Getting a foot on the housing ladder

High house prices in the South
East are leading to a staffing crisis for employees. Mike Broad looks at what
is being done to alleviate the problem

The Berkshire town of Reading
is facing severe key worker shortages. Few public sector staff can afford the
£120,000 or more needed to purchase a three-bed semi-detached home there and
many services are approaching a staffing crisis.

The Berkshire Fire and Rescue
Brigade is having to employ firefighters who live in Durham, Merseyside and
Norfolk – and a third of its staff live outside the area.

Public transport in the region
is close to collapse, with local bus companies struggling to recruit enough
drivers, said Joyce Markham, former chief executive of Reading Borough Council,
at a recent conference on key workers.

Staff turnover among teachers
in Reading is running at 23 per cent and in social work and occupational
therapy it stands at 45 per cent. Applications for these posts are so few that
50 per cent of job vacancies have had to be re-advertised at a cost of £2,000 a

A staffing catastrophe is
looming unless the Government acts quickly to support key workers, warns

Her view is supported by a
study by the Joseph Rowntree Foundation published earlier this month. It warns
that crippling staff shortages in the public sector are unavoidable as the
current rate of housebuilding stands, and argues that there will be a property
shortage of more than one million homes by 2022 if the building rate does not

But it is not only local
government and Reading that is affected – businesses and services across the
South East are being damaged by spiralling property prices.

Lord Best, report author and
director of the Joseph Rowntree Foundation, says: “This shocking statistic
shows why the time has come for policymakers to recognise that a plentiful
supply of new and affordable homes is of the greatest importance for the
nation’s future health and prosperity.”

While the Government has
launched a number of housebuilding initiatives to promote the construction of
affordable homes (see box, right), many employers doubt whether these are
sufficient to head off the impending crisis.

And with an increasing number
of employers starting to suffer from high staff turnover, skills shortages and
soaring recruitment costs, some employers are starting to take the initiative

The NHS is looking for
solutions to the affordable housing crisis. John Yates, housing co-ordinator of
NHS Estates, says that in London alone the NHS needs to recruit another 7,000 nurses,
but the process is being undermined by high housing costs. NHS staff can only
afford to spend between 25-35 per cent of their disposable income on housing.

Initiatives include making more
than 2,800 new units in London available for staff, which are being rented at
rates up to 40 per cent lower than the market value. Staff hotels are also
being developed close to hospitals. One is currently being trialled in the
Barbican, London, and two more are being developed at Great Ormond Street and
in Oxford. The projects are supported by the Government’s £250m Starter Home
Initiative for key workers.

Ian Young, director of HR at
Hammersmith Hospital NHS Trust, says that affordable housing for its 1,900
employees is a key part of its recruitment policy. He is considering the use of
the newly launched LiveIn Quarters – portable flat-pack homes that can be
assembled on disused land. Developed by the Peabody Trust and the London
Development Agency, the units are likely to cost £70 a week to rent or £65,000
to buy. “They are something we are looking at. Most importantly, it gets staff
onto the housing ladder and that is the key in London,” says Young.

The trust is also building a
range of purpose-built housing as part of its drive to attract and help staff,
particularly those from abroad. Young has targeted overseas to help reduce
staffing shortages and recruited 189 last year.

Private-sector employers are
also helping staff meet housing and transport costs. To improve its recruitment
and retention,  London bus company
Go-Ahead provides new staff with subsidised accommodation.

Passenger numbers in the
capital are increasing and the company has recruited aggressively for bus
drivers from all over the UK to meet the demand – it now boasts 3,200 drivers.

To lower the hurdle of high
accommodation costs in London, the company offers new staff rented
accommodation at half the market rate for three months. The company rents 50
houses for staff with between three and six people occupying each. Such
measures have helped lower the company’s staff turnover rate from 45 per cent
to less than 25 per cent.

John Traynor, operations
director of Go-Ahead London, says: “If you earn between £18,000 and £20,000 in
London it is very difficult to get on the property ladder and we have to work
out how we are going to get round it.”

Traynor is also lobbying to get
bus drivers recognised as key workers – 
the government has focused its attention on nurses, teachers and police
for the Starter Homes Initiative.

 “Planning regulations for new housing developments state that 35
to 50 per cent of the accommodation must be for affordable housing. We want
this affordable housing to be available to bus drivers, so we’re trying to gain
influence with developers, house builders and local government,” says Traynor.

He adds: “The NHS is two years
further down the line on where I would like us to be – its staff hotels are now
offering accommodation to other key workers, such as police officers, and I
would like bus drivers to be considered too.”

IT firm Logica has taken the
subsidy of staff housing costs a step further. It either helps staff save for a
deposit for a house, or contributes to mortgage repayments.

Glenn Connell, director of
compensation and benefits at Logica, says the company offers it as an alternative
to its contributory pension scheme. “We use it as a recruitment and retention
tool for young graduates who are on relatively low pay at the start of their
careers,” he says.

In its house purchase plan,
Logica matches staff contributions to a two-year savings scheme towards a
deposit. If the staff member has already bought a house, they can apply to join
the mortgage subsidy scheme where Logica contributes to mortgage repayments for
up to six years.

The schemes have been
successful, with a 12 per cent take-up among its 4,500 UK staff. “We help them
get their deposit together, or provide cash towards high mortgage repayments in
the early years,” says Connell. “We are assuming that because they are young
graduates, they will be able to make up the loss in pension contributions as
their career develops.”

Markham, former chief executive
of Reading Borough Council and new head of Harrow Borough Council, wants the
Government to enable public-sector employers to play a bigger financial role in
securing accommodation for its staff.

She wants local authorities to
be able to arrange and provide affordable mortgages on the behalf of their

“Employers need to realise that
if they don’t put anything back in, then they may not have cleaners or
electricians,” she says.

A report released by the think
tank Institute for Public Policy Research (IPPR), entitled Squeezed Out, also
calls for both private and public-sector employers to help staff finance their
homes in expensive areas to reduce spiralling skills shortages. It advocates
wage additions, interest free loans and help with deposits.

This is not solely a key worker
crisis. Organisations in the South East that employ staff who cannot afford to
buy a house and earn too much to qualify for social rented housing will have to
become increasingly sympathetic to their employees’ predicament.

More private-sector employers
are going to have to start exploring accommodation solutions for their lower
paid staff because, if they don’t, they could be left with severe skills
shortages – particularly among support staff.

As London mayor Ken Livingstone
puts it: “Frankly, I think everyone is a key worker.”

Government measures to
tackle the housing shortage

● The Starter Home
Initiative aims to help 10,000 key workers buy homes by 2004 in areas where
high prices are preventing them from living near the communities they serve. It
makes equity loans, interest free loans and shared ownership arrangements
available to key workers who want to buy houses. Nurses, teachers, police,
social workers, firefighters and transport workers qualify.

● London Mayor Ken
Livingstone (below left) has set high targets for the amount of affordable
housing new developments must include. Socially affordable housing should
represent 35 per cent of new housing schemes and key worker housing should make
up a further 15 per cent. The London boroughs of Ealing, Lambeth, Hounslow and
Brent have all committed themselves to the 50 per cent affordable housing

● Earlier this month,
transport and local government secretary Stephen Byers (below right) pressed
ahead with changes to planning laws to increase the supply of low-cost
affordable homes by allowing local authorities to require affordable housing to
be included in proposed commercial developments.

● In a recent speech to
housing experts, planning minister Lord Falconer said there was a clear and
pressing need to tackle the housing crisis via higherdensity housing,
redevelopments of redundant public-sector buildings and possibly building on
greenfield sites.

Putting a price on living in

London weighting is currently
being reviewed for the first time since 1974. It started as an allowance in the
1920s to bridge the gap between house prices and salaries.

A review panel has been set up
by the Greater London Authority, chaired by Bill Knight, former senior partner
of Simmons & Simmons. Francesca Okosi, president of the Society of Chief
Personnel Officers, is acting as his deputy.

The panel is trying to identify
a ‘London premium’ that should be paid to staff and hopes to report to the
Greater London Assembly in July. It will not set a specific figure for London
weighting, but will show the pay and costs differences between positions in
London and elsewhere.

A set weighting is
inappropriate because pay setting is more decentralised and complicated than in
the past, explains Knight, with employers combating costs in the capital in

different ways, including
recruitment and retention payments, market supplements, broad banding, London
scales and differentials.

“Many people say they can no
longer afford to live in the capital and this is a big problem affecting
recruitment and retention,” says Knight.

“We want our report to
genuinely be useful to decision- makers. If we do our job properly, our report
should help those who negotiate pay to set a fair London premium.”

In a recent submission to the
panel, the Public and Commercial Services Union called for all 86,000 civil
servants working in London to be deemed “essential workers” and given a
substantial pay supplement to meet the high cost of living in the capital.

Their allowances vary from
£1,000 to £4,225 depending on skills shortages, but these have barely increased
since London weighting for civil servants was abolished back in 1994.

If you would like to
contribute to the review contact


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