Building more affordable homes: Improving the delivery of affordable housing in areas of high demand

Transcription

1 Buildig more affordable homes: Improvig the delivery of affordable housig i areas of high demad REPORT BY THE COMPTROLLER AND AUDITOR GENERAL PREPARED JOINTLY BY THE NATIONAL AUDIT OFFICE AND THE AUDIT COMMISSION HC 459 Sessio December 2005

2 The Natioal Audit Office scrutiises public spedig o behalf of Parliamet. The Comptroller ad Auditor Geeral, Sir Joh Bour, is a Officer of the House of Commos. He is the head of the Natioal Audit Office, which employs some 800 staff. He, ad the Natioal Audit Office, are totally idepedet of Govermet. He certifies the accouts of all Govermet departmets ad a wide rage of other public sector bodies; ad he has statutory authority to report to Parliamet o the ecoomy, efficiecy ad effectiveess with which departmets ad other bodies have used their resources. Our work saves the taxpayer millios of pouds every year. At least 8 for every 1 spet ruig the Office. The Audit Commissio is a idepedet body resposible for esurig that public moey is spet ecoomically, efficietly ad effectively, to achieve high-quality local ad atioal services for the public. Its remit covers more tha 15,000 bodies which betwee them sped early 125 billio of public moey every year. The Audit Commissio s work covers local govermet, housig, health, crimial justice ad fire ad rescue services.

3 Buildig more affordable homes: Improvig the delivery of affordable housig i areas of high demad LONDON: The Statioery Office Ordered by the House of Commos to be prited o 19 December 2005 REPORT BY THE COMPTROLLER AND AUDITOR GENERAL PREPARED JOINTLY BY THE NATIONAL AUDIT OFFICE AND THE AUDIT COMMISSION HC 459 Sessio December 2005

4 This report has bee prepared uder Sectio 33 of the Audit Commissio Act 1988 ad Sectio 6 of the Natioal Audit Act 1983 for presetatio to the House of Commos i accordace with Sectio 9 of the Act. This report is based o a joit study coducted by the Audit Commissio ad NAO, oe of a series that looks at the delivery chais betwee importat atioal policy itetios (set out i govermet departmets Public Service Agreemet targets agreed with HM Treasury) ad local delivery. Joh Bour Comptroller ad Auditor Geeral Natioal Audit Office 15 December 2005 The Natioal Audit Office study team cosisted of: Hery Broughto, Theresa Crowley ad Khila Shah uder the directio of Mark Davies The Audit Commissio study team cosisted of: Katie Smith, Phil Hall, Margaret Maxwell ad Ady Crowe uder the directio of Roy Irwi This report ca be foud o the Natioal Audit Office web site at ad the Audit Commissio website at For further iformatio about the Natioal Audit Office please cotact: Natioal Audit Office Press Office Buckigham Palace Road Victoria, Lodo SW1W 9SP Tel: equiries@ao.gsi.gov.uk cotets Aalysig delivery chais 2 Abstract 4 Executive summary 8 Part 1 Icreasig the availability of 18 affordable housig The Office of the Deputy Prime Miister has 20 respoded by itroducig a ew Public Service Agreemet target The delivery chai for affordable housig is large 23 ad complex ODPM uses public fudig ad other mechaisms 26 to icrease the supply of affordable housig The delivery chai for affordable housig is uder 28 pressure to become more efficiet What our aalysis sets out to achieve 30 For further iformatio about the Audit Commissio please cotact: Audit Commissio 1st Floor Millbak Tower Millbak Lodo SW1P 4HQ Tel: ac-equiries@audit-commissio.gov.uk Natioal Audit Office 2005 ad Audit Commissio 2005

5 Part 2 How resources for affordable housig 32 reach the frot lie The presece of clear targets ad performace 33 measures to drive delivery Whether fudig arragemets ecourage ad 35 improve cost effectiveess Whether demad for housig is determied o a 38 cosistet basis Whether policies ad guidace are clear ad 40 well uderstood Whether orgaisatios withi the delivery chai 41 work together to commo aims Coclusios 45 Part 3 Deliverig affordable housig 46 Whether local authorities display clear leadership 48 uder their strategic eablig role Whether developers, housig associatios 51 ad local authorities are clear about each others priorities Whether, with a icreasigly regioal focus to 54 housig, there is effective joit workig across local authority boudaries Coclusios 56 Glossary 57 AppediX 1 Methodology 60 Photographs courtesy of ad

6 aalysig delivery chais Aalysig delivery chais Improvig the quality ad provisio of public services has bee a key priority for Govermet i recet years. As more moey has bee provided ad public expectatios have rise, there has bee a eed to offer better services, ivolvig greater diversity ad icreased choice, ofte focussed o local delivery, through a rage of differet service providers. Had i had with these developmets has bee the eed to better maage the delivery of those services. As part of the Spedig Review 2004 Sir Peter Gersho idetified scope to achieve efficiecy savigs across public expediture of at least 20 billio by This has caused departmets to look closely at how they operate ad provide services, with each havig to specify how they will secure the savigs for which they will be accoutable. More geerally, there has bee a rage of performace maagemet tools itroduced across cetral Govermet ad the wider public sector i recet years. I particular, i 1998, the Govermet itroduced Public Service Agreemet (PSA) targets, likig, for the first time, fudig with the performace expected from departmets ad their parters at atioal, regioal ad local level. The Spedig Reviews i 2000, 2002 ad 2004 have gradually refied this target-settig process. The umber of PSA targets has reduced from 600 i 1998 to 110 for Ad targets have icreasigly focused o outcomes for example reducig crime istead of o iputs, processes or outputs such as more police o the street, better utilisatio of court time etc. These developmets are welcome. There is cosesus i govermet ad more widely that fewer outcomefocussed targets reduce the risk of the uiteded cosequeces which come from measurig iputs or processes. This combied with a sustaied drive for improved efficiecy, provides a fresh opportuity for departmets to review their PSA targets ad the meas by which they ca best be delivered. I particular, more sophisticated outcome-focussed services, better tailored to the diverse ad local eeds of the public, ofte caot be achieved by oe orgaisatio aloe; istead they require close partership workig betwee differet orgaisatios at atioal, regioal ad local levels. These relatioships, ultimately likig Miisters to the frotlie health worker, school teacher or police officer, have become kow as the delivery chai, echoig the busiess cocept which refers to the etwork of systems, processes ad orgaisatios through which strategic objectives are achieved. Such complex delivery arragemets, if ot well maaged, create sigificat risk that resources, far from beig more effectively targeted at citizes eeds are lost i cofusig ad wasteful admiistrative activities. Thus as delivery chais have become more sophisticated, ivolvig a wider rage of orgaisatios of differet kids, the eed to uderstad them better, ad to make them more efficiet ad effective, has become icreasigly evidet. Some log-stadig delivery chais are strog ad clear ad more likely to succeed. Others, less developed, have struggled to meet the requiremets asked of them. 2

7 aalysig delivery chais This the forms the backdrop to three joit studies examiig the delivery chais associated with particular PSA targets. Here the Audit Commissio ad Natioal Audit Office, through their differet perspectives at atioal ad local level, ad by combiig their kowledge ad expertise, have examied the delivery chai associated with a PSA target o the delivery of affordable housig; 1 from the challeges faced by the ower of the target the Office of the Deputy Prime Miister through to the actios beig take by or ow required at regioal ad local level by those orgaisatios that have to deliver the large umbers of ew affordable homes required. There is a separate similar report o icreasig the use of buses ad a third, prepared i cojuctio with the Healthcare Commissio, o child obesity. Our aim i producig the three reports is to examie the characteristics of the specific delivery chais, ad their capacity to deliver the PSA target for which they were desiged. I so doig we idetify ways i which the various parties ivolved i the chais might work more closely together, as well as suggestig ways i which the target might be achieved i a more cost-effective maer. We also ited to produce a fourth report to be published i 2006 i which we brig out issues of more geeral relevace to the ways that public sector delivery chais are costructed ad how they ca best operate. 1 To achieve a better balace betwee housig availability ad the demad for housig, icludig improvig affordability, i all Eglish regios while protectig valuable coutryside aroud our tows, cities ad i the gree belt ad the sustaiability of tows ad cities.

8 abstract abstract A shortage of housig ad high house prices i recet years has made it icreasigly hard for may people to obtai a home that they ca afford either to ow or to ret, particularly i the South of Eglad. This shortage has a umber of importat cosequeces, creatig difficulties ad hardship for may people, who may fid themselves livig i iappropriate accommodatio. It also has implicatios for public ad private services as key workers are priced out of the market i some parts of the coutry. To tackle this situatio, the Office of the Deputy Prime Miister has bee set the followig Public Service Agreemet target: Achieve a better balace betwee housig availability ad the demad for housig, icludig improvig affordability, i all Eglish regios while protectig valuable coutryside aroud our tows, cities ad i the gree belt ad the sustaiability of tows ad cities. This joit study by the Audit Commissio ad Natioal Audit Office has take as its focus oe strad of the target improvig the availability of affordable housig i high demad areas. Fudig for ew affordable housig some 3.3 billio betwee 2004 ad 2006 is allocated by the Office of the Deputy Prime Miister (ODPM) to the Housig Corporatio which i tur provides grats ad subsidies to housig associatios ad developers to deliver ew housig. Agaist a target i to provide a additioal 27,000 homes for ret or low-cost home owership, icludig those for key workers, the Housig Corporatio achieved 28,756 completios. A complex delivery chai has developed aroud this fudig flow, ivolvig Govermet Offices for the Regios, Regioal Housig Boards ad Regioal Plaig Bodies, local authorities, housig associatios ad property developers. While addressig PSA 5 ODPM is also tasked to secure aual efficiecy gais i social housig of 835 millio by , of which 355 millio will come from housig associatios. The report sets out te areas where such efficiecies are likely to be achieved. More geerally the study makes various recommedatios for atioal, regioal ad local bodies to improve both efficiecy ad effectiveess of the delivery chai highlightig i particular the eed to icrease the speed of delivery ad to reduce the uit cost of housig. 4

9 abstract Fidigs The Departmet has itroduced sigificat chages to the delivery chai i recet years, but there has bee a lack of certaity at regioal ad local levels about roles ad relatioships uder the ew arragemets. ODPM has chaged the delivery chai by itroducig more decisio makig at the regioal level, removig Local Authority Social Housig Grat ad chagig the plaig system. ODPM has ot always followed through o these chages with clear, practical ad timely advice. Despite large amouts of fudig, a atioal target, ad affordable housig becomig a key corporate priority for local authorities i recet years, few authorities believe that they ca yet meet the challege to deliver large icreases i affordable housig. Recet statistics from ODPM 2 idicate that for Eglad as a whole, the umber of ew cases of homelessess has bee fallig sice the begiig of 2004, with the umber of ew households i temporary accommodatio remaiig steady sice September that year. The Departmet attribute this to additioal measures i recet years to tackle homelessess. I areas of high housig demad i the south of Eglad, however, the umber of households livig i temporary accommodatio has rise steadily over recet years. This has resulted i a backlog for local authorities ad very few, (oly 2 per cet of those surveyed for this study) 3, cosider that they will be able to meet the eed for social reted housig over the ext three years due largely to isufficiet fudig ad a shortage of lad available for developmet. I respose to such circumstaces ODPM plas to icrease the supply of ew social reted housig by 50 per cet by compared with It is also icreasig its ivestmet i homelessess prevetio (from 60 millio i to 74 millio i ). This, combied with a icreased supply of social reted housig will, i ODPM s view, cotribute to the Govermet s aim to halve the umber of households i temporary accommodatio by Iitiatives by the Housig Corporatio have started to focus developmet fudig ito the hads of those best able to sped it effectively. Fudig for affordable housig is ow allocated to fewer housig associatios i , 70 housig associatio parterships received 80 per cet of the fudig; whereas 400 housig associatios received fudig i Fudig is ow allocated o a two year fudig cycle. This gives more certaity to housig associatios which ecourages developers to ivest more ito affordable housig. 2 ODPM Quarterly statistical release o homelessess. 3 MORI survey of 50 local authorities i the South East, the South West ad Lodo. 5

10 abstract While there has bee a move towards more regioally based decisio makig about housig eed ad provisio, this has ot always led to a chage i workig practices at a local level. There is some ambiguity aroud the emphasis by ODPM for local authorities to work sub regioally creatig room for cofusio amogst developers who are usure about the status of sub regioal documets ad processes. Govermet Offices could play a ehaced role i providig guidace to local authorities. Govermet Offices are uiquely placed to help local authorities to improve their performace but their role has evolved i differet ways ad at differet rates across the regios. This meas that their role is ot always clear to local authorities. Sectio 106 has proved a effective lever for icreasig the supply of affordable housig, but there is a eed for clearer ad more cosistet messages from local authorities so that developers do ot waste time ad effort i puttig forward uacceptable proposals for ew schemes. Forty per cet of the Housig Corporatio s Approved Developmet Programme is ow chaelled to Sectio 106 sites. This importat lever is a complex part of the delivery chai ad oe that causes most delays. Local authorities have implemeted ODPM guidace icosistetly ad ofte lack the ecessary skills i egotiatio ad techical fiacial tools. Most local authorities ow have affordable housig as their corporate priority, but for this to be achieved it eeds the support of the commuity. Local authorities eed to work with housig associatios ad developers i providig a clear message to local commuities about the eed for affordable housig ad ivolve people i how developmets might be desiged. Some local authorities are achievig this very successfully but may local authorities are yet to fully take up this commuity leadership role. The release of surplus lad for housig by departmets could be aided by more coordiatio at a atioal level. The itroductio of the Register of Public Sector Lad ad chages to Govermet Accoutig are improvig the way i which Govermet Departmets release lad that is suitable for affordable housig. But more eeds to be doe to esure that surplus public sector lad is trasferred effectively to other agecies. 6

11 abstract

12 executive summary executive summary

13 executive summary 1 Sustaied iflatio i the housig sector i recet years has made it icreasigly hard for may people to obtai a home that they ca afford either to ow or to ret. The umber of households livig i temporary accommodatio has more tha doubled sice 1996 from 43,000 to 94,000, 4 while i 2003 costructio of ew houses i the Uited Kigdom fell to its lowest level sice the Secod World War. 2 This shortage of housig has a umber of importat ecoomic ad social cosequeces, creatig difficulties ad hardship for may people who may fid themselves livig i iappropriate accommodatio. There is also a problem for key workers, such as urses ad teachers, who are beig priced out of the market i the South of Eglad, resultig i staff shortages, riskig poorer public ad private services. Affordable housig There are two mai types of affordable housig; social reted housig (housig that is provided by either local authorities or housig associatios to those i most eed at a subsidised ret) ad itermediate housig (housig desiged to help people eter home owership through itermediate schemes such as shared owership or right to buy). 3 I other regios of the coutry such as i the North ad the Midlads there are, however, areas that have suffered a collapse i their housig markets. Such market failure ca result i a cycle of declie, with people trapped i poor housig i areas associated with high crime ad uemploymet. To tackle these issues of both excessive high ad low demad, i 2002 the Office of the Deputy Prime Miister (ODPM) itroduced a ew Public Service Agreemet target target 5 o housig markets. I the 2004 Spedig Review, the scope of the target was exteded to iclude improvig the affordability of housig: Achieve a better balace betwee housig availability ad the demad for housig, icludig improvig affordability, i all Eglish regios while protectig valuable coutryside aroud our tows, cities ad i the gree belt ad the sustaiability of tows ad cities. Delivery chai Busiess cocept, used icreasigly i the public sector, which refers to the systems, processes ad orgaisatios through which govermet seeks to achieve its strategic ad policy objectives. 4 The Public Service Agreemet target covers a wide scope of activity aimed at improvig housig i areas of both high ad low demad. Our study focuses o oe strad of the target improvig the availability of affordable housig i high demad areas where the pressure for housig is outstrippig supply. Growth Areas, such as the Thames Gateway, have ot bee icluded i the study because they are subject to separate additioal fudig ad are the subject of forthcomig work by the Natioal Audit Office. Focussig o three regios across souther Eglad where there is high demad for affordable housig the South East, Lodo ad the South West the study ivestigates the efficiecy ad effectiveess of the delivery chai for affordable housig, cosiderig ways i which it ca be stregtheed, ad tracks activity across the delivery chai at the atioal, regioal ad local level. 4 Review of Housig Supply, Deliverig Stability; Securig our Future Housig Needs. Kate Barker,

14 executive summary 5 Ulike may other delivery chais, direct Govermet fudig for ew affordable housig is relatively straightforward, with the majority of the moey beig allocated from the ODPM to the Housig Corporatio, which i tur makes paymets to housig associatios ad other bodies o the stregth of busiess pla proposals ad a rage of performace criteria. They, i tur, traslate the fudig ito ew housig through a system of grats ad subsidies. Agaist the backgroud of eedig to deliver the right housig i the right areas, a complex delivery chai has developed aroud this fudig flow, ivolvig Govermet Offices for the Regios, Regioal Housig Boards ad Regioal Plaig Bodies, local authorities, housig associatios ad property developers (Figure 1). 6 Resources allocated to the delivery chai to provide more affordable housig are sigificat, amoutig i to some 3.3 billio from the Housig Corporatio s Approved Developmet Programme. 7 I additio to direct fudig for affordable housig, there are four other mechaisms that have a ifluece over the supply of affordable housig. Firstly, by esurig sufficiet lad is allocated for housig through the plaig system (with priority give to buildig o previously developed lad ad i urba areas). Secodly, usig Sectio 106 agreemets to secure commitmets from private developers to iclude affordable housig o otherwise market-price developmets. Thirdly, by releasig surplus public sector lad for affordable housig, ofte through Eglish Parterships (the Govermet s regeeratio agecy). Fially, by developig ew affordable housig products to drive dow costructio costs so that housig ca be sold for less. Sectio 106 The Tow ad Coutry Plaig Act 1990 (as substituted by the 1991 Plaig ad Compesatio Act): Gave local authorities powers to egotiate commuity beefits as part of the plaig process (Sectio 106 agreemets). I the last five years this provisio has bee icreasigly used to provide affordable housig as part of private sector housig developmets. 1 How fudig for affordable housig flows from atioal to local levels of the delivery chai ODPM Govermet Offices Commuicate atioal policy Provide likage with other govermet bodies withi the regio Housig Corporatio Housig Corporatio (Regioal) Regioal Housig Boards Liaise with Regioal Plaig Boards Advise ODPM o housig allocatios Determie regioal housig eeds Regioal Assemblies Prepare Regioal Spatial Strategies Source: Natioal Audit Office examiatio Developers & Housig Associatios Local Authorities Approve schemes for ew housig developmet Prepare Local Developmet Frameworks Prepare Local Housig Needs Assessmets 10

15 executive summary 8 The affordable housig delivery chai, like other delivery chais for the delivery of atioal Public Service Agreemet targets, is uder pressure to become more efficiet as part of the Govermet s wider programme to secure 21.5 billio of aual efficiecy savigs i the three years to across all public expediture. For the Office of the Deputy Prime Miister, this target traslates ito a efficiecy gai for social housig of 835 millio by of which 355 millio will come from housig associatios. What we did 9 We iterviewed ad coducted workshops with over 200 directors, maagers ad frot-lie staff ivolved i the mai delivery chai for affordable housig; from ODPM, HM Treasury, the Prime Miister s Delivery Uit, Eglish Parterships, the Housig Corporatio, the Home Builders Federatio, the Local Govermet Associatio, the Natioal Housig Federatio, Regioal Govermet Offices, Regioal Housig Boards, sub regioal groups of housig strategy ad eablig officers i Hampshire ad Devo, 50 local authorities i the South East, South West ad Lodo, a further six local authorities i Lodo, the South West ad the South East chose as case studies (Hammersmith ad Fulham, Merto, Aru, Chichester, Plymouth ad South Hams) developers, cosultats ad volutary ad commuity housig advice bodies. 10 The joit approach by the Natioal Audit Office ad Audit Commissio, through their differet perspectives ad by combiig kowledge ad expertise, has allowed a uique look at the delivery chai throughout its legth; from the challeges faced by the ODPM through to the actios beig take by or ow required at regioal ad local level by those orgaisatios that have to deliver the large umbers of ew affordable homes required. Fidigs The Departmet has itroduced sigificat chages to the delivery chai i recet years, but there has bee a lack of certaity at regioal ad local levels about roles ad relatioships uder the ew arragemets 11 While the flow of fudig from ODPM to the Housig Corporatio ad the to housig associatios is relatively straightforward, the iter-relatioships betwee orgaisatios ad processes at a local ad regioal level results i a complicated delivery chai. This complexity meas that i practice there are may iflueces o how it is spet. I part this is due to the eed to ivolve regios i local fudig decisios. I additio, ODPM has chaged the delivery chai substatially over the past two years, focussig more decisio makig at a regioal rather tha at a local level. This has icluded the establishmet of Regioal Housig Boards, to determie housig priorities ad advise Miisters o the overall allocatio of fudig across the regio, the removal of Local Authority Social Housig Grat from local authorities, chages to plaig guidace, ad a ew way of fudig housig associatios, icludig two year fudig cycles. 12 ODPM has ot always followed through o these chages by givig clear practical advice to those affected about how they should ow act ad operate. The productio of guidace has ofte lagged behid the aoucemet of policy chages ad chages to market coditios. This meas that parts of the delivery chai have ot bee clear about their ew roles ad resposibilities. The delay i updatig Plaig Policy Guidace ote 3 has caused cofusio ad meat that agecies were operatig withi a outdated plaig framework. For example sigificat icosistecies i approach have developed betwee authorities with regards to the scale of housig developmets that ca trigger the iclusio of a affordable elemet through a Sectio 106 agreemet. Some authorities have bee workig to lower thresholds to secure more affordable housig. Where this has happeed, the practice has ofte bee supported by the Audit Commissio, but has sometimes bee challeged by developers who have o occasio had their challeges upheld by the Plaig Ispectorate. This lack of joied-up Govermet has led to challeges ad appeals by developers ad costly delays which udermie progress o PSA 5. Despite large amouts of fudig, a atioal target, ad affordable housig becomig a key corporate priority for local authorities i recet years, few believe that they ca yet meet the challege to deliver large icreases i affordable housig 13 All tiers of the delivery chai share the view that the shortage of affordable housig is a serious problem. Alogside the atioal Public Service Agreemet Target, 92 per cet of the 50 local authorities we surveyed for this study ow have affordable housig as oe of their key corporate priorities. Recet statistics from ODPM 5 5 ODPM Quarterly statistical release o homelessess. 11

16 executive summary idicate that for Eglad as a whole, the umber of ew cases of homelessess has bee fallig sice the begiig of 2004, with the umber of ew households i temporary accommodatio remaiig steady sice September that year. The Departmet attribute this to additioal measures i recet years to tackle homelessess. I areas of high housig demad i the south of Eglad, however, the umber of households livig i temporary accommodatio has rise steadily over recet years. This has resulted i a backlog for local authorities ad very few, (oly 2 per cet of those surveyed for this study) 6, cosider that they will be able to meet the eed for social reted housig over the ext three years due largely to isufficiet fudig ad a shortage of lad available for developmet. I respose to such circumstaces ODPM plas to icrease the supply of ew social reted housig by 50 per cet by compared with It is also icreasig its ivestmet i homelessess prevetio (from 60 millio i to 74 millio i ). This, combied with a icreased supply of social reted housig will, i ODPM s view, cotribute to the Govermet s aim to halve the umber of households i temporary accommodatio by A target was set by ODPM for the Housig Corporatio to provide ad additioal 27, 000 additioal homes for ret or low-cost home owership, icludig those for key workers. The Housig Corporatio achieved 28,756 completios i Iitiatives by the Housig Corporatio have started to focus developmet fudig ito the hads of those best able to sped it effectively 14 Over the period , large amouts of public moey amoutig to aroud 3.3 billio is beig spet by the Housig Corporatio o deliverig affordable housig. This fudig is allocated to housig associatios o the stregth of busiess cases for developig ad deliverig affordable housig ad, i recet years, the Corporatio has itroduced a umber of iitiatives desiged to improve the efficiecy of performace of the sector. These have icluded: two year fudig cycles givig more certaity to housig associatios, ecouragig developers to pla better ad to ivest i capacity for the future; focussig resources o fewer housig associatios over 80 per cet of the programme was allocated to 70 parter housig associatios through the Corporatio s pilot Ivestmet Parterig programme; ad the implemetatio of a framework for assessig the performace of housig associatios i receipt of developmet grats. 15 These chages have brought efficiecy savigs, with the fudig programme i beig o average 9 per cet cheaper tha the programme i This has resulted i a average of 28 additioal homes for every 10 millio of public fudig. Evidece from our fieldwork idicates that a extesio to three to five year fudig cycles could beefit developers ad housig associatios further, although this would require committig to ivestmet ad could reduce flexibility to chagig priorities. 16 The Ivestmet Parterig programme is ecouragig more housig associatios to cosider mergig or to form group structures creatig potetial for improvig cost-effectiveess through the availability of cheaper loa fiace or the opportuity to improve procuremet. Recet research by AT Kearey o back office fuctios geerally 8 idicates that potetial savigs averagig about 14 per cet, ca be achievable. There is scope for housig associatios to realise potetial savigs i sharig back office fuctios A further measure itroduced by the Housig Corporatio to ecourage efficiecy i the housig associatio sector is the Operatig Cost Idex. This sets out the operatig costs for those associatios with over 250 uits, allowig the Housig Corporatio to cosider what drives such costs. I additio, how associatios overall ad idividual service costs compare with other similar orgaisatios is looked at i Audit Commissio housig ispectios which also examie how well associatios maage ad improve value for moey. 6 MORI survey of 50 local authorities i the South East, the South West ad Lodo. 7 Ivestmet Parterig. A Evaluatio of the Pilot Programme. Chartered Istitute of Housig ad Tribal HCH Jue A.T. Kearey (2005) Success Through Shared Services: From Back-Office Fuctio to Strategic Drivers. Chicago, Ill.: A.T. Kearey Marketig ad Commuicatios, Ic. 9 The savigs so idetified will be specified i housig associatios aual efficiecy statemets. 12

17 executive summary While there has bee a move towards more regioally based decisio makig about housig eed ad provisio, this has ot always led to a chage i workig practices at a local level 18 The establishmet of Regioal Housig Boards ad the forthcomig trasfer of their resposibilities to Regioal Plaig Bodies should potetially allow for more coordiated decisio makig about whe ad where affordable housig should be built takig better ito accout issues aroud the ecoomic ad social eeds of the regio rather tha, as i the past, focussig o the immediate housig eeds of a local authority. 19 I additio, local authorities are icreasigly workig joitly with their eighbours at a sub regioal level to develop a more accurate uderstadig of ad better strategies to address wider housig markets rather tha focussig withi local authority boudaries. Expectatios of sub regioal workig have icreased with recet ODPM policy proposals but there is ot as yet clarity about the boudaries or the mechaisms for such workig. This has created room for cofusio amogst developers who are usure about the status of sub regioal documets ad processes. 20 There is some lack of clarity aroud the status of sub regioal housig strategies. Despite ODPM advisig that there is o eed for local authorities to produce local housig strategies where they have produced a sub regioal strategy with eighbourig local authorities (so log as they have demostrated a clear commitmet to the sub regioal strategy) some local authorities cotiue to do so resultig i duplicated effort. Nor is there cotrol over the timig, quality ad frequecy with which idividual local authorities prepare Housig Needs Surveys. This leads to a rage of differet surveys beig produced at differet times. ODPM is addressig the eed to create more cosistecy by developig a ew approach to local housig assessmets which will focus more o assessig housig demad ad by requirig the preparatio of coordiated Surveys ad Housig Market Assessmets. Govermet Offices could play a ehaced role i providig guidace to local authorities 21 Actig as a key lik betwee cetral govermet, local areas ad the regios, Govermet Offices are uiquely placed to help local authorities to improve their performace i deliverig affordable housig, but their role has evolved i differet ways ad at differet rates across the regios. This meas that their role is ot clear to local authorities resultig i some local authorities ot makig as much use of the advice ad guidace that Govermet Offices are well placed to provide. To deliver cosistecy o guidace ad good practice, requires a more proactive approach by Govermet Offices icludig: ecouragig local authorities to share good practice ad, where appropriate, resources, such as housig ad plaig staff, particularly where smaller authorities are faced with large housig schemes which they do ot have the i-house capacity to deal with; ad to better coordiate the activities of govermet departmets i the regios icludig esurig, i partership with Eglish Parterships, that opportuities to use surplus lad for affordable homes are explored ad where possible exploited. Sectio 106 has proved a effective lever for icreasig the supply of affordable housig, but there is a eed for clearer ad more cosistet messages from local authorities so that developers do ot waste time ad effort i puttig forward uacceptable proposals for ew schemes. 22 Forty per cet of the Housig Corporatio s Approved Developmet Programme is ow chaelled to Sectio 106 sites, where developers are buildig affordable housig as part of a private developmet. However, to esure value from the available resources the Housig Corporatio s preferece is that affordable housig o such sites should, wherever possible, be built without grat. This icreasigly importat lever is a complex part of the delivery chai ad oe that causes most delays to the delivery of more affordable housig. Audit Commissio data show that the time take to egotiate Sectio 106 agreemets ca vary from 6 to 67 weeks. The process is legtheed because: local authorities have implemeted ODPM guidace icosistetly, causig delays i reachig agreemets betwee developers ad local authorities because of cofusio ad disagreemets aroud what a appropriate cotributio of affordable housig should be for a give site; ad reachig agreemets aroud plaig obligatios uder Sectio 106 ivolves complex egotiatios betwee developers ad local authorities. Local authorities ofte lack the ecessary skills i 13

18 executive summary egotiatio ad i the use of techical fiacial tools, which meas that these egotiatios ofte take loger tha they should, addig extra costs to delivery. 23 However there is some progress, with some local authorities developig good practice that is reducig the time take to process agreemets to weeks rather tha moths. The Housig Corporatio also eeds to improve its egotiatio capacity o Sectio 106 work ad has put i place steps to achieve this by, for example, itroducig the Ecoomic Developmet Tool. This helps Housig Corporatio Regioal Teams to make idepedet assessmets over the amout of affordable housig that a housig developmet ca fiacially bear. Most local authorities ow have affordable housig as their corporate priority, but for this to be achieved it eeds the support of the commuity 24 Where local authorities have established affordable housig as a key corporate priority, they eed to work alogside housig associatios ad developers to provide a clear message about housig eed ad to ivolve people i how developmets might be desiged ad delivered. This is already happeig very effectively i some areas, where local authorities are actively cosultig the commuity about ew developmets; holdig evets where the commuity ca see plas, models ad artists impressios of future housig schemes. Cocept statemets, for example, supported by the Improvemet ad Developmet Agecy, 10 provide diagrams ad a statemet of the future layout; visual images showig the desig of the ew housig; ad what the teure of the developmet will be. But this good practice is ot widespread. May local authorities have ot take o the leadership role eeded to covice their commuities of the eed for developig more affordable housig ad have doe little to allay fears aroud developig more affordable housig. The release of surplus lad for housig by departmets could be aided by more coordiatio at the atioal, regioal ad local level 25 Shortages of lad for housig developmet are a major costrait i icreasig the supply of affordable housig, particularly i South East Eglad. The public sector is i a positio to ifluece the delivery of affordable housig through the disposal of lad ad buildigs that are suitable for housig. This would also help to alleviate recruitmet problems i the bodies they are resposible for, such as the Natioal Health Service. Departmets ofte sell lad, however, at best cosideratio the highest obtaiable market price o the basis that this represets the best value i accoutig terms. 26 ODPM ad HM Treasury have i part addressed this tesio by askig Eglish Parterships to establish the Register of Surplus Public Sector Lad followig the publicatio of the Sustaiable Commuities Pla i The requiremet o cetral govermet bodies to place surplus sites o the register has ow bee icorporated ito Govermet Accoutig. Govermet departmets are also ow required to give 40 days otice to other cetral departmets prior to disposig of surplus lad. I their recet aoucemet o extedig home owership, ODPM ad HM Treasury said that Eglish Parterships would be reviewig the 700 surplus public sector sites curretly o the register to assess their potetial to deliver more affordable housig. Eglish Parterships is curretly explorig ways to expad the Register to iclude local authorities, the Housig Corporatio ad the Regioal Developmet Agecies. More could be doe, however, to esure that surplus public sector lad that has value for other public sector objectives is trasferred effectively to other agecies. Makig the delivery chai more efficiet 27 The challege for the delivery chai is how to gear up delivery of ew dwelligs to meet the eed for social reted housig ad the demad for home owership. 28 This ca be achieved through two ways: by icreasig the speed of delivery by removig blockages, simplifyig processes ad makig sure that roles ad resposibilities are clear; ad by reducig the uit cost of housig by ratioalisig the delivery chai. There has bee good progress i improvig efficiecy i recet years with, for example, the itroductio of ew fudig arragemets for housig associatios that has ecouraged greater parterig ad reforms to the plaig service that are likely to speed up the processig of plaig applicatios. 29 I Figure 2, we set out five key areas where te efficiecies ca be realised. 10 The Improvemet ad Developmet Agecy works to improve performace of local authorities through promotig ad dissemiatig good practice. It is part of the Local Govermet Associatio. 14

19 executive summary 2 Icreasig efficiecy i the affordable housig delivery chai Key area for efficiecy 1 Reducig uit costs Parterig with housig associatios ad groups of housig associatios i the South East reduced total average public subsidy for ew dwelligs by 22.3 per cet, from 33,609 a uit for to 26,109 for Where the efficiecy ca be realised The establishmet of the two year fudig cycle for the Housig Corporatio s 3.3 billio Approved Developmet Programme has icreased partership workig amogst housig associatios ad is helpig to provide more homes more quickly. 12 A extesio of three to five years would create a better basis for busiess plaig, providig further potetial for housig associatios ad developers to build capacity, to realise efficiecy savigs i their procuremet, to achieve ecoomies of scale ad to provide more homes more quickly. 13 The Housig Corporatio s recet itroductio of direct fudig to other bodies such as developers will icrease competitio i the sector ad provide a direct comparator to measure the performace of those housig associatios already udertakig developmets. The Corporatio s lead parter approach meas that it is dealig with a sigle lead housig associatio, makig it resposible for the performace of its parters, creatig a efficiecy driver ad savig the Housig Corporatio s ow staff time. 2 Speedig up the delivery chai Time take to egotiate Sectio 106 agreemets varies betwee local authorities from 6 to 67 weeks. Legthy egotiatios o Sectio 106 agreemets icreases developers costs, which ultimately fall o the public purse i the form of a higher uit price to be paid for the ew housig tha would otherwise have bee the case. By settig a clear ageda, however, ad establishig from the outset with delivery parters what they expect Sectio 106 sites to deliver i terms of teure mix (through the productio, for example, of clear Supplemetary Plaig Documets), local authorities ca reduce the time take to egotiate agreemets from moths to days. Better skilled staff i local authorities, who ca readily uderstad the commercial propositios behid developers proposals also help to accelerate the process. 3 Sharig services Sharig back office services ca reduce housig associatios overheads. Such savigs could be reivested i buildig more affordable homes or improvig services. The Housig Corporatio s promotio of cosortia workig by housig associatios offers the opportuity for parter associatios to realise further efficiecy savigs by sharig back office fuctios. Icreased ad more effective collaboratio betwee local authorities plaig ad housig fuctios ad sub regioal cooperatio betwee eighbourig authorities would make for more efficiet use of scarce housig ad plaig staff. 4 Removig duplicatio Local housig eeds surveys ca cost up to Commissioig joit research betwee local authorities ad, thereby, ot havig to udertake a local housig eeds survey achieves sigificat savigs. Focusig housig eeds research o sub regios would reduce the umber of Housig Needs Surveys commissioed ad reduce duplicatio of work betwee local authorities. The clear ad more timely issuace of guidace aroud, for example, the productio of the Regioal Housig Strategies ad Housig Market Assessmets would avoid the eed for additioal work beig required by Regioal Housig Boards. 5 Makig better use of assets The Miistry of Defece, for example, has disposed of lad worth 1.2 billio sice 1999, much of it cotributig to affordable housig. Makig surplus govermet lad suitable for housig available to Eglish Parterships through the Register of Surplus Public Sector Lad rather tha sellig it o the ope market eables more housig to be developed more quickly. 11 Housig Corporatio, South East Allocatio Statemet for Ivestmet Parterig. A Evaluatio of the Pilot Programme. Chartered Istitute of Housig ad Tribal HCH Jue Ivestmet Parterig. A Evaluatio of the Pilot Programme. Chartered Istitute of Housig ad Tribal HCH Jue

20 recommedatios For Govermet Departmets ad atioal agecies We recommed that: ODPM develops guidace settig out a clear defiitio of local authorities strategic eablig role i relatio to housig, draw from evidece about how the best performig authorities are behavig. ODPM clarifies the role of Govermet Offices to improve liks betwee the atioal, regioal ad local levels so that guidace ad decisios are made cosistetly ad local authorities make more use of their expertise ad advice. Public sector lad that is beig sold by a Govermet departmet that may be used for aother public sector objective (such as affordable housig) should be trasferred effectively. To help esure that this is the case, whe ew lad is etered o the Register of Surplus Public Sector Lad this should trigger a process of otificatio, by Eglish Parterships, to the relevat regioal ad local offices such as the Housig Corporatio, the Regioal Developmet Agecy, local authorities ad other relevat bodies. ODPM, HM Treasury ad the Housig Corporatio should exted fudig to a three to five year fudig cycle as a icetive for those bodies i receipt of social housig grat that demostrate good fiacial stewardship ad performace i developig ew housig. Such fudig should be allocated o a reducig scale to ecourage sustaied efficiecy gais throughout the supply chai. The Housig Corporatio should build upo its recet iitiatives to chael resources ito the best performig housig associatios by requirig them to demostrate efficiecy savigs through the icreased sharig of services by developmet cosortia. For Regioal bodies We recommed that: Govermet Offices ecourage local authorities to eter ito Local Public Service Agreemets whereby fiacial icetives are available for iitiatives that brig about co-ordiated actio ad sharig of staff betwee local authorities, such as aroud the preparatio of Local Developmet Frameworks ad Local Housig Need Assessmets. I helpig to establish sub regioal workig arragemets, the Govermet Offices are explicit about which matters should be dealt with i sub regioal housig strategies ad which i local housig strategies. 16

21 executive summary Where effective sub regioal parterships ad strategies do exist, Govermet Offices, i cojuctio with ODPM, should clarify that there is o eed to produce a local housig strategy so log as the relevat local authorities demostrate their commitmet to the sub regioal housig strategy. Govermet Offices should act as champios for the good practice o Sectio 106 set out i Circular 05/2005, Plaig Obligatios to improve local authorities performace ad build a greater degree of cosistecy. For local bodies We recommed that: Where local authorities have already established affordable housig as a key corporate priority, they should work with their local commuities to uderstad their cocers about ew housig ad to ivolve them i the desig ad plaig of ew developmets. This will build o the commuity ivolvemet objectives i the ew plaig system. To overcome cofusio ad delay aroud egotiatio of plaig approval local authorities should, as a first step, put i place frameworks or cocordats with local housig associatios ad developers, settig out clearly their expectatios of them ad usig approaches such as cocept statemets to facilitate good forward thikig. Local authorities should devise ways to better itegrate plaig ad housig fuctios i order to make more effective use of existig staff, set cosistet policy o affordable housig across the authority ad provide a sigle poit of cotact with plaig applicats. Some authorities, particularly smaller districts, should explore the scope for icreased joit workig betwee local authorities to pursue further sharig of resources, such as the joit commissioig of research to determie housig eed, ad the productio of joit Supplemetary Plaig Documets, ad support services such as traiig i housig ad plaig. For particularly large applicatios (over 500 uits) local authorities i the South East, Lodo ad the East should also make use of the Advisory Team for Large Applicatios based withi Eglish Parterships. ODPM ca support this activity i ay future guidace that is issued to local authorities. 17

22 part oe Part oe Icreasig the availability of affordable housig 18

23 part oe 1.1 There is a shortage of affordable housig i may areas of Eglad. Sustaied iflatio i the cost of housig has made it icreasigly difficult for people o moderate icomes to buy or ret a house o the ope market. I 2002, oly 37 per cet of ew households could afford to buy a property compared to 46 per cet i the late 1980s. O the basis of curret demographic treds, the Office of the Deputy Prime Miister predicts that the demad for housig will cotiue to icrease, with a estimated additioal 189,000 households beig formed betwee 2001 ad The rate of costructio of ew houses has steadily declied sice the 1960s, fallig to i 2003 its lowest level sice the Secod World War, illustratig a substatial mismatch betwee supply ad demad. The govermet s delivery pla for PSA5 focuses o log-term supply issues, i order to reduce house price iflatio but it does ot attempt to address short term volatility i prices because there is little that it ca do to ifluece this (Figure 3). 3 The housig market has suffered short term volatility ad log term iflatio The graph plots rises ad falls i house prices agaist log-term price iflatio. The bads above ad below the iflatio curve idicate highs ad lows i house price fluctuatio. Real average UK house prices ( 000s) Source: Natiowide short term volatility log term iflatio

24 part oe 1.2 The decliig affordability of ope market housig has bee accompaied by icreasig demads o local authorities ad social housig providers. Sice the mid-1990s, the umber of households accepted by local authorities as homeless has icreased from aroud 25,000 per quarter i 1997 to a peak of 35,000 a quarter i mid-2003, before fallig back to its former rate more recetly. Over the same period, the umber of households i temporary accommodatio 14 has steadily rise from aroud 40,000 to aroud 100,000, 15 as the rate of costructio of affordable homes uderwet a declie i parallel with ope market housig. The Office of the Deputy Prime Miister has respoded by itroducig a ew Public Service Agreemet target 1.3 Faced with this sigificat shortfall i housig i the South of Eglad ad problems of market failure i the North, i 2002 the Office of the Deputy Prime Miister (ODPM), the govermet departmet resposible for local ad regioal govermet ad for housig policy, itroduced a ew Public Service Agreemet target (PSA 5) for housig markets. I the 2004 Spedig Review, the defiitio of PSA 5 was exteded to iclude improvig the affordability of housig. ODPM s Public Service Agreemet 5 o housig markets: Achieve a better balace betwee housig availability ad the demad for housig, icludig improvig affordability, i all Eglish regios while protectig valuable coutryside aroud our tows, cities ad i the gree belt ad the sustaiability of tows ad cities. 1.4 Public Service Agreemet 5 is more wide-ragig ad ambitious tha previous housig PSA targets, which focussed, for example, o reclaimig brow field lad, reducig rough sleepig ad improvig the coditio of social housig. The target covers a wide scope of activity aimed at balacig housig markets i areas of both high ad low demad. I areas of high demad, such as Lodo, the South East ad the South West, the pressure for housig is outstrippig supply, drivig up house prices. Coversely, sigificat pockets of the North ad the Midlads have suffered a collapse i their housig markets. Such market failure ca result i a cycle of declie, with people trapped i poor housig i areas associated with high crime ad uemploymet. Public Service Agreemet targets (PSAs) are agreed betwee govermet departmets ad HM Treasury. They are iteded to establish clear priorities ad directio through the use of outcome focussed targets. They iclude value for moey targets ad a statemet of who is resposible for their delivery. PSA targets are iteded to help Departmets to focus o delivery ad work effectively with the bodies they eed to get thigs doe. They form a itegral part of the spedig plas set out i Spedig Reviews. 1.5 The wide scope of the target meas that there is o sigle measure of performace. For high demad areas, those where affordable housig is i short supply, the Office of the Deputy Prime Miister uses three idicators of performace agaist the target: a b c umbers of statutory homeless households with childre i temporary accommodatio; the ratio of lower quartile house prices to lower quartile earigs i the regios characterised by high demad; ad aual et additios to the dwellig stock i the South East, Lodo ad East of Eglad Govermet Office regios Progress i meetig Public Service Agreemet target 5 will be reported i ODPM s 2005 Autum Performace Report. I 2004, ODPM reported that progress o the target was o course for delivery (Figure 4). 1.7 ODPM set the Housig Corporatio a target for of 27,000 homes for ret or low-cost home owership, icludig those for key workers. This target was exceeded with the Housig Corporatio achievig 28, 756 completios. 17 ODPM established, i the 2004 Spedig Review, targets for the delivery of social reted housig over the three years to ad i additio it aouced i 2005 targets for completio of fuded low cost home owership schemes to help over 80,000 people ito home owership by The majority of people livig i temporary accommodatio at the begiig of 2005 were housed i self-cotaied short term private sector leased dwelligs or social housig which has bee desigated as temporary accommodatio. 15 Homelessess ad temporary accommodatio figures from ODPM statistical release Jue ODPM, 2005 Aual Report. 17 ODPM, 2005 Aual Report. 20

25 part oe 4 Performace agaist ODPM s Public Service Agreemet target 5 i 2004 Idicator Statutory homeless families with childre i temporary accommodatio Progress The use of temporary accommodatio was cotiuig to icrease i 2004, with existig social housig costraits i high demad areas reducig the settled housig optios available to move o to. ODPM expect the umber of families i temporary accommodatio to cotiue to grow i the short-term. But the implemetatio of ew policies o prevetio ad icreased social housig ivestmet through Spedig Review 2004 is expected to reduce the umbers of homeless households with childre i temporary accommodatio startig to fall i , reducig by betwee 10,000 ad 18,000 i compariso with curret levels by Ratio of lower quartile house prices to earigs i high demad regios There has bee a upward tred i this ratio but the rate of icrease has slowed. This is due to short term fluctuatios i house prices ad the ecoomy. ODPM expects the affordability ratio to stabilise by 2016 as a result of the Sustaiable Commuities Pla brigig additioal homes oto the market. I the light of this, the Govermet is cosiderig itroducig a ew trajectory that reflects the Govermet s aims for improvig affordability. Net additios to the dwellig stock i the South East, Lodo ad the East ODPM has a target to provide about 1.1 millio ew homes withi the wider South-East by ODPM s trajectory assumes extra growth i the four growth areas, the bulk of which will be delivered i the followig four years up to Although recet figures show a up-tur i ew housig supply, this idicator is highly vulerable to market forces ad there is volatility i the market. Compared with , however, ODPM has ow made good previous shortfalls i the trajectory. Source: Office of the Deputy Prime Miister, Autum Performace Report, Large icreases are plaed for the umber of houses to be built i high demad areas i the South of Eglad, alog with the creatio of ew commuities called growth areas, for example Milto Keyes ad the Thames Gateway area to the east of Lodo. The objective is to deliver 1.1 millio ew homes i the South East by I low demad areas, the challege is to rejuveate areas of market failure with a 1.2 billio ivestmet to improve the stadards of homes ad eighbourhoods. 1.9 These activities ad the Public Service Agreemet target are part of the wider Govermet ageda of buildig sustaiable commuities. 18 The Sustaiable Commuities Pla sets out to improve the places where people live through a wide ragig set of programmes that icludes matchig demad with housig that is affordable ad better desiged, greater public participatio, improved trasport services ad more commuity ad volutary services to create vibrat, harmoious ad iclusive commuities. What is a sustaiable commuity? ODPM has defied sustaiable commuities as places where people wat to live ad will cotiue to wat to live. 19 Joh Ega, i his review of skills for Sustaiable Commuities, has built o this defiitio: Sustaiable commuities meet the diverse eeds of existig ad future residets, their childre ad other users, cotribute to a high quality of life ad provide opportuity ad choice. They achieve this i ways that make effective use of atural resources, ehace the eviromet, promote social cohesio ad iclusio ad stregthe ecoomic prosperity. 18 Sustaiable commuities: buildig for the future, ODPM, February Sustaiable commuities: buildig for the future, ODPM, February

26 part oe 1.10 There is o sigle accepted defiitio of affordable housig. For the purposes of our study, we have defied affordable housig as housig where there is a itervetio i the market through public subsidy (Figure 5). We iclude social reted housig ad itermediate housig, that is housig schemes such as shared owership schemes, which are desiged to help people eter home owership At the same time, the product rage for affordable housig has developed cosiderably i the form of shared owership arragemets (Figure 5), as has the fudig basis. Istead of local authorities fiacig ad buildig their ow stock, housig associatios secure grats from the Housig Corporatio as well as raisig debt fiace o the ope market. They have for the past 17 years bee the priciple supplier of ew affordable housig ad they, i tur, commissio private builders ad developers to costruct ew housig. 5 What is affordable housig? The demad for affordable housig is diverse. It icludes homeless people, others i severe fiacial difficulties livig i temporary accommodatio, youg families still livig with parets, key workers strugglig to fid a place to live ad youg professioals strugglig to eter home owership. The challege for the agecies ad orgaisatios ivolved is to strike the right balace betwee providig, o the oe had, social reted properties ad o the other itermediate housig, ad makig sure that people access the type of housig that suits them best. There are two mai types of affordable housig: Social reted housig: This is housig that is supplied by either local authorities or housig associatios ad is provided to those i most eed at below market ret. Social reted housig is maaged by local authorities, Arm s Legth Maagemet Orgaisatios o the behalf of authorities or housig associatios. Newly built social reted housig is almost always maaged by housig associatios. Housig associatios received grats from the Housig Corporatio uder a two year 3.3 billio programme of fudig called the Approved Developmet Programme for schemes to start i The ew Natioal Affordable Housig Programme for will allocate grat to schemes with a value of aroud 3.9 billio. Itermediate housig: This is housig desiged to help people eter home owership. This icludes the coversio of existig teacies through various part or full purchase schemes. Itermediate housig icludes: Shared Owership, where the occupier ows a share of the property ad pays a ret or a charge o the remaider. Over time, the occupier may buy further proportios of the property, possibly evetually owig it outright. Homebuy equity loa scheme uder which people select a property o the ope market ad receive a equity loa from a housig associatio equivalet to 25 per cet of the purchase price. The loa is repaid at 25 per cet of the value of the property o resale. Schemes that allow teats to buy their existig reted home at a discout to market value (for example Right to Buy, Right to Acquire). New HomeBuy, from April 2006, which will provide opportuities for key workers, social teats, people o housig waitig lists ad other priority first time buyers to purchase a home through equity sharig arragemets either o the ope market with a equity loa or a share i a ew build property. Social HomeBuy will eable social teats to buy a share of their existig local authority or housig associatio home. Key worker housig a scheme aimed at a cliet group, rather tha a teure, this is provisio of subsidised reted (sometimes called itermediate ret), ower-occupied or shared owership housig which is reserved for desigated public sector key workers. Registered Social Ladlord This is the techical ame for housig associatios that are registered with the Housig Corporatio. Housig associatios are ru as busiesses but they do ot trade for profit. Ay surplus is retaied by the orgaisatio to maitai existig homes ad to help fiace ew oes. Arm s Legth Maagemet Orgaisatio A orgaisatio that maages social reted housig at arm s legth from the local authority. The homes are still ultimately owed by the local authority. To set up a arm s legth maagemet orgaisatio, coucils must show that the idea is backed by a majority of teats ad obtai Secretary of State approval. 22

27 part oe The delivery chai for affordable housig is large ad complex 1.12 Traditioally, local authorities built ad owed housig for ret. Over the last twety years, however, that role has chaged sigificatly with teats beig give the right to buy their ow coucil houses ad large scale trasfers of housig stock from local authorities to housig associatios. Figure 6 overleaf shows how local authorities role i deliverig affordable housig has chaged Agaist this backdrop, the delivery chai for affordable housig ivolves a complex set of relatioships ecompassig five tiers of admiistratio ad as may as te orgaisatios ivolved at a local level i deliverig ew housig (Figure 7) At a atioal level, i additio to the Office of the Deputy Prime Miister, the pricipal orgaisatios ivolved i the delivery of affordable housig are the Housig Corporatio, resposible for fudig ew public housig developmet ad regulatig housig associatios, ad Eglish Parterships, ivolved i the acquisitio ad use of lad, together with other departmets, such as the Departmet of Health ad the Miistry of Defece, that may have lad to dispose of that is surplus to departmetal requiremets. The Departmet for Eviromet, Food ad Rural Affairs also has a role to play i esurig that people livig i rural areas have access to housig. Regioal Spatial Strategies Followig the Plaig ad Compulsory Purchase Act (2004) the plaig system has bee reformed ad there are ow two mai levels of plaig i Eglad. Firstly each Regioal Plaig Body is required to prepare a Regioal Spatial Strategy. This details issues such as how may homes are required to meet the future eeds of people i the regio, or whether the regio eeds a ew major shoppig cetre or a airport. Regioal Housig Strategies are aliged with the relevat Regioal Spatial Strategy. Secodly each local plaig authority is preparig a Local Developmet Framework that sets out how the local area may chage over the ext few years. The Local Developmet Framework will supersede the curret local developmet plas Below the atioal level, withi regios ad localities there are four key parts of the delivery chai that eed to work closely together if there is to be clarity ad coherece aroud guidace, plaig ad local delivery arragemets. These are the relevat Govermet Office, the Regioal Housig Board (shortly to merge with Regioal Plaig Bodies), the Housig Corporatio ad the relevat local authorities As well as commuicatig ad iterpretig atioal guidace, Govermet Offices curretly chair Regioal Housig Boards, the role of which is to develop a Regioal Housig Strategy. This determies the umber of social reted ad itermediate dwelligs to be provided for the fudig allocated ad, i so doig, has to take ito accout wider plaig issues such as the capacity of local ifrastructure to cope with icreased housig geerally. This would iclude, for example, water resources, health ad school facilities, roads ad other ifrastructure as defied i Regioal Spatial Strategies. Regioal Housig Strategies also cosider fudig for decet homes ad other iitiatives such as provisio for gypsies ad travellers, supported housig ad fudig for private sector reewal The Regioal Housig Boards also eed to take ito accout the views of the local authorities as set out i their idividual local housig strategies, which reflect local housig eeds, ad would iclude a assessmet of the umber, type, ad size of dwelligs eeded across the locality. The Regioal Developmet Agecies, as members of the Regioal Housig Boards, play a importat role i settig the ecoomic strategy for the regio ad workig with other bodies to esure that their strategy complemets the housig ad plaig approaches adopted for the regio The Housig Corporatio through its regioal offices fuds affordable housig schemes o the basis of busiess pla proposals from housig associatios ad developers. The Corporatio also sits o Regioal Housig Boards ad, i makig decisios o fudig for specific schemes, takes ito accout how well these fit with the eeds of the overall Regioal Housig Strategy, ad whether the scheme i questio has the support of the relevat local authority (i respect of meetig its local housig strategy ad developmet pla). 23

28 part oe 6 Date 1988 Chages to the housig delivery chai sice 1988 Chage Housig Act: Local authorities begi sigificat trasfers of housig stock to housig associatios. Sigificace to local authorities Local authorities cease to udertake large scale ew build programmes ad must work with housig associatios to meet local housig eeds Tow ad Coutry Plaig Act 1990 (as substituted by the 1991 Plaig ad Compesatio Act): Gave local authorities powers to egotiate commuity beefits, as part of the plaig process (Sectio 106 agreemets). I the last five years, this provisio has bee icreasigly used to provide affordable housig. Local Govermet Act 1999 Lauch of the Audit Commissio Housig Ispectorate. Local Govermet Act 2000: Itroduced a commuity leadership role for local authorities by givig them the powers to promote the ecoomic, social ad evirometal well beig of their area. The Sustaiable Commuities Pla: Established Regioal Housig Boards to produce Regioal Housig Strategies with a five year horizo. Housig Corporatio fudig to be distributed i lie with Regioal Housig Strategies. Local Govermet Act 2003 Local Authority Social Housig Grat is abolished Plaig ad Compulsory Purchase Act 2004: Itroduced a rage of reforms to the plaig system icludig the replacemet of developmet plas with Local Developmet Frameworks ad a ew resposibility for authorities to produce a Statemet of Commuity Ivolvemet. Proposed chages: Cosultatio o Ifluecig the Size, Type ad Affordability of Housig (July 2003), ad Plaig for Mixed Commuities (Ja 2004), were cosidered for the partial revisio of Plaig Policy Guidace ote 3 (PPG3). Proposed policy would have worked by ifluecig the size ad type of affordable housig. These proposed chages were ever adopted as fial PPG3 policy. Proposed chages to the plaig system that iclude the itroductio of the ew Housig Market Assessmets which will supplemet housig eeds surveys. Local authorities must ow be skilled i egotiatio to secure the most appropriate agreemets with developers. Itroduced Best Value requirig local authorities to demostrate cotiuous service improvemets, bechmarked agaist similar authorities ad ispected by Audit Commissio ispectors. Local authorities are ispected o key housig services icludig their strategic eablig role. This has bee a importat driver for improvig local authorities performace. Local authorities have a clear role as commuity leaders reiforcig their strategic eablig role i housig. Local authorities eed to egage with Regioal Housig Boards to commuicate the eeds for their area. Local authorities are statutorily obliged to produce a local housig strategy which are aually updated plas takig a wide ragig strategic view of housig eeds i their area (reted ad ower occupied). Up util 2003 local authorities could use Local Authority Social Housig Grat to fud housig associatios locally. This was abolished because it was foud to be iefficiet ad to ufairly favour debt free local authorities. Now local authorities o loger ca use fudig as a lever for ifluecig developmet. Local authorities must ow work with Regioal Housig Boards ad the Housig Corporatio to secure allocatios for their area. Local Developmet Frameworks are iteded to provide a more flexible system allowig idividual plaig documets to be updated i respose to chagig local circumstaces. This should be helpful i relatio to housig where market coditios ca chage relatively rapidly. To improve the assessmet of local housig eeds may local authorities are already startig to focus o housig markets rather tha limit aalysis to their admiistrative boudary. The aim of this ew approach is to provide a more robust evidece base for local housig strategies ad lead to greater joit workig. Source: Natioal Audit Office ad Audit Commissio examiatio 24

29 part oe Figure 7 overleaf 25

30 part oe 7 The affordable housig delivery chai Natioal HM Treasury ODPM Natioal level Her Majesty s Treasury Agrees the Public Service Agreemet ad budget with ODPM ledig PSA target ad atioal fudig Works with other govermet departmets ad ODPM to make sure that, where appropriate, surplus public sector lad is used for housig Regioal Office of the Deputy Prime Miister Establishes atioal priorities ad the policy framework for icreasig affordable housig fudig targets policy Idetifies the key atioal outcomes Sets atioal targets ad aspiratios ad traslates these ito regioal level targets Regioal Orgaisatios Regioal Developmet Agecy Local Authority coucillors The Housig Corporatio Decides o what the regioal split of ivestmet will be Develops ad implemets plas for regulatio that deliver the Govermet s objectives Admiisters fudig to housig associatios Tracks the efficiecy of housig associatios Sub regioal Housig Partership Housig Providers Housig Corporatio (Regioal) lettigs Regioal Housig Board Regioal Housig Strategy Sub regioal Housig Strategy LAs Sub regioal omiatios arragemet Local Authority Housig formalised o-statutory arragemets Housig Corporatio Eglish Parterships Govermet Office of the Regio Local Housig Strategy Regioal Assembly (icludig Regioal Plaig Bodies) Regioal Spatial Developmet Strategy Local Plaig Policy ad Developmet Pla Idustrialists Other govermet departmets Eglish Parterships Regioal level Govermet Office for the Regio Regioal Housig Board Regioal Plaig Body Regioal Developmet Agecy Local level Local authorities Other govermet departmets hold surplus lad that may be suitable for housig developmets Other govermet departmets supply the ecessary ifrastructure to support ew developmets such as ew trasport facilities, schools ad healthcare As the atioal regeeratio agecy Eglish Parterships takes a strategic role o surplus public sector lad, acquirig ad disposig to deliver more ad higher quality developmet Reviews local housig strategies Chairs the Regioal Housig Board Resposible for the productio of the Regioal Housig Strategy ad recommedig to Miisters fudig allocatios Drafts the Regioal Spatial Strategy that puts forward proposals for regioal housig growth. Sits o ad to be merged with Regioal Housig Boards. Sits o the regioal housig board Resposible for ecoomic developmet Provide local leadership, co-ordiatig the delivery of affordable housig that meets the eeds of the local commuity Prepare a local developmet pla that sets out where lad is available for developmet ad what cotributios will be expected from developers May maage some housig stock teacy maagemet Housig Associatio omiatios Developmet Cotrol Housig Needs Surveys Facilitate ivestmet primarily i the improvemet of existig stock but icludig icreasig the supply of affordable housig by brigig uused properties back o to the market ad workig with housig associatios re-lets HA buys affordable houses from developer S106 Negotiatios Developers Plaig Ispectorate Housig associatios Developers Customers Produce local housig strategies Build ad maage affordable housig Build affordable housig as part of their plaig obligatios Families livig i temporary accommodatio People who are homeless Housig Market Source: Natioal Audit Office ad Audit Commissio examiatio Affordable Houses Ope Market houses Housig Needs Key workers such as teachers ad urses Middle icome earers strugglig to buy their first property

31 part oe 1.19 Local authorities have a rage of roles i the delivery chai icludig drawig up the local housig strategy ad the local developmet framework, maagig existig stock (where appropriate) ad workig with housig associatios ad developers to provide ew affordable housig. Housig associatios There are over 2,000 housig associatios i Eglad, providig aroud 2 millio affordable homes ad housig some 5 millio people. I 2004, the housig associatio sector was worth some 63.2 billio. Some housig associatios were fouded ceturies ago, but may trace their origis to the 1960s ad over the last decade may ew associatios have bee formed to maage ad develop homes trasferred to them by local authorities. The 553 largest housig associatios are resposible for 95 per cet of the sector s activity I additio to these admiistrative tiers, there are also the housig associatios, which ow ad maage social reted properties, hold a equity stake i shared owership properties ad commissio the developmet of ew housig. The largest of these have aythig up to 45,000 properties ad are major atioal eterprises, with the capacity to udertake large ew developmets of several thousad homes Lastly, there are the may hudreds of developers across the coutry which actually costruct the homes. These rage from small family busiesses to atioally kow costructio firms. The Home Builders Federatio directory lists 1,500 leadig home builders i the UK but there will be may more smaller operatios ad local authorities may have to deal with over 50 developers operatig i their area Added to this complex delivery chai is a array of guidace, strategies, frameworks ad plas at atioal, regioal ad local level that eed to be aliged i order for delivery to be effective. By way of illustratio, there are 27 preferred parter housig associatios i the west Lodo sub regio ad Figure 8 outlies the various relatioships that a typical local authority has to maage. I some cases, geographic differeces (for example betwee local authority boudaries ad housig markets) add a further level of complexity. ODPM uses public fudig ad other mechaisms to icrease the supply of affordable housig ODPM plas to sped over 3 billio o icreasig the supply of affordable housig 1.23 Over the period , large amouts of public moey amoutig to aroud 3.3 billio are to be spet o deliverig affordable housig (Figure 9 o page 28). This fudig is allocated to housig associatios o the stregth of busiess cases for developig ad deliverig affordable housig. Housig associatios, i tur, use the moey to pay private developers to build ew homes While the flow of fudig from the Housig Corporatio is relatively straightforward i priciple, the complexity of the delivery chai meas that i practice there are may differet iflueces o how it is spet. For example, Regioal Housig Boards have cosiderable ifluece over how fudig is allocated across differet parts of their regio ad this, i tur, affects the grat awardig decisios of the Housig Corporatio. Local authorities ad others i the delivery chai use other mechaisms to icrease the supply of affordable housig 1.25 Beyod immediate fudig there are four other key mechaisms for icreasig the supply of affordable housig: a b Releasig lad for housig through developmet plas. Local authority plaig departmets release lad for housig by gratig plaig permissio. The priority is to build o brow field sites (previously developed lad) ad i urba areas so that the eviromet is protected. Usig the plaig system to secure cotributios of affordable housig. Uder Sectio 106 agreemets, local authorities ca require developers to iclude i ew schemes a elemet of social ad itermediate housig. Local authority guidace, if i place, ad the idividual agreemets will specify the percetage of affordable housig that will form part of the developmet ad the mix of itermediate ad social reted housig. Oce built, housig associatios will take over maagemet of the affordable housig. 26

32 part oe 8 Agecies dealt with by a typical local authority to deliver affordable housig Govermet Office South West Natioal Guidace Regioal Housig Board Regioal Plaig Board Housig Corporatio Regioal Office Regioal Housig Strategy Regioal Spatial Strategy Local Authority Plaig Coset Allocatio decisios take ito accout Regioal Housig Strategy priorities Iformed by local eeds (homelessess, etc) Local housig strategies Developmet Pla Developmet cotrol Lead housig associatio Parter housig associatio Parter housig associatio Private sector developer Source: Natioal Audit Office ad Audit Commissio examiatio NOTES 1 Regioal Plaig Bodies are to merge with Regioal Housig Boards. 2 Developmet plas are to be surpeseded by Local Developmet Frameworks. c d Sellig or trasferrig public sector lad for housig. Govermet departmets ad agecies may have lad ad property that they are sellig as surplus assets to deliver efficiecies as part of the curret Efficiecy Review. Where lad is suitable for housig developmet, it could be acquired for affordable housig by Eglish Parterships, the govermet regeeratio agecy, through the Register of Surplus Public Sector Lad process. Developig ew affordable housig products. The Office of the Deputy Prime Miister has recetly cocluded a cosultatio o proposals aimig to provide a simpler ad fairer rage of low cost home owership schemes. Its respose, which was published o 14 September 2005, icluded plas to itroduce a ew social HomeBuy scheme, which will give existig social teats the opportuity to buy a share of their home at a discout. It is also aimig to drive dow costs of housig. For example, Eglish Parterships is ruig the Desig for Maufacture Competitio o behalf of ODPM to demostrate that it is possible to build high quality, cost effective housig with a target costructio cost of 60,000. Greater use of moder methods of costructio, such as off-site maufacturig, is beig ecouraged to drive dow costructio costs so that housig ca be sold for less. How these mechaisms operate i practice is set out i Figure 10 o page

33 part oe 9 Programme Resources available for improvig the availability of affordable housig i Natioal Affordable Housig Programme (formerly the Approved Developmet Programme) A two year programme operated by the Housig Corporatio ad delivered by cosortia of housig associatios to provide social ad itermediate housig. Recetly, private developers have bee ivited to bid for grats for the fudig roud. This is comprised of four key elemets: Activities to add to the stock of properties for social ret Activities to icrease the umber of affordable houses for purchase or for low-cost home owership schemes (excludig key worker schemes) Activities to icrease availability of affordable housig for key workers for purchase. Activities to icrease availability of affordable housig for itermediate ret (icludig those for key workers) Total allocatio: Source: Housig Corporatio Ivestmet Bulleti 2004 Allocatio ,232 millio 410 millio 494 millio 124 millio 3.3 billio over period The delivery chai for affordable housig is uder pressure to become more efficiet 1.26 The eed for efficiecy i delivery has bee give greater impetus by the publicatio of the Gersho Review i Jue 2004 ad the Govermet s Efficiecy Programme to secure 21.5 billio of aual efficiecy gais by across all public expediture For the Office of the Deputy Prime Miister, this target traslates ito a social housig efficiecy gai of 835 millio by , of which 355 millio will come from housig associatios. This icludes gais from across all aspects of affordable housig (icludig ew build ad the better maagemet of existig stock). The Departmet ad the Housig Corporatio have proposed four ways i which they aim to achieve this: parterig arragemets betwee the Housig Corporatio ad housig associatios. I recet years, the Housig Corporatio has bee developig lead partership arragemets with 70 housig associatio parterships, ad iteds that 80 per cet of its fudig is to be allocated through these arragemets; paymet of Natioal Affordable Housig Programme fudig directly to property developers as well as to housig associatios, to ecourage icreased efficiecy though greater competitio; champioig of good practice i costructio procuremet; ad, workig with the Natioal Audit Office to desig a Value for Grat Comparator a system to assess how well differet housig associatios use Natioal Affordable Housig Programme grats I respect of developig ew housig aloe, the Housig Corporatio estimates efficiecy savigs to be 130 millio i , ad respectively 140 millio ad 160 millio i ad , through a rage of efficiecy gais i the system icludig housig associatios better partership ad cotractig arragemets with the private sector. The aim is to redirect the savigs ito the provisio of more homes ad frotlie services. To achieve the targets set by the Gersho review, the Housig Corporatio is measurig ad moitorig housig associatio performace, expectig them to make better use of their assets, employig moder methods of costructio ad buildig efficiet supply chais, as well as deliverig savigs i the procuremet of capital works, maagemet ad maiteace ad commodities. The Audit Commissio has resposibility for checkig that housig associatios are achievig value for moey i the delivery of their services. 28

34 part oe 10 How mechaisms for deliverig affordable housig operate Mechaism How it operates i practice Risks to delivery Exteral assessmet Approved Developmet Programme (reamed the Natioal Affordable Housig Programme for ) Housig associatios bid for fuds from the Housig Corporatio which looks icreasigly to deal with lead housig associatios represetig a cosortium of housig associatios. Bids will typically iclude housig for both ret ad for sale or shared owership. From 2005, other bodies, icludig developers will be eligible to bid for fuds. Housig associatios are icreasigly deliverig through larger, more complex sites, i partership with developers. This exposes delivery of social housig to volatility. The Housig Corporatio moitors aual regioal targets for the umbers of houses completed. Housig associatio busiess cases are assessed agaist a rage of performace criteria, such as past track record ad fiacial stregth. The Audit Commissio ispects the services that housig associatios provide to teats. Releasig lad for housig through developmet plas Local authority plaig departmets release lad for housig by gratig plaig permissio. The priority is to build o brow field sites (previously developed lad) ad i urba areas so that the eviromet is protected. Local Plaig Authorities may ot maximise delivery of affordable housig through the plaig system i the light of local demad ad housig supply. Developmet plas are subject to a iquiry by the Plaig Ispectorate which checks whether the pla complies with the Regioal Spatial Strategy, icludig housig allocatios. Local plaig authorities must submit aual moitorig reports to the Secretary of State detailig housig completios, icludig affordable housig completios, ad comparig these with developmet pla allocatios. The Audit Commissio also looks at progress agaist allocatios whe it ispects local authorities plaig services. Usig the plaig system to ecourage the private sector to build social ad itermediate homes alogside those for sale at market value Uder Sectio 106 agreemets, local authorities ca require ew developmets to cotai a elemet of social ad itermediate housig. Local authority guidace, if i place, ad the idividual agreemets will specify the percetage of affordable housig that will form part of the developmet ad the mix of itermediate ad social reted housig. Oce built, housig associatios will take over maagemet of the affordable housig. Sectio 106 housig will form oly the miority part of ay developmet ad may ot geerate the volume of affordable housig eeded i a high housig cost area. The housig built may ot match local housig eed; there may be a shortage, i particular, of social reted housig, sice this is the least attractive optio for developers; havig the potetial to make the private part of ay developmet less attractive to purchasers ad thus reducig its value to the developer. The Audit Commissio will look at local authorities use of Sectio 106 to mitigate the effects of developmet ad provide commuity beefit, icludig affordable housig, whe it ispects plaig ad housig services. 29

35 part oe 10 How mechaisms for deliverig affordable housig operate cotiued Mechaism How it operates i practice Risks to delivery Exteral assessmet Sellig surplus public sector lad for housig Govermet departmets ad agecies are sellig surplus lad ad property as part of the curret Efficiecy Review. Where it is appropriate for housig developmet, lad could be sold for affordable housig to Eglish Parterships, the govermet regeeratio agecy, through the Register of Surplus Public Sector Lad process. Valuable lad that could be used for affordable housig may be lost to other developmet programmes due to competig priorities betwee govermet departmets ad the pressure o departmets to realise efficiecy savigs. Govermet departmets efficiecy plas for disposal of assets. Developig ew affordable housig products The Office of the Deputy Prime Miister has cosulted o the developmet of a rage of low cost home owership products uder the HomeBuy baer. This icludes proposals to allow existig social teats to buy a share i their reted properties at a discout (Social HomeBuy) ad opportuities for first time buyers to buy a share of a home available o the ope market (Ope Market HomeBuy). The Office of the Deputy Prime Miister is aimig to drive dow costs of affordable housig by ruig a competitio for developers to produce a 60,000 home. Greater use of moder methods of costructio is beig ecouraged to drive dow costructio costs so that housig ca sold for less. 20 It is ot yet apparet whether developers will produce a suitable product at required cost ad quality i respose to the competitio. It is also ot yet clear whether moder methods of costructio will be more efficiet tha traditioal methods. Developers themselves are wary of ew forms of housig i case of warraty claims. Source: Natioal Audit Office ad Audit Commissio examiatio What our aalysis sets out to achieve 1.29 This study ivestigates the efficiecy ad effectiveess of the delivery chai for icreasig the supply of affordable housig through the delivery of ew affordable housig ad cosiders ways i which the delivery chai ca be stregtheed We have focused o a particular strad of the target improvig the delivery of ew affordable housig i high demad areas. The study excludes, however, those areas, such as Milto Keyes ad the Thames Gateway, which are desigated as Growth Areas ad have separate ad ew special delivery arragemets The Natioal Audit Office published a report i Autum 2005 givig practical advice o how to reduce time ad cost i buildig homes while maitaiig quality. 21 ODPM has desigated four areas Thames Gateway, Milto Keyes/ South Midlads, Lodo-Stasted-Cambridge ad Ashford as Growth Areas where radical actio is eeded to address the shortfall i ew homes. Special delivery vehicles with icreased plaig powers have bee created i the Growth Areas to speed up plaig processes ad coordiate developmet. 30

36 part oe 1.31 The study tracks activity across the delivery chai at the atioal, regioal ad local level. The joit approach eables the Natioal Audit Office ad Audit Commissio, through their differet perspectives ad by combiig kowledge ad expertise, to take a uique look at the delivery chai throughout its legth; from the challeges faced by ODPM through to the actios beig take by, or ow required of, the frot-lie deliverers who have to make this target a reality. We have examied the cotributio that differet agecies ad orgaisatios make towards deliverig more affordable housig, cosidered areas where there are particular risks to efficiet delivery, ad idetified good practice. Figure 11 sets out how we approached the work. 11 How we approached the work Our report draws o evidece from differet levels of the delivery chai: Natioal level We held meetigs with ad coducted iterviews of directors ad maagers at ODPM, HM Treasury, the Prime Miisters Delivery Uit, Eglish Parterships ad the Housig Corporatio. We also iterviewed atioal trade bodies ad orgaisatios, icludig the Home Builders Federatio, the Local Govermet Associatio ad the Natioal Housig Federatio. We aalysed Housig Corporatio data o housig associatio performace ad the Audit Commissio Comprehesive Performace Assessmets of local authority performace o balacig housig markets. Regioal level We iterviewed directors resposible for housig i Govermet Offices ad members of Regioal Housig Boards i the three regios icluded i the study. We aalysed the first ad secod rouds of Regioal Housig Strategies. Local level Six local authorities i the three high demad regios of Lodo, the South West ad the South East were selected as case study areas. The South West was chose because it has particular problems associated with high rural house prices ad low wages. The local authorities i the South West were Plymouth ad South Hams; i the South East, Aru ad Chichester, ad i Lodo, Hammersmith ad Fulham, ad Merto. We coducted over 50 iterviews i our case study areas with local authorities, housig associatios, ad developers. I local authorities, we iterviewed the Chief Executive ad/or the Head of Housig Strategy or the Head of Housig Maagemet if the local authority still owed social housig stock, the Head of Plaig, ad i most cases, the Lead Members for housig ad plaig. For housig associatios, we iterviewed seior maagers i the developmet departmet. For developers operatig i the local area, we iterviewed a director or seior maager. A telephoe survey was carried out of Housig Directors of 50 local authorities i the Lodo, South West ad South East regios, a oe-third sample of local authorities that did ot form part of the case studies or the desigated growth areas. Nie focus groups, comprisig i total 57 volutary ad commuity sector housig advice workers, were held to examie how local authorities ad their parters were addressig the demad for social ad itermediate housig i their areas. We ra 2 discussio sessios - i Hampshire ad Devo with housig strategic ad eablig officers at the sub regioal level. Whole delivery chai At the ed of our fieldwork, we carried out two whole delivery chai workshops (oe i Lodo ad oe i Exeter) with 48 represetatives from atioal, regioal ad local levels of the delivery chai the Prime Miister s Delivery Uit, the Housig Corporatio, the Local Govermet Associatio, developers, Govermet Offices, Regioal Developmet Agecies, Eglish Parterships, cotractors for Housig Needs Surveys, local authorities ad housig associatios. Iterviews at the atioal ad the regioal level were carried out by the members of the Natioal Audit Office ad the Audit Commissio project team. Iterviews at the local level were carried out by the Natioal Audit Office ad the Audit Commissio project team ad by PricewaterhouseCoopers, who also orgaised the whole delivery chai workshops. Focus groups of housig advice workers were carried out by MORI, who also carried out the telephoe survey. Aalysis of Regioal Housig Strategies was carried out by the Natioal Audit Office ad PricewaterhouseCoopers. Further details of the methodology are i Appedix 1. I Part 2 of the report, we assess the degree to which activities are co-ordiated atioally ad regioally to eable resources to reach frotlie housig associatios ad developers i a cost effective way. 31

37 part two Part two How resources for affordable housig reach the frot lie 32

38 part two 2.1 I this part of the report, we assess the degree to which activities are co-ordiated atioally ad regioally to eable resources to reach frotlie housig associatios ad developers cost effectively. The i Part 3 we look at how those at the frot lie go about usig their fudig ad powers to deliver the growth i affordable housig. 2.2 Ulike may other delivery chais, fudig for ew affordable housig is relatively straightforward, with the Housig Corporatio makig paymets to housig associatios ad (from early 2006) to other bodies such as developers o the stregth of their developmet capacity, fiacial security, quality of services ad busiess pla proposals. They, i tur, traslate the fudig ito the ew housig. 2.3 Yet surroudig these allocatios is a framework of plaig ad housig bodies that has a sigificat ifluece over whether or ot the supply of ew housig is icreased, ad delivered cost effectively. For this framework to work effectively, there are five key elemets that have to be i place, ad i the remaider of Part 2 we assess the delivery chai for affordable housig agaist these criteria: a b c d e The presece of clear targets ad performace measures to drive delivery Fudig is coditioal o ecouragig ad improvig cost effectiveess Demad for housig is determied o a cosistet basis Policies ad guidace are clear ad well uderstood Orgaisatios withi the framework work together to commo aims The presece of clear targets ad performace measures to drive delivery Key fieldwork fidigs The Public Service Agreemet target has raised the profile of the eed for more housig developmet. A target was set by ODPM for the Housig Corporatio i to provide a additioal 27,000 homes for ret or low-cost home owership, icludig those for key workers. The Housig Corporatio achieved 28,756 completios i Local authorities i high demad areas have recogised the eed for more affordable housig ad 92 per cet of the 50 local authorities i our survey (a oe-third sample of local authorities i Lodo, the South East ad the South West, excludig desigated growth areas) had established it as oe of aroud five corporate priorities. Oly 2 per cet of the 50 local authorities i our survey expected to reach their social housig target ad oly 4 per cet expected to reach their itermediate housig target over the ext three years, with lack of available sites ad fudig beig cited as the mai barriers. Source: Natioal Audit Office ad Audit Commissio examiatio 2.4 Housig eeds ad housig markets vary across Eglad. The Public Service Agreemet target therefore icludes diverse programmes aimed at tacklig differet types of problems. As a cosequece, the wordig of the target is geeral. While there are icetives i place such as the Plaig Delivery Grat ad the Commuity Ifrastructure Fud there are less specific icetives or sactios i place to drive delivery tha i other Public 33

39 part two Service Agreemets. I cotrast, for example, the Decet Homes Stadard target provides a very clear ad simple target with some liked fiacial icetives. The lack of clarity aroud PSA 5 creates a challege to commuicate the priority across the may differet agecies ad orgaisatios ivolved i deliverig affordable housig. 2.5 For high demad areas where affordable housig is i short supply, the Office of the Deputy Prime Miister uses three idicators of performace agaist the target: a b c umbers of statutory homeless households with childre i temporary accommodatio; the ratio of lower quartile house prices to lower quartile earigs i the regios characterised by high demad; ad aual et additios to the dwellig stock i the South East, Lodo ad East Govermet Office regios We foud that these measures were ot widely kow about or uderstood across the delivery chai. Local authorities where we coducted fieldwork, see their work i improvig affordable housig as a respose to local eed rather tha respodig to a cetrally drive target. For most local authorities i high demad areas, access to affordable housig is the top cocer for the commuity. A recet survey by MORI shows that it is a importat cocer atioally, rakig at umber two after crime as the most importat factor i makig somewhere a good place to live Despite the lack of kowledge of the target across the delivery chai there are sigs, however, that it is begiig to create more focussed actio to tackle shortages i affordable housig. District coucils have geerally respoded, for example, to the Balacig Housig Markets Assessmet (part of the Audit Commissio s Comprehesive Performace Assessmet) by icreasig the promiece of affordable housig i their corporate priorities. Niety two per cet of the oethird sample of local authorities i Lodo, the South East ad the South West surveyed for this study have made improvig the availability ad affordability of housig a corporate priority ad, of these, 56 per cet have doe so withi the last three years South Hams District Coucil, for example, awarded Beaco Coucil status i 2004, established affordable housig as the key corporate priority i Previously, the Authority s highest priority had bee protectig the eviromet, a key asset to the local area. Coucillors ad officers chaged priorities i respose to the critical shortage of affordable housig for local people; curretly the average price of a home i the District is aroud 270,000, compared with a figure for average icome of 17,000. The chaged priority sice 2002 resulted i the umber of completed affordable homes icreasig from 86 i to 142 i There are 154 dwelligs beig built, ad 168 uits proposed over the ext two years. Beaco Coucils The Beaco Scheme idetifies excellece ad iovatio i local govermet. The scheme exists to share good practice so that local authorities ca lear from each other ad deliver high quality services to all. South Hams District Coucil is oe of four Beaco local authorities for affordable housig. The Coucil has a rage of policy iitiatives icludig a secod home leasig scheme ad ew approaches to the delivery of rural housig. The Coucil has adopted Affordable Housig Supplemetary Plaig Guidace requirig 50 per cet of affordable housig o widfall sites. Effective user satisfactio practices are also i place, outside of the geeral cosultatio exercises. Source: The Improvemet ad Developmet Agecy 2.9 Despite the may chages i local authority housig priorities, however, oly 2 per cet of local authorities surveyed for this study believed that they will meet the eed for social reted housig over the ext three years ad oly 4 per cet believed they will meet the eed for itermediate housig i that time. 25 Local authorities cited a rage of barriers to explai this, with lack of available sites ad fudig beig see as the mai obstacles. I ODPM s view, the target of icreasig the aual provisio of social reted housig to ad the icreased fiacial provisio for this, alog with efficiecy improvemets, will tur aroud the growth i homelessess by ODPM, Aual Report, MORI Liveability Survey, Source: Natioal Audit Office ad Audit Commissio telephoe survey of local authorities i high demad areas. 25 Source: Natioal Audit Office ad Audit Commissio telephoe survey of local authorities i high demad areas. 34

40 part two Implicatios for achievemet of the target 2.10 A lack of kowledge about the target itself ad its associated performace measures meas that it will oly be by chace, or through other co-icidetal factors, that it is achieved. More likely, there will be cosiderable uderachievemet through ufocussed effort Few coucils cosider that the additioal actios they are takig will be sufficiet to achieve their affordable housig targets. Implicatios for efficiecy key cost drivers 2.12 The Housig Corporatio is takig actio to achieve efficiecy savigs i the developmet of ew affordable housig of 130 millio i , 140 millio i , ad 160 millio i , through its ow efficiecies ad from housig associatios better partership ad cotractig arragemets with the private sector. Beyod this, there are o direct measures agaist which to gauge the efficiecy with which the Public Service Agreemet target is delivered. Whether fudig arragemets ecourage ad improve cost effectiveess 2.13 The fudig arragemets for idividual housig schemes vary ad ivolve a mix of fudig sources, icludig Approved Developmet Programme fudig, private fiace borrowed by housig associatios, other public subsidies ad developer cotributios i the form of Sectio 106 agreemets. Figure 12 shows a rage of differet scearios, with scheme 1 fuded almost etirely from public subsidy ad scheme 5 attractig a substatial developer cotributio. 12 Cotributio to total cost 100% 80% 60% 40% 20% The fudig arragemets for idividual housig schemes vary widely, with o two schemes beig exactly the same Key fieldwork fidigs The supply of fudig from the Housig Corporatio to housig associatios for affordable housig is relatively straightforward. The Housig Corporatio has ratioalised the supply chai for affordable housig by focusig resources for ew housig o 70 lead housig associatios. Housig associatios must become more efficiet. A rage of measures are i place to support this, icludig the Housig Corporatio s Operatig Cost Idex ad Audit Commissio ispectios. Source: Natioal Audit Office ad Audit Commissio examiatio 0% NOTE Social Housig Grat Housig Associatio Fiaced Other Public Subsidy Developer Cotributio These idicative figures are based o six case studies i Lad ad Fiace for Affordable Housig (Mok et al, 2005). 26 The diagram does ot show the substatial cotributio made by private idividuals i shared owership housig, which would ormally be at least 50 per cet of the property value. The case study data was collected prior to the itroductio of the Housig Corporatio's Ivestmet Parterig pilot programme. 26 Lad ad fiace for affordable housig. The complemetary roles of Social Housig Grat ad the provisio of affordable housig through the plaig system. Sarah Mark et al Housig Corporatio ad Joseph Rowtree Foudatio. 35

41 part two 2.14 Regioal Housig Strategies set out regioal priorities icludig the balace betwee social reted ad itermediate housig ad make recommedatios o the allocatio of housig ivestmet. The distributio of ivestmet betwee regios reflects the varyig levels of demad for affordable housig across the Eglish regios, with Lodo receivig the largest fudig allocatio of 43.5 per cet of Approved Developmet Programme fudig (Figure 13). 13 The distributio of ivestmet betwee regios reflects the demad for affordable housig Regio % Lodo 46.0 South East 18.9 South West 5.7 East Midlads 3.8 East of Eglad 6.2 West Midlads 5.1 Yorkshire 3.9 North East 2.9 North West Source: Approved Developmet Programme: Allocatio Statemet 2.15 I decidig whether to allocate fudig to specific developmet schemes, the Housig Corporatio s regioal offices cosider bids from cosortia of housig associatios agaist four criteria their fit with Regioal Housig Strategies, value for moey, quality ad deliverability. Sice 1998 a mixed fudig regime has bee i place. Grat rates are geerally below the full cost of developmet with remaiig costs fiaced by housig associatios through private borrowig or through their ow resources For developmet of ew homes, the Housig Corporatio is aimig to deliver efficiecy gais of at least 140 millio i ad 160 millio i , agaist a baselie year of The corporatio has developed a Ivestmet Parterig approach, by which 80 per cet of its developmet fudig goes through Ivestmet Parters, icludig housig associatios ad uregistered bodies, such as developers. I parters were fuded. These parterships will act as lead parters for cosortia of housig associatios workig together o ew developmets. (Previously, i , fudig for ew developmets wet to some 400 housig associatios.) The aim of the Ivestmet Parterig programme is to make housig associatios secure ecoomies of scale, more efficiet procuremet, higher quality housig ad icreased ed user satisfactio. Parter associatios are selected accordig to a rage of criteria icludig overall competece, fiacial capacity, maagemet competece, efficiecy ad developmet track record. The Housig Corporatio s Ivestmet Parterig programme has simplified the supply chai for affordable housig by reducig the umber of housig associatios directly fuded by the Housig Corporatio to carry out ew developmet. Other housig associatios ca cotiue to develop by workig with lead associatios or accessig fudig through the Specialist Programme Accordig to the Housig Corporatio s allocatio statemets, there are idicatios that lead parterig arragemets are likely to produce future efficiecy savigs: South West: For the period , the Housig Corporatio has a target of providig 6,034 ew homes through 188,978 millio of Approved Developmet Programme fudig. 27 Sevety-seve per cet of the Approved Developmet Programme fudig is beig chaelled through 13 parterships, seve of which are beig led by oe housig associatio. These arragemets have reduced the total public subsidy of providig a ew home to ret from a average of 61,257 for to 50,730 for , ad the total public subsidy of a home for sale from 27,248 for to 20,508 for Parterig arragemets betwee housig associatios have also eabled the Housig Corporatio to secure agreemets with developers for 635 uits i the South West, without ay public subsidy. 27 Housig Corporatio, South West Allocatio Statemet for ad

42 part two Lodo: Parterig betwee housig associatios has secured agreemets with developers for 2,200 o-subsidised uits. 28 South East: Parterig betwee housig associatios has reduced total average public subsidy for developig each reted dwellig from 68,263 i to 58,848 for , a reductio of 13.8 per cet. Where dwelligs are for sale, the percetage reductio is much higher at 22.3 per cet, reducig subsidy costs from a average of 33,609 a uit for to 26,109 for To icrease trasparecy ad to assist the Housig Corporatio i makig decisios about lead parters, the Housig Corporatio has desiged, with the assistace of the Natioal Audit Office, a Value for Grat Comparator a tool to assess how well the lead housig associatios use their developmet grats, takig ito accout three mai factors ecoomy, quality ad timeliess. The Value for Grat Comparator tool will be used from Summer 2005 ad will help direct fudig to orgaisatios that are most successful i meetig Housig Corporatio priorities The Housig Act 2004 icludes provisios to exted the Housig Corporatio s grat-givig powers to uregistered bodies by itroducig a ew Sectio 27A ito the Act. For , this eables the Housig Corporatio to allow other bodies, for example, developers, to bid directly for ew Approved Developmet Programme fudig. The Govermet s itetios i chagig the Act is set out i the Sustaiable Commuities Pla 2003, which are to drive efficiecy, ecourage iovatio ad creativity i the sector, ad to wide the pool of potetial types of provider. The icreased competitio for affordable housig fudig has the potetial to drive dow costs A further measure itroduced by the Housig Corporatio to ecourage efficiecy i the housig associatio sector is the Operatig Cost Idex. This sets out the operatig costs for those associatios with over 250 uits, allowig the Housig Corporatio to cosider what drives such costs. I additio, how associatios overall ad idividual service costs compare with other similar orgaisatios is looked at i Audit Commissio housig ispectios which also examie how well associatios maage ad improve value for moey. Implicatios for achievemet of the target 2.21 I developig iitiatives such as lead parters ad the Value for Grat Comparator, the Housig Corporatio is puttig i place key drivers to improve the effectiveess of the sector over time. Similarly, i itroducig two year budgetary cycles, the Corporatio has give greater certaity to the sector; allowig developers to pla over a loger timeframe ad to ivest i icreased ad more cost-effective capacity. To maximise developmet capacity, however, developers would beefit from the icreased certaity ad the ability to pla over a three to five year fudig cycle. 30 Implicatios for efficiecy key cost drivers 2.22 The establishmet of the two year fudig cycle for the Housig Corporatio s 3.3 billio Approved Developmet Programme has icreased partership workig amogst housig associatios ad is helpig to provide more homes more quickly. 31 Early sigs are that this is already brigig some efficiecy savigs. Parterships, such as joit procuremet cosortia brig a rage of beefits, icludig access to wider iformatio etworks, savigs i procuremet (for example, joitly procured timber roof structures), shared learig, agreemet of stadards of house desig ad greater ecoomies of scale. CASE STUDY 1 Gettig a better deal whe buyig timber roof structures i the South West Devo ad Corwall Housig Associatio work i partership with West Coutry Housig Associatio ad other smaller housig associatios i the South West to secure better ecoomies of scale i procurig costructio material such as timber roof structures. Source: Natioal Audit Office ad Audit Commissio research Joiig up to improve supply chai maagemet i Bedfordshire The Bedfordshire Housig Associatio is the lead parter i a partership with four smaller local housig associatios. It carries out developmet services for the four other housig associatios workig with them to establish a sigle supply chai ad i agreeig desig stadards ad costructio techiques. Source: Ivestmet Parterig, A Evaluatio of the Pilot Programme, Chartered Istitute of Housig ad Tribal HCH 28 Housig Corporatio, Allocatio Statemet for Lodo Housig Corporatio, South East Allocatio Statemet for Natioal Audit Office, Improvig Public Services through Better Costructio, HC 364-1, Sessio , 15 March Ivestmet Parterig. A Evaluatio of the Pilot Programme. Chartered Istitute of Housig ad Tribal HCH Jue

43 part two 2.23 Further advatages of the cosortia approach for ew developmets by housig associatios are that, if successful: it makes housig associatios work together to share good practice ad traiig (ad may evolve to a positio where the lead parter develops properties o behalf of the other parters, reducig costs further); there are fewer iterfaces for the Corporatio to maage, reducig the amout of staff time that had bee spet i overseeig a series of ofte complex relatioships; ad the cosortia have icreased purchasig power with developers, givig them more leverage to egotiate better deals ad to udertake larger developmets that offer more scope to use moder, cheaper pre-fabricated methods of costructio. The Housig Corporatio expects bids through the parterig route to be for fudig i excess of 20 millio or 500 uits. To help housig associatios ad other developers, at the request of the Office of the Deputy Prime Miister ad the Housig Corporatio, the Natioal Audit Office is examiig how value for moey ca be obtaied from cheaper methods of costructio by reducig costructio time ad cost, while maitaiig or ehacig quality Prelimiary fidigs from the evaluatio of the Housig Corporatio s Ivestmet Parterig pilot programme i show that the Ivestmet Parterig programme was 9 per cet cheaper tha the previous programme had bee i , 32 eablig a extra 28 uits to be provided from each 10 millio of Social Housig Grat. This is equivalet to savig aroud 3,000 o a average subsidy of 35,000 per dwellig. The balace of fudig required to meet the total cost per uit would be supplied from other sources such housig associatios borrowig or reserves The Ivestmet Parterig programme is resultig i more housig associatios cosiderig mergig or formig group structures. Half of the housig associatios surveyed as part of the Housig Corporatio s evaluatio said that the itroductio of the Ivestmet Parterig programme had made it more likely that they will merge or eter ito a group structure with other associatios This presets opportuities for improvig cost effectiveess through the availability of cheaper loa fiace, the opportuity to improve procuremet or sharig back office services. The latter could represet sigificat aual savigs for housig associatios by icreased sharig of services such as huma resources, iformatio techology (IT) ad fiace. This could free up fudig to reivest i improvig services or buildig more homes The icreased competitio associated with opeig up opportuities for other bodies to bid directly for fudig, together with a ecouragemet to use better methods of costructio ad to secure procuremet efficiecies will also be importat cotributios to efficiecy. However, some developmets, otably the Corporatio s Ivestmet Parterig approach, may have egative cosequeces for some. The housig associatios which are ot selected as parters have lost oe of the key drivers for their busiess ad it remais to be see how they implemet efficiecy savigs, improve services ad cotiue to be well maaged. Whether demad for housig is determied o a cosistet basis Key fieldwork fidigs Local authorities are required to carry out Housig Needs Surveys, but the frequecy is ot specified, meaig that there is o direct read across betwee differet local authorities at differet times. There is also o cosistet methodology for the productio of housig eeds surveys. This creates problems for Regioal Housig Boards ad for the Housig Corporatio, which ca oly make sesible decisios about the allocatio of fudig across the regio o the basis of soud ad cosistet iformatio. As a cosequece, Regioal Housig Boards must ofte commissio further research to fully assess regioal housig eeds. Developers are reluctat to use local authority surveys for their busiess ad capacity plaig ad prefer to do their ow housig eeds assessmets. Source: Natioal Audit Office ad Audit Commissio examiatio 32 Ivestmet Parterig. A Evaluatio of the Pilot Programme. Chartered Istitute of Housig ad Tribal HCH, Jue The savigs so idetified will be specified i housig associatios aual efficiecy statemets. 38

44 part two 2.28 Sice 2000, local authorities have bee required to produce a housig eeds survey i lie with guidace supplied by ODPM; although the frequecy is ot specified. These surveys provide data o the demad for affordable housig. Most local authorities commissio specialist cosultats to udertake the work because they lack the i-house expertise ad capacity to do the surveys themselves. They are ot, however, a isigificat cost. For example, some Lodo boroughs have spet over 120,000 o such exercises There are, however, oly a small umber of cosultats with the ecessary skills to perform the work. Moreover, differet cosultacies apply differet methodologies, makig it difficult to directly cross referece data betwee local authorities. This creates problems for Regioal Housig Boards whe preparig their Regioal Housig Strategies, resultig i the eed for the Boards to commissio further work to obtai a coheret picture of regioal housig eed, ad to provide a sufficietly robust evidece base for the Housig Corporatio to refer to i determiig fudig decisios Separately, the Audit Commissio s Comprehesive Performace Assessmet of district coucils has foud examples of coucils relyig o surveys that are ot up to date, while other coucils do ot have a comprehesive assessmet of housig eed because, for example, of iadequate iformatio about the eeds of vulerable people Housig advice workers i our MORI focus groups were cocered that eeds were uderestimated by some of the survey methods used, ad that their orgaisatios were ot cosulted about local housig demad from cliet groups whose eeds might ot be picked up by housig eeds surveys The weakesses i housig eeds surveys mea that developers are reluctat to use them i their busiess plaig ad prefer to carry out their ow aalyses. These differeces i opiio cause difficulties ad delays i egotiatig plaig agreemets because they ca result i developers ad local authorities disputig each other s uderstadig of local housig eed. A housig market The Office of the Deputy Prime Miister defies a housig market as a dyamic system comprisig stocks (stocks of dwelligs, stocks of households) ad flows (chage i dwellig stock; chage i household stock). As i all systems, the stocks are coected by flows. The system as a whole is shaped ad iflueced by a wider rage of forces or factors impactig upo the ature of those flows, for example ecoomic ad demographic treds, at a macro or local level. Source: Office of the Deputy Prime Miister 2.33 To tackle some of the problems with housig eeds surveys, ODPM is developig a itegrated approach to assessmet which aims to ratioalise both housig eeds surveys ad housig market assessmets ito oe approach. The objective of this ew approach is to geerate a uderstadig of housig eed that is more i lie with local housig markets, which may straddle a umber of local authority boudaries. Early sigs are that the implemetatio of assessmets is ecouragig greater collaboratio betwee eighbourig local authorities, with more surveys beig commissioed at a sub-regioal level. I the South West, for example, the adjacet coucils of Carado, West Devo, South Hams ad Plymouth, coverig a populatio base of over 450,000, ow work together to create a itegrated ad coordiated uderstadig of housig eed i the Plymouth sub regio. The local authorities i Devo have also appoited a joit affordable housig officer to work with developers ad housig associatios across local authority boudaries. Local authorities have ot, however, foud the draft guidace produced by ODPM o preparig housig market assessmets to be clear; with the risk that the curret practice of applyig differet methodologies may cotiue. Implicatios for achievemet of the target 2.34 Accurate assessmet of the demad for itermediate ad social reted housig, icludig the size ad types of uits eeded, is essetial for addressig the eed for affordable housig. Housig eeds surveys are ot always accurate ad up-to-date, which may result i the wrog types of properties beig built, based o erroeous data. 39

45 part two Implicatios for efficiecy key cost drivers 2.35 A lack of cosistet methodology i the preparatio of housig eeds surveys meas that cross referecig of housig eed across a regio is difficult, leadig to more work, extra costs ad delay for Regioal Housig Boards i attemptig to get a accurate base upo which to determie fudig decisios across the regio Uder-developed guidace aroud the ew Housig Market Assessmets makes for poor uderstadig of the approach withi local authorities. This limits the capacity of local authorities to act as itelliget cliets whe commissioig cosultats to udertake assessmets ad wastes resources i producig surveys that are ot useful idicators of demad. Whether policies ad guidace are clear ad well uderstood Key fieldwork fidigs Guidace for the developmet of the first Regioal Housig Strategies was produced after the Strategies were already i preparatio, creatig icosistecies betwee regios. Revisios to plaig guidace are laggig behid policy, creatig icosistecies that cause cofusio ad delays for developers, housig associatios ad local authorities, ad drive up costs. Source: Natioal Audit Office ad Audit Commissio examiatio 2.37 Natioal housig ad plaig policies have experieced sigificat chages over recet years, desiged to secure that more housig is delivered more quickly. I particular, the 2003 Sustaiable Commuities Pla set out a ambitious set of programmes to icrease the supply of housig i the South of Eglad The Sustaiable Commuities Pla has required ew ODPM guidace. Some of this guidace has bee slow to develop, causig cofusio ad wasted work. For example, guidace o producig the first roud of Regioal Housig Strategies was issued whe the process was already uderway. As a result, differet methodologies ad approaches were take by differet regios, leadig to a set of Strategies that were of varyig ad questioable quality. 34 Some, for example, did ot reach a coclusio o the overall umbers of houses required; while others, failig to make a lik betwee housig ad plaig, did ot take ito accout the likely impact of Regioal Spatial Strategies ad Regioal Ecoomic Strategies produced by Regioal Developmet Agecies Our aalysis of the first ad secod roud of Regioal Housig Strategies for our case study regios showed that the revised versios of the Strategies, fialised i July 2005, show improvemet with better referecig to the Regioal Ecoomic ad Spatial Strategies. The Lodo Housig Strategy adopts the affordable housig targets set out i the Mayor s Lodo Pla (the Spatial Developmet Strategy for Lodo) ad the South East Strategy sets regioal targets for affordable homes ad the South West strategy cotais a actio pla that makes clear the resposibilities for these actios. Developmet plas Local authorities have a statutory duty to prepare a developmet pla for their area which allocates lad uses ad, alog with associated guidace, sets out policies related to issues such as buildig desities. The Plaig ad Compulsory Purchase Act 2004 replaced the existig system of structure, local ad uitary developmet plas with Regioal Spatial Strategies ad Local Developmet Frameworks Our fieldwork also highlighted commo cocers with Plaig Policy Guidace ote 3 ad, more specifically, Circular 6/98 (Figure 14). The latter sets out recommeded site size thresholds at which local authorities ca require developers to iclude a elemet of affordable housig. This is a key lik i the delivery chai, as almost 50 per cet of ew-build affordable housig completios are o Sectio 106 sites (mostly also fuded by Social Housig Grat). Circular 6/98 sets thresholds at 15 houses for ier Lodo ad 25 for elsewhere. The circular has ot bee updated to reflect curret, more ambitious policies, or the acute shortage of affordable housig i the South. May iterviewees ad those who atteded our workshops also cosidered it gave too much room for local iterpretatio While ODPM is ow addressig this through a revisio of Plaig Policy Guidace ote 3, due i Autum 2005, the lack of up to date guidace has allowed sigificat icosistecies i approach to develop betwee ofte eighbourig local authorities, leadig to challege ad appeals by developers, which are costly ad delay developmet. 34 Regioal Housig Strategies, Advice Notes. Chartered Istitute of Housig, November Regioal Housig Strategies, Advice Notes. Chartered Istitute of Housig, November

46 part two 14 Plaig: Key Govermet guidace Plaig Policy Guidace ote 3 (PPG3) Plaig Policy Guidace ote 3 (PPG3): Housig (March 2000) sets out the Govermet s policy o how the plaig system ca cotribute to the overall supply of affordable housig. It recogises that it may be desirable i plaig terms for ew housig developmets (over a certai size/threshold) to icorporate a reasoable mix ad balace of house types ad sizes to cater for a rage of housig eeds ad to ecourage the developmet of mixed ad balaced commuities. Circular 6/98 This Circular supplemets Plaig Policy Guidace ote 3 (PPG3), by amplifyig the Govermet s preferred approach to plaig ad affordable housig. It aims to provide a clearer framework for preparig local authority plaig policies, ad practical advice to local plaig authorities o how they should ecourage the supply of affordable housig i appropriate circumstaces through egotiatio with developers ad others. It is iteded to: help local plaig authorities to adopt a realistic ad cosistet approach to preparig pla policies ad hadlig plaig applicatios ivolvig affordable housig; ecourage a co-operative approach to preparig affordable housig policies, which esures that the views of all those ivolved i deliverig affordable housig are take ito accout; clarify that affordable housig policies should be based o a clear ad up-to-date assessmet of local eed for affordable housig; provide guidace o securig ad cotrollig the occupacy of affordable housig; ad esure that affordable housig delivered through the plaig system is likely to be attractive to leders of private fiace. Source: Office of the Deputy Prime Miister 2.42 Audit Commissio ispectors, as part of District Coucil Comprehesive Performace Assessmets, foud that some of the better performig coucils have successfully worked with developers outside curret guidace to secure more affordable housig. These coucils have either secured affordable housig o sites below the thresholds set by Circular 6/98 or secured proportios of affordable housig that were higher tha the orm. The Audit Commissio cosiders this to be good practice. However, for the Plaig Ispectorate to support this approach, coucils have to demostrate a clear ad up to date uderstadig of local housig eed ad lad availability. Paragraph 10 of Circular 6/98 explais that authorities ca go below the atioal thresholds providig that they ca adequately justify such a approach i the light of exceptioal local costraits. Implicatios for achievemet of the target 2.43 Ucertaity aroud iterpretatio of guidace, particularly for Sectio 106 agreemets, creates icosistecy betwee local authorities, leadig to plaig challeges from developers. This lack of clarity also risks developers becomig deterred from ivestig i log term capacity, or seekig alterative developmet opportuities. Implicatios for efficiecy key cost drivers 2.44 The lack of clarity of guidace aroud the productio of the iitial Regioal Housig Strategies resulted i additioal work beig required by Regioal Housig Boards. This has ow bee remedied for the latest roud of strategies, but there is a risk that uclear guidace persists, for example aroud the local housig market assessmets. Greater cosistecy betwee regios ad sharig of good practice, such as clear targets ad allocatio of resposibilities, would cotribute to accurately assessig the eed for affordable housig, allowig suppliers to build up the capacity to address it, ad creatig accoutability for performace. Whether orgaisatios withi the delivery chai work together to commo aims Key fieldwork fidigs Closer collaboratio betwee ODPM ad other govermet departmets that ow surplus lad could assist i releasig resources to icrease the supply of affordable housig. Local authorities are uclear about the role of Govermet Offices ad the assistace they ca offer. Source: Natioal Audit Office ad Audit Commissio examiatio There is scope to brig more surplus lad owed by govermet departmets ito use for affordable housig Effective co-ordiatio across govermet is importat for the efficiet implemetatio of Public Service Agreemet target 5 because may other departmets are i a positio to ifluece, ad are directly affected by, delivery of affordable housig. (Figure 15 overleaf). Both the Miistry of Defece ad Departmet of Health, for example, have trasferred surplus lad to Eglish Parterships for housig. 41

47 part two 15 Other govermet departmets are ivolved i the delivery chai Govermet departmet HM Treasury Miistry of Defece Departmet of Health Departmet for Educatio ad Skills Departmet for Trasport Departmet for the Eviromet Food ad Rural Affairs Departmet of Trade ad Idustry How the Departmet ca ifluece implemetatio of the target Agrees the Public Service Agreemet target with ODPM. Commissioed ad will respod to the Barker Review of Housig Supply. This will iclude a decisio o reform of plaig obligatios. Workig with mortgage leders to icrease the availability of shared owership. Overseeig the release of surplus public sector lad to icrease the supply of affordable housig. Is i a positio to sell lad surplus to defece requiremets that could be suitable for housig if required. Is i a positio to sell surplus lad that is suitable for housig to Eglish Parterships. More health services will be eeded i areas where there are large housig developmets. More schools will be eeded i areas where there are large housig developmets. Existig trasport provisio may eed to be expaded upo i areas of sigificat housig developmet. Resposible for esurig that ew housig provisio does ot damage the coutryside. As the sposor departmet of Regioal Developmet Agecies the Departmet of Trade ad Idustry ca help to make sure that Regioal Ecoomic Strategies lik with Regioal Housig Strategies ad regioal housig eeds. How the Departmet is affected by the target A balaced housig market will support balaced ecoomic growth across the coutry. More affordable housig will ease pressure o recruitmet ad retetio of staff i high demad areas. Improved availability of affordable housig makes recruitmet ad retetio of staff easier. The shortage of affordable housig is a sigificat problem i rural areas, adversely affectig the rural ecoomy. Shortages i affordable housig ca risk future ecoomic growth because they ca create labour shortages. Source: Natioal Audit Office ad Audit Commissio examiatio 2.46 Several departmets, otably the Departmet of Health, fid it difficult to recruit key workers, such as urses, as a result of the shortage of affordable housig. At the same time, may govermet departmets play a key role i cotributig to the supply of affordable housig through the disposal of their surplus lad or buildigs that are suitable for housig. But util very recetly, the target has ot had a very high profile across Govermet. This has meat that govermet departmets have ot always cosidered releasig surplus lad i such a way that ecourages the developmet of affordable housig where it has bee suitable Moreover, give the targets of the Efficiecy Review, alog with the additioal Govermet objective of realisig 30 billio i sales of public assets by 2010, govermet departmets such as the Miistry of Defece ad the Departmet of Health are ratioalisig their stocks of lad ad buildigs by disposig of lad that is surplus to departmetal requiremets. There is a tesio, however, betwee sellig at the best possible price so that maximum resources are released for frotlie delivery of departmetal objectives, ad sellig lad i such a way that will support aother govermet departmet s objectives such as, i this case, icreasig the supply of affordable housig. This has bee partly addressed with chages to Govermet Accoutig which allow policy to ifluece ad affect disposal decisios. 42

48 part two 2.48 As reported i a recet paper o sustaiable procuremet to which the Natioal Audit Office cotributed, 36 for govermet bodies to release surplus properties or lad to be tured ito affordable housig may ofte represet value for moey to the public sector as a whole. This is especially the case i relatio to the most vulerable groups, for example homeless people, those at risk of homelessess, or those sufferig metal illess. Improvig physical ad metal well-beig ad quality of life helps to reduce the call o a variety of public services, such as the crimial justice system, health care, ad social services. Ofte, however, surplus public sector lad ad properties are ot used i this way, for the simple reaso that the idividual bodies disposig of lad would ot experiece the beefits, but would merely absorb the costs ODPM ad HM Treasury have i part addressed this tesio by askig Eglish Parterships to establish the Register of Surplus Public Sector Lad followig the publicatio of the Sustaiable Commuities Pla i The requiremet o cetral govermet bodies to place surplus sites o the register has ow bee icorporated ito Govermet Accoutig. Govermet departmets are also ow required to give all departmets participatig i the scheme 40 days otice prior to disposig of surplus lad. Durig this time departmets ca acquire the lad at ope market value without exposig it to competitio. Eglish Parterships publishes a summary of the register quarterly. Ad it is explorig ways to expad the Register to iclude local authorities, The Housig Corporatio ad the Regioal Developmet Agecies. Eglish Parterships is also workig closely with Govermet Departmets to develop iovative approaches to preparig sites for disposal to deliver affordable housig without actually purchasig the sites. There are early sigs of better co-ordiatio at regioal level but the role of Govermet Offices could be more clearly defied 2.50 The regioal tier of the delivery chai has become icreasigly importat with the establishmet of Regioal Housig Boards ad their forthcomig itegratio with Regioal Plaig Bodies. I preparig their Housig Strategies, Regioal Housig Boards eed to make sure that they have a good fit with local housig eeds, as defied by local housig strategies prepared by local authorities. This requires good commuicatio ad cosultatio Local authorities i the three regios covered i this report have largely bee satisfied with the opportuities they have had to ifluece recet revisios to the relevat Regioal Housig Strategy. Half of those i our survey of oe-third of local authorities i the Lodo, South East ad South West regios were either fairly or very satisfied with their level of ivolvemet i the productio of the strategy (26 per cet were either satisfied or dissatisfied ad oly 16 per cet were fairly dissatisfied). Whe it came to the fial product, 56 per cet of local authorities either strogly agreed or teded to agree that the regio s housig strategy was compatible with their local housig strategy Beyod cosultatio o revisios to Housig Strategies, most Regioal Housig Boards have established couty-wide or sub-regioal groups of Housig Directors. These provide a useful forum for local authorities to meet regularly with members of the Boards Regioal Govermet Offices provide a importat lik betwee atioal policy ad local delivery ad have a complex role with respect to ODPM s Public Service Agreemet target 5 for housig markets (Figure 16 overleaf). This has evolved, however, i differet ways across differet regios ad, as a cosequece, local authorities are ot always clear about the role of Regioal Govermet Offices ad do ot always kow whe they should cotact them for advice. May local authorities see the fuctio of Govermet Offices as limited to chairig Regioal Housig Boards ad sigig off local housig strategies. Local authorities also cosider that at times Govermet Offices are themselves uclear about what advice they should give ad/or that they do ot have the capacity ad resources to deal with local authorities immediate cocers Our survey reflected a lack of clarity, ad a certai level of idifferece, about the purpose ad fuctio of Govermet Offices, with 40 per cet of local authorities beig either satisfied or dissatisfied with their role i housig policy. The more iformed ad better performig authorities, as assessed by the Comprehesive Performace Assessmet ad housig ispectios, however, have secured for themselves a better uderstadig of the role of their Govermet Office ad are takig a proactive role i seekig out its iput. 36 Realisig Aspiratios, report by the Accoutig for Sustaiability Group, May

49 part two 16 Role The role of Govermet Offices i ODPM s Public Service Agreemet target 5 Descriptio Chair to the Regioal Housig Board Reviewig local authority housig strategies Facilitator ad broker of parterships betwee local authorities Makig efficiet use of scarce resources ad talet ad spreadig good practice Providig the lik betwee atioal policy ad local delivery Oversee the productio of the Regioal Housig Strategy. Facilitatig dialogue with other regioal orgaisatios ad structures to esure that all regioal strategies are aliged ad mutually supportive. Oversee recommedatios to Miisters o fudig allocatios. Govermet Offices check local housig strategies to make sure that they match with regioal ad atioal priorities. Regioal Govermet Offices are well placed to ecourage joit workig betwee local authorities providig guidace ad help from across the regio. Where local authorities are strugglig Govermet Offices ca ecourage officers from better performig local authorities to offer guidace ad support. Govermet Offices are a importat lik betwee atioal policy ad local delivery. They have isight ito the challeges ad performace of local authorities which is highly valuable to ODPM, ad their regular cotact with ODPM meas they have valuable kowledge of ODPM policy developmets. Source: Natioal Audit Office ad Audit Commissio examiatio Implicatios for achievemet of the target 2.55 Shortages i affordable housig affect the delivery of the priorities ad Public Service Agreemet targets of may govermet departmets, icludig, for example, the recruitmet of key workers, such as teachers, urses ad police officers. By ot commuicatig the importace of affordable housig across Govermet, there is a risk that other departmets which are i a positio to cotribute to delivery do ot build affordable housig ito their plas. Where departmets are ot positively ecouraged to release lad for housig ad there are o clear mechaisms ad allocatig policies to eable this to happe, it will be sold to the highest bidder, represetig a lost opportuity to develop affordable housig Successful delivery of affordable housig ivolves the work of may govermet departmets. For example, ew housig developmet ofte eeds the provisio of ew ifrastructure, such as roads, doctor s surgeries ad schools, which are the resposibility of other govermet departmets Local Authority Social Housig Grat was foud to be iefficiet by ODPM because it teded to favour those authorities who were debt free ad there were historical problems with uderspeds. Because of these reasos it was abolished i With its abolitio local authorities ca o loger reclaim from the Housig Corporatio ay ivestmet they make i ew social housig. This reduces their ability to ifluece the developmet of affordable housig i their areas ad meas that good commuicatio betwee Regioal Housig Boards ad local authorities is particularly importat to esure that the Boards recommeded fudig allocatios reflect eed. Implicatios for efficiecy key cost drivers 2.58 Shortages of lad for housig developmet are a major costrait i icreasig the supply of affordable housig, particularly i South East Eglad. Ay surplus lad owed by other govermet departmets represets a asset that could otherwise be used to deliver more affordable housig Govermet Offices are uiquely placed to help local authorities to improve their performace i deliverig affordable housig, but at preset they are ot beig proactive i doig so. Local authorities are takig the lead i approachig Govermet Offices for guidace o good practice, with the risk that those local authorities most i eed of help will ot seek it. 44

50 part two coclusios Betwee 2004 ad 2006, the Office of the Deputy Prime Miister will fud the costructio of ew affordable housig i Eglad to the tue of 3.3 billio i grats ad other paymets to housig associatios by the Housig Corporatio. I order to improve efficiecy withi the sector i recet years, the Housig Corporatio has itroduced a umber of key iitiatives, icludig two year fudig cycles to give certaity to the costructio idustry ad to help develop capacity. Evidece from our fieldwork idicates that a further extesio of fudig to five year cycles would be welcomed by developers. The Housig Corporatio is also ratioalisig the umbers of housig associatios ivolved i the delivery of affordable housig, focussig resources ito 70 parterships that have show themselves most capable of deliverig the large amouts of house-buildig ow required, ad settig clear criteria agaist which to assess ogoig performace. Further efficiecies could be realised through parter housig associatios sharig back office fuctios, such as IT, fiace, huma resources, ad legal services. Housig associatios ad developers ca oly operate efficietly, however, where they are supported by clear plaig ad decisio makig at other poits i the delivery chai. Recet chages i atioal plaig policy have bee itroduced to simplify ad speed up the plaig process, but this has ot yet bee matched by the detailed ad updated guidace required at a local level, particularly i relatio to Sectio 106 agreemets, creatig ucertaity ad delay for developers. The developmet of Regioal Housig Boards, ad their forthcomig amalgamatio with Regioal Plaig Bodies, is a importat step i brigig together key parties at a regioal level. There is scope for Govermet Offices to develop a closer egagemet with local authorities; at preset their role is ot well uderstood ad, as a cosequece, local authorities do ot make as much use of their advice ad expertise as they might. As the represetatives of ODPM, Govermet Offices also have a key role to play i coordiatig the activities of all govermet departmets i the regios. This icludes makig sure that opportuities to use surplus govermet lad for affordable homes are explored ad wherever possible exploited. Despite iitiatives take to improve the efficiecy ad effectiveess of the delivery chai, of the oe-third of local authorities we surveyed across Lodo, the South East ad the South West, oly 2 per cet cosidered they could meet their targets for social reted housig over the ext three years ad oly 4 per cet expected to meet their itermediate housig target. I Part 3 of the report, we cosider the progress that the local level of the delivery chai is makig to icrease the supply of affordable housig. 45

51 part three Part three Deliverig affordable housig 46

52 part three 3.1 This part of the report cosiders how well those i receipt of fudig ad powers are able to provide more affordable homes i a cost effective way. This ivolves three key parties: local authorities, housig associatios ad developers, which have to work closely together if affordable housig is to be delivered successfully. 3.2 Much of the resposibility falls to local authorities which, although they do ot have cotrol over the fudig for house buildig, exercise a direct ifluece o housig developmet through their plaig powers i particular releasig lad to developers ad housig associatios i retur for commitmets to build agreed umbers of affordable homes. 3.3 Beyod this, local authorities have wider resposibilities for icreasig the supply of affordable housig through their strategic eablig role; requirig them to take the lead i brigig together all the various parties that have a role i creatig the right coditios for speedy ad efficiet housig developmet. This role was most recetly set out i Jauary 2005 i ODPM s five year strategy for housig Homes For All: local authorities will eed to build strog workig relatioships with house builders, ifrastructure providers ad regeeratio agecies Maagig the relatioship with developers ad creatig coditios more geerally to icrease the supply of affordable housig requires a rage of skills withi local authorities ad the developmet of ew ways of ifluecig ad workig with other parties to traslate plas ad resources ito ew homes. Agaist the three criteria below we assess how well local authorities are performig; specifically whether: a b c Local authorities display clear leadership uder their strategic eablig role Developers, housig associatios ad local authorities are clear about each others priorities, so that plas for ew developmets ca be agreed quickly With a icreasigly regioal focus to housig, there is effective joit workig across local authority boudaries 37 Sustaiable Commuities: Homes for All. A Five Year Pla from the Office of the Deputy Prime Miister. ODPM, Jauary

53 part three Whether local authorities display clear leadership uder their strategic eablig role Key fieldwork fidigs Local authorities commuity leadership role is critical for the case to be made to local citizes about the pressig eed for more affordable housig, ad the beefits that it will brig. Otherwise, there is a risk that, despite it beig a corporate priority, local authorities will fail to icrease the supply of affordable housig sufficietly to address demad. Local authorities have bee slow to adjust to meet their chagig role i housig. There is a eed for local authorities to recruit people with the right skills to egotiate more effectively with suppliers. Source: Natioal Audit Office ad Audit Commissio examiatio 3.5 The role of local authorities has chaged cosiderably sice the 1980s whe they owed a large umber of houses ad acted primarily as social ladlords. The Govermet ow sees local authorities as havig a strategic eablig role. The task is icreasigly to provide the clear leadership required to create the right set of coditios to icrease the supply of affordable housig. Providig leadership for the commuity 3.6 The results of our survey of oe-third of local authorities covered i this study shows that 92 per cet of local authorities have established affordable housig as a corporate priority, but evidece from our iterviews, atioal workshops ad from Audit Commissio Comprehesive Performace Assessmets shows that may local authorities have ot yet take o the leadership role required to covice citizes of the eed for ad importace of developig more affordable housig i their locality. We are chagig from a service delivery orgaisatio ito commuity leaders ambitiously seekig to meet the eeds of our residets i a challegig area by raisig the profile of housig issues withi the district. Head of local authority housig Source: Natioal Audit Office ad Audit Commissio examiatio 3.7 Providig the required leadership ca be challegig ad authorities eed to lear from what works elsewhere. For example, i Pewith i Corwall, the authority has worked effectively with the local media to raise awareess of homelessess issues. This has helped shift local priorities ad ifluece attitudes to ew housig developmets. I three of our case study local authorities, we also foud examples of how these issues were beig tackled (Case studies 2, 3 ad 4). CASE STUDY 2 Workig with parters to ivolve local people i the plaig ad desig of ew developmets I respose to its pressig eed for more affordable housig, South Hams District Coucil is actively seekig out rural sites which are sustaiable ad that have the right ifrastructure for housig developmet. Yet South Hams is a area reowed for its distictive ad beautiful eviromet, with oe Natioal Park ad two Areas of Outstadig Natural Beauty. As such, ew housig developmets ofte attract local oppositio. The coucil ivests sigificat resources i ivolvig local people i plaig ad desig to secure developmets that are sesitive to the local eviromet. Oce sites are idetified, the Coucil works with housig associatios ad developers to produce a cocept statemet, providig a clear visual impressio of what the developmet will look like, as well as iformatio o how may houses are likely to be built, for how may people, the teure split ad the rage of actios that will mitigate the impact of the developmet. Cocept statemets have proved effective tools for establishig a shared local visio betwee the coucil, housig associatios ad developers ad are used i cojuctio with ope forums where local people have the opportuity to iput ito plas ad meet with the developers ad housig associatios ivolved. Source: Natioal Audit Office ad Audit Commissio examiatio There is a eed for closer joit workig withi local authorities 3.8 To perform their strategic eablig role effectively, local authorities must have good iteral coordiatio betwee a rage of departmets (Figure 17) but most importatly betwee housig ad plaig. At a regioal level, there is already a recogitio of the importace of this relatioship with the establishmet of Regioal Housig Boards (o which represetatives of the Regioal Plaig Bodies sit). This would be further stregtheed whe Regioal Housig Boards ad Regioal Plaig Bodies are merged. 48

54 part three CASE STUDY 3 Arragig semiars for coucillors to help break dow some of the fears that surroud affordable housig i Aru The terms affordable ad social housig ofte create fears that stem from images of poorly built ad poorly desiged coucil housig of the 1960s ad 1970s ad ati social behaviour. Visitig ad discussig successful affordable housig schemes ca allay these fears ad raise the profile of affordable housig as a coucil priority. At Aru District Coucil, the housig team arraged a series of semiars for coucillors to explore some of the implicatios of the shortages i affordable housig ad what the ew Public Service Agreemet meat for the coucil. Examples of successful affordable housig schemes were discussed alog with presetatios of what ew approaches to high desity housig look like. Source: Natioal Audit Office ad Audit Commissio examiatio CASE STUDY 4 Joiig up housig ad plaig teams speeds up egotiatios with developers Plymouth City Coucil s Housig Eablig Team works closely with the plaig departmet i egotiatig with developers to secure cotributios for affordable housig. The team has more expertise i affordable housig which helps to take the burde off the developmet cotrol officers i the plaig departmet. I South Hams the strategic housig staff ad plaig officers are ow joitly the first poit of cotact for developers. The coucil has worked hard to build good relatioships with developers ad this meas that housig staff are able to become ivolved at a early stage whe developmets are still beig desiged. By joiig up at a early stage the time spet i egotiatig plaig agreemets is greatly reduced. Source: Natioal Audit Office ad Audit Commissio examiatio 17 Housig ivolves coordiatio betwee differet local authority fuctios Local authority departmet Housig Fuctio Resposible for preparig the housig eeds survey ad local housig strategy Works to prevet homelessess ad provides housig advice Udertakes a rage of private sector housig work icludig home eergy coservatio, improvig private sector stock coditio ad regulatig private ladlords Providig aids ad adaptatios of homes for people with disabilities Maages ad improves coucil-owed stock to the Decet Homes Stadard Plaig Allocatig suitable lad for housig Settig policies to ecourage good desig ad a appropriate mix i the types of housig beig built Securig appropriate cotributios from developers that lead to more affordable housig Legal Ecoomic Developmet Supportig the Plaig departmet i egotiatios o Sectio 106 with developers Likig ecoomic developmet strategies with housig strategies Respodig to the cocers of local employers Co-ordiatio with Regioal Developmet Agecies ad Eglish Parterships Social Services Eviromet Housig Beefit Makig sure that vulerable residets receive the support that they eed so that they ca stay i their homes Makig sure that ew housig developmets are supported by the services eeded such as adequate gree spaces, waste collectio ad street cleasig Makig prompt paymet so that teats are ot at risk of evictio through ret arrears 49

55 part three 3.9 Withi local authorities, however, the two departmets have teded to work separately a legacy from the past whe local authorities had a direct ad major housig role i developig ad maagig large umbers of coucil houses. This separatio, however, risks icosistecy, leadig to cofusio ad delay. For example, i oe local authority we foud differet targets for levels of affordable housig i differet corporate documets, with the coucil s supplemetary plaig guidace settig a target for affordable housig at per cet of ew housig developmets, but the housig strategy settig a target of 25 per cet. However uder the ew plaig system supplemetary plaig documets will ot cotai policies o affordable housig targets which will have to be subject to proper idepedet scrutiy through a local plaig iquiry The chagig role of local authorities also brigs with it a eed for ew skills withi, or secured i partership by, the plaig ad housig departmets, icludig the capacity to build parterships, uderstad the housig market place, ad to pla for the loger term. Local authorities, however, have bee slow to adapt their skills to this ew role. Skill shortages are a sigificat problem, with may local authorities fidig it hard to fill vacacies i both their housig ad plaig departmets. Plaig, i particular, is a problem with some 47 per cet of authorities reportig difficulties i retetio. 38 The problem is particularly acute i Lodo, with 83 per cet of authorities reportig difficulties retaiig plaig staff. ODPM is startig to address the shortage through a ew bursary scheme, but the umber of ew plaers this will create is ulikely to meet demad Some local authorities however, for example Plymouth, are establishig corporate affordable housig teams that iclude officers from asset maagemet, plaig, housig, commuity services ad legal teams. This puts the local authority i a stroger positio to egotiate with developers ad housig associatios ad to articulate clear ad cosistet policy for housig ad plaig Beyod local authorities iteral coordiatio, developmets of ew housig require local authorities to coordiate activity amog may differet agecies (Case study 5). For large sites, developmets of ew housig may ivolve a wide rage of orgaisatios, icludig Eglish Parterships, Regioal Developmet Agecies ad other govermet departmets, as well as private developers. CASE STUDY 5 Local authorities eed to take a lead where sites ivolve multiple agecies May sites i Plymouth ivolve multiple agecies such as the Regioal Developmet Agecy, the Miistry of Defece, Eglish Parterships, housig associatios, property developers as well as the local authority. I such cases co-ordiatio ca be a challege because each orgaisatio will have differet reportig structures with differet priorities ad targets. To prevet delays the local authority takes a lead i coordiatig housig developmets. Source: Natioal Audit Office ad Audit Commissio examiatio CASE STUDY 6 Clearly commuicated forward plaig speeds up delivery To improve workig relatios with housig associatios ad developers South Hams Coucil has set up a plaig framework for future allocatios of lad for housig. The coucil had foud that housig associatios were expedig valuable time ad resources biddig agaist each other to develop particular sites rather tha workig with the coucil to develop a joit visio for proposed sites. The plaig ad housig officers ow work together i the productio of plas (kow as cocept statemets) for each site that set out clearly who the preferred developer ad preferred housig associatio are. Each site is the allocated a housig or plaig officer who is resposible for overseeig the coordiatio of the site. Housig associatios welcomed this approach. Tor Homes, a local housig associatio, has foud that it sets out a good framework for them to get ivolved at a early stage, which aids their busiess, fiacial ad risk plaig. Source: Natioal Audit Office ad Audit Commissio examiatio 3.13 Local authorities eed to establish strog relatioships with housig associatios so that the type of housig they deliver matches what is eeded locally (Case study 6). Most local authorities (78 per cet i our survey) have a list of preferred parter housig associatios, o average aroud 6, but this ca vary from 1 or 2 to as may as 15. Advatages of workig with preferred parters cited by local authorities i our survey icluded allowig for better trackig of performace, improved housig maagemet ad more local commitmet, as well as reduced risk ad speedier egotiatios for ew cotracts ad ew developmets. However, local authorities preferred parters are ot 38 Employers Orgaisatio, Recruitmet ad Retetio Survey, September

56 part three always the same as those of the Housig Corporatio. This icosistecy meas that developers are uclear about which parters they will be workig with i puttig together proposals for ew schemes, causig delays while the parters egotiate which housig associatios should be chose. Where there are disagreemets, curret ODPM guidace does ot help to clarify how preferred parters should be chose. However, the Departmet tells us that further guidace will be issued o this. Coucils kow who they are workig with. You have some cotrol over buildig ad log term maagemet of property. The housig associatios have some commitmet to the borough ad will deliver extra value such as employmet ad log term ivestmet, ot just a quick buck i. District Coucil, South East Source: Natioal Audit Office ad Audit Commissio examiatio 3.14 There is scope for local authorities to create greater matchig of what housig associatios wat to supply with local demad by ecouragig them to become more ivolved i the productio of local housig strategies ad some local authorities are addressig this by establishig joit liaiso where housig associatios ad local authorities determie shared policy objectives. Implicatios for efficiecy key cost drivers 3.18 A shortage of skilled persoel i housig ad plaig, together with a lack of joied up workig, causes delay ad icosistet messages for developers. This slows dow the delivery of affordable housig ad icreases developers costs, which ultimately fall o the public purse i the form of a higher uit price to be paid for the ew housig tha would otherwise have bee the case. Whether developers, housig associatios ad local authorities are clear about each others priorities Key fieldwork fidigs Sectio 106 is a icreasigly importat mechaism for deliverig affordable housig. However, the system is complex ad delays, icosistecies ad the complexity of guidace represet a sigificat blockage i the delivery chai But there is some evidece of progress, with some local authorities developig good practice, supported by actio from the Office of the Deputy Prime Miister. Source: Natioal Audit Office ad Audit Commissio examiatio Implicatios for achievemet of the target 3.15 Most local authorities i high demad areas have ow established affordable housig as oe of their corporate priorities, but without a clear framework to traslate this ito actio, clearly commuicated to developers ad housig associatios, they will fail to take the ecessary actios to lead delivery. This will delay the progress of developmets, or dissuade developers from operatig withi a particular local authority area, reducig choice ad competitio, ad riskig the coucil s ability to meet its housig targets A lack of egagemet with the public ca mea that citizes cocers about ew developmets remai uaddressed, affectig coucils ability to deliver the housig growth that has bee idetified as ecessary through housig eeds surveys Local authorities are required to play a key coordiatio role betwee differet agets i the delivery chai for affordable housig. Shortages of skilled housig ad plaig staff reduce the speed with which local authorities ca approve plaig applicatios ad legthe the developmet process At a practical level, affordable housig ca be delivered i two ways. For schemes ivolvig purely social ad itermediate housig, housig associatios together with private developers ca preset proposals to the Housig Corporatio which, i additio to wider cosideratios about how well a scheme meets regioal ad local housig ad plaig requiremets, assesses the capacity ad capability of the particular housig associatio(s) ad developers to deliver, by referece to factors such as past performace, fiacial stadig ad maagemet capacity Alteratively, local authorities, uder Sectio 106, ca oblige developers to provide a proportio of affordable housig as part of ew private housig developmets. This leads to egotiatios betwee the developer ad the local authority about the proportio of affordable housig that should be expected ad the precise teure mix of a scheme. The developer o the oe had ofte wats to maximise the proportio of private market homes, the local authority o the other may prefer to maximise the umber of affordable, particularly social reted properties. 51

57 part three 3.21 The balace or teure mix is critical to these deals. While itermediate housig is geerally acceptable to developers (because the residet commits his or her ow capital to the property) too may reted social homes o a give developmet raise fears about possible ati social teats ad perceived risks that the prices of private market housig maybe depressed. This may discourage developers i their plas who may seek better opportuities elsewhere Sectio 106 agreemets have become a icreasigly importat mechaism for securig affordable housig with aroud 40 per cet of the Housig Corporatio s Approved Developmet Programme ow beig spet o these types of sites (Figure 18). However, to esure value from available resources the Housig Corporatio s preferece is that affordable housig o such sites should, wherever possible, be built without grat Sectio 106 agreemets are a complex part of the delivery chai (Figure 19) ad problems i egotiatig these agreemets were cited by developers ad housig associatios i iterviews ad at our atioal workshops as oe of the primary barriers to deliverig more affordable housig (Figure 20 o page 54) While some local authority staff are commercially mided ad cofidet i makig decisios quickly, i other authorities developers are frustrated by staff who are slow to make decisios; for example local authorities ofte lack the capacity eeded to deal with complex egotiatios ad there is a shortage i particular of skills i developmet fiace techiques i local authorities (for example i calculatig residual valuatio which assesses the likely profit from a developmet, takig ito accout a rage of factors icludig the levels of plaed affordable housig). Also, with the curret shortage of qualified plaers, property developers fid that they are ofte dealig with temporary, agecy staff who do ot have a good eough kowledge of local eeds or the wider Sustaiable Commuities ageda. There eeds to be a balace betwee rigid plaig guidace (this at least brigs us clarity) ad flexibility i egotiatios aroud particular sites. The more iflexible a local authority is the more likely it is that the developer will walk away. Developer 18 % of total affordable housig supplied through Sectio Sectio 106 agreemets have become a icreasigly importat mechaism for securig more affordable housig Eglad 2001 Source: Audit Commissio South East Lodo South West The vast majority of local authorities will ot egotiate o the percetage of affordable housig they require, or eve the teure mix. Sometimes meetig the local authority demads would leave a egative lad value ad as a result sites will ot come forward for developmet. Developer Source: Natioal Audit Office ad Audit Commissio examiatio 3.25 Local authorities would like developers to approach Sectio 106 with a ope book providig site-specific fiacial iformatio such as expected profit margis. Where there are good relatios betwee developers ad local authorities, some ope book egotiatios are takig place, but most developers are reluctat to do so because of commercial sesitivities However, progress is beig made i hadlig egotiatios with developers. For example, Plymouth s housig eablig team icludes represetatives from valuatio who add expertise i egotiatig with developers, uderstadig lad values ad viability issues. Ad i 2003, the Audit Commissio Comprehesive Performace Assessmet foud that most (ostock owig) district coucils had made sigificat improvemets i their use of Sectio 106 agreemets. Actio icludes: 52

58 part three 19 The plaig process with Sectio 106 agreemets is log ad complex Submit Uderstadig of atioal plaig policy Statutory Coucil Cosultatio Housig Local Coucil Coucil policy o Affordable Housig & other requiremets Developer s egotiatig positio S106 egotiatio Coucil s egotiatig positio Ecoomic assessmet of proposed developmet S106 agreemet siged Ecoomic assessmet of proposed developmet Plaig Permissio grated Start build 1 developmet of ope market ad/or affordable housig Source: Audit Commissio NOTE 1 Plaig permissios expire after 5 years but this is uder review ad may chage to 3 years. Early egagemet with applicats early commuicatio with applicats ca help to speed up the process of seeig projects through the plaig system. A icreasig use of preapplicatio processes by coucils meas that developers will have a clearer idea of local authority coditios ad priorities at a very early stage. But the best performig coucils go further, carryig out a cotiuous dialogue with developers, ivolvig them i strategic plaig ad i formulatio of the developmet pla. Staffig ad use of exteral resources some authorities are puttig i place dedicated Sectio 106 officers as a additio to the plaig departmet ad have see major reductios i time take to reach Sectio 106 agreemets. Also, havig a sigle poit of cotact for applicats works well. Some local authorities are cosiderig allocatig extra resources by usig private legal firms to process agreemets ad joit provisio with other coucils. Ivolvig other agecies i egotiatios has also proved to be helpful. Re-egieerig the process by itroducig parallel (rather tha cosecutive) plaig applicatios ad stadardisig Sectio 106 egotiatio processes, South Hams coucil have reduced the time take to secure agreemet to weeks rather tha moths. These ad similar iitiatives are welcomed by property developers ad housig associatios i those areas that have begu to implemet them. 53

59 part three 20 Key barriers to reachig efficiet ad effective decisios o plaig agreemets The variatio i time take to agree Sectio 106 agreemets Icosistecies betwee approaches to plaig obligatios Complex supplemetary guidace For some authorities, a elapsed time of 60 weeks is average while for others agreemet is reached withi 13 weeks. This makes it very difficult for property developers to busiess pla ad to predict whe costructio ca begi. Developers must ivest sigificat time ivestigatig the differet approaches towards affordable housig take by differet local authorities. May coucils produce extra guidace i additio to their local pla ad local housig strategy. Although this is usually helpful because it provides a framework which gives developers greater certaity, it does create a added layer of complexity for applicats. Source: Natioal Audit Office ad Audit Commissio examiatio 3.27 Eglish Parterships curretly provides a support service to local authorities i the South East, Lodo ad the East through the Advisory Team for Large Applicatios. This pilot project (fuded by ODPM) provides advice to local authorities who are dealig with large (over 500 uits) housig applicatios. Local authorities welcome this iitiative ODPM is curretly workig o good practice guidace to support Circular 05/2005. As part of this guidace, the Law Society has bee workig o a draft stadard Sectio 106 agreemet. The Audit Commissio is also due to udertake a short study lookig at the effectiveess of usig Sectio 106 agreemets as a way of securig commuity beefits, icludig affordable housig There is clear evidece that there has bee a shift i approach towards affordable housig o behalf of developers. Sevety per cet of local authorities surveyed have foud developers to be more positive ow i their approach towards providig affordable housig. The three mai reasos give for this shift are, a greater acceptace o the part of developers to accept this approach (40 per cet); developers recogisig that they have o choice (17 per cet); ad developers havig a greater uderstadig of what is actually eeded. Some local authorities are seizig the opportuity to capture this shift i attitude by egagig with developers at a early stage i their plaig proposals ad by icludig them i the productio of their local housig strategies ad i formulatig approaches to Sectio 106. Implicatios for achievemet of the target 3.30 Problems i egotiatig Sectio 106 agreemets were cited repeatedly by developers ad housig associatios as oe of the primary barriers to deliverig more affordable housig. Implicatios for efficiecy key cost drivers 3.31 Where local authorities have set a clear ageda, establishig from the outset with delivery parters what they expect Sectio 106 sites to deliver i terms of teure mix (through the productio, for example, of clear Supplemetary Plaig Documets), egotiatios ca commece o a much clearer footig. This, combied with a shared kowledge of how Sectio 106 agreemets work, meas that deals ca be struck o plaig with miimal delay. Whether, with a icreasigly regioal focus to housig, there is effective joit workig across local authority boudaries Key fieldwork fidigs Joit housig eeds assessmets offer opportuities for icreased efficiecy ad effectiveess ad there is evidece of this startig to happe at a sub regioal level. There is little sig of joiig up over Sectio 106 egotiatios. Source: Natioal Audit Office ad Audit Commissio examiatio 3.32 Housig markets do ot coform to local authority boudaries ad, icreasigly, local authorities are havig to work alogside their eighbours i both assessig housig eeds ad i plaig for future housig provisio. Eighty-eight per cet of local authorities surveyed for this study stated that the amout of partership workig betwee local authorities had icreased i recet years; ad sevety-eight per cet of local authorities i the South East, Lodo ad South West ow work i partership with other local authorities either a great deal (44 per cet) or a fair amout (34 per cet). I some cases, this was i respose to Regioal Housig Boards eed to have a clear ad cosistet picture of housig markets ad housig eed across their regios. I others, such as Lodo, the issue has ivolved fudig decisios, with the creatio of five sub regios as a basis for recommeded allocatios from the Regioal Housig Pot. 54

60 part three Local authorities fid sigificat advatages i workig sub regioally The mai advatage is that you ca draw i icreased fudig ad i regioal areas of high demad you ca esure that the most urget eeds are beig met Housig Director, South East There is a greater tedecy ot to worry if a eighbourig borough gets a large site, we ca share that. It takes away artificial boudaries. Housig Director, Lodo Borough We get resource savigs o officer time ad we ca draw i fudig parters Housig Director, South West Ecoomies of scale are better, so havig a critical mass to attract resources, flexibility of beig able to move resources aroud ad to share expertise Housig Director, South East We do t have time to each idividually re-ivet the wheel, ad we re ot pullig i separate directios. Workig together meas a cosistecy i approach Housig Director, South East Source: Natioal Audit Office ad Audit Commissio examiatio MORI telephoe survey 3.33 Most partership activity betwee local authorities revolves aroud producig housig strategies ad housig eeds surveys But despite greater workig across local authority boudaries, coucils are ot developig shared lists of preferred parter housig associatios, leavig potetial for protracted egotiatios about parters whe udertakig joit developmets. Also, the Housig Corporatio s ew parterig approach meas that 80 per cet of developmet fudig is ow chaelled through just 70 housig associatio parterships. Local authorities have ot yet worked out how to respod to the more restricted choice of parter housig associatios There is also little sig that local authorities are workig to develop joit approaches to Sectio 106 egotiatios. This is a cause of frustratio to developers who must sped time uderstadig the differet approaches ad expectatios as expressed i the supplemetary plaig guidace of local authorities withi particular sub regios Developers ad housig associatios reported i our workshops that they were ofte left cofused about the status of sub regioal processes. Apart from i Lodo, where housig sub regios have bee created after discussios betwee local authorities ad the Housig Corporatio, sub regioal work is usually dow to the iitiative of local authorities. This has resulted i sub regioal work beig udertake differetly betwee ad withi regios. The potetial efficiecy gais offered to CASE STUDY 7 Workig across local authority boudaries is a effective way to egage with developers ad housig associatios The West Berkshire Housig Actio Group icludes developers as well as represetatio from local authorities housig associatios ad local employers. This assists i the delivery of affordable housig, for example, by egotiatig a agreed approach to Sectio 106 agreemets. Source: Natioal Audit Office ad Audit Commissio examiatio local authorities whe coductig joit research ito housig eeds are ot always fully realised because local authorities cotiue to coduct ad commissio local research despite havig udertake sub regioal research. Implicatios for achievemet of the target 3.37 Workig with eighbourig local authorities brigs greater ecoomies of scale with more effective use of resources, improved sharig of best practice, greater cosistecy i approach to delivery (a importat factor for housig associatios ad developers) ad more access to fudig. Beefits are put at risk from beig realised however if sub regioal activity is ot set out clearly ad commuicated well to developers ad housig associatios. Implicatios for efficiecy key cost drivers 3.38 Sub regioal cooperatio, whereby local authorities work together, offers potetial efficiecy savigs; for example by sharig scarce housig ad plaig staff, by udertakig joit Housig Needs Assessmets, ad by establishig commo approaches to plaig obligatios. I a situatio where there is a eed to ivolve both regios ad local authorities i fudig decisios, some complexity is ievitable i how this operates. It is therefore importat that complexity is maaged so resources are ot wasted. Savigs are at risk, for example, if local authorities do ot reduce the amout of work udertake locally which duplicates work doe at a sub regioal level. 55

61 part three coclusios Agaist a pressig eed for large icreases i the supply of affordable housig, local authorities role has evolved from usig public fuds to commissio ew house buildig to oe where they have o direct fudig for ew housig but have sigificat impact o the supply of ew homes through their cotrol over plaig. May local authorities have ot take o the leadership role eeded to covice their commuities of the eed for developig more affordable housig ad to allay fears by ivolvig people i how developmets might be desiged ad delivered. The speed with which local authorities grat plaig permissio has a sigificat impact o how quickly developers ca build ad ca push up costs. Our fieldwork idicates, however, that cofusig sigals from local authorities, sometimes from differet parts of the same local authority, make it uclear to developers what is expected of them, leadig them to waste time o developmet proposals that will ot be acceptable. Local authorities also eed to better uderstad the market place ad the commercial risks faced by developers, so that realistic positios are take from the outset i respect of the balace betwee social, itermediate ad private housig, so that deals ca be doe with miimal delay. Where local authorities are usig good practice i relatio to Sectio 106 processes, the time eeded to broker agreemets ca be reduced from weeks to days, with savigs to all parties. Where local authorities are takig opportuities to work with adjacet authorities to develop affordable housig, there is cosiderable scope for realisig efficiecies through joit procuremet of housig eeds surveys ad sharig of scarce plaig ad housig staff. 56