Housing: a concrete bungle?

'Worst first', the rule of thumb for council house spending, is under attack, writes Paul Gosling

Baroness Dean, the recently appointed chair of the Housing Corporation, put her foot in it last month. She told a housing conference that social landlords should ditch the worst estates, and concentrate investment on maintaining high quality in their best housing stock.

Since then, the Housing Corporation has been trying to distance itself from Baroness Dean's remarks. "She was previewing some research we are working on," explained a spokeswoman, "examining whether the 'worst first' policy is the right one to pursue. It is part of the thinking going on here, but it is contrary to the investment strategy at the moment."

Nonetheless, Baroness Dean - the former trade union leader Brenda Dean - is well connected in the Labour Party, and her views may reflect similar thinking by environment ministers. Officials at the Department of Environment, Transport and the Regions said that housing investment priorities are being examined as part of the comprehensive spending review. They would not comment on speculation that ministers may share Baroness Dean's views.

The issues she raised are important ones. There is widespread concern within the housing sector that too high a proportion of too little investment is going into renovating the worst stock, and then only when it becomes badly blighted.

More spending is needed, many professionals believe, to maintain good quality social housing before it declines. Jim Coulter, chief executive of the National Housing Federation, says that a lot of money went into housing associations to purchase stock transfers away from local authorities, and then to improve those properties. "Spending focused on refurbishing what exists, even when demolition would have been better, and also preferable to tenants," he suggests.

John Perry, chief executive of the Chartered Institute of Housing, says it is wrong to suggest that there is an easy choice between spending on the best and the worst social homes. Even if it is accepted that many bad estates need to be knocked down and rebuilt, that does not free up money to maintain other homes in better condition - quite the reverse. "It costs a lot to demolish, and then you need to do something decent with the site," says Mr Perry.

Spending priorities should be more flexible, recognising important regional differences in housing conditions, demand and economic health, argue both Mr Perry and Mr Coulter. The point is accepted by officials within the Housing Corporation. Its spokeswoman says: "There is a huge dichotomy between the north and the south. There is not a demand problem in the north, but there is a problem with stock condition, whereas in London and the south people have to wait months if not years before they are offered a home that is acceptable." What is also agreed by all three bodies is that housing management practices must reflect the Government?s political priorities. In particular, the welfare-to-work programme would be undermined if social housing rents were increased to pay for commercial borrowing for stock improvement, thereby forcing tenants into greater dependence on benefit, making employment less attractive.

Paradoxically, there is also a fear that success for welfare-to-work and the minimum wage could create new problems for social landlords. John Perry explains: "Economic improvements in themselves can create worse problems for estates if people just up sticks and move. I don't think affordability of rents is an issue, but the low cost of buying is." Jim Coulter adds: "If welfare-to-work and the minimum wage work, without improving the physical housing stock, people will say the only sensible route is to move out."

The Housing Corporation points out that the Government's policies have already led to a cap on housing association rents, by limiting increases to 1 per cent above the rate of inflation, to assist the welfare-to-work programme and limit the impact on the ever-rising housing benefit bill.

But the great fear stalking the sector is that Labour may decide to reduce its spending on social housing. This was provoked in particular by comments from the Home Secretary, Jack Straw, last month, when he said: "Housing problems won't be solved by spending money. The errors in housing policy in the Sixties and Seventies were made to some extent because there was too much money around."

Jim Coulter's plea for investment sounds reminiscent of Roy Hattersley's criticisms of New Labour for ignoring its core supporters. "The proportion of housing stock that is publicly owned is very large, especially in the northern cities and some London boroughs where it is in excess of 60 per cent," says Mr Coulter. "If you don't deal with the physical decline in those areas, and people move out, then there will be significant blight problems."

As the housing professionals see it, the condition of housing stock cannot be separated from other social problems. "Government needs to invest in an area in a way that helps its sustainability," argues Mr Coulter. "They need to ask how bricks-and-mortar investment can help to sustain a community."