Y Pwyllgor Llywodraeth Leol a Thai

Local Government and Housing Committee

22/05/2024

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

James Evans
John Griffiths Cadeirydd y Pwyllgor
Committee Chair
Lee Waters
Mabon ap Gwynfor Yn dirprwyo ar ran Luke Fletcher
Substitute for Luke Fletcher

Y rhai eraill a oedd yn bresennol

Others in Attendance

Darren Baxter-Clow Prif Gynghorydd Polisi—Tai a Thir, Sefydliad Joseph Rowntree
Principal Policy Adviser—Housing and Land, Joseph Rowntree Foundation
Edward Shepherd Uwch-ddarlithydd mewn Cynllunio a Datblygu, Prifysgol Caerdydd
Senior Lecturer in Planning and Development, Cardiff University
Ken Gibb Cyfarwyddwr, Canolfan Gydweithredol y DU ar gyfer Tystiolaeth Tai
Director, UK Collaborative Centre for Housing Evidence
Nicholas Falk Cyfarwyddwr Gweithredol, The URBED Trust
Executive Director, The URBED Trust
Robin White Pennaeth Ymgyrchoedd, Shelter Cymru
Head of Campaigns, Shelter Cymru
Toby Lloyd Ymgynghorydd Annibynnol
Independent Consultant
Wendy Dearden Uwch-swyddog Polisi ac Ymchwil, Sefydliad Bevan
Senior Policy and Research Officer, Bevan Foundation

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Angharad Era Dirprwy Glerc
Deputy Clerk
Jennie Bibbings Ymchwilydd
Researcher
Rachael Davies Ail Glerc
Second Clerk

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Cyfarfu’r pwyllgor yn y Senedd a thrwy gynhadledd fideo.

Dechreuodd y cyfarfod am 09:31.

The committee met in the Senedd and by video-conference.

The meeting began at  09:31.

1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
1. Introductions, apologies, substitutions and declarations of interest

Welcome, everyone, to this meeting of the Local Government and Housing Committee. Item 1 on our agenda today is introductions, apologies, substitutions and declarations of interest. We are missing one of our committee members this morning, Luke Fletcher, who has a clash with another committee. His colleague Mabon ap Gwynfor will be substituting for him from around 10.30 a.m. Joining us remotely is committee member Altaf Hussain, who will not be able to stay with us beyond item 3. Another member of our committee, Sarah Murphy, has recently been appointed as Minister for Social Partnership, and has accordingly recused herself from our committee business, although she remains a member of the committee until a replacement has been elected. So, we're a little bit thin on the ground this morning, but I'm sure we will manage nonetheless.

This meeting is being held in a hybrid format, and aside from the adaptations relating to conducting proceedings in that way, all other Standing Order requirements remain in place. Public items of the meeting are being broadcast live on Senedd.tv and a Record of Proceedings will be published as usual. The meeting is bilingual and simultaneous translation is available. Are there any declarations of interest from committee members? There are not.

2. Cyflenwad tai cymdeithasol: Sesiwn dystiolaeth 1
2. Social housing supply: Evidence session 1

So, we will move on to item 2, our first evidence session for the committee's inquiry into social housing supply. I'm very pleased to welcome our witnesses: joining us here in person, Edward Shepherd, senior lecturer in planning and development; and joining us virtually, Ken Gibb, director of the UK Collaborative Centre for Housing Evidence; Toby Lloyd, an independent consultant; and Nicholas Falk, executive director of the the URBED Trust. So, welcome to you all.

We will begin, then, with questions, and I will start with some general questions, really. Firstly, could give us your overall assessment of the Welsh Government's performance on social house building? A nice general question to begin with. Who would like to start and offer some initial thoughts? Any of our online witnesses? Yes, Toby, please. Yes.

I'm happy to say that, historically, Wales has produced less social housing per head of population than other parts of the United Kingdom, but that in recent years that has begun to turn around. And what I particularly welcome is the shift within the Welsh Government's investment programme towards social housing, as opposed to other forms of affordable housing, which has really increased quite significantly, so that I would hope that, in future, Wales will actually start to outperform other parts of the UK in terms of the absolute numbers of social homes produced per 1,000 population.

09:35

Okay, thank you very much for that, Toby. Are there other witnesses who'd like to add anything?

Yes, I'll say something, if that's okay. 

So, yes, I would echo what Toby's just said. It seems to me that what's also important is the notion of trying to set up and deliver a longer term programme over a period of time that is in some way directly related to housing need. So, that's both commendable but it's also a challenge, I think. One of the things that we say in our written evidence is that, when you do this, as we've found in Scotland, you tend to set a level of housing need based on external research or a clear piece of evidence that does that prior to setting up the programme. So, I think the evidence comes from 2019 or so, and there seems to me to be a strong case to revise that sense of what the levels of need actually are, given COVID, market change, the cost-of-living crisis, the challenges that clearly exist in the housing market across the UK.

So, it seems to me that there's a case for, if we're going to assess performance, we need to understand the target it's being based against. So, that's the one kind of thing I would say. And it also seems that, given the challenges that have been created in the last five years in different respects, the programme has been doing pretty well relative to the need targets that it has set itself. 

Okay, Ken, thank you very much. Did you want to say anything, Edward?

Yes, just to add to those two points, which I totally agree with—just looking at the data from StatsWales, just to kind of draw attention to the increasing role played by local authorities, which I think is a really strong sign. And I think, later on, there's a question on the agenda about whether we can return to postwar delivery levels. That's a complicated question with a complicated answer, but part of it will be to do with the role played by local authorities and other public sector bodies, and an increasing role for them being a necessity for that. 

The other thing I'd say, to pick up on Toby's point, on the emphasis on social housing—more affordable tenures of social housing—the data that's available shows that the majority that's been provided has been for social rent. But that's only for registered social landlords. Now, RSLs do provide the vast majority in Wales, but I think, to pick up on a point in the UK Collaborative Centre for Housing Evidence's written evidence, it would be good to have more and better data regarding overall tenure splits across overall delivery, not just for RSLs, although they do provide the vast majority, so it does give an indication of overall trend. 

Okay, Edward. Just on that point about the levels of social house building achieved in the postwar decades—so, obviously, that was an exceptional time, but there was tremendous commitment and drive to achieve those levels—what are your thoughts on how realistic it would be for Wales to achieve something approaching those levels as we move forward over the next few years and beyond?

Okay. Well, I think Ken's got a quick answer to that, so I'll hand over to Ken. 

Yes, it's not a quick answer, I'm afraid, but it's an answer at least, or it's an opinion. I kind of think it's wrong-headed to think in those terms a little bit. I think what's important is that the Welsh housing system is as effective and as impressive in its outcomes for people as it can be, and that the world is kind of different today. But as I come back to the previous question, for me, it's really important that there's a significant social housing-led affordable supply programme. But its size and scale is about what's wrong with the housing system. It's about what the level of need is, and I don't think, even with the damage that's been done to housing over the last 40 years, with the right to buy and public spending cuts, and the rebalancing of housing, as it were—even in spite of all that, I don't think you simply want to privilege one tenure or one approach over another. It's about how the system as a whole works. But I'm confident in my mind that that requires, for a long time to come, a lot more social housing being built, and it's about the outcomes of a well-functioning housing system, rather than pinning your flag to the mast of a given number or a scale of social housing per se, in my view.

09:40

Can I make a point on this? In my view, the challenge is to create balanced communities and to create the sort of housing that will reinforce economic growth without hurting the environment. There will never be enough housing, or good housing, and obviously the legacy of Wales is a challenge, given its industrial past. So, I don't think we're just talking about building social housing, I think we're talking about what's needed to improve or create sustainable urban neighbourhoods and build mixed communities. And in some cases, I would like to use the example of Tycroes and the forest village that we built in Swansea—or outside Swansea—several decades ago. The challenge was to build the kind of housing that would attract people to want to live in Wales or stay in Wales, and so it's not just a question of social housing numbers but something more complex, on which, on the whole, Wales is leading the way with things like the Land Authority for Wales and what it's now doing with Transport for Wales.

Okay. Thank you very much. James, you wanted to come in.

Yes, I did, on postwar levels, because the demographic of the workforce has changed. A lot more people now work in office environments, compared to construction. In the postwar era, a lot more people worked in the construction and building industry. I give Government a little bit of stick on this, but you've also got to leave them a bit alone, because actually the workforce isn't there to build a lot of these houses as well. So, we talk a lot about the numbers and getting back to where we were, but if we don't have the people to actually build the houses, it's never going to happen. So, what do you think we need to do to actually encourage more people to go into the construction industry as a route of employment, because without a well-founded workforce, we are never going to build the level of houses that we actually need to the right standard to actually meet our housing targets across Wales?

I'll answer the first question first and then I'll come on to the question about attracting people into the workforce. The simple answer to your question is that, of course we could build as many as we wanted to in the postwar era, that is just a matter of political choice and will. But, as both Ken and Nick have said, it's not necessarily the right question. It's an arbitrary metric. The situation is different, and we need to be building the right homes and the right number of homes for now, not for 1950. But, of course, if we decided that we did need to massively increase social housing supply or any other housing supply, that is simply a matter of political will. The problem has been that it has just not been a high enough priority. We've had Governments right across the UK who have always said that this is a high priority, but their actions have suggested that it's not that high a priority, right, or we would be somewhere different. 

To answer the question about the workforce, that is undeniably true. There are real problems with the workforce in this country, but I would say that the solution to that problem is precisely to actually build more. It's a chicken-and-egg situation: you can't expect the workforce to be there if the projects aren't there to employ them. At the moment, we have allowed our housing supply system to become extremely market led and therefore extremely boom-bust cycle dominated, and that makes it a very difficult place to work in.

As an anecdote, I recently needed a tiny bit of bricklaying work done in my back garden, and I found that there were so many bricklayers desperate for work, which is crazy. There were literally hundreds and hundreds of bricklayers desperate for a tiny bit of work, because they'd all been laid off. So, we have a situation where, if you do have these high-value skills that we desperately need, you will spend a lot of your time unemployed, because the system is so volatile and so insecure, there is such a poor pipeline of future work that we can't even offer the people who do have those skills enough of a future pipeline of work to keep them doing the job. So, if we want to get people into these professions and we want to keep them there, the most important thing we can do is actually to send a clear signal to the market that there will be a steady pipeline of good-quality work ahead. And that, again, comes back to having a proper programme of house building. 

Okay. Thank you very much, Toby. Shall we move on, then? Lee. 

Yes, so to build on that point, then, of a pipeline, clearly there is market failure here and we are relying on something other than the market to be able to create the conditions to be able to provide that pipeline to cover all the needed mix or economic profile. So, what mechanisms do we think are best placed to do that? When we had housing going out of local authorities to social landlords, one of the arguments was that they'd be able to borrow more and be off balance sheet and that that would give them greater capacity to be able to develop themselves. Is that happening? If not, why is that not happening? Is there sufficient strategic ability within the Welsh public sector, either at a local government level or at a regional level, or, indeed, within the Welsh Government's land unit? I was intrigued by what, I think it was, Dr Falk said, about the collaboration between the land unit and Transport for Wales as showing signs of promise. So, I'd be really interested in thoughts on how we get this pipeline, who are the best actors, what are the current constraints, and what might we, as a committee, think about making it a recommendation to put that all right? There's a lot there.

09:45

I'll let Nick come in on some of the solutions in a second, but I'd say, in general, the problem has been that we have allowed our entire housing supply system, including our affordable housing supply system, to become entirely dependent on private supply. And while that feels quite clever in times when the market is booming, and we've used section 106 policies to extract some of the value of private development and channeling it into affordable housing—that feels like a very neat solution, with the problem providing its own antidote—of course, as soon as the market turns, it goes into reverse and we find that we don't have the counter-cyclical investment pipeline that social and affordable housing used to provide. 

So, during that postwar boom, we saw a much more stable production of overall housing precisely because, when market sales were poor, there was still a large pipeline of demand from the council sector and that kept people employed, it kept production going, it kept the brick kilns open—it keeps the entire supply system going. Whereas now, as soon as the market turns, your affordable supply drops off a cliff as well, the brick kilns shut, the bricklayers are out of work—the entire pipeline goes into free fall, and we find it very, very hard to then rebuild the supply pipeline in future. And this is why the emphasis on social house building is so important—it's not just about providing the tenure that people need most, although obviously, that's the ultimate purpose of it, it's because non-market supply is a critical part of the demand pipeline that keeps the entire house building industry going.

Well, I would reinforce what Toby has said. The challenge is one of continuity, of continually building whether the market is high or low so that you can sustain a supply chain of materials and also of skilled labour. People often forget that about half the cost of a house is really made up of the infrastructure, including land—land being the greatest variable—and very few house builders, developers, are really willing to take on all the risks involved in not only getting the land together, but also putting in the necessary infrastructure, which is getting ever more demanding with the concerns for low-energy housing.

So, I think that you've got to ask yourself the question: how can one provide the right sites in the right locations? By 'right locations', I'm above all concerned with reducing travel-to-work times, reducing energy emissions. So, I think that linking housing supply with infrastructure is the key challenge, and doing so in places where there is a potential for economic growth. And nobody does this very well in the UK. Really, to look for models, you've got to go to big cities like Vienna or Zurich on the continent, or medium-sized towns in the Netherlands, because we've just got it wrong in the UK in believing that the private market can respond to the demands, let alone the needs of people for better homes. I think the right values exist in the policies that have been set out, particularly the Well-being of Future Generations (Wales) Act 2015, and the issue is the delivery mechanisms to overcome the constraints. If you can provide the sites and cut them up into small enough chunks, then I think the house builders can respond. If the house builders respond on a continual basis, come high or low demand, then the supply of labour and materials will follow.

And could you say more about the TfW example you cited earlier?

09:50

Okay. I’ve been really excited, and I hope that the rest of the UK or, indeed, Europe will be aware of what Transport for Wales has been doing through the south Wales metro and other initiatives. I think that is absolutely doing the right things, and the fact that the trains have been bought and are there—I took the rail line up to Pontypridd just to check it out—is really encouraging, and way in advance of, I think, anywhere else in the UK, except for, perhaps, London. So, that’s really good. But the challenge is not just to improve connectivity by rail or public transport or walking, but it’s also to build the housing alongside, and that’s where we go wrong, because we don’t join up development and transport or other infrastructure and finance, and that is the task of government, and it’s probably not either central or local government, but it does require a mechanism like a development corporation or some form of public-private partnership to give you the continuity, because I would say regeneration takes a generation. It’s a 20-year period we’re talking about, when councillors will come and go, and even governments will come and go, but you’ve got to keep pressing on, and that continuity has got to be underpinned, in my view, by public funding because what we’re talking about is a public or common good.

Can I just press you a bit on that? Sorry, I thought you were praising TfW for some innovation of looking at how it could leverage the land along the metro rather than just building the trains.

I don't know—it may be starting to do that.

No, I don’t think it is. So, part of the original vision for the metro that Mark Barry argued for 10, 15 years ago was about leveraging those additional land values that would go up next to metros, and TfW should have a role in exploiting that, and I don’t think that has—I’m not sure if you have views on it—happened to that extent. So, on your question of a development corporation, I think that was my question, really, about capacity: who is best placed to provide this pipeline? Do you think there’s a role for TfW to add value to its existing infrastructure investments, or who else could do that? I’m interested, if anybody wants to answer that.

Well, I notice that, in London, Transport for London has set up a joint company to develop land around transport nodes, bus stations and so on, so I think that’s a start. I don’t think there’s anything like that in Wales. It is a different job; it’s not so different, but it’s not the same as electrifying a railway line or buying railway stock or whatever. So, I do think that it calls for some kind of partnership, and it’s got to be an organisation that, as I say, has got at least a 20-year perspective to deliver results. This is different from just—[Inaudible.]—a site with a few houses.

Sorry, I don’t know if you can hear me trying to interrupt. I just want to press you further on that. I’m intrigued by that notion of the joint spin-off company with TfL. Do you think that the land authority—sorry, that was a slip; it used to be called the 'land authority'—the land division in the Welsh Government is the right body to partner up in a joint venture like that, or do you think that does something else, and does it do that something else well enough?

I don’t know. I suspect the land division will probably be concerned with contaminated land, it will be concerned with former steelworks or whatever. I’m not sure. It’s part of what is required but it’s only part of it, because you need legal skills, you need, certainly, engineering skills, and you need the skills to be able to procure or do the right kind of deals with house builders. I’ve just come back from Freiburg, as it happens, and it’s quite clear—and that’s a model for the whole of Europe—that the local authority set the rules. It set down what it wanted because it was controlling the land and was then able to make it available, not by selling land for the highest price, which is the typical approach that a public sector body takes, but by selling land for the right uses, and using small housing groups, baugruppen—perhaps, in Wales, the equivalent would be co-operatives. So, I think that it’s a different kind of agency required. By the way, it doesn’t have to be huge; it may require a staff of 15 or 20. We’re not talking about anything much larger that, but they do have to be people, not consultants, but people who are employed with that long-term vision and ability to push things forward over all the obstacles.

09:55

Thank you. Would any of the others—? Sorry, Chair, I'm taking over your job here. 

No, you carry on, Lee, that's fine. I can see, anyway, Toby's coming in.

Just to reinforce what Nick said, I think the critical point is about integration. It's a kind of obvious point, really, but it is astonishing how poor we have become in the UK at integrating the different functions of placemaking, of development, and of government, frankly. So, it's not uncommon to find even within, say, a single local authority, the transport, housing and the property departments all pulling in absolutely opposite directions over the same piece of land. This is a nonsense. The job of government at any level is to be integrating and then balancing these different requirements, and making sure they all pull in the same direction. So, if the council or the Welsh Assembly Government or whoever it is, or a development corporation, is in place, they should be deciding, 'This is what we want to happen with this place and, therefore, we need the transport, the property and the housing departments to all pull in the same direction.' It shouldn't be a revolutionary request, this, and yet, strangely, it is, because, sadly, we have allowed these different functions to become completely siloed with their own targets, their own incentives. Often, those different teams just do not see that it is their responsibility to support the overall agenda of delivering a better place.

I'll talk about some of these things, but I wanted to return to the original question that we were set. I come back to what Toby said earlier—I think it's really important to recognise that procyclical nature of the private developer market in terms of its relationship with social housing and affordable housing opportunities. There was a period when it was fair to say that, in recessions or economic turn-downs, there was a counter-cyclical benefit from social housing. I think one of the things that has been apparent in the last five, six years, but particularly in the last two or three years, is the failure of that counter-cyclical level of things, and maybe that reflects the cumulative effects of the things that Toby was talking about, because of the dominance of the private sector model.

In that context, actually, I'd just refer to something that we wrote about in our written evidence. It is extraordinary, as to the Home Builders Federation's point that there's a lot of section 106 money unspent, that there's literally money on the table that isn't being used. I don't quite understand the whys and wherefores of how that's happened, and I guess each case is different at some level, but it's a remarkable thing in the era that we all live in of various forms of fiscal austerity operating from the UK to the devolved nations that that should be the case in England and in Wales. So, I'd point that out.

But the point I really was going to make before we had that very interesting digression is about the kind of choices that people at housing associations have about whether they get involved in development. Clearly, as in Scotland, we're very reliant on housing associations as the prime developer of social housing, but they're independent organisations. It may be their mission to deliver more social housing, but they face real challenges because they have other commitments, some of which come from the UK and the Welsh Governments, such as their commitments to climate change and suchlike, such as their asset management requirements to improve the quality of the existing stock, and we must never forget the importance of improving existing stock, as well as trying to build new homes. So, their rental surpluses, such as they are, or their planned rental surpluses can only go so far, and they have to make difficult choices. They will, on occasion, choose not to build new homes in that context, and that's not in any way an unreasonable position to hold. It depends on the specific circumstances of the association, the local context, the land that's available, how much they have to pay for the land—because another issue as a consequence of the private dominance of the development sector is that RSLs are trying to compete against private developers for land, and that simply doesn't work. I know that's something we're going to come on to later on.

The other thing to say, finally, is that we're all also buffeted by UK Government decisions that impact on how the housing systems function, the local housing allowance being a good example, or the levels of universal credit, et cetera, but also the UK system of mortgage regulation as it has been since 2008, which, of course, greatly reduces the effective demand for home ownership. It means people have to go elsewhere, which puts pressure on the private rented sector, which, in turn, puts pressure on social housing as well. So, these things are always complex and multiple things go on, because that's the nature of the housing system. But I do think RSLs face difficult choices, so it's great that, by ending the right to buy in Wales, you've actually created an environment where councils can start to build again and will, undoubtedly, do a good job.

10:00

Just very quickly to pick up on and agree with a couple of the points that have just been made, it's definitely the case that, post global financial crisis, volume house builders were pretty pleased to have section 106 commitments that they could sell to RSLs to get cash through the business, which is evidence of kind of the counter-cyclical benefit of having affordable housing and the need to focus on that as a sort of system of housing that's ideally outside of the market system, although it's currently embedded within it.

On the other point, around the need for a strategic, joined-up approach, if you look at the community infrastructure levy, it hasn't been widely adopted in Wales, maybe for a combination of reasons, including complexity and administrative costs. But, also, the land value has not been there to necessarily cover affordable housing and CIL, and in a case where CIL is in place, it only really contributes a fraction of the overall cost of the infrastructure that's needed, and so developers are frustrated and communities are frustrated. It's not achieving its objective because there's not that joined-up strategic vision with additional public funding coming in to help deliver the infrastructure.

And just on Ken's point around RSLs, because they are competing with private developers for sites—. I was speaking to a Welsh RSL yesterday and they were saying that they're competing with, perhaps, eight other bidders for sites at the moment, and most of those are private developers and they're bidding up the land price, which is obviously not great for their operations, and it'll alter the mix of private and affordable homes that even the RSLs can deliver. So, I'd just emphasise, I think, the necessity of moving away from this kind of market-led system where land-value capture and delivery of affordable housing is embedded within the market logics of private house builders, which is mainly the case now.

I'm going to ask about something that came up in the evidence. The Bevan Foundation, in its evidence, is raising some concerns about the reliance on the intermediate rental option—so-called 'affordable rent', which, in practice, in many places, is not what it says on the tin. I just wondered about your thoughts on that within the mix of the options available and whether you think we rely too much on it.

Well, with a lot of these questions, I don't have access to systematic research that's really quantified all these things, so—

—it's quite difficult. As an academic, that's what I like to base my comments on, but, based on what I have been able to discover, I mean—. To Nicholas's point, it may well be the case that we want to see lots of social rented tenure for people who are unable to access housing otherwise. That's really important. But we also need to think about the place as a whole, and this is why RSLs like to deliver—. Okay, they're delivering mixed tenure schemes because they need to for viability reasons, but it's also important and they also like doing it because it helps to make mixed communities. And so, I think there's room for all tenures on individual schemes, on strategic schemes and so on. However, in the Tirion case, their schemes are predominantly—. The affordable homes in those schemes are let at rents that, you know, may be a modest discount from market rent. So, although they are, strictly speaking, affordable social housing, they may not be targeting those who are in greatest need. We need to come up with imaginative solutions to address the problem across the piece, but I think we shouldn't be putting all our eggs in that basket, in that model. I see some other people have their hands up, but, yes, that would be my view.

I would just add to that that, without even commenting on the relative affordability of different tenures, because, as has been said, that will vary for lots of different places and people in different circumstances, and we do need a mix—. So, this is not against the concept of having intermediate housing in terms of its affordability, but the problem with the affordable rent model from the supply side is that it doesn't give you that secure pipeline of future demand, because, ultimately, the pricing is related to the market and, therefore, it is unpredictable. Therefore, it's very hard to know exactly what your future rental income is going to be from that product and, therefore, it's very hard to price it into a long-term delivery pipeline, and it's very hard to plan your business on that basis. So, even if it is the ideal tenure for a particular price point, which I suspect it probably isn't in most cases, but, even if it is, it's not giving you that supply-side benefit that's a really predictable, solid, non-market tenure that social housing gives you.

10:05

Yes. I've got mixed views about affordable rent—we call it 'mid-market rent' in Scotland, 'intermediate rent' in Northern Ireland. There are plenty of examples of really effective provision of affordable rent products in Scotland that often don't use grant at all and do that very effectively through low-cost debt and financial transactions capital and things of that kind. They actually, as a provider, work very well. We've found, both in Scotland and in Northern Ireland, that there clearly is a sub-group of people who will never be a priority for social housing who can't enter home ownership either and who are finding the rents unaffordable in the rental market. So, it can perform a role.

I think the point is, first of all, how much of a priority is that in contrast to the need of people who are homeless or facing really poor quality housing, et cetera? So, there's a political choice over how you allocate public resources between those things in a broader sense. In Scotland, we actually offer grant to mid-market rent, and I've always felt that's been over-prioritised given that there are parts of the country where land values allow you to do it without grant. I think there's a real issue there. There's grant there that could be better devoted to social housing. So, there are some tensions there.

I think there are also some issues about how the people who can apply for mid-market rent or affordable rent is actually allocated—how the eligibility rules work. We have local-authority-by-local-authority income caps on the incomes of people who can apply, but they're set at really high, to my mind, or quite high rates. So, that's all a mixed story. It can do a really good job in setting context, I'm quite sure of that, but it's about the priority that politicians want to give that within the broader portfolio of public expenditure on housing. 

I guess the other concern at a broader level is the long-term lesson from England, which seems to me to be the long-term shift out of what we understand as social housing and into these shared ownership and intermediate rent-type products, which have largely taken over. That's very undesirable. I think, when we get to discussions about new delivery vehicles and non-grant options, I think it's got to be clear that that, in most cases, is going to be affordable rent rather than social rent. It shouldn't be called 'social rent', it shouldn't be treated in that way, and it's set. So, we have this issue in Scotland as well. Going ahead, we have a housing investment taskforce, which is attempting to find new ways to pump private funds and institutional funds into the affordable sector more broadly, but I think we'd be very concerned if some of these kinds of models would be called social housing and would have a social tenancy name attached to it, even though the rents are far higher than what social rents are—as Toby says, they may go the way of all things if the market turns in the wrong direction on the financial side. 

Sorry, that's a bit of a scatter-gun thing, but I do think, like many things, it's nuanced and quite complex, because it does do a good job, but we do need to be careful about the implications of its over-extent.

Okay, Ken. I'll just bring in Edward, and then Lee would like to come back in. Edward.

Just a very quick point. I totally agree with everything that Professor Gibb has just said, but I think that's why we need aggregate data on the tenure splits of all schemes, not just RSL-led schemes, because then you'll really get a sense of what other tenures are coming through. They might be claiming to be affordable, but how much is actually social rent, how much is intermediate, at what level and so on? I think that's just a very important thing to have a good handle on, to really understand whose needs are being met and how.

It's just a quick follow up to you, Dr Shepherd, if I could, as we've got you and you do have expertise in land value capture. Just a question I raised earlier about the potential of TfW to leverage its role, because, obviously, as the metro kicks in, you're going to have some—. Pontypridd, for example, will be having a metro train service every five minutes. So, clearly, someone's going to be benefiting from that, and it's, as currently structured, not really being leveraged to then do further public good. So, just your thoughts on the potential and the things we should look out for in making a recommendation around that.

10:10

If land values and property values go up around the new piece of infrastructure, then, clearly, there's a moral and pragmatic argument to seek to secure a proportion of that uplift to help cover the cost of the infrastructure that's helped deliver that uplift. So, in principle, yes. I think the question is, obviously, the mechanism by which that is achieved. In London, they've experimented with something called tax increment financing, which might be something that could be experimented with in that environment, but that needs a lot of forethought, and there's some risk associated with that in terms of who bears the overall risk of the value not being achieved. If the state actually borrows against future uplift, and that doesn't materialise—. Examples in the United States where this is very widely used have shown that it's often the community that bears the cost through cuts in services and so on. So, there is considerable risk that could be borne by the public purse, but also, ultimately, by individual people living in those communities. Is that something we really want to take on? It's something to think about.

People talk about land value capture—and this is something I've tried to address in my written evidence—and it can come across as a panacea that can solve everything, but it's very much not a panacea, and some of the limitations of it in terms of how it currently operates I've set out in my written evidence, and I've just alluded to a limitation from the tax increment financing model, which is often promoted as being something that could be experimented with. So, I'm afraid it's a typical academic's if not politician's answer, that, 'It's complicated and there are different ways of looking at it.' But it's certainly something that could be explored.

Sure, but do you have any thoughts on my specific example of TfW and the development of the metro and its potential?

I would like to suggest that there are differences between places, not just in terms of east and west, but the proximity to cities, which will greatly affect the potential for uplift. There will also be great differences according to the condition of the land—whether it's contaminated or not. But, as a generalisation, it makes sense, in my view, for the land within, say, a kilometre or half a mile of a railway station, particularly one that's being upgraded, to be acquired for the purposes of development, for mainly housing, if it's not in the middle of a city. You've got examples, like between Cardiff and Newport, where I think four new stations are going to be developed. Now, the developers will not see the opportunities until the stations are up and the trains are running. The state can see those opportunities, or should be able to see those opportunities, acquire the land and begin to prepare it for development, but it does mean taking a 20-year or so perspective as far as a new community is concerned. I saw that to my cost in the development of Tircoed near Penllergaer, to the north of Swansea. It's now a great place; I can tell you that we had real difficulty selling any houses when there was a collapse in the housing market. But one could see that the opportunity over the long term was there. And this is where, as I say, the public sector has to come in.

The funding that one should be looking for will come from a financial institution, a pension fund, or an insurance company like Legal and General, who is looking for long-term investments, for 20-year, 30-year investments with relatively secure rates of return. So, the funding can be put together if you can find the right sites. Clearly, in the Valleys, there will be limitations where you've got particular problems with steep sites and so on. But, again, it's not, as I say, rocket science to spot these opportunities, though I do think that digital intelligence, mapping, can be used to take some of the risks away. It's not going to be done by a private developer. There will be private developers who will come in to do innovative projects, but once the basic risks have been taken out of it. Now, whether that's done as a subsidiary body of Transport for Wales, or it's done through the land division, I don't know, but it will require several, as Toby was saying, different mentalities, different kinds of organisations working together.

The mechanism seems to work quite well in parts of England, at least—the development corporation for the London docklands being a good case. But you do need to give it the right objectives, and not just, as in the earlier days of the London Docklands Development Corporation, attracting in private finance—so, selling things off for the highest price. But if you give them the right objectives, which you’ve got with the future generations Act, then I think development corporations will make a major difference where there are significant areas of land in places where people will eventually want to work or live. 

10:15

Land value capture is an issue very close to my heart. I would say that, as Edward has said, there is often a lot of, frankly, wishful thinking around this area, and I guess that stems from the fact that there is just so much value that is created, particularly from new infrastructure provision, and it just seems like madness that we don’t have a mechanism for channelling that into public benefits. That, at a very crude, high level, is true. The problem is that it is quite complicated how you capture that value. There are different mechanisms.

Very roughly, very crudely, I would say there are three different types of mechanism. Firstly, there is the tax system. What the economists have always preferred, right back to Adam Smith, is land value taxation—ways of using tax to capture the unearned increment in land value. Unfortunately, in this country, we just don’t have property taxes, so the reason why tax increment financing doesn’t work in the UK is because we don’t have the tax to increment the finance on. There are no, essentially, property taxes that go up with land value. I note that the Welsh Government had announced a plan to completely reform council tax. That might have gone some way towards actually creating a property tax that would enable some capture of that land value, but that’s now been kicked into the long grass. Without that, we can just set aside the whole question of using the tax system, because we just don’t have the taxes.

The next mechanism is planning gain. As discussed, that has some merits, but it is inherently procyclical and dependent on market actors, so it has extreme limitations.

The really powerful one, as Nick was saying, is simply owning the land in the first place. Acquiring the land at pre uplift cost prices, then generating the uplift, means that you internalise all of that gain for public benefit. The problem there is that the simplest way of doing that, which is simply to buy the land without telling people that you’re about to put in a new phone line, isn’t really an applicable solution, in a way. There are still examples where this most simple form of land value capture happens. It happened recently at Otterpool Park, where the local authority bought a racecourse and then announced that it was going to use it for housing development. The landowner was absolutely outraged, and is trying to take them to every court in the land as some sort of swindle. But it was a perfectly fair, open-market transaction, in my view.

But that’s quite difficult in a modern world, especially where infrastructure provision has long lead-in times, and people want to go ahead and say, ‘Yes, we will build this train line’, and then we turn up with a cheque book and ask people how much they want for the site. Inevitably, we’re going to end up paying over the odds in those circumstances, which is why it always comes back, unfortunately, to compulsory purchase. It’s the only real guarantee of land value capture. You don’t always have to use it all the time, but unless you have a really fair and effective system of compulsory purchase, the land market will always see you coming, and will always extract most of that value before you’ve even turned up with a digger, let alone put a planning application in.

Can I just make a modification to what Toby has said? I think the easiest starting point is with publicly owned land and to pool public land where that exists. I’m going to give you an example, and that’s Denmark, because it’s a relatively small country but a relatively advanced country. In Copenhagen, a development corporation, we might call it, was set up that simply took over all the public land. It started with defence land in a place outside Copenhagen, and was able to begin to get a really significant site. Then it went to take over dockland.

I think this principle of starting with public land is less controversial than starting by taking over private land. But once you’ve got a substantial site under way, which is going to benefit from public investment in the case of the site outside Copenhagen, with the building of a new metro, which was financed out of the uplift from land values, then I think you have, as Toby said, the moral justification for being able to acquire land alongside.

And by all means, then, you may sell it back to the people who owned it originally. If there are developers who’ve invested because they can see the long-term perspective, by all means give them the opportunity to buy the land. And this is where, if you like, the right kind of deal has to be set up while avoiding the sort of corruption that will lead you into the popular press. It's not just an amateur thing, this—it is going to require some skills and public values.

10:20

We're going to have to move on very quickly because we have other matters that we haven't covered yet. Edward, very briefly. 

Very quickly, just to follow up on some of the things that Toby was saying, the Welsh Government has signalled that it might be interested in introducing a land value tax to replace non-domestic rates and council tax. If that is something that is really still on the table, that's something that might open the door to more effective land value capture. I think on the other point around compulsory purchase, which I think we'll come on to later—there's a question later around the hope value provisions—the postwar history of attempts to collect a proportion of uplift were mainly all designed around this idea of taxation backed up by the threat of compulsory purchase at less than full market value. But we can maybe talk about that in more detail later on. 

Ken again. Briefly, if you could, Ken, because we do have other questions we haven't yet reached. 

Just very briefly, we've been doing a deep-dive into the affordable housing supply programme in Scotland to try and understand the blockers, and one of the key blockers that people repeatedly tell us about is the inability to access public land without it being at the uppermost commercial value. There's considerable interest from many parties in trying to find a way around that to get NHS land, Ministry of Defence land, local authority transactions to other parts of the local authority—that that can be done in a way that reflects use value in some way, and not market value. There seems to be considerable interest in doing that, but in practice it's incredibly hard to break out of that finance manual guidance that the public sector has to work with. So, it's thinking of the preventative benefits and the other reasons why it's all social good, even if the NHS or MoD don't get top dollar for the land they want to pass on when it's for non-market housing. So, that's definitely a major question for us.

Thanks very much. If we move on, the Welsh Government's target for building new social homes for rent includes those acquired by social landlords on the open market, for example properties that were formerly subject to the right to buy. To what extent do you think those sorts of acquisitions should be and can be part of the solution to these problems? Ken. 

This is a big issue in Scotland. Recently, some money has been allocated to social landlords to increase the acquisition of ex-private rented properties in particular, in part as a kind of fig leaf to do something about the temporary accommodation problems in Scotland. I think the challenge is that, sometimes, as I said earlier about the decision to build or not, there's also a decision about whether or not to purchase properties. They're not always the right kind of properties. They're not always in the right place. They may have significant underlying costs attached to the acquisition. So, it kind of depends, doesn't it? 

I know in places like Glasgow, a lot of social landlords are interested in this because it gives them an ability to take over more properties, say, within one tenement close, which is better for management of the close, and such like. But in principle, where it makes sense, I think there's absolutely nothing wrong with social landlords getting involved in that. The one thing I would say is that we should recognise that there are costs to taking properties out of the private rented sector. There is still a sense of where do people go if they don't go there and they don't qualify for social housing. You are reallocating the stock in a way that, to some extent, excludes some people from being able to use that. You may well argue that's fine, but we should be aware of that. There could be market consequences of doing that.    

I'd agree with that. I've put in my notes, 'It depends on the quality of the homes being acquired and the purchase price'. I know that RSLs in Wales, particularly during and in the aftermath of COVID when the scale of the hidden homeless problem was revealed, were purchasing homes directly from developers that would otherwise have gone to private tenure. Obviously, they're paying, presumably, market price for those homes, and hopefully letting them out maybe at social rents. Those homes won't be built to the same quality standards that are required for new social housing in Wales. So, it doesn't strike me as being the best solution, although it certainly, as Ken suggested, may have a place in the overall mix of solutions to address the overall problem. But I think it would be better value to enable and empower public authorities and not-for-profit developers to scale up their development activities and to make better use of public sector land to do so.

10:25

Thanks for that. I'll just bring in Toby briefly, and then James from the committee.

I'll be very quick. I just want to say that of course it's not always the most sensible thing to do, but it is equally a nonsense to have rules that arbitrarily restrict the use of public funding and all the different public levers just to do what makes sense in individual circumstances. We have far too many rules in this country—particularly Treasury-derived ones—that prevent people doing sensible things in the circumstances, and then we end up with the nonsense of unspent public grant or having to return large amounts of grant to the Treasury because we haven't been able to find schemes within the precise timetable that's allowed, that meet the precise metrics, that pass the precise thresholds for value for money under these circumstances. This is craziness. Of course in some circumstances it will make sense to acquire existing homes, and in others it won't. We should be trusting the people that we have already allocated funding to to spend it wisely in the circumstances that make sense.

I'm interested in what you think the role of Government is in the acquisition of these private homes. Because I know that, when I was a local government cabinet member for housing in Powys, it was very difficult actually acquiring some properties, because some of the older properties needed a lot of adaptations made to them, especially trying to meet the Welsh housing quality standard and the Welsh Government's new rules around energy performance certificate ratings. A lot of the older properties need an awful lot of money spent on them to bring them up to where they need to be to actually conform to the current social housing standards set by the Welsh Government. Do you think there should be some role for Government there in setting some parameters of what housing could be bought by local authorities or social landlords to bring in to their own stock, to make sure that, when they're buying something, say, for a couple of hundred thousand pounds, they're not having to spend another couple of hundred thousand pounds bringing it up to the right ratings that need to be delivered to meet Government standards?

I think that sometimes it will be entirely the right thing to do to bring in expensive properties that do require quite a lot of investment. I would be more inclined to trust local authorities and housing associations to make those decisions on a case-by-case local basis, rather than having endless central Government-determined rules that allow people to only do certain things in certain circumstances. Those rules never keep up to date with reality. The market is different everywhere, things are changing all the time. We end up in this stupid situation where we can't spend existing allocated grant because the price of bricks has gone up, and yet the maximum grant rate hasn't kept track, and so you end up not being able to buy a single brick. This is madness. So, no, I don't think we should be restricting local authorities in that way.

But you have to recognise as well, from my time on the coalface of doing this, that the housing revenue account that buys these properties also is a business account. If you're in local government, it has to have payback over a certain amount of time, and if something doesn't stack up financially—. I've seen a lot of houses that local authorities have bought, not just in Powys, having to go back on the market and being sold after because the amount of work they have to do to them to bring them up to standard doesn't actually fit within the realms of what the housing revenue account can pay for in terms of payback. Do you not recognise that that can be an issue?

I absolutely recognise that that can happen. I'm just saying that the solution is not having yet another set of arbitrary central Government-imposed rules that determine exactly what can and can't be done in different circumstances. As you say, that is a business decision for the HRA managers in that place. Actually, the HRA system has proved extremely robust in ensuring that councils behave sensibly. Of course, sometimes they'll make mistakes, and sometimes they'll have to correct them, but I think the system itself allows that correction, and we should be holding people to account at a local level, not relying on Treasury-imposed rules to do it for us.

Thanks for that. Let me move on to planning, which is always a prominent discussion point when it comes to house building. We've had a recent report by the Competition and Markets Authority that found that the planning system is exerting significant downward pressure on the number of consents granted in Wales. What would you say about that? What's your analysis of the extent to which social house building is being held up by planning delays? Would anybody like to offer some thoughts on that? I guess it's quite a difficult question if you're not quite—. Toby.

I'll have a go, with the caveat that I don't claim to be an expert on the individual circumstances of individual planning schemes in Wales, and every one is different.

In general, of course the planning system is an annoyance, and developers, public or private, find it irritating all the time. It's full of irritations and inconsistencies. I would say that there's far too much discretion in it, and that can lead to a lot of these uncertainties. The one thing that everyone can agree on planning is that it should give more certainty, so that people know what they will get permission for and what they won't, and therefore there's just less incentive to play games.

That said, I think it is often blamed excessively for the lack of house building, because planning permission is a necessary but not a sufficient condition to build a home. There are loads of other constraints on house building, most of which actually come from the market and not from the planning system itself. So, you can give as many permissions as you like, but if the market incentives and signals are such that private developers don't see it as being in their best interests to build those out now, then they will not do so, and it's kind of futile to blame the planning system entirely for that.

So, yes, by all means, let's look at reforming the planning system and dealing with some of those irritations, but let's not expect that in itself to make a systemic difference. If you want to make a systemic difference to planning, actually, you need more planning not less, in order to give people more certainty about what will get developed. I think we should have more emphasis on plan making and strategic planning and less emphasis on the kind of discretionary arguments over exactly what shape your windows are and whether it's two or three homes on that site.

10:30

Yes. I agree with that. Planning is often blamed; it's an easy institution to blame, and if you're a politician, you can pull the lever and change the policy much more easily than you can change the market and the composition of the market.

Well, you've got direct experience of this, Toby, maybe you can comment. But I think the key point is that if you're relying on the private sector to deliver a large proportion [correction: to deliver a proportion] of our social housing, then you're going to be beholden to their incentives and, as Toby alluded to, there's a limit to how much the private sector, particularly volume house builders, are going to want to deliver on individual sites each year because of local market absorption rates, which is discussed in some detail by Oliver Letwin and the Competition and Markets Authority report.

The other thing to bear in mind is that often there are calls to streamline the planning system, which I think, as Toby alluded to, is the wrong way of thinking about it. I agree that we need better strategic planning, which means more resources in local planning authorities and staff who are proud to be planners and are empowered to produce these strategic plans, which provide the certainty that's required. If you start trying to cut things out of the process, then what you might be doing is redistributing risks from development onto the community, by reducing the degree of scrutiny that those risks are subject to, and I think that's something that's really important to bear in mind. I think of planning as being an institution that distributes development risks, assesses those risks and distributes them, and if you're trying to streamline and simplify the planning system, then you're at risk of dropping the ball on some of those, and those risks may land with local communities or the environment. Yes, those are the key points.

I just wanted to make the point that we have our Master's degree in town planning at Glasgow, and I know that they have that in Cardiff as well. The big issue, I think—well, one of the really big issues—is the lack of planners, and the lack of planners being educated to do statutory planning functions. I think the Department for Levelling Up, Housing and Communities has acknowledged that and has made some suggestions about it, but it's just a drop in the ocean—giving another planner per local authority isn't really anything like adequate. So, until we have people—just to use the words that Ed just used—who are passionate and really want to be planners, doing that kind of job, that's a real market failure, as it were, in the labour market. We need more passionate town planners working on these statutory issues as well as the bigger strategic questions too.

I do agree that one needs ambition or vision or passion when one is trying to change a place that's, say, suffered from the loss of industry. I think one can also, though, reduce a lot of the risks through what I would call spatial science or digital intelligence, and the use of economics as well. So, it's not about architecture, it's not just about being able to draw things; it's about being able to understand the different factors, which will include the supply of infrastructure, the issue of the quality of the environment and so on. And these can all be brought together and mapped. This is an opportunity now because of the progress that's been made in dealing with data. So, it's a different kind of planner, perhaps, than we've been training in the past. And for want of a better word, I call it 'strategic planning', or 'urbanism' is another useful word, but it's wrong to just keep blaming planners when they're asked to try and do too much—much more than one could ever do in a lifetime.

10:35

On planning, one thing that's happened in certain parts of Wales and in my own part of the world is land banking by people—people getting planning on vast swathes of land and just leaving it sit there. They may put an access in or put the footings in somewhere and just leave it, and it's not touched then for decades on end. I was always a big advocate in local government of the use-it-or-lose-it principle: you either use your planning permission and you develop the homes, or you lose it and then that land becomes available again. I'm just interested in what your views are on that, on the planning process, and—everyone’s got their hands up now—actually how the planning process there could be more strict. I do think there are some big firms—. Private developers across the country are holding land back to drive up property values as well, and that doesn't help us in actually delivering more homes for people, so I'd like to get your thoughts on that, please.

You're quite right to bring in the point that many people who are called 'developers' are really just dealers in land, and you can make vast sums of money without taking great risks. The solution to that, as Toby has suggested, is property taxation. And in Denmark, which has a sensible system, there is a distinction between what we would call council tax and a charge on the land. If you put the charge on whoever has got planning permission, if they have sat on the land for two years and nothing has happened, but there is outline planning permission for housing, then it's sensible they should pay tax at the value that would have been achieved if the houses had been built, and that's what effectively happens in Denmark. And it means you don't see derelict land in Denmark because people make sure that it's used for something. So, I think that there is the opportunity to make a reform and to create a precedent in Wales that would then be taken up in the rest of the UK. This is a technical subject that is probably not best dealt with here, but there are perfectly good precedents for how to do this and, in my view, instead of creating something that's never been done before, just look at where it's been done successfully. And as I say, go to Denmark, go to Copenhagen or Aarhus and find a similar situation, and ask yourself, 'How do they charge the owners of property, on what basis, and does it work?'

Just on the land banking point. I don't know the precise circumstances of the sites that you've got in mind, but I think that it's important to bear in mind that the business incentives for going through the expense, risk and uncertainty of getting planning permission, putting in access, and then not developing—I'm not sure I see that as being necessarily the best business strategy for a house builder. So, I think that there may well be other reasons for those sites not being delivered than simply the developer sitting back and waiting for house prices to go up. It could be because they bought the site at a certain value and it's not viable. It could be because there are post-consent conditions that need to be discharged. I'm not saying there are no circumstances in which land is held speculatively, but I think that, once you've got planning permission as a house builder, you're incentivised to develop and sell those homes.

But the key words there are 'as a house builder'. An awful lot of land with planning permission is held by people who are not house builders and have never built a house and have no intention of doing so. They're holding on to it until such time as they can sell it to a house builder at a level that makes them huge profit. This is not challenging the fundamental economic truth of what Edward's saying, it's just that the reality is lots and lots of land is held with planning permission indefinitely like that. I could take you to thousands of sites that are like that.

I would say that Nick is right about the tax lever, because, unfortunately, 'use it or lose it' as a principle makes great political sense, but it does not work if you only mean losing the planning permission. We already have expiring planning permissions. It makes no difference, because the nature of the planning system and the nature of the market's understanding of the planning system is that, if you've got planning permission to build housing on this site once, you will get it again. So, having your planning permission removed actually doesn't change your incentives at all, unfortunately. We've tried that. We keep reducing the length of time that planning permission lasts before it expires; it makes no difference to this problem. You have to either tax the ownership of the land, or, again, it's back to compulsory purchase and saying, 'You have planning permission, you're not building it, we will take it off you and make sure we can get it into the hands of someone who will build it.'

10:40

Okay. We're going to have to move on. James, I know we've covered some of the issues, but do you want to—

Yes, just one point. The amount of public land that is owned by local authorities, Welsh Government, Natural Resources Wales—they all own vast swathes of public land. I'm interested in what your views would be, probably from a Welsh Government perspective. Should they be making more of their own land available for planning for housing, because it's a big land owner, the Welsh Government, but there are also other areas as well? I'm just wondering what your thoughts would be about releasing some of that land out for building.

I'm afraid I have a fairly hard view on this, that the point of planning is to identify the right bits of land for development, which should not be determined by who happens to own it. We've done a lot of this in England, where we've built lots of really crap developments in the middle of nowhere because the Government happened to own an old airfield. This is the wrong way to go about it. We should be building homes in the right places for the local community, and it frankly should not matter if those happen to be in private ownership or public ownership. 

Can I make a modest suggestion, which is that I do think the information about land ownership needs to be made more accessible? We're doing some work in the south of India at the moment, in Tamil Nadu, and I'm really impressed by the information system that there is in India—in English, I might say—which allows you to identify who owns land and what it's used for. In England, or Britain generally, it's a bit of a kind of secret. So, I think an easy change to make is to make the information publicly available about ownership, specifically or particularly in areas identified as having potential for growth or being important from a regeneration point of view. 

Okay. James, do you want to ask a question on compulsory purchase, because I know we touched on—

Well, I was actually going to go on to 106s, John, if that's all right, and the amount of affordable units delivered via 106s. It's something that I was always very keen on when I was cabinet member for planning, but, unfortunately, with the planning system, with the affordability criteria, I've seen some housing estates that were 50:50 that have actually gone down to 5 per cent, with 95 per cent for the open market and 5 per cent actually affordable, because they'd gone for affordability criteria through developers. What needs to change around that? Because, actually, the system, currently, from a personal perspective, I don't think works, because a lot of developers can drive out the affordable elements from housing developments, because of, 'Oh, it makes the whole site unsustainable and I won't build it.' I'm just interested to get your thoughts on some of this.  

This is something that I have done a lot on and I have actually made some progress on. So, we used to have this problem of what you've described, namely the viability threat, where a developer can buy a site for, basically, whatever price they determine they need to pay in order to secure it, and can then go back to the local authority and say, 'Well, look, I've paid so much for it and it's now no longer viable to deliver the affordable housing requirement on it.' Now, of course, they've overpaid; they should be factoring in the affordable housing policy when they bid for that site. 

When I was in Government, we changed the planning guidance on this precisely to try and close down this loophole. It does still happen in practice, often because local authorities don't realise that they should be holding firm at that point and saying, 'No, you knew the policy, you shouldn't have overpaid for it, that is on you.' It is on local authorities and central Government to make sure that the planning policy itself is clear enough, so that the pricing can follow through to the market. And when local authorities have really vague policies, where they just say 'affordable housing' without specifying what tenure, for example, that leaves too much wriggle room in there, and developers can end up overpaying for sites. But when you have clear policies, you have to just follow them to the letter, otherwise the market will not price in the effect of that policy. So, yes, I agree with you that it's a problem, but the solution to it is clear policy, rigorously enforced.

But you do get the rub, then, don't you, between local authorities wanting to deliver housing, whether that's open-market housing, social housing or affordable housing, and if you get—. This is from a councillor perspective, and I know a lot of them who sit on planning committees come to the point of, 'Well, we need to build more housing because people need houses to live in, whether that's on the open market or whatever', and if developers say, 'Well, I'm not going to develop it, I'm not going to build any housing', it's very difficult for local councillors sometimes to manage that expectation, isn't it?

It is very hard, and, unfortunately, this is a competitive game, and every time you roll over, that sends a very clear signal that, the next time, you'll roll over again. I would take the example here of the Mayor of London, who’s actually used the existing section 106 system quite effectively, because ahead of his election, his first election, he set out a very clear policy that the target would be 50 per cent affordable housing, but that he would accept 30 per cent, or 35 per cent, no questions asked, but that if you even tried to go below that the Greater London Authority would be down on you like a tonne of bricks, with an army of lawyers and accountants poring over the books. And all the market actors complained and said, 'This will kill development stone dead. Fifty per cent of zero is zero. We won't build anything.' And as soon as he was elected, they rolled over and accepted the new policy, because, actually, they knew that the certainty was worth it. They believed that he wasn't going to roll over and therefore they did. And it's actually worked pretty well.

10:45

I don't have too much more to add to Toby. He's done an enormous amount of work on this and has had lots of success, as he's just said. But, partly inspired by work that Toby had done, I looked at the planning context for Wales, and there's very little at a national level in terms of what should guide the negotiation. There's some good policy at local level, there's a commonly adopted viability model across lots of local authorities, but some key elements in there aren't really directly addressed in national policy guidance. There's the 'Development Plans Manual', which talks about benchmark land values for plan making—this is the uplift that landowners, quote unquote, 'need' to achieve in order to be incentivised to release land for development. But it's not as tightly controlled as it is in the national guidance in England, which adjusted as a result of Toby’s campaigning.

So, I think there's real opportunity there to look closely at what benchmark land values are assumed as being in plan making and viability negotiations across Wales, and to introduce some guidance at national level that basically shapes the context for decision making and plan making negotiations at local level. There's an example, which I looked at in the Bridgend local development plan plan-wide viability assessment 2021, where a letter from Savills was published in the appendix to that, which basically said, because of minimum land prices that have been agreed in option agreements with house builders, your benchmark land values, as recommended by Valuation Office Agency, are too low and they should be higher. And that seems to have been adopted without any quibbling.

So, I think that there's something to look at here, and there's a—. I'm not saying it's the same degree of problem as there has been in England, because land value patterns in Wales are different, and certainly different to London, but it's certainly something that I think that the Welsh Government should have a better handle on and try and make it the case that viability assessments are made public, which isn't currently the case, and that was a big change that came in as a result of Toby’s campaigning as well.

Can I just make a general point? Toby mentioned earlier that Welsh Government, local authorities, should be far more willing to compulsorily purchase land. Put aside the fact that they've lost a lot of the skills able to do that, that is not without risk, and, as you said, those returns the private sector had anticipated they would make would form the basis of a legal challenge, and then significant viability, if that speculative land dealer no longer had the cash that he thought he was entitled to. So, that is likely to be challenged, and there is a good chance that would be lost, so it's not quite as risk free as perhaps it should be and as you're both suggesting.

The present compulsory purchase system or the hope value provisions that are—?

Yes. That is the present system. It’s in legislation, but it's not currently used in Wales, the hope value issue [correction: hope value provisions]. I think that—. Toby can speak to this more, but people that have criticised the new hope value provisions in the Levelling-up and Regeneration Act 2023 do so making the point that, as you said, it's—. CPO is currently complex and it's risky and it's costly. It's not often done by local authorities, therefore will it really make a difference now we've got these hope value provisions? Those costs and risks will still be there. It's going to be even more subject to debates over what the current use value is. There are always debates over what the actual compensation level should be, but that will be shifted to current use value debates. And there is the perception about unfairness. So, if you're a landowner and you have your land compulsorily purchased at less than market value, you're worse off than you would be if you were able to sell it on the open market. Those are all the criticisms [correction: Those are the criticisms] that are made. But the counter to that is that, as Toby has said, we've got a system that has failed, okay, and we need to have some radical ideas. And this is definitely a step in the right direction. It remains to be seen how it will be used, it remains to be seen how much it'll be snarled up in the lands tribunal [correction: the tribunal], but let's at least see where it goes, and it may well be that, because it's only going to be used in tightly prescribed circumstances, then it might be a step towards a wider solution whereby this actually applies to all land transactions and therefore that's going to level the playing field.

10:50

And that sounds desirable. The reality is that is not the current position and so authorities would be liable to challenge under European human rights and probably lose, and so, 'Let's give it a try' is sort of—forgive me for saying this in a pejorative way—an academic view, but the reality is that local authorities, who are up against it, are not going to make those choices.

On the legal challenge point, I know that that was looked at very carefully through the course of the legislation being written. I don't have sight of the advice from counsel, but I know that multiple opinions would have been sought, and I'm fairly confident that the European Court of Human Rights issue is not an impediment. So, I don't think we can say—

I don't think that the current legislation, as set out, that enables land to be, in theory, acquired excluding hope value is going to be taken to court and lose as a matter of course because of the European convention on human rights.

I just think this is a red herring. In Germany, Holland, everywhere I've looked at, they appear to be able to assemble land at something like existing use value plus without having any problems with the European Court of Human Rights. I think it's only because we obsess with lawyers trying to maximise fees and so on that we've given an excessive value to land. In Holland, I think the general principle is that the value should be 25 per cent of the completed value of the development. And if we started with a general rule like that, if we started by identifying areas in plans as either growth areas or regeneration areas, forget about—. The mass of sites aren't affected, the mass of land isn't going to be changed in any way, so, we can get away from this ideological issue about the rights of the landowner versus the rights of the state and start thinking about what we need to do to improve our commonwealth for everyone's benefit, and, as I say, start what already is accepted as working in countries or cities or places that are comparable.

I agree with you that that's what we should be aiming towards, but that's not where we are, and the reality of austerity-hit local authorities and a very risk-averse culture within local authorities is that they often don't feel that they have the energy for that fight.

That is undeniable, but it is also true, as Edward just said, that we do have new legislation on this that has yet to be tested, because so far no local authority has tried to use it. And, critically, this will be an issue for Welsh Ministers—they have the power under the new Act to disapply hope value. And it will have to be tested in court—of course it will—and I would expect the first couple of cases probably to be quite contentious. But if, as Edward says, the legislation has been drafted correctly, it should go through, we should win those cases, and then that will have a seismic difference in the capacity of local authorities and their confidence in future. And I would ask the Welsh Assembly Government to think about whether, actually, they are the ones that have the political courage to step forward and actually use this legislation for the first time, because I don't see it happening from Westminster at the moment.

Okay, thanks for that. I'm going to bring Edward in briefly and then we will have to conclude this session.

Just to come back on Mr Waters, ideas will remain academic and seemingly impractical until they are tried, okay. So, we need to try it.

Yes, okay. Well, listen, thank you all very much. It's been a very interesting session, and thank you all very much for your views and evidence to committee this morning. You will be sent a transcript to check for factual accuracy in the usual way, but thank you all very much. Diolch yn fawr.

Okay, committee will break briefly until 11:05.

Gohiriwyd y cyfarfod rhwng 10:54 ac 11:08.

The meeting adjourned between 10:54 and 11:08.

11:05
3. Cyflenwad tai cymdeithasol: Sesiwn dystiolaeth 2
3. Social housing supply: Evidence session 2

We've reached item 3 on our agenda today, then, our second evidence session on our inquiry into social housing supply in Wales, and I'm very pleased to welcome, joining us here in person, Wendy Dearden, senior policy and research officer with the Bevan Foundation, and Robin White, head of campaigns for Shelter Cymru, and, joining us virtually, Darren Baxter, who is the principal policy adviser on housing and land with the Joseph Rowntree Foundation. Okay, welcome to you all.

Let me begin, then, with one or two general questions. First of all, your overall assessment of the Welsh Government's performance on social house building. A nice, very general question to begin with. Who would like to—?

Shall I kick off?

Yes, no problem. So, I think firstly with this, it's really important that we give a bit of credit where credit is due, and it is welcome that the Welsh Government has an ambitious target for the delivery of social homes. It's welcome that there's been significant budget allocated; we've got flexibility in the system as well. So, I think that is a positive situation to be in, and not one that is reflected in other parts of the United Kingdom, necessarily. That being said—there's a 'but' coming here—we definitely at Shelter Cymru think there is more that is needed, and I'm sure today we're going to talk about the need for social housing, but what we are very clear on is that, right now, the need far outstrips the supply that we are delivering and the supply that we're probably capable of in the short term. Some significant changes might be needed to boost supply, and I think this inquiry is doing a really good job of asking some of those questions.

As a service provider, I think it's important for us to always reflect on what the impact of failing to have sufficient supply of social housing is right now. So, we've all, obviously, seen the statistics, we know that there are a large number of people in TA, that homelessness remains a problem, that the private rented sector is seeing soaring rents. But, at Shelter Cymru, we see the people behind that every day as well—so, we see the single mothers who are stuck in temporary accommodation that is not the right size. We also see the impact in terms of people who are allocated social housing, but where it might be significant distances from their support networks, it might not suit their particular needs. So, as well as thinking about how we increase the numbers, and we definitely do need to increase the numbers, we also think there's more that needs to be done to think about the type of homes we're building within the wider concept of it being social housing—so, making sure that we have the homes that meet the needs of communities and people across Wales and that we have a way to capture what those needs are.

The final thing I'd say on this is key to that is also that we need to set out a very clear vision, not just for social housing, because social housing is one part of the wider housing supply. We need a vision that covers housing across Wales and that, within that, sets out very clearly what we are expecting social housing to be, who we expect it to be for, so that we can just start from that position of knowing where we need to get to.

11:10

Okay, Robin. Thank you very much for that. Any thoughts, Wendy?

I think, in terms of the numbers, it's pretty well accepted now that we won't achieve the 20,000 over the five-year period. So, 20,000 over five years, if you do the maths, is 4,000 a year. From the first two years of data that have been published, we've averaged 2,800. So, I think even the Cabinet Secretary now realises that, and we'll go into talking about the reasons why it's a difficult market for building social homes. Also, that 20,000 is based on data from 2019. The world has moved on a lot in terms of housing needs since then. The cost-of-living crisis, our housing market is in a very much harder position than it was pre COVID, so we're very much questioning at the Bevan Foundation that 20,000—not only is it not achievable, but is it enough, and are our ambitions enough in terms of social homes? We've got double the number of people in temporary accommodation that we had at that time, so we're in the high 11,000s now in terms of individuals in temporary accommodation, and also we've got more people worried about eviction and repossession and being in that position themselves. So, it's not just about, 'Will we achieve the target?', but is that target actually fit for purpose any more in our current housing crisis?

Yes. Okay, Wendy. Darren, did you want to add anything?

Yes, I will, and first, an apology, I've got a sick and quite grumpy three year old at home today, and he's around in the background, so if there is noise, that's what it is.

I would say very similar things to Robin and Wendy. I think it's great to see that the Welsh Government has an evidence-based target that's rooted in an actual calculation of housing need. As an organisation, we work across the UK, and we're used to working in England where even making the case for a target is—. There isn't even a target to not be met, but, obviously, that target has to be a minimum amount that's delivered, not just an aspiration, and, as the other two speakers have said, it is clear that that target probably will not be met in the time frame that's been set and that that target will need to be rebased to reflect the homes that haven't been delivered as well as the ones that have.

The other aspect is I think there needs to be that qualitative focus on the sorts of homes that—[Inaudible.] We had a report out in 2020 called 'Poverty in Wales', which noted that the growing levels of poverty in the social rented sector have been underpinned by rents increasing in social housing. So, it's not just about the numbers, but it's whether they're being built at rent levels that suppress rather than contribute to poverty.

Finally, I think there's a sort of grey rhetoric—and I'm sure we'll come on to this in future questions—from the Welsh Government on different models of delivering these homes and actually thinking about how the Government might intervene in the land market and the planning system to take a more active role in delivering homes. And if the Welsh Government is serious about that really significant step-change in the delivery of social homes, then I think exploring all those levers will be really important.

11:15

Okay. Thanks for that. If I could just ask about that 20,000 target for 2026 and whether it's likely to be enough to meet housing need, the Bevan Foundation, in your written evidence, you raised concerns about the methods used to assess housing need at a local and, indeed, national level. Could you just amplify a little what those concerns are?

Of course. For anyone who's not aware, each local authority prepares something called a local housing market assessment, and that then feeds into the planning process in terms of the amount of affordable housing that's needed, of different tenures and in different locations in the local authority area. It would not be fair—. It's fair to say that a lot of work has been done in that area around the Welsh Government, and there's a new model. But local authorities themselves are responsible for doing those calculations and they're currently coming to the end of a recent review of those. Meeting with a couple of local authorities, they have voiced not only the capacity to do that sort of work—you've often got one housing strategy officer in each local authority—but also managing things like the social housing grant programme. So, in terms of capacity, it's quite a big piece of work to do. But the model also allows for tweaks and assumptions on a local authority basis, and the intention of having the model for the whole of Wales was to ensure some consistency in the calculations. Also, from talking to some of the independent consultants who work alongside local authorities—so, if they're going to commission someone externally to do that work—there are concerns about the calculations behind the model and whether they might be under-representing need. I don't have the specific details on that, but it's something that feels like it just needs to be opened up and looked at.

Also, more generally, at the Bevan Foundation, the bedrock of the evidence for the local housing market assessments is social housing waiting lists and affordable housing waiting lists. Now, anybody who works in rural areas will know that the social housing waiting list in a small community where there are no social homes will be zero because there's nothing to apply for. So, there have always been concerns about waiting lists as a source of data. We do question that, if we've now got 139,000 individuals waiting for social housing and waiting up to seven years, how many people in housing need are actually bothering to make a housing application now, because are they actually going to get anything and is it worth the pain and effort of doing that process? So, it just feels quite outdated to be looking at housing need data as being housing register data. It's fair to say that it's going to be an under-representation of who actually needs homes out there.

There are models in England—there's a longitudinal study called 'Understanding Society' that academics have been looking at, which actually looks at modelling households and patterns of when people are likely to fall into housing need. So, that's one data source we could be using instead. There have also been calls in the sector to have some sort of census-like, regular housing need survey—the type of stuff that's done at a local community level, but could that be done broader, pan Wales?

Mae angen casglu data, yn sicr, ac mae diffyg data yn broblem. Pa mor effeithiol ydych chi'n meddwl ydy—beth ydy'r term—rural housing enablers sydd mewn rhannau o Gymru, wrth iddyn nhw gasglu data ac adnabod anghenion lleol ac yn bwydo i mewn i'r drefn? Ydy hwnna'n ffordd, ydych chi'n meddwl, sydd yn effeithiol ar hyn o bryd? Oes angen cryfhau'r drefn yna?

Data needs to be collected, certainly, and a lack of data does cause a problem. How effective do you think—what's the term—rural housing enablers are in parts of Wales, in terms of collecting data and identifying local needs and feeding into this regime? Is this an effective means, do you think? Do we need to strengthen that regime?

Definitely. I actually met with the longest standing rural housing enabler in Monmouthshire yesterday. Housing enablers have been—. We used to have an active network of them across Wales. I think we probably have two or three remaining at the moment. I don't see it as just a rural role; I think it's got very much—. Certainly, in north Wales, we had an example where we had an urban housing enabler, and it's very much about getting to those elements of the community who may not realise that they might be eligible for social or affordable housing, doing that very granular housing need data. They also have a role in identifying land and taking us on a little bit in the agenda, but, actually, just getting the community talking about housing itself can be a catalyst for getting more properties built and understanding what's needed much more.

11:20

Just going back to the 20,000 target again and what you said, Wendy, about different tenures, do you think that target is fit for purpose? Might it be better in different ways—for example, could there be targets for different tenures and rent levels?

There is huge confusion, I think, about what the target actually involves. So, we talk about 20,000 homes in the social rented sector. Those are properties for social rent, but not necessarily properties at social rent. So, the current target includes social homes—what we call in Wales 'intermediate housing'—at an intermediate higher rent, and also shared ownership, so where there is an element of rent to a social landlord. I think the feeling at the Bevan Foundation, certainly in the shorter term, given the housing crisis, is that we should be focusing primarily, if not wholly, on social housing at this point, because it's that tenure that will be most useful to getting people out of temporary accommodation. It provides the most affordable, most sustainable and secure tenure for those households and the people who need accommodation most at the moment.

Okay, Wendy. Thanks very much for that. Okay, we'll we move on, then, to Lee. Lee Waters.

I just want to stick on that target question for a second, because, Wendy, you said that you thought the target needs to be more ambitious, even though you acknowledge the target is unlikely to be met. So, I'm just wondering—and there is a perennial debate on the usefulness of targets—given, as you've said, these were headwinds out of the control of any Government, what you think might now be the unintended consequences of trying to reach that target.

That's a difficult one. A target focuses minds. However, we can get complacent—'If we achieve the 20,000, then that's our job done'. So, if anything, it sets a limit on our ambitions, potentially. I'm going to pass over to Robin, because I think this is an area that he particularly wanted to say something on.

Yes. I think it's a really important point, actually, around what the target is for. I don't think anyone would have ever expected, when that target was set, that the target was about meeting housing need across Wales. I don't think that is a single-term ambition for any Government, and I think having a target, and an ambitious target, as Wendy said, is really important for focusing attention and setting priorities. But I always think the easiest way to think about this, or the way I think about this, is that the target is not the objective. The target is the key performance indicator. Our objective here is, presumably, ending homelessness, ensuring everyone has access to a safe, secure, suitable and affordable home, and that's where I think the target can become a problem, where it's difficult to meet, because if we're finding it difficult to meet the 20,000 target, our response should in part be how do we boost it, how do we get to the target, but the other part of our response should be to do exactly what this committee is doing, I think, and to ask the question of why is it difficult to meet the target. Because getting to 20,000 homes by 2026 but not having addressed any of the barriers that made it difficult to do would be a mistake. What we want to do ultimately is make it so that we have a very sustainable pipeline of social housing coming through so that we can react to need easily and so that we can keep pushing on, because, in the next Senedd term and the one after that, we're going to have to keep ramping up delivery if we want to get to a level of social housing where we can say, 'Everyone has access to a home.'

And I think this also, as to what I said at the beginning—. I think I mentioned briefly that some of the cases we see, and cases that people from our services have mentioned to me in the last couple of weeks, include people who've been allocated a social home, which they will have accepted because it will be significantly better than living in temporary accommodation, but then that home is in a place that relies on patchy public transport and they don't drive, and which is quite far from their children's school, so they've got make a decision as to whether to pull them out of one school and put them into another, removing them from their support networks et cetera. So, what we want to get to is a position, actually, in my view, and I think Shelter Cymru's view, where our target takes us beyond a basic number of x number of people in need, we need y number of homes, so that we've got, in many ways, enough social homes that we also have choice and that every individual community, every individual household can access those things.

11:25

But in the here and now, have you observed any unintended consequences of trying to meet the target, given the underlying conditions—the unit cost, for example, of each social home having doubled—so that it's not going to be achievable within budgets? Have you found the system being gamed in order to try and put the best complexion on the performance?

It's not something that I can say I've seen evidence of. I feel what I'm seeing is a lot of people trying everything they can to reach the target, and that's where things like the flexibility through TACP funding is very welcome. There are obviously risks if we are relying on things like acquisition, that we might not be bringing in homes of the quality standard we might have wanted—

It could be an unintended consequence, absolutely, and I think—

But isn't that the problem in pursuing targets, and Wendy's suggestion we should increase the target? When the underlying conditions are not favourable, that's simply going to result in suboptimal paths being followed.

Potentially, yes, but I think that goes to the point of, 'Are we talking about increasing the target and doing nothing else, or are we increasing the target and also looking at the things we need to do?' So, if you know you're going to rely on acquisitions, for example, introducing additional funding to ensure that the RSLs acquiring those homes can also bring them up to the right quality standards where necessary. We just can't do these things in isolation.

But if we had that excess funding, we'd be producing more social housing in the first place, wouldn't we? Those are the realities of what policy makers are engaging with. Can I just move us on—

Just before you do, Lee, Darren wanted to come in on these points, I think. Darren.

I'll be brief, because I know you want to move on, but I suppose the reason for the thing about moving the target is partly because it should be in some way connected to need. The last need assessment that suggested that you need about 4,000 homes a year over a five-year period, which gets you to 20,000, was done in about 2018, and so it's almost certainly going to be out of date. So, there's just a bit about policy reflecting reality.

But on that broader point of the current regime versus what it could be, I think Robin's point is key. If you increase the target, you need to put in additional support. The model we have is quite a passive one, where the Government provides grants to, largely, the housing association sector, who are then buffeted by economic headwinds, input costs go up and it becomes harder to deliver. They face all the problems of competing with the private market in acquiring land to build on, all that sort of stuff. But if we think about when we used to build lots of social housing, it was when local authorities, when Government itself took a more active role in land assembly and it had greater powers to buy land at a sub-market price, you used uplifts in land value to pay for infrastructure, all those sorts of things. So, I think this is back to this essential point, which is that we need to not just think about the target and how much money we're pumping into the system, but, fundamentally, about how we deliver these homes and have a greater ambition in that space.

Jest i ddod i mewn yn sydyn. Un peth ydy trio cyrraedd targedau tai efo'r incwm neu'r gyllideb sydd ganddyn nhw, ond mae hefyd disgwyliadau ar sefydliadau tai i wella ansawdd y tŷ. Mae gennym ni'r Wales housing quality standard 1 a rŵan 2, sydd yn golygu bod yn rhaid iddyn nhw fuddsoddi'r ychydig o bres—a ddaru ni glywed ynghynt fod rhent yn y sector cyhoeddus yn cynyddu i'r max drwy'r amser er mwyn i'r cymdeithasau tai gael digon o bres. Oes yna falans yn fanna? Pa un sydd angen ei wneud neu gael blaenoriaeth? Ai gwella ansawdd y stoc bresennol neu adeiladu mwy o dai? Sori, Lee.

Just to come in quickly. It's one thing to try to achieve housing targets with the income or the budget that they have, but also there are expectations on housing organisations to improve the quality of housing. We have the Wales housing quality standard 1 and now 2, which means they have to invest the little money—and we heard earlier on that rent in the public sector is increasing to the max all the time in order for the housing associations to have enough money. Is there a balance to be struck there? What needs to be done or what needs to be prioritised? Is it to improve the quality of the current stock or to build more houses? Sorry, Lee.

If I may, meeting with housing associations recently, they are actively saying that, 'Our development ambitions are having to be curbed because our private finance can only go so far, and that private finance is also being used to meet the WHQS 2023 and to meet energy efficiency requirements.' It's almost as if—. Going back to Lee's point, it's not just about the target of 20,000 homes, it's how that target for 20,000 homes sits against the target for energy efficiency, decarbonisation and the WHQS. If we were going into the supermarket and we only had enough money to—. Well, if we needed milk, bread and beans and we didn't have enough money, we would choose, 'Well, we'll get the milk and the bread.' We're trying to get all three things at the moment, at a point when we've got very little or not enough resources going in, and there doesn't seem to be that honest conversation at the moment about how the one is impacting on the other. Ultimately, it is resulting in fewer social homes being built, because social landlords are having to prioritise the requirements they've got in their own stock. So, there's a wider discussion to be had about targets beyond the delivery of additional homes.

11:30

[Inaudible.]—delivery charges, because, as we've discussed, we don't expect the market, by itself, to be able to meet our need, and that requires public sector and third sector involvement. Just in terms of the barriers there, as you mentioned earlier, the land division within the Welsh Government, what's your assessment of its efficacy and how that could be improved? And, are there other models that you think might be necessary to bring together the capacity and capability to create the momentum needed to deliver at scale?

Who wants to jump in on that one?

I can kick off. I'm sure all of us might have stuff to say here. I wouldn't like to describe myself as an expert, currently, on the land division. I think the fact that it exists, at the very least, is a really, really positive start, because it shows a recognition that there's a role for the Welsh Government to be playing at that end of, what I would say, enabling social housing. I would like to see it play a bigger role and I'd like to have a discussion about a bigger role, because at the moment, it feels like the land assembly is the first part, and there's a discussion to be had about whether we want the role of Welsh Government to go beyond simply identifying and bringing together the land from the public sector and occasionally the private sector, where necessary, to 'Do we want to look at master planning the sites themselves?' and 'Do we even want to go as far as delivery being done in the public sector?' I think there are degrees where you can draw the line, but I think it would be a good debate to have, and I'm sure Darren will have things to say on this, particularly when you're talking big parcels of land and big parcels of development.

But I also think there's a lot that could be done—and I don't know if we'll come on to this elsewhere—around how we empower communities to play more of a role here as well, through things that feel like they aren't in the space of empowering communities, like land transparency. If you have total land transparency, if a community knows where the public sector land in its areas is and how much of the land is privately owned and how much is under the control of big developers, then if you want to set up a community land trust, for example, you're able to go to the relevant public body and say, 'We know you own that land.' So, I'd like to see the land division expand its role in that way, as well, and think about how we can map out and demonstrate to the people and communities across Wales who owns what's nearby and give them best practice examples, and really just start to be an enabler of lots of different ways of doing house building. Because, practically, we're going to need to pull on every lever in every different way if we're going to get to these targets.

That's still quite a small-scale solution there, isn't it?

The community, I think—. In terms of enabling communities—and Wendy has mentioned this—in small communities in Wales, you might have a housing waiting list of zero, but there'll be two or three households who would benefit. For those two or three households—and again, this is why, as a service provider, we often think in terms of people—that could be a significant change to their life.

Sure, and I've not got anything against that, I'm just saying, we were talking—. In terms of the target we're failing to meet, those seem to be secondary issues—

And I think this could go back to some of what you're saying about unintended consequence, as well. If we focus solely on how we get to the target, that might lead us to big development sites, because if you build 2,000 homes in one place, great, but then you're not necessarily supporting communities in every part of Wales, because there are going to be plenty of parts, particularly rural parts of Wales, where you're not looking at a 2,000-home scheme, realistically, you are looking at a 20 or a 10-home scheme to meet housing need in that area. And so, that's where I think giving the land division responsibility for all of those things, not just for major sites, could be quite interesting as a model to explore.

Do you think that can be done effectively within the Welsh Government? Because, before the land agency, some time ago, the Land Authority for Wales looked at sites and then there was Tai Cymru and others. Do you think the current model is right?

We're just starting some new housing research at the Bevan Foundation and one of the things we're very keen to do is not just look at new things, but look at what we've done in the past and how we could bring those back. I personally grew up in a Development Board for Rural Wales-developed property in mid Wales. We have those powers still in Welsh Government that the WDA and the DBRW used. It's almost as if they're in a back cupboard and we've forgotten about them. There are things that we could bring forward, and then tying the CPO powers and that side of things together, we could be doing things at scale. At the moment, it feels like the onus on delivery is with the local authorities and housing associations. We are, through our research, wanting to question what else could be done at a more national level to bring that pace and scale that we need.

11:35

Lee, just quickly, I think Darren would like to come in. Darren.

Yes, sure. Just very quickly, on the community-led housing point, I think they are inevitably small scale, but they often develop sites that just wouldn't get developed by the private sector, or which would be too small for the social housing sector anyway. So, if you're thinking about additions from where they wouldn't otherwise come, then community land trusts are often very good. 

But, on this point about the things we've done in the past, the model of delivery for social housing often did involve public land assembly, using those uplifts in land value to pay for infrastructure, developing houses and then renting them out. I think the Welsh Government has been pretty progressive on these issues: I mean, it's establishing a non-profit housing company, for one, and the proposal for Unnos is really interesting.

We've done work on this issue, largely thinking about the English context. We've argued that this public sector capacity is something that's really, really missing. So, you've got a private sector model that's very speculative, doesn't really think about the long term, is not really capable of doing master planning, and then local authorities who we've seen financially pressured and also haven't done large-scale house building or land assembly for a long time and therefore lack capacity. I think there is a role in the middle for a national entity. The Unnos proposal, which seems to have gone relatively quiet, has a lot of the building blocks of being able to do that. It's a thing that we've called for in England, for Homes England, as an equivalent body, to take on.

I think the lessons from the Homes England experience that can be translated into a body like that in Wales are, first, that you need to really give it the powers and the mission and the autonomy to be able to identify, acquire and develop out sites and be an actual active market participant. If you do that, there's a real capacity for delivering at scale, not just social housing, but private housing as well. And, secondly, that you really need to rationalise and focus its mission. I think the problem with this Unnos proposal is it seems to have this quite long list of different responsibilities that it would theoretically take on, and actually just rationalising those—. Homes England, in England, obviously, has a similar problem of just being a bit of a dumping ground of the various different responsibilities that the Government doesn't really know where to put. Actually, focusing its mission really clearly on land assembly and building out a high social and affordable housing target could be a way of really unlocking significant amounts of development in Wales.

Okay. Thank you for your thoughts on that. Wendy, just finally from me, just to ask you to expand on something in your written evidence, the fact you think it's unfair that tenants are having their rental income used in order to fund the building of new homes. You think that's not right. I just wonder if you could explain a bit more about your thinking there.

This is perhaps a moral point. I'm not saying that we particularly have the answers to it, but it's something that we need to be very much aware of. At the moment, social housing is partly capital funded through Welsh Government grants and partly through private finance raised by housing associations and paid back through social rents. Whenever we come to talk about our social rent setting policy, set by Welsh Government, there is always this friction between, 'We need to bring as much money in as we can because we've got all these ambitions, but also we need to keep these rents affordable.' What we need to remember is that the tenants in social housing are people on some of our lowest incomes.

I suppose it's just a moral issue of that rent coming in and, okay, being used to retrofit and improve their homes is one thing, but a huge proportion of that then going also into developing future homes, it just feels that the model—. The answer to the problem is not just raising rents and raising the proportion of private finance coming in, because we can't do that and we need to remember where that money is ultimately coming from in the system. Everything in housing is so intrinsically linked that you can't just say, 'Oh, we'll just rely on that', because then we're going to have affordability issues in the social rented sector. So, I'm sorry, I haven't got the answer to it, but we need to be aware of it as another friction.

11:40

Sure, but in order to meet your ambitions you set out, you say we should be more ambitious. If you are going to take that dynamic out of the mix, then you need to source alternative finance—if you wanted to build more. So, do you have suggestions on alternative finance to fill that gap?

I don't believe we can fill the gap; what we can look at is perhaps reducing some of the pressure on it. I'm not an expert on finance, but it feels to me that each social landlord is going and securing their own private finance at the moment. Is there a way of bringing that together, with the Welsh Government having a role? Again, it feels like everything is being done in bits. Is that the most cost-effective way of doing what we're trying to achieve?

I guess social landlords working with local authorities to access their borrowing powers as well could be a more efficient way of doing it.

Yes, both local authorities and the Welsh Government themselves. There are things in the system that we feel that we haven't explored yet.

The Welsh Government's borrowing powers are quite limited. Local authorities have much more flexibility, I think. But that's an interesting suggestion. Thank you.

On that point, do you have the same view on the HRA paying for building houses? Because, obviously, rent is going to the HRA to build houses in local authority control. Would you have the same view that the HRA shouldn't be being used to build houses in local authority elements, because the HRA is basically the money that comes back around from rent?

It's the same principle as where we're relying on rents to prop up the system. There's always going to have to be an element of rent—that's how a private sector landlord operates his business. However, when we're talking about rent settlement, we need to be very much aware of who's paying that rent. Local authorities who are building also now receive social housing grant, so it's not HRA that is purely their source of finance. When we talk about social landlords, I'm talking about housing associations and local authorities. It's the principle, I suppose. We just need to flag it, that we can't rely—

I just wanted to make sure you were including local authorities in that, not just the social housing landlords. Thank you.

Yes, if I can. I want to talk about land, if that's okay. A lot of public authorities own land—so, the Welsh Government own a lot of land, local authorities own a lot of land. What do you think should be their guiding principles with regard to publicly owned land? What should they be doing more with it? We heard in an earlier session that they probably shouldn't have guiding principles and it should be for everybody to decide what they want to do. I'm just interested in your views on that.

I feel I'm hogging the limelight. Do you want—?

I certainly have views on that.

If you're looking for a guiding principle—. And I don't want to—. These are bad words, because they have a meaning in some places. I think it's about best value, but not best value in the sense of how we've often understood it, as how do we maximise financial value of land, but best value in terms of a social value element. There will be some pieces of public sector land that are very well suited to being used as public open space, and that's the best value we can extract from those. There will be a lot at the moment, I think, where the best value would be to look at putting it into a system that maximises the number of social homes we can put on it. I think, when we look at public sector land in particular, it leads us nicely to thinking about the way in which housing is an issue that should be seen as a cross-Government priority, rather than just in terms of how we reduce housing waiting lists.

If you take the NHS—being a very obvious example—we know from Public Health Wales that first-year costs of bad housing and homelessness are about £95 million, and if you expand that to cover wider costs to society, you're getting up to £1 billion a year. Where we have NHS land that we could put good-quality affordable homes on, not only are we then driving down maybe a local waiting list and getting people out of temporary accommodation, but we're saving money for the NHS. So, I think, at a very high level, if we start to think about housing in that cross-Government way, and we have a cross-Government strategy, that is not exactly a guiding principle for public sector land, but it's the sort of space I would like to see us get more into—seeing how these issues interconnect and, therefore, how we can use the public estate being part of that to help in lots of different ways.

I think on the ground at the moment we need to remember the public sector context that we're operating in, and the fact that every department in local government, in the public sector, will be needing as much money as possible. As a former local government officer, I can remember, when a school was coming up for disposal, asking for it to be available as affordable housing, and the money for that school had already theoretically gone to pay for the school that was already on site. So, we’re in a very difficult context. Yes, everything needs to be joined up. It’s very similar with the planning process—you see that all the statutory consultees involved are using the planning process to get as much money out of it as they can. We’re talking with great enthusiasm about housing and the pressures in that system. I’m sure if you had somebody from education or health in front of you, they would be talking very much in the same way. So, it’s how many ways can you cut that cake, really, to provide money for everybody. 

11:45

You've mentioned the importance of aggregating, and we've talked about the land unit. Do you have any experience, any views, of Ystadau Cymru, which is the umbrella body for all the different bits of the public sector to co-ordinate their work on land? It's anything involving land, really. Do you have any thoughts on them, and whether or not that's been used to full effect?

I haven't been directly involved. The few conversations I've had are that perhaps it isn't being used to its full potential. But I'm not able to give any more detail than that, I'm afraid.

Os caf i jest godi dwy elfen o'r cwestiwn ddaru Lee yn ei ofyn, a chwestiwn James, o ran pres newydd a thir. Hwyrach bod gyda chi ddim barn ar hyn, neu arbenigedd, ond gwnaf ofyn rhag ofn. Un ffordd o ddod â phres newydd mewn ydy trwy LVT, land value tax. Dwi'n gwybod bod Rowntree wedi gwneud ychydig o waith ar hyn yn y gorffennol, ond ydy hwnna'n rhywbeth rydych chi'n meddwl y dylid ei ystyried er mwyn dod â phres mewn i ddatblygu tai cymdeithasol?

If I can just bring in two elements here from the question that Lee asked, and also what James asked, in terms of new money and land. You may not have an opinion on this, or any expertise, but I will ask in case. One way of bringing new money in is through the land value tax. I know that Rowntree has done some work on this in the past, but is that something you think should be considered in order to bring new money in to develop social housing?

I'm not sure we've done a huge amount on land value tax specifically, but we've done work on the way in which the planning system can bring more money in. I think it's unclear in Wales, partly because of the lack of evidence, how far the current set-up of the planning system is capturing uplifts in land value. But given that it rests on section 106, and we know from research elsewhere in the UK that that system is not particularly effective at capturing uplifts in land value, partly because developers often wriggle out of their commitments, there are potentially better systems that we could use to capture those uplifts.

We’ve done some work on the proposal for an infrastructure levy, for example, which would be more like a flat tax on development. I think there are challenges with that model, and quite a few organisations in England, for example, have taken quite a critical line on that. But I think the principle that you embed in the planning policy an expectation of the proportion of affordable housing in any given site, and bake into land values those commitments, is the right thing to do. I think there are definitely ways of evolving on top of the section 106 system or replacing it that are more efficient.

The other way is simply through acquiring land at existing use value and then using those uplifts. That is used historically across the UK as a means for delivering new towns, social housing, other public infrastructure, but it’s also a model that’s used across European cities and countries as an almost default model of development. It’s why, often, big suburban extensions and things like that are achieved and done in ways that join up public sector infrastructure like schools and hospitals, transport, et cetera. The public sector can pay for that without having to put lots of capital in up front because they’re able to borrow against the future potential value of that land at the point it gets developed.

I think both through those active models of land assembly or through the way in which you design the planning or land tax system, there are loads of opportunities for effectively an untapped revenue source for paying for new housing and the infrastructure that’s needed to enable it.

It's one thing when you talk about public land, but public land sometimes can be in some quite difficult places to build, and there is a prejudice that comes with social housing, isn't there, in some communities. I got experience of that when I was a cabinet member for housing. We were trying to develop social housing in a certain area and it creates an awful lot of problems. You get the local residents up in arms—'I don't want that type of housing near me'—even though they advocate for it when the planning permission isn't there. I'm just interested in what your views are around the prejudice around social housing a little bit, and how you can break that down. Because I think to deliver a lot of social homes it does also need a lot of community buy-in as well in some of these areas. I'm just interested in your wider thoughts on that and some of the engagement that perhaps we need to have with local communities about understanding social housing. I hate the term 'social housing', actually, because it automatically creates a stigma, I think, in itself. But I'm just interested in your thoughts on that, really—anyone.

11:50

We've recently done some work with an organisation called the FrameWorks Institute. They do a lot of research on how to best frame the language around things in ways that get public buy-in, et cetera, and I think what we found through that— . And that focused on housing in general, and social housing specifically. And what we found was the ways in which you talk about these things are really important in public acceptability and the extent to which people are supportive of the idea of social housing. Being able to connect it to poverty alleviation was the thing that—. There were two things that you connect it to that that seemed to have the biggest impact. One was poverty alleviation, so making clear links between making people financially better off, avoiding poverty. The second was connecting it to health and to moving people from unhealthy to more healthy homes. So, I think there are ways in which local authorities, housing associations, local politicians can probably use some of those insights in the way in which they talk about it. 

The other thing that's come out of that work is often people like social housing when they think it's for them or for people locally, and they get more worried when they don't think there's going to be an obvious local benefit from it. I think that is true of both social housing and housing more generally. I think being able to make the case—. I think sometimes that the way around that is making the case that these are homes for local people, making the case that people will benefit. Partly, it's sometimes this probably reasonably understandable worry that homes don't come with the infrastructure that's needed, because, often, the private models of development don't necessarily lead to more school places, more doctor surgeries, the transport infrastructure that's needed. And it comes back to some of those other things we talked about, about having a joined-up land system and planning system actually delivering on some of those things.

It's very much about people's stories, I believe. We can take it away from social housing and actually just talk about homelessness in general, people's understanding of who might experience homelessness who might be on a social housing waiting list. It's breaking down those stereotypes and relating it not just to the properties, but actually the people who need those. It's a big piece of work that really needs to be done. It's not new in terms of where we're struggling with supply now; it's something that's been in the sector a long time, and I agree with you that just labelling it something different just sets it aside. 

All I might add, because I think that's covered it well, is I think this also goes to a point around we need to make sure that we are aspirational about the social housing we build in terms of looking beyond affordability. I think, for obvious reasons, we often talk about affordability with social housing at the moment, and I understand it—we are a service provider, we see how tough it is on affordability—but social housing should also be extremely high quality. We should be talking about things like design. We want these to be among the most aspirational homes, because that will help people want it in their communities—we want people to actively want this housing—and also it will drive change across the wider housing system, because if I'm a private developer and I see that everyone actually wants the product over there because it's so much better, that might also incentivise me to do more. So, I think thinking about having that conversation about what do we want from our social hosing, what should it be, is a really important part of this. 

This is where the planning system comes into a lot of it, isn't it? It's around mixed tenure housing developments, isn't it? It's not just having all social housing estates over there and then all private here, then perhaps mixed social rents somewhere else. So, how do you think the planning system can help with that? I think Mabon probably touched more on 106s, but how do we do that in the planning system? Do you think sometimes the planning system needs to be a bit more flexible and inventive as to how it can actually make these mixed tenure developments, and encourage people to do it? And that's a job then for local authorities, isn't it, to be able to incentivise, to provide grants, and that's where Government comes in as well to help developers who are building those private housing estates, for example, to actually include those mixed tenures in this, so that we can have mixed communities, where everybody's together, so we don't create the one-size-fits-all model for one type of housing solution for somebody, if you get what I'm getting at.

11:55

The feedback I'm getting from the appetite of market developers at the moment is they're very happy to be working with housing associations and additional properties being purchased as part of schemes. But I think that's more of an indication of where the private sector housing market is, because a housing association will come along and buy 10, 15 properties off plan. That finance really helps then to make everything stack up. In terms of the planning system, the messages are that, for both developers and for housing associations who are leading schemes themselves, the whole system is very complex, uncertain and costly. And the amount of money being spent just on the system and getting through it can be prohibitive, and housing associations having to walk away, and, potentially being able to build at least one if not two properties by the amount of money they've spent just on all that money upfront. So, again, it's going back to that point I think I made about all public sector consultees—they've all got their different take on what the planning system should be delivering. The planning system isn't necessarily working for housing or social housing at the moment.

Do you think there should be more flexibility, allowing people to buy off plan?

When I was a councillor, I can remember having big arguments with the housing department, trying to get a local developer, who said, 'I've got these three units, which have got the footings in, can you buy them?' And, actually, it's the prescriptiveness of it.

It's more about the standards that we're setting for our social housing that is getting in the way of that, rather than what the—. So, as you say, we did have some funding a few years ago that allowed us to mop up empty market units, and the standards were lowered at that point. So, we've got that crux, really, between trying to produce the best houses we possibly can, in terms of standards, but we might be missing some opportunities along the way because we are putting the cherry on the top, in terms of what we're trying to develop.

Okay. I know we've got to finish soon, Cadeirydd, so I'll be quiet now.