Finance: Home is where the job is

Economic decline has left some councils with more houses than people.

A new housing crisis is emerging, but not the well-known one of too few homes: instead, it is about too many homes in the wrong places, leaving thousands of council and housing association properties empty. The result is extra pressure on their rent accounts, and the risk of a downward spiral as it becomes more difficult to improve and maintain homes.

The Department of Environment, Transport and the Regions, continues to maintain that across England and Wales alone there is a shortage of 4.4 million homes. Yet there are more than 81,000 council homes lying empty in Britain, plus another 27,000 housing association homes. Surprisingly, a higher proportion of housing association properties are empty, at 2.7 per cent, than council owned, at 2.4 per cent.

In simple terms, many homes are in the wrong places. The decline of traditional industries has left whole communities isolated from jobs, shops, transport links, and leisure activities. The new jobs are in the south, particularly the south-east, and people are prepared to move.

Whole estates in Glasgow, Newcastle, Leeds, Sheffield and Manchester are proving difficult to let. Leeds City Council has responded by demolishing some of its worst estates. Newcastle City Council has spent pounds 15m improving one of its West End estates, which is still proving difficult to let. It admits it will have to demolish more homes while helping to create new local jobs to increase housing demand. The Wirral has reported an increase of 20 per cent in void properties, and a halving of its housing waiting list.

But the problem is not restricted to the north. In Cornwall, estates near closed tin mines are no longer in demand. Birmingham has mothballed entire estates. Even Kent has suffered its own localised economic decline with the closure of coal pits and containerisation and job cuts at sea ports. One side-effect has been a reduction in housing demand.

There are other factors elsewhere. Leicester City Council - which has gone from a surplus of demand over supply to a surplus of supply over demand in three years - believes that one factor has been excessive building locally by housing associations. The Housing Corporation, which gives grants to housing associations, concedes that its old method of evaluating housing demand (housing needs indicators), is too crude, and has commissioned research to suggest a new basis to decide on investment. It adds that new homes building will have to be geared more closely to where jobs are being created.

Tenants are clearly becoming more choosy, and many homes for rent do not meet today's needs. The demand now is for more four-bedroom houses for larger families, and sheltered accommodation for the frail and elderly, whereas the surplus is often of one-bedroom flats. Many tenants have taken advantage of financial incentives to move out of the rented sector into owner-occupation, often pushing problem areas into sink estates. The clampdown by councils on anti-social tenants has been inspired not just by the Government's rhetoric of being tough on crime, but also because of the loss of rental income as increasing numbers of tenants move out.

Social housing in much of the country has gone from being supply-led to being demand-led in about five years. There is no single solution to a situation that has such a range of causes, and councils and housing associations are reacting according to local circumstances. Some of Sheffield's tower blocks are very close to its universities, and the council has generated 500 new housing applications a month by furnishing the flats and targeting students. Leicester is going to use capital receipts to convert surplus one-bedroom bungalows into larger, two-bedroom properties.

Swale Housing Association in Kent, which covers areas of local economic decline, including the Isle of Sheppey, has focused on environmental improvements. This has included tree-planting, traffic-calming and the demolition of vacant garage units, which have been replaced by new, elderly people's bungalows. It has also taken on neighbourhood wardens to assist tenants. This led to a halving in reported crime on one estate. On another, pounds 25,000 was spent in evicting two families who were regarded as causing most of the crime and social problems.

Swale's properties were purchased as voluntary housing transfers from the local authority, and there has been an investment programme of pounds 3m a year - installing central heating and double glazing - as well as a repair programme of pounds 2m annually. All contractors must use local labour, which has increased the number of Swale's tenants in work. The association is also assisting tenants to enter training schemes, obtain jobs and develop community businesses.

Margaret Wright, director of Swale Housing Association, says that the problem with empty properties is now under control, with void levels dropping. Its borrowings allowed for non-payment of rents of up to 5%, and the actual figure has stayed below that, despite vacancy levels much higher than that on individual estates. "We haven't changed our rents at all," she says.

Leicester says that the damage to its housing revenue account is not so much from lost rent as from the cost of protecting vacant units. Dave Pate, Leicester's principal assistant housing director, says there are particular problems with the high turnover of tenants in its tower blocks, which are more unpopular as they get older and in worse condition.

"Turnover is pretty high - tenants change three or four times a year - and we are constantly having to make repairs," he says. "Many of these tenants don't have life skills, run up bills, and get evicted."