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Circle Housing and Orchard Village

Volume 619: debated on Thursday 12 January 2017

Motion made, and Question proposed, that this House do now adjourn.—(Christopher Pincher.)

This debate is about Circle Housing’s Orchard Village development in the South Hornchurch part of my constituency. Circle was a group of nine housing associations formed following a merger in 2005. It now no longer exists, having merged only last month with Affinity Sutton to form Clarion Housing Group, the country’s largest housing association with nearly 130,000 homes and half a million tenants, and with plans to build another 50,000 homes.

Orchard Village was formerly known as the Mardyke Estate. Back in 2007, the London Borough of Havering balloted residents to find out whether they agreed to a stock transfer. When more than 60% said yes, the site was taken over by Old Ford housing association—one of the Circle housing associations—in March 2008, and redevelopment work started in late 2009. When finished, over four phases it will contain 555 new homes available by mixed tenure, and all six of the original Mardyke tower blocks, of up to 13 floors, will have been pulled down.

Willmott Dixon was contracted for the first three phases on a design-and-build contract arrangement. This contract was terminated in August last year, as I will explain later. Hill Partnerships has been contracted for phase 4, the final phase. As an aside, the estate has been the setting for two recent award-winning British films—“Made in Dagenham” and “Fish Tank”. Unfortunately, the project has been dominated by questions of build quality, estate management, standards of repairs, the performance and costing of heating systems, fire safety, parking, exposure to various hazards, and many other issues.

Before I go on, I want to make it clear that I view housing associations as playing a vital role in any successful resolution of the escalating local and national housing crisis. Housing associations have a proud history of delivering for their tenants. More generally, they are part of a rich tradition of mutualism and co-operation in this country—part of a charitable and non-profit-making commitment to social housing stretching back well into the 19th century on behalf of working people. For decades, they have played a civilising role in our society, and I hope that will continue. Given our local experience, however, I fear that this historic legacy could be threatened if we are not careful, especially if housing associations and the Government increasingly see their role as housing developers rather than as organisations rooted within traditions devoted to the social and economic well-being of their residents.

I suggest that Orchard Village estate should be a test case for the sector and its future direction, given the urgent need for greater independent scrutiny and regulation on behalf of tenants and buyers. To be clear, I am not making a party political point; in fact, the opposite is true. The Orchard Village project began under a Conservative council and Labour Government. When problems have emerged, all political parties have raised concerns. For example, in February last year Roger Evans, a Conservative member of the Greater London Authority, raised concerns with the then Conservative Mayor of London in Mayor’s question time by highlighting the build quality on the estate. Unfortunately, the then Mayor simply said that the homes would be National House Building Council-certified and that Circle would rectify any plumbing defects—as if this reflected the scale of the problems on the estate. This intervention by Mr Evans followed a complaint to Havering Council by the local councillors for the South Hornchurch ward. None of these councillors represents my own party. Indeed, none represents any party represented in the Chamber at present. There is, in short, wide cross-party agreement concerning the quality of the build, and I trust that the Minister appreciates that.

I put on record my appreciation of the work of the three local councillors in South Hornchurch—Michael Deon Burton, Philip Martin and Graham Williamson—on behalf of their residents on the estate, and of the work of the newly formed Orchard Village residents association chaired by the tireless Colin Nickless.

There have been literally hundreds of complaints by residents. I have scores of resident complaints covering all aspects of building and repairs. In every instance there are multiple complaints about each property, and most of them involve long-term problems regarding resolution of the faults.

The main problems include failure to build homes to an adequate standard with regard to damp, mould, noise pollution, fireproofing and adaptions; failure of the maintenance service; unacceptable response times for repairs, with the treatment of vulnerable residents and tenants being of particular concern; homes without adequate insulation in all phases of the development; heating issues whereby homes with vulnerable residents are left for days without heat, as well as excessive heating bills and major concerns about the standing charges on district heating systems. In short, there are serious allegations that homes have been built in breach both of building regulations and of the funding conditions stipulated in grants from the Homes and Communities Agency and the GLA, and that has had a consequent effect on the wellbeing of my constituents.

On 10 November 2016, the newly formed residents association submitted a formal complaint to Havering Council about their treatment by Circle Housing and its agent Willmott Dixon. That is currently being investigated by the council under the corporate complaints procedure. As well as raising the issues with the council, I have been in contact with the Health and Safety Executive and the HCA, met the social housing regulator and the Mayor’s office, and corresponded with Public Health England. Residents have lodged their concerns with the relevant ombudsmen throughout.

The issue of the regulator and Circle Housing is particularly important. In 2015, the HCA downgraded Circle Housing from G1 to G3. The HCA increased the rating earlier last year, given the improvements in the repairs service, although that was challenged at the time by residents.

The Department for Communities and Local Government is well aware of all of the issues. On 16 August, I wrote to the Secretary of State about the problems. The Minister for Housing and Planning responded on 12 September, saying that

“the regulatory standards had not been breached in this case”

and that the Department was, therefore,

“unable to take regulatory action”,

not least because it does not have a statutory mandate to deal with individual cases. I accept that that is the ombudsman’s role. The Minister concluded:

“I appreciate that your constituents will feel disappointed by this decision”.

So disappointed were the residents by the Minister’s letter that they actively considered a legal response to the regulator’s decision, but that was ruled out when the regulator subsequently informed us that its investigations were ongoing, so it was not possible to make a legal challenge.

On 21 December, just before Christmas and just after the merger was completed, Circle Housing was criticised by the housing regulator for risking “serious harm” to its tenants, given the continuous concerns regarding the repairs service. The HCA issued a regulatory notice saying that Circle had breached the home standard, with a

“large number of outstanding complaints”

affecting vulnerable tenants. Obviously, that decision is welcome, but I have to tell the Minister that the view among residents is that the announcement was delayed until after the merger. They believe that if the announcement had been made earlier in the year, it may have had significant implications for Circle Housing, given its earlier downgrades, and, therefore, the merger.

The important point is that we were disappointed with the Minister’s response, particularly in the light of the regulator’s findings in December. It is especially disappointing if we compare the Minister’s response with that of the newly merged Clarion group since the takeover. In contrast to the Department, it has accepted the significance of all the issues. Arguably, that is the type of response that we might have anticipated from the Department and the regulator, which are supposed to act on behalf of the residents.

Clarion Housing Group has established a new project team to resolve the issues at Orchard Village. In turn, the project team has appointed Pellings to act as an analyst and sort out the full extent of the problems on the estate through internal and external surveys. Pellings has also been instructed to undertake a full survey of building quality compared with the original building specifications on the site. Aaron heating services has also been employed to review the heating systems. We shall see what they uncover over the next few months.

We are awaiting a report from the fire brigade on fireproofing and fire risk on the estate. I, as well as local councillors, now receive a weekly briefing on the progress of the casework. On 19 December I was forced to contact Public Health England about concerns regarding combustible gas exposures on the estate. Clarion has now appointed expert consultants to investigate, and tests began on air quality this week.

Interim compensation payments are being made available for phase 3 residents in particular.

This month’s meeting of the Circle housing board is also discussing the question of buying back the shared ownership and freehold properties. The contract with Willmott Dixon was terminated for non-performance in remedying serious defects, and Clarion is considering the legal consequences of that. Most significantly, the full building spec survey will tell us whether Willmott Dixon built the homes to the appropriate standards, and what the legal consequences are if it did not. That is all to be welcomed, and it is a tacit acknowledgement by Clarion of the reputational damage that might affect the new housing association if this is not sorted out, not least because of the major building programmes and opportunities that are likely to open up across Barking and Dagenham and Havering over the next few years.

The point is this: why was none of that fully taken on board by the Department? If there had been no merger, would we just be carrying on as we were with the Department and the regulator—and everyone else, apart from the residents—telling us that nothing was wrong? What recourse do residents have in such cases? Of course, it should be to the Department. The Minister is formally responsible for housing supply policy, home ownership policy, planning policy, planning casework oversight, estate regeneration, the HCA, the Thames Gateway, building regulations and so on. Is the system working? Is the only solution to wait for a merger and for the merged organisation to put its hands up?

Between 2010 and 2016, Circle Housing received more than £250 million of public money. Within the local community, people assume that there have been breaches of public grant compliance in the building standards—we shall wait and see whether that is the case—and we are talking about grants of £31.2 million over the three phases of the development. The outstanding investigations initiated by Clarion and the council will, we hope, get to the bottom of all this.

More generally, legal issues are ongoing, including exposure to mould and damp, which is leaving children hospitalised. Freeholders and shared ownership leaseholders are starting legal proceedings over misrepresentation of their properties and failure to repair, and seeking damages to cover their suffering. There are issues for the Department. Basically, do we need a review of the system of regulation? The HCA found against the residents even when the new merged organisation accepted the legitimacy of some of the residents’ concerns and decided to investigate other key parts of the case independently. Should it not have been the investigations of the regulatory system that secured that outcome, on behalf of the residents?

Overall, Orchard Village holds a light up to some of the changes occurring in the housing association sector, aided by Government strategy. The danger is that housing associations are, in effect, turning into housing developers. Consequently, they appear to be in danger of losing their historical role, and, indeed, their historical ethic. Yet the Government are actively committed to deregulating the sector further to ensure that housing associations are not treated as part of the public sector, so as to build more homes. I accept the logic behind their position on deregulation, but what is the cost in terms of oversight and accountability on behalf of residents, such as my constituents in Orchard Village? The Government argue that further deregulation will not change their strong regulatory framework. Well, the experience of Circle Housing and Orchard Village does not bode well in terms of whether that works at present.

More generally, the Government now appear to have redirected attention back toward housing associations to resolve the escalating housing crisis, rather than just relying on the market. That is obviously a good thing, because the private sector business model for housing supply has, for too long, been built around land banking and rationing. Yet the Government rethink poses dangers for the sector in reconciling housing associations’ role as developers with their historic purpose.

My real fear is this. I hope that we do not look back in a few years’ time and realise that we missed the warning signs—similar to the experiences of building societies in the financial services sector—as key non-market institutions are swept up in a dash for growth, with the collateral effect being the removal of their original ethical purpose. I hope that the experience of Orchard Village will act as a warning, and that, locally, Clarion can turn the situation around on behalf of residents. Nationally, we must preserve the integrity of housing associations as part of a genuine mixed economy across the housing sector.

I congratulate the hon. Member for Dagenham and Rainham (Jon Cruddas) on securing this debate on Circle Housing and Orchard Village. It is an issue that I am familiar with, for two reasons. First, I am sure he is aware that the hon. Member for Bethnal Green and Bow (Rushanara Ali) raised in an Adjournment debate at the end of last year issues relating to Old Ford and the impact on her constituents.

The hon. Gentleman referred to Colin Nickless and his role on behalf of residents of the Orchard Village estate. I can tell him that Colin Nickless communicates regularly with me on social media, raising concerns about the quality of development at Orchard Village. I am therefore familiar with the issues that the hon. Gentleman has raised and I am grateful to him for doing so. He speaks powerfully on behalf of his constituents. There have been several developments since the previous Adjournment debate and I look forward to updating hon. Members about those as well as responding to the hon. Gentleman’s particular concerns.

If the hon. Gentleman will forgive me, I will start in general terms by setting out the Government’s vision for affordable housing and the important role that housing associations play in that. I do not need to remind hon. Members of the chronic housing shortage in this country. It is clear that we need to build more homes and that we have not been building enough homes for 30 or 40 years. The Government are determined to put that right and provide more homes for those who need them. Nowhere in this country is that need more acute than in London in constituencies such as mine and the hon. Gentleman’s. We are already making progress: housing supply rose by 11% in 2015-16; the highest level for eight years. However, I accept that much more needs to be done. As the hon. Gentleman said, housing associations have a crucial role to play in that. Let us not forget that, during the financial crisis, housing associations kept on building. The sector is responsible for about a third of all new housing in England each year. That is why we are increasing investment in the housing association sector. Just last week we invited bids to the expanded shared ownership and affordable homes programme. As well as the additional £1.4 billion that the Chancellor announced in the autumn statement, we have introduced greater flexibility into the programme, which will allow housing associations better to respond to local needs and markets.

As I said, the situation is at its most acute in London. We need new homes of all tenures but in particular we need to ensure that there are affordable homes for sale and rent. In November, we announced a £3.15 billion funding package for London, with an ambitious aim to build significantly more affordable homes over this Parliament. The Mayor of London was generous enough to say that that was a record level of funding for City Hall for affordable housing. He has since opened registration to his own affordable housing programme using that money. Bidding will be open from the end of this month to mid-April. We look forward to housing associations building more homes so that more Londoners get a decent and secure place to live.

Before I come on to Circle Housing, I want to respond clearly but gently to the hon. Gentleman’s challenge about the changing role of housing associations. He is right to say that their role has changed over time. Many, particularly those that are engaged in large developments, have become increasingly commercial in their practice. Often, they are building market housing and using that to subsidise increased provision of affordable housing. However, I would like to challenge the hon. Gentleman in two regards. First, I have not yet come across a housing association that thinks of itself as equivalent to a private sector developer. All the people I had the privilege of meeting during my six months as Housing Minister are still very conscious of the original purpose behind housing associations.

Generally, housing associations come from three main routes. Some are the old Victorian philanthropic bodies—Peabody is a good example. Many emerged from the “Cathy Come Home” movement and others emerged through local authority stock transfers. At one point in his speech, the hon. Gentleman posited that perhaps there was a tension between the housing associations’ role in developing new homes and their historical purpose. I disagree. To me, their historical purpose was to meet housing need in our communities, and at this time, particularly in London, but all around the country, there is a desperate need for more affordable housing. In trying to meet that need, housing associations are fulfilling their historical purpose.

There is common ground between the hon. Gentleman and me on the point that as housing associations engage in increasingly commercial activity to help them provide more affordable housing, they must not lose sight of their historical purpose or their obligations to their existing tenants. I am completely with him on that. He was honest enough in his speech to recognise why the Government are deregulating. Historically, we have viewed the housing association sector as part of the private sector, and that remains the Government’s view, but the Office for National Statistics has reclassified them into the public sector. If we allow that situation to continue in the long term, it will have a damaging impact on housing associations’ ability to develop new housing, because not only the funding that the Government give them, but the money that they raise through private markets would be counted as Government spending and fall within the Treasury’s control. It is therefore very important—I hope there is a political consensus on this across the House—that they are returned to the private sector. That means we need to address the concerns raised by the ONS. Again, there is common ground between us. We need to ensure the funding we give to housing associations is used in the interests of public policy and for a clear purpose, and that we do not lose sight of that.

The hon. Gentleman raised a whole suite of serious concerns in relation to Circle Housing and Orchard Village. Many of his constituents have been seriously let down by their landlord. I congratulate him on championing their cause. I very much share the concerns he set out.

The regulator received a large number of complaints and referrals regarding Circle’s repairs service across east London, in particular the quality of new build properties at Orchard Village. The information provided by residents was part of the regulator’s wider investigation into Circle and it informed the notice issued in December. The regulator found that Circle had breached consumer standards and risked serious detriment to its tenants in its repairs service across east London. It is worth noting that I believe this is the first time the regulator has made such a finding in relation to an ordinary repairs service. The regulator also concluded that the specific issues at Orchard Village did not, of themselves, constitute a separate breach of standards, but it will continue to examine any new evidence provided by the residents of Orchard Village. This is still a live issue—the regulator is still looking at it.

As the hon. Gentleman said, Circle has merged with Affinity Sutton to form Clarion. It is the responsibility of Clarion to address the issues raised by the regulator. I met the chief executive of Clarion earlier this week, and I believe the hon. Gentleman met him, too. He is committed to resolving these problems quickly. Clarion has a responsibility to protect the needs and welfare of its tenants and leaseholders, and it needs to meet that responsibility. He is clear that Clarion needs to work with the regulator and provide assurance on how the issues are going to be fixed. I am encouraged, although I will continue to pursue to the issue, that Clarion is investigating what has led to the problems. It is making immediate improvements where it can, such as: improving call waiting times at the relevant call centre used by Orchard Village residents, and improving systems to ensure calls are properly logged and actioned. It is also trying to increase engagement with tenants.

Clarion has established a dedicated project team to manage and resolve the issues with Orchard Village specifically. It has put in place new contractors to develop the final phase of regeneration, as the hon. Gentleman mentioned in his speech, and repairs to properties. It has appointed a specialist property consultant to undertake a full survey of build quality. I also understand that Havering’s environmental health department is launching an investigation following reports of the presence of methane gas at Orchard Village. Clarion has appointed a specialist consultant to undertake its own investigation and is taking the potential risk to public health very seriously.

There has been some concern regarding the potential impact of Circle’s merger on tenants. Having spoken to Clarion’s chief executive, I see the merger as presenting an opportunity to sort these problems out—and to sort them out quickly. That is clearly what the hon. Gentleman, in raising these issues in this debate, wants to see. The new organisation should bring the skills and expertise to transform the service that tenants receive, putting matters right and ensuring they do not recur. I am sure that that is what the hon. Gentleman and his constituents want.

In a wider context, I welcome Clarion’s vision to build 50,000 new homes in the next 10 years. I think the hon. Gentleman and I agree that if the organisation wants the Greater London Authority and London boroughs to work with it, it will need to demonstrate progress on these issues before anyone will want it to be given funding to develop new housing. I welcome its ambition, but it will need to be seen to be putting this matter right before local authorities in this part of the country will want to work with them on further new supply.

The role of the regulator presents the real challenge in both this case and that raised by the hon. Member for Bethnal Green and Bow, who wants to know whether the Government are satisfied that the arrangements are working properly. Through its framework, the regulator is meant to support and create the conditions for a flourishing housing association sector and ensure that housing associations are properly managed, provide good-quality homes and serve the needs of their tenants and communities. The Government are committed to upholding a strong and independent system of regulation for social housing, which is why before Christmas we announced we were establishing the regulator as a stand-alone public body, following the recommendation in the HCA’s tailored review.

At the moment, the regulator forms part of the HCA, which is also responsible for delivering many of my Department’s programmes, but the review recommended that it be set up as a wholly separate body, and we will take forward that recommendation. We are consulting on the legislative process to do that, but I want to make it clear that that change will not diminish the regulator’s powers or objectives. The regulator will continue to have a vital role in encouraging and challenging the sector to improve efficiency and asset management and to maintain robust governance so that the sector remains attractive to commercial lenders. If we want private organisations to lend money to housing associations to help them deliver affordable homes, they must have confidence in the quality of the governance.

Finally, and most importantly and relevantly to this case, the meeting of tenants’ needs is a vital aspect of housing associations’ purpose. While it is commendable that they explore different commercial models, their tenants’ needs must not be forgotten. Indeed, they must have a mechanism in place for tenants to have a say in how the organisation is run and deals with complaints when tenants think that the service they are receiving is not satisfactory.

Finally, I want to explore why the threshold for action was quite high, as the hon. Gentleman would see it. The regulator does not have an active role in monitoring compliance with consumer standards. The ombudsman is the starting point for such complaints. The regulator can intervene only where there is judged to be a risk, or there has been risk, of serious harm to tenants. That is the threshold at which the regulator takes action. As the regulator is independent, I cannot personally intervene in those decisions, but it is my role, when Members or others draw concerns to my attention, to make sure the regulator is aware of them. I am confident that the regulator takes all complaints it receives from tenants seriously and investigates where necessary. I have undertaken to the hon. Member for Bethnal Green and Bow, however, to look at the interaction between the ombudsman and the regulator to make sure that those processes work well so that when the ombudsman spots a spike in complaints about a particular association or element of an association’s work, it is drawn to the regulator’s attention speedily so that these situations can be resolved as quickly as possible.

Tonight’s debate serves as a reminder of the importance of robust governance, accountability and transparency within the housing association sector. As the sector evolves and becomes more complex in its diversification and commercialisation, it is vital that housing associations continue to uphold their responsibilities to their existing tenants. The regulator has a crucial role in maintaining standards in the sector and upholding both financial viability and management. In the case of Orchard Village, there is a clear expectation from me, as the Minister, from the hon. Gentleman, as the constituency MP, and from residents that Clarion will follow through with its assurances and address the issues he has raised tonight. It will be held to account by him, me and its tenants if it does not do that. I thank him for securing this debate on such an important and timely issue.

Question put and agreed to.

House adjourned.