Baroness Whitaker
To ask Her Majesty’s Government what is their response to the report by the Future Homes Commission Building the Homes and Communities Britain Needs.
Baroness Whitaker
My Lords, when I first became interested in housing decades ago, the late and much lamented Victor Rothschild, then head of the Government’s first think tank, the Central Policy Review Staff, said, “Is it impossible to have a sensible housing policy?”. That problem has never seemed solved to me, and this is confirmed by the very good Library note rounding up government initiatives—of which there have been several—ideas from many experts and some very sad statistics.
However, this new report, by an independent commission set up by the Royal Institute of British Architects, makes a very good stab at a large part of the solution. Its members are neither developers nor architects nor planners, but an eminent businessman and public servant as chair, Sir John Banham; a retired civil servant of great distinction, Dame Mavis McDonald, whom I remember as a rising star in the then Ministry of Housing and Local Government; and two more very distinguished members, the criminologist and film-maker, Roger Graef, and the property analyst, Kate Faulkner.
This commission took a sharp and clear look at what is generally recognised to be a dire housing situation: nearly 2 million households currently on the housing list, well over 50,000 homeless, and more than that in temporary accommodation. As Professor Steve Nickell put it, the queue for social housing has doubled since the turn of the century. The private sector is not delivering either, and planning laws are not the problem: there are 400,000 outstanding planning permissions for residential housing. We have been underinvesting in domestic housing for a long time.
The commission found another problem, less often commented on: the quality of new-build homes is now so poor that only one in four people would consider buying one. Most people would choose to buy a century-old home, with all its high running and maintenance costs, rather than one of the poky and poorly designed homes, with too little storage space, too little natural light, poor privacy and noise protection, difficulties in adapting to different needs and general dinginess, which are all too common now in this country, which was once the envy of Europe for its domestic housing but is now falling far short of the space standards in the rest of Europe.
The commission’s remedies are equally clear. To summarise very crudely, it points out, first, that we must have a threefold increase in the number of new homes built every year, from 100,000 to 300,000—and incidentally, the idea that there is insufficient space for building is proven to be a myth, with only 11% of our land built on and plenty of brownfield land; secondly, that funding for this could be kick-started by a pooling of 15% of local authority pension funds assets into an independently managed local housing development fund, investing in both rental and shared ownership housing; thirdly, that we can no longer try to provide proper homes without strengthened design standards; and, finally, that home buyers and communities must have the kind of information that enables them to make an informed choice, and that local government is the paramount institution for taking all this forward.
This very quick summary hardly does justice to the well argued and well evidenced proposals of the commission. The investment proposals are particularly well worked out. I urge noble Lords to read the report for themselves. It is not long and it is written with exemplary clarity.
I would like to move on to what can be done now. The funding process is all-important in these hard times. The Pensions Institute’s latest report draws attention to the deficit suffered by many funds, so a 6% return, likely under the commission’s proposals, would be very welcome. Can the Minister tell me whether the Government have looked at what barriers there might be to local government pension funds pooling their assets and how these could be overcome? Can she set in hand a review of local government pension fund investment regulations to make wide investment in local infrastructure and housing a practical possibility? My noble friend Lord Rogers, who very much regrets that he cannot be here tonight, told me that in Canada pension funds invest in development. Perhaps the department could have a look at the Canadian system.
As for quality, do the Government acknowledge the extraordinary importance of good design, of the total place as well as the home itself, for the well-being, security and prosperity of our citizens? If the Minister accepts this—as I am sure she does—will she look again at the need for space and storage standards? If the Mayor of London can achieve them in London, why should the rest of the UK be deprived of their benefit? Will this form part of the current review of housing standards? Let us also acknowledge that if a new housing development is attractive and of high quality, sensitively attuned to place, residents are very much less likely to object.
There are other powerful recommendations relating to transparency and better information, and which address the current fragmentation of the development process, which noble colleagues will deal with. I welcome the great expertise of the speakers in this debate.
I simply want to draw the attention of this House and the Government to the supremely well informed and clear pathway out of the quagmire of our senseless housing situation presented by this report, and urge action. It was the planning Minister himself, Nick Boles MP, who said last week that having a house with a garden was a basic moral right, like healthcare and education. While I am not too sure about the garden, the idea that a decent home for everyone is fundamentally important does not seem to be comprehensively lodged in government policy. Someone tweeting a response to the report said:
“I think the important thing would be to ensure that appropriate accommodation and shelter is recognised as the human right that it is supposed to be”.
Now can we have a sensible housing policy?
Baroness Maddock
My Lords, I thank the noble Baroness, Lady Whitaker, for initiating this important debate. I do not know if she is aware of it but today the leader in the Times led on the need for more housebuilding and highlighted some of the issues which she has already highlighted tonight and we will discuss further this evening.
We on the Lib Dem Benches find that there is much to support in the report to the Future Homes Commission. As Lib Dems our party policy is developed by our party members and is vigorously discussed before being voted on at our party conferences. Last September we passed a policy paper called Decent Homes for All. In it we set out plans to get to building 300,000 homes a year. The Future Homes Commission report also calls for this.
Perhaps I may highlight a couple of things that we have done in coalition Government. The Government have allocated £500 million to the Growing Places Fund, which is aimed at kick-starting stalled housing projects. The Infrastructure (Financial Assistance) Act earmarks £10 billion of Treasury investment to go towards helping what we call “shovel-ready” housing projects to get started. I am pleased to say that in the recent issue of Inside Housing, which I get every week, figures showed that,
“the decline in new house building has stabilised after more than a year of steady falls”.
That is some good news on this front.
The commission report suggests that more land be made available, and makes a convincing case for suggesting that this is achievable without damaging communities, as is often feared. I think that the noble Baroness referred to that. In our Liberal Democrat policy paper we also identified the need to increase the supply of land and we suggested a pilot of community land auctions where local authorities could designate an area for auction. In addition we proposed a stronger consideration of “use it or lose it” in planning policy. At the moment people can just start on a site and it is assumed that development is going to go ahead and that they have continuous permission. I understand that the Government have looked at this and that trying to draw up a workable policy is proving rather difficult.
There are other areas where the commission report, our party policy and government policy coincide, including one of the areas to which the noble Baroness referred—the use of pension funds. The policies do not all look specifically at local authority pension funds, but in the 2012 Budget the coalition Government, of whom we are part, announced plans to establish a new pension infrastructure platform owned and run by the UK pension funds. This was to help invest an initial £2 billion in UK infrastructure, which may include housing, by early 2013. I understand that seven funds are already signed up and expect to deliver this initial £2 billion in January. The Government are also working with other private-sector pension funds to encourage them to invest in UK infrastructure projects. We heard from the noble Baroness that this has been very successful in other countries.
Given that the Liberal Democrat Party is the only party that has always been in favour of localism—the devolution of decision-making to local authorities—we strongly agree with the call for local authorities to take a leading role in housebuilding, using their powers to work with local people, organisations and developers in their area to create attractive developments that people want to live in. This is also in line with what local authorities are calling for themselves. I declare an interest as a vice-president of the Local Government Association. I understand that it is having a conference on 19 December which is entitled, “Housing the Nation, Financing New Homes”. I know that my noble friend Lord Greaves will touch on this, but I am aware that the ability of local authorities to deliver affordable housing in all parts of the country is not the same. As he will point out, in some areas it proves rather difficult.
One of the areas with which I strongly agree in the commission report is the need to improve design standards and for sustainable, aesthetically pleasing developments. Again, the noble Baroness referred to this. In my experience British builders have traditionally been conservative in their approach and often kicked against new building regulations and ideas. In addition, as a nation we have never developed a system where you are required to have qualifications to operate as a builder. Any one of us in this Chamber could set up as a builder tomorrow. No specific qualifications are needed.
This is an important debate and we have only a short time to deal with it. I look forward to the noble Baroness’s answers, particularly on the issue of how we can deal with improving standards, not only aesthetically but also making our houses sustainable and making the sort of houses that people want to live in.
Lord Best
My Lords, I am very grateful to the noble Baroness, Lady Whitaker, for securing this debate and for her excellent opening speech. We have been blessed over the past few weeks with a string of important new reports on housing, of which the readable and sensible one from the Future Homes Commission, as described by the noble Baroness, is particularly valuable. For my sins, I have also read most of the others. In my five minutes, perhaps I could reflect on their messages and on overarching conclusions that can be drawn from all of them.
We have had four reports concentrating on the private rented sector, in particular on the role of lettings agents, from the Property Ombudsman, Shelter, the RICS and Which?. They all argue for more consumer protection in the private rented sector, which has grown so dramatically in recent years. We have also had the annual monitoring report on the state of the nation’s housing from the Chartered Institute of Housing, Shelter and the National Housing Federation. I fear that its traffic lights are nearly all red, or at best amber, confirming that housing remains a highly problematic issue, particularly for those who rely on housing benefit.
Another report during the last few weeks has come from the Smith Institute, looking at how local authority pension funds could finance local investment. This proposition has been taken forward in the Future Homes Commission report, which notes that just £10 billion of the £180 billion invested in these pension funds could finance a serious housebuilding programme. Reporting for the Government, Sir Adrian Montague has looked at channelling institutional investment into market renting; that is, “Build to Let” schemes, which would create new homes for rent with professional management. The Building and Social Housing Foundation also launched a report on building more homes for market renting. It notes that the most likely partners for institutional investors are not the private developers, since they have little experience of the rented sector, but those large housing associations which are willing to diversify into market renting in addition to—but not in substitution for—their role in providing affordable housing.
Meanwhile, a report from the Chartered Institute of Housing, the National Federation of ALMOs and the Association of Retained Council Housing, Let’s Get Building, points out that councils could themselves address the need for new affordable homes for rent if they were given more headroom to borrow to build. Despite the recent localising reforms to the housing revenue account, local authorities still cannot act like a housing association and borrow prudently against their considerable housing assets.
The last report I have time to mention—and what a flurry of new reports there has been in these past few weeks—is the All-Party Group on Housing and Care for Older People’s new offering Housing our Ageing Population: Plan for Implementation. This adds an extra dimension to the others by pointing out the huge advantages of concentrating on building high-quality apartments for our older population. Retirement housing has highly significant benefits in terms of health, well-being and the relief of loneliness, while making big savings for NHS and social care budgets. Perhaps best of all, building to meet these needs brings thousands of family homes, some in need of the input of energetic young households, on to the market, multiplying the total number accommodated.
Putting the Future Homes Commission’s excellent document alongside these other contributions, what overarching conclusions might one reach? First, all are agreed, as are the Government, not least the very committed Minister for Planning, Nick Boles, that we need a huge increase in housebuilding to meet the nation’s needs. Secondly, in relation to the wider economy, these reports all highlight the direct contribution to GDP made by constructing new homes. If there was a return to the level of building of just a few years back, even though that was not keeping pace with the demand from new households, it would add 1% to GDP, taking us out of recession at a stroke.
Thirdly, all agree that local councils are the central players for housing provision, not only in their role as local planning authorities but as primary partners with housing associations and developers and as direct providers themselves. It may well be local authority pension funds that will provide the extra capital for housebuilding needed during this continuing credit crunch.
Finally, we need an emphasis on good design as the key to ensuring all this investment lasts and that new development gains public acceptance. Perhaps this is of the greatest importance in relation to housing for older people. Unless the design of new accommodation means plenty of light, space and air, with big windows and balconies, storage space and good ventilation, older people will never be attracted to right-size and leave their family-sized accommodation, even though it may well be increasingly difficult to manage, expensive to heat and with problematic stairs and steps. The message from the HAPPI report, as well as from the excellent report of the Future Homes Commission, is that unless we recognise the significance of good design, all our other efforts in seeking to address the nation’s acute housing problems will be a waste of time and money.
Lord Sawyer
My Lords, I thank my noble friend Lady Whitaker for engaging with this excellent report. We went together to the launch. It is clear, to the point and exactly the kind of thing we need.
In the short time I have available, I shall follow the previous two speakers and say more about a bit of a hole in the Government’s policy, which is design. Their policy covers many important aspects of housing but it does not say very much about design, and this report does. There is poverty of expectation about design and space. No one in the supply chain, whether bankers, building societies, developers or even the Government, talk about it enough or promote it. It is absent. Consequently, people get limited choice from developers who stick with the standard design. It is easy and cheap to produce boxes with two bedrooms of 12 feet by 11 feet and a living room of 15 feet by 11 feet. That is pretty dreadful really, but many thousands of such houses have been built over the past years. Yet when asked about design, witnesses report that people have aspirations. They like large windows, natural light and large rooms with high ceilings—all the things that people who can afford to move away from the bottom and middle of the market buy for themselves.
Some of the homes that we build today are a disgrace, with no space for storage or for other things for the family: places to work, places to eat and separate spaces for other members of the family. International comparisons reveal that the scale of space problems is serious. We have the smallest spaces of any western European country for people to live in. Along with space, people need light. This report shows that natural light is the single most important attribute in a house, yet we now see that many homes with small standard-design windows have been built over previous years. While addressing this report, I would like to see the Government take on some of these issues.
Space, light and storage are very important and should be included in the building regulations, a point made by the noble Baroness. There should be a much more comprehensive way of getting to know what customers want and getting those things followed by builders and developers. Often today, properties are simply described as one-bed, two-bed or three-bed, which tells you nothing about design or space or what the house or flat is really about. That is totally inadequate.
There may be those who think that in a time of austerity with deep-seated problems in the housing market and many big political issues in housing, a focus on design should not be a priority. I think they are wrong. Previous speakers have said that, and the report says it. When you see how blighted and limited the lives of people can be without proper space, light or design, you see how important it is. You see couples with no storage space. If you read the report, you will see that it mentions a couple in Liverpool who bought a new-build house and have to store things in the boot of the car outside. It is amazing that these things can happen. When you see so many people with those small 15 feet by 11 feet rooms for all the family to live in and no common areas in the house for people to work in, you realise how much benefit good design could bring to the lives of those people.
Homes are important to people. After families and loved ones, homes are perhaps the most important thing. When I was a trade union official, how many times I heard people say, “Oh my God, if I lose my job, I lose my home”. I knew that the job was important, but, my God, the thing that was most important to them was their home. That is very important and we must never underestimate it. The successful Scandinavian countries spend a lot of time and energy on design and space; there must be some lessons for us there. Good design is a major contribution to the mental and physical well-being of the population, and it must be important to productivity and business success. I would like the Government to look at the chapters in the report about design and think about incorporating some of them in government policy. I am sure there will be some good ideas there and that the Government will not be too proud to take on good ideas when they are able to find them.
In particular, will the Minister comment on what current policies the Government have to improve design in new-build homes and what their thoughts are on the space, light and storage issues, the three big things that are lacking? Will the Government let us know at some time what plans they have to provide more information for consumers and, in particular, to raise the level of debate? I know it is not their job solely, but we need them to be involved in raising the level of debate in the country about design so that people can be more informed and we can get the whole thing moving in the right direction.
Lord Greaves
My Lords, I, too, thank the noble Baroness, Lady Whitaker, for introducing this short debate on this very interesting and useful report. I associate myself with pretty well everything that has been said by all four previous speakers, particularly my noble friend Lady Maddock. I am particularly pleased with the emphasis in the report on design, which is so important. I think it is a little optimistic about how useful the Localism Act will be in these areas, but we will see.
I shall talk about a case study of the problems and frustrations in my own area—Pendle in Lancashire—associated with trying to make a very modest contribution to affordable housebuilding in this country. I should declare an interest as a member of Pendle Borough Council. I have read what seem to be innumerable announcements and press releases while lots of schemes with interesting names have been coming out of the Government about housebuilding, but none of them seem to reach our valley up in the Pennines in east Lancashire.
We have a shortage of affordable family housing, like many areas, partly due to the fact that most three-bedroom houses on council estates have now been sold off. We have wanted to build a number of affordable family houses on council-owned land on small sites, many of which are a result of the housing market renewal programme, when the powers that be at that time would not allow us the money we needed for renovation of areas unless we knocked down a few blocks of houses. We resisted as much as we could, but some of the worst have gone and we are left with small brownfield sites. The idea was to replace what had been there with a mix of affordable houses to sell, to rent and possibly for shared ownership.
It has proved very difficult indeed to do this. In the small town of Brierfield there is a cleared site that was formerly three streets where various schemes were drawn up for 30 or 40 houses. In my own town of Colne a small, cleared site of two blocks is proving impossible to redevelop and in my own ward there are two derelict blocks of housing which are all boarded up. Many but not all of those now belong to the council; it requires a compulsory purchase order and demolition before any rebuilding can take place. That will cost, believe it or not, around £1 million and that money simply does not happen. Yet when there are sites, the money simply does not add up.
The idea is that the council provides the land for free and that the development is done by the council’s own joint venture company on behalf of the local housing association, which now operates all the former council housing in the area. One scheme of just eight houses in my own ward is now going ahead. We had hoped that it was going to be a mix of tenures; it now all has to be for rent and that only just adds up. Most of the schemes on these sites do not add up at all. The grant per unit from the Homes and Communities Agency is £21,000 to £22,000 per unit; the affordable housing unit, including the free land, might cost £95,000 to build. The ability of the registered social landlord, Housing Pendle, to pay for it does not come to more than about £70,000 to £75,000 when one takes into account the level of local rents that can be charged and the future administration and maintenance costs. There is a gap there of something around £20,000. The council has been able to plug that gap with right-to-buy receipts in one scheme, but there is a limit to those.
We want to build and it is a very modest scheme. It is necessary locally but we cannot do it, in most cases, because the money which is available and the subsidies that are available from central government via the HCA are simply not big enough to plug that gap. Like many other authorities in the north of England and similar areas, we are stuck. We want to make our own, very small contribution and it is not possible. I hope that the Minister will look at that.
Lord Whitty
My Lords, I thank the noble Baroness, Lady Whitaker, the RIBA and the Future Homes Commission for producing such a good report. I declare an interest as chair of Housing Voice, which was designed 15 months ago to raise housing up the political agenda. There is no doubt that we have succeeded in that with help from a lot of others—the whole list of reports that the noble Lord, Lord Best, outlined indicates that. Indeed, we have produced our own report which comes to roughly the same conclusions as everybody else’s if we are to tackle what is a chronic dysfunction in all sectors of the housing market, we need 250,000 or 300,000 homes brought to the market in one way or another, probably for the next 20 years.
That is a colossal problem and it requires some change in long-term strategy. The Government, as the noble Baroness, Lady Maddock, said, have taken some useful initiatives, as did the previous Government, but, frankly, in terms of the size of the problem, they are tinkering. They may be successful, but the long-term problem requires a more long-term solution. Others have emphasised the lead role of local authorities in this aspect. Although I share some of the scepticism of the noble Lord, Lord Greaves, about the effect of the Localism Act 2011, at least it is a start at putting local authorities in the driving seat on housing needs in their area, assessing and helping to meet them, using neighbourhood plans and other planning to ensure that adequate homes are built for the kind of population that lives or works in their areas. However, in order for local authorities to succeed, they and/or their partners in delivering those homes need long-term access to resources.
That is the central dilemma for any long-term strategy. Local authorities have restrictions on their borrowing powers if they are to invest either in their own stock or in partnership with private developers or housing associations. There are grave restrictions in the Treasury rules on local authority borrowing. Just today, the London councils have pointed out that the cap on borrowing against their stock is actually inhibiting the ability of London to build enough homes for the population.
Another source of resources which the report identifies is institutional funds, in particular, local government pension funds. The report suggests that 15% of these assets should be invested in providing funds for housing. I have just retired as chair of a local government pension scheme member fund and I think that 15% may be a bit ambitious in terms of the attitudes of the advisers, trustees and members of the funds. Nevertheless, significant funds could be raised not only from local authority funds, but, as the noble Baroness, Lady Maddock, said, from a wider range of pension funds.
We are in an austerity period and there are grave restrictions on public expenditure, but at the end of the day some of these problems, particularly in relation to social housing, will not be resolved unless there is an increase in public expenditure over the longer term in housing. It need not be of traditional form—it could be in partnership with all sorts of partners—but some form of expenditure is needed. There is a fundamental dilemma in government spending in housing. On present plans, although the Chancellor may change them shortly, roughly £100 billion will be spent on housing over the next five or six years. The problem with that is that £90 billion of that £100 billion is to be spent on housing benefit, not on building houses. It is almost the reverse situation from that of the Macmillan Government and other Governments in the 1950s and 1960s. It is a very painful process to switch subsidy away from individuals and welfare and back into providing housing, and affordable housing. But if we do not start on that process now, it will be not only the present generation of house seekers and new family formations that find themselves in dire distress, but future generations as well.
As my noble friend Lord Sawyer has just said, for many people their house, or home, is at the centre of their quality of life. If we are to resolve this issue over the longer term we have to find a way where government support, institutional investment and private investment is directed at providing more homes, and better quality homes, for our people. It is one of the biggest issues facing this Government; at present, they have not yet matched up to it. I hope that despite his occasional infelicities, Nick Boles is taking on this task; I assume that he is not being considered for transfer to the Foreign Office, since his diplomacy needs a little bit of attention—but at least he has the drive. I hope, therefore, that the Government will begin to shape up to that task and that all who are interested in housing help them so to do.
Lord Stoneham of Droxford
My Lords, I welcome the debate and thank the noble Baroness, Lady Whitaker, for initiating it. I found it difficult to disagree with anything that has been said so far in the six speeches tonight—but I suppose that noble Lords would expect me to say that, particularly of my own colleagues.
I declare my interest as chair of Housing 21, a national housing and care provider for the elderly. The Future Homes Commission report shows the continuing severe gap between the current housing supply and what is actually needed. It also shows the potential of housing investment stimulating the national growth rate, since £1 spent in housing creates £2.84 elsewhere in the economy. Good housing design and energy- saving initiatives underline the social benefits of new housing, and pension fund investment in UK rental and shared ownership housing is overdue and needed. It can be used to keep the pressure off the government deficit.
Housing must be one of the key drivers of the coalition Government’s growth strategy. It played this role in the 1930s recession while government spending was constrained and interest rates were low. No one can doubt its potential now. Although I hope that there has been an improvement this autumn, the problem is that we have been going backwards in the past year. In the 12 months to September 2012, new housing starts, at 98,020 homes, were 9% down on the previous year, ending in September 2011. More worryingly, in the same 12 months to September 2012, housing association new starts were down 23% at 16,810. I hope that this is simply a case of worse before better, but we have to ask why this performance has been so disappointing.
We know that the mortgage market is still difficult and restrictive and lenders have been cutting back. In March 2012, the Government aimed their new-buy indemnity scheme to help, but there remains a problem with the higher interest rates now charged on these new-buy mortgages. Housing associations have also suffered from uncertainty due to changes in grant funding and the change in their overall funding arrangements, as they have had to move to private bond placements as banks have reduced their previous dominance in this sector. Sadly, confidence among potential house buyers has remained low out of fear of unemployment, and because the fall in house prices may not yet be complete. Changes in the planning system have also caused uncertainty in the market, but as the noble Baroness, Lady Whitaker, said, there remain some 400,000 potential homes with planning permission still to be built.
So what is to be done? First, the Government, through the HCA, must ensure the current programme of funded social housing must is be delivered. There is a lot to do in the last two years of this Government, and the recent further government initiative on retirement housing is also welcome. We just need to get on with it, but we also need to do much more. In September, the Government announced their £10 billion guaranteed housing loans for private sector renting and social housing. This is a real opportunity, but I fear we remain a little cautious about the extra housing we will get from it. The indication that I have received is the Government’s target by 2015 is for 15,000 extra homes. I hope that the Minister could clarify this. I believe that, given average house prices, it should be three times this, and if we spent a higher proportion of this funding on actual development projects its impact on the economy, as the Future Homes Commission demonstrates, would be three times the housing investment.
Pension funds could provide further funds for private rented, council and other forms of social housing, where funding streams could be secure. We should ask whether the Government are going to allow councils to borrow now that they control their housing revenue accounts so a further impetus on new housing could be sourced.
I finally return to a previous theme of mine. To be successful in government, you need people who can demonstrate that they can pull the right levers to get things done. We need to get the most from the guaranteed housing loans. We have to keep the pressure on public sector departments to release land which could be used for housing development. We have to keep the dialogue going with lenders and developers to improve confidence in the sector and wider funding opportunities. We have to work with housing associations and councils to maximise their plans for more housing. So we need the drive and determination of a Minister, such as a Heseltine or a young Macmillan, to direct and galvanise all this work. We also need to give the Minister an objective of doubling our current annual housing development by 2015. The Future Homes Commission has shown us the potential of what is required. The coalition must now grasp the levers and deliver.
Lord McKenzie of Luton
My Lords, I, too, would like to thank my noble friend Lady Whitaker for the chance to discuss, albeit briefly, the report of the Future Homes Commission. As the noble Lord, Lord Best, said, it is one of a string of important reports on housing that we have received recently. We welcome this report, which contains a number of innovative proposals to tackle the worst housing crisis in a generation.
We find ourselves in a situation where we are building fewer than half the new homes needed to keep pace with new household developments, let alone to address the backlog. There are some 2 million people on housing waiting lists; homelessness is increasing; and the private rented sector has rising rent levels and inadequate regulation where, according to the commission, some 37% of property fails to meet the decent homes standards. As the noble Lord, Lord Greaves, says, there is a shortage of affordable housing, and as the noble Lord, Lord Stoneham, has just told us, housing stocks are actually declining. This is at a time when growth in our economy is weak at best, and is dragged down by the dramatic decline in the construction sector, where every £1 of construction output could generate nearly £3 of demand in the economy. Where people need homes and jobs, young people need skills and apprenticeships, the economy needs growth and the construction sector needs work, the imperative of building more homes should be something on which we can all agree. To increase the number of new homes built every year to over 300,000 certainly sets an ambitious target—indeed, a step change.
However, this is not just a numbers game. It is about the quality of the homes provided; crucially, it is also about how this scale of investment is to be funded—a matter spoken to by my noble friend Lord Whitty in particular. We very much support the emphasis of the commission in highlighting the key role of local councils in helping to create sustainable communities. We share the vision of mixed communities living in well designed and high quality homes in neighbourhoods with good facilities where people want to live. However, sustainable communities will not be helped if people are shunted from pillar to post because of draconian housing benefit rules. What is clear is that in the current climate, traditional forms of finance from the Government and banks will not be sufficient to deliver the scale of funding required. There is a lack of mortgage finance for those who wish to buy and a current dearth of institutional investment for those who want to rent. The Future Homes Commission drew attention in particular to the demand for private sector rental property as being a huge and neglected issue, driven not so much by those who cannot afford to buy, but by those who choose to rent, particularly for job mobility.
As we have heard, the suggestion is that the funding gap can be filled by institutional investors. The analysis seems to show that the percentage of UK financial institutions’ property portfolios held in the residential sector, at 1%, is significantly less than in many other countries. The RIBA points out that typically, for residential property, the institutions do not wish to take on planning or construction risk and that currently there is very little for them to invest in. There is a lack of good quality, large-scale rented and shared ownership schemes.
The commission proposes that there should be a local housing investment fund of £10 billion, created by pooling 15% of the assets of the largest 15 local authority schemes. This 15% is the current maximum of the assets of such schemes which can be invested in infrastructure, although the Government are consulting on increasing this to 30%. Do the Government support this recommendation? We should clearly be mindful that any investment of pension fund assets has to be in the best interests of the members. Following the review by Sir Adrian Montague, can the Government outline what they now consider to be the main barriers to significant institutional investment in housing?
My noble friend Lady Whitaker, supported by a number of noble Lords—the noble Baroness, Lady Maddock, my noble friend Lord Sawyer and the noble Lord, Lord Greaves—alighted on the recommendations about the need to change attitudes to poor design, including space standards. These matters affect not only the well-being of households that occupy properties but their very willingness to buy new homes in the first place. Good design is also a component of getting the acceptance of communities to new developments. We acknowledge that the Government have announced a review of housing standards, but would not wish to see the ability of local councils to set standards being diminished. We certainly subscribe to the concept that local authorities should have a pivotal leadership role at every stage in developing new housing provision. This is essential in tackling what the commission describes as a fragmentation of the development process. However, we remain dismayed at the latest government proposals to bypass local planning authorities which are contained in the Growth and Infrastructure Bill.
The commission concludes that to realise its vision,
“land will be needed in or close to virtually every city, town and village”.
This will certainly test the leadership of local authorities and, indeed, the effectiveness of the duty to co-operate.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, I join other noble Lords in thanking the noble Baroness, Lady Whitaker, for drawing this report to the attention of the House. I do not think there is any disagreement among any of us about the importance of it. It is aspirational and practical and draws attention to a lot of the things we all know exist. It also draws attention to things that we all know we would like to see. There is a small problem with finance at the moment but that does not mean to say that we cannot all look forward and take serious steps to deal with it.
I agree with all the points that have been made about making sure that we have adequate and affordable housing and a mixture of tenures. A number of noble Lords have specifically mentioned that any new housing should be of good design and good quality. It is a complete waste of money not to do that. One has to be able to send messages out to developers that it is important that a block of flats is not just thrown up that looks like any other block of flats that is thrown up elsewhere. Therefore, I have no difficulty with any of those points, and I do not think that any other noble Lords have either.
I do not think any of us would disagree with the fact that we are not building enough homes—we are not. We know that. My honourable friend the Minister for Planning made that very clear in an interview the other day. There is government recognition that there has to be a doubling in the number of houses that are built over the next few years. That may be aspirational, but we know that it is required. However, things are moving gently. There is a projected growth of 232,000 households per year until 2033. We know that there were 117,000 completions last year and the expectation is that at least that figure will be met this year and going forward. However, it is clear that that will still not be enough.
The Government also support the necessity to support people’s aspiration to own their own home. A number of noble Lords pointed that out. I think that the noble Lord, Lord Sawyer, pointed out that the security of knowing that they have a home in which they want to live is a real part of people’s lives. Therefore, the quality of homes, both of rented and affordable housing, is very important.
However, the report recognises that not just government action is needed. A response is also needed from the industry: that is, housebuilders, mortgage lenders and landowners. That includes public land. As noble Lords will know, we are beginning to put pressure on departments and local government to release the land they do not need. Assembling land in this way will also be an important aspect of ensuring that there is enough land available on which housing development can take place.
The noble Lord, Lord Best, mentioned four reports that are all pouring out at the same time. I thank him for what he has done and acknowledge that the happy reports on housing for older people to which he referred have raised very important issues, particularly the fact that if older people can get housing which they like and want to move to, which may not be as big as their current family home, they release those homes for families and other people.
The report, as has been said, calls for an increase in the number of new homes built every year to 300,000, which of course is substantially above the current predictions. It also looks for a £10 billion local housing development fund, to be financed by local authority pension funds. Practically all noble Lords who have taken part have referred to the pension funds. There is no disbarment to local government pension funds doing that at the moment. They can already choose to invest in affordable housing projects, although there will be constraints on how much they can put into it—I believe that a figure of 15% was put forward. However, this is not something for which the Government need to legislate or do anything other than encourage—as they are doing—the local authority pension funds to think about making that investment. As everybody has said, it is correct that this money could be used to boost home ownership and development, and once we can get the construction industry moving, that will itself contribute to the economy; it will create new jobs and skills—the noble Lord, Lord McKenzie, referred to apprenticeships—and it begins to open up and unlock all sorts of problems.
The Government are investing a lot of money in housing; the noble Lord, Lord Greaves, perhaps rather unaccommodatingly suggested that there were a plethora of announcements coming out on this. However, to be fair, there is a lot of money and a lot to be said about it. Investing £4.5 billion—a significant sum of money—along with £15 billion from the private sector, will deliver 170,000 new, affordable homes over the period of the spending review. In the September package we provided an extra £300 million to deliver 15,000 additional affordable homes and to bring a further 5,000 empty homes back into use. The Government, therefore, are investing heavily in housing and are encouraging others to do so.
A £10 billion debt guarantee will support more rented housing, including affordable rents. Our reforms to the planning system, which have already been mentioned, will all improve the speed and quality of planning decisions and will bring in local people in order to get their enthusiasm and encouragement for development. So often, as we know, local people are very resentful about any development. Neighbourhood planning should ensure that there is not only a better idea of where housing should go, but there should also be a better idea of quality of housing, what that housing is for, whether or not it is family housing, and where it is placed. Therefore there will not be so much antagonism to development. Part of the Localism Act underscored the point that developers ought to talk to local people about what they want to do in order to try to get that accepted before it goes to a planning committee. We also announced in September that the Government and housebuilders are together investing an additional £900 million in FirstBuy, which will help first-time buyers into home ownership.
These are not trivial sums of money but rather mega-sums, which will generate a renaissance of housebuilding and homebuilding. As noble Lords know, I never like to be unkind, but I point out that the previous Government were not absolutely shining white in terms of the numbers of homes that were delivered. I believe I am correct in saying that the number of homes we are building is well in excess of those built over the last few years of the previous Government. We need to move on all of that.
The Deputy Prime Minister announced last week that the European Investment Bank is going to inject £400 million into affordable housing, particularly to deal with energy-efficient homes—again, a matter that was raised in the report. Another £225 million of government money will leverage private investment to help unlock the large housing sites. The housing development fund is intended to bring together local government pension funds for investment in housing. As I said earlier, that can be done without further legislation.
Any investment decisions made by the Local Government Pension Scheme must be made by its local administering authorities. They must act in a way that protects taxpayers and local services. I know that the Local Government Association is already bringing together people associated with local government pension funds to discuss what can be done.
I am rapidly running out of time. The best that I can do now is to say that I hope that I have given to the House a sense of the fact that we welcome this report as being aspirational and pragmatic. There is plenty in it for everyone to work on. We acknowledge that design and space issues are important, and we clearly acknowledge that we need more affordable housing, and more housing, in this country. The ways of achieving that against the background of a not very secure financial position are important. However, the ideas that are flowing in from all areas are very similar, and on much of this we will be able to harness the future housing of the country.
I thank the noble Baroness again for introducing this debate. I know that we will return over and over again to the matters raised in the report, to which the Government are already directing their attention and addressing in many ways.