COMMITTEE FOR SOCIAL DEVELOPMENT
OFFICIAL REPORT
(Hansard)
Commission on the Future for Housing in Northern Ireland - NIHE response
21 January 2010
Members present for all or part of the proceedings:
Mr Simon Hamilton (Chairperson)Mr David Hilditch (Deputy Chairperson)
Mr Billy Armstrong
Mrs Mary Bradley
Mr Mickey Brady
Mr Jonathan Craig
Ms Anna Lo
Mr Fra McCann
Witnesses:
| Mr Clark Bailie | ) | |
| Mr Stewart Cuddy | ) | Northern Ireland Housing Executive |
| Mr Paddy McIntyre | ) |
The Chairperson (Mr Hamilton):
I welcome to the Committee Mr Paddy McIntyre, chief executive of the Housing Executive, who is no stranger to us; Mr Stewart Cuddy, his deputy chief executive; and Clark Bailie, director of finance. I remind the witnesses to switch off their mobile phones. If only members would take heed of that; everyone else seems to adhere.
The briefing session is being recorded by Hansard and is to be included in the Committee’s response to the report by the Commission on the Future for Housing in Northern Ireland. Members have copies of the Housing Executive’s paper. I invite Mr McIntyre to make a few introductory remarks, after which we will ask questions.
Mr Paddy McIntyre ( Northern Ireland Housing Executive):
We thank the Committee for the invitation to talk about the commission’s report, which I commend the Institute of Housing for initiating. The report comes at an opportune time, following Varney and various other reports, including the Housing Council report ‘Bridging the Gap’, which I know that the Committee has looked at and which was supported by all political parties. That report made a number of recommendations, one of which was that the medium- and long-term funding of housing should be looked at.
From the Housing Executive’s perspective, I want to take a few minutes to highlight four key issues raised by the report. First, what type of structure could be devised for the Housing Executive that would allow it to attract investment funding for its stock? That question raises important issues, including the organisation’s strategic role; its landlord role; the governance arrangements that would have to be put in place to allow landlords to borrow privately without counting against public expenditure, which raises issues around what happens to the Housing Executive’s current loan debt; how the comprehensive nature of the existing body is maintained; and complex issues around rents, capital receipts and so on.
The report indicates that it is unrealistic to rely on public funding and capital receipts to fund the scale of investment that we need in the next 10 years. At present, house conditions in Northern Ireland are as good as those anywhere. The soon-to-be-published house condition survey shows that levels of unfitness are low. Savills states that public sector stock here is as good as one will get in the UK. Our stock is good because of the investment that was made over the years, and we must somehow ensure that the same level of investment is maintained over the next 10 years. That is our first key issue.
The second issue concerns what role might be played by the new forms of investment that the commission proposes to explore further, which are outlined in the report. They include bonds, leasing, investment from institutions and so forth. We see that as being of particular relevance in expanding the programme of newbuild social housing in Northern Ireland. Although the current output of around 1,750 is as high as it has been for some time, our opinion is that the level of demand means that output must be higher.
The third point is around how we make best use of the private rented sector, which is now as big as the Housing Executive sector. Until recently, its annual growth was bigger than the output from the social and newbuild programme. Its profile and image is probably one of bad properties, poor standards, bad management, extortionate rents and dodgy landlords. In reality, that is probably not the private sector profile these days. The Housing Executive leases about 800 properties from private landlords around the Province to accommodate homeless families. That property is of a good standard and reasonably priced, and feedback from residents is good.
Recent research from the University of Ulster indicates that most private rented sector tenants are satisfied with the product. We believe that our landlord partnering scheme, which will be rolled out over coming months, will begin to tap into that sector as a means of meeting housing need. There is also a big issue about regulation, registration and licensing, and the Department has issued a consultation document about that. The Committee and the Housing Executive have responded to that consultation.
Our final key point relates to rent convergence and affordability. We think that it is important to compare comparative, as opposed to average, rents, because there is a difference between the profile of housing association stock and that of Housing Executive stock. Housing associations also have a different business model, which involves raising private finance. To give real examples of comparative rents, a three-bedroom house on a specific street in west Belfast is £64 for Housing Executive stock and £84 for a similar dwelling through a housing association. In east Belfast, to rent a similar house costs £59 with the Housing Executive and £82 with a housing association. Independent research that was carried out a couple of years ago illustrated that there is a divergence in rents.
I do not make that point to criticise housing association rents. I am saying that we need a rent structure that prices the product at the same level, regardless of the sector. Therefore, we say in our report that we want to see rent convergence. Inevitably, that would mean Housing Executive rents rising.
The advantages of that would be the same rent being charged for the same product and additional income for investment being generated. We calculate that a full rent convergence over 10 years would raise about £1·7 billion in additional funding. Around 80% of that would be covered by housing benefit for tenants. However, the downside of that is the question of affordability for tenants who are not on housing benefit.
Thank you for your indulgence, Chairman. We have responded to many issues in our paper but, from our perspective, those are the key ones.
The Chairperson:
Thank you for your detailed and useful paper. The commission’s key issues paper focuses on the question of whether the Housing Executive could move to a different format of governance so that it is free to raise finance from its own assets. Has the Housing Executive investigated that possibility or formed an opinion on it? It would be an innovative development for the funding and financing of housing in Northern Ireland.
What other work is the Housing Executive involved in at the minute? We discussed public service agreement (PSA) targets earlier. There is a PSA target to not only create 10,000 social and affordable homes by 2013 but to identify new initiatives to deliver that. What work is the Housing Executive doing to try to identify new initiatives?
Mr McIntyre:
Although our board has not agreed a particular model for the future of the Housing Executive, it recognises that a strategic options study must be carried out. That would bring a number of options into play, including stock transfer; the creation of a housing company that would be under the authority of the Northern Ireland Executive, which, when the governance arrangements are in place, would move outside the public expenditure process; arm’s-length management companies, and so on. Now is the time to seriously consider what that model will be.
We have done a lot of preliminary work on the cost of our landlord function and the cost of strategic activities, and we have received legal advice about how to put such arrangements in place. In reality, someone needs to take the lead, and a decision needs to be taken to carry out a strategic options study into the future of the Housing Executive that will examine a range of models, some of which would be on balance sheets and others that would be off balance sheets.
We are looking at a different model of delivering newbuild and are considering leasing as an option. I will not go into the mechanics of it, because it is a complex financial arrangement. If the Committee wants to pursue that further, Clark Bailie can help you; I will dodge that issue.
Along with the Department, we have reached a stage where we have invited a number of housing associations to submit proposals to us for producing newbuilds under a leasing model. We have shortlisted those proposals and are in detailed discussions on them. The next stage is to build a detailed business case and submit it to the Department for Social Development and the Department of Finance and Personnel. That source could produce 300 or 400 units a year on top of the target delivered through the housing association grants process. That work is actively under way.
We are doing some work on the partnering scheme for private landlords. That is a new scheme that will bring together landlords and our waiting lists in a way that we have not really done previously. Interestingly, we are considering a small-scale stock transfer in Derry. That might be a way to address some other issues with our stock in the future. Those proposals are at various stages in the Housing Executive.
The Chairperson:
You said that some leadership is required. The Housing Council made that point in its report. Do you agree that we are now at a stage where there are many ideas and potential ways to deliver social housing more innovatively in the future? Although we need to scope out those ideas and be absolutely certain about the best option or options, now is the time to get on with that.
Mr McIntyre:
In our paper, we said that the time is now right to respond to the report by kicking off that study. It does require a political consensus, and an important finding from the Housing Council report was that that consensus is there.
Ms Lo:
The commission’s research into the future of housing in Northern Ireland is timely. In your response paper, what views did you outline about putting housing on a sound financial footing, to use the phrase often used by the Social Development Minister? I am sorry, I did not have time to read your paper. In it, did you recommend the establishment of an independent body to assess annual rent increases? Assessing increases each year or every other year, in line with other parts of the UK, would be a way in which more money could be brought in. Last year, we had an increase of less than 2%, whereas in the rest of the UK the average increase was between 5% and 6%. A larger increase would give more income and help our little pot of money.
Mr McIntyre:
In answer to your question about a sustained funding platform for housing finance, we are not saying that a particular model needs to be put in place, nor have we come down in favour of a particular model. We are saying that the model that we have used has to be replaced, and now is the time to begin a study to see the best way of doing that. Alternatives are available, and several have been well used throughout the rest of the UK. It is not necessarily the case that all those alternatives are appropriate or that they must follow the existing model. Nevertheless, the bones of something that could be created in Northern Ireland are there. Our paper is saying that we really need to pursue that options study now.
An independent body that sets rent increases has some attractions, as it could take account of rent levels across all the social rented tenures and private renting. It could take account of affordability and investment needs. However, the reality is that, as in any other jurisdiction throughout these islands, the decision about rent increases is a political decision. Whether that remains the case here is not for me to say.
With regard to the differences in rents between comparable dwellings in our stock and housing association stock, there is a case to be made for looking at rent convergence, which would narrow the gap and generate additional funding for investment. I am dodging your question around the independent body.
Ms Lo:
You are.
Mr McIntrye:
You will understand why.
The Chairperson:
You are remaining independent.
Mr Brady:
I come back to the old chestnut: is the Housing Executive in favour of the mandatory registration of landlords? We had a debate on that topic on Tuesday, and I am still not sure of the Department’s position. It seemed fairly clear that the Minister was not in favour, but I am not 100% sure about that because she did not seem to answer the question directly.
Your briefing paper states that the Housing Executive believes that ultimately all social and private landlords should be licensed and should be required to comply with a common set of housing maintenance standards. That gets us into the semantic issue of “should” or “must”, or “may or shall”. It is not particularly clear.
My other question relates to advice and information. The thrust of the ‘Foundations for Change’ paper is that the situation would be enhanced by the provision of more information and advice facilities, particularly through the voluntary and community sector, but that would require more funding. Is the Housing Executive or, more generally, DSD prepared to put more money into that area?
Mr McIntyre:
Our response in relation to the private rented sector is set out on pages 43 and 44 of the paper. There is a difference of opinion within the Housing Executive on that issue. One view is that all of the 90,000 dwellings should be registered and regulated, and the other is that the registration and licensing should be targeted at properties that involve risk, such as houses in multiple occupation (HMOs). A recent UK-wide consultation paper suggested that housing benefit should be tied to properties that reach a minimum standard; that is another approach that could be considered. We have set out our role; we want to explore licensing for all landlords owning in excess of five properties. That is the view of the Housing Executive board.
Mr Brady:
I accept what you are saying, but the point is that you are saying “should” rather than “must”. In a sense, “should” implies an opinion rather than saying that something must be done. It is a suggestion that can be taken on board or not.
Mr McIntyre:
Again, this may be a matter of semantics, but my clear understanding from the Housing Executive board is that it wants to see licensing in place for all landlords with in excess of five properties. As I said, there are different opinions within the Housing Executive, but that is the view of the board.
Mr Brady:
Wanting is not getting.
Mr McIntyre:
That is the steer that we have got from the board.
The Chairperson:
The question of what is meant by “should” only really becomes relevant when looking at legislation.
Mr McIntyre:
I will move on Mr Brady’s question about advice and information. Under the Housing ( Northern Ireland) Order 1981, the Housing Executive is required to provide advice; that is listed as a function that the organisation must deliver on. The Housing ( Northern Ireland) Order 1988 also places a statutory requirement on the Housing Executive to provide advice. I think that new legislation will also up the ante in that regard.
There are four layers of advice. The Housing Executive provides general advice and information as required under those two pieces of legislation. It also funds Citizens Advice to provide specialist advice on matters such as debt prevention; the Heatsmart programme, which provides advice on energy; and it funds the Simon Community to provide advice on the education sector. General assistance is also provided by a range of bodies, such as the Housing Rights Service, which provides a wide range of housing advice and with which the Committee will be familiar, as well as the Fold Group and Gable, which provide advice to elderly and disabled grant applicants.
The Housing Executive has a good track record. It probably invests £1·2 million or more in housing advice each year. I know that the government are also further expanding the advice service through another Department. For us, key advice relates to debt prevention and homelessness. We consider any reasonable proposals as to how we can up the ante, but we see the Housing Executive expanding the advice that it provides. We are training staff in how to look at the whole range of options for an individual and provide advice tailored to their particular needs. That advice may be to direct them to a private landlord.
Mr Brady:
I was not necessarily criticising what is available, but if that is going to be enhanced, more funding will need to be made available, particularly to the voluntary sector. That is the point that I was making.
Mr McIntyre:
Yes, that is the point that you were making, but it may be that we should consider whether the funding that is available is going to the right places.
Mr F McCann:
I will not get into the debate about mandatory registration for landlords, but I will say that I am not as confident as Paddy that there are no serious problems in the private rented sector. In areas where there is a growing number of private rented properties there are some serious difficulties, such as overcharging, bad properties, illegal evictions or intimidation of people. Despite its attracting almost £100 million of housing benefit, there is no transparency in the private rented sector. All those factors need to be taken into consideration.
You made a number of very interesting points, such as the one about rent. You said that you would like to see rent convergence, but we need to take into consideration that we live in a low-wage economy. Therefore, if services and essentials are made more expensive, people on low pay will find it even more difficult. Even some of the rents charged by housing associations put the low paid under serious pressure. The Housing Executive charging what people call a “fair rent” has stood it in good stead over the years. It is not always best to chase after housing associations that charge expensive rents or private landlords who, in many cases, charge extortionate rents.
On the face of it, block leasing may provide an easy way out, but there could be some major pitfalls unless such a scheme is got right. I understand that a number of builders or developers may have already approached the Housing Executive to offer block leasing in their developments. Are we close to provision being made for block leasing? Is it a decision for the Housing Executive, the Department or the Assembly?
Mr McIntyre:
You are absolutely right; the private-rented sector is not perfect, and I did not mean to convey that it was. That is why we are registering HMOs, for example.
The point that you make about affordability and rent convergence is important. Looking at Housing Executive rent as a percentage of average earnings — I cannot remember exactly whether the figure is for manual earnings, but I can supply that information to the Committee — we are on a par with England and Wales at 12%. People being on low incomes is a big issue that I should have mentioned.
You mentioned block leasing, but I take it that you were talking about the leasing scheme to which I referred and not our block leasing for homeless provision.
Mr F McCann:
Yes, that is right.
Mr McIntyre:
We will have to get a business case for that approved by DFP. It has not been sent to DFP yet, and I do not know what the approval functions will be, but our Minister will certainly need to approve it.
Mr F McCann:
If possible, it would be good for the Committee to get a briefing on that.
Mr McIntyre:
There will be no difficulty with us providing a briefing on that at an appropriate time. As I said, we still have some work to do before we can discuss it with anybody, but there will be no problem with providing a briefing after that work is done.
Mr F McCann:
The house sales scheme is addressed in the Housing Executive’s response to the key issues paper. Over the past number of years, it has concerned me that the Housing Executive stock has fallen dramatically to between 85,000 and 90,000 homes. If there had not been a collapse in the housing market, we may have seen the total demise of the social housing stock. Should the house sales scheme be abolished to save housing stock for future generations?
Mr McIntyre:
As you can see, we are hedging our bets on that. A fully informed review of the house sales scheme would require substantive work. We are signalling that that will need to happen at some stage. We have sold around 110,000 dwellings, but we only sold around 50 last year. The market has intervened to an extent, and we are not selling at the same rate as we used to. There are a lot of benefits to house sales, such as mixed communities and mixed tenure in estates.
The house sales scheme is at a stage where it needs to be re-examined. It would not be possible to carry out a full scale review in the time frame of the commission report. If you were to go to the Housing Council about it, you would see that there are mixed views among politicians on whether the house sales scheme is a good or a bad thing. I suspect that the Committee will not be much different when it examines the issue.
The Chairperson:
It depends on your view on Maggie Thatcher.
In any review, one would have to consider the full range of options from complete end, partial end —
Mr McIntyre:
Or the possibility that new tenants do not get the option to purchase.
The Chairperson:
You have focused on the discount, which may be one of the lower-hanging fruits in respect of the right-to-buy scheme.
Mr McIntyre:
I imagine that all options would be brought into play. It was recently decided in Scotland that no new tenants will have a right to buy. Existing tenants who have that right will continue to have it, but even that was restricted a few years ago when the Scottish Parliament first kicked in.
The Chairperson:
There is a broad range of options, so it is worth exploring what is acceptable.
Mr F McCann:
Since 1979, over half the social housing stock has been sold off. We are arguing that we are in the middle of a crisis in the provision of social housing, so can we continue to sell off that stock? What are we doing for future generations that might need housing?
The Chairperson:
That is a big issue, but it has to be balanced with the fact that the huge public housing estates built around that time that posed some problems for years are now in part much better because of mixed tenure and the responsibility that it brings when people own their own property.
Mr McIntyre:
For the first 20 years of the scheme, it probably made no difference to re-lets. Those dwellings would never have become available for re-let because those people would have remained there. The last research that we looked at indicates that over the past four or five years the scheme is beginning to have an impact on the number of re-lets that are coming into the stock.
Mr F McCann:
The fact is that we have already had the Semple report into affordable housing, and now we have a report from the housing commission. Most people believe that mixed tenure is the way forward, but that takes a lot of planning. Previously, those who supplied housing saw themselves in the position of supplying housing and did not look beyond that. Most people now see that it is not just about supplying housing, it is about building communities, and a whole infrastructure need to be put in place. Would that fit into the Housing Executive’s future thinking and strategy?
Mr Stewart Cuddy ( Northern Ireland Housing Executive):
You are absolutely right. We are training our staff in anticipation of community planning, for that very reason. I was at one of the training sessions yesterday, and it dealt with exactly that issue; that is, housing and planning for housing must be seen in the context of the community plan, which deals with demography, regeneration, infrastructure and mixed communities. Those issues must all come together.
Mrs M Bradley:
How do you reconcile the withdrawal of the legal commitment to provide homeless families with secure tenancies and the restriction of housing waiting lists to only those in housing stress?
Mr McIntyre:
We believe that the private rented sector can offer an opportunity to take a homeless family off the waiting list and put them into a property that is in good condition, well managed, at a rent level within the housing allowance and with a fixed tenancy of a minimum period. That is happening in other jurisdictions, not only Northern Ireland. We suggest exploring that withdrawal, although we recognise that it would involve a lot of political sensitivities and we would need to do a bit of work to do that. We are not saying that that is our view; we are asking whether such a withdrawal would offer a way of satisfying our homelessness duty. That is the way that it is done in Scotland, by the way.
These figures are probably a bit crude, but around 40,000 people are on the waiting list, and 20,000 of those people are not in housing need or housing stress. Our real interest is in the 20,000 people who are in housing stress. We ought to be managing them. The waiting list has two elements. One is the people who are in housing need and for whom we need to try to sort out housing opportunities. The other element is the people who register for housing but who attract no points. They have registered their interest in getting housing. Many of those people do not share facilities, and many have their own home. We should be trying to pursue housing solutions for the people who are in need, rather than seeking to give solutions to the other 20,000 people who have registered for whatever purpose and are on the waiting list.
Mr F McCann:
Does that proposal involve widening the remit of the private-rented sector to take up the slack?
Mr McIntyre:
The private-rented sector is not subject to an allocation system, but many of the people on the waiting list may already live in private-rented property, have no points and are not in housing stress. We see the private-rented sector as not only meeting those requirements but as satisfying those of people who are in housing need and who may not have any likelihood of getting an allocation from the Housing Executive within a reasonable period of time.
Our paper refers to developing personal housing plans by giving advice. That would involve discussions between us and people in housing need who will not get housed in any of the social-rented housing schemes in their area. We would discuss whether we could match a person with a good landlord who is offering a minimum tenancy in a good property with a rent level that is around that of housing benefit for the area.
Mrs M Bradley:
I was going to ask about the length of leases, which you just mentioned. If people do not get a long lease, they will not be left with much confidence.
Mr McIntyre:
I cannot remember whether minimum one-year or two-year leases apply in Scotland, but we can confirm that for the Committee.
Mr F McCann:
To follow on from Mary’s point, people who register with the Housing Executive or a housing association do so because they know that their rights will be protected as a result of some controls being in place. That protection does not exist in the private-rented sector.
Mr McIntyre:
I accept that, but if the system cannot deliver all the housing that people need, the next best option is to work with a private-rented sector that, in a sense, behaves in a way that we want. That means having good standards, good managers and reasonable rent levels. Perhaps we could provide a rent guarantee with that. That is a better option than that that currently exists. I accept that people who use the private-rented sector do not have the same rights as they would otherwise, but that sector has a role in helping us to meet demand for the 20,000 people who are in housing need and who will not get housed by way of re-let or a newbuild social house.
The Chairperson:
People who are homeless or in real housing stress will not particularly care about the length of a lease.
Mr McIntyre:
I am sure that you are right.
The Chairperson:
I am teasing this boy.
Ms Lo:
People who rent privately often have to pay a top-up amount to fill the gap between the housing allowance and the rent amount.
Mr McIntyre:
The scheme aims to adjust the level of rents to around that of the local housing allowance so that that top-up payment is not required. You are right to say that, on occasions, that gap may exist. We are working towards a target that is around the level of the local housing allowance, and landlords have shown interest in that.
Mr Brady:
If the Housing Executive monitors to some degree the service that the private-rented sector provides, why is there such reluctance, and I use that word advisedly, to implement mandatory registration? If private landlords are doing what they should be doing, what is the problem with being registered and fulfilling the obligations that they should fulfil?
I think that it came across very clearly in Tuesday’s debate that the majority of private landlords are good landlords and do not seem to have a problem with registration; indeed, they would want to be registered. That view is also coming from the Landlords’ Association. There will always be a rump of landlords who do not want to be registered; however, I cannot see what the huge problem is with registration.
Mr McIntyre:
The landlord scheme that we are talking about is, in effect, a form of registration. Under that scheme, a landlord’s property must meet certain conditions, he must have adequate management arrangements in place and the rent level must be in and around that of the targeted housing allowance. Therefore, although it is not a formal registration, we will not be bringing landlords into this scheme in the way that we did with the scheme that provided accommodation for the homeless. We will bring in landlords who want to deliver good standards to their tenants.
Mr Brady:
How do you deal with landlords who come up to scratch initially but who then do not?
Mr McIntyre:
They would be taken out of the scheme.
Mr Brady:
How easy would it be to do that if a landlord has a signed and sealed tenancy of two or three years? There would be contractual difficulties; that is my point.
Mr McIntyre:
It would not be without its difficulties.
Mr Hilditch:
I wonder whether any thought has been given to the difficulties that maintenance and refurbishment schemes faced in certain areas. Those problems were caused by cutbacks and budgetary matters. At the end of the day, it is all about money.
Do you see the private sector having any role in renovation schemes that would bring in private investment that could be used in the transfer of existing stock? That would be prudent from the tenants’ point of view
Mr McIntyre:
I mentioned the small-scale stock transfers that we are looking at in Rinmore Drive, which has around 60 dwellings. We will use a housing association and some private funding for that.
Beyond that, we have around 3,000 dwellings to which multi-element improvement schemes have never been carried out. Given our current investment profile, those houses are out of the programme, and I can think of some dwellings in your district council area that have also fallen out of the programme.
We are talking to the Department about how to deal with those 3,000 dwellings, and a bigger debate is ongoing about the future of the Housing Executive stock and how investment might be generated. We are looking at whether we could set up some form of special purpose vehicle with the private sector to begin to tackle that issue. That would bring in private funding. Work is being done on that at the moment, and legal issues are involved. However, 3,000 tenants are living in poor housing, and we would like to see whether we can bring that forward.
One way of doing that is through a small stock transfer and another is by looking at the 3,000 dwellings as a package or as something smaller. However, we would not want to create small schemes; rather, we want to create a vehicle to carry out improvements. Inevitably, that would involve partnering with the private sector.
The Chairperson:
If the Housing Executive goes for a large quantity of small-scale voluntary transfers, its asset base would be diminished. That is incompatible with the desire, which we talked about earlier, to move the Housing Executive towards private arrangements. Perhaps that terminology is wrong, but if you are running around the country slicing up stock and handing it over to other organisations, for example, your asset base would be diminished.
Mr McIntyre:
There are two issues. Getting some of the stock off our balance sheet might not be a bad idea. [Laughter.]
However, that is not where we will be starting. Some of the stock is extremely poor, and, indeed, by the time that the appraisal is done, some might have been partly demolished or improved.
The Chairperson:
You could do that now or soon.
Mr McIntyre:
Yes, we could.
Our board is probably not keen on small schemes, and that is why we are looking at doing the matter in a different way and at creating a special purpose vehicle. In some cases, it may be appropriate to carry out a small stock transfer. However, we believe that there might be other options that we would want to consider.
The Chairperson:
As there are no further questions, I will say thank you. That was very useful.