Lord Best
Main Page: Lord Best (Crossbench - Life peer)“( ) is subject to a restriction requiring repayment of the 20% discount, reduced by 1/20th for each year of occupation by the purchaser, for a period of 20 years,”
Lord Best (CB)
My Lords, in moving my amendment, I am grateful for the support of the noble Lord, Lord Beecham, and the noble Baroness, Lady Bakewell of Hardington Mandeville. I draw attention to my housing and planning interests in the register.
This may look like a dull, technical amendment, too dull to be the first for consideration on Report, but it gets to the heart of the fundamental problem with the Bill—namely, the introduction of measures to generously subsidise home ownership schemes, in this case the new starter homes initiative and, later, the extension of the right to buy, with the subsidies being found by a transfer of public resources away from low-cost rented homes for less affluent households. Most of us in this House are very supportive of the Government’s ambitions to ease acute housing shortages by getting more homes built and to assist more of the next generation to become owner-occupiers. Very few of us, however, want to see more homes for better-off potential buyers at the expense of significantly fewer homes for those on lower incomes who struggle to find rented housing that they can afford.
The starter homes initiative, in the format set out in the Bill, was a manifesto commitment at the last election, and this amendment does not seek to undermine the concept or to diminish the number of first-time buyers whom starter homes can help. But the amendment tries to ensure that this new initiative is not so generous that it displaces, by the end of this Parliament, a very high proportion of all new homes for those who, with the best will in the world, are not going to buy a property in the near future. As with so much of the Bill, we may or may not be unnecessarily anxious about the Government’s intentions, because so much of the detail remains for later regulations. We have all been entirely sympathetic to the Minister, who has had to tell us so many times that our questions cannot yet be answered. The only way to resolve key concerns is with changes to the Bill, as with Amendment 1.
The starter homes scheme of 20% discounts for 200,000 first-time buyers is the flagship policy in the Bill. Those buying in London could get help to the tune of £112,000, while those outside London could get more than £60,000. Without Amendment 1, those discounts would take the form of grants that the purchaser can keep when they sell after a period initially set at five years, but with the Government now suggesting eight years. A 20% discount on the average value of property acquired by first-time buyers last year would be £43,000, so 200,000 starter homes will cost the country some £8.6 billion, assuming no further increases in house prices over the life of this Parliament. The resources to pay for this generous subsidy are to be found partially by switching government grants away from affordable rented housing and, most prominently, by switching the present requirement on housebuilders to include affordable rented homes in their new developments to, instead, including a proportion of starter homes. In relation to grants for social housing by 2021, virtually no grant aid will be available to housing associations or councils for affordable rented homes, which will mean the lowest level of support for those who cannot be home buyers since 1919—that is, for a full 100 years. Switching the gains from granting planning consent, or Section 106 agreements, as they are called, away from helping poorer families and single people to instead supplying starter homes, will hugely diminish this highly successful method of achieving affordable housing for rent.
Amendment 1 would still offer the same level of support for the first-time buyer on day one, greatly reducing the level of the deposit as well as mortgage repayments. But it would mean the funds being returned proportionately if and when the purchasers sold up, as they almost certainly will, within the next 20 years. Since most first-time buyers move on after five to eight years, the amendment would recycle up to three-quarters of the initial support. The billions saved by this measure would make it possible for the starter homes initiative to be in good measure an addition to, not instead of, desperately needed new homes for less affluent households.
As well as the social arguments for moderating the generosity of the starter home subsidies, there are powerful economic and financial arguments. First, a subsidy available to an entire group in a particular category—in this case, to hundreds of thousands of first-time buyers—runs the risk of simply being absorbed into a higher price for the purchasers. Everyone is entitled to the same subsidy, so everyone can pay that much more for the same product. This means the starter home subvention could prove inflationary, pushing up prices without increasing supply. The position becomes even more problematic if the 20% starter home discount is combined with 20% interest-free Help to Buy loans enabling people to purchase at 40% less than the market price. The position gets quite out of hand in London, where Help to Buy can cut the initial price by 40%, meaning the combination with the starter-home subsidy could enable purchasers to get a 60% reduction in the initial price, which would have obvious inflationary consequences. I can hardly believe it is a serious proposition that a buyer of a property costing £500,000 in London would actually pay only £200,000, getting the other £300,000 from government schemes.
Lord Best
My Lords, I am grateful to noble Lords all around the House for supporting Amendment 1 in my name. The noble Lord, Lord Shipley, proposed the alternative of the discount remaining at 20% in perpetuity. That admirable idea would moderate the generosity of the measure and ensure that the public benefit from this big discount lasted for very much longer—indeed, for ever. However, there are some technical difficulties with it. You would need to have a valuation each time anyone sold the property to see what the 20% represented a percentage of and you would need someone to police who is buying to determine whether they are a genuine first-time buyer and so on. These properties will be dotted around all over the place. A lot of complexity could be involved in that alternative, although in principle it is sensible.
The noble Lord, Lord Beecham, pointed out that housebuilders may sell their properties for rather more, knowing that buyers can pay rather more because they are getting a big discount. He raised a lot of interesting questions. I am afraid that starter homes are still a step into the unknown. This is the hazard that we face in debating them. The noble Lord, Lord Taylor of Goss Moor, applauded the Government’s ambitions to increase the number of homes being built and to help first-time buyers, as we all do. He liked the in-perpetuity arrangements but he was also very much in favour of Amendment 1 and felt that anything that discouraged short-term, speculative use of a discount would have a distorting effect on the market and should not be there.
I am grateful indeed for an economist supporting Amendment 1. The noble Lord, Lord Horam, welcomed the starter homes initiative in principle, as nearly all of us do, but felt that it could be improved. He greatly welcomed the idea of there being a payback over a period of years once people moved out and moved on. The noble Baroness, Lady Warwick, was equally supportive and the right reverend Prelate gave the House a very practical illustration of a family with five children. Even in the most affluent of households, finding the deposit for five children to buy would be a pretty uphill struggle. Starter homes, as a way of helping people who will not be able to get hold of a deposit, will be a useful addition, but the right reverend Prelate felt that securing the public benefit for as long as possible—which Amendment 1 achieves—would be useful. The noble Lord, Lord Cameron of Dillington, talked about the transience of an arrangement where, after five—or possibly eight—years, all the benefits are lost to the wider public. That is what the amendment seeks to avoid.
I am grateful to the Minister, who mentioned that she has been listening. She has, indeed, been an absolute model of courtesy, patience and helpfulness throughout Committee and I know there will be amendments to come. She already concedes that the initial proposition, which is that people who buy a starter home get nothing back in the first five years of occupation and after that time collect the whole of the average of £43,000—possibly over £100,000 in London—was not a very helpful way of doing things. Instead, the Government are likely to go for a taper so that one keeps a proportion each year. However, that taper would run out after eight years, whereas Amendment 1 proposes that the public benefit is retained for 20 years, with the occupier getting more and more of the benefit the longer they stay there.
The Minister hoped that I would not wish to test the opinion of the House on this. I am clearly reluctant to do so when she has been a listening Minister throughout this process. We have the assurance that secondary legislation, after further consultation, may produce regulations that take us further in the right direction, but this is only in prospect for the future. Only by putting things on the face of the Bill can we, ultimately, be sure that they will happen. So, with a slightly heavy heart, I would like to test the opinion of the House.
Lord Best
I shall speak briefly to Amendment 10, but I add my support for Amendment 4 in the name of the noble Lord, Lord Lansley. Amendment 10 states that age-restricted housing schemes for older persons will be exempt from any requirement to provide starter homes. I do not think this will detain us for very long because it is pretty obvious that if you are building an extra care scheme for older people, or even a block of retirement apartments, there is no place for housing for people under 40, for whom starter homes are intended. The 22% requirement simply cannot apply if we are to have those homes built for older people. I therefore hope that the Minister will be able to be very reassuring on this point and that wherever a developer or a housing association puts in for planning consent for an extra care or continuing care development, a retirement village, a retirement community, a sheltered housing scheme or a retirement apartment block the planner will be able to say that in these cases there is no requirement to insist upon starter homes and that the developer can proceed with a scheme exclusively for older people. That will help younger people as well because nearly everyone who moves into a retirement apartment leaves behind a three-bedroom or possibly even a four-bedroom family home and frees a flow through the marketplace that helps everybody right through the system.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, as this is the first time I have spoken on Report, I draw the attention of the House to my interests as set out in the register as a South Somerset District Council councillor and as a vice-president of the LGA.
I rise to support Amendment 10. As the noble Lord, Lord Best, ably demonstrated, age-restricted housing schemes for older people should, by their very nature, be exempt from the requirement to provide starter homes. The majority of these schemes will have been designed around the needs of older people and will be completely tailored to their needs. The ethos of the Government’s starter homes policy is targeted at younger people between the ages of 23 and 40. It would be inappropriate for starter homes to become part of an elderly people’s complex, and they should therefore be exempt. This should be clear in the Bill.
Lord Beecham
On behalf of the Opposition, I congratulate the noble Lord on apparently achieving his objective of persuading the Government to be reasonable. We very much welcome the indication that that will be the case. I hope this is a trailer for what might happen when we discuss right to buy and its impact in rural areas. It is a parallel situation. There are particular needs in those areas which have to be reflected in the legislation and the changes the Government envisage. I will not ask the Minister to commit herself today to that point, but we look forward to a sympathetic response on similar lines when we get to it. I am sure the House will join me in thanking the noble Lords, Lord Cameron and Lord Best, for pursuing this case so assiduously and with what is apparently a very satisfactory outcome—although we will read the small print when it arrives.