Local Government and Communities Committee, 14 Nov 2007

Meeting date: Wednesday, November 14, 2007

Official Report 279KB pdf

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Housing Supply Task Force

I welcome today's witnesses. I am delighted that they can be here. Councillor Harry McGuigan and Councillor Chris Thompson are from the Convention of Scottish Local Authorities; Jonathan Fair is chief executive of Homes for Scotland and Allan Lundmark is its director of planning communications.

I thank you all for your attendance. I understand that you could not make our previous evidence session on 26 September, when we received evidence from your colleagues on the housing supply task force. We look forward to completing our evidence taking this morning.

Would anyone like to make an opening statement before we move on to questions?

I just want to say, on behalf of the COSLA representation, that we appreciate the fact that you have given us the opportunity to respond to questions. We obviously want to stress that we share the concerns of all about housing supply—particularly affordable housing supply. I look forward to answering the questions that you put to us and am glad to assist in enabling you to understand the issues and to develop initiatives, approaches and working relationships with us so that we can achieve that common objective.

As I said, we took some evidence on 26 September. At that point, there had been only one meeting of the task force. We understand that there has been a second meeting. On the basis of the evidence that we took previously, we expected that it would focus on themes, objectives and a work plan. Can you update us on progress? What decisions about the task force's future work were made at the meeting?

The task force has identified an approach that will look at geographic areas to try to develop an understanding of specific difficulties in housing supply. The three areas are Edinburgh and the Lothians, greater Glasgow and parts of rural Scotland.

An important stakeholders event will be held in Edinburgh and the Lothians. It is an opportunity to develop a deeper understanding of the specific problems in the area that are barriers to housing supply in general, not only affordable housing supply. We want to analyse and understand the problems and make recommendations that provide options that might enable us to make an impact in those specific geographic areas.

There might well be general lessons that we can also learn. Obvious, almost predictable, things have come out already, such as the assertion, which some people make, that there are unnecessary barriers from local authorities in regard to land supply—we would of course contend that that is not the case. There are other issues, such as whether the land supply problem is compounded by difficulties with developers—the objective of developers is not necessarily to assist us in reaching the goal of a better supply of social housing. Those matters are currently being considered, and we hope that options will emerge for serious potential solutions to the issues that we face in this important area.

We will touch on some of those themes as the evidence taking goes on. In the evidence that we heard previously, the theme of relationships between the sectors was not confirmed—I do not know whether that will be a theme. Is there work that is focused on the areas that are covered by the housing improvement task force and the homelessness task force, or are you not considering that?

You cannot consider housing supply without taking into account the homelessness legislation and the commitment—a very good commitment—to the 2012 target. It is fine to give commitments to a particular target, but there are realities: resources, and a common will, are needed to enable us to achieve it. It would be fallacious to suggest that there is an easy way to deal with the problem and to achieve that target unless we have a collective, sensible view on the pace at which we can move towards the target and the resources that will be needed. I am talking about the aggregated resources—the intelligence as well as the finance—that will be necessary. That is a critical area for us.

Does anyone want to pick up on the general points?

How many meetings have you had so far?

We have had two meetings.

Have you been asked for input to the green paper, or will you be expected to give a response—not as COSLA, but as the housing supply task force? Given what you have just said about resources, has the housing supply task force been asked to contribute to the very current and live discussion surrounding the budget and the comprehensive spending review, ahead of the announcement today? Will the budget have had any input from the task force?

There have not been any specifics in connection with the budget. Indeed, at all the meetings that I have attended with ministers and cabinet secretaries, the opening gambit has been that we cannot go into the territory of spending because of the comprehensive spending review—they do not know what money will be on the table. That has been a disappointment, and we have made that point, but we have recognised that there is no settlement figure and that it would be a shot in the dark to talk in detail about resources at that stage. We cannot talk about solutions unless we know what level of resources will be committed.

So you have not even been asked to flag up the challenge of resource? I appreciate that you do not know the immediate figures, but have you not been asked to comment on the implications of having a strategy? Will you be consulted on the green paper on housing? Will you respond as a group?

Perhaps I should recap. The uncertainty arising from the comprehensive spending review has been flagged up, but as part of our case for a more coherent, collective and sensible approach to affordable housing supply, we have made clear and strong representation about the need for resources. We have made strong representation in relation to Communities Scotland. The solutions to local and regional problems are best understood, identified and solved by the agencies in those areas. We must have control of investment in the localities where the need is manifest—we have certainly made strong representation on that. We have expressed a degree of disappointment about the missed opportunities in last week's announcement in relation to Communities Scotland. We feel that we should move toward identifying the resources that will come to local authorities for regeneration—we hope that we will move away from a ring-fencing approach to that—and local investment in housing. We have made that general representation without going into specifics about amounts.

So the task force was not consulted on the abolition of Communities Scotland?

The task force was not consulted on that.

I have a question about the targets and the overall background against which you are conducting your work. Please correct me if I have the figures wrong but, as I understand it, the current level of house building is about 25,000 units a year in the private and social rented sectors, and the Government seeks to raise the level to approximately 35,000 units a year within a 10-year timescale. As a housing supply task force, do you start from the assumption that that is achievable and deliverable, or is it part of your job to assess whether the target is achievable and deliverable?

I know that I am responding all the time, but I have one important point to make. Neither I personally nor COSLA is necessarily convinced that having targets and numbers is the best and most sensible approach to meeting serious local needs. Depending on market circumstances, it might not be possible to achieve the target of 10,000 more new homes a year for a variety of market-forces reasons. In certain parts of Scotland, particularly rural areas, it may not be possible to achieve the required figures. The situation will vary from place to place, so one template will not fit in all areas.

Perhaps other members of the panel, particularly those from Homes for Scotland, might like to say whether the target is sustainable and achievable.

You are correct: the current output of the sector is about 25,000 units per annum. Homes for Scotland has consistently taken the view that we should aspire to produce approximately double that number per annum in the foreseeable future.

Did you say "double"?

That is correct.

If you think the number should go from 25,000 to 50,000, would that thereafter be the approximate plateau level that we should deliver year on year? For how many years should we run at that plateau level?

The figure of 50,000 is a target to which the industry aspires. The green paper that was produced last week contained a target of at least 35,000 units per annum by the middle of next decade. All the members of the housing supply task force will no doubt want to comment on that target as part of the natural consultation process on the document.

Homes for Scotland supports the principle that we should make a significant difference to the housing supply in all tenures and that we should do that sooner rather than later, to address deficiencies to which a number of people point in the supply and affordability of housing.

I understand that your position is that the number of new houses that are constructed should increase rapidly from 25,000, which has been the relatively steady figure for several years, that making that figure 50,000 is achievable and that it should be sustained at 50,000 for the foreseeable future. Is that correct?

Perhaps I should explain where the 50,000 comes from. It comes from an analysis of how we replenish our housing stock. At 25,000 units per annum, we replenish our housing stock by just under 1.5 per cent per annum. Most of Scotland's housing stock was built with a design life of 60 years, so that position is unsustainable. In broad economic terms, it means that we lose stock faster than we replenish it.

To replenish housing stock at a sustainable level, we must consider how to replace it in a 50-year cycle, which pushes the rate towards 2 per cent. If we factor in the unmet need that is emerging from studies such as housing needs assessments, the figure starts to push above 40,000 and closer to 50,000. That is where we are coming from. In a sense, the discussion is not about whether we can sustain that level of production; to tackle the problems in our housing stock and the unmet need and demand, we must reach the number that we have given. The question that I encourage members to ask is what we must do to reach that level of stock replenishment.

We have said that we will not achieve the figure overnight—we will have to move towards it with year-on-year growth in production. The question is how we go sustainably from 25,000 units a year to 35,000 and wash over that towards 50,000. We must reach that target level if we are to do something about replenishing our stock and meeting the unmet need and demand.

We have given a guiding figure rather than a target. That is what the industry, working with our colleagues in the social rented sector and now those who provide public sector housing, must do to achieve that figure.

The housing supply task force has directly tasked Homes for Scotland with producing a scoping paper on the capacity building that is required in the industry. We will present that paper for consideration at the task force's next meeting at the end of this month.

I will describe one thing that I do not understand about the 2 per cent. When I look around Edinburgh—where I have lived most of my life—and Glasgow, I see tenement buildings, most of which are more than 100 years old. I, and, I suspect, many people around the table, were brought up in such houses. I do not recognise the idea that the Scottish housing stock has a replacement cycle of 60 years and that we need to work on the basis that 2 per cent is replaceable. Are you suggesting that, for example, the whole of the Great Western Road in Glasgow will have to be demolished and replaced in short order?

No.

Exactly. If that is so, why do you take 2 per cent of the total and say that 50,000 is the answer? The idea that vast areas of traditional Scottish tenemental housing would have to be replaced even within 60 years is absurd, as that housing has been standing for well over 100 years and is of very solid construction.

We are saying that properties are built with a design life—a capital life, if you like—of 60 years. Factored into the calculations is the fact that much stock has its life extended because it is refurbished and rehabilitated throughout its life. However, we also know that that is not happening to some stock. In the past 30 or 40 years, we have lost public sector housing in far less than 60 years. Stock that was built in the 1950s and 1960s has been lost.

The figure that we reached is the target that we have to look to if we are to have an adequate housing stock. A lot of expenditure continues to go to refurbish and rehabilitate the existing stock. That is fine, and we tried to factor that in. We also tried to consider the ways in which stock is lost. Private sector stock that was built in the 1940s and 1950s will need significant investment because, for example, it does not meet the targets for sustainability and energy usage that modern houses meet. The question that arises is whether we need to do something to that existing stock or whether we should replace it. We tried to make judgments about that in arriving at the figure.

I stress that we are not saying that we have to reach the target. What we are saying is that a housing stock of that order will adequately house Scotland's population. It is an ambition that we should move towards. We must consider whether we have the procurement systems in place that will allow us to deliver the level of investment and provide that replenishment rate.

To summarise, you think that we should build 50,000 new houses a year and that that is sustainable year on year?

No. We should accept the figure in the consultation—35,000—and consider how we can reach that. However, given the indicators of market pressures and demands, our ambition is to wash over that and go beyond it.

Also, it is not simply a case of reaching 50,000 and sustaining that figure. Population characteristics and people's ambitions change, so the figure will have to be constantly monitored. For example, the new-build figure will change if we increase the amount of money that goes in to replenish the existing stock.

I am not saying that we have to reach the figure, but the ambition is to reach 50,000 a year and stay there. Demand is market driven. If demand tails off, production will tail off. However, if we have that ambition, it will allow us to focus on the impediments to achieving that level of investment.

I think that Councillor Thompson is anxious to come in on that point.

Yes, convener. Good morning, ladies and gentlemen.

Targets have to be realistic and achievable. I suggest that the type of information that you and your colleagues will be looking for is not just an arbitrary figure for the number of houses that need to be produced. We need to look far deeper than that. We need to ask questions about land supply. What is the present land supply? Does it meet the requirements? Will it meet the requirements of any targets? What about the process of development planning? How long does it take?

The other question that we have to ask is the thorny one about infrastructure. We are talking about building a certain number of houses. Do we have the infrastructure to do that? I am thinking about Scottish Water, roads, the capacity to meet public transport needs and so on. Also, a big question arises about the capacity of the building industry. Huge projects are happening in Scotland and the United Kingdom and there is big pressure on skills. The targets can be achieved only if we have the capacity. To be frank, it is dangerous to set an arbitrary figure. Do we have the land supply, the people to build the houses and the infrastructure? All those factors must go into the calculation if the target is to be achievable.

We will have one more question on the matter. I promise that we will move on to land supply, planning and skills shortages.

That was a significant contribution. Questions are being raised rather than answered by your comments, Mr Fair and Mr Lundmark. Both of you used the expression "foreseeable future". What is the foreseeable future in your view?

Like Mr McLetchie, I am concerned about building standards. Have they deteriorated so much that houses will in future have a life expectancy that is half that of those built a century ago? How does that chime in with sustainable development?

The objective of 50,000 houses, which is too round a figure not to have been plucked from thin air, seems to be a holy grail for the industry, but what is the realistic timescale for achieving it?

Whether we look at an uplift of 35,000, 40,000 or 50,000, we all agree on the clear need substantially to increase the supply of housing in the Scottish marketplace across all tenures and, as has been pointed out, if we are to do that, we will need to think carefully about the support mechanisms, professional skills and supply processes that will allow it to happen.

In the private sector, the businesses that we represent are flexible in their approach to meet the demands that they face in the marketplace. As we are focusing on targets, let us take the example in the green paper, which suggests moving to a target of 35,000 units within the next decade. That represents approximately a 5 per cent per annum increase on current production levels. It is extremely achievable given the economic climate in which we operate, but it needs to be backed up with a recognition of the importance of, for example, planning skills and adequate resources. There must be clearly linked Government investment in infrastructure support mechanisms such as schools, roads and transport networks, utility supplies and waste mechanisms, to allow that managed increase to be integrated into existing communities.

That discussion perhaps went on a shade too long, but I must arrive at the conclusion that the targets that should be set will differ from one member of the task force to another. Even their significance is not accepted by all on the task force, and I suppose that Chris Thompson is saying that targets are all very well but, unless we address the other issues, we will not achieve any of them. We are discussing this morning not our targets but what has been announced by the Government.

I hope that we can now get into the substantive issues that could be barriers. I ask Alasdair Allan to open on that.

Councillor McGuigan touched on the availability of land for housing, which cannot be characterised as a problem for rural or urban Scotland as a whole. The situation varies a lot geographically. Do the witnesses have a view on how it is possible for local authorities to reconcile the conflict that, on the surface, there appears to be between the pressures on local authorities to ensure best value and to sell land and their equal responsibility to ensure that land is available for affordable housing?

That question goes right to the heart of a particular financing matter. Local authorities have a responsibility to secure best value receipts to enable them to undertake the capital programmes that they embark on, not just in housing but to meet other social needs. We will continue to make strong representations on enabling local authorities to release land without that barrier and without being penalised financially as a consequence.

Has the task force come to a view about the scale of the assets we are talking about? Does the extent to which local authorities have suitable land vary geographically?

It does indeed. The picture is different throughout Scotland. There is an expectation that local authorities or public agencies have sufficient land to make available, but that is not necessarily the case—it is certainly not the case in North Lanarkshire and perhaps in other parts of Scotland. That has to be factored into the equation. Costs to local authorities will be contingent on the amount of land that they can make available.

Land supply is the deeper issue that we must consider before we think about land ownership. We conduct housing land audits for all mainland authorities in Scotland, and our information leads us to conclude that around 30 per cent of the land in development plans cannot be built out in the lifetime of the plans, because it is impossible to remove constraints. Constraints fall into two categories: physical constraints in relation to the provision of infrastructure, such as water supply, drainage and roads; and constraints to do with community infrastructural requirements, because contributions must be found towards transportation systems, such as railways, and other community facilities, such as schools. Land supply is heavily constrained to start with, because of the exact match system that our planning system attempts to implement, but it is further constrained because it can prove impossible to remove the constraints that I described.

The problem leads us into two potential avenues of inquiry. First, we can consider whether we need to release more land in different locations. Secondly, we can consider how to be smarter about removing the constraints that threaten the viability of projects. We must address those issues before we address land ownership. If we do not, it will not matter who owns the land, because the private sector will not be able to promote development opportunities if the financial burdens are stacked up.

Johann Lamont has a question, to be followed by a question from Jim Tolson.

I am sorry, convener, can we move on? I thought I was after Jim Tolson.

On the back of the land supply issue it is important to consider infrastructure, in particular in relation to Scottish Water and the provision of drainage and sewerage infrastructure, which has been a problem on a number of sites. What is the task force's approach to that? Will proposed or future investment in Scottish Water improve the infrastructure and ensure not only that land is available but that the necessary infrastructure for water and sewerage is in place to enable programmes to be taken forward?

Throughout Scotland, perceptions of the relationships that local authorities have in relation to necessary infrastructure supply differ. In the main, the feedback that we get is that Scottish Water has covered some mileage in terms of those relationships. The issue is not just Scottish Water but other utilities and the types of development that communities require. It is not simply about the numbers and the targets that we set; it is about identifying the needs and aspirations of the people who live in our communities. Local authorities and their strategic partners in community planning have a responsibility to ensure that our plans mirror the expectations and aspirations of the people in our communities, so that we have sustainable communities.

We talk about the availability of houses and what the target should be. I am not making a political point, but we should remember that the right to buy is a big issue that has created problems in social housing, albeit that many people say that it has brought great benefits. The right to buy has seriously affected the availability of social housing in many areas of Scotland, and it is in danger of creating ghettos in certain townships. That has to be addressed through a deep, accurate understanding of local needs that does not simply take account of the aspirations of a particular business sector.

I often look for the business plans that we hear about—they have been described as master plans—but I have not seen an awful lot of evidence that developers are in the business of master planning. Some developers' approach is, "Get in, get the development done and get out"—with as little pain as possible to the market benefits that they will receive from developing the land. We need a much more partnered approach to considering local needs and communities' aspirations. Developers' aspirations should dovetail with local needs.

COSLA members have strong views on the development constraints that have delayed developments in recent years. The good news is that dialogue between local authorities and Scottish Water is far more positive. However, the investment programme for 2006 to 2014 that has been agreed with and will be managed by Scottish Water does not reflect Scotland's housing growth needs. COSLA thinks that there should be early analysis of current water and drainage infrastructure capacity needs, which should take into account the increased number of houses that are needed. Scottish Water is doing its best, but there is not enough money in the investment programme.

Scottish Water and the utilities are not represented on the task force.

That is correct.

Is that an obvious omission, or was it too difficult to include them? All the evidence that the committee has taken suggests that the utilities and Scottish Water present a significant barrier to development. I am sure that the companies have a view, but they cannot put their view to the task force because they are not represented on it. Should that omission be corrected?

I do not know whether it is necessary for the utilities and Scottish Water to be on the task force, but they should certainly be present and fully involved in deliberations at stakeholder events, and there should be on-going dialogue between local agencies and infrastructure agencies. I would be surprised if Scottish Water or other infrastructure agencies were not represented at the event on Edinburgh and the Lothians on 20 November.

Convener, I want to follow up Councillor McGuigan's comments on social housing, but do you want to continue the discussion on infrastructure?

It might be helpful to stick with infrastructure.

I apologise for losing the plot earlier. I was looking in my papers for a reference to a question on land availability that I asked other members of the housing supply task force, when the committee took evidence from them at a recent meeting. It is alleged that private sector developers hold on to land, thereby managing the market and, in effect, managing supply. How does Homes for Scotland respond to that? Would a public register of privately held land be helpful?

I am equally interested in the land that is held by the public sector. The housing supply task force will not just consider affordable housing, but land supply is a particular challenge in the context of affordable housing. Witnesses have made clear the challenge that local authorities face. The contradiction for the Government is that it is advising local authorities that have high housing debt to sell off housing revenue assets—land—but if local authorities sell land to manage their debt, they cannot make the land available to housing associations for building. Will that issue be flagged up by the housing supply task force?

Also, will you comment on the effectiveness of the benchmark in planning advice note 74, on affordable housing? Does it need to be revisited, strengthened or brought to the attention of all concerned again?

I will answer the first of those questions. I am not aware of any evidence that backs up the allegation that the private sector land banks. In the context of an economy where developers and house builders compete for land more often than they compete for customers, it is clear that there is a lack of land supply rather than that there is land banking, which is the public perception that is often fomented against the industry.

Developers are incentivised, by virtue of their company targets and the need to satisfy their shareholders, to bring land to development as quickly as possible. Given that it takes about two years, on some occasions, to take land fully through the planning system, there is no incentive for developers to land bank. They spend significant money, time and resources to get to the point of development. By the nature of their company structures, house developers make money by developing and selling on properties. They are structured to make that happen as quickly as they possibly can. I do not accept that the private sector land banks, and I am not aware of any evidence to support the claim.

We could discuss the matter for a long time. COSLA has discussed it with local authorities in Scotland and almost all of them cite examples of what they consider to be land banking by developers. We cannot be certain about the extent of land banking, but local authorities convey to us that it is a real problem throughout Scotland. The housing supply task force needs to look into the matter when it considers land supply in general. The issue is not only public sector land supply; it is land that is apparently held back because market conditions do not encourage housing development on it.

I will expand on a point that our chief executive, Jonathan Fair, made.

The two years that it can take to promote a project through the planning system kick in from when the project is driven into a development plan and a consent is driven out, or when an application is lodged and a consent is driven out. There is another period before then, when one attempts to get land driven in to the land supply in the first place, which can take more than seven years.

No developer will promote land into the planning system unless they have some kind of control over it, usually through an option agreement. Confusion might arise because people assume that the developer is land banking. In fact, they have an option to develop the land if they are successful in promoting it through the planning system. No one would promote land through the planning system—and go to all the expense of doing so—if they might lose the right to develop the land at the end of the process. That is why there are option agreements. We need to be careful about what we mean when we talk about land banking. At times, it is essential to have land in one's control, if not necessarily in one's ownership.

On the point about local authority land, I understand the dilemma around attempts to release land at low cost to allow affordable housing to be built on it, and the need to maximise capital receipts from that land. We should examine whether that land can be promoted for development in much the same way as land is promoted by private developers or private landowners. Essentially, one tries to build out to the maximum value in the knowledge that contributions will have to be made to supporting infrastructure and to making land available for affordable housing under the quota system that has been referred to.

There is no reason why that process could not almost be retrofitted, so that the local authority promotes the land for development, understands the costs that it has to incur in servicing the site, passes it over at cost value to the registered social landlord for the affordable housing, and then seeks to gain market value for the balance of the site for market housing. That commercial risk could be taken. The model is used successfully by the Highland Housing Alliance, which does not compete against the private sector for land that the market is promoting anyway, but looks at sites that, for some reason, the market will not develop. It plans the front-end engineering of the site, makes it available at cost to the registered social landlord, and then puts the balance of the site on the open market. In one example in Tain, part of the secondary release was for individual self-build and part went to a volume builder.

We need to do more work on whether the model that the private sector uses to grow private land can be used by the public sector to achieve release for affordable housing and to realise some uplift in capital value for the balance of the site when it is released for private development. I accept that a huge commercial risk has to be taken in doing that, but, given the buoyant housing market, I see no reason why we should not examine whether that model can be used by the public sector.

There are issues around land banking, which is a sensitive issue for Homes for Scotland. There are challenges for local government—we have heard evidence in the past that we need more central direction and a regional focus, and that we need to focus on six or seven basic markets around Scotland. What are the chances of 32 local authorities working together more strategically to meet the challenges of housing needs in wider regional areas?

There is already strong evidence of willingness to work together—doing so is common sense. It is happening with regard to waste and economic development. We are not resistant to the idea that local authorities can work together with other strategic partners in areas or regions—indeed, they could and should do so. We do not want centralised control. One of our main objections with regard to Communities Scotland was that a template was handed down to local authorities and they had to fit into it. The template did not necessarily match, in any way, the real needs of their areas.

It is not a case of one size fits all, but local authorities and other agencies may want to work together to enable us to achieve the goal of providing housing across all tenures, and affordable housing in particular. Other, more localised, approaches might better suit the requirements of particular areas. There is no hang-up, as far as local authorities are concerned, about working together and identifying new mechanisms and new arrangements to enable us to secure the objective of good housing for our people.

The language is not mine but, in evidence to this committee on 26 September, the phrase "central direction" was used by Shelter and the Scottish Federation of Housing Associations. They also said that a solution cannot be found for 32 local authorities.

I am not going to get into a discussion on the number of local authorities; the current arrangements are for 32 local authorities.

I am anxious to advise the committee that COSLA and Scottish local authorities are not barriers to identifying new, sensible and better arrangements for enabling us to achieve our objectives. However, we should reflect on the experience of Communities Scotland, as the centralised strategic lead body, and the difficulties and inefficiencies that have arisen. Bureaucracy has developed, and onerous burdens have been placed on local authorities. The work has become about monitoring, inspections, returns, and targets here and targets there. It has become a box-ticking exercise. We want to move away from that and get on with the business of delivering houses.

Do you have a clear understanding about what will replace Communities Scotland and the central direction that lots of people agree is required? Who will deliver that central direction?

We do not have a clear understanding. I suppose that we will have a clearer idea after 2 o'clock this afternoon, when we hear the full financial settlement. However, our understanding is that not a penny of additional resources will come under the control of local authorities and not a single member of staff of Communities Scotland will be moved to local authorities, which are concerns. We recognise that abolishing the quango is removing one buffer, but we hope that it is not simply replaced by another centralised buffer of civil servants.

Johann Lamont mentioned PAN 74, and I wanted to come in on your earlier comments on affordable housing. PAN 74 is one of the few tools that local authorities have to work with the market to ensure that 25 per cent of any new development—such as regeneration developments within existing communities—is social or affordable mix. I am led to believe that Scottish planning policy 3 is soon up for review. What are the views of Homes for Scotland and COSLA on the figure of 25 per cent?

Further, is there tension between Homes for Scotland's aspirations and the need for affordable housing? I have some information that Homes for Scotland previously indicated that the planning system should facilitate and assist development rather than control or regulate it. One point is that the market does not want to act on housing needs assessments in local communities because it is not profitable to do so. Is there a necessary tension?

From the COSLA side, we do not believe that a 25 per cent target is particularly useful. The situation varies throughout the country and from council to council. We need to be far smarter and to ensure that there is a level of discretion when considering different areas, the market and land supply. For example, an affordable house in Edinburgh or Glasgow would not be an affordable house in landward Lanarkshire or other parts of the country. We need to look at local solutions for local areas. It is only right that local authorities ensure that there is affordable housing, but the local solution must fit what is happening. Rather than create a percentage that can be a rod for everyone's back, we should answer the question of what is needed for the future. I think that we can do that without losing focus.

Are you saying that there should not be a suggested percentage, or that there should be more flexibility in meeting a target and negotiating locally with developers?

That is exactly what should be done. Local authorities should be charged with the job of setting targets in particular areas, having assessed the local needs with others. That takes us back to the importance of setting achievable targets. In everything that we do, we should have such targets instead of setting ourselves goals that may be appropriate in one area but completely unrealistic in another. Also, we should not set goals that are far too low—we may have to set higher targets in certain areas because of current market prices.

Would you like local authorities to have more power and discretion to formulate the percentages as part of their local housing plans?

I believe that we are in the best position to do that.

My question follows on from Mr Doris's question about policy in relation to the percentage of affordable housing in new developments. Most people think, superficially, that if permission has been granted to build 200 houses, of which 25 per cent are to be affordable, and they see 150 new houses being built by Cala or another developer that is a member of Homes for Scotland, 50 more houses will be built somewhere. However, all the evidence that we have received suggests that hardly any of those houses have been built or are in the process of being built. Can you explain why they are not being built, despite the fact that the planning system apparently dictates that they should be built as part of the overall development?

I ask Allan Lundmark to answer that question.

I agree entirely with Councillor Thompson about the need for local flexibility. The 25 per cent figure is a benchmark; all too often, we lose sight of that. It is supposed to be justified by reference to a housing needs assessment, and those assessments are different throughout the country and in different parts of local authority areas.

It is worth pointing out that the requirement is for 25 or 15 per cent of the houses, not for 25 or 15 per cent of the land. I make that point because the extent to which the percentages work depends on the viability of the project as a whole. It is much easier to achieve 25 per cent in areas where land with a low existing use value is released than in areas where land with a high existing use value is released. When the requirement to allocate part of the site for affordable housing might take the development value just below the existing use value, the site will not be promoted. The viability depends on the nature of the land that is promoted for development. When the land has a low existing use value, it is easier to push the percentage towards 25 per cent.

We are not aware of projects where that 25 per cent figure has been achieved, other than on land that is delivered by the public sector, where the public sector has been prepared to take the hit in terms of the allocation. Mostly, the figure is around 15 or 20 per cent, or lower, because of project viability.

The other thing that has to be borne in mind is the need for policy stability. It takes time to factor affordable housing requirements into land deals. One large urban authority in Scotland had a policy of requiring 15 per cent affordable housing on most of its sites, and it took us about two years to see that requirement effectively built into land deals and projects. Then, as the projects began to proceed, PAN 74 was published and the local authority moved to change the requirement to 25 per cent. The projects are now stalling. Our view is that if the requirement is left at 15 per cent, the local authority will get 15 per cent; if it is raised to 25 per cent, the local authority will not get that. It will take a long time for that requirement to be factored into the land deal and, even then, because of high existing use values, it may not be possible to achieve that percentage. The authority will then end up negotiating back down towards the figure of 15 per cent. Policy stability is, therefore, important. Fundamentally, it is about project viability.

So is the higher requirement that is imposed on the development a constraint on the supply of housing?

Yes. It goes back to what I said earlier. Sometimes, the cumulative effect of constraints on a project is such that one cannot remove them and bring the project to fruition. That sits with the requirement for education, the requirement in Edinburgh for a trams contribution and all the other contributions that we have to make.

You asked about some of the projects that stall. Our impression—I stress that it is only an impression, because we have not gone back to examine the section 75 agreements on such projects—is that the cumulative burdens in the section 75 agreements threaten viability and therefore projects stall, probably predicated on an assumption that the market will rise and eventually remove the red numbers from the assessment sheets. I cannot be objective about that or confirm it to you, but our impression is that that is the problem.

The term "project viability" has been used. It is not an objective term and does not necessarily mean the same thing to all of us. That is why it is imperative that local agencies and developers get to grips with what they mean by "project viability". I fear that my definition might be different from the one that my colleague has suggested.

In David McLetchie's initial question, I think that he said that the affordable 25 per cent of the development would be built somewhere. With respect, that is a dangerous mapping arrangement to commit ourselves to, because we are trying to encourage mixed-tenure developments in our communities.

I am interested that the green paper on housing makes no reference to PAN 74. Can we assume that you will ask the minister to consider those issues? PAN 74 is intended to rationalise the discussion so that people do not start out saying that a development should be 70 per cent affordable housing and get beaten down to 25 per cent. Instead, the proposal is tested against whether it fits with the planning policy on mixed tenure. PAN 74 tries to create a situation in which the benefit that communities derive from developments on their doorsteps is worth more to them than money that is given to the council for other things. Will you comment on the challenge of how we tie in a commitment to the 25 per cent benchmark so that, rather than the units being pushed off to be built elsewhere, a mixed community is created and local planning gain provided, in that the community can see that affordable housing is available to it?

The green paper gives us an opportunity to examine our expectations in detail. Serious reflection is needed on what used to be called planning gain and what it means. I have heard people talk about a planning gain that was four miles away from the housing development. When we move into territory like that, it becomes absurd. The planning gain must assist in the infrastructural arrangements and other community features that are necessary in the area. We have been critical of some aspects of the green paper that was announced the week before last, but it provides an opportunity to continue serious discussion and negotiation about the best outcomes from the consultation that will be held.

The green paper does not refer to planning advice note 74 at all.

No, but it can be opened, of course.

One of the things that the green paper does is point out that there are different ways of providing affordable housing other than by providing social rented accommodation. To that extent, it refers to examples in PAN 74. We know that we have a continuing problem with affordable housing and that planning authorities emphasise social rented accommodation, but year on year, the targets set by Communities Scotland for social rented accommodation have been met. For the past couple of years, Communities Scotland has been tasked with delivering 6,000 units and it has done so. Before that, the target, which was 4,500, was also met. Throughout the terms of the past two Administrations, those targets were hit every year. At that level, the problem is being dealt with.

I fully accept that that begs the questions whether the units are being built in the right locations, whether we need to build more units and whether we build in the most pressured areas or where the opportunities arise.

The one thing that we have been very bad at since the beginning of the decade is considering the other categories in PAN 74: shared ownership, shared equity, discounted low-cost sale and housing built without subsidy—in other words, starter or entry-level homes. We lobbied hard for starter homes to be included in PAN 74. The private sector has not been allowed to exploit the opportunities for building starter homes for sale. Do not misunderstand me: I am saying not that we do not need to continue to build social rented accommodation, but that we can relieve some of the pressure if we get smarter at building low-cost homes for sale, whether through building more housing that is brought to the market without subsidy or using schemes such as shared equity or homestake for new builds.

The green paper points to the opportunities to get people into the housing market and to build houses for first-time buyers. We need to get a bit smarter. We have member companies that deliver those solutions south of the border, but we have not been in a position to deliver them in Scotland.

I call Patricia Ferguson.

My question takes us on to another issue. I do not know whether you want to take another related question first.

I will call Kenny Gibson in that case. We are approaching the end of this line of questioning, but you could also mention skills, capacity and types of housing tenure, Kenny.

Yes. The task force is focusing on three geographical areas: the Lothians, greater Glasgow and rural areas. "Rural areas" is not very specific. Do you mean all Scotland's rural areas, or will the task force look at specific locations in rural Scotland?

The task force will look at a specific area of rural Scotland. I could use the term "the Highlands", but that is a huge generalisation too. I cannot give you the specifics of what will be covered.

But you will be looking at an area in the Highlands.

Yes.

Okay. We touched on skills briefly. Are you concerned that we will not have the skills to meet the targets, whether they are specific or aspirational? Do we have enough joiners or plasterers on the ground to do the work? What would you like the Scottish Government to do to increase the supply of people who are able to do such jobs?

I will let Chris Thompson answer your question about skills. We are not just talking about the physical construction of the houses. We hear a lot of criticism that planners are professionals who are there to put up barriers, but that is not the case. There is a dearth of planners throughout Scotland. Some of us might see that as a virtue in some situations, but there is a serious need for more planners. We will be making strong representations on that. I will ask Chris Thompson to answer your question about the capacity of the building industry to put up the houses.

The issue is important. I reiterate what Harry McGuigan said: the shortage of qualified planners and building control staff in the system affects the ability of the public and private sectors to handle a number of issues. COSLA has made a bid to meet the requirement. Like many other people, we hope to hear about our bid soon.

The building industry faces an interesting time because of the Olympic games, the Commonwealth games and the amount of building that is going on throughout the United Kingdom. There is no question but that there is a shortage of skilled tradespeople. With the help of the previous Administration and the current Government, many local authorities have increased the amount of training available. We must put more money into that.

COSLA must encourage the private sector to carry its responsibility for apprenticeships. Some companies are good at that, but subcontracting can cause problems at times. In a big development that has taken on other contractors, it is hard to ensure the proper numbers of trainees and apprentices.

Another impact on the availability of affordable housing is the migration of workers whom we encourage into the country to feed our building industry. That is a catch-22 situation. As we try to meet the building industry's need to build more houses, we attract more people to build those houses, which has an effect. There are no short-term answers. We need more people in the trade professions, to increase modern apprenticeships in the trades and to involve schools, so that parents and pupils see becoming a joiner, plumber or whatever as a positive outcome.

I discussed with Planning Aid the shortage of planners and it told me that a wheen of new planners would come on stream soon and that the shortage, which is a serious problem, should be resolved in the next two or three years.

I will move on to the type, tenure and geographic location of affordable housing. One point that has emerged clearly from today's meeting is that there is not much consensus among the witnesses, and therefore in the housing supply task force, about land banking, affordable housing or whatever. How confident is the task force that agreement will be reached on the type of housing that we need, the balance of tenures and the geographic locations? We know that, for example, a glut of two-bedroom waterfront flats has appeared in places such as Edinburgh. I am not convinced that you are all pulling in the same direction for recommendations. Will the task force be able to make recommendations to the minister on those matters?

It would be unfortunate if we gave the impression that we are not committed to a serious, mature and intelligent examination of all the aspects. I am confident that if the commitment exists to take a deeper look than ever before at many of those matters, we can come out of that process with a set of options that can be presented as realistic and achievable, as Chris Thompson has said repeatedly. I have listened to discussions in the task force and I am confident that there is a will to embark on that voyage of discovery or whatever it may be. I believe and hope that we can come out with something positive for the future.

Can the target of 30,000 affordable homes by 2012 be met?

I said that I am not a great one for targets, but that does not mean that I want us to deliver only 28,000 homes. I want to see the analysis of need, which I want to be met. I also want meeting the aspirations for ownership and different types of tenure to be taken seriously. If we do not make recommendations that will improve the optimism that we can tackle the Scottish people's affordable housing needs, that will be a major disappointment.

Does the panel have any views on definitions of affordable housing? I know that it is a vexed subject, but do you have a meaningful definition?

I would not like to venture a definition of affordable housing here. It depends on where you live, the stability of your income and so on—it is like a lot of other things. I think that it was Jonathan Fair who spoke earlier about the shortage of affordable housing throughout Scotland. If you look at North Lanarkshire, for example, an aggregate figure tells us that there is sufficient affordable housing, so it does not look like we have a major problem in that area. However, once we start to focus on particular areas, such as Cumbernauld, we find a remarkable difference between the figure there and the aggregate. It comes down to criteria. We need to look at how we define need, who has defined it and how thoroughly. We can do that.

Allan Lundmark made a valid point about PAN 74—it highlights five different types of affordable housing. The debate sometimes becomes polarised and identifies only social rented housing as affordable, which is missing a trick. Homes for Scotland would like there to be a much greater focus on the range of different types of affordable housing that PAN 74 identifies in local plans and with investment structures that support that type of development.

We need to remember that one size does not fit all in this situation. A two-bedroom apartment on the river might be quite affordable depending on which area you live in—

And on which river it is.

However, if you live in a landward area, you could probably get a reasonably sized farm for the same amount. The question has a local dimension. As Harry McGuigan said, we have to look at what is happening in a particular area and the question of affordability has to fit into that local community. We need to be careful that we do not look for an easy answer or set a target for affordability, but that we break it down to local community level.

I encourage the committee to go beyond the definitions of the five different types of affordable housing contained in PAN 74. One of the things that we are not good at is breaking down the housing need assessments for different types of housing. That is a flaw. We identify a housing need and we tend to assume that it can be met only by social rented accommodation.

Given today's evidence and that given on a previous occasion, I echo Mr Gibson's comment about the apparent disparity of views on the task force. It is probably just as well that no report of your work will be published—I think that you would struggle a little to condense your discussions for publication—but that is a trick that will be missed. I had hoped that part of the task force's work would be to give guidance and advice to the Government on how this important issue should be dealt with.

I listened carefully to what was said about a definition of affordability. There could be a definition, but it should not necessarily be about money or house prices; it has to be about what an individual in a particular situation can afford. It would be disappointing if no work were done to see whether a broad definition could be identified and used.

I return to another of Mr Gibson's points that was not covered. How do we make sure that people's needs are met? I am not talking about just in social rented housing, but across the board, although it probably applies more in social rented housing than in other sectors. The people who come to my surgeries often come because they are in overcrowded accommodation or because they are unable to get the kind of housing that they want in the community in which they want to stay. In my constituency, that applies equally to both sectors, although the problem is probably more acute in the social rented sector. What is being done to address that? Will more one and two-bedroom flats continue to be built when what people need, in fact, are three and four-bedroom homes or larger apartments?

I would expect the local housing strategy, which is a mechanism for identifying and addressing need, to include mixed tenure housing and the types of housing variations that fit the required need in an area. After all, we have to ensure that we deliver the types of houses that people require.

We might well struggle with the definitions. I do not like definitions myself; I would rather have a better understanding of the outcomes that can be achieved from particular approaches. However, although we might not come up with any definitions, I believe that we will be able to formulate some options that will take us further along the road of meeting our people's housing needs than we are at the moment.

I can reassure the committee that, using the regional zones that were selected as a proxy for identifying general supply problems, the presentations delivered at the task force's second meeting very much concentrated on the issue of appropriate housing mix. I am certain that it will also form a key theme of the wider seminar and consultation process that has been planned for 20 November and the rural development issues that will be discussed in mid-December.

At the committee's previous evidence session with some of your colleagues, the issue of community engagement arose, and I understand from our background briefing that the task force is carrying out thematic work on that. What themes are being explored, and what progress is being made?

I would not attempt to give a very full response to that question; after all, it is difficult enough to get one's head around the concept of community. Phrases such as community empowerment and community engagement might well roll off the tongue easily, but it is an extremely complex matter to maximise and achieve real community engagement in which communities begin to feel more responsible or become reconnected with decision-making processes that affect their lives.

We will look at the different models that are out there, including local forums and area partnerships. I am not tremendously optimistic about finding any easy answers to this very difficult problem, but we have to keep striving to find the best options at any particular time. I simply hope that we can keep building on what we are doing.

I am a great believer in local involvement in local issues. However, politicians, officers and other agencies come to communities with a blueprint already in their heads for the best way of dealing with their various issues and difficulties. The problem that we have to overcome is that the community has usually not participated in drawing up that blueprint.

COSLA recognises that there will always be objections. However, evidence has shown that if communities have the facts in their possession early on and know about the planning process, their objections will be made from a knowledgeable background. In fact, in many cases, many of their worries and fears will fall away.

That said, we should accept that it is most unlikely that someone who lives with a nice outlook will approve of any proposed development on that land. We must get better and smarter at supplying people with the information that they need and should learn to welcome their comments, even if they are objections. Local authorities are working towards that aim, and I know that much of the private sector is working closely with us to help us to balance people's fears and demonstrate advantages to development. At the end of the day, though, we need to take objections on the chin.

The committee has clearly been briefed on the housing supply task force's future activities. I should point out that a scoping paper on this very theme has been tabled for discussion at the task force's third meeting. In order to identify good practice, Homes for Scotland will certainly contribute to that paper some recent and publicly acclaimed examples of sound community engagement that our members have delivered on. As a result of that engagement, objections to what were in some cases very substantial developments and, in others, much smaller-scale but still very contentious projects have been removed to allow the development to proceed.

I thank the witnesses for attending this morning's meeting. We wish you well in your work and will follow your progress with keen interest.

There will be a short break as the witnesses change over.

Meeting suspended.

On resuming—