The Local Government Association speaks for nearly 500 local authorities and its membership includes every local authority in England and Wales. The LGA provides the national voice for local communities in England and Wales; its members represent over 50 million people, employ more than two million staff and spend over £65 billion on local services.

  The LGA welcomes the opportunity to make a submission to the Inquiry. Our comments are set out in relation to the specific questions posed by the Sub-Committee. The key points that we would like to make are the need for more resources, stronger planning powers, changes to Circular 6/98, better integration between planning, economic and housing strategies at both local and regional level and a level playing field between the investment options for local authorities and housing associations.

DEFINITION OF AFFORDABLE

  A clear definition of the use of the term "affordable" within the local context needs to be set out in all local and regional plans, and national guidance should ensure that authorities do this. Too much time and resources are spent on trying to negotiate the terms of affordable contributions with landowners and developers without the benefit of clear government guidance. Circular 6/98, which includes low cost homeownership as affordable housing, contributes to this ambiguity and lack of clarity as it requires the definition of affordable housing to be tenure neutral.

  Defining and identifying affordability remains a complex area, often subject to dispute. There are differences between economic affordable housing (including low cost home ownership) and social rented housing but all should provide homes that people want to live in and which they can afford. Authorities should, in the local plan or supplementary planning guidance, clearly set out their policy on affordability, based on proper assessments of housing need and supply, so that landowners and developers are left in no doubt about their interpretation of affordability and their expectations for the delivery of affordable housing.

  The LGA view is that the definition of what is affordable should be defined locally according to the relationship between local low income levels, house prices and rents. This must be done at a local authority level since even within a county or region there will be considerable variations with pockets of both low incomes and of high prices compared to the regional norm. Any need for low cost market housing, shared ownership and key worker housing should be identified and defined separately from the need for subsidised social rented sector housing. While the various low cost home ownership options may well meet certain need in some areas, in many others housing sold below average house prices for the area is still beyond the means of local households although the developer may consider it to be an affordable housing contribution.

  Increasingly many authorities are finding it necessary to make provision not only for those on the lowest incomes but also for middle income groups who are still unable to afford to buy or rent in the private sector. While the LGA welcomes the government's Starter Home Initiative we consider it is too restrictive as it primarily focuses on nurses, teachers and the police and the schemes are concentrated in Southern England. The LGA considers the initiative should be broadened in both scope and purpose. In many areas the lack of essential staff, such as other public sector workers, service providers and agricultural workers, can have serious consequences on both the local economy and the sustainability of the local community. The LGA considers that local authorities are best placed to define key workers according to local needs.

SCALE AND LOCATION OF THE DEMAND FOR AFFORDABLE HOUSING

  The nation-wide situation on affordable housing is complex. While the acute shortage of affordable housing in London and the South is well known, even in areas generally considered to be in low demand such as the North and parts of the Midlands many local people are effectively being priced out of their communities. Areas with good motorway access may attractive affluent commuters and rural or semi-rural areas are popular with second homeowners and the retired. These groups have greater purchasing power that can inflate house prices beyond the reach of local income levels, particularly in rural areas where wages are lower than the national average. In some authorities a booming housing market in one area may be next to a collapsing market nearby. This means that the response to addressing these problems must become increasingly more sophisticated at local, sub-regional and regional level.

  The LGA agrees that responsibility for planning new provision should be devolved to local authorities but this does not negate the Government's responsibility for making broad estimates at regional and national level to inform decisions about the necessary level of resources to be provided. The housing needs identified through the local and regional planning processes should be linked to the distribution of Housing Corporation resources.

QUALITY OF AFFORDABLE HOUSING

  In general the Housing Corporation sets high standards in the provision of social rented housing which the LGA supports. Scheme development standards, Egan principles and partnering have all improved the quality of new social housing provision in recent years. However, the rigidity of the grant and TCI regimes means that, if costs are high, standards may be lowered below the optimum in order to make the scheme financially viable. Developments produced without the benefit of social housing grant are likely to have poorer space and insulation standards. The LGA would prefer that all future new housing be built to lifetime homes standards. However, such requirements do add to the cost of development, especially when compared to private sector new build, even though the long-term maintenance costs are reduced.

  The LGA welcomes the additional powers and flexibilities for local authorities in private sector renewal as a result of the deregulation of the grants regime. This now needs to be matched with additional resources to address the growing problem of deterioration in the private housing stock.

ADEQUACY OF EXISTING SUPPLY AND AMOUNT OF RESOURCES AVAILABLE

  To meet the objective of giving everyone the opportunity of a decent home, the Government must significantly increase the level of available resources in order to at least double the current output of affordable homes. Despite the increase in grant rates and the review of TCIs last year high land prices means that it is difficult for housing associations to find sites for new housing. They are often outbid by speculative developers who will also frequently challenge the affordable housing requirement set by local authorities. The potential gain for the developer is huge but for smaller local authorities the financial risk involved in a legal challenge or planning inquiry can be a considerable deterrent to enforcing these conditions. Increasingly, sites are small and below the thresholds set out in Circular 6/98. Yet often it is these small sites that are the most valuable in terms of sustainable communities.

  The definition of obtaining "best consideration" in the sale of public land should be amended to enable all or part of the site or the sale proceeds to be used for affordable housing.

  A key problem that affects the supply of affordable housing is the inadequacy of housing benefit when compared to market rents. The excessively complex rules in assessing housing benefit, non-dependent deductions, local reference rent requirements and the single room rent restrictions all deter private sector landlords from letting properties to those on housing benefit, especially in areas where the housing market is buoyant and they can easily obtain higher rents without going through all the hurdles and delays involved in processing housing benefit claims. When the housing market is depressed this becomes less of an issue. However, many young households who might otherwise be adequately catered for in the private sector are effectively being denied access to housing because of the inadequacies of the benefit system.

  Single person households, of all ages, represent the highest growth area in new household formation. The existing social rented and home ownership sectors will not be sufficient to cater for this group. The expansion of a fully licensed, well managed and properly maintained reputable private rented sector is essential and good private sector landlords should be further encouraged. Many young people might prefer to rent if the quality of accommodation and the price was right. The emphasis on home ownership at all costs inhibits labour mobility and can create financial hardship. Very few home owners are spending enough on maintenance and this is building up problems for the future. In urban areas well designed high density and mixed use housing also has a part to play.

  The LGA considers that the various investment options (stock transfer, stock retention, arms length management or PFI) for local authorities should be on a level playing field with those for housing associations. The LGA also considers that authorities and their tenants should be given as wide a range of investment options as possible, including securitisation in which rental income is used as security for loans, so that they are able to make informed choices appropriate to local needs.

EXTENT TO WHICH PLANNING GAIN CAN FUND THE LEVEL OF AFFORDABLE HOUSING REQUIRED

  Planning policy on its own has only achieved relatively low levels of affordable housing, although the proportion has increased as the policy has been incorporated more widely into local plans. Greater use of Supplementary Planning Guidance and better links between housing and planning would improve the process but authorities still need stronger planning tools. The establishment of joint commissioning partnerships with housing associations and the use of a planning obligations template is recommended as good practice.

  The LGA welcomes the proposed tariff approach set out in the Planning Green Paper supplementary proposals on Planning Obligations. The Association considers that this approach has the potential to achieve more predictable, speedier, less costly and transparent outcomes than is currently the case with many negotiated Section 106 agreements. However, the system should not divert contributions away from other planning benefits to affordable housing. It is not a substitute for government provision of adequate funding for affordable housing.

  Currently, authorities balance the distribution of developer contributions between, for example, affordable housing, transport and open space demands. In deciding upon the balance, authorities must have regard to Circular 6/98 and Planning Policy Guidance 3. If the tariff system is to replace this then the requirement to provide affordable housing, where there is demonstrable need, must be very explicit in any guidance and the Government should keep under review the amount of affordable housing delivered through the tariff system.

  In rural areas the additional flexibilities allowed in small communities of 3,000 should be expanded to larger settlements. In sustainability terms a significant proportion of the need for rural affordable housing should be provided in market towns where people have greater access to a wider range of facilities.

BALANCING RESOURCES BETWEEN SOCIAL HOUSING AND OPTIONS FOR OWNER OCCUPATION

  The LGA believes that local authorities should have the power to determine the mix, size, type and tenure of affordable housing provision and that such decisions should be made on the basis of a robust assessment of housing need, and an analysis of housing market and demographic trends. Regional and sub-regional needs should also be taken into account. The planning system as it currently operates permits these key decisions to be subject to frequently protracted negotiations that contribute to inflated land prices.

  The right to buy (RTB) has had a significant impact on the availability of affordable housing, especially in rural areas. As properties have been sold on and not replaced RTB has reduced the number of properties available for low income households in housing need. The LGA considers RTB should be brought into line with the right to acquire for certain housing association tenants which excludes properties in designated rural areas and requires the receipts from sales to be used for replacement housing.

  However, in other areas new financial models may be required to develop low cost home ownership, as part of a neighbourhood renewal package, where the housing market may be too weak to act on its own or where there is a disproportionate density of social rented housing. A number of local authorities are currently developing innovative approaches to the problem of market failure and the LGA supports the call for a Housing Market Renewal Fund to tackle the problem of abandonment and low demand.

  One of the problems with shared ownership is that, as house prices rise, so does the shared ownership purchase price which can mean this form of housing is still beyond the reach of local people. Mechanisms need to be identified that will keep shared ownership at affordable levels. There is also a need to develop a more comprehensive resale market for shared ownership homes as occupants can find it very difficult to move should their circumstances change. Low cost market housing is rarely genuinely affordable and is difficult to regulate to ensure that low, or even middle, income households are able to access it. However, in some areas this can benefit key workers in the middle income range. The use of restrictive covenants to ensure affordable housing units are only sold on to local people would also help to lower prices.

ARE TARGETS IN REGIONAL PLANNING GUIDANCE APPROPRIATE?

  Current regional guidance sets out provisional indicators for affordable housing rather than clear targets. At present these are, in the main, unachievable without additional resources and stronger powers. The proposed Regional Spatial Strategies should more explicitly address and define the need for affordable housing at both regional and sub-regional level and should be more directly linked to Regional Economic Development Strategies and Regional Housing Statements. Local authorities should work together to develop a regional planning framework that recognises different approaches and needs at local level while accepting the contribution that individual local authorities can make to meeting regional and sub regional need. Cross authority issues, while fraught with difficulty, must be acknowledged. In some places the only access to growth or mobility will be in other local authority areas.

  Regional plans should include a breakdown by size, type, tenure and affordability in each region. This information would be informed by local needs surveys. The regional planning body should then monitor provision and advise planning authorities to adjust supply accordingly. Funding regimes should be more closely integrated to regional housing and planning strategies but this is unlikely to be achieved while regional housing statements remain in the ownership of government regional bodies and the Housing Corporation.

WILL CENTRAL AND LOCAL GOVERNMENT MEET DECENT AND AFFORDABLE HOUSING TARGETS?

  The LGA welcomes the commitment in the Housing Green Paper to tackle the £19 billion investment backlog in council housing within 10 years. However, it is clear that achieving this target remains dependent on a significant stock transfer programme that is in itself likely to be difficult to meet. Unless considerable resources are made available to local authorities in the next Spending Review period then the Decent Homes target will be at risk.

  It is highly improbable that the planning system alone will be able to provide sufficient affordable housing without a considerable increase in central government subsidy. The Planning Green Paper proposal to reduce the thresholds in Circular 6/98 is welcome. However, authorities still need greater power to designate the type and tenure of housing required which would help to depress land prices.

ARE CURRENT POLICIES AND PRACTICES ARE LEADING TO THE CREATION OF MIXED COMMUNITIES?

  The current planning system fails to provide the tools that are sufficiently strong and flexible to deliver affordable housing to meet local need. If planning authorities are to take a truly strategic approach and promote sustainable development in line with local needs and priorities, and regional and sub-regional strategies, then they need to be able to determine the mix of new provision within their communities. Plan monitoring will have a key role to play in collecting the information required to assess whether current policies are leading to the creation of mixed communities.

  The commercial considerations of private developers should not be underestimated. They exist to make a profit. In areas of high demand where potential land supply is very limited the potential profit margins for private sector development aimed at the upper end of the market are huge. Without stronger powers the ability of local authorities to ensure genuinely mixed communities are very constrained. Where developers recognise that they will be required to make an affordable housing contribution they will try and do it off site or by offering a financial contribution, since mixed developments are less profitable. Planning guidance should be strengthened to ensure this is the exception rather than the rule and only occurs where site constraints make mixed development genuinely unsuitable.

  The segregation of the social housing part of the development from the owner occupied part happens all too often and does nothing to create mixed communities. Design differences can also label social housing and this contributes to social exclusion and lowers the self-esteem of residents. Pepper potting of affordable units that are otherwise indistinguishable from the owner occupied homes remains the best method of ensuring mixed communities. However, developers (for financial reasons) and housing associations (for management reasons) sometimes resist this. On some developments the cost of service charges may also inhibit pepper potting. The acquisition of existing general purpose properties for socially rented accommodation also contributes to sustainability but involves a heavy capital outlay that is rarely feasible when the housing market is buoyant.

  In many areas, particularly rural areas and in London, the opportunity to obtain sites for affordable housing on the open market is minimal. Few local authorities have significant land banks. The LGA supports the proposal in the Planning Obligations consultation paper to allow authorities to allocate sites solely for affordable housing where there is a robust assessment of need.

IS MORE GREENFIELD DEVELOPMENT NEEDED TO MEET HOUSING NEED?

  The LGA considers that more should be done to remove the barriers to brownfield development in order to reduce further greenfield development. The planning system is a key delivery mechanism for brownfield regeneration. However, land use plans have become increasingly bogged down and convoluted by adversarial processes that have made the flexibility and responsiveness required increasingly hard to achieve.

  There is widespread recognition and acceptance of the need to tackle brownfield regeneration and there are some excellent examples of innovative practice. However, there is also evidence that securing the right development is a difficult, complicated and costly process. In certain areas of the country brownfield sites are simply not commercially viable. Negative or low land values make sites commercially unattractive to developers. Although not always contaminated, some brownfield sites do require remediation, the cost of which can tip the balance for developers when considering whether sites are viable.

  Assembling packages of land for development is often a major stumbling block. Compulsory purchase should be a key tool for overcoming site fragmentation and inertia from land owners. However, CPOs have not been an easy tool to use, existing legislation has become complex and unwieldy. The government has published a series of consultations on the planning system, planning obligations and CPOs that may address some of these problems.

  Finally, the lack of public sector funding to facilitate development is seriously impeding local authorities' ability to acquire sites and meet the costs of reclamation. The demise of government grant regimes and the loss or suspension of gap funding measures has had a massive negative impact on land reclamation activities.

  In some areas additional greenfield sites will be required. Such sites may offer an opportunity to maximise the proportion of affordable housing since they may be subject to less constraints and fewer competing demands. However, it is also important that large new developments involve mixed tenure schemes so as to maximise community sustainability and to ensure that a range of housing options are available to suit a variety of needs. It is also important to ensure that such sites are only developed with access to adequate facilities, such as schools, shops and transport.

THE COST TO INDIVIDUALS, BUSINESSES AND THE ECONOMY OF THE SHORTFALL OF DECENT AFFORDABLE HOUSING

  High house prices are creating staff recruitment problems, especially in the public and service sectors, which impact on local economies and businesses and result in key local services being under-resourced. The economically active are forced to move out which means that local businesses fail, leaving premises empty and in disrepair, and contributing to further deterioration of the area. Social exclusion is increasing with those on low income, a high proportion of which are likely to be from vulnerable groups and ethnic minorities, being concentrated in the least popular and poorest quality housing with little real choice of where to live.

  More people are being forced to travel further and longer, simply because they cannot afford to live near where they work. This puts greater strain on the public transport and road systems and means that people are working longer hours which has an impact on their health, disrupts family life and increases absenteeism in the workplace. Young people are often forced away from where their families and friends are to areas where house prices are more accessible. The cost of housing and of additional travel can lead to financial hardship and debt.

  There is considerable evidence of the impact on both physical and mental health that housing insecurity brings. Many households live in temporary, insecure and inadequate housing often for prolonged periods. The use of Bed and Breakfast accommodation is at its highest ever level and is increasing, not only in London but also in many other areas particularly in the South East, South West and East Anglia regions. Poor quality and overcrowded accommodation can have a serious impact on educational achievement and lead to associated behavioural problems and criminal activity. Many people are forced to move a long way from family support, the strain of which can lead to family break up. In rural areas young people are being excluded from their villages leaving a disproportionately high elderly population who find it difficult to access services and facilities.

  In terms of the broader economy there is a real cost to health care, to welfare benefits that meet the housing costs of low income households and there are costs associated with criminal and anti-social behaviour that are attributable to the stresses and disruption placed on family life.

  At the other end of the spectrum large areas of unpopular housing in poor condition with low income occupants unable to maintain the stock can also have an adverse impact on local economies and on sub-regional economic growth.