Property Market

Lord Jackson of Peterborough Excerpts

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 Stewart Jackson (Peterborough) (Con)]

It is a pleasure to serve under your chairmanship for the first time, Mr Turner. I congratulate my hon. Friend the Member for Watford (Richard Harrington) on an excellent, well informed and intelligent contribution to an important debate. However, I fear I may unfortunately disagree with him on a practical and philosophical level.

Under the Labour Government the fewest houses since 1923 were built. Indeed, that Government tested to destruction the idea that centralised, top-down targets could be the way to engender growth in the provision of private sector, intermediate and social rented housing. Another issue, which has been disastrous in relation to social cohesion, is that, even the social housing that they did produce served, in a period of benign economic growth, to embed welfare dependency, to the extent that the number of people in social housing who are in paid work has shrunk every single year over the past 40 years or so. A mono-tenure culture in social housing cannot be right for the community, the economy or for our nation in general.

[Graham Jones]

Will the hon. Gentleman give way?

[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.

[Graham Jones]

Will the hon. Gentleman accept that it is the responsibility of local authorities to fund planning departments and that local councillors have decided that they are a low priority—ditto building control? Will he also accept that the previous Government introduced planning legislation that allowed local authorities to determine what they did and how they did it in their area, but that, because local authorities chose not to resource planning departments, it was left to top-down Government guidance and advice?

[Mr Jackson]

I do not agree with that comment at all. What happened under the previous Labour Government was that central Government decided that councillors were not qualified to decide how much residential development should take place in their area or to co-operate on infrastructure projects. That is something we have made changes to through the Localism Bill, which received its Second Reading last week. In many respects, the previous Government undermined the autonomy and authority of local councillors and planning departments, specifically by adopting a completely crazy top-down and, as my hon. Friend the Member for Watford said earlier, Stalinist approach to the regional spatial strategy. Of course, that did not work. It would have been great if it had actually worked, but—

[Graham Jones]

Will my hon. Friend give way on that point?

[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.

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[Mark Pawsey (Rugby) (Con)]

It is a pleasure to serve under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for Watford (Richard Harrington) on securing this debate. Although I recognise that the debate so far has been exclusively about housing, its title is “Property Market” and I hope to raise a point about commercial property, when my declaration in the Register of Members’ Financial Interests will become relevant.

[Hywel Williams in the Chair]

My hon. Friend and other Members are quite right to draw attention to the failure to build new homes at a time when our country needs additional housing. I want to talk about the factors involved, particularly those that relate to the planning system, and to raise the issue of price. My hon. Friend has rightly drawn attention to the link between the planning system and the supply of land for development. We know from a report that came out earlier this month that less land is being approved for development than before. As elected representatives, we all know about the fundamental contradictions that exist within planning. We know that individuals are generally conservative with a small c. They like the environment they live in and they do not want to see change; indeed, they fear change, so we often find communities that are inherently anti-development and which oppose proposals for development at the first opportunity. At the same time, those very people are often looking for places for their children, so that their children can remain within their community, and they are often looking for smaller residential units, too, where they might retire, and which they know in turn will free up family homes for their children in future. Part of the planning system is about the challenge to reconcile those competing influences.

The abolition of the regional spatial strategy was one of the very first acts of the new Government and it is one of the reasons why my hon. Friend the Member for Watford has concerns about whether enough land will be made available for development. However, I think that local authorities have thrown off those shackles as a completely natural reaction, as they were imposed on them by those at the top. If somebody demands or insists that a local authority do something and the local authority then does it with great reluctance, as soon as that demand ends there is an incentive for the local authority to say, “Well, we’re not going to have anything more to do with that, we are going to control our own destiny and take things forward in the way that suits us best”.

However, I believe that there are two measures in particular that will allay my hon. Friend’s anxieties. The first measure, to which my hon. Friend the Member for Peterborough (Mr Jackson) has referred, is the new homes bonus, whereby councils will retain the council tax for six years. It is not a simple concept. It has taken local authorities a great deal of time to work out how they will benefit financially from taking that action. I am delighted that my local authority in Rugby has made the calculations and recognised the benefits that will accrue to it from taking a progressive and positive attitude to the new homes bonus. I think that, as people look in detail at the proposals, more and more communities will say that this idea for dealing with development will mean that the community will benefit and the new homes bonus will start to make a great deal of sense.

The second measure is in the Localism Bill. Like many of my hon. Friends who are in Westminster Hall today, I would have loved to have discussed that Bill last week but I did not have the opportunity to do so. I want to discuss the effective consultation proposals in that Bill, which demand that developers undertake consultation with local communities before introducing development proposals. We know that good, sensible developers, who want to achieve what is best for the communities they want to work with, are doing that anyway. It is in their interests to do so; it is in the interests of a good developer to get the community working on the same side as them.

An example of a developer taking a proactive approach before the Localism Bill becomes law is the developer who is introducing proposals for 6,200 new homes in my constituency on the radio mast site in the west of my constituency. Many Members will be familiar with that site, because anybody travelling up and down the M1 will see the radio mast, with lights on it, which tells them that they are about an hour from London if they are driving south. The site is a sustainable urban extension, and the local authority continues to introduce plans that, in general, are supported locally. There is some immediate local opposition to the site, but I think that one reason why the ideas are making progress is the very effective consultation that the developers undertook in 2009. They held a detailed design inquiry lasting five days. Stakeholders were there for two days, but the weekend was allocated exclusively to the general public. People in the town and communities most likely to be affected by the development were able to talk to the developers about their vision for the site—what they wanted to see on the site and how they saw its future development.

A big part of the consultation was about learning lessons from recent developments in the town. One reason why people have a negative attitude towards development is that they can identify poor development that has taken place, which is often development that has been rushed through without effective consultation. Poorly designed road structures and poorly thought-out houses are built, leading to people being negative about development.

Another feature included in the design inquiry was respect for the site’s heritage. Signals were sent from the site to the British Navy in times of war, so its heritage is important and links into Rugby’s industrial heritage. That will be respected through the retention of existing buildings on the site. A significant issue for local people was the infrastructure and the ability of people in the add-on development, at the extremity of the urban centre, to find their way into the town centre. That was important if the development was to be seen in positive terms as contributing to the development of the town. Businesses will be attracted to our town because of the additional spend from people living in the new homes.

Local people have had their say. I might add that the time taken up in working on the proposals has been beneficial. In fact, the delay in bringing things forward caused partly by the state of the housing market means that we will get better planning. My hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile) argued for speedier planning decisions. I think that we want better planning decisions, not necessarily faster planning decisions.

The price of land is a key factor in providing housing—in the rate at which housing is made available—because it is a very significant proportion of the eventual selling price of housing. An anxiety that may prevent land from being made available forward and about which my hon. Friend the Member for Watford may be concerned about is that, in many cases, developers have built up land banks at times when prices were rather higher than they are now. That acts as a disincentive to use the land for development now, because if prices are expected to rise in the future, the land value will be a smaller proportion of each house price than if development were undertaken now. It is a perfectly natural reaction for developers to hold on to their land bank in the hope that things will get better.

In respect of demand, reference was made to the uniquely or characteristically British view of home ownership. Homes are seen as an investment, as something to put one’s money into to add to one’s pension, rather than as somewhere to live. We have seen a massive growth in home ownership, to a peak of 71% of UK homes being privately owned by 2003.

[Mr Stewart Jackson]

Does my hon. Friend agree that one problem with registered social landlords not developing more schemes for shared ownership is that the existing business model is one with a constant stream of housing benefit income—and that has been the case for a number of years—while the Government’s reform of housing benefit will use the market mechanism to develop more innovative ways of getting people into shared equity?

[Mark Pawsey]

My hon. Friend makes a very sensible point. Shared equity offers a real opportunity. I like to see variable rates of shared equity, so that people may start with a 25% equity stake and increase that as their circumstances change. That is not happening as often as it should.

Points were made about the availability of finance. People’s ability to buy homes is very much driven by their ability to borrow, and there are real uncertainties in the market because of the current FSA proposals, which have been described as draconian. The harder we make it for people to get the level of finance they require, the less demand there will be for housing, and that will provide a disincentive for people to bid at a higher price, which in turn will lead to a further reduction in supply.

I wish to make a quick point on the supply of commercial property, because there is a specific measure that the Government could introduce to provide an additional supply of commercial property which, as we move out of recession, will be increasingly important, at it applies to the non-domestic rates for commercial property that have been in effect since April 2008. For decades before that date, Governments helped struggling businesses through the application of empty property rates relief as an incentive to bring empty commercial property into use; my hon. Friend the Member for Carlisle (John Stevenson) raised the issue of bringing empty housing into use.

If there is insufficient activity in the economy, it does not matter what the rent is, because very often the commercial property will not have a use. That leads to two things: the demolition of commercial buildings, and the fact that there is no speculative building of new commercial premises, because if someone constructs a building they end up with an immediate liability for non-domestic rates on an empty building; they have an outflow before there is any inflow. As the economy recovers, it will be important to ensure that premises are available for our businesses to use. I again congratulate the hon. Member for Watford on introducing the debate, and I look forward to the Minister’s response.