Affordable Home Ownership

1st reading: House of Commons
Tuesday 24th October 2017 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

13:43

[Mr Christopher Chope (Christchurch) (Con)]

I beg to move,

That leave be given to bring in a Bill to make provision for affordable home ownership; to require the inclusion of rent to buy homes in the definition of affordable housing; to make provision for a minimum proportion of new affordable housing to be available on affordable rent to buy terms; to provide relief from stamp duty when an affordable rent to buy home is purchased; and for connected purposes.

It is beyond dispute that home ownership is by far and away the most popular and desirable form of housing tenure. This is confirmed by the British social attitudes survey, which shows that 86% of people aspire to own a home. Home ownership lies at the heart of a true property-owning democracy, in which young and old alike are enabled to take responsibility for their own lives. Home ownership facilitates flexibility in the size and location of accommodation, taking into account changes in a place of employment or additions to the family. Home ownership also encourages long-term financial independence from the state and, therefore, from taxpayer subsidies.

With home ownership so popular and so manifestly in the public interest, one is bound to ask why it has been allowed to decline—it is now at a 30-year low of only 63%. The answer is lack of affordability. In most parts of the country, the price of houses has been increasing far faster than earnings. The greatest impact has been on younger buyers. In the 1980s, six out of 10 of those aged under 40 were homeowners; now, fewer than four out of 10 are.

To her credit, the Prime Minister clearly wishes to correct this public policy failure, which is having such an adverse impact on the next generation of aspiring homeowners. The proposals in the Affordable Home Ownership Bill should therefore be particularly appealing to the Government—not least because they do not add to the nation’s debt, but rely instead on ensuring that some of the land set aside under section 106 planning agreements for affordable housing is earmarked for homes built for affordable rent to buy. My Bill requires the Government to put beyond legal doubt that local authorities must treat affordable rent to buy on a par with affordable rent, and it requires local authorities to specifically include affordable rent to buy schemes in their development plans.

For those not familiar with affordable rent to buy, this is how it works. It provides an accessible route to home ownership for those who cannot immediately afford a deposit. In that respect, it has an advantage over other low-cost home ownership schemes, which still require substantial up-front funding. Under affordable rent to buy, families take out a fixed five-year renewable assured shorthold tenancy and agree to pay an affordable rent—80% of the market rate, normally—for five, 10, 15 or 20 years. By paying an affordable rent, families are able to start saving towards a deposit.

In addition, under the scheme, which is being pioneered by a small number of imaginative local authorities, the tenants receive 10% of the property’s market value as a gifted deposit to add to their savings and reduce their mortgage costs at the point of purchase. On becoming 100% homeowners after five, 10, 15 or 20 years, tenants can access a wide range of mortgage products utilising the credit worthiness they will have developed during their time as tenants. The essential element of security of tenure also enables families to develop roots in their local community.

The model to which I refer is wholly funded by institutional investors. Substantial funds have already been forthcoming, but a further £40 billion will be available under this system for new affordable homes, at no cost to the Exchequer. That could provide homes at £200,000 each, and that could provide 200,000 such homes—a significant way of addressing the problem we have with housing.

However, that is all subject to one caveat, which it is the purpose of the Bill to address. Currently, affordable rent to buy does not come clearly within the definition of affordable housing, and the Bill requires that it should so do. There needs to be an explicit reference to affordable rent to buy in the national planning policy framework definition of affordable housing. Such clarity would enable many more local authorities to take forward these innovative schemes.

There should be no problem with clarifying the definition, because, in a typical affordable rent to buy scheme, one in three purchasers is moving directly from the social rented sector, and almost all the others are from the housing waiting list.

The House of Commons Library briefing paper published in late August states:

“There is no all-encompassing statutory definition of affordable housing in England. Indeed, there is a good deal of ambiguity in the way the term ‘affordable’ is used in relation to housing.”

It is to help fill that vacuum that I brought forward this Bill, which will provide a definition of affordable rent to buy. Subject to consultation, this would be the definition: “Affordable rent-to-buy housing is housing that is made available at a rent level which is at least 20% below market rent, including service charges where applicable, and later made available to the tenant living at the property to buy at a cost which may be less than market value. Provision should be made for receipts or a proportion thereof to be recycled for alternative affordable housing provision if the subsidy is withdrawn. Eligibility is determined with regard to local incomes and local house prices.”

I hope that the Minister for Housing and Planning, my hon. Friend the Member for Reading West (Alok Sharma), who I am delighted to see in his place on the Treasury Bench, will embrace that, or a very similar, definition. Unfortunately, despite parliamentary questions and letters from a number of colleagues, many of whom are co-sponsors of the Bill, we are still waiting for a result. It may be that we are waiting for the announcement to be made not by my hon. Friend but by the Chancellor of the Exchequer on 22 November. However, whether it be now or on 22 November, something must be done about this, because we need to open up the £40 billion of private institutional investment in our housing that we so desperately need.

If one looks, as some of us may, at the Government website on affordable home ownership schemes, it is a depressing sight. Indeed, there is hardly anything on it, and certainly no reference to anything as imaginative as the schemes to which I have referred. I will save anybody interested in looking at the website the need to do so by quoting from it. It has an overview saying how people can get

“help with savings, through a Help to Buy ISA”

or

“a home through shared ownership”.

It goes on to say:

“The Help to Buy mortgage guarantee scheme closed at the end of 2016.”

It then talks about Help to Buy equity loans and so on. However, it does not address the real problem: that so many people in this country want to embark on a road to home ownership but cannot afford even to save for a deposit because they are paying full market rent rather than an affordable rent. I therefore hope that the Government will take seriously the issues raised in this Bill.

One of the most significant fiscal changes affecting housing in the last 30 years has been the policy of the Treasury to treat stamp duty as a cash cow. Stamp duty is now a significant burden for those moving into home ownership. It is a transaction tax, which, like all such taxes, has had the consequence of reducing the number of transactions. My Bill would enable the Government to give special relief from the burden of stamp duty, in line with avowed Government policy to promote home ownership among first-time buyers. I hope that we will hear more about that in the Budget.

This Bill should enjoy the support of everybody in this House because it works with the grain of public opinion and would enable more people to reach their aspiration of becoming homeowners in the United Kingdom.

Question put and agreed to.

Ordered,

That Mr Christopher Chope, Mr Gary Streeter, Derek Thomas, Craig Tracey, Mr Philip Hollobone, Mr Ranil Jayawardena, Steve Double, Robert Halfon, Philip Davies, Sir Edward Leigh and Sir Desmond Swayne present the Bill.

Mr Christopher Chope accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 3 November and to be printed (Bill 115).