Rural Housing (Scotland)

Petition – in the House of Commons at 10:27 pm on 4th February 1997.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peter Ainsworth.]

Photo of Jim Wallace Jim Wallace , Orkney and Shetland 10:28 pm, 4th February 1997

I am pleased to have secured this Adjournment debate on rural housing policy in Scotland. Many of the organisations associated with housing in Scotland, such as Shelter, the Scottish Federation of Housing Associations and the Chartered Institute of Housing in Scotland, have been trying in recent months to raise the political profile of the housing issue. It is important to do so in a context that shows that housing is not an issue that operates in isolation.

Housing has implications for health, in that there is a proven link between poor housing and disease; and for education, in that children can lose time at school through housing-related ill health or difficulty in doing homework in overcrowded homes. There is a relationship between housing and crime, in that cheaply built and poorly maintained homes are more prone to break-ins; and between housing and employment—for example, in the costs to the construction industry resulting from any reduction in investment in housing. I hope that by holding this Adjournment debate on Scotland's rural housing policy, we can make some small contribution to the wider debate.

The problems of urban housing are usually obvious. Those of rural housing tend to be scattered over a large area, and are therefore not so obvious to view. But the figures highlight the serious extent of a problem that, unless it is adequately addressed, could quickly develop into a serious rural housing crisis.

I shall start by sketching in some of the background. Scottish Homes invests 20.2 per cent. of its annual funding budget in Scotland's rural areas, although 28.8 per cent. of Scotland's households are within those areas. About 22 per cent. of all rural homes require repairs costing £2,500 or more, compared to 10 per cent. of urban houses. Rural home owners are twice as likely as owner-occupiers in large towns and cities to live in damp conditions.

Despite the fact that they account for only 29 per cent. of Scottish households, local authority areas defined as rural account for 39 per cent. of dwellings assessed as below tolerable standard. Indeed, one of the most recent surveys pushed the "below tolerable standard" estimate in an area of Skye and Lochalsh from 8 per cent. to 22 per cent. of the housing stock; and in several other Scottish rural areas, more than 20 per cent. of the housing is below tolerable standard.

Officially recorded homelessness in rural Scotland rose by 63 per cent. between 1989–90 and 1995–96. The comparable figure for urban Scotland was a much lower, but still unacceptable, 36 per cent. Those are average figures, but especially high increases have been recorded in Western Isles, in Orkney, Angus and Lochaber, and in Kincardine and Deeside. In all those areas, homelessness has more than doubled in the six-year period that I mentioned.

Then there are the problems that can so easily be overlooked—for example, the number of people who are obliged to live in caravans. That can sometimes disguise the real extent of housing need. A report prepared for Shelter in 1993, entitled "A forgotten problem", found that caravan dwelling was seen as a predominantly rural housing solution for about 4,000 Scottish households.

Caravans are seldom the accommodation of choice—a fact that my constituency surgeries often bear out. Apart from the heating problems and the dampness encountered in caravans, insurance cover can sometimes be impossible to find, with all the consequences that that brings for families trying to put things together again after their caravans, furniture and property have been destroyed by wind or other bad weather.

Recently, a constituent drew to my attention the fact that concessionary electricity tariffs were unavailable for some caravan dwellers, because their connection was via the council rather than directly with Scottish Hydro-Electric. People already disadvantaged by low incomes find themselves further disadvantaged when they cannot get access to concessionary tariffs.

Many of the problems of rural housing are associated with low income, especially with the combination of low income and higher costs, including higher housing costs. It is a well established fact that, in many rural parts of Scotland, the costs of transport and the general cost of living, including the price of ordinary household goods, is much higher. For people on low incomes, that means that there is even less of their income left to meet housing costs.

I am talking about areas of low income, of seasonal employment and of high living costs. Rural households have less income to meet those higher housing costs. Rural areas account for 20 per cent. of all homelessness applications, but 27 per cent. of those result from mortgage default.

In addition, the cost of owner-occupation is often increased because of the external demand for housing. Houses up for sale in rural areas are often advertised in the national rather than the local press. In the Argyll islands, one quarter of the housing stock consists of second or holiday homes, while social housing for rent accounts for less than 16 per cent.

Even when there is social housing for rent, the availability of less than 100 per cent. housing association grants makes private loan finance a necessity, so rents are pushed higher. To that we must add the consequences of recent and proposed changes in housing benefit. In Scotland's rural areas, the incidence of private rented accommodation is well above average, much of it at relatively high rents.

New rules from next October will restrict benefit for single people under the age of 60 to a single-room rent. I was advised earlier today by the housing department of Orkney Islands council that that has already prompted a number of private tenants in Orkney to do a simple calculation to work out that they will not be able to afford their current accommodation, so they will present themselves as homeless. In turn, that has implications for landlords, who have been encouraged until now to let their premises, but who may well find that they cannot attract tenants at the levels of rents that they have been charging until now.

Against that background, there are two key aspects of Government policy that I wish to challenge this evening. First, there has been a significant cut in funding for housing investment over the past year and next year. It is my understanding that the Scottish Homes approved development programme for housing associations and private developers will be down by 25 per cent., from £280 million to £210 million, in 1997–98.

I am sure—because I have been through these debates before—that the Minister will tell us in his reply that, on Budget day, the Secretary of State gave another £43 million to Scottish Homes, and that Scottish Homes has managed to find about £30 million through housing stock transfers. He has claimed in a letter to my right hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel) that, over this year and next year, Scottish Homes will invest over £500 million in housing development.

I understand that, if the investment had remained at the 1995–96 level, it would have been about £650 million. Certainly the information from the Scottish Federation of Housing Associations, and from housing associations in my constituency and that of my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood), is that the associations all expect a decrease in the funding available for housing investment in the year ahead.

We cannot take that money out of housing investment without consequences in terms of the number of new units started, or without reducing what can be done to try to tackle the condition of Scotland's rural housing. It will also have consequences for construction firms—many of which are small community businesses—which are facing job losses as a result of cuts in housing expenditure. Linked to that is the problem faced by many local authorities, who see the capital receipts from the sale of council houses going up to 75 per cent. These sums have to be applied to pay off accrued debt on housing.

Surely it would be far better to allow the local authorities an opportunity to determine their own priorities. Under its own proposals—and without any prompting from the Government—Orkney would have paid off its housing debt within the next 12 to 14 years. It now finds that tenants who have waited patiently for some refurbishment and have been told that it would happen next year will be seriously disappointed. In Shetland, some £500 million is expected to be lost from the refurbishment budget, thereby knocking out of sync a long-prepared programme to try to catch up on the refurbishment that was not done at the time of the oil boom.

In Shetland, the Western Isles and Highland, the Government have indicated in principle a willingness to commute debt, and that is very welcome. A lot of the detail has still to be worked out, and I very much hope that whoever is sitting on the Treasury Bench after the election will honour that commitment in principle and ensure that the detail is satisfactory. Although the expectation with regard to investment through Scottish Homes is that the pain will be shared equally when Scottish Homes divides up the cake, may I ask the Minister tonight if he will consult Scottish Homes about showing a bias towards rural housing associations?

I do not think that I need declare an interest but—in case it is necessary—I declare that my wife is a vice-chairman of the Orkney housing association, and I have had my ear bent at first hand on this issue. However, I know that all rural housing associations in the Highlands and Islands, and other parts of rural Scotland, feel strongly about the matter.

Since Scottish Homes launched its rural initiative in 1990, it has—according to a recent review—invested £311 million in rural Scotland, resulting in more than 10,400 starts. It has made an important contribution to care and repair and it has managed to get leverage of private finance, which has increased over the years. Without that rural initiative, I accept that the position would have been worse.

Notwithstanding that, as I said earlier, the consultant who conducted that review of Scottish Homes' rural policy concluded that a rural share of 20.2 per cent. of Scottish Homes national investment is not commensurate with a 28.8 per cent. share of households, and a much faster rate of new household formation Moreover, the disproportionate cut in rural investment approved for 1996/97 is hard to reconcile with these trends. It is recommended that Scottish Homes both increases the rural share of its spending and articulates a clearer rationale for the geographic distribution of its expenditure. I extract two points to justify my plea for favoured treatment. First, it will reverse a disproportionate cut in 1996–97, and, secondly, it will address the issue of much faster rate of new household formation.

The review to which I have referred highlights trends projected into the next century, which show proportion and household numbers increasing faster in rural Scotland than urban Scotland. In the Highlands and Islands and Grampian district, household growth between 1992 and 2001 is estimated at 12.7 per cent., and in Lothian and Borders it is estimated at 10 per cent., compared with the Scottish average of 7.7 per cent. A rationale for geographical distribution would undoubtedly favour those areas; I ask the Minister to encourage such an approach.

The second key point concerns the Government's obsession with home ownership, and its target setting of 60 per cent. home ownership, against which it seems that all other objects must take second place.

I have no ideological objection to home ownership, which is a necessary feature of any liberal democracy. The objection is to an obsessive ideological pursuit of the aim. Liberal Democrats did not oppose the principle of the right to buy, but we have pointed out the wisdom of allowing local authorities flexibility to maintain a balanced housing stock. What I heard earlier today shows that that view is justified: Orkney Islands council must place a newspaper advertisement in an attempt to find suitable accommodation for a family with special but not exceptional needs, because it no longer has any accommodation suitable for adaptation in its own housing stock.

I ask the Minister, in the case of Scottish Homes, to allow much more local discretion and flexibility for districts and housing associations to determine the balance of their own areas between low-cost home ownership and public rented housing at affordable rents. The review of Scottish Homes' rural policy recommended that Scottish Homes gives primary emphasis in rural areas to the provision of affordable rented housing, although low cost home ownership should continue to be promoted in areas where there is sufficient and identified demand as a secondary priority. The guiding principle here should be local flexibility to respond to local circumstances, and efficiency targets should permit this. In turn, the Scottish Homes district plan for Highlands, Islands and Grampian concluded: The highest priority district objective is to increase the supply of low cost rented housing whether through direct provision or bringing redundant dwellings back into use.We will concentrate the provision of general needs housing for rent in rural areas where there is currently low provision of local authority or assured tenancy housing. This will be provided through the funding of housing associations/co-operatives. I have received representations from the Orkney housing association and the Hjaltland housing association in my constituency to the effect that, although the local district office in Inverness is well seized of the point, and sees the need to increase the supply of low cost rented accommodation, the indications they get of directions from on high, either from the board of Scottish Homes or—probably more likely—from Ministers, are that the drive towards a greater share of home ownership must go on.

That is happening against the following background. In Orkney, owner-occupation already stands at more than 65 per cent., in Dumfries and Galloway at 60 per cent., in Argyll and Bute almost 55 per cent., in Highland 55 per cent., in Borders more than 53 per cent., in Shetland 52 per cent., and in the Western Isles almost 77 per cent. There are already substantial levels of home ownership in much of rural Scotland. I repeat the recommendation from the review of Scottish homes rural policy: the guiding principle should be local flexibility to respond to local circumstances". There are many other connected issues, which we could discuss all night; instead, I shall write to the Minister about them. The problems relating to rural housing are deeply serious. The market has not brought about a solution, especially for people on low incomes, who cannot afford to rent or buy. For many, the alternative may be to leave their native community, with all that that means for rural services, such as education, in the areas that they leave behind. Investment in rural areas and a greater emphasis on affordable rented housing are two key ways of tackling that problem. I hope that the Minister will be able to give us some encouragement in this direction tonight.

Photo of Mr Raymond Robertson Mr Raymond Robertson , Aberdeen South 10:43 pm, 4th February 1997

First, I congratulate the hon. Member for Orkney and Shetland (Mr. Wallace) on securing this Adjournment debate this evening. It gives us an opportunity to discuss, albeit briefly, rural housing. If he wishes to raise other issues, he should write to me, and I shall ensure that he gets a very speedy reply.

I shall begin by outlining some key features of the Government's approach to housing. Obviously, those involve extending choice and developing policies that address people's aspirations. That approach is the same for both urban and rural Scotland. Our objectives are to promote greater housing choice; to assist and enable the provision of an adequate supply of housing; to promote improvement in housing quality; and to seek a more effective use of resources in housing.

Our belief in home ownership is rooted in the view that to be a home owner is a fundamental aspiration of the vast majority of people. I was therefore somewhat concerned to hear what the hon. Gentleman had to say about home ownership. Surveys suggest that 70 to 80 per cent. of households would ideally like to be home owners, and we wish to enable as many people as possible to achieve that aim. We can therefore take great pride in the fact that owner-occupation in Scotland has increased dramatically, from 35 per cent. in 1979, when the Government first took office, to 58 per cent. at the end of 1995.

I am still firmly of the view that local authority tenants in rural areas who aspire to become home owners should have every opportunity to purchase their homes. However, we recognise that there are special housing problems in rural areas. The Government fully acknowledge those, and adequate provisions exist within the right-to-buy We also asked Scottish Homes, as one of its first priorities after it was set up in 1989, to draw up a policy to address the special problems of housing in rural areas. As a result, it operates a number of schemes that can help with the problems associated with housing in rural areas. Those include shared ownership schemes, which are used extensively in rural Scotland, and can be particularly beneficial in helping local people enter home ownership in pressurised housing markets.

Rural home ownership grants are also available to help people on modest incomes to build their own homes or renovate an existing building.

As I said, the Arkleton centre at Aberdeen university reviewed Scottish Homes rural policy in the light of experience, the White Paper entitled "Rural Scotland: People, Prosperity and Partnership", and the reorganisation of local government. Of course the review identified a number of aspects in which improvements might be made, but the thrust of its findings was mainly positive.

The review found that Scottish Homes rural policy has had a considerable impact on rural areas, acting as a catalyst for the development of strategies to meet the wider needs of rural communities. Investment in housing association provision has made a major contribution to improving the variety of housing options for people in rural Scotland. The policy has succeeded in encouraging private developers to build in rural areas, where they would not otherwise have operated because of narrow profit margins.

Scottish Homes support for local housing associations and local housing agencies has played an important role in supporting community development and involvement. The rural programme contributes directly to employment and economic development in rural areas, and has the potential to support economic development strategies indirectly. The formulation of an explicit rural policy is widely seen as a model.

The review is on-going. If the hon. Member for Orkney and Shetland wishes to contribute to it, he may do so directly to Scottish Homes or through me. He mentioned the need for investment in rural council housing. Housing has had to play its part in a tight public expenditure round.

Photo of Jim Wallace Jim Wallace , Orkney and Shetland

Before the Minister leaves the rural homes policy review, how does he respond to the clear recommendations in the review? Scottish Homes does not seem to be giving resources to rural areas commensurate with the number of households in Scotland's rural areas. It is recommended that the primary emphasis must be on the provision of affordable rented housing, with local flexibility to take account of the need to achieve a proper balance between low-cost home ownership and rented accommodation.

Photo of Mr Raymond Robertson Mr Raymond Robertson , Aberdeen South

As the hon. Gentleman knows, Scottish Homes has considerable licence as to how it operates. I meet the chairman and board twice a year to review the strategic objectives. The rural review is one of the subjects that will be discussed when we meet soon. I am happy to feed in the hon. Gentleman's comments.

As the hon. Gentleman pointed out, this year's public expenditure survey is tight, and housing has had its share of cuts. The reduction in resources arises from the requirement for local authorities to set aside 75 per cent. of the receipts from house sales next year rather than 50 per cent., as we envisaged originally. That change results from the overriding need to tackle the burden of debt. Despite the controls on the use of capital receipts that were imposed last year, local authority housing debt has continued to rise, and the average debt per house has also increased. We believe that further steps should be taken to reduce the burden of indebtedness.

Following that change in the receipts rules, I decided that it was no longer sensible to issue housing allocations on a gross basis. In future, local authorities will receive a net allocation for housing investment, and I announced the allocations for 1997–98 before Christmas. That brings capital allocations for council housing into line with the position on non-housing capital. It has an added advantage in that, for the first time, I was able to respond to the request by the Convention of Scottish Local Authorities to issue housing capital allocations before authorities set their rents.

The total net allocations for 1997–98 amount to £171.9 million, and are higher than those issued to authorities in 1996–97. In addition, on the basis of councils' own estimates, I would expect them to generate useable receipts of between £50 million and £60 million next year in order to augment their investment. The change in the rules on receipts set-aside means that some redistribution of resources has been necessary to protect those authorities, such as Orkney, that are most reliant on receipts. That has worked to Orkney's advantage, because the gross estimated resources available are higher than the central planning assumption on which the council planned its forward capital programme.

I accept that that change has reduced the net resources available to Shetland by some £266,000. In determining the distribution of the resources available for investment, I decided that it was necessary to spread the impact of the change in set-aside rules equitably over all authorities. The redistribution of the net ensures that all authorities are able to meet their forward legal commitments, taking account of each council's own estimate of the capital receipts that it expects to generate next year. In the main, the councils' estimates were consistent with our own, but my Department will continue to monitor the situation to ensure that no council can exploit the new method of allocating resources by deliberately underestimating receipts.

The hon. Gentleman suggested that it would be sensible to link set-aside to the level of debt in each authority, but I cannot accept that, as it would be too complicated to operate a different regime for each authority. In any event, authorities with lower debts, such as Orkney, stand to benefit if they become debt-free more quickly. I believe that considerable scope exists for authorities to increase investment levels by involving the private sector to a greater degree than occurs at present. Authorities should therefore be considering the potential for transferring stock to other landlords outwith the necessary constraints of the public sector.

As the hon. Gentleman is aware, I visited Orkney last September, and this was one of the main items of our discussion with the council. I welcome the consideration that the council is giving to transferring its stock to a new landlord, and I hope that it will take forward that idea in consultation with my officials. After all, the transfer of the council's stock to a new landlord not only would facilitate increased investment in the existing stock, but potentially could produce a substantial receipt of which any surplus remaining after debt redemption could be invested in the provision of new rented housing.

I appreciate that the transfer of housing stock to an alternative landlord would be a difficult matter for Shetland Islands council at present.

Question put and agreed to.

Adjourned accordingly at three minutes to Eleven o'clock.