OPTIONS FOR POLICY ANALYSIS AT STAGE 2
EMERGING KEY ISSUES
- Too Few New Houses Being Built
Background
The Audit Scotland report suggests that too few houses are being built in Scotland and that there is a growing overall shortfall. This conclusion is based on demographic projections and the conclusions of modelling work undertaken by Glen Bramley of Heriot Watt University, funded by the SG in 2005 and which has not been updated. These conclusions are supported by Shelter’s own analysis. Further background is given in the Housing Supply section (paragraphs 7 to 17 of the Current Housing Issues paper circulated for the August meeting of the Commission).
Policy Options / Explanation / Comment / Recommendation for Stage 2Increase Funding for SG Affordable Housing Investment Programme (AHIP) / AHIP main SG programme for providing subsidies for all forms of “affordable housing” and includes funding for new housing. / Any increase in AHIP budget would be expensive and require re-allocation of resources from other parts of the SG budget / Consider in detail at stage 2
Adjust split of AHIP funding between subsidies for new social housing, “mid market” rental housing and low cost home ownership (LCHO) / New social housing generally attracts higher levels of subsidy than the other options. The balance between the affordable housing options determines the amount of housing that can be bought for a given amount of money. / Higher levels of subsidy for social housing may be justified in terms of wellbeing / Consider in detail at stage 2
Change the funding model for affordable housing. / Public funding for affordable housing is provided in the form of grant which is intended to bridge the gap between the total cost and the value of a loan that could be met from rental income (allowing for other costs such as maintenance and management). The lower the grant, the more affordable houses that can be provided for any given affordable housing budget. / Grant rates have oscillated in recent years (see Finance Paper) and there are other factors besides grant that can affect the viability of any building project, for example, the extent to which it is possible to cross subsidise from reserves or utilise land already in the ownership of the landlord in question. / Further consideration as to whether it is possible to undertake further work in the time available and whether this is likely a priority for the Commission.
Attract new forms of funding/loan finance for affordable housing / In addition to any Government subsidies, social landlords normally need to borrow to fund new housing projects. Traditional bank loans (as used by RSLs) have become more expensive and shorter term. / Recent research undertaken by Professor Gibb and others. / Worth reviewing at stage 2 in the light of recent research
Provide government guarantees to facilitate cheaper or additional borrowing / Government guarantees could allow social landlords to borrow more (and possibly at cheaper rates) than might otherwise be the case. / The SG’s National Housing Trust initiative provides guarantees for local authority borrowing. / As above
Seek to attract institutional investors to fund new private rental housing / Institutional investors in the UK such as pension funds have been reluctant to invest in rental housing / In Scotland, most landlords have a very small portfolio (less than 4 houses in the main) and have bought through the buy to let scheme or are “accidental” landlords letting out a house which is not required for one reason or another. To date, most institutional investment has targeted student housing. / As above.
Require local planning authorities to allocate more land for new housing / Shortage of land zoned for new housing and without infrastructure constraints is sometimes alleged to be a major brake on new housing development (all tenures) / Longstanding arguments about merits of brown field and green field sites, impact of land hoarding by developers and availability of funding for tackling infrastructure constraints. / Undertake a review of existing research and policy work in this area, for example, the work undertaken by Kate Barker at the behest of Gordon Brown. It is also possible that the RICS Scottish Commission may make relevant recommendations on this topic.
Use planning powers to require developers to include a proportion of affordable housing in all new developments / Local authorities have powers under planning legislation (known as section 75 powers in Scotland) to require developers, as a condition of planning permission, to include certain types of additional development. Section 75 powers have been used to require a proportion of affordable houses. / Seen as a significant potential source of affordable housing before the GEC, it is unclear how many houses and of what type were actually realised and what the indirect consequences might have been. Current potential, post GEC, likely to have reduced but may increase in the future. / Undertake a review of experience to date, particularly in experience in England where use of equivalent powers has been greater.
Provide increased resources for the Empty Homes Partnership (EHP) / Aims to reduce number of long term empty homes in the private sector. Not directly related to new building, per se, but aims to increase the effective housing stock. / Relatively small numbers of housing brought back into use so far. Not clear how much potential there is. / Review potential based on experience with EHP to date.
- Too little investment in improvement, repair and maintenance of existing stock (as opposed to expenditure on acquisition)
Background
There are a number of longstanding housing quality issues which are discussed in the Housing Quality section (paragraphs 18 to 27) of the Current Housing Issues paper. In essence, these problems largely relate to lack of expenditure on improvement, repair and maintenance.
Policy Options / Explanation / Comment / Recommendation for Stage 2Damping house prices through tax changes / There are a number of potential tax changes which could act a financial disincentive to excessive house price increases including applying capital gains tax to sales of principal residences, taxing the imputed value of housing and modifications of stamp duty (which is paid by the buyer not the seller) / Apart from stamp duty which is being devolved all other relevant taxes are currently reserved to the UK Government.
It is generally considered that such tax changes could be very unpopular with the electorate. / Review the in principle case for tax changes and the ways in which these might be applied to minimise undesirable side effects.
Providing equity loans for certain types of improvements/repairs / These would be interest free or low interest loans for approved major works necessary to protect the integrity of the property or improve its energy efficiency. Loans would be repaid when the house is sold on. / Equity loans will be available for house purchase in Scotland (new houses less than £400k).
Under the “Green Deal” fuel companies arrange “loans” for energy efficiency works which are repaid through increases in fuel bills.
There are also some grants available for low income households for energy efficiency works
Any new system of equity loans would have to compete for funds with existing programmes and be tightly defined to constrain costs. / Undertake further work at stage 2
Promote equity release where funds are used for repair and improvement by providing a Government endorsed scheme or schemes. / Equity release schemes allow owners to cash in some or all of the equity in house whilst allowing the owner to stay in the house. For some older owners, they may be an alternative to “downsizing”. / Some lenders may still offer equity release schemes but none currently operate on any scale.
Many older households have difficulty with the idea of equity release schemes and some schemes have criticised. / Consider what might be done to make this work in practice more effectively than at present.
Upgrading the Scottish Housing Quality Standard (SHQS) / All social landlords are required to bring their houses up to the SHQS by 2015. The SHQS was originally specified in 2004 but the energy efficiency standards have subsequently been raised. / The Scottish Housing Regulator monitors progress. Any further improvements in the standard itself are likely to focus on energy efficiencyand/or improvements to the external environment (not currently included in the SHQS)
The cost of any works required to meet the SHQS have to be met out of borrowing (repaid from rental income)or accrued surpluses. / Work to decide whether improvements are a good idea, in principle, and , if so, what should be included.
Encouragement and/or legislation to require owners of property in flatted blocks to establish an owners association, appoint a management agent and establish a sinking fund to finance future major repairs / The Tenements (Scotland) Act 2004 establishes a default scheme for management of communally owned property which owners may use if they so wish. This proposal would encourage or require owners to adopt this model unless another alternative had been agreed. / Agreeing communal repairs is a general problem for flatted blocks in multiple ownership. Most modern blocks of flats are established with an owners association and an appointed agent.
Older blocks of flats (tenements) are much less likely to have similar arrangementsand sinking funds are very rare.
Owners associations could encourage other forms of co-operation between neighbours with wider wellbeing benefits.
Many owners are suspicious of property agents/factors which led to a limited measure of statutory regulation in 2011. / Undertake a review of existing research to identify what practical steps could be taken with minimal or no public funding.
- Too many older households lack the housing support necessary for independent living in their own homes or choices to move to something more satisfactory
Background
The Demographic Context paper circulated for the October meeting pointed to a substantial growth of older households in Scotland over the next 25 years
Policy Options / Explanation / Comment / Recommendation for Stage 2Provide more resources for handyperson, small repairs and telecare services / These are examples of housing based “preventative” services that can help older persons to stay in their own homes / The SG’s Strategy for Housing for Scotland’s Older People 2012 to 2021 expresses strong support for these services but fails to provide a way of resourcing this.
Much of the existing provision comes through Care and Repair teams (ngos) which exist in most parts of Scotland and which are funded by local authorities and have proved vulnerable to funding cuts / Undertake further work on funding options
Ensure speedy delivery of disability adaptations / Many older households require adaptations to their houses to make it feasible for them to stay in their existing houses. / Substantial sums of public money are spent on disability adaptations but the funding mechanisms vary by tenure. Process of considering applications can be protracted / Consider if we should be recommending a more integrated and speedier delivery mechanism.
Provide more specialised housing for older persons / In the social rented sector, specialised housing normally means older persons bungalows or flats, sheltered housing (possibly with a warden) and very sheltered or extra care housing which provide a certain amount of social care. In the private sector, specialised firms offer “retirement housing” which is similar to sheltered housing. / New specialised housing in the social rented sector is relatively expensive and, inevitably, can only benefit a small number of households.
In the private sector, new retirement housing is very much dependent on demand. / Consider as part of the consideration of the need for new affordable housing (se 1 above)
Encourage relevant housing associations to providesocial “care” and support services to older persons in the wider community / Housing associations, especially those that specialise in providing housing for older persons, can potentially provide a wide variety of services if that have the skills and funding. / There are a significant number of examples of this – some of which are described in the SG’s housing strategy. This includes help with shopping, befriending, leisure and recreational activities etc / Consider as part of the review of wider role activities – see item 6
`Encourage innovatory forms of communitysupport for older persons with support needs. / There a number of experimental schemes that encourage, for example, mutually supportive relationships and communities and volunteering schemes. / JRT have been funding research on initiatives of this sort. The research team have identified 9 different types of initiative (in the UK as a whole). / Consider if the Commission’s report should publicise any successful schemes.
- Too many households in Scotland are experiencing homelessness
Background
Paragraph 35 of the Current Housing Issues paper provides a brief summary of the position on homelessness in Scotland. Broadly speaking the level of homelessness (as judged by applications to councils) in Scotland is relatively high in comparison with south of the Border although the numbers have been falling in recent years.
Policy Options / Explanation / Comment / Recommendation for Stage 2Build more affordable, socially rented housing / More social rented housing would make it easier to rehouse homeless persons and, possibly, reduce the number of households becoming homeless. / Councils have a duty to rehouse the homeless although they can seek to use housing association and, in some cases, privately rented housing for this purpose. The stock available to councils for this purpose has contracted dramatically over the last 30 years as a result of the RTB and demolitions. Any conceivable new building programme would only have a modest impact on the total stock / Suggested for consideration under issue 1. In considering recommendation about new building, we should seek to take account of how best to maximise the impact on reducing homelessness.
Provide person centred, integrated housing, health care, social care, employment support linked to known pathways into homelessness. / Many homeless households have a wide range of needs beyond housing. These needs vary between groups where there is a high probability of homelessness – young people who have been looked after, people leaving the armed forces, people coming out of prison, persons with mental health problems / Prevention of homelessness and repeat homelessness is an important policy objective which can be obscured by debates about the precise nature of statutory duties. Nevertheless this is already widely recognised and there is good practice at local level / Review existing research to consider the arguments for a person centred, multi-disciplinary, integrated approach and how this might be put into place
Provide good quality advice on housing options to homeless and potentially homeless person / This is known as the “housing options” approach and its adoption by many councils is widely considered to be responsible for the recent substantial drop in homeless ness applications in Scotland. / Advice can be both positive and negative. Negative advice which simply aims to deter applications is known as “gatekeeping”. / Review existing research etc to identify principles and practice in implementing the housing options approach .
Setting out clear minimum standards for temporary housing used for initial housing for homeless persons / It can be necessary to rehouse homeless persons in temporary housing before a suitable “permanent” option can be identified. Such housing can be of variable quality. / Ideally temporary housing, especially B and B accommodation, would not be used at all. Where this is necessary, it is sometimes argued that minimum standards for both the physical accommodation and any support requirements should apply. / Unlikely that the Commission would be able to do any original work in this area but we could set out the case for minimum standards and point to existing attempts to specify what this might be.
- Too many households find that satisfactory housing is “unaffordable”
Background
The increase in the house prices in comparison with the increase incomes over a number of years together with the problems created by the General Economic Crisis has created difficulties for new households, in particular, wishing to buy their own house and this, in turn, has put pressure on rents in the private rented sector. In the social rented sector, changes in Housing Benefit linked to the UK Government’s welfare reform agenda could also create affordability problems for some households.
Policy Options / Explanation / Comment / RecommendationTransfer responsibility for housing benefit (HB) to Scottish Government to allow changes to remove those which could undermine the current safety net, for example, the “bedroom tax” / Reforms to HB linked to wider UK Govt welfare reforms are alleged to create significant affordability problems for some households in both the social rented and private rented sectors. / Transfer of responsibility would require legislation and, if agreed, by the UK Govt would only come with the existing budget i.e. the budget after welfare reform savings.
In addition to meeting any shortfall between the transferred resources and the cost of an “improved” Scottish scheme, the SG would also bear the risk of budget increases resulting from changes in economic circumstances. / Consider further at stage 2 drawing on research by Professor Gibb and others
Establish a new “housing allowance” system to replace HB with standard payments for qualifying households (e.g. those on welfare benefits and low incomes). / Currently HB is linked to the actual rent paid in the social rented sector and to the 30 percentile rent in the private rented sector. A housing allowance would be determined by household circumstances. In principle, it could be tenure neutral. / It is argued that the introduction of a housing allowance would require a complete transfer of responsibility for welfare to the SG as it would need to be closely integrated into other aspects of the welfare arrangements.
A system of housing allowances is also likely to require rent reform in the social rented sectorto ensure that rent differentials reflect differences in quality. This would require the involvement of the SG in setting rent levels. At present these are determined locally. / This could be considered at the same time as any review of the devolution of HB drawing on existing research.
Increase budget for low cost home ownership schemes. / This could, for example, allow an extension of the Scottish Help to Buy scheme to cover second hand houses / The long term real increase in house prices together with the contraction in mortgage funding since the GEC make it difficult for many new households to buy their own property.
A challenge for any scheme of this nature is to provide assistance to the intended beneficiaries without stimulating further inflation in house prices. / Some limited consideration (linked to issue 1)
Introduce rent controls/regulation in the privately rented sector / A variety of options are possible including temporary rent freezes, limits to annual rent increases or limiting rents to “fair rents”. / Many more households now have to look for housing in the PRS and although there is no direct evidence on rental levels in Scotland it seems likely that they could have increased substantially.
Past experience suggests that rent controls and/or rent regulation is likely to discourage new landlords from setting up and encourage disinvestment by existing landlords / Undertake a more systematic review at stage 2
- Too many communities lack control over their own neighbourhoods
Background