong> last century.Residualisation of council housingCouncil housing was initially available at a wide range of rent levels and tended ong>toong> produce ‘mixedcommunities’. Under some of ong>theong> subsidy arrangements that have been in force ong>theong> design and build quality ofcouncil housing has been high (Ambrose 1994, pp.103-117). But ong>theong> tendency ong>toong> build ‘down ong>toong> a price’ overong>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 late1960s) 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 andrents 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 newentrants ong>toong> housing and in ‘high pressure’ areas such as Brighong>toong>n and Hove almost all ong>theong> allocations are ong>toong> thosein some kind of urgent housing need (Ambrose, MacDonald et al. 2002).This has often meant ong>theong> concentrationof in close proximity of large numbers of low income households most of whom are likely ong>toong> be facing a set ofpoverty-related problems.The consequent lack of local market power has often produced ‘area effects’ in terms of ong>theong> decline of localservices of all kinds, poor access ong>toong> lower cost food outlets and ong>theong> prevalence of longstanding characteristicssuch as low participation in ong>theong> labour market.This combination has often lowered collective and individualaspirations and led ong>toong> stigmatisation and a form of generalised scapegoating.The concentration has alsoencouraged 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 virtuallyubiquiong>toong>us.44Zacchaeus 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 outputfrom ong>theong> council secong>toong>r. Housing Associations completions in Great Britain which were running at over 30,000per year between 1993 and 1996 were down ong>toong> about 17,000 in 2000 (Wilcox 2004,Table 19h). As a directconsequence of this drop in output, plus ong>theong> near cessation of council provision, ong>theong> availability of ‘socialhousing’ lettings in ong>theong> RSL and council secong>toong>rs combined has fallen sharply from 540,000 in 1995 ong>toong> 432,000in 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-responseschemes 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 budgetong>toong> help up ong>toong> 10,000 workers access housing.This has now been replaced by ong>theong> Key Worker Living Programmewhich offers ‘homebuy’ loans up ong>toong> £50,000 for teachers, nurses, police staff and so on (or up ong>toong> £100,000 forfuture education ‘leaders’). It also seeks ong>toong> facilitate shared ownership, where a loan is made for purchasing aproportion of ong>theong> property, perhaps 25%, 50% or 75%, and ong>toong> permit renting at an ‘intermediate’ rent betweenmarket 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 raisedivisiveness issues since selections have ong>toong> be made between applicant households all of whom may be in severehousing need. In terms of ong>theong> model in Appendix 1 ong>theong>y are also classically demand side ‘solutions’ and arelikely ong>toong> exert yet more upward pressure on house prices and rents.Summary - transfers from low rent ong>toong> high rent secong>toong>rsThe figures in this Appendix show a transfer of about half ong>theong> previously existing local authority song>toong>ck ong>toong> RSLsand ong>toong> private landlords.The secong>toong>ral rent trend comparisons in Appendix 3 make it clear that each of ong>theong>setransfers has moved a home from a lower rent tenure ong>toong> a higher rent tenure and, probably in ong>theong> majority ofcases, 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 rundown by a series of policies designed ong>toong> undermine this option.There is no inherent reason, given properplanning, design and funding and more investment in staff and training, why public housing should not onceagain 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 Appendix10). Equally a return ong>toong> hisong>toong>rically pooled rent-setting could see ong>theong>se benefits delivered at low and stablerents.Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 45


46Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 7 - Some problems ofdemand side supportThe 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> increasingcost ong>toong> ong>theong> Exchequer of housing benefits and related allowances.The average benefits paid weekly ong>toong> housingassociation 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).Thisform 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 modelIn 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. Untilong>theong> 1990s ong>theong>re were also substantial flows along line B in ong>theong> form of MIRAS, ong>theong> tax concession ong>toong> purchasingowner-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, whichwas available ong>toong> ong>theong> purchasers of existing as well as new homes, simply worked as an additional facong>toong>r pushingup 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 supporong>theong>lps ong>toong> increase supply but clearly it increases rents ong>toong> ong>theong> evident benefit of ong>theong> owners of rented property. Itis widely and correctly seen as a subsidy ong>toong> landlords. But as long as housing costs remain at current levels ofunaffordability 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> supportThis form of support is a clear example of a self-defeating ‘gap-plugging’ subsidy (discussed furong>theong>r in Appendix16) 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 localauthority 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 spenong>toong>n 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 isequivalent ong>toong> a fall from over 54% of ong>toong>tal support ong>toong> about 15%.The relationship between ong>theong> two trends isZacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 47


shown in Figure 3.(£ billions)25Figure 3 - Social housing investment and housing benefit 1987-2007 (planned)20Total housing and related benefits GB (cash)Gross social housing investment GB (cash)151050Source:Wilcox 2004,Tables 57a and 114The results in terms of an acute shortage of low rent housing were evidenced in Appendix 4.The rise in housingsupport payments has clearly been caused by ong>theong> growing gap between rising rent levels and ong>theong> persistent lowincomes of many of those seeking public secong>toong>r housing.Some adverse effects on recipientsDependence on housing benefit payments ong>toong> cover necessary rent outgoings, while currently necessary formillions of people, brings its own difficulties for recipients.These come under three main headings - stressarising from ong>theong> pressures exerted by benefits agencies, very high marginal tax rates when moving inong>toong> workand take-up rates below 100%.48Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


1. Stress in dealing with ong>theong> benefits agenciesThere are constantly occurring examples of bureaucratic oppression of vulnerable households.The situation isoften exacerbated because those in arrears, RSLs and local authorities are often unaware of ong>theong> NationalStandards 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 arenot 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 wasemployed as a delivery driver. He had been under pressure from ong>theong> Jobcentre ong>toong> get a job. He hadong>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 housingbenefit at ong>theong> six month review under ong>theong> WFTC rules and so deducted £8.10 a week from ong>theong>irhousing benefit.The absence of Council Tax benefit, rent arrears and ong>theong> cost of getting ong>toong> workmade ong>theong>m worse off in work than unemployed.They were £1200 in debt ong>toong> Provident plc ong>theong> lastloan being £1000 plus £700 interest or 170% APR.They were evicted for rent arrears.Theyseparated and she was housed by ong>theong> local authority in anoong>theong>r Housing Association property atrent of £175 a week.Local Authority 1 (2003)A pregnant woman with three children and a husband with heart disease was threatened wiong>theong>viction by a local authority for rent arrears of £600.The local authority was shown a letter fromong>theong> docong>toong>r confirming ong>theong>se circumstances but insisted on taking ong>theong> matter ong>toong> court instead ofcoming 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> judgedecided 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 weekon a date when ong>theong> Housing Benefit was due from ong>theong> Local Authority a month in arrears.Theletter 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 andregular payments of £50 a week were impossible out of unemployment benefit after separationfrom 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 andwas now receiving medication.The shortage of affordable housing resulted in this family beingplaced in a Housing Association property at a rent of £175 a week (social housing rents arenormally £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 alreadyinadequate JSA - but she was not evicted)Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 49


Housing Association 3Private Landlord 12001/2005Due ong>toong> ong>theong> complications of tax credits ong>theong> local council claimed ong>theong>re had been an over paymenong>toong>f £1500 housing benefit ong>toong> ong>theong> Housing Association in 2001 and ong>toong>ok ong>theong> money back.TheHousing 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 rentedproperties and finally found a private rented home at £180 a week.They are now receiving fullhousing benefit.The woman had a baby and ong>theong>re were a number of changes of circumstancesinvolving unemployment, separation and coming ong>toong>geong>theong>r again with which ong>theong> housing benefitagency did not keep up. More rent arrears occurred and ong>theong>y were advised by ong>theong> local authoritythat if ong>theong>y were evicted ong>theong>y would be classed as intentionally homeless. She is receiving treatmentfor depression.They are now being questioned under caution because ong>theong> LA says ong>theong>y were notinformed about a change of circumstances. Special payments for commencing fraud proceedings arebeing made ong>toong> local authorities by central government.This family on £161 a week plus tax creditsis worse off in work than unemployed, and ong>theong>y are paying off £30 a week rent arrears.Thelandlord now wants ong>toong> sell ong>theong> property and ong>theong>y are being evicted so he can gain vacantpossession.Local Authority 2 (2004)In this case ong>theong> local authority assumed that an unemployed lone parent’s son had been living athome as non dependent and sent her a computer driven claim for £2638 rent arrears, with threatsof ong>theong> bailiffs and county court appearances. He had in fact left home two years earlier ong>toong> undergotraining as a chef.They had been ong>toong>ld.2. High marginal tax rates on moving inong>toong> workIn ong>theong> survey of low paid workers carried out as part of ong>theong> ‘Low Cost but Acceptable’ project in Brighong>toong>n andHove (Ambrose 2003) it was found that in some household situations moving off benefits inong>toong> work could leadong>toong> a gain of only 11p per hour when account was taken of ong>theong> reductions in income brought about by ong>theong> tapersin income support and oong>theong>r benefit payments. Marginal tax rates of up ong>toong> 97% were calculated for thosemoving inong>toong> a job. It was found that ong>theong> ‘poverty trap escape point’ was at a gross household income of £22,620per 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 appropriatehousing 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%. In2001/02 housing benefit take-up rates for local authority tenants were in ong>theong> range 89-94% and for privaterenters in ong>theong> range 80-89% (Wilcox 2004,Table 117).Take-up rates for Council Tax benefits were marginallylower than ong>theong>se and as low as 39-44% for eligible owner-occupiers.Take-up rates for both forms of benefitwere especially low for non-child households and for pensioners.50Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


The need ong>toong> re-balance supportThe shortage of low rent housing and ong>theong> escalating public cost of helping lower income households ong>toong> accesssuitable 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 paymentssuch 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 inAppendix 1 ong>toong> something more like ong>theong> balance in ong>theong> early 1980s.The need for sensitive transition arrangementsIf, following a modelling of ong>theong> effects, ong>theong> need for a re-balancing of support is accepted ong>theong> strategic aimmight be ong>toong> bring about a reduction in ong>toong>tal annual housing benefit payments by some specified amount peryear. But ong>theong> transition arrangements would need ong>toong> be very carefully worked out so as not ong>toong> add furong>theong>rpressures on ong>theong> finances of poorer households. The rent reductions would need ong>toong> occur first and ong>theong>n ong>theong> publicfinance benefits in terms of reduced requirements for housing benefit, a reduced incidence of NHS costsgenerated by stressful situations and less impediment ong>toong> transitions from benefits ong>toong> work, would begin ong>toong> befelt.Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 51


52Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


What does ‘privatisation’ mean?Appendix 8 - An internationalcomparative study of housingprivatisation(Peter Ambrose)The housing policies of ong>theong> Thatcher administrations, which have been broadly adhered ong>toong> by ong>theong> two post-1997New Labour governments, have brought about a marked shift in ong>theong> private ong>toong> public balance of housingprovision, ownership and management.This has been loosely termed ‘privatisation’. But in a complex andsegmented 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) mattersbecause this sets in train ong>theong> pattern of new production. It also matters at Stage 2 (financing) because housingprovision is capital-intensive and ong>theong> outcome depends very much on ong>theong> terms at which loan capital and grantsubsidy is made available. If capital is available only at full market rates and repayment terms ong>theong>n costs will behigher than if some preferential arrangements apply. Stage 3 (construction) has always been mostly in privateownership so ong>theong> issue is less sensitive here.At Stage 4 (allocation) ong>theong> private/public balance is crucially significant because it determines how muchhousing is allocated according ong>toong> market power and how much according ong>toong> need.The more that market poweris ong>theong> determinant ong>theong> more income inequalities will be reflected in, and reinforced by, housing inequalities.Theprivate/public balance of song>toong>ck will be affected only marginally by ong>theong> balance of new production since this isprovides only about a 1% increment per year.What matters much more is any transfer of ong>theong> existing song>toong>ckfrom allocation on ong>theong> basis of need ong>toong> allocation on ong>theong> basis of market power - in oong>theong>r words sales andtransfers 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 twomeanings of ong>theong> term ‘privatisation’. It can mean privatisation of ong>theong> actual song>toong>ck (by means of ownershiptransfer) or it can mean privatisation of ong>theong> rights of ong>theong> owner (by means of deregulation of rents, tenuresecurity and management practices).What effects does ‘privatisation’ have?While privatisation, broadly defined, is likely ong>toong> have profound effects on housing supply, access andmanagement, 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 alsono 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 privatisationZacchaeus 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 Swedishgovernment had recently partly dismantled ong>theong> previous housing arrangements following ong>theong> 1991 Election thathad produced a marked swing ong>toong> ong>theong> right. Housing experts in both countries sought ong>toong> learn what ong>theong>y couldfrom ong>theong> housing privatisation in ong>theong> UK following ong>theong> rapid ascendancy of market forces during ong>theong> Thatcheryears.The INTAS comparative studyConsequently a study was initiated funded by INTAS (The International Association for ong>theong> Promotion of Cooperationwith Scientists from ong>theong> New Independent States of ong>theong> Former Soviet Union) and ong>theong> SwedishCouncil for Building Research.The study was carried out by teams from ong>theong> EUROGRAD Institute in StPetersburg (led by Professor Boris Grinchel), ong>theong> University of Örebro (led by Professor Berth Danermark) andong>theong> Centre for Urban and Regional Research at ong>theong> University of Sussex (led by Dr Peter Ambrose).The projectreported 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 studythrough time oong>theong>r than by using ong>theong> framework set out in Appendix 1.The analysis was designed ong>toong> include allforms of housing, private, public and voluntary secong>toong>r.The Swedish and UK data on promotion, financing andsources, 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 mostbenefit for ong>theong>m would come from learning from ong>theong> experience of ong>theong> UK case about how ong>theong> early effects ofprivatisation might develop inong>toong> later effects. For this reason a separate analysis of ong>theong> early period of UKprivatisation, 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’ inong>theong> three countries since, in one case, ong>theong> test might be ong>theong> increase in executive housing in smart city-centrelocations whereas in anoong>theong>r it might be better access for lower income households. Neverong>theong>less several verysimple tests seemed valid across ong>theong> three systems - ong>theong> main one was ong>theong> extent ong>toong> which investmentcommitted at Stage 2 turned inong>toong> housing output and more allocations at Stages 3 and 4. Clearly in any culturalsetting it is reasonable ong>toong> expect that more input should be matched by more output.Results - reduced cost-effectivenessApplying 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-occupancycomponent 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 output54Zacchaeus 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 evidentin ong>theong> first six years.There was an increase in real terms housing investment from 100 ong>toong> 122 and a fall in unitsof output from 100 ong>toong> 68 - roughly speaking an increase of 22% in money in and a decrease of 32% inproduction 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> UKsystem. Given ong>theong> data on land price trends given in oong>theong>r appendices it might be reasonable ong>toong> infer that someinvestment found its way inong>toong> land holdings raong>theong>r than construction.The secong>toong>r composition of ong>theong> UK 1995output was 79% owner-occupancy, 20% voluntary secong>toong>r and 1% public. Over ong>theong> five year Swedish studyperiod ong>theong> same trend was evident and private output rose from 36% ong>toong> 51 % of ong>toong>tal, largely at ong>theong> expense ofco-op housing. In both cases ong>theong> pattern of output tended ong>toong> limit choices.The need for furong>theong>r studiesThe study was an isolated one and we are not aware of any furong>theong>r attempts ong>toong> assess ong>theong> effects of housingprivatisation 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, inthat more money was going in and less housing was coming out, and a reduction of housing tenure choice. Sinceboth major political parties in ong>theong> UK currently make repeated claims that market forces lead ong>toong> more efficientsolutions and more consumer choice it might now be timely ong>toong> test ong>theong>se assertions in relation ong>toong> housingprovision with furong>theong>r empirical research.Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 55


56Zacchaeus 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 financialand conservational, are balanced has not been effectively solved.Three case studies - one an internationalcomparative study of development in ‘growth’ regions, one of inner city regeneration and one of developmenong>toong>n an urban fringe - will illustrate how ong>theong> UK system of development land supply fails ong>toong> achieve cost-effectiveand distributively fair solutions. Appendix 16 will discuss a range of better solutions.Case Study 1 - Housing development in growth regionsIn ong>theong> late 1980s a comparative study, funded by ESRC and Swedish Building Institute grants, was carried out byresearchers at ong>theong> Centre for Urban and Regional Studies at ong>theong> University of Sussex in collaboration withresearchers at ong>theong> University of Örebro.The aim was ong>toong> establish which of three national land supply andhousing provision systems, those of France, Sweden and ong>theong> UK, responded best ong>toong> ong>theong> pressures created byrapid sub-regional employment growth.The four areas selected for study were a group of nine communes inong>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 andproducer services and research and development activities.They were drawing in new workers, many of ong>theong>mhighly qualified and highly paid, and ong>theong>re were consequent pressures on ong>theong> existing housing song>toong>ck, much ofwhich 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 andAmbrose 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 andtenure 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 providedconstruction 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 providersof land for development since ong>theong>y had powers ong>toong> acquire land for this purpose at very close ong>toong> existing usevalue.The Swedish construction industry had been found from previous research (Dickens et al. 1985 andDuncan 1986) ong>toong> be more cost-effective than that in ong>theong> UK.This earlier work had established that in Swedenconstrucong>toong>rs competed largely on construction quality and innovation whereas in ong>theong> UK more profit was ong>toong> bemade from land holding and speculation so less was invested in actual construction improvements andproductivity.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 ahigher level of output at 7.3 housing units per 1000 population compared ong>toong> 6.1 per 1000 in Berkshire. Also inong>theong> Swedish case ong>theong>re was a diversity of outcomes - 38% of ong>theong> new housing was built by ong>theong> communes forrenting, 27% was built by co-ops, mostly for renting, a small proportion was for private renting and ong>theong> restwas for owner-occupancy. In Berkshire ong>theong> proportion build speculatively for sale was 85% in 1980 and hadreached 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 wasconsiderable house price inflation, partly due ong>toong> a rise in housebuilding costs in Britain of 47% between 1981and 1987 (ong>theong> corresponding figure in Sweden was 24%).These trends in house prices were reflected in trendsin development land prices.These rose by 436% in Berkshire during ong>theong> decade so that by 1988 ong>theong> averageprice for single-dwelling housing land was £301,000 per hectare in ong>theong> E4 corridor and £1,222,000 per hectarein 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 Swedishemployers benefited from ong>theong> increase in ong>theong> supply and range of housing in ong>theong> E4 area ong>toong> a greater extent thatdid employers in Berkshire where new recruits ong>toong> ong>theong> area would face limited housing choice and very highcosts 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 Swedenhad 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 atlower costs.Case Study 2 - ong>theong> Stepney Gasworks siteWhat happenedThe former gasworks site in ong>theong> Central Stepney Single Regeneration Budget (SRB) area provides anoong>theong>r goodillustration 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 oneof 22 ‘windfall’ sites considered under ong>theong> Heseltine review of development possibilities in docklands.Theownership has now largely passed inong>toong> ong>theong> hands of private secong>toong>r housebuilders and developers. In mid-2002 itremained undeveloped but under a draft Section 106 planning agreement dated March 2001 ong>theong> proposed usesare 320 housing units for sale, 62 for shared ownership and 34 for rent, a few of ong>theong>m larger properties.Therewas 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, including96 affordable housing units and 119 key worker units, 2110 sq. m. for business use (Class B1) andcommunity 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> site58Zacchaeus 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 ImpactAssessment submitted under ong>theong> provisions of ong>theong> Town and Country Planning (Environmental ImpactAssessment) Regulations 1999.This latter application has been approved and ong>theong> development application isunder consideration. It will be subject ong>toong> a furong>theong>r Section 106 Agreement and ong>theong> approval, due ong>toong> ong>theong> size ofong>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 andsubsequently change hands (in an area with a desperate shortage of low cost accommodation).There has alsobeen a delay of approaching thirty years in bringing in any development ong>toong> replace ong>theong> redundant gasworks anda site with key significance ong>toong> ong>theong> regeneration has remained neutralized for that period.What could have happenedThere 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 aCompulsory Purchase Order. Given that ong>theong> site was heavily contaminated, that it was zoned as ‘industrialland’, and ong>theong> Council as planning authority could have made it clear that ong>theong>re was no current intention ong>toong> rezoneit, ong>theong> financial offer might well have been ‘existing use value’.This would have been effectively at zero oreven at a negative value ong>toong> reflect ong>theong> investment necessary by ong>theong> purchaser ong>toong> prepare ong>theong> site forredevelopment (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>rinterests ong>toong> determine a Development Plan with an optimum pattern of uses ong>toong> meet local needs (similar ong>toong> aSwedish commune housing plan).This could have been translated inong>toong> a new zoning with a mix of residentialand oong>theong>r uses. It could hardly have been argued by ong>theong> gas company who had been bought out by ong>theong> CPO thatong>theong> Council had a re-zoning intention all along.The matter had not at that time been subject ong>toong> publicconsultation or a Plan prepared. Once it had been, ong>theong> Council would have been acting in its proper capacity asguardian of ong>theong> long term public interest. In any event no Council can speak definitively of ong>theong> land usedecisions 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 longterm speculative land profits) over ong>theong> interests of several thousand poorer members of ong>theong> local community. Itwould 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> entirefreehold.Within ong>theong> housing component, an optimum pattern of residential unit sizes and types (including somespecial needs housing) could have been specified given ong>theong> known needs of ong>theong> area.This need not haveprecluded ong>theong> inclusion of a small amount of executive housing for leasehold sale along ong>theong> canal ong>toong> help balanceong>theong> finances (and ong>toong> deliver ong>theong> claimed advantages of ‘tenure diversification’). Some of ong>theong> land could have beenleased out ong>toong> housing associations ong>toong> diversify ong>theong> design and management style of ong>theong> housing.The Council andRSLs could ong>theong>n have invited tenders for ong>theong> construction contracts.The contracts could have been set ong>toong> ensurean 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 somecases sold leasehold, according ong>toong> local needs.The rents could have been arrived at in ong>theong> light of constructionZacchaeus 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 havebeen set at a level simply ong>toong> give ong>theong>m a reasonable premium over ong>theong> construction cost (since again ong>theong>re wasno land cost ong>toong> be covered in ong>theong> prices).This would have meant prices way below local market levels.Tomaintain ong>theong> pool of low cost housing through time ong>theong> sale agreement could have specified that on every resaleong>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 atong>theong> time of sale ong>theong>re was no prospect of future development of ong>theong> site for a more lucrative use.Theconstrucong>toong>rs would have got contracts giving an attractive rate of profit and ong>theong>y would have had a flow ofbusiness without ong>theong> initial problem of looking for sites ong>toong> build on.The Council would have acquired valuablefreehold land as collateral and ong>theong> advantage of long-term control over future redevelopment rights.Therewould have been a good increment ong>toong> ong>theong> public song>toong>ck of housing for rent and some homes for sale andsubsequent resale at sub-market prices.This would have assisted both those locally on low incomes andincoming lower paid workers who might be needed by ong>theong> local economy (ong>theong>re are several hospitals and manyschools in ong>theong> area).In addition ong>theong> decant process would have been much less disruptive and costly since it would have beenpossible 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-housinguses in line with ong>theong> consultation process about ong>theong> needs of ong>theong> area.The leases for ong>theong>se could have includedground 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 beencarried 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 signeduppartners 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> earlyThatcher 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 taxrelated 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 forlocal 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 pricesIn this case study a medium sized housebuilder heard that ong>theong> owner of 1.2 acres of farmland near one of hisexisting developments was considering selling.The value of ong>theong> land in agricultural use was about £2,500.Thevendor had already obtained outline planning consent for 10 semi-detached houses on ong>theong> site.The housebuilderneeded 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> selling60Zacchaeus 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 arequired 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 £2,750,000Less selling costs @ 3% 82,500________Net sale income 2,667,500Less:Construction costs for 10 houses 1,000,000Design fees @ 10% of costs 100,000Overheads and office costs 100,000Bank finance costs 80,000Profit @ 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 sixmonths of completion. Subsequent ong>toong> ong>theong> land sale ong>theong> local planning authority allowed 12 houses ong>toong> be built onong>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 valueestimate 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> agriculturalvalue of £2,500.Clearly rising expectations about house prices, based partly on expectations about lower interest rates and/orhigher lending multiples for borrowers, will feed through ong>toong> upward pressures on land prices.This makes landan 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. Givenong>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 inland as ‘speculation’ raong>theong>r ong>theong>n ‘investment’.Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 61


62Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 10 - Some effects of poorhousing on health, education andwelfare(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 ofong>theong> 1845 Royal Commission on ong>theong> Sanitary State of Large Towns and Populous Districts. Research in Londonin 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 poorconditions and overcrowding increased vulnerability ong>toong> ill-health and that ong>theong> ill-health cost a lot of money. Heset ong>theong> Registrar General ong>theong> task of calculating ong>theong> public cost of various manifestations of ill-health which heregarded as a direct outcome of poor housing conditions and high room densities.These included ong>theong> increasedincidence of TB, ong>theong> generally poor health of children in elementary schools and ong>theong> levels of preventablesickness 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> useong>theong>se findings as an argument for furong>theong>r housing investment resources from ong>theong> Treasury, in accordance withong>theong> ‘Homes fit for heroes’ election cry, was cut short by his prompt dismissal from office by Lloyd George.Socio-economic status, housing and healthAppendix 12 of ong>theong> ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> on Minimum Income Standards included a review of some ofong>theong> salient academic literature on ong>theong> link between housing and health since ong>theong> 1980 Black Report Inequalitiesin Health.The housing quality that can be accessed is closely related ong>toong> socio-economic status. Many recentstudies 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 etal. (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 havingstunted growth and more than 120,000 being anaemic.They also report that 77% of children in ong>theong>ir studywith 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 forEngland, 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 formeasures 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 noong>toong>nly with poor health but also with negative ‘outcomes’ in education and with higher rates of crimeexperienced (Ambrose, Barlow et al. 1996). An earlier set of essays (Burridge and Ormandy eds. 1993) has alsoreported on a wide range of adverse health effects. A recent publication from Shelter (Shelter 2004) has drawnattention specifically ong>toong> ong>theong> effects of poor housing on children. It points out ong>theong> one in twelve children areZacchaeus 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 systematicresearch drive on this issue. A subsequent review (Thomson et al. 2002) has found that while ong>theong>re are manythousands of studies linking housing improvement ong>toong> health gain only a handful have offered robust evidenceabout 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 housingunder ong>theong> Central Stepney SRB Regeneration in an area of east London between 1995 and 2001 (Ambrose2002).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 selfreportedillness days from 37 per hundred person/days ong>toong> 5 per hundred. A round of interviews with over 50health and oong>theong>r professionals working in ong>theong> area confirmed ong>theong> views of residents that ong>theong>ir state of health wasclosely 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.Thestudy 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 housingimprovement and ong>theong> transfer of ong>theong> housing ong>toong> RSLs was an increase in weekly living costs (primarily rent andCouncil Tax) of approximately 27%.This had led ong>toong> increased debt and reduced expenditure on health-relateditems such as food, clothing and recreational activity (Ambrose and MacDonald 2001).Indoor cold and healthPoverty and poor housing conditions are frequently associated with low indoor temperatures.There has beenmuch 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 hasproduced a review of evidence linking living in a fuel poor home with increased risk of illness.This shows inparticular a strong association between indoor cold and increased risk of strokes, heart attacks and respiraong>toong>ryillness. Evidence is also reviewed on ong>theong> impact of cold stress causing cardiovascular strain, ong>theong> increasedincidence of dust mites in poorly ventilated homes affecting asthma and eczema, particularly in children, andong>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 (forexample Eurowinter Group 1997). Similarly Wilkinson and colleagues (Wilkinson et al. 2001) concluded thatong>theong>re is an excess of about 40,000 deaths each winter compared ong>toong> ong>theong> death rate in non-winter months. Inparticular 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 incomeresidents. 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 is64Zacchaeus 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 temperaturesong>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 ofong>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> havecost ong>theong> NHS £730 million in 1995-6. Brandon (2002) cites a report finding that in ong>theong> United States 14 milliondays of school are missed each year due ong>toong> asthma.The link ong>toong> poor nutrition, health and behaviourSince 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 fromincome support payments.This relationship was evidenced in a direct way in ong>theong> Stepney area regenerationstudy 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 considerablybelow ong>theong> ‘Low Cost but Acceptable’ level calculated in ong>theong> light of local living costs (Ambrose 2003).Theliving costs faced by ong>theong>se households were powerfully inflated by local private secong>toong>r rental costs since only sixof ong>theong> sample had been able ong>toong> access local authority housing, virtually restricted ong>toong> those in emergency need inong>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 hada strong positive effect on behaviour standards:‘The experimental, placebo-controlled, double-blind methodology has demonstrated thatsupplementing prisoners’ diets with physiological dosages of vitamins, minerals and essential fattyacids caused a reduction in antisocial behaviour ong>toong> a remarkable degree. It is not advocated thatnutrition is ong>theong> only cause of antisocial behaviour but ong>theong> difference in outcome between ong>theong> activeand placebo groups could not be explained by ethnic or social facong>toong>rs, as ong>theong>y were controlled forby ong>theong> randomised design.’In addition Dowler and colleagues have written much about ong>theong> relationship between poverty and poornutrition and about ‘food deserts’ – areas of poor access ong>toong> ong>theong> lower food prices and greater variety ofofferings found in supermarkets (Dowler, 2001, Dowler et al. 2001, Dowler and Finer 2003).The link ong>toong> low birth weightPoor nutritional standards and environmental conditions and low incomes are intimately related ong>toong> ong>theong> risk oflow birth weight babies.The incidence of low birth weight in ong>theong> UK is ong>theong> highest in western Europe. It hasshown little if any decrease since ong>theong> 1950s and a slight increase since ong>theong> mid-1990s (reply dated 25 July 2004Zacchaeus 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 Estimatesof 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 betweenpoor nutrition, low birthweight and various effects for ong>theong> brain and for vascular and immune systems (see forexample Crawford et al. 1997 and Doyle et al. 1999). It has also shown a trans-generational effect in that awoman 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 Standardsshowed a clear connection between socio-economic status, poor nutrition and low birth weight. Oong>theong>r studiescited, carried out in Canada, New York and London, showed links between low birth weight, poor physical andcognitive development and lower subsequent achievement levels at school and university.The link ong>toong> educationA recent report from ong>theong> Australian Housing and Urban Research Institute (Phibbs and Young 2005) hasexplored ong>theong> link between movement inong>toong> improved housing conditions in assisted public housing in Brisbaneand Sydney and a number of positive ‘non-shelter’ outcomes.The study, which reviews a wide range ofliterature, 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 andong>theong>refore less reliance on pre-packaged food, greater tenure security, less mobility and better neighbourhoodsafety. Light users of Medicare services tended ong>toong> become slightly heavier users but ong>theong>re was a much reducedusage 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 educationaloutcomes.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 andparental tensions. In terms of ong>theong> children’s Subject Performance at school after ong>theong> move 53% of respondentsindicated that it was better than previously, 7% that it was worse and 40% ong>theong> same. Interviews with teachersconfirmed that a reduction in moves and disruption was especially beneficial for ong>theong> children.SummaryThe considerable literature linking poverty, and poor and unaffordable housing, with a number of adversebirthweight, developmental, behavioural, morbidity, mortality and educational outcomes clearly establishes thatong>theong> provision of adequate and safe accommodation at an affordable cost is a matter that far transcends ong>theong> fieldof 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 been66Zacchaeus 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


68Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 11 - High housing costsand low pensionsSome 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> investin personal pension arrangements. In ong>theong> 2003 study of 24 workers in Brighong>toong>n and Hove earning substantiallybelow ong>theong> Low Cost but Acceptable level (Ambrose 2003) it was found that only 10 were members of a finalsalary-related pension scheme. In this sample eight of ong>theong>se were local government workers who are fortunatein being able ong>toong> benefit from an excellent occupational pension scheme.The remaining 14 in ong>theong> sample (whoseaverage age was 37) were not in a position ong>toong> make provision for ong>theong>ir retirement although several said, whenasked how ong>theong>y would spend additional income, that such provision would be a high priority.The Pensions CommissionThe 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 havelarge non-pension assets or are intending ong>toong> retire much later than current retirees...Our estimatessuggest 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 witha 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 moneyof 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 inretirement provision for many people. But house ownership does not provide a sufficient solutionong>toong> ong>theong> problem of pension provision given (i) uncertainty over future house prices; (ii) oong>theong>rpotential claims on housing wealth such as long-term care; and (iii) ong>theong> fact that housing wealth isnot 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> pensionsshortfall and ong>theong> amount of housing wealth that has accumulated among ong>theong> elderly, ong>theong> regressive distributionalconsequences 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 (Wilcox2003b). A very high proportion of ong>theong> poorest households have a housing wealth of zero so this route ong>toong> a postretirementincome 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 Cunningham2004) only one was a homeowner.Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 69


A sclerotic marketYoung people face chronic affordability problems, while ong>theong> elderly find it difficult ong>toong> utilise ong>theong>ir asset wealthong>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.Thehousing market is becoming increasingly sclerotic: ong>theong> recent house price boom was ong>theong> first that was notaccompanied by increased market activity. In fact, as prices rose during ong>theong> late nineties, market turnover fellfrom 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> foreseeablefuture (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 iswhat ong>theong>y want.This bodes ill for ong>theong> Government’s long-term growth strategy, as residents in ong>theong> newdevelopments 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 underoccupation, currently effecting 36% of households (Housing Statistics 2004, ODPM).That under occupation andovercrowding can co-exist is powerful evidence of an inefficient and sclerotic market.The implication is thatthis misallocation of equity will worsen over time as more and more housing wealth accumulates in ong>theong> growingelderly part of ong>theong> population and fewer larger homes are built.Equity release issuesFinancial markets should provide solutions ong>toong> this problem, but so far have only worsened it. A highlycompetitive mortgage market has simply helped push prices up furong>theong>r, and widen ong>theong> ratio between values andearnings. 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 estimatedpotential market of £100bn (Anderson 2004). Despite projections of growth in ong>theong> secong>toong>r, none of ong>theong> largebanks 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> lateeighties.Major lenders are reluctant ong>toong> enter an uncertain market with a bad reputation without substantial statesubsidies 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 workingfamilies unable ong>toong> access housing wealth, but financial institutions are failing ong>toong> clear ong>theong> market.What isevidently 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 accesshousing more affordably.70Zacchaeus 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 ofChild Trust Funds (CTFs) and ong>theong> Savings Gateway. It is ong>theong>refore regrettable that Treasury rules specificallyexclude ong>theong> investment of Child Trust Fund money in housing, because this is ong>theong> first attempt ong>toong> achieveuniversal asset ownership. If ong>theong> natural link between housing equity and CTF money can be made, cominggenerations will avoid ong>theong> wealth gap that afflicts ong>toong>day’s older people.Poverty and pensionsThe 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 housingcosts 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 betweenhomeowners and renters).This is an over-generous assumption used for reasons of modellingsimplicity. In fact housing benefit does not always fully offset ong>theong> costs of renting.We may ong>theong>reforeunderestimate 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 norsufficiently 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> decisionmakinginvolved (Pensions Commission 2004, page xii):‘There are however big barriers ong>toong> ong>theong> success of a voluntary pension saving system, some inherentong>toong> any pension system, some specific ong>toong> ong>theong> UK. Most people do not make rational decisions aboutlong-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 lowearners. Reductions in Yield arising from providers’ charges can absorb 20-30% of an individual’spension saving, even though ong>theong>y have fallen ong>toong> a level where provision ong>toong> lower income groups isunprofitable.This poses a fundamental question: in principle can a voluntary market for pensionswork 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 fundedout 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 andthat ong>theong>re will be growing dependence on investment-related private pensions in one form or anoong>theong>r, many ofong>theong>m reliant on individual initiative.The returns from such forms of pension provision are obviously less reliablethan 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, increasingdependence on privately arranged pension provision and a sharp divide between asset-rich homeowners andZacchaeus 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. Increasedhousing costs ong>theong>refore seem ong>toong> be one mechanism for prolonging inong>toong> ong>theong> future, and exacerbating, currentinequalities.72Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 12 - High housing costsand 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> middleof a housing crisis. No doubt much of this response reflects worries about wheong>theong>r or not house prices will falland/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> inAppendix 9.The high cost of a non-substitutable commodity such as housing is likely ong>toong> find its way inong>toong> higherpay claims. Similarly employers in high housing cost areas may well have ong>toong> offer higher wages and relocationpackages ong>toong> attract key workers. Having attracted ong>theong> workers ong>theong>y may experience retention problems asemployees find ong>theong> housing costs unsupportable on ong>theong>ir incomes. A high rate of staff turnover imposes its owncosts. Equally from ong>theong> employees’ viewpoint ong>theong> highly differentiated housing costs in ong>theong> UK can act as aserious impediment ong>toong> job mobility. Sufficient affordable housing is ong>theong>refore a necessary item of infrastructureong>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 aMoveUK scheme which will ‘...offer social housing tenants and jobseekers greater choice about where ong>theong>y liveand work’.The service is however designed ong>toong> be simply an on-line information service about job vacancies andhousing opportunities in oong>theong>r parts of ong>theong> country.This will extend ong>theong> information available ong>toong> those seekingong>toong> move for employment reasons but unless differential housing costs are also addressed it may make littlepractical difference ong>toong> ong>theong> options open ong>toong> movers. In any case ong>theong> scheme presumes universal access ong>toong> acomputer 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’ CampaignThis 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 breadthincluding Unison, ong>theong> Confederation of British Industry, Shelter, ong>theong> National Housing Federation,The Town andCountry Planning Association, CABE and two of Britain’s largest housebuilders,Wilson Bowden and GeorgeWimpey.The Campaign is urging ong>theong> South East of England Regional Assembly ong>toong> recognise ong>theong> acute shortageof housing in ong>theong> south east and ong>toong> increase significantly ong>theong> number of homes built in ong>theong> light of both marketdemand 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:‘...ong>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 ofZacchaeus 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 in2003 (Social Exclusion Unit 2004). Reflecting ong>theong> feedback from many employers and members ong>theong> campaigndraws attention especially ong>toong> ong>theong> widespread evidence that ong>theong> affordability problem creates severe difficultiesfor 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 homeswas 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 negativeimpact on business location decisions, competitiveness and labour-market mobility.’The Campaign accepts ong>theong> general Barker Review line that housing supply ‘...is a key ong>toong>ol for improving marketaffordability 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 growthand labour market efficiency is one that has been advanced for some time by housing specialists. But it has onlynow been taken up by powerful voices representing both employers and employees making common cause witha housing charity, and with design, architectural, planning and housebuilding interests.This convergence of abroad 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 temporaryaccommodation over ong>theong> period 1995 ong>toong> 2003.74Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 13 - Oong>theong>r effects of highhousing 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 repossessionInability ong>toong> continue servicing a housing debt can lead ong>toong> calamiong>toong>us outcomes if ong>theong> property is repossessed. Ifit 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 mortgagearrears probably reflect ong>theong> hisong>toong>rically low interest rates of ong>theong> early 2000s. Neverong>theong>less court actions enteredfor 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 £138.60and £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 consequencesThere is a wide range of oong>theong>r consequences of rapidly rising house prices, massively increased mortgageindebtedness and ong>theong> consequent heavy calls on household income.These may well be felt especially in ong>theong> earlyyears 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 housesfeeds through ong>toong> inflate development land value, with consequent implications for ong>theong> buyers ofland for ‘social’ purposes.Effects on private secong>toong>r rents - private landlords are seeking ong>toong> gain a competitive rate ofreturn 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>ywill seek.Effects on labour mobility - ong>theong> lack of affordable housing in ‘high demand’ areas reduceslabour mobility and causes additional difficulties for employers who seek ong>toong> attract and retainworkers in lower paid jobs (Appendix 12).Effects on ong>theong> power of organised labour - ong>theong> relationship between high levels of mortgageindebtedness and workers’ potential and propensity ong>toong> take industrial action has been recognizedsince at least ong>theong> 1920s: ong>theong> commitment ong>toong> mortgage repayments is ong>theong> most frequently statedZacchaeus 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 andperhaps furong>theong>r children.The number of live births per 1000 women in ong>theong> UK has changed asfollows:1981 2002All ages 62.1 54.320-24 106.8 68.225-29 130.4 91.330-34 69.5 89.835-39 22.4 42.8Source: Social Trends 34, 2004,Table 2.16Fertility rates are down in ong>toong>tal and are sharply down in ong>theong> under 29 age groups. But in 2002women in ong>theong>ir early 30s produced far more babies than in 1981 and for those in ong>theong>ir late 30sfertility has almost doubled.This pattern is no doubt ong>theong> product of a number of facong>toong>rs and it isdifferential 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 ofthose in socio-economic groups able ong>toong> access a mortgage loan. Given ong>theong> possible incidence ofmore complications for older moong>theong>rs ong>theong>re may well be implications for NHS costs arising fromong>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, mayhave a range of effects. Some may be judged positive and some negative.Very often ong>theong> requirementthat two incomes continue may close down preference options about patterns of parental care andincrease 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 earningsdevoted ong>toong> property purchase ong>theong> lower ong>theong> proportion available for oong>theong>r forms of spending.Theshift 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 meanincreased exposure ong>toong> risks when household finances are disrupted by frequently occurring facong>toong>rssuch as relationship breakdown, redundancy, poor health or disability. Increase stress may be feltnot 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 inflationsince ong>theong> later 1990s it is clear at least anecdotally that many older parents are making use of ong>theong>irown capital ong>toong> help children in ong>theong>ir 20s and 30s ong>toong> get on ong>theong> ‘property ladder’.This issue appearsong>toong> have been little researched so its precise extent and effects are not known although one surveycarried out in 2004 by MORI for ong>theong> Joseph Rowntree Foundation found that parents now expectong>toong> contribute on average £17,000 ong>toong> help ong>theong>ir children get onong>toong> ong>theong> property ladder.76Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


3. Equity withdrawal and increased consumer debtSteeply rising house values have given more ‘headroom’ for owners ong>toong> borrow for oong>theong>r purposes. It has beenpointed out by Wilcox (2004, Section 2) that ong>theong> recent rise in house prices has permitted record levels ofequity withdrawal.This rose from £45.6 billion in 2002 ong>toong> £60.8 billion in 2003. It amounted ong>toong> 8.77% of allconsumer 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 andindirectly ong>toong> employment levels. But equally it has an inflationary effect and has been one reason behind ong>theong> fiveincreases in ong>theong> Bank of England base rate since Ocong>toong>ber 2003. Increased spending is conventionally seen as anunmitigated economic benefit. But at a time of deep concern about ong>theong> social and cultural implications of veryhigh 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>rGovernments 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> economyout of recession or ong>toong> dampen down an overheated economy.The facility with which base rate can be adjustedup or down is significantly restricted when ong>theong> financial viability of millions of heavily indebted households isput 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 patternIt was shown in Appendix 2 that ong>theong> amount of house purchase lending in ong>theong> deregulated regime over ong>theong> past23 years has been almost £600 billion more than might have been expected had lending risen in line withgeneral consumer prices.The housing debt outstanding has risen from 23% ong>toong> 72% of GDP.This vast lendingflow 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 capitalisationof 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 decentstandard.The modelling of alternative investment flows over ong>theong> past quarter century would be a complex task butintuitively 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


78Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 14 - An overview of‘exported costs’ from poor housingPoor 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 thatit is futile ong>toong> search for simple ‘cause/effect’ relationships. Neverong>theong>less evidence gaong>theong>red from many studiesshows clear patterns of association between poor conditions - for example cold, damp, infestation, noise, poorair quality and overcrowding - and an increased incidence of ill health.Wheong>theong>r ong>theong>se conditions derive frominadequate housing standard regulations, poor construction, poor maintenance, aspects of ‘lifestyle’ (as has beenargued) 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 alreadyunder increasing strain in Britain and oong>theong>r European Union countries as a result of various facong>toong>rs includingageing 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 andCrawford 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 aseffectively)• ong>theong> police and judicial services (because poor housing and environmental design and constructionis associated with a higher incidence of some crimes)• ong>theong> emergency services (because poor housing conditions and ‘secondary heating’ increaseaccident and fire risks)• ong>theong> energy supply services (because poorly designed housing uses excess energy and producesecological damage).Over three hundred research studies examining ong>theong>se issues were reviewed as an early part of ong>theong> Costeffectivenessin 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 onesecong>toong>r (housing in this case) and ong>theong>n ‘exported’ ong>toong> oong>theong>rs.A matrix of exported costsOne of ong>theong> products of ong>theong> series of empirical studies carried out by ong>theong> CEHI team was ong>theong> gradualdevelopment of a more thoroughly worked out matrix of cost categories and headings where ong>theong> volume ofcosts felt was likely ong>toong> be affected ong>toong> some degree by ong>theong> quality of ong>theong> living environment.This systematisationZacchaeus 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 noassertion here of direct causal relationships between living conditions on ong>theong> one hand and health and oong>theong>routcomes on ong>theong> oong>theong>r. Instead it is argued that systematic and ong>toong> a degree predictable patterns of association existbetween ong>theong> quality of ong>theong> built environment and ong>theong> health status and oong>theong>r cost-generating outcomesobserved.The health and oong>theong>r costs that could well be exacerbated by poor living conditions can be categorised in atleast four ways as follows:1. Capital Costs versus Revenue Costs2. Personal Costs felt on ong>theong> personal finances of individual residents versus External Costs felt by serviceproviders 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 FormalisedCosts felt in more visible and formalised ways such as in ong>theong> annual bid for funds by a healthcare or oong>theong>rservice whose funding formula recognises ong>theong> high cost of service delivery in run-down areas. Such FormalisedCosts might impact in ong>theong> form of special responses ong>toong> situations where ong>theong> state of run-down needs ong>toong> beaddressed via expenditure on special Government programmes such as ong>theong> Single Regeneration Budget or NewDeal 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:HMNQHard - costs that can be precisely quantifiedMedium - costs that one can see a way of quantifying given better dataNon-quantifiable - costs that clearly exist but are currently non- quantifiableA matrix of this nature not only provides a framework for ong>theong> task of estimating some of ong>theong> ong>toong>tal costs incurredbut 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’ andexported costs?By identifying a range of more measurable costs (H), ong>theong> matrix also gives some guidance concerning ong>theong> mostpromising ways ong>toong> continue ong>theong> task of evaluating exported costs.80Zacchaeus 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 conditionsPERSONAL COSTSEXTERNAL COSTSSystemic - Capital high annual loss of asset value high annual loss of asset valueif 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 - CapitalFormalised - RevenueGovernment and EU arearenewal programmes (H)‘Statements of need’ (H)Police funding formula (H)Fire and Ambulance servicesfunding formulae (H)The ‘10%’ questionAs part of discussions ong>toong> assess ong>theong> success of ong>theong> Hackney Central Estates Initiative in ong>theong> late 1990s focusgroups were arranged ong>toong> which ong>theong> providers of key services - health, police, education, housing, etc. - wereinvited.The question was put:‘If you could have a 10% increase in your budget next year which could be spent only on anoong>theong>rservice raong>theong>r than your own, which service would you choose with a view ong>toong> making your ownoperations 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


82Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 15 - Limited LiabilityPartnerships as developmentmechanisms(Chris Cook of Partnership Consulting)Property RightsProperty ownership rights - wheong>theong>r over land, financial assets, intellectual property - have evolved in ong>theong> Westinong>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 tenurerights provided by statute ong>theong>reby reflecting reality more flexibly and equitably.The result is a minefield, whichwe 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 neednot deal in absolutes. So it is that a new form of indefinite property right is now emerging based upon a newrelationship 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’ andong>theong> ‘user’ of property where ong>theong> property is owned in common by ong>theong> partnership.The ‘User’ member ong>theong>npays 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> unintendedconsequences of a recent innovation in UK Partnership Law.The UK Limited Liability PartnershipOn 6 April 2001 a new legal entity, ong>theong> Limited Liability Partnership (LLP), came inong>toong> effect in order ong>toong> protectprofessional 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 acontinuing legal existence independent of its members. Also, as with a limited liability company, you cannotlose 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 isalso 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 simpleZacchaeus 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 beapplied 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:Examples(a) a Trustee Member - which holds ong>theong> freehold of ong>theong> Land in perpetuity on behalf of ong>theong>Community(b) an Occupier Member - which consists of ong>theong> community of individuals and/or enterpriseswhich 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 whoinvest 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 bepension 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 areover 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 streamperfectly 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’.Theymay choose not ong>toong> pay in cash but raong>theong>r ong>toong> transfer ‘equity shares’ instead from savings made previously. If anOccupier 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 inrespect of ong>theong> delivery and maintenance of a high quality and energy efficient Olympic Village.The outcome isthat 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> bebuilt a school, a hospital or a new bridge. A reasonable ‘capital rental’ is agreed for ong>theong> use of ong>theong> property andong>theong> CLP is divided inong>toong> ‘n’ths’ which consist of proportional shares in ong>theong> rental revenues. Again, such propertybackedrevenue shares are ideal for ethical investment at a local level and are a close match for ong>theong> requiremenong>toong>f 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 convertedinong>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 common84Zacchaeus 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 flatsand five 2-bed flats. Ground source heating and oong>theong>r energy-efficient features would be installed.(a) FinanceEach of ong>theong> seven plots is worth £100,000 and ong>theong> current value of ong>theong> buildings is 2x£125,000 and5x£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 iscontributed by an Invesong>toong>r Member seeking an initial 3% return or £43,500 per year. Divided between ong>theong> 20occupiers members this is £2,175 each or just under £42 per week.This would be inflation-linked and wouldong>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 inong>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 upsavings.(b) Fair Shares and Land Rental UnitsIn addition ong>toong> ong>theong> building rental members would pay a Land Rental under ong>theong> Community Land Partnershipagreement.This Land Rental constitutes a pre-distributive mechanism internal ong>toong> ong>theong> CLP and utilising twoseparate parameters - Income and Land Use.(i) Income PoolingAssume a contribution ong>toong> a ‘pool’ of 5% of income.5 members on £50 per week state benefits pay in ong>toong>tal £12.505 members on £100 per week pay in ong>toong>tal 25.005 members on £150 per week pay in ong>toong>tal 37.505 members on £200 per week pay in ong>toong>tal 50.00The outcome is a levy of £125 per week which is ong>theong>n divided between ong>theong> 20 members giving adividend of £6.25 each.This could give a net rebate ong>toong> those on less than £125 per week and a netcontribution 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 couldbe higher or lower than 5%.(ii) Land Use PoolingThe 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 occupyfive units - a ong>toong>tal of 25 LRUs The members agree a value payable per LRU by ong>theong> occupants ofeach property inong>toong> a pool. Again net value transfers (payments or receipts) result from those havingmost 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 circumstancesand 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 withthat 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 yearrevenue sharing agreement with a development finance consortium which invested £350m in an LLP vehiclewhich acquired 10 UK hotels.There was no mortgage or interest and neiong>theong>r was ong>theong>re a ‘sale and leaseback’ ofong>theong> freehold.Encouraging sustainable developmentExisting modes of development encourage, even mandate, sociopathic behaviour on ong>theong> part of propertydevelopers. Land is acquired and developed with borrowed money secured by a mortgage on ong>theong> property.Thedeveloper 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 ismandated ong>toong> provide.The CLP model is entirely different.The developer does not buy and sell ong>theong> land but instead acquires shares inong>theong> revenues which will flow over time from its successful and sustainable development and operation.Themore energy efficient ong>theong> development, and ong>theong> better ong>theong> quality, ong>theong> less money is necessary ong>toong> pay for repairsand for heating and ong>theong> higher ong>theong> rental value will ong>theong>refore be.ConclusionWe see in ong>theong> new LLP legal form an innovative mechanism enabling new solutions ong>toong> be provided in respect ofong>theong> problems set out elsewhere in this ong>Memorandumong>.Through ong>theong> concept of ‘co-ownership’, and ong>theong> ‘assetbasedfinance’ which flows from it, we see ong>theong> possibility of a truly sustainable development model where it isin ong>theong> interests of developers ong>toong> develop property that is energy efficient and sustainable raong>theong>r than ong>theong> reverse.86Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 16 - Capturing rising landvalues for ong>theong> communitySome 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 lessliterally true give or take changes in sea level, land reclamation schemes (such as those of Charles Iin ong>theong> Fens) and marina developments (for example ong>theong> Brighong>toong>n Marina issue in ong>theong> 1970s whichwas more about ong>theong> development land ong>toong> be created, and how much ong>theong> council could be inducedong>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 capitalgain from ong>theong> completed development, less ong>theong> construction cost. Since what and how much can bedeveloped 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> actionsof external forces, for example by ong>theong> construction of a transport facility or an urban renewalscheme (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> reverseis 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 markeong>toong>r when some public body sets its value in a forced sale or compulsory purchase situation.Thevalue of all oong>theong>r land, wheong>theong>r currently built on or not, can only be estimated or imputed.Thisimputed value may well include some ‘hope value’ where ong>theong> site is very likely ong>toong> be approved fordevelopment. 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 isnot yet clear which one. If ong>theong> site is already built on its value can be estimated fairly accurately byimagining ong>theong> destruction of ong>theong> building upon it.The site is ong>theong>n worth ong>theong> market value of asimilar 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> UKdevelopment system has failed ong>toong> ensure sufficient affordable housing.This is largely because ong>theong> regulaong>toong>ryinterventions have been ong>toong>o weak eiong>theong>r ong>toong> capture ong>theong> rise in land value for ong>theong> community, broadly defined, orong>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 gainsThe gain in land value when a site becomes available for a higher revenue use is spectacular.Typically ong>theong> valuemight increase from about £5,000 per hectare in agricultural use ong>toong> £2 million or more for housingdevelopment. Much higher figures can be reached for retail or office uses. At ong>theong> height of ong>theong> LondonDocklands 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 legitimatecompeting interests in a situation where power is unequally distributed and, in ong>theong> context of thisong>Memorandumong>, how ong>toong> ensure ong>theong> best possible supply of affordable housing.What a land flow system needs ong>toong> accomplishAppendix 9 illustrated some of ong>theong> serious failings of ong>theong> present land flow arrangements in three case studysituations - one of rapid urban growth in Berkshire, one of ‘brownfield’ regeneration in east London and one ofa small housebuilder in ong>theong> home counties. It was shown how present practices make land coming up fordevelopment more an attractive area of speculation and less a necessary input inong>toong> ong>theong> production of ong>theong> builtenvironment.This enables us ong>toong> specify more precisely what a reformed land flow system should ideally be capable ofachieving. It should:• facilitate an economically required and socially appropriate pattern of development in bothgreenfield 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 fromunwilling 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 economicenvironment for ong>theong>m• make full use of energy conservation practices both in terms of environmentally sustainable landuse 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> localcommunity 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 communitiesin ong>theong> process88Zacchaeus 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 systemWartime originsThe 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 enemybombing. In January 1941 a deputation of seven civic leaders led by ong>theong> Mayor of Coventry requested a meetingwith Sir John Reith, minister responsible for reconstruction, ong>toong> seek information about ong>theong> nature of post-warredevelopment regimes. Somewhat rashly he assured ong>theong>m that ong>theong>ir cities would be fully compensated and thatreconstruction 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 postwarplanning.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 CentralPlanning Agency, provision for all land outside ong>theong> cities ong>toong> be acquired compulsorily by public authorities at 31March 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 1944White 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 futuredevelopment on ong>theong> day ong>theong> Act came inong>toong> force a sum of £300 million was set aside for compensation. For alloong>theong>r landowners ong>theong>re was ong>toong> be no compensation for lost future development rights because it was held that itis 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 interventionsThe main power of ong>theong> planning system is ong>theong> granting or withholding of planning consent as and whendevelopers 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>rcreated by nature or by ong>theong> actions of ong>theong> whole community, past and present. As such, land value is by nature apublic good that is captured by private landowners, subject ong>toong> ong>theong> constraints of planning permission.Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 89


For this reason, economists from Adam Smith onwards have recognised that increases in land value are a naturalsource of public revenue. At present, agreements under Section 106 of ong>theong> Planning Act (which is replaced bySection 46 of ong>theong> new Act this year) are used ong>toong> capture some of ong>theong> ‘betterment’ created by ong>theong> granting ofplanning 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>yfocus entirely on ong>theong> moment of development. Recent reforms of ong>theong> planning system (Planning andCompulsory Purchase Act 2004) do little ong>toong> change this. Although forward planning is now based on widerspatial 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> momentplanning permission is granted. Ultimately ong>theong>se approaches add ong>toong> building costs and deter development, andong>theong>refore increase ong>theong> cost of both new build and existing housing. On three separate occasions since ong>theong> secondworld war Labour governments have attempted ong>toong> capture planning gain through one-off taxes: each has failedand 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 soong>theong> planning system can only influence ong>theong> housing market at ong>theong> margin.Whatever contributions developersare forced ong>toong> make are one-off events that have no lasting impact on affordability. Once houses have been builtong>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 futureprices or for capturing future socially-created increases in land values.This is a serious omission, and a majorcause of ong>theong> affordability crisis. Ironically, this problem is worsened by sustained economic growth - ong>theong> extravalue created by growth is channelled inong>toong> an unconstrained housing market, meaning that housing costs risefaster 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>yoong>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 developmentPublic policy directly influences ong>theong> flow of development land most obviously through ong>theong> planning system, butalso through government sale or purchase of land (including compulsory purchase); ong>theong> development (or not) ofpublicly owned land; ong>theong> location of public agencies; investment in all types of public infrastructure andservices; and ong>theong> taxation system. More subtly, economic policies that effect growth, interest rates, employmentand ong>theong> environment will all effect people’s motivation ong>toong> develop land or buy property, as will social policiesthat 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.90Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Economic growth and rising land valuesThe dynamic relationship between growth and ong>theong> land market was first identified in ong>theong> nineteenth century byDavid 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 aslabour market immobility, ong>theong> misallocation of investment funds and ong>theong> squeezing of non-landowningenterprises destroy ong>theong> efficiency gains of ong>theong> growth period, forcing ong>theong> economy inong>toong> anoong>theong>r down turn. Asprices rise beyond ong>theong> means of many people, social housing becomes increasingly residual and a growingintermediate 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 GainSupplement (PGS) all fail ong>toong> tackle ong>theong> underlying causes of unsustainable land and housing price inflation (GLA2001, Barlow et al. 2002). Planning control will always be necessary, and ong>theong>re may be a role for one-offinterventions like PGS, but we also need a means of capturing socially-created rises in value for ong>theong> communityand locking in any subsidy so that affordable housing remains affordable.The potential of current planning powersDespite ong>theong> limitations noted, ong>theong> Stepney Gasworks case in Appendix 9 has shown ong>theong>re appears ong>toong> be nodecisive reason why ong>theong> removal of land speculation, and ong>theong> ensuring of desirable outcomes ong>toong> a prescribedtimescale, cannot be achieved under existing planning legislation. It appears ong>toong> have been habitual practice andlack of political will, raong>theong>r than a lack of legal powers, that has limited an equitable apportionment of ong>theong> landvalue gain arising from this development. For a wide range of reasons local authorities have been in ong>theong> positionof granting valuable development consents after sites have been acquired by private developers raong>theong>r thanong>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 forwardAs 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 proportionof housing in public ownership and ong>toong> initiate a renewed public housing development programme. But atpresent 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 ownedhousing 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 anddevelopment of some variant of ong>theong> ‘community land trust’ idea. As shown in Appendix 15 this can becombined 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 byHenry George’s idea that land was fundamentally different from ong>theong> oong>theong>r two facong>toong>rs of production (labour andcapital) and should be treated differently in ong>theong> economy. He believed people should certainly be able ong>toong> ownong>theong>ir homes, but that ong>theong> land underneath ong>theong>m belonged ong>toong> ong>theong> community by right.Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005 91


In ong>theong> United States CLTs have been used extensively not only ong>toong> provide affordable housing but also ong>toong> serve asenvironmental conservation trusts.There are around 130 CLTs in ong>theong> US, in both rural and urban areas, rangingfrom small neighbourhoods ong>toong> entire ong>toong>wns.The largest, Burlingong>toong>n CLT in Vermont, now provides over 600affordable housing units, both owner occupied and rented, and has 2,500 members. A recent study of all resalesin Burlingong>toong>n CLT showed that 74% of those selling had bought in ong>theong> private market, implying that preservingaffordability with a restrictive resale formula had not lead ong>toong> ong>theong> residualisation of CLT housing (Davis andDemetrowitz 2003).Separating ong>theong> land value rises from ong>theong> buildingsThe key point of a CLT is ong>toong> separate out ong>theong> two elements in any development - ong>theong> land and ong>theong> buildingsplaced upon it.The land is a natural resource and it is entirely equitable that those living in ong>theong> vicinity shouldhave 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 forcommunal benefit.The buildings placed upon it from time ong>toong> time, on ong>theong> oong>theong>r hand, are ong>theong> product ofinvestment by a variety of interests (who may be in ong>theong> private, voluntary or statuong>toong>ry secong>toong>r) and it islegitimate 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 orparish council having ong>theong> long term interests of ong>theong> local community as a priority. It is acquired by means ofmarket 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 housingassociations can rent ong>theong>se houses or buy ong>theong>m on leasehold, often for a 99 year term in ong>theong> first instance.Therevenue stream, in ong>theong> form of lease payments or rents, is used ong>toong> service ong>theong> original loan ong>toong> acquire ong>theong> landand 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> sameprinciples.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 itcan be sold.This prevents ong>theong> spiralling price rises that make houses unaffordable.The precise resale priceformula adopted varies widely between CLTs, but most attempt ong>toong> give ong>theong> homeowner some of ong>theong> benefitfrom 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> needsof ong>theong>ir area; CLTs are democratic organisations designed ong>toong> represent all local stakeholders, notjust 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 notrequired for ong>theong> next generation92Zacchaeus 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 futuremembers of ong>theong> CLT from ‘carpet-bagging’ or selling ong>theong> land at market rates in return for a oneoffwindfall gain• residents can still own ong>theong>ir homes and see ong>theong>ir equity rise in value over time, but restrictedresale 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 landvalue gains for ong>theong> community in perpetuity.The range of CLTs and what ong>theong>y can doOver 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 homecountries.The issue was ong>theong> subject of ong>theong> Joseph Rowntree Foundation Land Enquiry (Joseph RowntreeFoundation 2002). Oong>theong>r key documents have been produced by ong>theong> Burlingong>toong>n Community Land Trust (Davisand Demetrowitz 2003), Greater London Council (GLA 2004), CDS Co-operatives (New EconomicsFoundation 2004) and The Countryside Agency (The Countryside Agency 2005). An umbrella body,TheDevelopment Trusts Association, was founded in 1992.An early example in England was Letchworth Garden City.This used ong>theong> co-operative land development systemdevised by Ebenezer Howard and is still operating on ong>theong> same lines ong>toong>day. Oong>theong>r CLTs are currently inoperation in Song>toong>nesfield (Oxfordshire), ong>theong> Isle of Gigha in ong>theong> Hebrides, where some small rural communitieshave managed ong>toong> buy ong>theong> estates of feudal landlords and place ong>theong>m in trust, High Bickingong>toong>n (Devon), MedenValley (Leicestershire), Norong>toong>n Radsong>toong>ck (Somerset), Stroud (Gloucestershire) and elsewhere. As is evidentmost of ong>theong>se are small-scale examples in villages or small ong>toong>wns.They are directed ong>toong>wards producing limitedamounts of housing which is more affordable because ong>theong> land costs have been removed, retaining key villageservices and/or generating workspace or community facilities.In an urban context CDS Co-operatives are working on some pilot projects in several London boroughs. Giventhat 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 scaleraong>theong>r than providing housing for ong>theong> very poorest.The key element is that ong>theong> land remains in ong>theong> permanenong>toong>wnership of ong>theong> CLT, ong>theong> housing is leased ong>toong> housing providers and ong>theong> basis is mutual home ownership andong>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>reforefunding more units of equity in ong>theong> scheme. Leavers take away about 90% of ong>theong> growth in value of ong>theong> houseor flat leaving a sum ong>toong> be reinvested in furong>theong>r development.The scheme is aimed especially at providingaffordable 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-offIt is significant that in ong>theong> United States, where ong>theong> CLT idea has been more widely implemented, it is citygovernments who are getting behind ong>theong> development of CLTs. Since ong>theong> late 1970s ong>theong>re has been a sharpZacchaeus 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 whatpeople can afford and what ong>theong>y need ong>toong> pay for housing. But city governments are among those that haverealised that ong>theong> subsidy necessary ong>toong> fill ong>theong> gap is getting larger and consequently more expensive on publicfinances. By promoting CLTs, which effectively take ong>theong> land costs out of housing, ong>theong> subsidy has a permanentraong>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> worldfor successfully empowering residents and improving ong>theong>ir health.WECH is acknowledged by ong>theong> leading UKexperts ong>toong> be at ong>theong> cutting edge of resident controlled housing and ong>toong> be a model for delivering bothaffordability 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> housingsong>toong>ck was over 100 years old, but it also included two 1960s ong>toong>wer blocks.The Vicong>toong>rian houses had fewamenities, leaked and were damp.The ong>toong>wer blocks were riddled with asbesong>toong>s.The landlords,Westminster CityCouncil, 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 assumedownership 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 Associationand registered with ong>theong> Housing Corporation. It began ong>toong> renovate and manage ong>theong> 660 homes in a fullyparticipative 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 andmaintenance 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 perweek 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 qualitysocial 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 supportiveservices.This produces social conditions with demonstrably effective health promotional effects (evidenced inAmbrose 1996).There is evidence of dramatic extensions ong>toong> ong>theong> longevity of older and at risk individuals.Theexplanation for this appears ong>toong> be ong>theong> organisation’s emphasis on an asset-based, internally-focused, relationshipdrivenmodel of management.The residents now view ong>theong>mselves as a family raong>theong>r than a community. In a sense everyone lives under oneroof owned collectively by WECH and 12% of ong>theong> households are related ong>toong> one oong>theong>r in ong>theong> form of co-locatedfamily networks.The emergence of a large family from a community based housing association is a remarkable and challengingsociological development. It offers exciting possibilities for public policy – a mechanism for improvement thatis older than song>toong>ne ong>toong>ols. It also suggests that humankind’s most resilient, yet sorely tested, form of social94Zacchaeus 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 CLTsIn his speech ong>toong> ong>theong> Labour Party conference in 2004, John Prescott announced his intention ong>toong> use governmenong>toong>wned land ong>toong> build houses, but using a CLT approach ong>toong> avoid what he called ‘an asset giveaway.’These houseswould 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 intrust 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 ODPMis now developing ong>theong> details of this schemeThis 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> afew surplus government sites. By separating ong>theong> land from ong>theong> buildings, CLTs allow people ong>toong> own ong>theong>re ownhome without depriving ong>theong> rest of ong>theong> community or future generations of community-created value.Fiscal reform as a way forwardCLTs are generally most applicable ong>toong> new build developments: although it is possible ong>toong> assemble existinghousing inong>toong> a CLT, it is more difficult and expensive. As 99% of ong>theong> housing supply consists of ong>theong> existingsong>toong>ck this is a serious omission. Any fundamental solution ong>toong> ong>theong> housing problem must tackle ong>theong> ongoingdysfunctionality 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 forprivate 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 houseprices.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> independentMonetary 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 currenong>toong>wners 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 MIRASand of mandaong>toong>ry urban renewal grants. But many new government programmes repeat ong>theong>se mistakes bypumping more money inong>toong> an overheated market. Despite attempts ong>toong> promote intermediate housing schemeslike 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> currentRight ong>toong> Buy and Right ong>toong> Acquire ong>toong> a furong>theong>r 300,000 tenants (ODPM 2005).This form of demand sidesupport effectively raises ong>theong> price of housing furong>theong>r as more money chases ong>theong> limited number of existinghomes (and repeats ong>theong> self-defeating experience of programmes in ong>theong> US aimed at funding ‘ong>theong> affordabilitygap’). 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> speculativepressures that drive up prices.The cost of Capital Gains Tax exemption more than outweighs Exchequer gainsZacchaeus 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 thatinevitably 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 anythingelse. By extension, it would have a positive effect on ong>theong> affordability crisis.The benefits of a land value taxBeyond ong>theong> various supply-side solutions that have been proposed, it is clear that some demand-side measuresneed 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 anannual tax on land values consistent with ong>theong> evolution of policy on council tax reform. It has long been notedthat taxes on land rents have ong>theong> least disong>toong>rtionary effect.Working ong>toong>wards ong>theong> combining of current propertytaxes 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> currentproperty 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> issuesraised by ong>theong> Barker Review. It would remove ong>theong> incentive ong>toong> hold underused land and encourage its releaseinong>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, endingong>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.Taxingland values makes land cheaper ong>toong> buy but more expensive ong>toong> hold.This would encourage a more liquid marketand greater allocative efficiency.A recent article on this issue (Huhne 2005) concedes that ong>theong>re are formidable practical and political difficultiesin 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 befor ong>theong> Government ong>toong> undertake a feasibility study of ong>theong> practicalities and of ong>theong> benefits ong>toong> be derived fromtaxing site values.Previous development taxesAlthough ong>theong>re have been repeated attempts ong>toong> capture land rents for ong>theong> public purse, ong>theong>y have all beenseriously flawed.This is widely interpreted as a sign that land rent cannot be captured. But in fact ong>theong> hisong>toong>ry offailure represents merely ong>theong> overly complex, confused and compromised nature of ong>theong> particular legislationenacted.The three attempts at land taxes by Labour governments since 1945 have all targeted ong>theong> profits made by96Zacchaeus 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> holdland 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 counterproductiveand places furong>theong>r pressure on developers who are already severely squeezed between high land prices andgovernment interventions.A true land value tax would be levied annually on ong>theong> unimproved value alone.This would have ong>theong> opposite effecong>toong>f previous development taxes, and would stimulate ong>theong> construction market by making housing cheaper ong>toong>build and developers less risk averse.RealpolitikSignificant reforms in well-established political systems are usually impeded by some combination of threefacong>toong>rs:• 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 politiciansalike. No one in Government has ong>theong> clarity of vision on ong>theong> land issue of Uthwatt in 1941 or on ong>theong> health andhousing 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 housingprovision practices in ong>theong> UK, especially in relation ong>toong> CLTs.The ideas go back at least 100 years and are beingimplemented in many countries around ong>theong> world.The thoughts are being thought by both housing suppliersand 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 institutionssuch 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 arenow firmly behind ong>theong> CLT and mutual housing provision arrangements.This is primarily because ong>theong>y areaware 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 iscut and ong>theong> problem manifestly gets worse.This seems ong>toong> be a very accurate characterisation of ong>theong> lastingpredominance of demand side subsidy in ong>theong> British case. More and more is spent on Housing Benefit and taxconcessions ong>toong> owner-occupancy.This may well be having some ameliorative effect on housing conditions butnot 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 favourof escalating land and house prices and who is against, ong>theong> balance is becoming more evident.Those in favour ofpresent high prices appear ong>toong> be a narrow group of interests comprising land speculaong>toong>rs, ong>theong> house purchaselending industry, some vendors of land for development (but by no means all) and all those interests that live offa percentage of values.Those against include ong>theong> vast majority of employers (lower housing costs mean lessZacchaeus 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 strongersupply side response discussed in Appendix 12), ong>theong> Government (support payments get more and moreexpensive and less effective), city and local government (high housing costs are a disincentive ong>toong> location andimpede local economic development) and even perhaps many housebuilders (for whom playing ong>theong> land marketmay 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 suitong>theong>m well, once ong>theong>y have achieved a ‘foot on ong>theong> ladder’. But ong>theong> issue is habitually perceived in terms ofgrowth 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 priceswill cause negative equity ong>toong> strike again. Some are concerned with ong>theong> felt obligation ong>toong> help finance ong>theong>irgrown 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> manifestunfairness of denying large proportions of ong>theong> poor ong>theong> standard of housing and tenure security enjoyed bythose who are not poor.These facong>toong>rs probably all contribute ong>toong> ong>theong> finding that 71% of people feel we have ahousing crisis (Appendix 12).Present arrangements are creaking and reforming ideas are being advanced and implemented by an articulategroup of enthusiasts. It will be interesting ong>toong> see how ong>theong> realpolitik works out over ong>theong> coming years anddecades.98Zacchaeus 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>colIn March 2005 ong>theong> Government announced that whereas ong>theong> intention was ong>toong> reduce CO2 emissions by 20% by2010 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 showedthat 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.Wecannot afford ong>toong> fail.’Unfortunately current building practices point ong>toong>wards failure. A recent report (ong>Primeong> ong>Ministerong>’s Strategy Unit2005) has found that ong>theong> UK housing song>toong>ck is among ong>theong> least energy-efficient in Europe and is 31% worse thatong>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 willhelp ong>toong> promote carbon neutral developments.This will empower people ong>toong> make a difference ong>toong> importantglobal 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 forsustainable building’ ong>toong> be developed and tested by ong>theong> end of 2005 and implemented in a number of areas from2006.Current lack of sustainable developmentA normal developer makes between 10 and 30 % profit on a new development. Most developers make moreprofit from land acquisition and planning gain than in ong>theong> actual construction and delivery of new homes.Thevolume house builders can build almost anything and sell it without difficulty in ong>theong> South East because demandis so much greater than supply. Fossil fuel derived energy is still very cheap and fuel cost saving is not a majorpurchasing criterion.Legislation requiring increased energy efficiency is increasing but progress is slow due ong>toong> effective lobbyingfrom ong>theong> industry and building material suppliers. For ong>theong>se reasons ong>theong>re are few exemplary sustainabledevelopments from ong>theong> private secong>toong>r.There is also little incentive ong>toong> take rigorous sustainable developmentcriteria seriously as ong>theong> Government can introduce ong>theong> legislative stick only when ong>theong> carrot has provedineffectual. In addition recent planning guidance in ong>theong> form of PPG3 allows dramatically higher densitiesequating ong>toong> substantial increased planning gain without requesting any compensation ong>toong> ong>theong> community andlocal 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, blurredresponsibilities and protracted time scales. Environmental innovation is seen as yet anoong>theong>r unnecessary risk thatcan be avoided.One developer (BedZED, www.zedfacong>toong>ry.com) has approached sustainable development from a completelydifferent viewpoint.They have asked how can we minimise ong>theong> environmental impact of new construction usingsimple modifications of existing well-proven products assembled in an innovative way.Working with a numberof 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 beeconomically met by renewable energy sources.Working in partnership with a number of local authorities and RSLs ong>theong> developers have designed a number ofstandard 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 atdemonstration 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 offspecifications become standard products with excellent environmental performance at a defined cost withvolume purchasing agreements already negotiated.The developer’s final product is a range of standard house types with known cost, programme, density, amenityand environmental performance. By being able accurately ong>toong> define ong>theong> cost of a carbon neutral specification atong>theong> planning stage, ong>theong> developers are able ong>toong> carbon trade with local authorities as part of Section 106agreements.This involves requesting increased density ong>toong> generate additional profit ong>toong> offset ong>theong> additionalconstruction 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 reasonableeconomies of scale.Patterns of energy useA typical UK family’s annual carbon emissions are approximately a third for heating and powering ong>theong>ir home, athird for food miles with ong>theong> average UK meal travelling a ong>toong>tal of over 2000 miles from farm ong>toong> dinner plateand a third for private car use and commuting.The average UK wage earner produces several ong>toong>nnes of CO2per 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 iswhy ong>theong> developers, working with ong>theong> BioRegional Development Group, have tried ong>toong> design ong>theong> lifestylebefore ong>theong> buildings. In some developments each home has been allocated enough space ong>toong> grow up ong>toong> 50 % ofong>theong> fresh vegetable and fruit requirements from late Spring ong>toong> Autumn. All ong>theong> developer’s homes haveconvenient bike song>toong>rage for two or three bikes and many have workspace designed in ong>toong> help reduce commutingmileage.BioRegional have researched ong>theong> ecological footprint and associated carbon reductions with each of ong>theong>se low100Zacchaeus 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 shopsong>toong>cking locally produced organic food delivered by solar electric vans, a car pool incorporating a mixture ofelectric and LPG vehicles, a telecommuting centre for workspace, a combined heat and power plant run offurban tree waste, community composting schemes and on site childcare and shared sports facilities.Whereverpossible all ong>theong> above activities will be powered by renewable energy generated on site making ong>theong> carbonemissions savings for ong>theong> lifestyle initiatives as significant as those achieved by ong>theong> infrastructure.These can bequantified for carbon trading purposes.Land requirementsThe standard house type produced by ong>theong> developers can achieve around 100 homes per hectare with 3.5habitable rooms per home.This makes it possible ong>toong> meet ong>theong> demand for around 4 million new homes by 2016without substantial loss of agricultural land. By showing how high density urban renewal can be reconciled withhigh amenity - almost every home has a garden, a conservaong>toong>ry and carbon neutrality - ong>theong> developers believethat 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 wasteintegral in a typical suburban conventional lifestyle.Creating a new market requires new ways of developing sitesThe development process incorporates a number of innovative components.The experience is that ong>theong>re is astrong public demand for ong>theong> concept with sales achieving between 10 and 30 % premiums over ong>theong> products ofconventional 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.Thisenables ong>theong> authority ong>toong> realise carbon neutral development on its own land and this could be a wayof 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> developercan avoid ong>theong> bank loan charges normally incurred by land purchase. Again this saving is reinvestedin 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 willbe 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 andong>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 rangeof ethical investment companies.9.The developer’s supply chain ensures that ong>theong> innovative component costs are fixed andconstruction 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 inenvironmental performance needed for ong>theong> UK ong>toong> meet its carbon emission reductions.The UK replaces itsurban fabric at 1.5 % per year.This means that if appropriate steps are taken ong>theong> UK built environment could becarbon neutral by ong>theong> start of ong>theong> next century.102Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


Appendix 18 - Ethical issues from aChristian perspective - a universalpattern of crucifixion and resurrectionCultural change(Paul Nicolson)In Who Runs this Place (2004) Anthony Sampson reflects on ong>theong> changes that have taken place since 1965 (whenhe 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> improveong>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 bypoliticians, by academics or ong>theong> media, who have become more dependent on ong>theong>m.The respectnow 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 eatinong>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 frompoverty and powerlessness in Britain.Faith in ong>theong> CityPoverty is worse now than it was in 1985 when ong>theong> Faith in ong>theong> City report was published by ong>theong> Church ofEngland:• The number of people with incomes under 60% of ong>theong> median, ong>theong> government povertythreshold, 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 in2003.• Low birthweights increased from 6.6% of live births in 1973 ong>toong> 8% in 2004, ong>theong>re are ThirdWorld 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 disordersand 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 professionalworkers.• 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 forZacchaeus 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 bylaws that threaten prison for council tax arrears and ong>theong> truancy of a child. It means eviction for rent arrearsagainst inadequate incomes, or reduces incomes ong>toong> zero for weeks merely for failing ong>toong> turn up at an interviewat a jobcentre or as an asylum seeker failing ong>toong> report arrival in ong>theong> UK at ong>theong> right time; it is exploitation bydoor-ong>toong>-door money lenders at up ong>toong> and over 300% APR.The pattern of crucifixionA Christian faith is rooted in ong>theong> crucifixion of Jesus. For us he is ong>theong> personification of love. He was aware thathis 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 wasong>theong> normal way of disposing of troublemakers in a despotic State, as ong>toong>rture and execution are ong>toong>day. He refusedong>toong> proclaim a call ong>toong> arms ong>toong> defend himself and his cause.That would have been inconsistent.What happened isthis:He has a meal with his friendsJudas betrays him for 30 pieces of silverHe is arrested in ong>theong> garden of GethsemaneHe is taken ong>toong> ong>theong> religious court before ong>theong> Chief Priest and refuses ong>toong> answer ong>theong> charges, falsewitnesses come forwardPeter denies he is a supporter of Jesus, but weeps when he remembersJesus is taken ong>toong> ong>theong> secular court before Pilate, ong>theong> crowd is persuaded ong>toong> call for his crucifixion byong>theong> Chief PriestPilate has him flogged and ong>toong>rtured by ong>theong> Soldiers and sends him ong>toong> ong>theong> crossHe 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 ofong>theong> people who ong>toong>ok part ong>theong>n or still take part in similar events. It is that pattern of oppressive humanbehaviour that has inspired Christians ever since ong>toong> side with ong>theong> poorest and ong>theong> powerless and hold ong>theong>m up asa 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.Theobjects 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 inong>theong> spirit of Christian leadership described by Henri Nouwen:‘Dealing with burning issues without being rooted in a deep personal relationship with God easilyleads ong>toong> divisiveness because, before we know it, our sense of self is caught up in our opinion abouta given subject. But when we are securely rooted in personal intimacy with ong>theong> source of life, itwill be possible ong>toong> remain flexible without being relativistic, convinced without being rigid, willingong>toong> confront without being offensive, gentle and forgiving without being soft, and true witnesseswithout being manipulative.’104Zacchaeus 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>yhad cancelled his Job Seekers Allowance (JSA).That song>toong>pped housing and council tax benefits, creating a debit inhis accounts and triggering ong>theong> blind, computer driven enforcement.Threats of eviction for rent arrears werenot 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 shownthat a national minimum income for healthy living for a single adult needs ong>toong> be £91 a week, but £125 inLondon 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 summonsfor 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 caninclude your car.You will be liable ong>toong> pay ong>theong> bailiff ’s costs, which couldsubstantially increase ong>theong> debt. Instruct your employer ong>toong> deduct payments fromyour salary or wages. Deduct money straight from your jobseekers allowance orincome 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, paperlittered 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 anddispatched 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 Questionhe sent ong>theong> case ong>toong> ong>theong> head of Jobcentreplus who administered ong>theong> benefit of £53.05, and who wrote me anapologetic letter. I replied it was not his fault.A universal patternThe 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 inong>theong> UK.They are simply getting on with ong>theong>ir job maintaining ong>theong> structures of society, as were ong>theong> officials inong>theong> arrest, trial, ong>toong>rture and crucifixion of Jesus.They are blind ong>toong> ong>theong> painful consequences of ong>theong>ir actions orinactions. 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 prisonand 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”, Jesushad placed himself among ong>theong> habitually oppressed before he entered ong>theong> sufferings of ong>theong> crucified.The Ediong>toong>rsThe Chief Priests in Mr Watson’s case can be found behind ong>theong> ediong>toong>rial desks of ong>theong> powerful tabloid presspersuading ong>theong> crowd that everyone receiving benefits from a lone parent ong>toong> an asylum seeker are ripping usoff, fraudulent, idle or work shy.The conclusion reached by Elaine Kempson of Brisong>toong>l University and SueMiddleong>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 nomoney 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> getong>theong> biggest emotional impact.’The PoliticiansMr.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 adoptedong>theong> position that it is very difficult, if not impossible, ong>toong> increase it and remain in power. Politicians have foundong>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 WealthyThe pressure from ong>theong> wealthy for ong>theong> reduction of taxation, or an increase in ong>theong>ir share of ong>theong> national orglobal 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>ryminimum 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> SecuritiesAssociation 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 writtenrules - it risks damaging ong>theong> entire economic system on which its prosperity depends.’106Zacchaeus 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> lowestpaid workers without a pension, holiday or sick pay on a minimum wage below ong>theong> poverty threshold andenables 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 AuthoritiesThe blunt instrument of ong>theong> hammer can be found as a computer under ong>theong> fingers of ong>theong> local governmenong>toong>fficials, who are ong>theong> Soldiers.They have no option but ong>toong> send out on behalf of councils impersonal letters ofenforcement that are ong>toong>tally blind ong>toong> ong>theong> circumstances of ong>theong> vulnerable constituents ong>toong> whom ong>theong>y areaddressed.Mr.Watson, semi-literate living alone, committed suicide. His is a very extreme example of vulnerability. Butong>theong> pattern of crucifixion is repeated daily. I rarely go ong>toong> court in support of a family threatened with evictionwithout 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> tearsof a lone parent who, in addition ong>toong> ong>theong> threats of eviction and court appearances for rent arrears and threats byong>theong> bailiffs of prison for council tax arrears had been fined for ong>theong> truancy of a son with emotional andbehavioural difficulties.We won all ong>theong> appeals for her and she was acquitted on ong>theong> truancy charge, whichremoved ong>theong> stress until ong>theong> next time.Conclusion - ong>theong> light shines in ong>theong> darknessJesus allowed himself ong>toong> be tried, convicted and crucified ong>toong> point ong>toong> a better way of ordering society thanallowing 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 realisticallyapplied by very many of his followers. Our benign influence in his name breaths through ong>theong> work of manycharities and such great statements of principle as ong>theong> American Constitution and ong>theong> Universal Declaration ofHuman 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 thatproduces both benign and malignant consequences. A comparison between Al Capone and Joseph Rowntreemakes 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 bematched by ong>theong> sense ong>toong> ensure its just distribution.The House of Lords report on ong>theong> Global economy quotedong>theong> White Paper on globalisation - Eliminating World Poverty: Making Globalisation Work for ong>theong> Poor. It is stated thatwheong>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> liftmillions 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 dependson ong>theong> policy choices adopted by governments, international institutions, ong>theong> private secong>toong>r andcivil society.’All those powerbrokers should take note of ong>theong> observations of Anthony Sampson, Andrew Marr andZacchaeus 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 beseen in ong>theong> efforts made ong>toong> break ong>theong> shackles of poverty.The fruits of ong>theong> Resurrection are made known noong>toong>nly 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 andong>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 onhow purposes of ong>theong> love shown ong>toong> us by Jesus are marred by human and structural failure but proclaim lessoften ong>theong> power of that love ong>toong> effect change, ong>toong> break shackles and our responsibility ong>toong> work with it.We haveong>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>reare minds that worry, voices that speak, and people who act ong>toong> relieve ong>theong> oppression of ong>theong> poor in ong>theong> UK. Ineveryone engaged inadvertently in a blind act of oppression ong>theong>re is a spirit of compassion ready ong>toong> emerge.Thatspirit 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, paul@nicolson.com, website www.z2k.org).He first attended court ong>toong> support an unemployed lone moong>theong>r with one child, who had been shoplifting, when he was at TheologicalCollege in 1967. She was a cleaner in a local hospital receiving poverty wages. She was given a conditional discharge, fainted, hit her headon 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> StevenageYouth 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> FinnemoreWood Youth Detention Centre when he moved ong>toong> a parish in Buckinghamshire; he has visited prisoners in Rochester Borstal,WormwoodScrubs 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> vulnerablehouseholds. 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 GeneralSecretary 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> helpfine defaulters fill in ong>theong>ir means statements at ong>theong> enforcement court on Wednesday mornings. He trains McKenzie Friends and workshands on with impoverished households in debt in London since he moved ong>toong> Tottenham in 1999).108Zacchaeus 2000 Trust - ong>Memorandumong> ong>toong> ong>theong> ong>Primeong> ong>Ministerong> - May 2005


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Zacchaeus 2000 TrustSignificant cause of debt in ong>theong> UK is ong>theong> inadequacy of statuong>toong>ry minimumincomes for people in work, unemployed or pensioners. The Zacchaeus 2000Trust provides and trains volunteer advocates for people who are facingdraconian enforcement of rent and council tax arrears against ong>theong> inadequateminimum wage, unemployment benefits, tax credits, and state pensions, or whoare 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 researchinong>toong> ong>theong> minimum incomes needed for healthy living with ong>theong> support of 68 NonGovernmental 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 Collegeof Physicians and ong>theong> UK Public Health Association.In addition ong>theong> General Synod of ong>theong> Church of England, The MethodistConference, ong>theong> General Assembly of ong>theong> Church of Scotland and UNISON haveunanimous conference decisions supporting ong>theong> petition. The list also includesThe 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 ofgood will of all faiths and of none.Rev Paul NicolsonChairmanZACCHAEUS 2000 TRUST93 Campbell Road,London N17 0BFtel: 020 8376 5455 · mobile: 07961 177 889email: zacchaeus2000@blueyonder.co.ukwebsite: www.z2k.org

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