A REPORT FOR THE LIBERAL DEMOCRAT TEAM FOR CORNWALL

“In from the Cold”

A Report on Cornwall's Affordable Housing Crisis

By Simon Fleming, Jennifer Stubbs,

Isabella Holby and Julia Goldsworthy

for Matthew Taylor MP

May 2003

As everyone who lives in Cornwall knows, finding an affordable home in the County has become next to impossible for local people on local incomes. This report, written by four young graduates from Cornwall (Simon Fleming, Jennifer Stubbs, Isabella Holby and Julia Goldsworthy) examines the factors that have lead to this housing crisis, and suggests how the Government must act to resolve the situation. Everyone should be able to afford an adequate home in their community.

The issues surrounding affordable housing are interrelated, and this report examines each in turn.

But the intention of writing this report is not simply to raise the issue -it is to propose solutions. The truth is, both Conservative and Labour Governments have pursued policies that have actually made things worse. That must not go on. An agenda for change is needed, including:

I hope that the Government will listen. Unless they do, increasing numbers of Cornish people will find themselves out in the cold.

Matthew Taylor MP

`In from the Cold'

- Summary -

The Liberal Democrats' 7 key solutions:

1. Give local authorities greater planning powers to specify the percentage of social housing in all new developments.

2. Cut VAT on renovation and renewal of older properties, to bring more affordable homes into usable condition.

3. More use of shared ownership schemes by the Local Housing Association to give people an affordable start on the housing ladder.

4. Implement the legislation ending the 50% council tax rebate on second homes, and use the extra money raised for affordable homes.

5. Introduce the power for Councils to buy properties where they are kept empty and allowed to run down unreasonably.

6. Reform local authority borrowing to allow increased building of affordable social housing.

7. Give Councils the option to require planning permission before more full time local homes are turned into second homes or holiday lets.

Unaffordable Homes

-The mismatch between house prices and average Cornish incomes

A fundamental problem in Cornwall is the mismatch between low local wages and rising house prices. Cornwall has the lowest annual salary in England at only 70% of the national average. Yet house prices are well above the national average -and rising faster than almost anywhere else.

Between March 2001 and September 2002 house prices in Cornwall increased by 49%, that's 63% higher than the national average. Meanwhile, Cornish weekly wages increased by only 3.5%, while the national average was 4.5%.

The most recent figures show the problem getting even worse. In January to March 2003 the average house price in Cornwall was £149,413 compared to the national average of £145,897. In contrast, the average Cornish weekly wage in 2001 was £334.20 compared to a national average of £444.30.

So house prices in Cornwall are now rising much faster than the national average, yet wages in Cornwall continue to rise more slowly, falling even further behind. The result is obvious: local people on local wages cannot keep up with the price increases.

As a result a study by the Joseph Rowntree Foundation released this week shows three Cornish districts in the top 40 for unaffordable homes, with the rest of Cornwall not far behind. In Cornwall as a whole, a typical small house costs 4.5 times average Cornish incomes - compared to just 3.37 times average incomes across the country as a whole.

A twilight world of “hidden homeless” has evolved within the Cornish housing market. Sections of society, notably the 18-30 year olds, are particularly liable to be caught within this. Unable to find the capital to buy a first time home, they are forced either to remain at their parental home or leave Cornwall altogether. The result is that official figures of homelessness, already high in Cornwall, do not come close to recording the full level of housing need and desperation in the County. Estate Agents themselves acknowledge that the current Cornish housing market is discriminating against local first time buyers. Estate Agents have acknowledged that coastal homes are currently more often than not sold to people wishing to retire and people moving into the county rather than local people.

The problem is clear, but why have Cornish house prices increased so dramatically compared with wages?

Inadequate housing stock and the impact of second homes

There are two reasons why Cornish house prices have outpaced then market in the country as a whole despite low wages: a low supply of houses and a high demand from outside the County.

Because of the desirability of Cornwall, houses are sought after by people moving from far wealthier areas who can afford much more as a result of selling their home there, often on retirement, and by very wealthy people buying second homes. This price pressure is especially intense in coastal communities.

In 2001 163,000 people moved into the London region, while 233,000 left. This is typical of the movement out of urban centres. More people are moving to the South West than to any other part of the country. The National Housing Federation predicts an extra half million people to be living here by 2016. Cornwall has been a favourite destination for migrants moving into the countryside. Typically these migrants are selling homes in London and the South East -the area with the highest wages and the highest house prices in the UK. So they can affor45d to pay a high price for a home in Cornwall -far higher than local Cornish wages allow.

None of us who live here can deny that Cornwall is one of the most beautiful parts of Britain, and our scenery, relatively low crime, strong communities and good education record make the county a very desirable home. But it has also meant large numbers of properties being bought up as second homes and a large migration as people, many of retirement age, moving to make the County their permanent home. This leaves Cornwall with a double whammy of problems: a rapidly increasing population who all need homes, and many houses being bought up to be used as holiday homes and occupied only part of the year.

A rapidly expanding population will always put a strain on the supply of housing. On top of this, Cornwall has the added problem of increasing demand for second homes which puts an even greater strain on stocks. In Cornwall and the Isles of Scilly, by 2001 there were 10,787 second homes and holiday lets registered. That means 4.6% of properties in Cornwall are now second homes -almost one house in 20. Many of these properties are kept as second homes for the owner's use only, usually occupied only a few weeks a year. The diagram below illustrates the extent of the problem and the importance to the Duchy: Devon and Cornwall account for fully a third of holiday homes in the UK, whilst only 3% of the national population live full time in the two counties.

In fact, the number of second homes is so great that in North Cornwall, for example, there are now more second homes than Council houses. Even these figures mask the true level of the problem hitting many communities. Popular holiday locations take a particular strain, with some villages reporting as many as a third of all homes or more lost to local families.

The social consequences of a high second home ownership include reduced use of local shops, pubs, schools, buses and other services, leaving them ghost towns in the winter months and threatening the very existence of these services, as well as denying local homes to local people. On top of this, the large number of people buying second homes in the county has helped drive all house prices in Cornwall higher than in other regions despite low wages. While Cornish people earn some of the lowest average wages in the country, people buying second homes are necessarily well off and can therefore afford to pay more for a house than local people on local wages of, on average, only 70% of the national average.

The high level of second home ownership in Cornwall has helped therefore put people living in the county in a next to impossible position when it comes to affording a house, especially in attractive coastal towns and villages. Moreover, second home owners have been benefiting from a 50% cut in council tax for their second properties - financial subsidy for owning second home, while all the evidence presented by this report points to the need for a disincentive! In fact the council tax rebate has created an subsidy for the wealthiest home owners costing Cornwall millions of pounds every year, at the cost of local services. Meanwhile, huge numbers of Cornish families struggle to find an adequate and affordable home in the county at all.

Local MP Matthew Taylor helped head opposition by the Liberal Democrats to the second home Council Tax discount when it was first introduced by the Conservatives as part of their Poll Tax reforms. So Liberal Democrats welcome the Government's belated acceptance of the longstanding Lib Dem proposal to abolish the Council Tax rebate on second homes. Soon the discount for second home owners will be reduced to 10%, which, while short of the fair situation of equal council tax, is a significant step in the right direction.

It is however regrettable that the Government have not earmarked, as we suggested, the extra funds from ending the council tax rebate to tackle the affordable housing stock problem by investing in new social housing to rent. As a result, even after this change, local people will continue to find the housing market unaffordable, and homes to let unavailable. The Government appear to have missed the opportunity for a joined-up policy which could have used the money from Council Tax on second homes to increase housing stocks for local people.

As the Chief Executive of the Rural Housing Trust has said, “Collecting the full Council Tax on all second properties would help to build an extra 5,700 affordable homes annually.” Instead, the Government has not ring fenced the extra revenue for affordable housing. Indeed most of the extra revenue won't go to the local district and borough councils at all, which are the local authorities responsible for housing. The vast majority of extra revenue raised will go to the County and Police authorities instead - a welcome boost for them, but no help at all in addressing the housing crisis.

So ending the 50% Council tax reduction on second homes is fair, and may discourage a few people from buying up houses as holiday homes for infrequent use, but it will not solve Cornwall's problems alone.

Unavailable Homes

- The mismatch between the need for an affordable home to rent, and the supply

So if local families can't afford to buy, can't they rent? The answer is simple - they often can't find an affordable rented property either. Council houses have never been built in large numbers in Cornwall - and many have been sold under Right to Buy. Housing Association alternatives are very few and far between. And the private rental sector for people looking for a home is smaller in Cornwall than it appears, since good properties get better returns on the holiday market. Local families often struggle to find even an affordable winter let - and are turned out of these to free them for the more profitable tourist market each summer.

The amount of rented accommodation in Cornwall is therefore low compared to the rest of the UK, despite the unaffordability of homes to buy keeping demand and so rents high. The graph below illustrates the proportion of different types of housing in each Council in Cornwall compared to nationally.

As can be seen, Cornwall has a very low proportion of Council and Housing Association properties (less than 15%) compared to the national average of almost 25%. It has a slightly higher level of private rental -but much of this is for the holiday market in the summer, so does not make a secure home and leads to higher rents for those that are available. In the South West the average weekly rent for Local Authority housing is £44.50 and £55.50 for registered social landlord housing - but £85.60 for private rented housing, which is simply unaffordable for many local families even if a property can be found.

Under the Right to Buy (RTB) Council house tenants are able to purchase the properties they live in at a significantly reduced price. Although, a house is a symbol of independence and freedom, the Right to Buy initiative activated under the Conservatives has produced severe negative effects on the affordable housing stock in Cornwall.

Sales under Right to Buy have dramatically affected housing stock in Cornwall. Since the Right to Buy was introduced in 1979, 128,580 Council houses have been sold under RTB in the South West - that represents about a third of the original stock. In Cornwall and Devon, in 1980 (before Right to Buy was brought in) there were 120,000 Council and social houses to rent - by March this year it had fallen to just 71,000. Despite Labour expressing concern when in opposition about the lack of affordable housing Cornwall has substantially less social housing in 2001 than when the Labour Government took power in 1997.

There was never a high proportion of social housing in Cornwall in the first place, far less than the national average. Due to the popularity of the RTB scheme, there is now huge gap between the numbers of affordable homes to let in many areas for the people who require them. In many popular villages, almost all the Council homes have been sold, and many have ended up as yet more holiday homes. Although in principle RTB is a self empowering initiative, the problems caused by selling off council houses to occupants are two-fold. First, there are less affordable houses to rent available (resulting in situations such as that in North Cornwall where second homes out number council houses) Second, many of the houses sold under right to buy in coastal villages don't even provide permanent affordable homes in the long term, since, when they are sold on, many end up as holiday homes rather than staying as affordable homes for local people on low Cornish wages.

Right to Buy should have been used to fund new affordable housing. Of course, the discounts inevitably meant the money raised could not replace all of them - but worse, the Conservative Government allowed almost none of the money raised to be spent on new Council Houses. Instead it was banked as “income” by the Treasury, and used to fund Income Tax cuts. The tiny numbers of Housing Association and Council properties built in the Conservative's time in office totally failed to make up for the Council House sales. In Cornwall this has been a particular tragedy, as there never were many Council Houses built, and the private rented sector doesn't fill the gap, since more money can be made out of the holiday let market by property owners.

In March 2003, the Labour Government finally altered the Right to Buy schemes in 42 Housing Authorities in London and the South East, in order to retain housing stocks in areas the Labour Government said had high housing need. Maximum RTB discounts were lowered to tackle housing shortages and homelessness. It is impossible to understand why nowhere in Cornwall was seen by Labour as having such housing need. Labour should examine similar provisions for those parts of Cornwall which are clearly suffering a greater, if less obvious, housing crisis than the urban areas of poverty targeted by the Government.

In 2002 the Conservatives announced they would extend the Right to Buy to Housing Association homes as well. In many Cornish coastal villages almost all the Council Houses have long been sold, and in an effort to overcome this, the last precious affordable local land was made available to replace them with Housing Association properties. If the Conservatives get their way, and these Housing Association properties are sold as well, the land is no longer available to replace them, even if funding was available. The Conservative policy would lead to no affordable rental properties for local people in many villages across Cornwall.

As properties were sold, since the Government kept the money for tax cuts, inevitably there has not been enough building to replace the stocks of affordable housing to rent. For example, even under Labour, in the Caradon and Restormel areas only 72 new public sector rented houses are planned under the Cornwall Housing Corporation Programme for 2003/4. However, this is dwarfed by the 164 homes bought under the Right to Buy scheme annually. Therefore, in effect these two councils alone are actually losing almost 100 affordable homes per year.

In fact, Labour has actually cut the annual budget for affordable housing even below the level of the Conservatives when they left office. This has caused local authorities real difficulties in housing people who truly cannot afford to enter the housing market. Between 1996 and 2002, there was a 765 unit decline in the South West in local authority houses completed, to little more than a third of the level in the year before Labour was elected.

Under the Conservatives, there was already a huge decline in investment in affordable house building. The amount allocated to the Housing Corporation's budget fell from £1.9 billion in 1993/4 to £1.2 billion in 1996/7. When Labour was elected, the expectation was that this decline would be reversed. But in fact the investment was cut further, down to £918 million in 2001/2. In 2003/4, planned investment is still lower than when the Conservatives left office.

Cornwall has been no exception to this trend as illustrated by the tiny number of new homes planned by most Cornish Housing Corporations -across the County only 238 new homes are planned for 2003/4.

In March 2002 the Labour Government allocated £250 million for the Home Starter Initiative. Roughly 20% of people live in rural areas, yet the Government allocated those areas only 3.5% of Home Starter Initiative Funding, just £8.7 million. The diagram below illustrates this disparity in national funding.

If the Government was serious about tackling the affordable housing crisis in rural areas, they would invest in housing and ensure their housing plans were possible. Sadly, the Government does not appear to be taking the issue seriously.

In 2000 the Government pledged in the Rural White Paper, to tackle the effects of declining housing stocks and specifically to:

HOWEVER, the Labour Government has:

The Government has further advocated “Sustainability Community Plans” which would abolish the Local Authority Social Housing Grant, LASHG, from April 2003. However, the LASHG has successfully created 53,000 homes since 1996. This is an unacceptable initiative unless the Government implements a more ambitious funding scheme in housing for rural areas. Unfortunately, the Government seems unwilling to make the effort and investment required, especially in rural areas like Cornwall.

Social Consequences for Cornish Communities

Homelessness is a very real concern within rural districts, not least Cornwall. Increasing numbers of individuals and families are finding themselves in temporary accommodation, such as Bed and Breakfasts. Bed and Breakfast in this context does not mean a happy holiday home near the sea, as many visitors experience it. Instead it means a whole family living in one or two rooms with little or no cooking or other family facilities, often very dilapidated conditions, and sometimes the family made to stay away from home through the day, even when they have very young children to look after.

In the Restormel area alone there are more than 150 families defined as priority homeless. Restormel Council, like others, has become a leaseholder on private homes, as a desperate measure to house the homeless. This initiative has proved to be a success in reducing the numbers in B&B. In December 2002 156 families were in temporary accommodation and only 24 of those were in B&B. This was a reduction of 29 families from August of 2002. However, such leases are expensive, and do not provide a permanent solution to the problem. Indeed, the effect is to further reduce the supply of affordable private sector rental accommodation for the majority of local people who do not qualify as priority homeless for Council accommodation.

Local people are currently in danger of being squeezed out of areas in which there families have lived for generations. Affordable rented homes have virtually disappeared from the popular coastal villages. It seems bitterly unfair that someone from a high wage area like the South East can buy up a second home in a beautiful rural village in Cornwall, while local people are forced to move away to find a home at all.

Since migration into the county cannot be stopped (though the Council Tax subsidy for second homes can be), making more affordable housing available to local people must become a priority. Cornish communities should surely have room for those families who have lived in the area for generations, not just those who want to move here or holiday here.

Finding Solutions

Cornwall is suffering from a prolonged housing crisis. Housing stock to rent has been reduced as funding for new dwellings has been cut even as the existing stock is sold under right to buy. At the same time the demand from incomers and the holiday market drives up prices of houses to buy to a level which local people, on local wages cannot pay. Every year yet more housing stock is bought up by those from higher income areas migrating into Cornwall or looking for a second home. This has left Cornwall with a local hard-working population who are unable to afford a home. Many young families are eventually forced to leave their area for somewhere with higher wages and a lower cost of living.

Restormel Borough Council alone estimates that only 40 affordable new homes to rent will be built this year. BUT there are currently 158 families in homeless accommodation, and many more young families are forced to live with grandparents or friends -the “hidden homeless”.

The Liberal Democrats firmly believe that we should ensure the availability of an adequate and affordable home for everyone who needs one. Furthermore we want to strengthen local communities as good places to live and work, not just to visit.

Seven steps to affordable houses for local people to buy and rent

If these seven steps are taken, we can turn around the housing crisis in Cornwall. As four Cornish graduates who would like to be able to work in Cornwall and afford a decent home, we have written this report to show how it can be done, and to support the Liberal Democrat campaign to bring people in Cornwall “in from the cold”.

Julia Goldsworthy, Camborne

Simon Fleming, Penzance

Jennifer Stubbs, Bugle

Isabella Holby, Tregony May 2003

With special thanks to:

Websites.

National Statistics.

National Statistics, for April 2002.

HM Land Registry

Census 2001

www.jrf.org.uk

J,Groves: Western Morning News. 20/09/02.

www.cornwall.gov.uk/FACTS/2001/cen02.htm Accessed 18/03/03.

The Guardian.

Shelter Regional Statistical Briefing, South West

Shelter Regional Statistical Briefing South West

www.odpm.gov.uk/pns/DisplayPN.cgi?pn_id=2003_0034 Accessed 28/03/03

Caradon District Council and Restormel Borough Council.

Local Authority returns to ODPM 2003.

Hansard, 9^th May 2002, c300w

Hansard 9^th May 2002, c.300w

Hansard 2^nd May 2002, c.902w

Hansard 23^rd May 2002, c.507w

Restormel Borough Council

Restormel Borough Council

In from the Cold - A Liberal Democrat Report

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