Property Market

Debate between Lord Harrington of Watford and Lord Jackson of Peterborough

Tuesday 25th January 2011 Westminster Hall

[Richard Harrington]

That is correct, and a valid intervention, which I intend to discuss briefly.

The demand side of the equation is clear. Short-term economic factors may have reduced it, but the fundamentals are as bullish as ever. The south-east, according to all the research that I have seen, is expected to continue the population growth trend, and despite all the incentives that the Government may provide for a change in regional preferences I think that the trend is unstoppable. Without going into too much detail, the factors include migration, the social trend towards more households following divorces, the population getting older and the great predilection for living in small households. Above all, I do not think that anyone can say that the demand side will change much.

My hon. Friend the Member for Ilford North (Mr Scott) mentioned lending. At the moment, one of the biggest obstacles is the decline in lending. The figures show that the contraction in UK mortgage lending since 2007 has been the most severe on record. In 2008 and 2009, about 500,000 loans were granted for house purchase. That is a lower figure than for any year since 1974.

[Mr Stewart Jackson (Peterborough) (Con)]

I congratulate my hon. Friend on securing this debate. Is he as concerned as I am that the review being undertaken by the Financial Services Authority may not only stifle mainstream mortgage products but prevent the development of new products for intermediate housing, such as do-it-yourself, shared ownership and key worker schemes?

[Richard Harrington]

My hon. Friend makes a valid point on a subject that I intended to mention later. The Financial Services Authority is reviewing the mortgage market and, from all the indications that we have received, it intends to bring in, with the intention of protecting the consumer, various restrictions, such as appraising customers and reducing the type of mortgage available, that will significantly reduce the supply. I know that Ministers are aware of that, and I hope that they will bring as much pressure to bear on the FSA as they can. It is fair to say that the lending side is definitely a short-term constraint, but for the purpose of this debate, I will put it to one side. However, I am not trying to reduce its validity.

The core of my argument concerns the supply side of housing—the availability of land with planning permission to build social and private houses. Although I fully support the Localism Bill and its core values of local people and their representatives being responsible for their own actions, I believe that in respect of planning, it could significantly adversely affect the supply of land for housing. If the incentives on offer do not outweigh the anti-development sentiments of residents and their elected representatives, we are in real trouble.

Indeed, the Localism Bill will liberate local communities from stifling Labour targets, especially the well-intentioned but misdirected regional spatial strategies, because it is clear that they have not worked. New homes are being built at the slowest rate since the war.

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[Mr Jackson]

I will not at the present time, but I might give way to the hon. Gentleman later. I fear that the problem for my hon. Friend the Member for Watford is that he is looking through the wrong end of the telescope. The integral issue is mortgage availability and the fact that mortgage providers have failed to adapt and make progress in the market in terms of providing funding and mortgages to people.

[Richard Harrington]

I thank my hon. Friend for giving way, particularly after I have spoken for 20 minutes. If the banks decided suddenly to lend twice as much money to people who want to purchase houses—we hope that it will happen, so let us pretend for a moment that it will—what effect does he think that would have on the supply of housing?

[Mr Jackson]

As a Christian, I hope that sinners will repent and that the retail banking sector will lend. I think, however, that the issues are much more integral and institutionalised, as my argument will make clear. I welcome the new homes bonus, although I am slightly concerned about its top-slicing element from year three, which could have an impact on the propensity of local authorities to develop its potential—remember that the scheme is about developing housing appropriate for a particular area.

The situation reminds me of the emperor’s new clothes—no one quite knows on what evidential basis we are to decide how many houses are needed. Is it the 2004 Barker report? Is it the misguided views of the then Office of the Deputy Prime Minister and the Prescott sustainable communities plan of 2003? We need to step back and carry out a full analysis of the demographic and social change. The hon. Member for Hyndburn (Graham Jones) has made the point—quite astutely, though in a roundabout way—that this should not just be about the south-east and the east of England and London, but that we should spread our country’s wealth through the housing market throughout the UK. In fairness, we are looking at mechanisms such as the regional growth fund, sustainable transport funding and, of course, high-speed rail, which seeks to bridge the gap between the overheating of the south-east and other parts of the country—the north-east, the north-west and Yorkshire and Humberside. We need to have a much more existential approach to why we think we need more houses.

It is also important to think in terms of the operational capacity of planning departments. One would struggle to find many people who would admit that their local authority’s planning department is completely fit for purpose. The huge bureaucracy and time lags drive local and bigger businesses and developers mad, because there is not a high degree of accountability in this often technical area for local councillors and residents and, in particular, for business. That causes an enormous and inordinate delay to the development of projects.

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[Mr Jackson]

I will not at the present time, but he is always my hon. Friend, especially if he wishes to cross the Floor.

Other operational issues stray into the area of regeneration. It is very difficult to put together a residential and commercial package for brownfield sites because of some of the institutional issues at which the Government need to look. One issue is that of European Commission procurement laws. If there is one thing guaranteed to scare planners off, it is the idea that it will take months and months to put together a package and that they must put the work involved—consultancy and other issues—out to European Commission procurement rules. As I said, that can cause massive delay in bringing forward good projects—for example, shopping centres with associated housing.

The other issue, which was touched on by my hon. Friend the Member for Carlisle (John Stevenson), is that of empty properties. I remain to be convinced that empty dwelling management orders were the right way to go about dealing with the matter. We really need to tackle the issue of empty properties. If we are going to develop on marginal sites—green belt sites and others—we should be able to satisfy ourselves that we have exhausted every other possibility of developing on brownfield sites. We also need to consider the whole area of brownfield remediation. That is an issue for the Department for Environment, Food and Rural Affairs, the Treasury and the Department for Communities and Local Government.

My hon. Friend the Member for Wolverhampton South West (Paul Uppal) made a very astute point about real estate investment trusts. That is a matter the Leader of the House was very keen to take forward when he was Housing Minister in 1996. Some pretty arcane legal and financial rules in the Treasury mean that it has not been possible to develop such a consumer friendly way of accessing private sector capital in the private rented sector. At the moment, such an approach is confined to the student market in university towns. However, we need to have a bigger philosophical debate on whether—I know it is heresy for any Conservative to say this—we have perhaps reached the limit of owner-occupation. If we consider comparative studies in Canada, Germany, Italy and France, people are happy to live in and pay rent for high-quality residential accommodation. We have not exhausted the possibilities of that here.

[Richard Harrington]

It is important that my hon. Friend accepts that although he might be right about housing penetration and such things, those matters are irrelevant to the core argument of the debate, which is that the supply of land is needed—whether it is for rental housing or any other form of housing.

[Mr Jackson]

My hon. Friend has a point. I should not mix my metaphors too much, but if the Government were taking the one-club golfer approach of only putting eggs in the basket of the new homes bonus—we will see from the regulations and secondary legislation how the details of that work out—I would accept the premise of his argument. However, the Government are also looking at community right to build and urban extensions to rural and semi-rural areas because people are very keen to save their post office, their bus service and their local shop. If we can envisage building 10, 15 or 20 houses, housing some key workers and some high-income people, which concurs with, for example, the Sustainable Communities Act 2007—that legislation was passed with cross-party support a few years ago—my right hon. Friend the Minister for Housing and Local Government is absolutely right: people will want to do that. If we do that cumulatively across boroughs and districts, we will drive up housing numbers.

I am mindful of the time, so I will move to a conclusion. We desperately need Treasury buy-in in the housing market to support the new homes bonus and other initiatives such as asset-backed vehicles, in which private sector capital can be accessed for regeneration schemes, including housing; tax increment financing—not just in town centres for retail but for housing-related issues as well—and the important accelerated development zones.

I recognise my hon. Friend’s very sincere concern for those young people who want to get on the housing ladder in Watford, and I see the same in my own constituency. We must not ignore the disparity between the joint income of young couples and the amount that mortgages are proffered at by lenders. That gap is huge, and we need to work with the Treasury and the FSA on the matter. I know that our right hon. Friend the Minister for Housing and Local Government is battling hard to make the FSA understand the practical ramifications of restricting the mortgage market, which will be disastrous for the housing market.

Although I support the views of my hon. Friend the Member for Watford, the picture is technical and very complicated. What we do not want to see is the son of regional spatial strategy. Compulsion has failed, and there is no evidence to suggest that it will work in the future. We all hope that we can build more homes for constituents of all incomes. We all support do-it-yourself shared ownership and intermediate housing to get people on the housing ladder so that we can become a property-owning democracy again.