Whitehead Report - Social Housing Waiting Lists - Research - 1 August 2011

A Review of Social Housing in Jersey

Main Report July 2009

Cambridge Centre for Housing and Planning Research

Department of Land Economy University of Cambridge

TABLE OF CONTENTS Section Page

1. Introduction 1
2. IssuesspecifictoJersey 5
3. HousinginJersey 10
4. Role andorganisation of States housing 18
5. A potentialframeworkfororganisationalchange:options 23
6. RestructuringStateshousing:theoptions 31
7. ConclusionsandRecommendations 43

Annex  List of Consultees in Social Housing Review  51

Technical Appendices

A1  The housing stock in Jersey  52 A2  The characteristics of the Jersey housing market  55 A3  Household types and tenure  59 A4  Housing tenure by age of household  62 A5  The allocation of States housing  68 A6  Turnover and lettings in the States housing stock  72 A7  Household incomes, employment and qualifications  74 A8  Housing costs and tenure  79 A9  Rent income and expenditure in States housing  82 A10  Housing and Income Support  89 A11  Comparative staffing levels between Jersey and UK  96 A12  States housing: current financing and future options   98

Section 1: Introduction

When the States of Jersey agreed the States Strategic Plan 2006-2011, it tasked the Housing Department with reviewing, developing and implementing strategies for the provision of social housing in the Island, including the long-term management of States' rental accommodation.

In setting out the task it was recognised that social rented housing plays a major role in providing good quality, affordable housing to a significant proportion of the population of Jersey and impacts on the way the whole housing market operates. It was also recognised that it was necessary critically to re-examine the ways in which social housing is provided to ensure that it is fit for purpose in the 21st century.

1. Termsofreference

The Housing Department set out the terms of reference for a research project to support this initiative in a tender document issued in 2007. The general purpose of the project was to take a longer term strategic view of the role of social rented housing in Jersey. To this end the consultants were asked to provide a comprehensive picture of current social housing provision in Jersey; to identify areas of strength and weakness; and to recommend approaches which could meet social housing need in a more sustainable and effective way.

The specific terms of reference, developed with the input of the Health, Social Security and Housing Scrutiny Sub-Panel, were as follows:

1. toestablishthenatureandextent of theneedforsocialhousing in theIsland,includingwhether that need is primarily relatedtoaffordability or toaccess;
2. toidentifytheagencies,includinghousingtrusts,presentlyprovidingsocialhousing in theIsland,andthenatureand extent of their involvementineachcase;
3. toestablishthepresentoverallandagency-specificcosts, including grants,developmentandinterestsubsidies, of providing social housing in theIsland;
4. toexaminetheextenttowhichthosewhoarepresentlyreceivingthebenefit of social housingintheIslandareactuallyinneed of that assistance;
5. toestablishthenatureandextent of any currentlyunmet social housingneedandknownfutureneed, with particularreferencetodemographicchanges;
6. if there is foundto be anymismatchbetweenprovisionandneed,toestimatethecosts and anyotherimplications of movingto a positionwhere Jersey socialhousingprovisiontargets social need more accurately;
7. toanalysethepresentregulatorystructure,compare it withregulation in otherjurisdictions,andrecommend a suitableframework;
8. toanalysecurrent policy andsystemsforsettingsocialhousing rents, including differentials withopen market rates,andrecommendchangesaccordingly; and
9. toconsider,andtomakerecommendationsforthe future structure/status of the States of JerseyHousingDepartment.

The detailed terms of reference concentrated almost wholly on the effective provision of social rented housing. However the Strategic Plan itself includes a much broader range of housing objectives, the achievement of which would necessarily impact on social housing provision. These broader objectives include:

• improving access to adequate housing and the operation of the housing market;

• increasing the levels of home ownership, including both transferring existing social sector stock into home ownership and the development of shared equity schemes;

• increasing equity with respect to access to the housing market;

• increasing standards both in the existing stock and for new provision; and

• improving the terms and conditions by which tenants occupy their housing.

The Strategic Plan also looked to (i) limit immigration to levels which could be accommodated within current estimates of the need for additional housing and land release (para 2.11) and (ii) to address the changing requirements of the ageing population.

2. The ChangingEconomicandPolicyEnvironmentinJersey

Since the publication of the Strategic Plan a number of important changes have occurred that directly impact on the effective provision of social housing.

First, rapidly rising house prices in recent years have put additional pressure on housing affordability and reduced the potential effectiveness of schemes to increase owner- occupation. The current halt in this trend can be expected to have a positive effect on affordability but may, as elsewhere, result in increased risks, reductions in new supply, and a sluggish housing market;

Second, the introduction of the new Income Support system has changed the basis on which housing assistance is provided, setting it more firmly within the more general financial support available to low income households. This has implications both for affordability and for the most appropriate ways to set rents in the social sector;

Third, the complex regulatory framework which determines access to different types of housing, dependent mainly upon length of residency in the Island, has been significantly modified to increase the proportion of qualified households. This has directly affected the need for both social housing and income support;

Fourth, the previous economic environment in the Island has become more uncertain over the last few months in ways that are likely to put additional pressure on the provision of affordable housing and affect both levels of net migration and access to and mobility in the housing system, with both the availability of credit, and its terms, affected.

Over the past year, the financial tsunami that has hit markets across the world has further worsened the economic situation on the Island, while new regulatory frameworks may put recovery at risk. The current recession and further uncertainties directly affect both the health of Jersey's public finances and the housing market.

Thus, especially as the vast majority of households in Jersey are already well housed, there are increasing pressures to ensure that the social housing asset is used as effectively as possible.

3. RelevantPolicyDocuments

Over the last few years a number of important and relevant policy documents have been published. These include:

• the Social Housing Property Plan 2007-2016 approved by the States in 2007 which discusses whether the States-owned social rented sector is fit for purpose;

• the Housing Needs Survey – undertaken in 2007 and published in 2008, which estimates the potential housing requirements of households in Jersey for the forthcoming 5-year period 2008-2012 by analysing respondents' expected behaviour and aspirations;

• Planning for Homes 2006 – the latest in an annual series of statistical reports produced jointly by the Planning and Housing Departments;

• The Review of the Island Plan 2008 (which is currently completing the consultation process) – projects likely housing requirements and the availability and location of land to achieve required levels of output;

• Imagine Jersey 2035 – a consultation process to understand future social and economic challenges, the results of which were published in March 2008;

• Migration – Monitoring and Regulation (P25/2005) – the Report and Proposition from the Policy and Resources Committee, outlining a new system for controlling entitlement to employment and accommodation, which led to changes in the qualification rules, and the subsequent Consultation Papers on Managing Migration: New Mechanisms (June 2009);

• Social Policy Review (P47/2002) produced by the Social Security Department, which helps set priorities with respect to welfare in the Island;

• Income Support System (RC48/2004) which led to the Income Support (Jersey) Law (2007). (Revised edition 26.550, February 2008) which introduced the single access point and consistent eligibility rules for rights to social security, including support towards rental payments.  

• Affordable Housing as a Proportion of Private Housing Development – currently being carried out by Kelvin MacDonald in parallel with the Review of Social Housing. This concentrates on understanding the need for affordable housing and the potential for using the land use planning system to achieve affordable housing in perpetuity. As such both studies draw on the same basic understanding of how the Jersey economy is operating and particularly of the demographic basis for additional housing requirements.  

4. The Social HousingPropertyPlan

The most immediately relevant policy document is the Social Housing Property Plan 2007- 2016 which sets out currently agreed policy. The Social Housing Property Plan was developed within the existing Strategic Plan and in the knowledge that a more fundamental review of social housing in the Island was to be undertaken.

The Property Plan was developed within the existing financial framework by which net rental income is inadequate to pay for improvement investment. Given this overwhelming lack of available resources, the only option available was to plan to sell off a proportion of the stock to realise the necessary finance. This had the benefits in supporting the government's policy of expanding homeownership but was fundamentally the only option available if standards were to be maintained

The Plan identifies the priorities as:

• dealing with refurbishment requirements;

• ensuring the States rental accommodation is fit for purpose with respect to scale, size and type;

• putting the Housing Department's budget on a sound footing;

• increasing the level of homeownership by innovative means; and

• putting an end to the previous strategy of transferring sites to Housing Trusts at nominal value

The plan puts the greatest priority on (i) maintenance and regeneration and (ii) the lack of funding to achieve this goal. To address these issues the refurbishment plan suggests sales of selected properties into the open market as well as sales to tenants in order to fund the required investment.

A further important priority was to provide for the housing needs of the rapidly growing population who are over 65 years old by an increase in sheltered as well as smaller accommodation. A higher proportion of households in the social rented sector are over 65 than in any other tenure.

In this context it was noted that as brownfield sites become vacant, especially in the centre of St Helier there will be significant potential to develop smaller lifetime homes (mostly in the form of flats) for the identified needs of older households.

Overall, the financial constraints in the social rented sector were to be overcome by reducing the size of the sector. The mix of future social provision was to move away from family housing to smaller units for older people and a higher proportion of new family homes were to be provided as affordable rather than social housing.

The Property Plan was a response to the constraints of a situation created by the combination of the policy of the States to fund investment from revenue, rather than from borrowing, and a backlog of repairs and improvements created by the chronic revenue underfunding of the Housing Department budget.

It is in this context that a more fundamental review of the role of social rented housing was commissioned. Two core elements of this review are (i) to assess whether the current system of provision through the Housing Department is fit for purpose and (ii) to examine the possible ways in which the governance and organisation of social housing might be changed. This latter includes in particular the possibility of restructuring the Department either as an independent management organisation or as an arms-length organisation agency or by transferring the stock into independent ownership.

Section 2: Issues Specific to Jersey

Jersey has both specific opportunities and particular constraints arising from its physicality; its history; its governance structure; its financing regime; and its regulatory framework.

1. Governance

First, as a result of its size and its constitution Jersey operates basically a single tier of government in terms of both policy and provision of housing. The powers and responsibilities of the parishes are relatively limited except to the extent that the Constables play an active part in the States. The vast majority of social housing is provided by a States Department, with a small minority provided by Trusts. This is a very different scenario from most other countries where central government makes the policy and sets the financial framework by which affordable housing is provided but the day to day operation is carried out at local level either by local authorities or independent non- profit landlords.

Second, the States operates on a non-political party basis. Elected members are directly responsible to their constituents as individuals without a defined policy platform. Members therefore act both to develop policy and to determine how the state finances housing activity. On the other hand they also act as the conduit for the concerns of individual constituents and of local communities. Again this is a very different scenario from most other countries with significant social housing sectors where locally elected councillors are involved in local and individual decisions while central government develops more general policy.

2. Finance

A second near unique aspect of Jersey is the way that public sector organisations are financed. In particular, services are normally provided through revenue rather than from borrowing. The majority of public services including social housing are provided by States Departments which operate under the financial terms specified by Treasury and the States budget. As such they are staffed by civil servants. Historically investment in social rented housing was funded from general state revenue streams. The social housing stock is thus debt free and does not pay for these assets through interest payments. On the other hand the Housing Department is expected to make a large contribution to States funds to enable other services (notably income support) to be funded from the housing revenue stream.

The most obvious comparator is perhaps Hong Kong where a large public sector, accommodating around one third of the population, has been funded through revenue and the rent levels are only just adequate to cover immediate operating costs. The major difference in Jersey is that the Housing Department is expected to contribute to general States finances.

Other activities, notably Jersey Telecom and Jersey Airport are wholly owned government enterprises with independent Boards of Directors and management structures. This model of privatisation is the only one yet operational in Jersey and does not enable the enterprises to make independent decisions on funding. Rather they may request permission from the Council of Ministers to borrow for investment purposes against a defined stream of future revenues under government guarantee. In addition the bus service is franchised to private management. However, as yet there are no fully privatised organisations with the capacity to borrow on their own account.

The implication of a revenue funded social housing system is that there will inherently be a surplus over-and-above the direct annual costs of managing and maintaining the existing stock. Decisions about investment thus involve a trade-off between returning funds to the centre to be used for other purposes and increasing expenditure on social housing. In Jersey this translated to a transfer of £21.8m in 2008 and a transfer of £22.4m in 2009. The consequence of this is that the Housing Department is not left with sufficient income to properly resource the services it is providing.

This is again a very different scenario from most other social housing systems that have a ring-fenced financial framework in place within which investment expenditure can be assessed and then financed through borrowing.

3. Migrationcontrolsandresidentialqualification

The small size of Jersey, relative to its population, and the attractiveness of the Island as a place to live and work, have resulted in a long standing policy of migration control and residential qualification linked to housing eligibility through the Housing Law of 1949 and its subsequent amendments and regulations.

The Housing Law sets out a wide range of criteria which control access to different segments of the housing market by households according to their status as residentially qualified or not qualified plus other criteria.

For most practical purposes, there are now five main groups:

• seasonal workers: every year, an estimated 4,000 seasonal workers enter the Island to work, primarily in the agricultural and tourist industries. They are housed mainly by their employers, and leave the Island at the end of the season;

• non residentially qualified households, who are resident on the Island, possibly for many years, who are not permitted to rent or own property in their own right, and who can thus only access the lodging house' sector of the housing market. In 2001, there were 4,380 non residentially qualified households, and 250 lodging houses with 5,550 rooms (see page 59). Since 2005, non residentially qualified households become residentially qualified after 12 years. Prior to 2005 the period was 19 years. A reduction to 11 years was agreed in May 2009;

• households who are residentially qualified under the j' category as essential workers. These households cannot own property in their own right, but can occupy property owned by a company of which they are the beneficial owner;

• a small number of households (averaging 4 per annum) who bring sufficient independent wealth to the Island are admitted as k' category residents;

• the majority of households who are qualified under categories a-h. These are households who have either been born in the Island or who have qualified by length of residence. This group of households may rent or own property in their own right.

The residential qualification system has a major impact on both total population and how housing in the Island is allocated. If it were fully effective, it would make it possible on reasonable assumptions to project the numbers of additional dwellings required to achieve a balance between requirements and supply.

In this context it is worth noting that there is a general agreement among the Jersey population that net migration levels should remain strictly controlled and a near majority, particularly among middle aged and older households, who want no increase in net migration in the future (Imagine Jersey 2035, 2008).

However, in practice the residential qualification system and the related Regulation of Undertakings and Development Law are fairly blunt instruments. Factors such as the marriage of locals to non locals, the return of residentially qualified people to the Island, and the reliance of the island on migrant labour, make it impossible to fine tune population levels. The current policy includes the following:

• Maintain the level of the working age population in the Island.

• Ensure the total population does not exceed 100,000.

• Ensure population levels do not increase continuously in the longer term.

In practice, it has proved difficult, if not impossible, to restrict inward migration to the Island. As recently as 1997, the States resolved that there should be a resident population no greater, or less, than that in September 1995 when it was 85,000. The current figure is 91,800. A practical housing policy cannot be based on population assumptions which are unrealistic.

The growth in non-residentially qualified households has led to a corresponding growth in the lodging house' sector, much of which now consists of good quality, self contained, accommodation operated by private house owners.

It should also be noted that the trend towards smaller households means that the demand for housing rises faster than any growth in population numbers.

4. Jersey'sLandUsePlanningSystem

Jersey's land use planning system is an outcome of the small scale of the Island and its economic and social success. Jersey is a small island of only 118 sqkm with a density of population of 770 people per sqkm[1], almost double the density in England. However, it is much less densely populated than comparable islands such as Guernsey, Bermuda or Malta, or indeed of the outer London Boroughs. Over the long term population growth has actually been less than that of England.

Within the total land area, a quarter is built-up, over half is cultivated and one-sixth is natural vegetation. In this context is not surprising that the land use planning system concentrates on preserving undeveloped land and supporting the re-use of brownfield land.

The principles underlying the Jersey land use planning system are based on the UK regulatory system first introduced in the UK in the Town and Country Planning Act 1947, which requires government agreement for any change of use.

The 2002 Island Plan set out a spatial strategy which includes: development within the main built-up area of St Helier; extension of this area by rezoning land for housing at its edge and possibly redefining the boundary; and supporting key workers and seasonal settlement development elsewhere in the Island. Notably, the 2002 Island Plan, although estimating a need for additional homes in the non-qualified sector, made no provision for supply in this sector, which was expected to come from the existing stock.

The Island Plan Review 2008 noted that:

The land use planning system has a crucial role to play in providing an adequate supply of land to meet the housing requirements of the community. To this end, the island Plan is the primary mechanism governing the availability of land for housing.'[2]

However, the Island Plan Review 2008 also commented:

The location of new housing has been subject to ongoing levels of objection and increasing politicisation over recent years.'[1]

It is in this context that decisions about migration; housing land allocation; new building and regeneration plans have been developed.

The outcome of Jersey's unique attributes with respect to social housing is that the vast majority of such housing is provided through a States Department with few powers of its own; the housing assets are completely unencumbered but cannot be used as security to enable further investment; the group who benefits from social provision is only a subset of those who experience problems in achieving adequate affordable housing; and yet it is unlikely that large scale new developments will occur to reduce pressure on the housing system.

The position with respect to social housing is very different in other countries (Whitehead and Scanlon, 2007; Scanlon and Whitehead, 2008).In all major European countries where significant social housing is provided the model of independent social landlords, usually operating at local or regional level, prevails. England used to be the exception but now has over 50% of the social housing sector owned by independent social landlords, in the form of housing associations, and a further 25-30% managed by independent organisations free of direct intervention in day-to-day decisions, in the form of local authority owned Arm's Length Management Organisations.

In terms of the appropriate organisation of social housing the main issues to be resolved include:

• does the States wish to divest itself of housing assets thus freeing up funds for investment elsewhere (including the possibility of additional housing investment), or does it wish to maintain ownership of a potentially valuable asset?

• does the States want to enable a more independent and focused landlord which takes day-to-day and strategic housing decisions within a clearly defined regulatory framework, or does it wish to maintain the social housing sector as a States Department so that the States remains directly responsible for the management, maintenance and allocation of the stock?

• does the States want to specify a regulatory and financial framework within which an independent landlord would have power to determine rents at least in the context of viability, or does it want to retain control over how rents are set, particularly in the light of the impact of rent rises on both the income support bill and the welfare of poorer households?

• does the States want to define and clarify regulations of access, security of tenure and other terms and conditions and hand over day-to-day responsibility to an independent landlord or does it want to maintain full responsibility and control over allocations and the terms and conditions of tenancies, not only setting general rules but also responding to individual concerns?

The current situation where a States Department has control over all these decisions has worked in the past, albeit with some difficulties. However it is a very traditional and

constrained approach and there are important reasons to re-examine options that can improve efficiency; enable the social landlord to be more responsive to changing tenant needs; and perhaps most immediately can better address the backlog of repairs and improvements required and better adjust the mix of provision for identified future needs.

To address these questions we first need to clarify how the overall housing system operates and the role that social housing plays in providing adequate affordable housing. This involves looking at overall demand and supply and its allocation between tenures; house prices and rents; and the specific attributes of social housing.

3. HousinginJersey

The overall level of demand for housing in Jersey depends upon the specific demographics in the Island, and upon the wealth of the population.

1. Demographics

The total population of Jersey at the end of 2008 was estimated[1] to be 91,800, an increase of 3.9% since 2001. Four fifths of this increase was estimated to result from net inward migration, and one fifth from the natural growth of the resident population.

The proportions of the population below working age (18%), of working age (65%) and above working age (17%) have remained relatively constant for the twenty years to 2001. However, this is changing and the ratio of workers to non-workers is expected to fall from about 2.0 now to about 1.3 in 2035 mainly because of the aging population. This may have significant implications for States finances as well as for housing requirements.

In 2001 some 77% of the population aged 16 and over were in categories a-h which allows access to all parts of the housing market (although only persons aged 18 or over can purchase property); 2% came under categories j and k who have some restrictions on purchase; and 21% were non-qualified residents who could only occupy lodging houses with no security of tenure. This situation changed dramatically when the period of residency necessary to obtain qualified status was reduced from 19 years to 12 years in 2007 (with a further small reduction to 11 years in 2009). As a result the updated profile (JASS 2007) shows 85% qualified (i.e. categories a-h); 7% in categories j and k (partly reflecting the growth in the economy); and only 9% unqualified[2].

This shift in the proportions of the resident population that are also residentially qualified does not necessarily have any immediate impact on the housing market: previously non- qualified people who had lived in Jersey for more than 12 years prior to 2007 may continue to live in the same house. The number of households, and the number of homes, on the Island are not affected by any switch in the proportions of qualified and non- qualified households.

The total number of private households resident in Jersey[3] at the end of 2007 was estimated[4] to be 37,900, an increase of 6.6% since 2001. The number of households is therefore rising faster than the total population so that average household size has fallen from an average of 2.38 in 2001 to an average of 2.33 in 2007, a trend similar to that occurring in all European countries.

If current population trends are simply projected forward to 2020, and there were to be no net migration, the total population of Jersey would grow very slowly, by natural increase alone, by 1.7% to a total of 92,350 in 2020.

On present trends the number of households would increase much more rapidly. The Island Plan Review 2008 for instance assumed[5] that household size would continue to decline linearly, to an average size of 2.2 people by 2020. This would result in an increase from 37,900 in 2007 to 42,000 by 2020, an increase of 10.8%.

2. Nethousingrequirements

The Island Plan of 2002 was based on the assumption of net immigration levels of 200 heads of households per annum – which has been the average observed in the following five years.

The new Plan included a planning assumption within it of 250 heads of households (540 people) based on the Imagine Jersey 2035 findings that, while public participants were strongly opposed to new building on greenfield sites, they would accept new housing developments of good quality in St Helier and to a lesser extent elsewhere as long as they are affordable to ordinary citizens.

However, it should be noted that this planning assumption of an increase of 250 households, and 540 people, is less than the actual average increase of 660 people per annum over the last few years.

The 2008 Island Plan Review identified:

• current and future housing land availability, through existing planning permissions, zoned sites for different categories or for sheltered/retirement purposes;

• opportunities for development at the St Helier Waterfront; and

• windfall developments in the built-up area and some brownfield development outside the built-up areas.

The Review concluded:

it is anticipated that the supply of required new homes in the qualified sector' over the next ten years will come from a range of sources, similar to those identified in the current Island Plan - but notably not from the re-zoning of any green field sites'[1]:

This conclusion follows from the analysis of new supply and demand with different in- migration assumptions used to estimate net housing requirements (table 3.1). Based on demographic projections and planned land supply alone, housing requirements can be met without the additional release of land. It is thus considered that there are no grounds for any large scale release of additional land as long as immigration is limited to around 250 additional households per annum.

However, it should be noted that the Review refers primarily to housing demand resulting from increases in the qualified population. Increases in the non-qualified population, only a small proportion of whom stay long enough to become residentially qualified, will increase demand in the so-called lodging house' sector. As standards rise is this sector, with more self-contained apartments, this will put pressure on the existing housing stock in the Island.

Table 3.1 Net Housing Requirements 2008 - 2013