Housing and Related Jobs (Greater London)
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Simon Hughes (Bermondsey and Old Southwark) (LD)
I thank Mr Speaker for choosing this subject for debate today. I welcome the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Keighley (Kris Hopkins) to the first debate that I have had with him on such issues and to his new responsibilities.
For the 30-plus years that I have had the privilege of being a Member of Parliament in Bermondsey and Southwark, housing has been at the top of the political agenda for my constituents. It is what they come and see me most about—they need more and better housing. We need more affordable housing of higher quality to meet the demands in a community such as ours. It is not that the local authority has not played a fundamentally important part; we have the largest local authority housing stock in London and one of the largest in the country. There is also significant housing association housing, and we have one of the highest proportions of shared ownership in the country. We have also seen considerable growth in owner-occupation over the years. It was only 2% when I was first elected and is now well into double figures.
As the Minister and everybody in London knows perfectly well, however, the legacy that this Government inherited has meant that we have seen relatively less housing being provided to meet the need in London. I am happy to give credit where it is due. More local authority housing was built under the Governments of Mrs Thatcher and John Major than thereafter, but we then had a period when, although money was spent by Government on bringing homes up to a decent standard, we did not build new local authority housing. We therefore have an accumulative deficit in housing need.
The other self-evident factor is that London has the greatest gap in the country between average family income and the average cost of a home. Both rental costs and purchase costs are far greater relative to income in London than anywhere else. We have a real crisis that the Government, to their credit, have sought to address. I am here to urge the Government to do more and to come up with specific proposals. In particular, I am here to place on the record in Parliament some of the recommendations of a report, which the Minister has now seen, commissioned and worked on by my colleagues in the Greater London assembly, who put forward proposals for how we can increase not only the number of properties built, but also the number of jobs created as a result. There is no better way to increase jobs and apprenticeships than through the construction industry. My constituency, like all others, will benefit from that upturn in jobs, and there are many who would want to work in the construction industry.
At our party conference in September 2012, my colleagues made housing a priority and specifically asked for various things. People can look up the full motion that was passed, but we wanted the Government, the Mayor of London and local government to
“stimulate a major programme of house building, increasing the rate of construction until we reach at least 300,000 houses a year”—
across the country—
“using untapped sources of finance and giving more freedom to social landlords, local authorities and local communities”,
and radical steps to be taken
“to improve land supply, through releasing public land with ‘build now, pay later’ deals.”
I persistently return to this issue.
I initiated an Adjournment debate in the summer on foreign purchases of properties in London. We have seen growth in the number of people purchasing from abroad and in the number of properties built and offered for sale abroad before they are offered for sale at home. That has caused particular anger and frustration. It has driven up prices, because if properties are opened up to the global market—Malaysia, Singapore and other places—and advertised to people who see London as a good place to invest in housing, the general price goes up because sellers can get higher prices for sales abroad. If local people cannot even get access to bid for properties until after they have been sold—on-plan or off-plan—to someone far away, that is a double frustration. That has been a real cause of grief and frustration to my constituents, in particular around the Elephant and Castle, where a huge development is ongoing, and elsewhere.
I am pleased that the message has got through and that local developers are now making commitments to offer property for sale locally. I am still frustrated that my local council, which Labour still runs, does not insist that the planning conditions that are meant to be applied, specifically that all developments should contain 35% affordable housing, are adhered to. That condition is regularly opposed or not fulfilled when planning permission is granted. I was particularly pleased, however, that the Chancellor responded specifically to the issue in the autumn statement as a result of, I hope, my debate, but also the propositions of others, and announced that, in the following financial year, any non-UK purchaser of residential property who sells a property will pay capital gains tax on that sale, as everybody else does. That has corrected a real injustice where residents in the UK felt that they were being penalised when those who came in from outside were not.
In October, against this background, my colleagues at the London assembly, Stephen Knight and Caroline Pidgeon, produced a report entitled “Affordable Homes & Jobs for London: A Seven Point Plan”. I thank them for their work and the Secretary of State for Business, Innovation and Skills for launching the report in Southwark. I will not repeat the history of difficulties, but I want to highlight one or two things before I concentrate on the proposals for how we get out of the difficulties and increase the Government’s current plans. We have a
“historically low cost of public borrowing”,
which is a plus, a
“high economic multiplier for investment in construction”,
which a plus, and a
“high level of spare capacity in the construction sector”,
which is again a plus. At the moment, we are placing
“13,000 homeless households into temporary accommodation”
in London every year, for which the best estimate of cost
“is £408 million every year”.
The best estimate for the cost to the taxpayer of poor housing is
“£17.5 billion a year in crime prevention, health costs and the loss of children’s future productivity”.
There are still lots of people in emergency temporary accommodation and in overcrowded homes, huge numbers on waiting lists and, as I indicated before, a multiple of 12.5 times the median income for London property prices. Furthermore, private rent levels have risen by more than 11% since June 2012.
The Mayor has his policy, and a draft housing strategy is out for consultation, so I encourage people in London to respond—the deadline is in February. I hope that people who read and hear our debate will look at the consultation and respond. Slightly, if not very frustratingly, when the report was compiled only 737 homes had been started by the Mayor in London this year, and only 5,225 homes had been built on GLA land, although the commitment was to build nearly 40,000. He therefore has a long way to go.
The Government have introduced policies that have certainly initiated significant new development of affordable housing. I hope that we are on target to deliver by the end of the Parliament much more affordable housing England-wide than in the previous Parliament—although the definition was changed—but we are still falling badly behind comparable countries. The report gives a table of the increase in housing completions since 2010 in the UK, Belgium, Finland, France, Switzerland, Poland, the Netherlands, Denmark, Sweden, Germany and Norway: all the others have achieved many more housing completions than we have. We have to be more ambitious. I remember, though I was not politically alert at the time, one of the great legacies of Harold Macmillan was building “homes fit for heroes”. We had a huge housing building programme after the war, as we did after the recession in the ’30s. I am clear that we need that sort of action now.
There are proposals for the Greater London authority to increase investment in and use much more GLA land for affordable homes, but I will speak about matters that the Minister and his colleagues in the Department for Communities and Local Government can deal with specifically. One thing is already on their agenda, which I welcome. This very week, the Minister sent me and colleagues a letter announcing the allocation for the new homes bonus; my local authority has received £10,845,251, according to the letter—I do not doubt the figure. This is a good initiative of the Government, and we welcome it. I am conscious that the GLA has experienced some top-slicing, which is controversial; none the less, the new homes bonus is allowing us to build many more homes and I am positive about it.
I want to propose, however, that the Government could usefully look again, and more boldly, at the housing revenue account and the way in which local authorities can deal with it. I ask the Government not only to take the welcome steps in the autumn statement—allowing shared spend of money up to the housing revenue cap—but to scrap the housing revenue account borrowing cap, allowing London boroughs to invest in affordable housing under prudential borrowing rules.
I want, too, the Government to increase their investment in affordable homes, shifting the balance of spending from housing benefit to bricks and mortar. We are in a nonsense position in this respect at the moment: for the four financial years of the current affordable housing programme, £4.5 billion is being invested by the Government to support the creation of affordable homes; over the same period, however, the Government are also spending an estimated £95 billion on housing benefit. In London, in 2011-12, £5.9 billion was spent on housing benefit alone; about half of that, or £2.6 billion, would provide 111,000 extra affordable homes.
I appreciate that we have to have the homes first, before we can move people from privately rented accommodation, where the rents are high, into much cheaper accommodation, which is their own. Of course there is a cycle, but it cannot be beyond the wit of Government to think of ways in which to forward finance that, so that we can build more quickly, move many more people into affordable housing and reduce the housing benefit bill, which I am sure that colleagues in the Department for Work and Pensions would wish. Only 11% of the annual housing benefit spend in London for four years would seem to be enough to fund 111,000 extra affordable homes.
On the benefit for jobs in London, the reality is not only that all the house building would produce extra jobs in the construction sector, which has the capacity—housing associations, too, have capacity, because I have spoken to them and they have confirmed it—but that there is opportunity for full-time employment and for apprentices. Eighteen per cent. of all small and medium-sized enterprises in London are in the construction sector. In the first quarter of 2013, however, the balance of construction employment in SMEs fell faster in London than anywhere else in the UK. Less than 20 years ago, more than two thirds of homes were built by companies employing fewer than 500 people; by 2012, only 27 companies were responsible for 70% of the housing starts in London. SMEs in construction have been squeezed, therefore, and some have left the market altogether.
The last benefit of such a programme is the apprenticeships. The Government have done a huge amount on apprenticeships, which I welcome, as the Minister would expect, but he knows about the capacity to recruit and retain other people as apprentices, who would then go on to the construction industry as a whole. In Southwark, we are bidding to have a university technical college in Bermondsey to specialise in construction skills, as well as in health service-related skills, because we believe that the market is there.
I will end with one encouragement to the Minister. I understand that the Treasury rules always make such issues difficult, because the Treasury counts local authority borrowing as public sector borrowing. I have, however, talked to the housing associations in London, which have been extremely helpful—there are 16 big ones and more than 300 smaller ones—and they are beginning to find ways of expanding the amount of social building. By and large, they are not simply building conventional, rented affordable homes; they are building homes that they sell at market rates and that they rent at market rates, allowing them to use private finance in their associations and so to cross-subsidise the affordable rented accommodation—so much so that associations such as London & Quadrant are now beginning to be able to relet and let their new affordable housing not only at the Government’s affordable rent—up to 80% of market rent, or even 60%—but even at target or social rents, which really meets the need.
As my last Christmas proposal to the Minister, I ask him to take back to Government the request that they should look at liberating local councils to do the same sort of thing, so that they can access not only the Treasury and public money, but the private sector, and lead in the regeneration of London’s housing. If we could get house building going in London, the land accumulation is waiting and ready. If we could add more incentives to the tax system so that people do not sit on land, but develop it, there would be huge benefit socially, to family life, relationships and mental and physical health, and economically. I hope that the Minister can be encouraged, but also encouraging, and go back to his Department to say, “We must do more, and we will find ways of doing so.”
The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)
It is a privilege to serve under your chairmanship, Mr Bayley. I thank my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) for his generous comments, which are much appreciated.
I came into the Chamber towards the end of the previous debate, and saw many Members enthusiastically contributing to a half-hour discussion on VAT and sixth-form colleges. My right hon. Friend and I see housing as an important issue, so it is somewhat sad that only he and I are here now to contemplate the matter. I am sure we will not agree on all the issues that he raised, but I acknowledge the spirit in which he has approached the debate.
I also want to acknowledge the comments my right hon. Friend made about Margaret Thatcher and John Major, which are appreciated, as well as his recognition of the interventions that the Chancellor has already made to address concerns about foreign investors. I intend there to be a strong relationship between housing associations and the Department, so if my right hon. Friend has ideas for specific interventions in that sector that he would like to see developed further I encourage him to write to me with them.
I appreciate the opportunity the debate gives me to consider the document that my right hon. Friend mentioned, “Affordable Jobs & Homes for London: A Seven Point Plan”, and I am pleased to respond to the debate on behalf of the Government. In doing so, I must stress that the Government are fully committed to seeing the supply of all types of housing increase, not just affordable housing. Through a balanced package of measures targeting both supply and demand, we want everyone to be able to access the home that best meets their needs.
London is experiencing rapid growth. Although that is good for its economy, it puts massive pressure on its housing. However, we are responding to that pressure. Over the Mayor’s two terms, more than 100,000 low-cost homes to rent or buy will be built, providing quality homes for around 250,000 Londoners. That represents the highest number of low-cost homes delivered in the GLA’s history. Around 67,000 have already been delivered.
My right hon. Friend suggested that the Mayor should borrow against the GLA’s annual revenue stream to increase investment in affordable housing in the capital.
Kris Hopkins
Increased borrowing would only be a short-term approach and would not be sustainable year on year. The GLA already receives substantial capital grants to invest in affordable homes. The Government have provided £1.1 billion to the GLA from 2012-13 to 2014-15 to deliver affordable housing in London.
However, the Mayor recognises that more needs to be done. In his draft housing strategy, the Mayor has set out ambitious plans to double output, including an annual target to deliver at least 42,000 market sale, private rented and affordable homes, which is more than at any point since the 1930s; new funding of £1.25 billion to support the delivery of 45,000 low-cost homes from 2015 to 2018; and £160 million for a London housing bank to speed up building on large sites.
My right hon. Friend mentioned the use of GLA land. In 2012, the GLA inherited 625 hectares of land from the Homes and Communities Agency, and it is vital that a significant part of that is used for new house building. The GLA is already utilising land and property assets to drive economic growth and housing supply of all tenures. Much of that land has already been developed. Around 130 hectares have been released so far, with a gross development value of £3.6 billion. For instance, in recent months, contracts have been exchanged in the Silvertown quays and Royal Albert dock area, with a capacity for 1,500 homes and 29,000 jobs.
The GLA is also driving regeneration schemes through grant funding and infrastructure investment at Greenwich peninsula, Barking riverside, Kidbrooke in Greenwich and Woodberry Down in Hackney. Those four developments will provide in excess of 30,000 homes of all tenures. The GLA is using, and will continue to use, its public land holdings to deliver new homes in London.
My right hon. Friend suggests that the Government should scrap the housing revenue account borrowing cap, enabling London boroughs to invest further in affordable housing through prudential borrowing rules. I must stress that the Government’s first priority is to reduce the national deficit. Allowing councils unlimited borrowing would increase that. With the introduction of self-financing in April 2012, London boroughs collectively had about £1.4 billion extra headroom to invest in housing if they chose to do so. We recognise that some councils may need additional borrowing, which is why we announced in the autumn statement an additional £300 million of borrowing capability, which individual authorities may use on housing if they so choose. We expect that to support around 10,000 affordable homes over 2015-16 and 2016-17. The provision will be allocated through a competitive bid process.
I reiterate that the Government are committed to building more affordable housing. More than 170,000 new affordable homes have been delivered in England over the past three and a half years. In comparison, between 1997 and 2010, under the previous Administration, the number of affordable rented homes fell by 420,000, as my right hon. Friend pointed out. Our affordable homes programme is making almost £20 billion of public and private investment available to deliver 170,000 new affordable homes between 2011 and 2015. Some 98,700 affordable homes have been delivered through the affordable homes programme since it started in 2011, which is more than half way towards delivering the 170,000 new affordable homes we expect by 2015.
Up to an additional 30,000 homes will be delivered by March 2017, supported by a share of the £10 billion housing guarantees scheme and grants of £450 million. Around £23 billion of additional public and private funding will deliver another 165,000 new homes over three years from 2015. That will be the fastest annual rate of building of affordable homes for nearly 20 years.
We are also committed to boosting the supply of all tenures of housing and are investing in expanding the wider supply of housing. Housing supply is now at its highest since the end of the unsustainable housing boom in 2008, with 400,000 new homes built over the last three years.
I agree with my right hon. Friend that it is vital that Londoners—and everyone else around the country—are equipped to respond to the housing demand and to take advantage of the new jobs created by an increase in house building. That is why the Government have a range of measures and schemes in place to ensure that that happens.
My right hon. Friend talked about small and medium-sized enterprises. We have a shared desire to increase the number of homes built. Part of that will be to get all builders—not just the big six but small and medium-sized enterprises—developing new homes. The Government are playing their part in improving demand through schemes such as Help to Buy equity loans. Some 87% of builders out of the 939 registered with the scheme are small builders building 40 units or fewer. We are working with the Department for Business, Innovation and Skills to ensure that small builders are aware of the business bank, which includes schemes to provide lower levels of development finance guarantees.
We have introduced a range of measures to support apprenticeships. The Government introduced the apprenticeship grant for employers in February 2012, which pays £1,500 per apprentice to support employers of up to 1,000 employees taking on a new young apprentice aged 16 to 24. The Government fully fund the training costs for 16 to 18-year-olds to provide an incentive to employers to take on a younger person. For apprentices aged 19 and over, the Government will pay 50% of the assessed cost of the framework.
In conclusion, I acknowledge the scale of the challenge in London, which we and the Mayor are dedicated to tackling. Our housing strategy adds to a balanced package of support for both supply and demand.
Question put and agreed to.