Housing (Right to Buy) (Maximum Percentage Discount) (England) Order 2014
Baroness Stowell of Beeston
That the Grand Committee do consider the Housing (Right to Buy) (Maximum Percentage Discount) (England) Order 2014.
Relevant document: 2nd Report from the Joint Committee on Statutory Instruments
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Stowell of Beeston) (Con)
My Lords, this order was laid before the House on 5 June. As the Prime Minister and the Chancellor of the Exchequer both recently reiterated, helping people buy their own home will always be part of this Government’s policy for housing, so I am delighted that the reinvigorated right to buy has already helped over 19,500 households achieve their home ownership aspirations since April 2012.
It is not just about buying but about building. Over £419 million from these right-to-buy sales has been ring-fenced to help local authorities fund new homes for affordable rent. Already, 3,000 new homes for affordable rent have been started on site or acquired by local authorities through additional right-to-buy receipts since April 2012. This includes authorities from across England such as Camden, Birmingham and Cornwall, to name but a few.
When we reinvigorated the right to buy in April 2012 by increasing the maximum cap to £75,000, we committed to keeping the discounts under review to ensure that they remain effective in helping people turn their home ownership dreams into reality. That is why we increased the maximum cash cap for social tenants in London to £100,000 in March 2013 in recognition of the unique nature of the housing market in London. It is why we are proposing, through a separate order, to increase the maximum cash caps annually in line with the consumer prices index rate of inflation, and it is also why we propose, through this draft order, to increase the maximum percentage discount available for houses across England from 60% to 70%.
This change, if it is approved, will provide tenants with a clear message about the discount levels available for all eligible tenants. It will ensure that those living in houses will be able to accrue the same maximum percentage discount as that available to those living in flats. Long-term tenants of houses will benefit from this policy—often those who have committed to the area for 30 years or more. Affording them the same opportunity to access up to the maximum percentage discount of 70%, just as their peers living in flats can, gives them every opportunity possible to achieve their home ownership aspirations and leave a legacy for their families. The revenue from additional sales will be ploughed back into delivering new affordable homes for rent.
The draft order also includes important transitional provisions, which will apply for this year only, to ensure that no eligible tenant currently in the right-to-buy application process misses out. Equally, however, we are mindful that some people who are near to completing the purchase of their property may not want to take up the new discounts, and the draft order will allow them to opt out if they wish.
We have listened to representations from social tenants who have asked to be allocated the same equality of opportunity as their friends and neighbours who are able to buy flats. My officials have also spoken to the Local Government Association and the National Housing Federation, as well as to social landlords.
Bringing parity between the maximum percentage discounts for all properties, combined with the changes we are making to increase the maximum cash caps, is the right thing to do to help more social tenants exercise their right to buy. I commend the order to the Committee.
Lord McKenzie of Luton (Lab)
I again thank the noble Baroness, Lady Stowell, for her clear introduction of this order, which deals with the maximum percentage discount. There are separate arrangements dealing with the change to the cap. The Labour Party supports those who want to buy their own home, which is why we support the right of tenants to buy their council home, including the preserved right to buy. However, at a time of national housing crisis, we do not want to see the stock of council homes diminished.
The Government have claimed that homes sold through the right to buy will be replaced one for one. Indeed, in March 2012, Reinvigorating Right to Buy and One for One Replacement stated:
“For the first time, every additional home sold under Right to Buy will be replaced by a new home for affordable rent”.
I shall probe that proposition a little.
The Government’s figures appear to show that currently for six homes sold, only one has started to be built. The evidence of the LGA during the passage of the Deregulation Bill was that in many local areas one-for-one replacement simply is not possible. As the LGA also made clear, replacement homes are not necessarily like for like. The rents in replacement homes will be higher, meaning the rents are unaffordable to many tenants and will increase the housing benefit bill. The houses are not necessarily the same size and may not even be in the same area. The LGA also expressed concern about the impact of these arrangements on councils’ business plans.
I shall ask the Minister a few questions. For a start, can she clarify the position of those who are deemed to underoccupy their social housing and who would, if they are on benefits, currently be subject to the bedroom tax—or, in the Government’s terms, have their spare room subsidy withdrawn? Should somebody exercising the right to buy and underoccupying their property be eligible for the full discount? Can the Minister confirm that, although the information we have before us for this order refers to the need to have at least five years as a public sector tenant, the Deregulation Bill reduces this qualifying period to at least three years? Assuming that the Bill is secured by the Government, it will provide that the qualifying period is to operate from a date determined by the Secretary of State. Can the Minister let us know what the Government’s intention is in respect of the starting date of those provisions? If this provision takes effect, will the starting discount rate still be 35%, with the additional 1% accruing after three years rather than after five years?
The assumption about the ability to replace one for one is that it would be at an affordable rent. Can we have an update on the definition of affordable rent in these circumstances? How does this replacement work where the sale is through preserved right-to-buy arrangements or previous stock transfers? Can we understand how many of the current sales are under preserved right to buy rather than the normal routine arrangements?
As for the changes that have taken place, there are changes to the cap: there will be CPI uprating of the cap—the qualifying period is going to be reduced to three years—and there is this change to the maximum discount. What are the estimates of the take-up that each of these changes has generated, and the estimates of the number of replacement homes? More specifically, I am trying to understand the financial model that drives the replacement arrangements—and, in a sense, who makes the decision. Is it always the council?
If we are talking here about a council that has sold the house and is in the driving seat in determining the nature of the replacement, in what circumstances is there wider provision by and engagement of government in the process? Having had one read of the documentation that was produced, it is less than clear to me. It is one of those issues that requires quite a lot of study. If the Government’s contention is that there is going to be one-for-one replacement, who is driving that? Who makes the decision about the nature of the replacement—the nature of the property that is going to replace the one that is sold—or its specific location? Is that primarily always the local council? At what stage is there a national or central input to that decision-making?
As I said, we will not oppose this order but we are seeking to understand how real the commitment is to one-for-one replacement, which we think is a very important part of the right to buy.
Baroness Stowell of Beeston
My Lords, I am grateful to the noble Lord, Lord McKenzie, for clarifying that his party supports the right of people living in council homes to buy them. This is something that we feel very strongly about. It is an important right that we want to see more people have the opportunity to exercise than has been possible over the past few years, because the reduction in discounts had rather diminished the number of houses that were being sold to people. We wanted to change that, because we believe that owning your own home is an important aspiration for people and we wanted to make sure the opportunity was widely available to as many people as possible.
Lord McKenzie of Luton
Before the Minister sits down, may I return to the issue of numbers? I thought I heard her say that the issue of one-in one-out applied to additional housing sales. Is that right or are we talking about the total sales here, minus perhaps the preserved right-to-buy disposals?
Baroness Stowell of Beeston
We have always been very clear that the right-to-buy scheme is about generating money that is used to construct replacement homes. The money comes from the sale of houses under the reinvigorated scheme. We are committed to that. As the noble Lord acknowledged, both his Government and my Government previously did not make that commitment to take steps formally to use receipts from housing sales to build new social housing. This Government have made that commitment but we said specifically that we would do so on the basis of the additional homes resulting from sales under the reinvigorated scheme.
Lord McKenzie of Luton
I am not sure that that was clear. It was certainly not clear to me that it applied only to additional sales. I took the replacement arrangements to be that every council house that was sold would lead to another one being provided at an affordable rent. If I understand the noble Baroness, she is now saying that that is not the case and that it is a question only of housing under the reinvigorated arrangements. I am not sure how that sits with the additional housing which is above and beyond that which was assumed in business plans and reflected in local authorities’ housing revenue accounts. Which is it? Does the commitment apply only to those additional sales, or additional sales minus the preserved right-to-buy ones?
Baroness Stowell of Beeston
All sales of council houses clearly generate income that returns to the Exchequer. That has been the case since right to buy was first introduced. That money will be used for a range of purposes. When this Government came to power, we introduced a reinvigorated scheme to encourage more people to buy their council homes than had done so over the preceding years. We wanted to make it possible for more people to purchase homes. When we did that, and because we knew that it would lead to an increase in purchases of council housing, we said that the money received from the sales of houses that were made available under the reinvigorated right to buy would, for the first time, go right back in full to the local authorities that had sold those properties, and they would have to use that money to build replacement social housing. That had never happened before; that is what is new, and that has been the policy since it was introduced.
Lord McKenzie of Luton
Could the Minister explain which houses are deemed to be sold under the reinvigorated right-to-buy arrangements and which are otherwise?
Baroness Stowell of Beeston
I think that I will need to follow up this debate with a specific letter that covers some of the specific detail. What has happened in terms of business planning is that, clearly, local authorities were preparing for sales on the basis of the previous scheme. On the introduction of the new scheme, sales have increased; when sales have increased in the light of us reinvigorating the scheme, and there is an increase above and beyond their estimates, the money goes straight back to local authorities. It has never happened before. That money must be used for the construction of new homes.
Lord Deben (Con)
May I say how pleased many of us are that we have at least moved to this stage? It means that at least some of the money that goes from selling council houses goes back to building new ones. The trouble is that the Minister is saying, rightly, that this is the first time that this has happened, which is true—but both sides of the House should be pretty ashamed of what has happened before.
The truth is that the sale of council houses, for it to be sensible, should mean that you sell a house to somebody who lives in it and it is therefore not vacant for anyone else to live in, then use the money towards building houses that are not lived in and which new people can move into. At long last, we are doing this. But let us not kid ourselves—neither the Labour nor the Conservative Party has done this before, and that is what was wrong about the whole system. It was supposed to be circular and, as usual, the Treasury pinched the money, under both Labour and Conservative, because the Treasury never changes. So congratulations—and I hope that the Minister will press for all the money to go to local councils for this purpose.
Lord McKenzie of Luton
To be fair, I think that, in the past, not all the money was snaffled by the Treasury—I think that 25% went to local authorities. I was not pressing the point to be pedantic, but because it is a very bold statement about replacement to say that you will sell one house and another will replace it. That will be a very important policy, but as we pick away at it we see that it is not quite like that; it does not seem to be every house that is sold that will give rise to this replacement.
I am not sure that we can take the discussion much further, as I think that we need some facts and clarification on this. I would be very grateful if the Minister would write on this and share the answer, because my understanding is that the Government’s position is not as strong as I had understood it to be from the pronouncements that they had made on this.
Baroness Stowell of Beeston
I am grateful to my noble friend for his intervention. I am absolutely clear, and I know that the Government have been very clear, in introducing the policy that they did—and as my noble friend has reinforced, this is the first time that it has ever happened; it has not happened before—the change in policy was about ensuring that the money raised through the sales of homes in addition to those that were forecast would go straight back to local authorities for building new homes.
I understand my noble friend’s point about whether there is scope to do more. There is always, of course, scope to do more, but I remind him that we have done more to increase affordable and social housing through a range of different measures than happened under the previous Government. I do not think that I can be any clearer than I have been, but I will none the less commit to review the noble Lord’s specific points and, of course, to follow up this debate in writing with supplementary information.