Selling expensive council houses can't accommodate the future

"What might be an appropriate tactical response in some cases could not be considered to be a comprehensive strategic solution."

According to the latest government figures, the number of households in England is expected to grow by 232,000 per year over the next twenty years. Last year, we completed just 109,000 homes, with rates falling again in the first quarter of 2012. How can we bridge this gap and what combination of tenures would best meet the needs of the population? With the economy in double-dip recession and access to mortgages constrained, most of these homes need to be for rent, although an element of housing for sale, possibly using a rent now, buy later model, would help to ensure more balanced communities.

A recent Policy Exchange report proposes that the volume of affordable housing could be increased by at least 80,000 homes per year by selling off social housing properties in high-value areas and replacing them with new homes in low-value areas. This might be an appropriate tactical response in some cases but could not be considered to be a comprehensive strategic solution to providing sufficient affordable homes.

There are a few difficulties with the Policy Exchange approach.

Firstly, it is a reactive approach that can only come into play once a home becomes vacant, so it is difficult to plan a new development when the timing of the cashflow to fund it is so uncertain. Inevitably, there would be a delay with fewer affordable homes available, before the new homes could be constructed.

Secondly, over the long term, we risk denuding high-value areas of all affordable housing, pushing families on lower incomes away from their places of work, reducing their disposable income and putting additional pressure on the transport system. It would also create greater pressure on public services in low-value areas. Having said that, many social landlords are making judgements about the appropriateness of their existing stock as they become empty, so this approach is already in place in some areas. Alternatively the homes may be retained by the landlord but let at 80 per cent of the market rent, which would generate a better income stream for the landlord while retaining the housing mix in the area.

The efforts of the coalition government to encourage house building, by streamlining the planning system and giving some support to stalled schemes, have failed because they are largely relying on the private developers to deliver the increase and they will only build where they can make a profit, difficult when first-time buyers find it so difficult to access mortgage finance. There are few private companies undertaking development for rent so this is a gap in the market that social landlords could exploit, at the same time as making a significant contribution towards bridging the gap between the number of new homes and new households.

Housing associations have access to relatively cheap finance, they have established development teams who know their areas and have good relationships with local councils, and they have the scale and housing management expertise to manage a large portfolio of rented stock efficiently. Under the current Affordable Homes Programme, most new affordable housing is being let at 80 per cent of market rent, well above social housing rent levels in most areas. This model requires relatively little capital subsidy (in many cases, none) but the higher rent levels are increasing the housing benefit bill for households on low incomes. Indeed the properties in high-value areas could be relet at market or sub-market rates and the cashflows from these used to support borrowing to build more homes.

Using their scale, financial strength and community knowledge, housing associations should be able to increase the volume of new rented housing without subsidy, while still being able to let at rents a little below the market rent level. These should be secure homes in which families could remain long-term without the fear of being pushed out at the end of a fixed-term tenancy introduced under the current regime. There would also be no requirement to means test the tenant population to identify the high earners who would be paying higher rents under the proposed “pay to stay” policy.

The government has begun to recognise that increasing the rate of house-building would also have a significantly positive effect on the economy, reducing unemployment and largely sourcing materials from within the country. An announcement is expected soon that the government will guarantee housing association loans, enabling them to further reduce the cost of capital and thus their costs of development. This is an opportunity to scale up the delivery of new homes for rent well above the level envisaged in the Policy Exchange report.

A man walks in late afternoon sunshine on the Heygate housing estate near Elephant and Castle on February 11, 2010 in London, England. Photograph: Getty Images

Chris Mansfield is a managing consultant at Hargreaves Risk and Strategy, a consultancy working in the housing association sector.

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An unmatched font of knowledge

Edinburgh’s global reputation as a knowledge economy is rooted in the performance and international outlook of its four universities.

As sociologist-turned US Senator Daniel Patrick Moynihan recognised when asked how to create a world-class city, a strong academic offering is pivotal to any forward-looking, ambitious city. “Build a university,” he said, “and wait 200 years.” He recognised the long-term return such an investment can deliver; how a renowned academic institution can help attract the world. However, in today’s increasingly globalised higher education sector, world-class universities no longer rely on the world coming to come to them – their outlook is increasingly international.

Boasting four world-class universities, Edinburgh not only attracts and retains students from around the world, but also increasingly exports its own distinctively Scottish brand of academic excellence. In fact, 53.9% of the city’s working age population is educated to degree level.

In the most recent QS World University Rankings, the University of Edinburgh was named as the 21st best university in the world, reflecting its reputation for research and teaching. It’s a fact reflected in the latest UK Research Exercise Framework (REF), conducted in 2014, which judged 96% of its academic departments to be producing world-leading research.

Innovation engine

Measured across the UK, annual Gross Value Added (GVA) by University of Edinburgh start-ups contributes more than £164m to the UK economy. In fact, of 262 companies to emerge from the university since the 1960s, 81% remain active today, employing more than 2,700 staff globally. That performance places the University of Edinburgh ahead of institutions such as MIT in terms of the number of start-ups it generates; an innovation hothouse that underlines why one in four graduates remain in Edinburgh and why blue chip brands such as Amazon, IBM and Microsoft all have R&D facilities in the city.

One such spin out making its mark is PureLiFi, founded by Professor Harald Haas to commercialise his groundbreaking research on data transmission using the visible light spectrum. With data transfer speeds 10,000 times faster than radio waves, LiFi not only enables bandwidths of 1 Gigabit/sec but is also far more secure.

Edinburgh’s universities play a pivotal role in the local economy. Through its core operations, knowledge transfer activities and world-class research the University generated £4.9bn in GVA and 44,500 jobs globally, when accounting for international alumni.

With £1.4bn earmarked for estate development over the next 10 years, the University of Edinburgh remains the city’s largest property developer. Its extensive programme of investment includes the soon-to-open Higgs Centre for Innovation. A partnership with the UK Astronomy Technology Centre, the new centre will open next year and will supply business incubation support for potential big data and space technology applications, enabling start-ups to realise the commercial potential of applied research in subjects such as particle physics.

It’s a story of innovation that is mirrored across Edinburgh’s academic landscape. Each university has carved its own areas of academic excellence and research expertise, such as the University of Edinburgh’s renowned School of Informatics, ranked among the world’s elite institutions for Computer Science. 

The future of energy

Research conducted into the economic impact of Heriot-Watt University demonstrated that it generates £278m in annual GVA for the Scottish economy and directly supports more than 6,000 jobs.

Set in 380-acres of picturesque parkland, Heriot-Watt University incorporates the Edinburgh Research Park, the first science park of its kind in the UK and now home to more than 40 companies.

Consistently ranked in the top 25% of UK universities, Heriot-Watt University enjoys an increasingly international reputation underpinned by a strong track record in research. 82% of the institution’s research is considered world-class (REF) – a fact reflected in a record breaking year for the university, attracting £40.6m in research funding in 2015. With an expanding campus in Dubai and last year’s opening of a £35m campus in Malaysia, Heriot-Watt is now among the UK’s top five universities in terms of international presence and numbers of international students.

"In 2015, Heriot-Watt University was ranked 34th overall in the QS ‘Top 50 under 50’ world rankings." 

Its established strengths in industry-related research will be further boosted with the imminent opening of the £20m Lyell Centre. It will become the Scottish headquarters of the British Geological Survey, and research will focus on global issues such as energy supply, environmental impact and climate change. As well as providing laboratory facilities, the new centre will feature a 50,000 litre climate change research aquarium, the UK Natural Environment Research Council Centre for Doctoral Training (CDT) in Oil and Gas, and the Shell Centre for Exploration Geoscience.

International appeal

An increasingly global outlook, supported by a bold international strategy, is helping to drive Edinburgh Napier University’s growth. The university now has more than 4,500 students studying its overseas programmes, through partnerships with institutions in Hong Kong, Singapore, China, Sri Lanka and India.

Edinburgh Napier has been present in Hong Kong for more than 20 years and its impact grows year-on-year. Already the UK’s largest higher education provider in the territory, more than 1,500 students graduated in 2015 alone.

In terms of world-leading research, Edinburgh Napier continues to make its mark, with the REF judging 54% of its research to be either world-class or internationally excellent in 2014. The assessment singled out particular strengths in Earth Systems and Environmental Sciences, where it was rated the top UK modern university for research impact. Taking into account research, knowledge exchange, as well as student and staff spending, Edinburgh Napier University generates in excess of £201.9m GVA and supports 2,897 jobs in the city economy.

On the south-east side of Edinburgh, Queen Margaret University is Scotland’s first university to have an on-campus Business Gateway, highlighting the emphasis placed on business creation and innovation.

QMU moved up 49 places overall in the 2014 REF, taking it to 80th place in The Times’ rankings for research excellence in the UK. The Framework scored 58% of Queen Margaret’s research as either world-leading or internationally excellent, especially in relation to Speech and Language Sciences, where the University is ranked 2nd in the UK.

In terms of its international appeal, one in five of Queen Margaret’s students now comes from outside the EU, and it is also expanding its overseas programme offer, which already sees courses delivered in Greece, India, Nepal, Saudi Arabia and Singapore.

With 820 years of collective academic excellence to export to the world, Edinburgh enjoys a truly privileged position in the evolving story of academic globalisation and the commercialisation of world-class research and innovation. If he were still around today, Senator Moynihan would no doubt agree – a world-class city indeed.

For further information www.investinedinburgh.com