The Policy and Delivery of Affordable Housing in England - Term Paper Example

 The Policy and Delivery of Affordable Housing in England Introduction: There has been a notable increase in the prices of houses in England which is making it very difficult for the people to secure permanent homes. The growing need of building new, affordable homes and to manage the existing homes more efficiently can no longer be avoided. Especially since the average household income has not been increasing with the increasing house prices, the Government has been under a lot of pressure to provide assistance to the people. The Government, in return, has been taking steps to meet the increasing demand of affordable housing and has come up with a number of solutions such as Section 106. The department responsible for this is the Communities and Local Government department which makes the housing policies in England. The aim is to increase the number of affordable housing in available in the market and to promote home ownership. There are a number of way in which new housing can be provided, and the Government has been exploring these ways to ensure the delivery of affordable housing. This paper has explored the housing associations, affordable housing, and their need in detail. The paper also provides the policies and delivery of affordable housing by the Communities and Local Government with a detailed discussion on Section 106. The paper also includes the barriers faced by the developers in the building of new affordable housing. Affordable Housing and Housing Associations: There is a lot of confusion in the way the term “affordable” is used in relation to housing and it may not be necessary to have a precise definition when talking in general terms, but there is a need to achieve some specific outcomes, it becomes important to provide definitions which are precise and appropriate to avoid any confusions (Chartered Institute of Housing 2002). However, affordable housing may be defined as “dwelling units whose total housing costs are deemed affordable to those that have a median income” (Borough of Roseland 2010). The Housing Associations are independent societies, bodies of trustees or companies in the UK that work on a non-profit basis and are set up to provide affordable social housing for people with an average income and in housing need (Communities and Local Government 2010). The two main types of affordable housing are social rented housing and intermediate housing (National Audit Office 2005). The social rented housing is provided either by the local authorities or housing associations, to people who are in need, at a subsidised rent while intermediate housing is designed to help people get intermediate home ownership through schemes such as shared ownership or right to buy (National Audit Office 2005). In England, the National Housing Federation represents around 1,200 housing associations which are independent and work on a non-profit basis and whose mission is to maintain and promote housing associations and the work done by them along with endorsing better housing and neighbourhoods (National Housing Federation 2010). It has become very difficult for people in the past few years to obtain affordable housing because of the shortage houses and their high prices (Wilson & Anseau 2006). The need for affordable housing is increasing with time in England. A cost of private sector housing has become so high that it is almost as much as the average household income and most of the population in England do not have enough resources to demand a decent housing effective in the market (Holmans 2001). Kate Barker published a report, Review of Housing Supply: Delivering Stability: Securing our Future Housing Needs, in 2004, highlighted these issues which encouraged the Government to commit itself to take measures to improve housing supple (Barker 2004). As a result, new household projections were presented in 2006 which predicts household growth in future and requires additional housing, taking 2001 census into consideration to calculate whether the efforts made by the Government will have any significant affect on the housing prices in the future (Wilson and Anseau 2006). The Housing Associations are largely responsible for the provision of new homes for rent and some even work to help people who are not that well off to buy their own home (Communities and Local Government 2010). These Housing Associations in England were formerly supported by a non-departmental public body, known as the Housing Corporation, which used to report to the Local Government and Communities (Aref 2005). However, the operations were ceased by the Housing Corporation in November 2008, and so the duties formerly performed by it were transferred to the Tenant Services Authority (TSA), which is now responsible for the regulations of Housing Associations along with the Homes and Communities Agency (HCA), which is now responsible for investments in the Housing Associations (Communities and Local Government 2010). Need for Affordable Housing in England: Social rented homes play a significant role in the provision of affordable housing in England and so their shortage can create many problems, such as applicant waiting for a long period of time before they’re given a permanent home, forcing many households to live in insecure temporary accommodation for years, etc (Shelter 2010). The demand for social rented housing is increasing every year and is becoming more difficult with time for the Government to cope with the issue. There has been much research and discussion about how much affordable housing is needed in England since 1990’s illustrated by facts, such as the number of households residing in temporary accommodation because they are still homeless and the ones living in housing which is overcrowded or deemed unfit for living (Wilson and Anseau 2006). In a research published by the Housing Corporation in 1992, concluded that England would need an average of a hundred thousand new housing units each year till the year 2001 to meet the housing needs (Whitehead and Kleinman 1992). Another research done by Alan Holmans, on behalf of the Joseph Rowntree Foundation, published in 1995, concluded that at least 117,000 new social homes would be needed per year from 1991 to 2011 to meet the housing demands (Holmans 1995). Because of the difference in the figures in these results, and the results of other similar researches which were conducted at around the same time, the Commons Select Committee, in October 1955, held and inquiry itself to look into the matter (Wilson and Anseau 2006). The Committee concluded that these estimates were exaggerated and the actual need for social housing was estimated to be much lower than presented and that the future breakdown of tenure depended on many variable which were quite difficult to predict (Wilson and Anseau 2006). Another housing inquiry was carried out in the 1997-98 parliamentary session by the Commons Selected Committee, which also considered the “valdity of the Government’s household projection figures and the regional allocation of the projected increase” (Wilson and Anseau 2006, p.11). It was concluded that in England, the production of the rented dwellings had been the half of what was produced in 1995-96 from the Housing Corporations Approved Development Programme, resulting in the provision of only 14,171 new homes in 2000-01 (Wilson & Anseau 2006). The cause of reduction in the number of newly built homes was said to be the increased costs in London (Chartered Institute of Housing 2002). It was estimated by Alan Holmans that the newly arising needs for the social dwellings will increase from 90,000 a year in 1991-2001 to a 100,000 in 2001-2011 (Holmans 1995). The Barker’s analysis was updated by CCHPR, which was especially formed by Shelter in 2005, and it concluded that Barker’s declining figures of new households and social housing required were not accurate (Shelter 2007). According to the report published by the CCHPR, at least 40,000 units of social rented housing must be established every year to meet the housing need, which would result in an increase of 675 pounds in public expenditure a year (Wilson and Anseau 2006). The report also concluded that in addition to the 30,000 homes a year by 2007-08, which was the Government’s was planning to provide, a total of 60,000 social rented homes, or 20,000 a years, will be needed from 2008-09 to 2010-11, to keep up with the increasing demand of social housing stated in the Barker review, increasing the public expenditure to over a billion pounds a year (Shelter 2005). Another inquiry was carried out, the Affordability and the Supply of housing over 2005-06, by the Commons Select Committee which was published in June 2006 (Wilson and Anseau 2006). The Committee concluded that the objective of the Government to increase the net number of homes to 200,000 by 2016 was not enough to keep up with the new growing household projections and said that it was important for the Government to promote the level of building (The Commons Select Committee 2006). In the direct Government funding chain, the affordable housing is very simple since most of the money is given from the ODPM to the Housing Corporation which then makes all the needed payments to the housing associations and rest of the associated bodies (National Audit Office 2005). Policy and Delivery: Building new homes is a very difficult process and depends on the operation of a complicated delivery chain which involves a number of different players from private and public sectors (Shelter 2010). The sectors are made up of private developers who gain profit by buying and selling new homes; local authorities which are responsible for providing land for development and granting to the developers the planning permission; Central Government which develops “policies and regulatory framework for housing delivery” and provides national planning guidance; Housing Associations build and manage affordable housing of both, social rented homes and intermediate homes; and the Homes and Communities Agency, which is the youngest national body, is charged by the Government to make sure that affordable housing is provided in England and to support their renewal (Shelter 2010). The House prices have increased by 0.6 per cent in July and the average UK property is now worth 167,425 pounds (King 2010). Even though the house prices continue to increase, the average household income remains the same, making it more difficult of people to secure safe housing. The House prices were very high in the beginning of the decade but the increase in prices was confined to London, the South East, and a few other regions but since 2005, there are now many areas in all the regions where the house prices are very high making it extremely difficult for the new time buyers to buy a home in the market (Communities and Local Government 2006). As a result of the planning agreements, which were made between the local councils and private developers, many new social rented houses are being built, only on the condition that a definite amount of the houses built, including social housing for rent, will be of affordable price (Communities and Local Government 2010). However, this agreement is not always enforced and as a result the number of social homes that are delivered in the end is actually less than originally agreed (Shelter 2010). Social rented and other affordable homes need to be subsidised in order to be built so the housing can be offered at rents which are lower than the market and can be achieved in three different ways (Shelter 2010): 1. Grants from the Government to housing associations through the Homes and Communities Agency. 2. Private borrowing by the housing associations against future social rental payments. 3. Planning agreement between developers and local authorities, also known as Section 106 agreements. Section 106: A large number of affordable housing provisions are given using the land use planning system with the help of Section 106 (S 106) agreements, but not much is known about their implementation (Monk, et al. 2006). According to the Section 106 of the Town and Country Act of 1990, planning obligations, also known as Section 106 agreements, the local authorities are to settle arrangements with developers under which the developers contribute to the infrastructure, either in cash or in kind, in return for the grant of planning permission (Arbour, et al. 2008). In simple words, Section 106 planning agreements ensure that the developers contribute in the affordable housing through planning gain (Monk, et al. 2006). The Section has been described as an “increasingly important lever” in the affordable housing delivery chain by the National Audit (Joint National Audit Office and Audit Commission 2005). Since the number of S106 affordable homes given permission has been rising more rapidly than the S106 affordable completions, it is predicted that the system may not be able to deliver the agreed levels of affordable housing in time (Monk, et al. 2006). The Department of Local Communities and Government concluded in 2006, that the “proportion of planning permissions accompanied by planning agreements had risen from 1.5 per cent of all permissions in 1997-98 to 6.9 per cent in 2003-04” (DCLG 2006). It is expected that the contributions made by the developers will allow 30 per cent of the dwellings provided on the side to become affordable, based on the developer contribution being equivalent to the social housing grant available for each of the affordable housing units (Thanet District Council 2010). The affordable housing delivery chain has come under a lot of pressure to keep up with the Government’s wider programme and secure 21.5 billion of annual efficiency saving according to the Public Service Agreement targets (National Audit Office 2005). The Government announced its plans for securing affordable housing through the planning system in February 2003, and also expressed its intentions to replace planning obligation negotiations with a tariff style contribution (ODPM 2003). Section 106 has been playing its part in increasing the supply of the affordable housing in the market but there is still the need for a more acceptable and clearer message from the local authorities to prevent the developers from wasting time and effort in to drafting unacceptable proposals for new schemes (National Audit Office 2005). However, once the development begins on the site, Section 106 delivers what was agreed in most of the cases (Monk, et al. 2006). Barriers: Building new homes requires a long procedure before the building can even begin. First the developers must find a suitable site which they plan to built and then seek planning permission from the responsible local authorities. The developers must be convinced that they will find people who are willing to purchase the homes they build at a price which will allow them to make enough profit after paying for the costs of building and buying (Shelter 2010). The most significant barrier that the developers face after finance is the developer contributions, under Section 106 and tariffs, negotiated in strong market conditions (SEEDA 2009). Keeping this in mind, the Government has taken measure to encourage the developers to build new homes. National guidance now requires that the local councils must identify enough land ready for development in their local areas for at least 5 years in advance (Shelter 2005). High monthly payment to banks has been a big problem for the existing and potential home owners. Therefore, the Government reached an agreement with Advantage, Halifax Bank of Scotland, Nationwide, and Yorkshire Building Societies on July 31, 2006, over the private financing of equity loans, which means that the Government funding will increase, making sure that more people are assisted in the buying of home on the open market (DCLG 2006). The aim of the Government is to assist 20,000 households in the home ownership using shared equity loans (Wilson and Anseau 2006). The Government has also maintained a register of extra public sector land which can be used for building new houses and has been making efforts to release enough land to provide at least 200,000 new homes by 2016 (Shelter 2010). Conclusion: The Local councils have been playing a very important role in the provision of affordable housing using Section 106 and are believed to have provided around half of all the affordable housing in England (Monk, et al. 2006). Even though many local authorities manage to deliver social and affordable housing, many a times the homes agreed under Section 106 agreements are not delivered because of the lack of enforcement. The Government has also been encouraging other organizations, such as councils, to participate in the process and to form local housing companies (Shelter 2010). It is very important for the Government to keep up with the increasing demand for affordable housing in the region. The Government has been putting a lot of effort in the delivery of affordable housing throughout the region and has formed organization and communities to achieve this, such as, Homes and Communities Agency (HCA) and the Tenant Service Authority (TSA), both created to improve the development of new affordable housing. List of References Arbour, T., Shawcross, V., Hamwee, S., Johnson, D., McCartney, J. and Neill, B., 2008. Who gains? The operation of section 106 planning agreements in London. 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