Housing: Affordability and the Underoccupancy Charge
Baroness Quin
That this House takes note of the availability of affordable housing in the United Kingdom and the impact of the underoccupancy charge.
Baroness Quin (Lab)
My Lords, I am pleased to be introducing this debate and delighted that it has attracted a good number of speakers. I am delighted but not surprised because the crisis in housing and the effects of the bedroom tax in particular have been raised repeatedly in this House in recent weeks and months, showing the deep concern that your Lordships feel about these issues. I very much look forward to listening to the maiden speech of the noble Baroness, Lady Bakewell of Hardington Mandeville—I hope that I have got that right—and of course I wish her well in her new role as a Member of your Lordships’ House.
I also add my congratulations to the Minister on her recent well deserved promotion. I am only sorry that she will no doubt be put in the position today of defending an indefensible policy, the bedroom tax, which is a policy not of her making and, indeed, one which only partly falls within her departmental responsibilities, although I recognise that many of the wider housing issues raised today fall within her remit.
Although I am the opening speaker, the themes of the debate were suggested by both me and my noble friend Lord Whitty. We were both keen to use opposition time to highlight these issues, and I therefore very much look forward to his contribution later in the debate.
My remarks will focus mainly on the bedroom tax which I have raised through Oral and Written Questions previously but which, given its pernicious effects, needs to be aired at every opportunity until, hopefully, the Government see the error of their ways. However it is important to set the bedroom tax within the wider housing and economic context, and this debate gives us the opportunity to do so. For example, it needs to be set against the overall and desperate shortage of affordable homes, which was referred to in Oral Questions today. It also needs to be set against the problems in the private rented sector at a time when private rents are soaring and there is a crying need for the sector to be better regulated, something which I know my noble friend on the Front Bench has raised on a number of occasions.
That needs to be set against the fact, recently highlighted by Shelter, that the number of families who live in emergency bed-and-breakfast accommodation is now at its highest for nearly 10 years. We have all become aware of the huge increase in homelessness and rough sleeping in recent months. We also have to consider the overall context of welfare reform and, in particular, of the cuts to local authorities and council tax increases. Finally, perhaps this debate should also be seen in the wider context of issues such as the rise in fuel costs and the difficulty so many people find in simply making ends meet. That, of course, links in to the second debate today, on the cost of living and its impact on family budgets, which my noble friend Lady Prosser will lead.
The bedroom tax has now been in operation for more than six months. This is, therefore, a good opportunity to examine, as far as we can tell, what its effects have been. Some problems with the policy were apparent from the start, but others have emerged more clearly over time. For a start, we know that the Government’s thinking behind introducing the tax was the need, as they saw it, to free up housing to allow those in overcrowded accommodation to find suitable homes. The Government made much of the figure that overall a quarter of a million people lived in overcrowded accommodation, and contrasted this with the estimated million so-called spare bedrooms. However, the problem was that there was a complete mismatch between the areas of the country where there was overcrowding and those areas where there was underoccupancy, so that this often quoted overall figure was largely meaningless and misleading. For example, the National Housing Federation pointed out from the outset that in the north of England—in the regions of the north-east, Yorkshire and Humberside, and the north-west—families affected by the bedroom tax outnumbered overcrowded families by 3:1.
Examples have flooded in from around the country about the lack of smaller properties available to those who, designated as underoccupying, signified their willingness to move. In this House the right reverend Prelate the Bishop of Ripon and Leeds quoted the example of Hull, where 6,000 people were affected by the bedroom tax while only 70 properties were available to move into. I could quote many other examples from around the UK because this is a UK issue; the situation in Scotland and Wales has been repeatedly referred to in this House. Certainly the mismatch between types of accommodation is very clear, whether you are talking about Aberdeenshire, Swansea or Birmingham, Norfolk, North Tyneside or Cornwall. No part of the UK is exempt from this mismatch, although some areas are much worse affected than others.
The lack of alternative accommodation is therefore still a key issue after six months of the tax. Of course, there is the clear unjustness of a situation where people who are willing to downsize but cannot find alternative accommodation still have to pay the tax. It is interesting—perhaps one can make an ironic comparison—that if you are a jobseeker and you show that you are available and willing to work, you get benefit. However, if you are available and willing to downsize, your benefit gets cut all the same.
There is much distressing evidence of those in arrears for the first time as a result of the introduction of the bedroom tax. Many of those people, who have previously been able to meet their bills, are I think horrified and traumatised to find themselves in an upsetting and unfamiliar situation. The sum involved in the reduction in benefit can mean the difference between keeping your head above water and sinking below the poverty line.
One striking feature of the tax as it is operated is that many of those affected are in employment. That has once again highlighted the problem of low wages and such things as zero-hours contracts. Again, it is tragic that this tax hurts the very people the Government say they want to support: those people who want to get into and stay in work. However, as a result of this charge they cannot make up the income shortfall they face and again, end up sinking into debt.
I also believe that the disabled have not been adequately protected in this legislation. Considerable efforts were made in your Lordships’ House to amend the legislation when it was going through to provide better protection for disabled people and, indeed, even to consider exempting them from the tax in the way that pensioners are exempted. In the course of conducting research for this debate I have come across many examples of disabled people who have found themselves penalised considerably as a result of the tax. I hope that the Minister will look at some of these instances.
All benefit and welfare changes are complicated, as we know, simply because of the variety of individual circumstances involved, but in this case the complexity seems to have turned into a nightmare. There are myriad personal circumstances and many particularly difficult and heartbreaking situations have arisen since the imposition of this tax. For example, children who have grown up and moved out of home, having found employment and accommodation elsewhere, but who have subsequently lost that employment then need, and want, to move back home but find that they cannot because of the bedroom tax.
As we know, couples often split up and sometimes one parent will have custody of the children but the other parent may have partial custody and will understandably want the children to stay with him or her. Such families can easily fall foul of the bedroom tax rules. Another category I have come across is that of young grandparents who are not pensioners and therefore not exempt but who play a part in looking after the family and have the grandchildren to stay with them, although not all the time. These grandparents can fall foul of the bedroom tax and its rules.
All these situations can break up families and damage community cohesion. The complexity of this issue is also adding to the costs and burdens on local authorities which are struggling to cope with it. Crucially, I believe that the tax is not saving as much money as the Government claim. Recent evidence compiled as a result of research undertaken by the University of York and a number of housing associations seemed to suggest this. I also understand that the National Housing Federation is compiling statistics on this issue. What is the Government’s current estimate of savings as a result of this measure?
Will the Minister give more details of how the Government are monitoring this situation? I was concerned by the reply I received from the Minister’s predecessor to a Question for Written Answer that I tabled. I asked what information the Government had about those who had gone into arrears for the first time since April, and what proportion of those were subject to the bedroom tax. I received this not very reassuring reply:
“The Department does not collect official statistics on how many social housing tenants were in arrears for the first time nor on any notional sub-classification based on welfare reform”.—[Official Report, 23/9/13; col. WA 450.]
It is vital for the Government to get as much information as possible from local authorities and others to see what the evidence is regarding people who have gone into arrears for the first time as a result of this measure.
The noble Lord, Lord Freud, in replying to an Oral Question, spoke of the choices people could make as a result of being affected by the tax. However, these are very unenviable choices for many people, such as trading down or “pulling in lodgers”. I do not know whether the Government have any information about how many people have taken in lodgers following the introduction of this tax but I would imagine that, for someone living on their own in accommodation that they have occupied for a very long time, taking in a complete stranger to share that home could be a daunting and upsetting experience.
A lot of people have chosen to stay put following the introduction of the measure, but their ways of doing so have often involved simply getting financial support from family or friends or cutting back, in many cases to living on the poverty line. Not surprisingly, people do not want to move away from areas where they are part of a social network, where there are support systems and where there may be valued childcare facilities or reliable friends and neighbours. Even when people agree to move, transition can take a long time and transition costs for the tenants and the local authorities, such as in reletting costs, can be considerable. So downsizing is not a cost-free option.
Something that I hope will sway the Government is the fact that according to recent polls the underoccupancy charge or bedroom tax is deeply unpopular. Although the Government may hope that some of their welfare reform measures are popular, that certainly does not seem to be the case in this instance.
In preparing for this debate I was helped by a number of organisations: the National Housing Federation, Shelter and church charities, which make grants for those in dire need and are particularly aware of the hardship that is being caused in particular parishes and communities. I am also very grateful to the council with which I have had the honour of being associated throughout my time in both Houses of Parliament, Gateshead Council, which has told me of its findings after six months of the charge. It says that the amount of the penalty applied for underoccupation of one room in a council tenancy in Gateshead is almost double the additional housing benefit that would have been paid. The impact of this weekly penalty on many tenants has been immense and has contributed to a large increase in tenancy turnover, vacant property costs and rent arrears. The impact on the council’s housing revenue account is also considerable because of the additional rent arrears, additional expenditure on relet work and the loss of rent because of vacant property.
I am running out of time and would have liked to refer to many specific instances. Perhaps I may send some of these details to the Minister. In conclusion, I should say that of course the Government have to look at ways of saving money, but not by cruelly mistreating vulnerable people who were in no way the cause of the global financial crisis and should not be penalised as a result. Just last week we heard an entertaining spat between the former Prime Minister Sir John Major and the current Secretary of State for Work and Pensions. Sir John put it well and very tellingly when he referred to the plight of the “silent have-nots” and talked of the painful choice between heating and eating. Given this debate, he might have said heating, eating and keeping a roof over your head. I was delighted when my party’s leadership gave a firm commitment to repealing this tax. I call on the Government now to follow suit before even more hardship and misery are caused as a result.
Baroness Seccombe (Con)
My Lords, I congratulate the noble Baroness, Lady Quin, and thank her for giving us the opportunity to debate this important issue today.
Any change in the law will doubtless cause concerns to those people who stand to be affected. However, I hope that this debate provides us with an opportunity to better understand the proposals. There are many issues surrounding the area of welfare. Not least is the responsibility of government to ensure that all benefits are dispensed in a way that is fair to both the taxpayer and the recipients. We can all understand the frustrations of those who rise early, work all day and find that some of their neighbours on benefits appear to live a comparatively comfortable life without any of the hassle. Any welfare system should therefore be equally fair to those who pay into it and those who receive it. The principal aim should always be to help those who are able back into work. At the moment we can all agree that this has not been working.
However, I want to concentrate on just one small point. With life expectancy increasing, many elderly, and indeed very elderly, people live alone and are able to live independent lives. This is certainly the case for many women who are more often than not the ones left behind. They have raised their families in the same home and then, when their children have flown and the hustle and bustle gone, they can find themselves living alone in a property too large for their needs. This happened to me and I was then able to buy a smaller property, cut down on bills and “downsize”. For anyone living in social housing, this can be much more difficult and the choice has simply not been there.
I want to encourage choice and I was therefore pleased to see that pensioners are not subject to the spare room charge. So, if it is their wish to continue to live in their accommodation, they may do so. However, should they prefer, councils will support social tenants who wish to downsize. There continues to be funding for an action team within the Chartered Institute of Housing, which works with all social landlords to help them to promote moves. It seems to me that for an elderly person struggling with the upkeep of surplus rooms, that could be hugely welcome. Such a scheme would not only encourage choice and make it possible for a person to move to a smaller home but it would release a property for a large family with all its needs.
I was interested to see that in action with the introduction of HomeSwap Direct, which has made it possible for councils and housing associations to tackle underoccupation. The Seaside and Country scheme is another option. It offers social housing outside London to elderly tenants living in Greater London in family-sized properties, and this must present an attractive proposition to some who are looking to get away from the mad rush of city life.
Life can be very lonely for older people. I believe that we, in this House particularly, have a duty to make the later years as enjoyable as we can. I commend the Government for ensuring that those who wish to do so are able to stay in the accommodation that they know as their precious castle but also for alerting them to other opportunities.
Baroness Hollis of Heigham (Lab)
My Lords, I thank my noble friend Lady Quin for introducing this vital debate. Like her, I will speak about the bedroom tax. I do not blame the Minister, whom we welcome to her brief; the DCLG has sensible underoccupancy standards. I blame Sir George Young. In the 1990s, as Housing Minister, he said that we should subsidise people, not property. Housing benefit, he assured us, would take the strain: too true. Housing benefit soared, social housing collapsed and the bedroom tax is the result.
The Government claim that the housing benefit bill is high because tenants occupy over-large property that should instead go to families who are overcrowded or on the waiting list, thus saving £490 million a year. That is not true—none of it. Let us unpick it. Families are overcrowded because other tenants do not trade down? False. As my noble friend said, outside London that is not a problem. The DCLG’s own statistics show that there are far fewer overcrowded families than underoccupying families by a ratio of about 1:6. The Government do not need to do this. Helping pensioners who want to downsize, but now will not be able to, would sort it.
The next claim is that the bedroom tax will help waiting lists—false. Some 80% of those on waiting lists are single people or young couples without children also requiring one-bedroomed flats. However, they will now, as the Scottish report showed, wait twice as long because underoccupiers will take priority for that accommodation. This applies similarly to the homeless—mostly single vulnerable people—and, as the noble Baroness, Lady Seccombe, rightly mentioned, pensioners. They, too, need and want the smaller properties that will be made artificially scarce because of the bedroom tax, and it will be harder to help them.
We simply do not have single-bedroomed properties, as two-bedroomed homes are far more flexible. Earlier this summer, Wolverhampton had 118 one-bedroomed properties to let but 2,500 tenants underoccupying and nearly 7,000 households on the waiting list for a one-bedroomed property. A similar situation applies in Leicester. Reports from Scotland and Wales show that it will take years for underoccupiers to trade down within the social sector. Three-bedroomed homes are now standing empty, taking 50% longer to let, and some in the north may be boarded up, while families with children or disabled families who want to live in them are forced into scarce smaller property that other people—pensioners, those on the waiting list and the homeless—want and now will not get.
“Well”, says Esther McVey brightly, “Convert three-bedroomed houses into two flats”. Double up kitchens and bathrooms, build external staircases, increase sound insulation, and provide car parking and external storage, and the cost of £70,000 or more, excluding land, outside London actually builds a new home. Further, you cannot adapt mid-terrace houses, you cannot adapt post-1960s houses as their rooms end up too small by DCLG standards, and many built before 1960s have been sold. As a policy it is, frankly, absurd.
Two-thirds of those affected, as my noble friend said, are disabled families. There are people with epilepsy, Huntington’s, Parkinson’s, severe asthma, who as couples need separate bedrooms. Their letters would break your heart. Now their carer partners will be denied an adequate night’s sleep, which will break their health as well. They have committed no offence. They have lived difficult lives, yet we are now punishing some of the poorest and most afflicted families in the land for the sin of occupying a house that their social landlord, years earlier in good faith, allocated to them.
“Oh!”, says the DWP, brightly, “Discretionary housing payments will help them”. False again. The impact analysis shows that only 40,000 of the 660,000 affected by the bedroom tax may end up on DHPs. The extra money found by the department might extend to just 60,000 or 10%. The Government insist that tenants downsize to make way for people who do not want the larger homes they have left. However, at the same time the Government hypocritically expect to make their savings precisely because 90% of underoccupying tenants do not do what the Government state—move—but do what the Government actually want: stay put and take the hit if they can, to make the savings. Make the savings, and you do not deliver the policy; deliver the policy and you do not make the savings.
The recent ALMO survey finds a 24% increase in empty property and that 65% of underoccupying tenants are in arrears, which have doubled. Many have been sent eviction notices and just 8% qualify for DHPs—so now what? I declare an interest as chair of a housing association. If we as social landlords do not evict, arrears soar, and the social landlord goes into the red and into special measures. If we do evict, where do tenants go—into our smaller accommodation? We do not have it. Perhaps into the private rented sector, where the rent of one-bedroomed flats is higher than that of the two-bedroomed flats they have left. That is if a landlord will take them, if they have the money for deposits, and the money for moving costs. With children, they may go into B&B at huge cost and distress, or if single, sofa-surf until they end up on the streets. Some tenants may return as vulnerable into hard-to-let, unwanted—guess what—three-bedroomed properties, perhaps even as squatters because that is the only property available, and the sorry cycle starts all over again.
None the less, the Government insist that the bedroom tax will produce savings of £490 million to outweigh all this misery: false again. Let us do the sums. The Government modelling for savings assume that 90% will stay and take the hit and that just 10% will move. The ALMO survey shows instead that only 60%, not 90% want to stay and pay. Let us assume that 70% stay—between the two figures, I think that that is realistic—and that 30% go, most going into higher-cost private renting. Add in the cost of voids, arrears, B&B and DHPs, and the public purse—I have done the stats—far from making savings, makes a significant loss.
Tenants, far now from enjoying a settled home, will face a “snakes and ladders” of moving up, down and across, from one-bedroomed to two-bedroomed, perhaps to three-bedroomed, properties, all in different places, and then down the snake again according to the age and gender of their children, each move bringing huge moving costs, stress and dislocation, especially to disabled families, their children and the local communities that support them. All this misery, all this cruelty, all this distress to meet housing pressures that will now worsen and to make savings that now will not happen—and we call this a housing policy. It is strong language, but I call it contemptible.
Lord Shipley (LD)
My Lords, I thank the noble Baroness, Lady Quin, for initiating this debate. I declare an interest as vice-president of the Local Government Association. I look forward particularly to the maiden speech of my noble friend Lady Bakewell of Hardington Mandeville, whose expertise will prove of enormous value to the House.
This debate is important and timely. We now have a great deal of evidence as to what is happening in house building, the affordability of housing and the impact of welfare changes. More evidence will emerge over the coming weeks and I hope that the Government will prove sufficiently fleet of foot to adapt their policies to reflect what is happening on the ground.
In summary, we have not been building enough homes for years and prices are consequently higher than they might have been. If we do not increase supply, the private rented sector will see higher rents, which are clearly rising anyway in many parts of the country. Not enough social homes for rent have been built and the impact of welfare changes, particularly the underoccupancy charge, has led to rising demand for smaller units when smaller units do not exist.
Last year saw the lowest house completion rate since 1923. In fact, since 1990 annual housing completions have never exceeded 170,000 and they have averaged 140,000, in which four out of five homes have been for owner occupation. The failure of successive Governments to replace stock sold under the right to buy has led to a lack of affordable housing for rent and we are now seeing the consequences.
There has rightly been specific criticism of the previous Government for reducing the stock of social housing by 420,000 units. This is because it is for Governments to intervene to reduce social inequalities, not the markets, which is why much of my contribution today is to urge the Government to build more homes more quickly for social rent and to think again about how the underoccupancy charge is being applied.
As to affordability, house prices are rising again and we may be at the start of yet another housing bubble in some parts of the country. Funding for lending and help to buy provides cheaper credit to boost sales, but the underlying problem is lack of supply. House building is half of what it needs to be to match the rate of household formation and this imbalance now seems likely to continue for three years at least because of the time it takes to get schemes into the ground.
In addition, important as Help to Buy is, unless the supply is increased, prices will rise further, putting home ownership out of reach of even more young people. We should be very concerned that the ratio between house prices and local earnings has returned to very high historic levels. With 1.8 million families on social housing waiting lists, it is undeniable that we need more homes for rent. Large numbers of people are not in a position to take out a mortgage nor ever will be. If interest rates rise, even fewer will.
I will now say something about the underoccupancy charge. I have always felt that it was a bad policy and nothing I have seen since April has changed my mind. The evidence of impact is now available from a variety of sources, all of it expert.
It seems that around half of all tenants are paying the increase, a quarter are paying something, and a quarter may not be paying at all. Of those paying, some may be doing so by reducing their spending on food or heating, so we should not assume that because they pay, it means that their household finances are in good shape. Of those not paying, many are simply unable to do so. We should not make poor people poorer. Yes, we should encourage people into work where there is work to do and they can do it, but if there is not, poor people should not be penalised.
We should all thank the housing associations, arm’s-length management organisations and councils, where they have retained their housing stock, for their work in helping people affected by the charge. A lot of unseen effort is going on at the individual level in supporting tenants to manage their finances more effectively and so as to keep rent arrears to a minimum. Since two-thirds of tenants want to stay in their homes and are trying to pay, every method of support should be made available to them.
That takes me on to discretionary housing payments. They are being made available, but will they suffice? Two-thirds of housing associations and ALMOs say that they will not. I hope the Government will ensure that, as we progress into 2014, they will watch very carefully what is happening to demand on the funds and take action as necessary. Many tenants who are subject to the new underoccupancy rules want to move to a smaller home, but they cannot do so because the smaller home does not exist. In my view, the charge should not apply where there is nowhere to move to.
One way forward is to give local councils greater flexibility to meet demand for smaller accommodation in their areas. To do this, the Government should see councils as part of the solution and progressively remove the housing borrowing cap imposed on local councils, relying instead on the existing prudential borrowing code under the Local Government Act 2003, which guarantees that only sustainable housing investment would get the go-ahead. Councils could raise a further £4.2 billion above their current £2.8 billion borrowing headroom and they could build up to 60,000 more homes over the next five years. It will not be enough if the only action the Government take is to give permission to pool the existing £2.8 billion headroom to make sure that it all gets spent.
Since last year, April 2012, council housing has been self-financing. The average debt on a council home is only £17,000, so there is plenty of scope for safe additional borrowing against the asset of the existing stock. In addition, we should note that across Europe, trading accounts such as these are not seen as part of a Government’s borrowing. They are not related to the deficit or to debt. The UK, for reasons that are never satisfactorily explained, uses a much wider definition of public debt than any other country in Europe. The consequence is that we are not building as much social housing as we could. The aim of making better use of the existing social housing stock, which is the aim of the Government, can be done only if sufficient numbers of smaller properties are made available for those affected to move into. ALMOs in particular are in a good position to develop small plots for one- and two-bedroomed accommodation.
Research is to be undertaken into the impact of the underoccupancy charge. I understand that it is to be done by Ipsos MORI, along with the Cambridge Centre for Housing and Planning Research and the Institute for Fiscal Studies. They will all be assessing independently what is happening with the underoccupany charge. Initial findings will be made available in 2014, although I do not know which end of 2014 that might be; earlier rather than later, I hope. There is then to be a final report late in 2015, which means that we are two years away from the final report actually being produced. I hope sincerely that we are not expected to wait for two years before anything is changed because there is enough evidence now, and into the early months of 2014 there will be even more. The picture will have become very obvious.
We want to build a stronger economy and a fairer society, enabling everyone to have a good education and get a secure job. However, that is only part of what is needed to strengthen equalities, social inclusion and that fairer society. A decent, affordable home is just as important as education and a job because they are all linked. In conclusion, I hope that the Government will start to see local councils as part of the solution in building more social homes for rent.
Lord Whitty (Lab)
My Lords, I thank my noble friend Lady Quin for initiating this debate. I will dwell largely on the broader housing side, as did the noble Lord, Lord Shipley, but wanted to say something first about the bedroom tax, spare room charge or whatever we care to call it. Some evidence that I do not think has yet been cited comes from the National Federation of ALMOs, which has done a survey of council and ALMO-run properties. It found that arrears among those affected have already almost doubled—there has been an increase of almost 27 percentage points in the numbers in arrears. Of those affected, only 13% were prepared to consider moving and only 2% have actually done so. In other words, for a policy that is supposed to free up property for more appropriate use, a very low level of achievement has been recorded. As other noble Lords have said, and as the noble Baroness, Lady Maddock, said during Question Time—I am afraid that the Minister did not give her an adequate reply—the reality is that there is no alternative accommodation for these people to move into in most parts of our country. Of those surveyed by the federation, some said it would take up to 14 years to put people in appropriate housing.
However, this is not only about the nonsense of the bedroom tax. Behind all this, there are chronic problems with housing and with affordable housing in particular. The term “affordable” is of course difficult to define. I declare an interest in that, last year, I chaired an inquiry for an organisation called Housing Voice, which produced a report to try to push housing up the political agenda. I think that we, along with others, have succeeded in doing that. The definition that we used then was,
“comfortable, secure homes in sound condition that are available to rent or buy without leaving households unable to afford their other basic needs”.
Others have been more specific, saying that it should not cost the household on median earnings more than one-third of their income.
However, the Government and the powers that be have used the word “affordable” in an entirely different way. In an affront to the meaning of the English language, the term “affordable housing” in the social housing sector is used, in Newspeak, to mean charging what are, for many social tenants, totally unaffordable rents. In more general usage, there is a chronic lack of affordability not just in the social housing sector but across all tenures of housing. Rents and prices are rising in all housing sectors and in all parts of the country—the issue affects our inner cities and our rural areas, young families seeking a mortgage for the first time, leaseholders, private tenants and those in social housing. Above all, it affects the young and those who are in the wrong kind of housing because of family circumstances.
The situation reflects a long-term failure to build housing, which as the noble Lord, Lord Shipley, said, has continued under successive Governments for many years, with new housebuilding running at less than half the rate of household formation. It is particularly acute towards the affordable end of the market and was, I am afraid to say, greatly aggravated in the early days of the coalition Government when they deliberately slashed government support for affordable social housing by nearly two-thirds. They have belatedly introduced policies to offset that, but it was a severe blow, which has meant that recovery and improvement in the total level of housebuilding is even further off.
I have to say to noble Lords opposite that, to some extent, among their ranks and in some of the coverage in the newspapers that support them, there is a deep prejudice against tenants of social housing. That has led to measures that are hitting social housing and, in particular but not exclusively, those who are on benefits. That has been compounded by aggravating and detailed interventions such as the bedroom tax. This combination of factors has already led, as noble Lords have said, to severe distress and threatens serious social and communal dislocation. Other things have affected the situation and will, in future, affect it even more, such as the move to the default position of payment to tenants rather than to landlords. Although there is some justification for that, particularly in the private rented sector, it means that housing associations’ income and creditworthiness is less assured and they are therefore less able to raise money to build new homes. In the private rented sector, the refusal to regulate private landlords is leading to soaring rents and inadequate conditions in large parts of the burgeoning private rented sector, not least here in London.
All this is, naturally, leading more people to claim housing benefit and more people to claim a larger amount of housing benefit, reflecting their housing costs. The Government are right to point to this escalating cost of housing benefit as being a major problem in the welfare bill. However, that has led them to the wrong conclusion. Instead of tackling the increase in housing benefit expenditure as a reflection of dysfunction in the housing market, they have treated it as a dysfunction of the welfare system. That has led them down exactly the opposite road to the one which they should be going down. Part of the real solution, which I have been advocating for some time in this House and elsewhere, would be for housing in central government to be placed in the hands of one Minister and the resources available for housing benefit to be put together with those available in CLG. That way, we could have a strategic approach to housing demand and supply and match them more substantially. As the noble Lord, Lord Shipley, said, the other part of this would be to give councils and local authorities the responsibility for strategic delivery of housing right across the board in their areas.
Although the Government have recognised the need to build more houses and have introduced some policies that they say are going to lead to that, nothing has yet been seen. The Public Accounts Committee, in its assessment of the new homes bonus, effectively said, “Case completely unproven”. In its actual text, there are harsher words than that. Although the Help to Buy policy has helped a number of people into the housing market, and has undoubtedly had the political effect of reassuring existing homeowners that the market value of their property is going up and giving them a warm feeling about that, there is no point pouring money into the demand side if you do not match it with policies to deliver the supply to meet that demand. All that will happen—particularly in the high-stress areas, but right across the country, as we have already seen—is that house prices will increase but there will not be an increase of any great significance in housebuilding.
Those measures are probably misplaced and they are certainly not working. We need further measures. On the planning side, we need to ensure that new housing developments include a minimum proportion of affordable housing, in whatever form of tenancy we decide should apply. Instead, councils are having their arms twisted by developers and going back on the previous policy. We must ensure, in so far as there are new right-to-buy deals, that there is a genuine one-for-one replacement of anything that goes out of the social housing system. The arithmetic that the Government have come up with on that is completely phoney.
Above all, we need to ensure, as the noble Lord, Lord Shipley, said, that housing associations and councils are able to go to the market and obtain money to build and improve housing, whether through traditional council housing, housing association stock or joint ventures with the private sector. As the noble Lord said, we are the only country in the world, or at least in Europe, which counts expenditure by municipalities and provinces to buy housing—a clear asset—as part of public expenditure generally and puts a cap on it. If that cap were raised, and preferably removed entirely, councils’ ability to borrow would go some considerable way, even if it takes us 10 years to get there, to replacing and improving the amount of housing stock available to our people. I hope that the Government take a grip on this area and come up with a strategy which will deliver just that.
Lord Howard of Rising (Con)
My Lords, I thank the noble Baroness, Lady Quin, for introducing this debate. I declare an interest as a member of a district council.
No one can possibly argue the principle that housing should be provided for those who cannot afford it. In this day and age it would be inconceivable that we should not have people housed properly and adequately. But where a house or flat is provided by taxpayers, it is clearly unfair that those who receive this benefit should be given more than they need or require. I find it inconceivable that anyone should argue against this. Why should taxpayers—many of whom are not well off, many of whom have seen a horrible drop in their standard of living, many of whom are obliged to share bedrooms—contribute to the benefit of spare rooms for those in housing that they, the taxpayers, are paying for in addition to paying for their own housing?
Where housing allowance, introduced by Labour, is given to enable those on benefits to rent accommodation in the private sector, no allowance is made for rooms over and above what is strictly necessary. You get sufficient funds to pay for what you need and no more. Yet this very fair principle—as I said, introduced by Labour—is demonised when it comes to housing provided by the state. My noble friend Lady Seccombe has already commented on the exemption for the elderly and the disabled. If the beneficiary of the spare room wishes to stay where they are presently living, they can pay for that—that is a choice. If they feel they cannot pay for it, they can take in a lodger to help. That might not be ideal but where others are subsidising, it cannot be right that they should be subsidising a surplus. I find it curious that some Members of this House have been speaking in favour of that.
Of course, the real culprit where housing is concerned is interference by government. There are planning difficulties. I know of one housebuilder that reckons on 10 years between identifying and purchasing a site and building houses. I know of another housebuilder where the planning application was half a million pages long. There are building regulations and so on and so forth. If the same government interference in housing had continued in the motor industry, we would all now be driving Allegros and Marinas. Add to that the explosion in immigration promoted by Labour, it is hardly surprising that there are housing problems.
Baroness Blackstone (Lab)
My Lords, I declare an interest as the chairman of the Orbit Group, a large housing association. Like others, I am very grateful to my noble friend Lady Quin for introducing this debate.
There can be few people in this country today who do not believe that we face a serious housing crisis, which is blighting the lives of a growing proportion of our people. The causes of the crisis are complex and previous Labour Governments must take some share of the responsibility for not addressing them adequately. Nevertheless, the present Government’s policies are actually exacerbating the situation, not improving it.
I am especially puzzled as to why the Government have attached so little priority to providing the capital for a large housebuilding programme. I very much endorse what the noble Lord, Lord Shipley, and my noble friend Lord Whitty said about this. It is particularly bewildering in a context where such an investment would help to kick-start the economy and promote the increase in economic growth that we so desperately need. Perhaps the Minister can explain why the Government have done so little in this respect.
Some key statistics illustrate the extent of the housing crisis we are experiencing and demonstrate the wider problems of affordability that many people are facing, which my noble friend Lord Whitty commented on. I will turn later to the bedroom tax but must say that I find it curious—to use the phrase of the noble Lord, Lord Howard—that he has so little sympathy with those who have been affected by it, which in some cases amounts to cruelty.
If food prices had risen at the same rate as house prices since the 1970s, the average weekly shop for a family of four would now cost £453. House prices increased from 3.6 times to 6.5 times the average salary between 1997 and 2011. The affordability problem is most pronounced in the capital. Figures from the Land Registry show that house prices in London increased by 9.3% in the 12 months to September, meaning that the average house price is now £343,000 in London—more than double the average house price for England and Wales. Taking a 3.5 house price to income ratio, a household would need to earn almost £100,000 a year to buy in London.
Home ownership is in decline. It now takes 22 years for the average low to middle-income family to save for a deposit. Most people dream of owning their own house but are denied the opportunity to do so; 1.3 million families are struggling to pay their mortgage or rent, spending more than 35% of their net income on housing costs. This number is likely to grow as average rents in the private sector are increasing four times faster than renters’ wages. In addition, 13% of people have resorted to borrowing on a credit card to help pay for their housing costs.
There are 1.8 million families on waiting lists for social housing. During the financial year 2012-13, nearly 113,000 households in England applied to their local authority for homelessness assistance—an increase of 4% on the previous year. Last autumn there were nearly 2,500 rough sleepers on any one night in England—a rise of 31% from autumn 2010.
In spite of all this evidence of housing need, housebuilding has dropped to its lowest levels since the 1920s. Housing completions in England fell from 170,610 in 2007-08 to 107,820 last year—a 37% drop. Against this, around 221,000 new households are forming annually, yet in the 12 months to June of this year housing starts totalled 110,530, only half of what is needed.
In 1975 more than 80% of public spending on housing was spent on supply-side capital funding. The composition of spending has changed greatly since then. At present, for every £1 spent on housing only 5p is spent on capital funding while 95p goes on housing benefit. This is a truly grotesque statistic and I would be grateful if the Minister would tell the House why no capital programme of any size has been put forward to reverse it.
The impact of higher housing costs is spreading to a much wider group than those who find themselves completely priced out of a home: 22% of 18 to 34 year-olds—2.9 million people—live with their parents, and 17.8 million people believe that their children or future children will not be able to afford a decent home, dashing their aspirations for a decent quality of life for their children when they grow up.
I turn to the underoccupancy charge, known as the bedroom tax. I could produce many case studies revealing the problems that this has given individual people, but I shall give only one or two. They come from the Orbit Group. Miss B had been living in her home since 1992. Because she was unable to make up the shortfall in her housing benefit as a result of the bedroom tax, she had to leave her home, in which she had raised her children. She has mental health problems, which means that she needs the support of her family and friends, who would often stay the night to make sure that she was okay. She is now living in a one-bedroomed flat with no space for visitors and has moved to an area that she does not know and where she has no support network around her.
I take a second case. Mr and Mrs M have lived in their home for nearly 20 years, but were told last year that they were underoccupying and have had their housing benefit cut. Four years ago, they both had serious health problems, which had a big impact on their daily lives. Because of their health conditions, both rely heavily on the support of their children, who live on the same street. They were initially awarded discretionary housing payment by their council, but this has now stopped, and the council has told them that they will receive no further assistance because they are not considering moving to another area. Unsurprisingly, this has caused them an enormous amount of stress, and means that they are heavily reliant on their children for financial support.
A survey of 51 housing associations conducted by the National Housing Federation found that more than one-half of the tenants affected by the underoccupation charge were pushed into arrears in the first three months of the policy. One-quarter of those affected are in arrears for the first time. This is a very unfortunate outcome of the Government’s policy. According to its own impact assessment, the DWP estimates that two-thirds of those affected by the underoccupancy charge are disabled; 100,000 of these are living in adapted properties. Many of these people, if they move, will then require adaptations to be made in a new property, which will be very costly for the taxpayer. Perhaps the Minister would like to comment on that.
The Government’s discretionary housing payment pot, designed to protect the most vulnerable, is insufficient. The Papworth Trust report showed that three in 10 disabled people are being refused a DHP; 90% of them are having to cut back on food or utility bills, and one-quarter are cutting back on medical expenses. As my noble friends Lady Quin and Lady Hollis and the noble Lord, Lord Shipley, have said, there is an enormous shortage of smaller properties for people to downsize to. Across 60 councils, a total of nearly 170,000 households are affected by the policy, while there are only 9,000 one or two-bedroomed properties available in the local authority housing stock in those areas. If all the families hit by the measure wish to move into these one and two-bedroomed homes, only 5.6% would actually be able to do so. How absurd that is.
I conclude by asking the Minister, first, whether the Government will urgently undertake a re-evaluation of this policy, and will also have the courage to abolish it in the light of the evidence that it is failing. Will the Government halt the decline in social housing and help the 5 million people on local authority waiting lists to obtain a house that they can afford with the security that they need by having a major housebuilding programme? Without this, they will not be able to obtain in the privately rented sector either security or a property that they can afford.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, it is a privilege to be able to address your Lordships’ House on a subject so dear to my heart, and I thank the noble Baroness, Lady Quin, for presenting us with the opportunity. Like many before me, I suspect, I am somewhat surprised to be here at all in the first place. I thank my sponsors, my noble friends Lady Brinton and Lord Ashdown, whom I worked with for 10 years, for their patience and continued support in helping me to settle in. Everyone who has entered this noble House in the past has commented on the warm welcome they have received and the help and directions given by the staff. I add my name to that list. I also want to place on record my gratitude to my husband, daughter and son for their tremendous support and encouragement throughout my political career.
Next year is the 40th anniversary of when I joined the Liberal Party. During my political career I have been the leader of Somerset County Council and a vice-chair of the County Councils Network. I remain involved with the Local Government Association as a trustee of the leadership centre. I am now a councillor on South Somerset District Council, leading on troubled families, and chair its strategic partnership, so I am aware of the impact of the lack of affordable housing in rural areas.
I was born in a bomb-torn Bristol after the Second World War. Returning servicemen such as my father found that there were no homes for them to buy for their growing families. My parents, like others, lived with a parent, accumulating points to move up the list to buy a house. When I was three, we moved into a road of newly built houses taken entirely by young families. Today the issues are more complex and, in Somerset, the rising demand for housing and number of waiting applicants is growing. The average house price is many times the average wage. It would be extremely helpful if the Government saw fit to introduce an improved grant regime to support further investment for those unable to afford home ownership. It is important for the planning system to be pro-housing. The economic case is proven; the contribution, regionally and nationally, brought by housing associations building new affordable homes is £6 for every £1 of government grant. These developments create jobs, skills, apprentices and support local supply chains.
The consequential impact of the additional burden of ending the spare room subsidy may not have been adequately assessed before its introduction. There has been a disproportionate focus on the out of work, when the reality is that a high proportion of those affected work in low-wage economy areas, such as south Somerset, some in part-time employment, because full time is unavailable, or on zero-hours contracts, relying on housing benefit top-up to balance their budgets. The gap between the haves and have-nots has widened. This is unacceptable in Britain in 2013.
There appears to be a misconception around the difference between a house and a home. Creating a home requires effort and investment which will be made only if there is some certainty about the future. I am sure that the Government do not wish to destroy any idea of investing in homes or communities except for those able to afford a mortgage. In April, the number of households in arrears with one of our registered social landlords was 65. This has now risen to 397 for those affected by the charge. Most have managed to make some payment, but debt and arrears are rising, as, sadly, is the demand for emergency charitable food parcels.
It is important that the DWP considers whether there is a sufficient supply of appropriately sized properties available to those wishing to downsize. Those requesting to downsize have combined with those seeking to enter the affordable housing market, creating a high demand at one and two-bedroomed level. Meanwhile, families with a comparatively low-level need are being housed in three-bedroomed properties. Where no suitable property exists, there is the option of leaving affordable housing and moving to private rented property. However, rather than reducing the housing benefit bill, this is generally leading to an increase.
Rural exception housing in our smaller villages is largely two or three-bedroomed homes to ensure this meets the long-term needs of the community. Many communities make their homes in villages for life yet now some will be required to leave if they are unable to pay for underoccupancy as children leave home. Allocation of these houses is ring-fenced to those from the community or surrounding villages. Families with two children of different sexes, say aged seven and eight, will not be eligible for a three-bedroomed property in their village and may be forced out, while the three-bedroomed property they will require in two years’ time would be allocated to a family from outside the area.
Another impending contributing factor to the housing supply is the recent, welcome announcement on Hinkley Point C. According to EDF, the construction of Hinkley Point C will involve 5,600 construction workers and a further 20,000 to 25,000 support jobs over the seven years plus of the project. Of those, 5,000 jobs will be filled by existing Somerset residents. Beyond temporary accommodation for some construction workers, a high proportion will be housed within the existing rental market and through holiday accommodation. The impact across a 90-minute travel-to-work area will be marked, as the higher wages of EDF workers impact on the local housing market. EDF’s gain could mean the collapse of the private rented market for local people. Already, rents in this area are rising and will continue to rise as the low-wage economy of the region is priced out by the high-wage economy of Hinkley Point C. I look forward to speaking to my right honourable friends the Housing Minister, Stephen Williams MP—himself a Bristolian—and to the Secretary of State for DECC, Edward Davey, to see what solutions might be found to these local issues.
I fear that I have painted a somewhat gloomy picture but felt it wise not to underestimate the issue. It is only by realistically assessing the situation that we can find suitable solutions to take us forward.
Baroness Dean of Thornton-le-Fylde (Lab)
My Lords, I am delighted to congratulate the noble Baroness, Lady Bakewell of Hardington Mandeville, on her contribution, particularly as, like me, she has a home in the West Country. Her contribution this afternoon was very thoughtful, sensitive and realistic, knowing what is happening on the ground in so many parts of our country. I welcome her and look forward to listening to many of her speeches in future.
I thank my noble friend Lady Quin for obtaining what are in fact two major debates in this one three-hour debate. They are on very important areas. I welcome, too, the Minister to her new portfolio, though I doubt she will succeed in her continued search for a George Clooney in this area. She certainly has an extremely difficult and sensitive portfolio to deal with. The issue we are debating today will not go away. It will keep coming until we sort this out.
I declare two interests. I am the president of the Abbeyfield Association, which provides homes and residential accommodation for elderly people. I am also a very new member of the board of Places for People, a large registered social landlord but with a lot of commercial activities linked with that.
In the 12 months to June this year, 110,000 homes were started in Britain. That is 40% below the number started in 2006. We need about 250,000 homes per year and if we go on at the current rate we will be 750,000 homes short for our population by 2025. That is the size of the problem. Alongside that, we have the problem that many of us could not say what the Government’s policy is on housing. They do not appear to have either a medium or long-term policy on how we will address the housing shortage in this country.
We talk about affordable housing but the make-up of people who need it today is very different from what it was 15 years ago. Then, a young couple, whether single or getting married, who were in a profession such as nursing or teaching—that whole cadre—would have thought only of buying. Today we have two countries in England. We have London and the south-east, and we have the rest of the country with regards to the housing problem. Many of those young people who would have been able to buy can no longer afford to because of the cost of housing. The average age today of a first-time buyer is 37 years of age. The number of families living in bed and breakfasts is at a 10-year high. I was reminded of something as I thought about this debate: are we ready for another “Cathy Come Home” television programme? That seared this country into doing something about homelessness. We have 4.5 million people on the housing waiting list.
For the first time in 50 years, we have more people in privately rented accommodation than in what we call social housing—a dreadful term: it is the housing of local authorities or housing associations. Yet the average rent in the social sector is £83 a week while the average in the private sector is £164 a week and a typical mortgage outside London is £141 a week. If we are to tackle the cost of housing and support, we must do it in the private rented sector in particular. Part of the problem the Government have is that they do not seem to have a flexible policy at all. We need a policy on housing. How are we to address, in the medium and longer term, the basic housing shortage we have in this country?
A number of ways would contribute to that if the Government would but listen. For instance, they could form a national housing innovation fund which could be small, with small resources, but would encourage innovation and research. There is no doubt that the answer cannot be in one policy or through one channel alone. It can be supplied only by partnerships and consortiums, and by accepting and acknowledging that the private sector has a key role to play. Starts in the private building sector fell off a cliff in 2007. I know: I was at that time and until April this year a non-executive director in Taylor Wimpey housebuilders. We could see there what was happening and we knew that the impact would not just be then but would last for years and years. It takes time to buy land and get planning permission—although we never had anyone at any time who had to wait 10 years for planning permission. We need a policy on how we deal with this issue. That cannot be on just the purely rented sector; it must be different kinds of ownerships. People for Places, for instance, has 14 different schemes, including mortgage, shared ownership and a scheme I worked on some years ago when I was chairman of the Housing Corporation and was asked by my noble friend Lord Prescott to carry out some work.
A lot has been said about the underoccupancy charge. It is a cruel policy. I would accept totally that it makes sense for housing funded through the taxpayer to be used efficiently but you are dealing with people and their lives. Just to have one policy that is almost slash and burn, irrespective of circumstance, is so wrong. We were delighted at Abbeyfield that people in retirement were not affected by the underoccupancy rule. Could the Minister confirm that there is no intention to change that current situation? If it was extended to retired people, the problems we have now would look almost nothing to the real issues we would face.
I would like to talk about the impact of underoccupancy on registered social landlords. The policy only came in from April this year but arrears are going up substantially. There is no doubt about that. Underoccupancy of one bedroom cuts housing benefit by 14% and of two bedrooms by 25%. Where do those people get the money from to fund that? They cut back, obviously—they have to—but we also see an increase in loan sharks knocking on the door on Friday nights for their money. People are getting into personal debt that they cannot or are highly unlikely to meet. We have heard a contribution about the working poor. It is true that people in underoccupied houses are not just the unemployed. They are working people, trying to look after their families, whose pay does not give them enough. Why do not the Government get behind a living wage? That would help these people. They do not want benefit; they would prefer to pay for their own accommodation.
The long-term impact will be wider than the narrow band that we are seeing at the moment. For instance, it could affect the very viability of housing associations, because the level of their arrears is part of the consideration of their financial stability. They loan money in the private sector. They have to answer to the regulator. Rising arrears is one of the factors by which they will be judged.
That will impact on housing availability, because housing associations will retreat into what they have now. They will not expand; they will not need to. They will feel that they risk their balance sheet by expanding. That will substantially impact on our housing policy. Yes, associations are trying to help people with advice about budgeting and bank accounts. If only everyone could open a bank account. The banks need to know that people with a low income need to be able to open an account. How many banks actually go along with that and support those people?
This is a wide-ranging topic, and I look forward to the Minister’s answers on whether the underoccupancy payment is to be extended to the elderly, the retired—but, more importantly, just what is the Government’s housing policy to deal with this huge issue.
Lord True (Con)
My Lords, I declare an interest as leader of a London borough council and join others in thanking the noble Baroness, Lady Quin, for bringing what is a very important debate to this House. I add my congratulations to my noble friend Lady Bakewell of Hardington Mandeville on a very distinguished maiden speech. I look forward to working with her and my other noble friends on those Benches in supporting our coalition Government—sometimes with modified degrees of rapture, but we have managed.
Many factors contribute to housing pressures, and we have heard of many of them, including population growth, immigration, changing expectations about household formation, some related to past benefit policies, and factors limiting supply to the market. I should like to follow up a few of the points made by the noble Baroness, Lady Blackstone, about the London area. Heaven knows, in London, we understand the cry for affordable housing, whether for sale or rent. It may be that we have to ask ourselves whether we can overcome those difficulties without major policy changes. We all want to sustain mixed populations, but in many areas, embedded land values and limited development land mean that the prospect of providing large-scale affordable housing for sale or rent for all who might want it is slight. My local authority has raised affordable housing performance a little above that of our Liberal Democrat predecessors, but the numbers are still small, because of the factors that I described.
In some areas, we have to ask whether it is axiomatically correct that everyone should necessarily expect to find a home in the place in which they grew up. That may have been so in the past in, say, the close fishing communities, where my ancestors lived. They cast their nets on the cold North Sea and, many, sadly, drowned but, fortunately, not before producing children—at least, fortunate for me. However, in a more varied modern economy, that will not always be the case. Some areas will always be more accessible and affordable than others. In my case, I did not form a household in the place where I was brought up. Nor did my father; nor did my grandfather; nor, it seems, will my son. The same is true in the case of my wife’s family and, no doubt, that of many other families. It is a reality in a healthy economy that as localities evolve and change people will have to travel to find convenient homes that they can rent or afford to buy. This we should facilitate.
Too many policies work the other way. I should like to touch on something not yet referred to in this country, which is the cruel impact—we have heard the word cruel—of stamp duty in south-east England. That was something piled on by Gordon Brown from his very first Budget and not yet relieved by the coalition Government, although I welcome the action of the Chancellor to address the abuse of very expensive homes being bought by corporate bodies, which is distorting the London market. In London, and not just in the wealthier parts of London, a young, first-time buyer can be asked to pay close on £10,000 in stamp duty to buy a basement flat. I hope that my right honourable friend the Chancellor will find time when he can to address that.
Points have been made about the need for varying approaches in different areas. We may need in time to look at that. Like other noble Lords, I believe that local councils have a role in that. Lower tax is a good old-fashioned benefit, as the coalition Government showed by taking low-paid households out of the income tax that they used to pay under Labour. I would be looking to break down more of the barriers that cramp both construction and investment in the housing market.
Fewer people will downsize. We have heard about the importance of downsizing. I have to say that it is not only the fault of the Government if social landlords do not have smaller homes available. Investors must choose in what size of property to invest. In the private market, few will downsize electively, liberating more affordable homes to buy for growing families, when in many areas of the south-east, stamp duty will take £30,000 or £50,000 out of their accumulated capital. Few families will trade up to a larger home, liberating smaller homes, when the £60,000 or £70,000 they would have to pay in stamp duty could go on an extension. In some areas, the young family looking to move from a one-bedroomed home to a two or three-bedroomed home to buy finds nowhere to go. The behavioural impact of reducing stamp duty is clear from recent peaks and troughs in the statistics. Excessive taxation on housing transactions has an impact at every level, including a knock-on effect on the demand for social housing.
Turning to the social housing sector, it follows from what I have said about mobility that I welcome schemes supported by the Government, local councils, including Labour ones, and social landlords to promote the exchange of homes. I am glad that we have moved on from the initial dismissal of that by Mr Dromey. Indeed, I find much that is confusing about the Opposition’s position on the policy. They have admitted that they presided over an unsustainable growth in benefit. They claim to accept the need to address it, but, as we have heard today, they oppose the means, or at least this means.
No doubt the noble Lord, Lord McKenzie of Luton, who is always so admirably clear in his remarks in this House, will say in his wind-up whether a Labour Government would commit hundreds of millions of pounds to restoring the subsidies in housing benefit for spare rooms, which have been abated by this Government as part of one of their most popular programmes, tackling the benefit bill.
As others have said, through the local housing allowance and other policies, the previous Government were ready to attack underoccupancy in the private sector. Indeed, they took pride in the action that they were taking. Why should that be a taboo subject in the social sector? Much of the rhetoric about the spare room subsidy is, of course, based on genuine concerns—we have heard some good, strong arguments in this House—but some of it is also political rhetoric. It is called the bedroom tax, although it is neither a tax nor a levy specifically on bedrooms. My noble friends on the Front Bench should not neglect the battle of language that is always so well understood on the left in politics but less readily by my own party, as the rather terrible story of the community charge—aka poll tax—demonstrates.
It is agreed across the House that there are almost 1 million underoccupied rooms being paid for under housing benefit. Yet there are over a quarter of a million households living in overcrowded accommodation who need more space, and 1.8 million in England and Wales on the waiting list. Meanwhile, our country is still borrowing £13 million an hour and is short of public finance. Can underoccupancy be ignored in such circumstances?
Like most local authorities, my own has set up systems to monitor carefully the cumulative impact of benefit changes. So far, in our case, that impact is relatively small. Out of many hundreds of households which our officers contacted in a programme to help tenants, only 15 have so far left as a direct result of changes to the local housing allowance, although we will have to wait as tenancies run out to see the full effect. In terms of the underoccupancy rules, we were offered more than £400,000 to support discretionary payments. So far, we have had to pay down only £136,000, although the second six-monthly round will provide further evidence. The number of households in receipt of housing benefit remains almost constant.
To conclude, I accept that my authority is not a bog-standard authority and that we need to see more evidence but this does not bear out the more apocalyptic statements we have heard. The coalition Government are surely right to seek to bring fairness back to the system and make better use of social housing stock. I hope that my noble friend Lady Stowell, whom I, too, warmly welcome to debates on local government matters, will stick to her course.
Baroness Turner of Camden (Lab)
My Lords, I, too, would like to contribute to this debate. I thank my noble friend Lady Quin for introducing it and for the manner in which she did so. I also take this opportunity to thank the noble Baroness, Lady Bakewell, for a most interesting and expert speech on this subject.
We have often spoken about housing in this House and about the bedroom tax, which the Minister must know is deeply unpopular. Many vulnerable people have been distressed, particularly those who are disabled. The opposition to it is widespread, including in Scotland, where housing associations report that many people are already in arrears and fearing eviction. The same applies in Wales, where there are also problems. As we have heard during the discussion this afternoon, there are many instances of extreme distress, of which I hope that the Government will take note. It really is about time that the Government reconsidered this whole policy.
This is of course part of a wider discussion of housing in general, where I fear we have rather a crisis. This is particularly true of London and the south-east. We shall no doubt be told by the Government that one cannot talk about a housing crisis without reference to the economic situation, which they will claim is set to improve. It is true that the figures show that this is so for London and the south-east but I do not think it applies in the rest of the country. Indeed, manufacturing growth seems not to have improved in areas where it was hoped that the economy would be rebalanced.
In London and the south-east, everything is no doubt very good for those who are well off. For the remainder—the majority—that is not so. Housing costs have risen dramatically and are still rising, by more than 7% in the past year. People say that it is now even more than that. Things are particularly difficult for younger people, for whom unemployment figures are still high. The area in which I live was once regarded as one of the cheaper areas of Hampstead—it is adjacent to Kilburn—but no longer. It is now really expensive. The problem for younger people can be simply stated: private rents are too high and wages too low, while there is insufficient secular housing.
The Government will no doubt claim that they are attempting to deal with the cost of living and the housing crisis by introducing the so-called Help to Buy Scheme. Yet as many have pointed out, that could merely introduce a housing bubble like that which put housing out of the reach of many in the past. People are already struggling to make ends meet and are going to find it difficult to produce the requisite deposit. The scheme is likely to benefit those already in housing. It will enable people who are already not too badly off to climb further up the housing ladder by uprating. It will not help younger people, who are often in low-paid jobs, on to the housing ladder at all.
There is a further problem. Councils are having difficulty in coping with the lists of those who need social housing. Increasingly, they are having to look outside London and the south-east to access social housing for those who need it and who have not been able to be accommodated in that area. This means that the people so housed will have the expense of commuting, if they still have jobs in London, thus adding further to the expense involved. Moreover, it risks turning London and the south-east into an area where only the well off can afford to live. If you happen to be poor but hard-working, too bad—even if you have a job.
Previous generations have often faced housing crises. Just after the war, there was a shortage of housing. There had of course been the bombing and the destruction of large parts of London and the south-east. The Government of the day took very strong measures, with a lot of public support. They built the pre-fabs: small houses put up rapidly, which housed people very quickly and which still exist. The Government also took control of the housing market. While controls were placed on what could be charged by private landlords, there were rent tribunals which made decisions in line with what people were earning. So, despite the shortages and suffering caused by the war, people realised that everything possible was being done to help them. That is not the situation today.
It is only too clear that if you have the money, you are going to be okay. If not, well, join the queue for secular housing, where you will be very lucky if you are accommodated. This is a grave and serious situation, particularly in the London and south-east area. We all need policies for more secular housing, which we have been told is planned. On the other hand, that is for the future and we have a crisis now. Measures are therefore needed to cope with that crisis. I hope that the Government realise how very severe the situation is in the London area.
Lord Greaves (LD)
My Lords, I declare my interest as a member of Pendle Borough Council and as a vice-president of the Local Government Association. I, too, thank the noble Baroness, Lady Quin, for sponsoring this important debate, which has resulted in a number of extremely important speeches. I particularly associate myself with the remarks of my noble friends Lord Shipley and Lady Bakewell of Hardington Mandeville. I very much welcome her here as another local councillor, who I hope will continue to give us the benefit of her local experience in this great Chamber, which in my view too often behaves as if it were the Westminster parish council.
The noble Lord, Lord Whitty, put his finger on an important issue: that 30 or so years ago, there was a very significant change of policy, in which support for social housing and council housing, as it mainly was then, moved away from supporting what people then called bricks and mortar to supporting people. It all sounded right and there was a general political consensus in favour of it. When I did not agree I always thought that I was little Johnny out of step, but it has been disastrous. As the noble Lord said, housing benefit is a matter not really of benefit policy but of housing policy, and the sooner that we start to debate it on those grounds, the better.
The noble Lord, Lord True, who has just left for a moment, said that some of us would support the Government in various ways, with “modified degrees of rapture”. I have to say that my degree of rapture on this subject with regard to the Government is modified. Having said that, and in saying how much I support what was said by the noble Baronesses, Lady Quin and Lady Hollis, the noble Lord, Lord Whitty, and others on the Labour Benches, I say very gently that they should remember that we had the opportunity in this House to stop the bedroom tax when it was going through. The noble Lord, Lord Best, who is not here today, moved amendments to do away with it, and we could have stopped it. Between us, we failed, so we should all remember that. However, we are where we are.
I stand here fully in support of the policy of my party, the Liberal Democrats. I remind the House that we are still, and I hope will always be, a democratic party that meets twice a year and decides our policy in open debate in a democratic way. When we met this year in Glasgow, we passed almost unanimously a resolution that had the full support from all parts of the party, from top to bottom. It said that we were, effectively, against the bedroom tax. It supported the Scottish Liberal Democrats, who had passed a motion against it, and said it believed that:
“The majority of rural and urban areas outside large cities such as London have insufficiently large, diverse and dynamic social housing markets to make moving into a smaller property locally a viable option”,
and of course we know that is true in other areas, too. It continued:
“There is lack of appreciation of the housing requirements of children and adults with disabilities and care needs … Insufficient funds are allocated to Discretionary Housing Payment Funds of Local Authorities”,
and so on. I do not have time to read it all out, but noble Lords will get the gist that it was pretty critical. It welcomed:
“Scottish Liberal Democrats passing a motion against the policy”,
and,
“reports that some councils will not evict those in arrears”,
for that reason. It encouraged the Government to have a review of the whole policy, which I believe is now taking place as a result of pressure from the Deputy Prime Minister, and called for no withdrawal of housing benefit from those who are on the waiting list for social housing that fits the current guidelines within their local area, and no reduction in housing benefit from their projected housing need for those who, for a period of less than six months, temporarily have a small housing need due to a change in their circumstances but whose need will predictably return to a higher level—for example, children who pass the age limits for separate rooms within that period. There are quite a few ameliorating measures that the Government can and should take now in order to prevent some of the cruelty that is occurring as a result of this policy. Of course many of us would like them simply to abolish the policy, but I do not think they will do that in the short run.
The other part of the motion refers to affordable rents. The problem with affordable rents is that the words have an ordinary meaning that people will assume them to have, but the way in which they are now used by the Government and the Homes and Communities Agency is as a very specific technical phrase. As some noble Lords have already said, in many places they are not really affordable, so what they are called is not an accurate description of what they are.
I have some evidence for that from my own authority in Pendle. The HCA affordable homes framework covers the period 2011-15. It introduced a new affordable rent product that replaced the previous social rent model. Registered providers therefore cannot obtain funding to develop housing for social rent now; they have to go to affordable rents, and rents for these properties can be charged at up to 80% of market rates. What is called an “affordable” rent is related very closely to market rates. This approach is designed to give providers more income to build affordable housing, as the assumption is that market rents will be significantly higher than social rents, hence borrowing capacity will be increased.
The problem in areas like the one where I live and am a councillor is that housing is relatively cheap to buy, and levels of rent in the private sector are also therefore relatively cheap. For example, for a two-bedroomed flat where the social rent might be £65.06, in the example that I have been given by my officers, the affordable rent per week—that is, 80% of the average market rent in the private sector—is £83.07. For a three-bedroomed house, the affordable rent would be £87.69 per week. These are cheap rents relative to many parts of the country. Low differentials between market rent and social rent put registered providers developing in low-value areas at a disadvantage, because the figures basically do not add up.
Coupled with the change from social rent to affordable rent is a reduction in the grant level in the current HCA programme. The average grant for an affordable rent property is now around £22,000, but for a social rent property in the previous programme it was around £50,000.
When you take into account the cost of building the property, the revenue that comes in from rents over 30 years and the management costs and assumed refurbishment costs during that time, that simply does not add up for a lot of these properties. The council puts money in, in the sense of free land for sites for these properties, but it still does not add up. Up to now the council has been able to use right-to-buy receipts that it still has in the bank to subsidise this operation, but that will not be possible in future. For pieces of land that the council owns, which are perfectly remediated and ready to build on, the figures simply do not add up to build new properties, or they are very marginal.
I was asked today to give a quote for eight new properties that have just been built for affordable renting in my own ward, built by the council’s own company for the main housing association in the area, which runs a form of council housing. We think that eight properties is a great step forward, but we are not going to help the Government very much with their targets unless the basic rules behind what we are trying to do are changed and made more favourable to us.
Lord Morris of Handsworth (Lab)
My Lords, as we have heard, the House thanks the noble Baroness, Lady Quin, for her initiative in securing this important and timely debate. I declare an interest as chairman of Midland Heart Housing Association.
This debate is driven by two negative factors: the decreasing provision of affordable housing, measured against demand, and the impact of the spare room tax on both tenants and providers. It is common ground that in England the shortage of affordable housing is now over 100,000 per year, and at the current rate of growth will shortly exceed 150,000. Demand for extra homes in England is now estimated to be over 200,000 properties a year, which means that even if housebuilding output was increased by 4.5%, it would be 2022 before we got back to 2007 figures.
As we have heard, the issue of affordability is not confined to London and the south-east but is to be found across the length and breadth of the country. In 55% of local authority areas, fewer than one in 10 available properties are affordable to a working couple on average wages with, say, two children. The Help to Buy scheme is seen as an instrument that will fuel increased demand and put up house prices but not address the fundamental issue of lack of supply. It certainly is not doing that. That is a pretty unanimous view across the board. There is only one man in the United Kingdom who cannot see the problem and that is the Chancellor. Until recently, providers of affordable housing have been focusing on building family homes and moving away from smaller units, but the impact of the bedroom tax has now set that trend in reverse.
Let me now say a few words about the underoccupancy charge. It is fair to say that few policies have been more controversial in the current Parliament than the Government’s decision to reduce the amount of housing benefit available to social housing tenants who have one or more unoccupied bedrooms. Even the name invites controversy. Campaigners like me have labelled it the bedroom tax, which is what it is, while the Government have called it a spare room subsidy, which it is not.
One of the primary criticisms against this policy is that the measure will not achieve the so-called objective of freeing underoccupied properties. Tenants are downsizing in any event not because of the effectiveness of the policy but because of pure and simple unaffordability. Frankly, there is insufficient stock of the appropriate size in the social-rented sector to meet this demand. A survey of 51 housing associations around England, carried out by the National Housing Federation, found that 51% of residents affected by the bedroom tax have been unable to pay their rent between April and June. This situation is likely to get worse as discretionary payments provided to customers hit by large charges are withdrawn. There is concern among some of these groups, including those paying in full, as the impact on their ability to pay for other essentials, such as food and fuel, leaves them with the stark choice of eating or heating.
My organisation, Midland Heart, continues to see an increase in people leaving their homes following the introduction of the welfare reform programme. Demand for one-bedroomed homes has increased, and exceeded demand for two-bedroomed homes for the first time. It is now common to have more than 200 people applying for a one-bedroomed property in cities such as Birmingham in the West Midlands. There will be a price to be paid: families forced to live in overcrowded conditions with nowhere for children to do their homework and the dignity of family life undermined.
Clearly a tension arises as the current model for delivering new affordable homes is predicated on providers increasing rents to 80% of the market rate, and that in turn puts pressure on the housing benefit bill at a time when such charges are under huge pressures. Individuals face major difficulties as they seek to make the necessary underoccupancy adjustments. The challenge is therefore to fulfil the desire to provide much needed housing while ensuring that it is affordable to the most vulnerable in our society. That is a challenge to government and to society.
Lord Stoneham of Droxford (LD)
My Lords, I declare my interest as chair of Housing 21 and offer my congratulations to my noble friend Lady Bakewell on her maiden speech. I hope that it is the first of many contributions to housing debates in the House in future.
At this stage of the debate a lot of the points have already been made, and I do not think there is much point repeating them. I shall concentrate on a few issues. I think there is common agreement that no Government in the past 30 years have had a housing record that they could be really proud of. The housing sector has been dominated by catastrophic cycles of boom and bust. We all recognise that there is a need to build more than 200,000 units annually and consistently to meet the demands of household formation, and we have failed miserably. There has been a huge problem of selling off our social housing stock: 2 million homes since 1979. As we heard from the noble Lord, Lord Shipley, the previous Government saw a net loss of 400,000 units from our social housing stock. Now we are reaping the consequences.
I shall concentrate on supply issues but first I shall make two brief comments on the spare room subsidy clawback. I do not have a problem with the principle of the policy: there is an issue of equity with the private rented sector, and a problem with the imbalance between underoccupancy and huge demand for social accommodation. However, we have warned about the transition problem that results from retrospective implementation of the clawback without the availability of sufficient smaller accommodation. We need to concentrate on the transition, but the principle is right.
Secondly, I pay tribute to the staff in the social housing sector, particularly in housing associations and local councils, who have been grappling with the issue of tenants who have had to incur significant extra expenditure when their household budgets are already tight. The information I am getting is that efforts in that direction, and the extra resources provided for that sort of advice and assistance, are helping to keep arrears at lower levels than might otherwise have been expected. It is an area that we should learn from and concentrate extra resources on.
I turn now to the longer-term issue of housing supply. The issue is how we are going to build more affordable housing in future. If we are going to advocate that, we have to say how we are going to fund it and achieve it. This Government have had to face appalling problems in the housing sector. Let us remind ourselves—I do not think that we have done it much in this debate—that, arguably, the heart attack which our economy experienced was sourced from the overindulgence, credit expansion and speculation in the housing sector. It was inevitable, certainly for the first couple of years of this Government, that confidence, finance and capacity simply fled the housing sector.
In 2009, Tony Pidgley, group chairman of Berkeley Group Holdings, said to me, “Never forget that housing is a cyclical industry and you need two to three years’ cash up your sleeve to survive the years of famine that follow the years of plenty”. In 2009 he had £300 million in cash to keep going for three years with no house sales, if he needed to. In fact he did not need to use it but he had it there. The trouble was that many other developers did not have it and, as a result, capacity has suffered. There are now fewer larger developers and self-builders and thousands of skilled workers have simply left the industry.
Nobody has mentioned the fact that the housing sector is at last showing signs of life. In the past quarter there was a 25% increase in completions, housing starts were up by a third and stamp duty revenues were up. The Government have retained their target of building 170,000 extra affordable homes by 2015. I hope the Minister will tell us what progress the Government are making on that . It is clear that there will be terrific pressure in the next two years to meet that target after a slow start. There are signs of a pick-up, however, and it is still achievable.
How will we fund and build more affordable housing? That is the issue. The first priority in the current circumstances, as the market is beginning to pick up, is to beware of house price inflation. As we know, that is a sign that everything will eventually end in tears, with unfavourable consequences for new buyers and for the cost of building new affordable housing. The Government must watch the market like a hawk and should consider adopting a regional focus for the Help to Buy scheme if there is any sign that the London and south-east property prices are getting out of hand.
The noble Baroness, Lady Blackstone, who is sadly not in her seat, mentioned that 95% of the subsidy to housing is spent on the revenue side and only 5% on capital expenditure. The current government policy of using affordable rents to fund housing for the future is, of course, more expensive in the long term. It is understandable in the short term when there are problems with the borrowing requirement, but this is not a sustainable policy in the long term if we want to have more social housing while reducing the amount spent on housing benefit.
Housing associations have limited borrowing capacity. They certainly have enough, it is said, for the next four-year cycle. However, we will need additional funding beyond this capacity and it should be the role of government to help to find it. One of the areas mentioned in this debate, particularly by my noble friend Lord Shipley, is the borrowing potential of council revenue accounts to add to our funding capacity. I will not go into the detail as I think the arguments have been well made. We simply need a review, particularly with the economy improving, to look at whether this can be done in the near future. It is absolutely essential as we need that funding capacity.
The other thing that the Government have initiated, and on which I would like to hear a progress report from the Minister, is the matter of guaranteed bonds. The scheme has had little publicity but considerable sums have been put into it. It has the potential to achieve lending facilities with lower interest rates for both housing associations and the private rented sector and could be an important tool for funding affordable homes and housing generally in the future. I hope that my noble friend can tell us what extra capacity the Government believe the scheme can provide in the next two years.
Finally, one of the paramount needs is for a long-term and focused government housing strategy. That will depend on finding new funding facilities. We will need help in opening up complicated sites, finding extra sources of land and ensuring that our technical colleges turn out trainees with the skills that the construction industry needs. I have to ask why the Government have downgraded the role of housing in government—we no longer have a Minister of State with responsibility for the subject. Surely we need somebody higher than an Under-Secretary of State to lead in this important sector if we are to improve the performance in building new houses, particularly social housing. Consistency of delivery, a consistent medium-term policy and a strong Minister are the essential requirements for a successful housing strategy.
Lord Sawyer (Lab)
My Lords, I thank the noble Baroness, Lady Quin, for initiating this debate, along with the noble Lord, Lord Whitty. I also congratulate the noble Baroness, Lady Bakewell of Hardington Mandeville, on her maiden speech, and offer congratulations on her 40th anniversary as well.
I am the last Back-Bench speaker; many people will be pleased about that. This has been a good debate and people really understand this issue about tax. I was going to speak about the tax. I now do not intend to do so because it has been said so well so many times. Instead, I will offer a few reflections on how the issue makes me feel and how it affects the life I live in the community in which I live and which I care about. My overriding feeling about the housing issue is depression. The noble Baroness, Lady Bakewell, said that her contribution was slightly in that vein. I think it is almost impossible to see it any other way. The statistics, the evidence and the experience of people who care about and need housing has been quite unsatisfactory for many years.
In a way, my generation has let our children down. The noble Baroness, Lady Turner, spoke about what happened after the war. My parents’ generation really rolled their sleeves up and did something about the housing shortage, about the bomb damage and the slum clearance; they really tackled it. For many reasons which we have heard this afternoon, we have not been able to do that. We have left our children with some awful housing problems to face.
I listen to what has been said and I hear people with vast experience speak about policy, a critique of a policy, a new policy and so on, and I do not think that is what we need. Policies are no longer enough. We have heard this afternoon about poor-quality housing, overcrowding, homelessness, soaring prices, the private rented sector boom, extortionate rents, the buy-to-let boom, brownfield sites, green-belt sites, high-rise versus low-rise and funding issues. Is that an agenda that needs another policy? I do not think so—it needs something bigger than that. It needs a much bigger vision, a strategy. It needs a strategy which cannot be brought forward by this Government because it is too short term. We really need to be looking at the contenders for the next general election and for the London Mayor and to ask them, “What is your vision? What is your strategy? What have you got to say about solving this housing crisis?”. It is that big, and that is the sort of thing that it needs.
Then I look around me at where I live and the people I care about. Part of my family is living in London now. I look at what is happening in London and at the developments which have taken place. I look at the Shard and the price of flats there, the Cheesegrater, the Walkie-Talkie, the development in Vauxhall, and I think, “My goodness me. This city is on a real roll. It is undergoing a commercial, economic and business boom the likes of which none of us has seen in our lifetime”. Then I think, “What is happening to us?”—that is, what is happening to me? What is happening to my family and to people who do not actually live or work in these places and cannot afford to live there? What is going to happen to us? That is where we get back to the bigger picture of the strategy for housing people in London.
I do not know whether noble Lords read Michael Goldfarb on London in the Observer a couple of weekends ago. I thought it was a really powerful article. He said that the property market in London is no longer about people making long-term investments and owning their own home, but a place for the world’s richest people to get a return of about 10% at an annualised rate by buying houses there. In 2012, an extraordinary £83 billion of flats were purchased in London without mortgages and no financing. He also said that with extra foreign and domestic millionaires and billionaires, it is not just the rate of return but the coalition’s tax regime. Britain has a corporate tax rate of 23%, due to come down to 20% in 2015. In Germany it is 29%. Again, while the majority of London citizens pay up to 40% or more of their incomes to maintain services in London, the rich pay taxes in small change. His answer was a mansion tax.
I can certainly indentify with this. I can see a rich person’s London which does not affect me, my family or my neighbours. That has to be addressed. There must be a way of making sure that the same attention is given to ordinary people and their housing needs as is given to big business, capital and commerce. There has to be a way of doing that. As the noble Lord, Lord Shipley, said, the responsibility to make that case rests at the door of the politicians. It will not be made by business people or commercial people; we have to make the case for as much attention for the people that we want to house as business and commerce manage to make for the people that they represent.
Those, therefore, are my thoughts on the debate. I am glad that the noble Lord, Lord True, is back in his place. He said that nobody has a right to live where they were born, and I think that that is probably accepted. However, people have a right to a home in the place where they live and work. We are not talking about everyone staying where they were born but about being able to find a job and have a home where they can easily and without too much difficulty travel to the place where they work. That is what the aim of the big picture strategy needs to be.
I was not going to speak about the bedroom tax, because it has already been covered. However, the noble Lord, Lord True, provoked me into saying that everyone calls it a bedroom tax because it feels like a tax. The amount is taken out of your benefit at source and you are left with a rent bill that is beyond your means. The Government cynically believe that the poor will find the money, but of course many cannot or they find it only because they deny themselves other basic things such as heating and food, and they may get some way forward by asking their families for help.
Data from the Notting Hill Housing Trust show that about half its affected customers pay the shortfall in full, and only one in 10 makes no effort to pay. In reality, of course, the Treasury has already banked their money, contributing millions to the Government’s cuts programme. The local authorities and housing associations have to try to get this money from the tenants on benefits, who are by definition the poorest people in Britain. It is not easy, but as has already been said today, the shortfall will be borne by social landlords and it will no longer be the Government’s problem.
It is pretty brutal for the people who are having their benefits cut. I am on their side and I have no doubt about that or problem with saying it. I am on the side of the poor, the needy and all the people who legally come to work in this country, whatever their nationality. Those people have a right to live and to eat in the same way that I have—I do not see any distinction. If I have a home and job and the wherewithal to have a decent standard of living, I expect it for everyone in this community, regardless of their origin or their birth.
Finally, I am now looking ahead, to the next Government and the next Mayor of London, to give us some hope for the future. I have been here for only 15 years—other noble Lords have been here longer than me—and I must have taken part in about 12 to 15 debates on housing, maybe more. They have not made the slightest bit of difference and none of the policies that have been tried by any Government or party has solved the problems. I therefore look to the future for something much more imaginative and engaging, which can get this nation fired up to do something about housing needs and the young people we are letting down so badly.
Lord McKenzie of Luton (Lab)
My Lords, like other noble Lords I will start by thanking my noble friend Lady Quin for leading on this first-class debate, the focus of which is the availability of affordable housing and the impact of what—the noble Lord, Lord True, notwithstanding—I shall continue to call the bedroom tax. I offer my congratulations to the noble Baroness, Lady Bakewell of Hardington Mandeville, on a very impressive maiden speech and I have no doubt that her expertise in local government will be put to good use in this House. I am sure that she is disappointed at having just missed the Local Audit and Accountability Bill, but I can promise her much more excitement in the future.
We should acknowledge, as have most noble Lords today, that we face the biggest housing crisis in a generation because of the long-term failure of successive Governments to build enough housing to meet a growing need. That issue will not go away. For many, the desire to own their own home has shifted from being difficult to being frankly impossible, with home ownership falling for the first time in a century. There are now nearly 9 million people in private rented accommodation—a largely unregulated sector—who spend on average 41% of their income on rent. There are 5 million people on the list for social housing and we know that there is an increase in homelessness and rough sleeping.
We can only begin to tackle this crisis if we build more homes of all tenures. As the noble Lord, Lord Stoneham, said, this means a long-term effort. In the past three years the number of houses built has reached its lowest level in peacetime since the 1920s, but it is welcome news that new building is picking up, albeit from a low ebb. However, we are still starting to build less than half the number of homes we need to build each year. Can the Minister say whether the Government are still guided by the 2008 household projections, which imply an overall need for new homes—affordable or otherwise—of 230,000 each year until 2033? If not, what is the new projection and what level of annual new homes provision are the Government working to?
Given the demise of regional spatial strategies, the determination of housing needs is to be driven by a bottom-up approach. Can the Minister also say how current local plans underpin the Government’s affordable housing programme, and how many local authorities have in place a strategic housing market assessment and a strategic housing land availability assessment? How do these correspond to the overall numbers the Government propose for this and the next spending round?
As we have heard, the programme for affordable housing comprises some 170,000 new homes for the period to March 2015, although 70,000 of those were commissioned by the previous Government and 165,000 back-end loaded for the period to March 2018. We will have to see what gets delivered, but that is not a step change on what has gone before.
We have heard about the previous Government’s record. They were faced with significant competing priorities for housing investment. They had in particular to deal with the stock of social rented housing which had generally been starved of funding. Rotting windows, outside toilets and poor or non-existent insulation could not have been ignored. Had we done so, the consequences today, especially with soaring energy costs, would have been distressing indeed. In 1997 the Labour Government inherited a £19 billion backlog in repairs, but brought 1.5 million social homes up to a decent standard through the Decent Homes programme. Notwithstanding that, we still built 500,000 more affordable homes during our time in office and delivered 256,000 additional affordable homes in our last five years. Between 1997 and 2010, nearly 2 million more homes were built in England.
So far as this Government are concerned, we have seen the switch in the funding model—my noble friend Lord Whitty in particular referred to this—for the provision of affordable housing from capital to revenue with the halving of grant funding, and we heard about the initial negative impact of that on delivery. Can the Minister give us any information about the numbers and spread of properties now let at “affordable” or intermediate rents, and any figures for the estimated increase in housing benefit payable as a result of social rents being payable at this higher affordable rent level?
For us, Ed Miliband has set out the ambition of building 200,000 homes a year by the end of the next Parliament—which is just a start. He and Hilary Benn have asked Sir Michael Lyons, supported by a panel of experts, to lead a new housing commission to look at the policy solutions needed to deliver the step change required to close the gap between housing demand and current levels of delivery.
At present, we know that some areas want to grow to meet local housing need but do not have the land within their local authority boundary to do so. Neighbouring authorities too often block the building of badly needed homes, particularly affordable homes. That is why we propose that local authorities should have a new “right to grow”, with bids to the Planning Inspectorate leading to the requirement that neighbouring authorities are required to draw up a joint plan. We would also like to see local authorities given strengthened compulsory powers so they can buy and assemble land which is being hoarded and is holding back development. There should be powers to charge developers who sit on land with planning permission.
The last time we faced such a big need for housing, new towns and garden cities played a big part in meeting it. We need to build new institutions and incentives to help deliver this, and we look to local authorities to engage and take this forward. Given the need for more social housing, it is surely time to look again to local councils to play a larger role. Many would welcome this and some—mostly Labour—councils are already beginning to build on a scale not seen for a generation. Of course, that would involve looking at the financing arrangements for local authorities. There is much else to say on that but time does not permit me to go into it.
There must be a fair basis for supporting those who need help with housing obligations. At the very time when there is a switch to funding affordable housing by revenue support rather than capital, we see attempts to cut back housing benefit through the bedroom tax. Working-age renters of affordable housing are the direct targets of this draconian measure. Let me be clear: we consider this a cruel, misguided attempt at behavioural economics which has already caused great hardship and distress to the vulnerable and disabled. We have heard some individual stories today and there are doubtless many more. This measure is already putting people into debt and leaving them with impossible choices regarding how they spend meagre budgets. We know that it is distorting the allocation of properties, with larger properties lying empty and pressure on rents for single-bedroomed accommodation.
As usual, Ministers have sought to justify this policy by setting one group against another—underoccupiers against those who live in overcrowded accommodation and those in the private rented sector against those in social housing. Then we get the small pot of extra discretionary money, which is supposed to cover all the problems that might arise but, of course, never does—the “loaves and fishes” money in the terms of my noble friend Lady Lister.
Noble Lords will be aware that the Government expect to save some £450 million, gross of DHP, in the first year of this programme, but this is on the assumption that tenants caught by the provisions will generally sit tight and take the hit—a cynical approach to policy-making, as my noble friend Lady Hollis touched on. However, the Centre for Housing Policy, referred to by my noble friend Lady Quin, has worked with four significant housing providers, looking at the early data to test some of the DWP assumptions on savings, and has concluded that the suggested savings are likely to be substantially lower than the impact assessment suggests. In particular, it suggests there has been an underestimate of the proportion of those underoccupying by one bedroom who will move, and of the proportion of those who move who will go to the private sector. It suggests that for some who move to housing associations at so-called affordable rents the housing benefit bill will rise, and some vacated homes will be taken up by new households claiming housing benefit for the first time.
This early study suggests that savings might be between 26% and 39% less than originally predicted—a very substantial difference. This is before taking account of the additional challenges the policy presents to providers. RSLs will doubtless invest to support their tenants and will also carry an increased burden of tenant debt which they have to manage; and this at the same time that universal credit is coming down the track, albeit slowly.
We are absolutely clear that we will abolish the bedroom tax and have given detail of how we would fund that commitment. That includes taking away some tax breaks from hedge funds and the nonsense of selling employment rights for shares. If, in doing so, we are joined by the noble Lord, Lord Shipley, and other Liberal Democrats, we would very much welcome that. However, the challenge in the mean time, before we get to do this, is for providers, support services and families to help those affected through the misery it is creating.
Lord McKenzie of Luton
I think there is great confusion in that regard, although I am not sure that there is confusion in the noble Lord’s mind. However, confusion has been spread about trying to equate those two tenures. They are completely different so the argument does not follow through to the LHA arrangements.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Stowell of Beeston) (Con)
My Lords, I start by congratulating the noble Baroness, Lady Quin, on securing this debate. While we have differences of view, we all agree on the importance of affordable housing. I am grateful to the noble Baroness for giving us the opportunity to debate this important issue. I also welcome my noble friend Lady Bakewell of Hardington Mandeville and congratulate her on her maiden speech.
We have covered a huge amount of ground and I know that I will not be able to reply to all the questions that have been put to me, but I will ensure that, where I fail to do so, I follow them up in writing. I start by addressing the issue raised by my noble friend Lord Shipley, which was echoed by many noble Lords, including the noble Lords, Lord Whitty and Lord Sawyer, as regards the most important issue being that of increasing supply and the number of affordable homes available to everyone in England. That is why, because it is so important that we increase supply, we are building more of those homes. More than 150,000 new affordable homes have been delivered in England over the past three years.
Our Affordable Homes Programme is generating nearly £20 billion of public and private investment to deliver 170,000 new affordable homes between 2011 and 2015. I say to my noble friend Lord Stoneham that we have already delivered more than 80,000 of those, and around £23 billion of additional public and private funding will help deliver another 165,000 new homes over three years from 2015. All this adds up to being the fastest annual rate of building of affordable homes for at least 20 years. As the noble Lord, Lord McKenzie, and others have heard me say in other housing debates to which I have responded in the past couple of weeks, this compares with the figure under the previous Administration, where the number of affordable rented homes fell by 420,000.
I am grateful to the noble Baronesses, Lady Blackstone and Lady Dean, for their realistic assessment of the previous Government’s performance. However, the noble Baroness, Lady Blackstone, was wrong to claim that things are getting worse because if we focus specifically on council housing we see that more council housing has been built in the three years of this Government than in all the 13 years of the previous Labour Government combined. As regards the increase both in specific council housing and the affordable housing to which I have just referred, it is important to bear in mind two things. The lack of supply under the previous Government occurred during a boom period whereas we are trying to increase supply and tackle the deficit at the same time. That leads me to respond to the point which I think was first raised by the noble Lord, Lord Whitty, but was certainly echoed by the noble Baroness, Lady Blackstone, and the noble Lord, Lord McKenzie, in criticising our policies on affordable housing. It is because of them that less government capital grant is required in terms of building. This means that we can build more affordable homes for every pound of upfront government investment using affordable rent. My noble friend Lord Stoneham questioned whether this was a sustainable approach in the long term. I think that I am just over my three-week anniversary in the job so I do not feel qualified at the moment to get into a detailed debate on that. However, I say to all noble Lords that we are increasing the supply of affordable housing—all noble Lords in today’s debate seem to be united in that request—at a time when we are also dealing with the deficit, so we are having to balance those competing needs.
Noble Lords also asked whether we were using other measures to increase supply. I should say to my noble friend Lord Stoneham, who asked about guarantee bonds, that up to £3.5 billion in government-supported guarantees will be available in the affordable homes guarantees programmes, but we have yet to get the approval of the first of those.
My noble friend Lord Shipley and the noble Lord, Lord Whitty, asked about the capacity of councils to borrow more money to build more affordable housing and whether the Government could raise the borrowing cap. Because of the competing objectives of retaining or bringing down the deficit and trying to stimulate new builds in local areas we do not feel that it is right to lift that cap. However, it is important to note that not all councils are borrowing up to their cap and it is possible from self-financing for councils to have a new source of revenue that was not open to them previously.
The noble Baroness, Lady Dean, asked how innovative we are being. We are certainly looking at a range of options whereby we can provide grant funding towards building new homes, which would first be let at affordable rents but give those tenants the first option to buy. In all of this area we are trying hard to fulfil the absolutely important objective that we all share, which is increasing supply, and we are making positive inroads in that area.
I am not going to get into a lot of detail about the wider issue of housing supply beyond affordable housing, except to say that I disagree with the noble Baroness, Lady Blackstone, and others who said that our efforts are not bearing any results. Housing supply is at its highest since the end of the boom in 2008, with 334,000 new homes built over the past three years. Only last month the Chartered Institute of Purchasing and Supply said that houses are being built at the quickest rate for a decade. The latest GDP figures showed that 2.5% was from construction output and jobs in the construction industry are up 9,000 on last year. I therefore agree that this is an important area but progress is being made.
While there is pressure on us to deliver more new homes, we also have to make the most out of existing stock. We are giving landlords the freedom to do that. The noble Baroness, Lady Dean, was right to highlight how things have changed in terms of those who now need access to social housing than perhaps had been the case 15 or 20 years ago. Some people may need social housing for life but for many others it should act as a stepping stone or springboard that provides stability and support for only as long as it is needed. Councils and housing associations can now offer short, fixed-term tenancies as well as lifetime tenancies to new tenants where it makes more sense. We have made sure that councils can decide who qualifies for social housing in their area while finding alternative solutions for those who do not qualify. I was moved by what the noble Lord, Lord Sawyer, said about people having a right to a home where they work and live. I agree with him about that but our changes to the law via the Localism Act mean that councils have much greater flexibility than they had in the past in terms of their power to respond to the crucial issue that the noble Lord raised.
Before I move on I should mention something that no one has raised in this debate. An important point for us not to lose sight of is that the Audit Commission estimates that around 98,000 social homes in England are being unlawfully occupied and that social housing fraud is costing us an estimated £1.8 billion a year. To try to drive that down because we need to make strong inroads in this area we are giving £19 million over four years to local authorities to help them tackle fraud in social housing. We are also funding a team of experts at the Chartered Institute of Housing who offer free help to landlords on how to tackle fraud and underoccupation.
Let me move on to the other issue raised in our debate—the removal of the spare room subsidy. The first thing I would say is that we in this Government strongly believe that removing that subsidy returns fairness to housing benefit through levelling the playing field. People who receive housing benefit when renting privately, as we have just heard in the exchange between my noble friend Lord True and the noble Lord, Lord McKenzie, have long been entitled to benefit for the number of bedrooms that they need. The Opposition have said that they will reintroduce the spare room subsidy for social housing, but if I understood correctly the point that the noble Lord, Lord McKenzie, was making in his exchange with my noble friend it is the Opposition’s position that they will not extend the reintroduction of that subsidy to those who are in receipt of benefit but in the private rented sector.
Lord McKenzie of Luton
Usually the questions go the other way but let me be clear. We see these two types of tenure as being quite different. My noble friend Lady Hollis stressed this point. A person’s council house tenancy is allocated at the time on the basis of their needs. If their need changes over time a change is made. It is different from short-term tenancies in the private sector where there is a much higher turnover. We do not see the two as being the same.
Baroness Stowell of Beeston
I am grateful to the noble Lord for that clarification. I understand the point that he and the noble Baroness, Lady Hollis, have made, but what I have been trying to outline regarding the use of existing stock and more innovative ways to address the need for social housing of all kinds—particularly in relation to the point made by the noble Baroness, Lady Dean—is that we need to ensure there is a level playing field in the way we deal with different people.
Lord McKenzie of Luton
If that is the proposition, how is there a level playing field when someone who is supposedly underoccupying has no effective means of downsizing within any reasonable space of time or to any reasonable geographic location?
Baroness Stowell of Beeston
I will come on in a moment to transitional arrangements and what is in place to support people affected by the removal of the spare room subsidy.
As my noble friend Lady Seccombe reminded us, pensioners are not affected by this measure, and I am happy to reassure the noble Baroness, Lady Dean, that there is no question of that position changing. The focus is on working-age people who are better able to improve their financial position and make up any shortfalls, and there are a number of other exemptions in addition to pensioners.
Baroness Hollis of Heigham
The noble Baroness implied that working-age people are able to work but she will know that two-thirds of those affected are disabled families for whom the option of increasing their income is minimal.
Baroness Stowell of Beeston
If I may, I will move on in a moment to how we are helping those who require special support.
Removal of the spare room subsidy is also in part helping us get to grips with the housing benefit bill, which has grown to £24 billion this year and nearly doubled under the previous Government. I promise that I will come back to the remarks of the noble Baronesses, Lady Hollis and Lady Quin, on savings estimates. While it gives me no pleasure to say this, given the spiralling housing benefit bill it cannot be right, as my noble friend Lord Howard of Rising said, that the taxpayer should continue to pay for homes that are too large for the household’s needs. Before we made the change, up to 1 million spare bedrooms in working-age households in England were being paid for by housing benefit.
As I have acknowledged, we are in a transitional period, with both landlords and tenants facing change. The Government are investing heavily in new affordable homes and we have to get that supply coming through. Over time we think that there will be more efficient use of social homes, with the spread of accommodation being more appropriate for the area as a result of the measures we are introducing. However, getting there will take time, which is why we have made available £405 million of discretionary housing payments over this spending review period. The noble Baroness, Lady Blackstone, said that that is not enough, but we have trebled the DHP budget to £190 million this year. I think that it was my noble friend Lord True who talked about how his council is drawing on that fund and how other areas are adjusting to the new situation.
It is early days but I can report in general terms that councils are using the fund to give awards where it is clear that the claimant is unable to make up the shortfall. This includes longer-term awards, including, as the noble Baroness mentioned, to disabled claimants living in significantly adapted homes, and short-term support—for example, to help people who have been off work due to illness but are due to return soon, and people engaging with their landlord in attempting to downsize.
However, many people are of course already managing the change. Among those who are out of work, some are finding work for the first time, some people already in work are able to increase their hours and others are able to move to smaller accommodation. In the two and a half years between the policy being announced and it being implemented, local authorities, landlords and tenants in some areas started to prepare for this change. Because time is limited I shall not go into the detail but Westminster, for example, has used a scheme to ensure that support is available for those who want to downsize. Likewise, the council in Salford is running schemes to help to bring together tenants who may be interested in swapping their homes. My noble friend Lady Seccombe referred to HomeSwap Direct. Through this scheme, for the first time, social tenants who want to swap their homes can now see every available property, thus boosting their chances of moving. More than 10 million searches have been made on that website since it was launched a couple of years ago.
My noble friend Lady Seccombe mentioned some other schemes which support pensioners who, although they are not required to move, might want to downsize. My noble friend Lord Stoneham made an important point when he highlighted the effort made by some responsible local authorities and housing associations to advise tenants on financial management to avoid getting into arrears.
We are taking proper steps to make sure that we understand how the removal of the spare room subsidy is working. We have commissioned extensive research, which will provide evidence of how this and other welfare reforms are working in practice. I can reassure my noble friend Lord Shipley that the interim evidence on the removal of the spare room subsidy is due to be published next spring. In the mean time—I mean this absolutely sincerely—I acknowledge that it is inevitable that we will hear stories, which, albeit anecdotal, will be concerning and upsetting, about whether this is a policy that we support in principle or oppose. However, we believe that it is too early to draw conclusive evidence from the emerging data on how the policy is operating at the moment. We want to make sure that sufficient time is allowed to pass so that we can reach a fully informed view on the impacts on both landlords and claimants. As I have said already, I make it clear that we are committed to giving proper consideration to all that evidence. We will publish it, and be held to account for it, next year.
In conclusion, as I said at the start, this Government are committed to building more new affordable housing and we have made a strong start in putting right the previous decline. We are committed to making the best use of the existing stock of housing and have changed the law so that local authorities and housing associations have more freedom. We are also committed to supporting people who are not yet able to buy or rent on the open market but who, in time and with the kind of support that we are offering across the board, could realise their aspiration to do so.
As always, I have learnt a great deal today. The noble Lord is about to stand up and ask me a question, so before I sit down I shall give way.
Lord McKenzie of Luton
I have a very simple question. Obviously in the time available the Minister has not been able to answer all the questions that have been put to her. Will she undertake to look at the record and write to noble Lords where appropriate?
Baroness Stowell of Beeston
Absolutely. I said right at the beginning that I would do so and I am happy to repeat that. I shall ensure that I write as quickly as possible to all those who have contributed today and place a copy in the Library.
Baroness Quin
My Lords, given the list of speakers, I expected that we would have a well informed debate and I certainly have not been disappointed. Many important contributions have been made during the past three hours.
I add my own congratulations to the noble Baroness, Lady Bakewell, on her excellent maiden speech. It was very good that she chose to make it in this debate, where her experience at local government level was highly relevant.
A great deal has been said about the bedroom tax and what we should call it. The noble Lord, Lord Greaves, reminded us of earlier debates on the subject in this House, including the amendments put forward by the noble Lord, Lord Best, who I think is credited with coining the expression “bedroom tax”, so perhaps we can see this as a Cross-Bench initiative.
The impact of the tax has been referred to by many people and, not surprisingly, there have been different experiences. The noble Lord, Lord True, spoke of his experience in Richmond upon Thames, which, I think, after the City of London is the wealthiest area in London in terms of average household income. My noble friend Lady Turner also spoke, in a very interesting and well informed speech, about the London situation. She made points that we should certainly consider. However, other areas around the country were also mentioned: Birmingham; the north-east, which is my area along with the noble Lord, Lord Shipley; the south-west; and, indeed, East Anglia.
I am glad that issues wider than the bedroom tax were also raised, particularly by my noble friend on the Front Bench.
We expected the Minister to give a robust speech and she did. She said that the policy will be better evaluated over time. Even so, I would ask her to look very seriously at all the current evidence about the people who are obviously losing out in a very distressing way. I think that there is a lot of evidence and I hope that she will carry our concerns about this very important issue to her ministerial colleagues across government.
Meanwhile, once again, I thank everyone who has participated in this debate.