New Housing Supply
Debate between Lord Jackson of Peterborough and George Hollingbery
George Hollingbery (Meon Valley) (Con)
I have the unenviable task of following the eloquence of the Chairman of the Select Committee, the hon. Member for Sheffield South East (Mr Betts), who spoke without notes and made extremely important points about the report. If he will excuse me, I will not be quite as rigorous or eloquent.
Housing is obviously an incredibly important issue for us all, not just for getting future generations somewhere decent to live, but for this country’s future economic prosperity. Without substantial improvement in our building rates and the production of new housing supply, our economy will struggle to grow, and we need it to grow. The Chartered Institute of Housing released a report just this month that said that home ownership was unachievable for many young people. The report suggested that since 1992 it is down 67% among those aged 25 to 34. That is a pretty stunning statistic. The average age of the first-time buyer is now approaching 40, at 37.5. It now takes 83 months to save the deposit required to buy a house, compared with the 30 months it took 10 years ago.
At present, investors, builders and the market seem reluctant to invest in new housing, despite large waiting lists. Locally, we have 3,000 people on the housing waiting list in Winchester, 2,900 in east Hampshire and 4,500 in Havant. These are prosperous areas of the country, where one might expect the lists to be rather shorter. The current economic cycle has led us to a situation in which lenders are reluctant to lend, builders find it difficult to build and buyers find it difficult to buy.
Mr Stewart Jackson
My hon. Friend is making a powerful point. Does he agree that a key issue is not that lenders do not wish to advance moneys, but that they do not have the appropriate flexible intermediate products to support intermediate housing across the country? Those unable to lay their hands on a 30% deposit, for instance, are therefore in a difficult position and are having to look at social rent or affordable rent, rather than an intermediate product.
George Hollingbery
That is indeed the case; my hon. Friend will forgive me if I come to that in a moment.
Several Government schemes are helping. They have been slow to start, but they are now moving forward. With the exception of areas such as London, uncertainty has also meant that potential buyers have been unwilling to take on what is frankly one of the biggest financial decisions of their lives. If we look rationally at the decision to buy a house at the moment, is this really the time to take on, say, £200,000 of debt? People might not be sure about their job or their future. Can it be an enormous surprise that an awful lot of people are very reluctant to take on such a commitment at this time? Frankly, I do not think so.
Despite low interest rates and a number of Government schemes—such as Firstbuy, NewBuy, “Buy now, build later”, intermediate rent and others—there is an acceptance that more still needs to be done. To date, nearly 3,000 homes have been sold through the NewBuy scheme, but, at a time when we are deleveraging our economy, the financing of new housing is undoubtedly going to continue to be a challenge.
Some reports suggest that up to 50% of new starts being contemplated by certain major house builders are down to NewBuy. The scheme seems to be taking effect, with 60 house builders now offering products through it. The figures for January 2013 show that new housing starts under NewBuy are 30% up on the same time last year. The progress is definitely slow, but there is some encouragement. Given the fact that taking on a debt is a serious commitment at this time, that is not bad going.
An article in the Financial Times today alludes to that point, and to some of the other measures that the coalition plans to introduce, and I shall quote from one or two parts of it:
“The prime minister and his deputy are set to make a joint appearance on the eve of the March 20 Budget to make several announcements, including shared equity schemes, social housing and support for first-time buyers…At the housing launch, Mr Cameron and Mr Clegg will flourish the promise of ‘garden towns’, more flats above shops and an expanded private rented sector. Ministers have discussed the radical option of extending an existing scheme, NewBuy, which allows people to buy homes with a deposit of 5 per cent, from new developments to older homes.”
I would just comment that a couple of those announcements do not seem to be that new, but I hope that when they are made in a couple of weeks’ time, they will be made with a little more commitment and determination than they were before.
George Hollingbery
Indeed.
The coalition has rightly taken a localised approach that incentivises housing policy, and good work is taking place on freeing up public land and opening up new opportunities to increase supply. Changes to the housing revenue account devolve real power and budgets to local councils to deliver housing, although, as the Chairman of the Select Committee pointed out, some freedom in relation to the caps on borrowing requirements would be welcome.
Areas such as Denmead in my constituency have become pilots for the Government’s neighbourhood planning approach, and some are contemplating more housing than has been allocated to them in the local plan. That is to be welcomed. The new homes bonus has also been a welcome incentive to encourage extra housing. To date, Winchester city council has received £1.5 million under that scheme, East Hampshire has had £1.4 million and Havant has had just shy of £500,000. This financial boost, allowing councils to invest directly in new homes, has also benefited the two unitary authorities of Southampton and Portsmouth, which have received £2.5 million and £1.7 million respectively. Those are only a few examples from the package of measures included in the Government’s housing strategy, which is designed to help increase supply. It has to be admitted that the measures have had a slow start, but they are welcome. They are the right idea, and the Government are doing a great deal to try to push the market forward.
What more should the Government do? The report that we are examining today concluded that there is no panacea or silver bullet to solve the problem of our housing deficit. I have no doubt that the Committee’s 33 recommendations will have been looked at more carefully by now, and I look forward to the Minister clarifying which of them he is considering.
At the heart of the report lie two themes: encouraging institutional investment and promoting action from local authorities. The Select Committee’s report is clear on the first theme of encouraging institutional investment, and I shall quote from it at some length:
“Institutions and structures that have traditionally ignored housing should be encouraged to invest. Increased investment from large financial institutions and pension funds may not be a panacea, but could make a significant contribution to the building of new homes in both the private and social rented sectors. Public sector bodies and housing associations should take steps to encourage institutional investment. Vehicles such as Real Estate Investment Trusts should be revamped to encourage investment in housing. The Government should also consider whether the remit of the Green Investment Bank can be expanded to cover housing and, potentially, wider infrastructure projects.”
As we have heard, the local authorities in the Association of Greater Manchester Authorities area are working to leverage their pension funds into investing directly in housing. That is something that their pensioners should welcome. Pension funds need long-term, steady returns and if public moneys can be leveraged to produce more of that in such a creative way, we should all welcome it.
The Select Committee’s report also builds on the good work that organisations such as the Joseph Rowntree Foundation have been doing. The Committee believes that we should be unlocking institutional investment and allowing for real delivery into the sector. It was noted, however, that progress in that area has been slow, and that institutional funds were somewhat difficult to access. The Government recently commissioned the Montague report, which focused in particular on the private rented sector. The report reinforces the concept of push and pull factors that can serve either to incentivise or to discourage investment.
Locally to Meon Valley, Winchester city council and Grainger, which I think is one of the more innovative suppliers in the private sector rented market, have been working on managing these factors while delivering the west of Waterlooville development right in my constituency. I was the chairman responsible for the delivery of the vehicle for this development while a city councillor in Winchester. The council has been looking at section 106 and community infrastructure levy obligations among many other factors to make sure that this development is a success. I know that planning and housing Ministers are looking into this difficult area of policy to try to free up the rules to ensure that the build-to-let market is freed up, allowing more accommodation to be built.
Mr Jackson
My hon. Friend is making a polished contribution, but does he agree that the big hole in the report is the issue of extra care? Given the demographic time bomb, the number of over-85s will double in the next 20-odd years. At the moment, housing associations shoulder the burden for producing appropriate accommodation for elderly people in extra care facilities without any particular tax incentives or assistance from any other agencies, including institutional investors.
George Hollingbery
I am grateful to my hon. Friend for making that point. I chaired a conference in Winchester only six months ago on exactly that issue, and I have made representations to the planning Minister, my hon. Friend the Member for Grantham and Stamford (Nick Boles), saying that at the very least we need some incentives or recommendations in the national planning policy framework for local authorities to examine the need for provision for older people. It seems to me that in the long term that is the way to get the very best out of existing housing stock, let alone to provide good housing stock for older people in the longer term. I agree wholeheartedly with my hon. Friend the Member for Peterborough (Mr Jackson) and believe this area needs to be looked at across government to make sure that we plan more carefully for the needs of older people.
The second theme is the importance of local authorities and how much more can be done by them and by housing associations. In Hampshire, we are starting to see local authorities make a real difference in housing provision. In February, Isle of Wight council introduced a scheme to help first-time buyers, while Southampton has an estate regeneration project that is making great strides. Real differences are emerging in housing starts and in some areas schemes are proving seriously successful—in fact, occasionally, too successful. I have not encountered this personally, but I have recently been told that Wigan council had to close its £1 million scheme to help first-time buyers after only a month because all its funding had been used up. Further afield, the Scottish Government are introducing a £20 million scheme to help people with shared ownership. This is another way of incentivising supply that should not be ignored. The Government need to get behind local authorities and create a repository of knowledge and good practice that can be shared right across the local government community. I have no doubt that the Local Government Association will be involved in work of that sort.
The Select Committee talks about two areas that could make a real difference. It makes suggestions on looking at increasing the borrowing limits for housing revenue accounts, as well as on promoting the right to buy. The Select Committee Chairman has covered the increase in borrowing limits reasonably thoroughly so I shall not go back there, but the latest figures show a slight increase in right-to-buy requests in Southampton, Portsmouth, Fareham and Winchester. Much remains to be done in this area, but we discussed at some length in the Select Committee the need for one-for-one replacement to be guaranteed in certain circumstances, particularly in small rural villages. If we do not replace a social house with another social house—and nowadays, frankly, it might be the only social house in a small village—there will be no social housing left at all, which is an important issue.
Another area of note is provision of housing for older people, but I have covered the issue and as I said it was mentioned in today’s Financial Times article.
Housing has a significant potential to help economic growth. In 2009, the Chartered Institute of Housing wrote a report suggesting that buy-to-let alone contributed £5.2 billion to the economy in just the south-east of England. The importance of housing in respect of the general economy cannot be underestimated. Realising the growth required in the housing supply market is tough, given the economic circumstances we face, but it is vital that we encourage housing associations and local authorities to take action to promote growth.
The Government are making real strides. Lots of schemes are beginning to work, and I welcome them all. The issue is not just about the need for more housing, however, as it is about the future of our economy as a whole. It has to remain absolutely at the heart of Government policy if we are to get our economy back on its feet and if growth is to be achieved. I hope that the announcements mentioned in the Financial Times prior to the Budget genuinely provide a kick-start to the industry. As far as I am concerned, it is very much needed for all of our futures.