Housebuilding

Lord McKenzie of Luton Excerpts

Thursday 24th October 2013 Grand Committee

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the noble Lord, Lord Stoneham, for initiating this short debate. When he introduced it he referred to the noble Baroness, Lady Stowell, and welcomed her to the Front Bench. She is now a veteran of housing debates. This must be the third in a couple of weeks, with one to come next week. I enjoyed the contribution of the noble Lord, Lord Borwick, although I did not agree with much of it. I have enjoyed the contribution of the noble Lord, Lord Oakeshott, whom I found myself closer to. I am interested that he bought his first house in 1972 with a mortgage of £7,500. So did we. I think we were both at that time members of the Labour Party, so our histories have diverged a bit.

We know that housing is moving up the political agenda, and for good reason. We have a growing housing crisis because we are building less than half the number of homes we need to keep up with demand. The truth, as others have said, is that we have not been producing enough homes under successive Governments for some time. In the past three years the number of homes built has reached its lowest level in peacetime, since the 1920s.

The recent upturn in activity is to be welcomed, but there is a long way to go. Homelessness and rough-sleeping are increasing, and the number of families in temporary accommodation is rising. People are struggling to get mortgages to get on the housing ladder and there is a rapidly growing private rented sector where too many lack security, have to pay ever increasing rates and suffer poor quality accommodation. There are nearly 5 million people on local authority waiting lists and this housing shortage is central to the cost of living crisis. It now takes the average family more than 20 years to save for a deposit, and house prices are, I think, eight times the average wage. It is no wonder that home ownership has fallen for the first time in a century, and that there are now some 8.5 million people in private rented accommodation, spending an average of 41% of their income on rent.

If home ownership is to be a realistic aspiration for working people and rents are to be affordable, we need a step change in the scale of house building in this country. This will not, of course, be achieved overnight, and on present policy certainly not by 2015. We have seen a plethora of initiatives by this Government, but they have not delivered anywhere near what is required. On home ownership we have seen First Buy, launched in 2011 and closed in March of this year, followed by Help to Buy equity loans, followed by the NewBuy Guarantee Scheme and now Help to Buy brought forward from January 2014.

However, there are real concerns about the latest Help to Buy scheme. If the Government simply increase housing demand but do not act to increase housing supply, all that will happen is that house prices will be pushed up and up. The end result is that the very people that the policy should be helping—first-time buyers—will find it even harder to get on the housing ladder. How in touch are this Government who introduce a scheme allowing taxpayer-backed mortgages for homes worth up to £600,000 when the average house price in the UK is £245,000 and the average price paid by a first-time buyer if less than £200,000?

We are not the only ones voicing concerns; the Treasury Select Committee has done so, and the IMF has warned about its impact on rising prices. These issues have particular resonance in London and we have heard from the Business Secretary, Vince Cable, about soaring house prices being dangerous and unsustainable. The new homes bonus was designed to incentivise local authorities to approve new housing developments, but has yet failed to deliver.

In its report in March this year, the NAO concluded that there is,

“little evidence that the Bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply”.

On coming to office, the Government cut the budget for new affordable housing by 60% and put the strain on increased rent levels to fund such provision. Even then its claim to deliver 170,000 new homes by 2015 includes those commissioned by the previous Administration. However, the programme has got off to a slow start, and anyway, some half of the programme is back-end loaded and is due to be delivered only in the final year.

We will doubtless hear from the Minister about the reduction in the number of affordable homes under the Labour Government; in fact, the figure usually quoted is a reduction in the number of homes rented from local authorities and housing associations over the period, and does not take account of the wider stock of affordable housing. The reduction is a direct consequence of the Right to Buy programme, touched upon by the noble Lord, Lord Oakeshott, which is a policy that this Government are seeking to make more generous. In fact, under the previous Labour Government, nearly 2 million more homes were built in England, including half a million affordable homes, with 256,000 in the last five years.

It is not difficult to conclude in all of this that the patchwork of current initiatives will simply not produce the step change in housing provision which is required. We have a job as the Opposition to criticise, challenge and support where necessary the Government of the day. However, we are now doing more so that in May 2015, given the chance, we will be in a position to start seriously to close the gap between the homes that are currently being built and the homes that we need.

Ed Miliband and Hilary Benn have asked Sir Michael Lyons, supported by a panel of experts, to lead a new housing commission whose task will be to set out a road map for how an incoming Government can help secure a big change in the number of homes being built. Some of the policy solutions to a step change must include tackling land banking and speculation by looking at giving local authorities proper compulsory purchase powers so that they can buy, assemble and grant planning permission on land that is being hoarded and is holding back development and giving councils the power to charge people escalating fees for sitting on land with planning permission.

There must be planning to establish new towns and garden cities. The UK has never delivered a large uplift in housebuilding without large-scale development such as the post-war new towns. This will entail the creation of new town development corporations as public/private bodies with the power to raise finance, undertake building and provide infrastructure. It would also necessitate financial incentives and freedoms for local authorities within the scheme and a fast-track planning process under the nationally significant infrastructure planning regime.

We know that at present some areas want to grow to meet local housing demand but do not have land within their local authority boundary to do so. Neighbouring authorities block the building of badly needed homes and the duty to co-operate has yet to prove effective. We want to establish a “right to grow” status with bids from local authorities assessed by the planning inspectorate. We also consider that there is scope to reform the housing revenue account system and we are not unsympathetic to the proposition to remove the cap. We want to give local authorities greater flexibility so that they can build more social homes. A number of local authorities are already beginning to build again within the constraints they have but we want the commission to look at the obstacles to overcome and the incentives needed to get councils and housing associations back into the business of building again. Despite various attempts to do that through Section 106, the community infrastructure levy and the new homes bonus, we consider that there remains a significant mismatch between the national and regional need for further housebuilding and the incentives which local communities have to accept new developments, especially developments such as new towns.

We need to find ways of ensuring that a larger share of windfall gains from planning permission goes to local communities. One thing is certain: if we carry on as we are, by 2020 there will be 2 million few homes in Britain. Our aspiration is to see 200,000 new homes delivered each year by the end of the next Parliament. That would be a significant improvement but there needs to be a long-term national effort to turn this around.