Housing market and low income housing provision in UK by lanyuehua


									        Housing market and
low income housing provision in UK
         UK-Brazil urban network
                March 2011

               Youngha Cho
         Oxford Brookes University

1. Housing policy: brief overview
2. Social housing provision for low income household
   in UK
3. Impact of demographic and economic changes
      The impacts of economic downturn
      The impacts of political regime change
4. Social housing reform: new delivery model for low
   income household
5. Conclusion and responses

1. Housing policy: brief overview
 After the WWII:
    urgent need to repair war damage,
    active urban renewal programmes during the late 1950s and 1960s,
    mass construction of new housing

 1970s to 1990s: characterized by Thatcher government (1979-1990)’s policy
    Deregulation and liberalization
        • Deregulation of the financial system
        • Housing privatization
             • Right to Buy (privatisation of social housing)
             • Deregulation of private rented sector
    Restructuring housing subsidies
        • Supply-side subsides demand-side housing cost subsidies
    Asset Restructuring of social housing sector

Key policies in 2000s
   2000s: focused on tackling localized and contingent problems,
      different housing problems between high growth area and low demand
      affordability problems in the south/London area,
      low demand in north regions
      mismatch between supply and demand.
   2001:Housing Green Paper, Quality and Choice: A Decent Home for All
      Focus was mainly on social sector housing’s quality and condition, up-
        grading the existing stock
      No mentions on new dwellings to be built
   2003/4 : Kate Barker Report ,
      Lack of new construction
      Worsened affordability
      Planning regulations

   2007: Housing Green Paper
      New mass construction plan: 2 million new homes by 2016
                                   3 million new homes by 2020

2. Social housing provision for low income household in UK

  Housing revenue grant (demand subsidy)
     aimed at supporting the monthly housing costs of
     either direct to tenants in the form of housing benefit
     or in certain cases, to providers of special needs

  Capital grant (supply subsidy)
     subsidised construction of housing
     managed by local authorities and housing corporation

Social housing products by capital grant
    Social rented housing
        LA housing (11 %, 2007)
        HA housing (8 %, 2007)
    Rented housing owned and managed by local authorities and registered social
    target rents are determined through the national rent regime.

    Intermediate tenure housing (Low Cost Home Ownership)
        It helps social tenants, key workers and first-time buyers to get onto the
          housing ladder.
        Housing at prices and rents above those of social rent, but below market
          price or rents.
        includes shared equity products (e.g. HomeBuy), other low cost homes for
          sale and intermediate rent
        LCHO gives housing developers access to grants for the provision of new
          affordable housing.
        Also help housing associations in encouraging and supporting their social
          rented tenants into affordable home ownership.

Low Cost Home Ownership scheme
There are currently five products in the HomeBuy scheme:
 New Build HomeBuy: new homes are provided by our development partners and
   offered for sale as leasehold properties on shared ownership terms

 Open Market HomeBuy: purchasers buy a home on the open market with the
  benefit of an equity loan that sits alongside a conventional mortgage

 Social HomeBuy:enables social housing tenants of participating housing
  associations and local authorities buy their current home either outright or on
  shared ownership terms.

 HomeBuy Direct: purchasers buy specific new build properties with an equity
  loan of up to 30 per cent of the purchase price, with the loan jointly funded by
  the government and the developer.

 Rent to HomeBuy: selected new build homes are rented on intermediate rent
  terms for up to three years, after which time the tenant can purchase their home
  through the New Build HomeBuy scheme

Relative costs of capital grant required to develop
affordable housing

  Social rent: £67,932 per unit on average (£113,775 in London)

  Intermediate rent: £44,023 per unit on average (£55,840 in

     OpenMarket HomeBuy:£34,960 per unit on average
     NewBuild HomeBuy: £30,829 per unit on average

 Source: Affordable housing review, 2009 Knight Frank

Housing under-supply and mismatch in nature

Owner-occupier focused policy

Relative poverty of social tenants

Household incomes as a percentage of the average.
France(1996) Germany(1996) GB(1997/8), Netherlands(1998) Sweden(1997)

Source:ODPM 2005, Lessons from the past, challenges for the future for housing policy

Incomes as percentage of average

Source:ODPM 2005, Lessons from the past, challenges for the future for housing policy

   Greater levels of income inequality in Britain
   Greater concentrations of households from the lowest income deciles live in the
    British social rented sector.
   Greater commitment in Britain to house the most disadvantaged groups in the
    social rented sector.

Summary of English Housing Policy: 1970s-2000s

 Housing under-supply: supply mechanisms are not
  providing sufficient amount of new housing for both
  market and social sector

 The deregulated finance market combined with a highly
  regulated land market produced housing market instability

 Owner-occupier focused policy

 However, greater commitment to house the most
  disadvantaged groups in the social rented sector.

 Lack of social housing in high demand areas

3. The Impact of demographic and economic changes
  Household estimates and projection by household type, England

  Rapid increase of one person household

Aging population

  more vulnerable and no/low income hh

House price increase (real house price 1969-2002)

    Strong long term upward trend
    3.3% pa in real terms over this 35 year period
    Low supply elasticity
    Regional differences

Worsened affordability (house price-income ratio)

   Ratio of average house price to average disposable
    household income.
   The worst between late 1980s and early 1990s.
   The latest boom period ( 2003-2007) : much worse

Households in temporary accommodation and B&B in England

    For poorer and vulnerable households there are particularly acute
    87,000 hh living in temporary accommodation including around
     4,000 in bed and breakfast.

 Source: Housing Green Paper (2007)

   The number of hh waiting for social housing has risen from 1m to 1.8 m
    over the last ten years(1997-2007)
   Provision of new social housing has increased by 50% in 2007-8 since
   However, it remains significantly lower than the 40,000 households
    which make up newly arising need each year.

How the recession has changed the housing market?
   Downward trend in house prices.

   It does not mean improved affordability.
   In mid 2007, FTB bought a property priced
    at 5.4 times their annual salary. Falling
    prices since 2007 meant that this ratio had
    fallen to 4.2 by mid 2009.

   Real concern is access to mortgage
       Mortgage lending 2% down on Oct
         2010 than one year before.

   UK GDP rose by 0.8% in Q3 2010, the 4th consecutive quarter of growth
    since the recession
   Q3 Housing starts 9% lower than previous quarter but annual housing starts
    in England totalled 102k in the year to Sept 2010, 40% up on previous year.

How wider political regime changes are beginning to
impact on thinking and activity in the sector?
 New coalition government
 Spending review outcome
    “Most challenging situation in living memory”
       To illustrate – Total Departmental Capital(DEL) forecast outturn of
        £56.6bn in 2009/10
       By 2011/12 planned DEL falls to £43.5bn
       And by 2013/14 £39.2bn

      Source: CLG, 2010, M Bailes, Affordable Rent-an introduction, Affordable Housing

    The use of grants to fund social housing, particularly low cost
     homeownership is likely to be questioned.
    Affordable housing providers will need to become far more self reliant,
     will need to work their existing assets harder to support more

4. Social Housing Reform
   Change was inevitable.
   Reduced public funding- requires innovation and value for money
    driven by local partner
   Land & regeneration- public land assets crucial for delivery
   Renewal of existing stock

   In November 2010, radical reform of the social housing system was
   Local decisions; A fairer future for social housing :
      To ensure that councils and social landlords can better meet the
        housing needs of their communities
      include changes to the way people access social housing, the types
        of tenancies which are provided

The Social Housing Reform

   The measures include:
      improving social housing mobility(social home swap scheme)
      changing the way social housing is regulated
      reform of the council housing finance system, and
      doing more to bring empty homes back into use as affordable

Affordable Homes Programme (2011-2015)
   Aims to increase the supply of new affordable homes in England.
   During 2011-15, the Homes and Communities Agency will invest £4.5bn in new
    affordable housing through the Affordable Homes Programme.
   The majority of the homes built will be made available as Affordable Rent and
    with some for affordable home ownership.

   A new delivery product, ‘Affordable Rented Housing’ is introduced:
      a form of social housing introduced from April 2011.
      provided by registered providers of social housing,
      has the same characteristics as social rented housing
      except that it is outside the national rent regime,
      is subject to other rent controls.
          Independent valuation based on method recognised by RICS
      Affordable rent may be charged at up to 80% of local market rents
          Uprated at RPI+1/2% for the period of a tenancy
      Available to providers who commit to reinvest extra revenues in new supply

A new delivery model for low income household:
Affordable Rent Model
 Traditional social rent                           Affordable Rent
    Rents at 50% of market rent                      Rents at up to 80% of market rent
    Life time tenancies                              Fixed term tenancies
    Grant at £ 80k per unit                          Grant as part of wider subsidy
    Limited use of existing assets                   Asset management strategies
                                                       involving conversion of voids and
 Source: CLG, 2010, M Bailes, Affordable Rent-an introduction, Affordable Housing Division.

 The aims of the new delivery model are to:
  meet housing need at a local level;
  provide a more flexible offer for social housing tenants;
  ensure that public funds (and funds generated from conversions) are
   properly and effectively spent and;
  maximise delivery of new affordable housing supply.

The new local delivery model

   Affordable rent has to be aligned
    with local priorities

   HCA will assist local delivery
    with the right mix of:
      Public land assets
      Affordable rent
      Regulation
      Aligning public funding
      Private and local partners

     Source: HCA, 2010, P Ritchie, HCA Investment seminar-Affordable Rent

It is a local investment planning!

   Locally led, voluntary process to develop local priorities for investment
   HCA will enable local areas to realise benefits from land
   £1.4 bn Regional Growth Fund will be key source of funding over next three
   HCA is working with 160 local partnerships
      Working closely with emerging Local Enterprise Partnership (LEPs)
      24 LEPs announced

The Role of HCA (the national housing and
regeneration delivery agency)
   Investment and enabling agency:
       investment in new housing and communities,
       enabling support to local partners,
       utilising public sector land assets, assisting DCLG playing central role in
        managing land and property assets of RDAs and
       the economic regulation of registered housing providers (RPs).

   Delivering three investment programmes:
      A new affordable housing model
      Addressing the Decent Homes backlog to prepare for self-financing
      P&R commitments and maximising receipts

   Central to the new role is combining investment, enabling and land to support
    the affordable rent model

     Source: HCA, 2010, P Ritchie, HCA Investment seminar-Affordable Rent

5. Conclusion and implication
   New economic and market conditions
   Reduced public funding signals a shift in the way housing and
    regeneration are delivered
   The Localism Bill (Dec. 2010) shift power from central government back
    into local communities.

   Flexible local approach is essential for delivery of social housing
   This is an opportunity to support diverse range of people on waiting

   HCA will invest in housing and enable regeneration
   HCA will co-operate with local authorities in their strategic housing role
    to allocate affordable rent properties.

   Registered housing providers will need to be included in planning and
Private sector (developers/housebuilders)’s responses

 As land and sales prices have fallen, section 106 agreements
  becoming impractical.
 The importance of grant as the major source of social housing
  support will increase for their business.
 This is a real opportunity for developers
    There is no option but to consider the affordable
      rent/intermediate housing as the future growth sector.
 They welcome the flexibility in terms of the tenure types
 They argue that HCA should be given far more flexibility
  regarding subsidy allocation.

Research Questions

   We are not sure about yet how the new model, under the social
    housing reform framework, will work!

   How will the central government’s power be devolved to local
    communities to implement the new delivery model smoothly?

   The new model implies more support for housing need of far broader
    and wider demographic group (middle income household). Will the
    model be fair to those who need it most?

   Some concerns about the new model are the general drift of policy
    towards flexible tenure and a blurring of the boundaries between
    private, intermediate and affordable housing. How would the new
    model will support people it is intended to help in the same way that
    current social housing does?


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