Housing

Lord Sharkey Excerpts

Tuesday 11th October 2016 Lords Chamber

[Lord Sharkey (LD)]

My Lords, I am a member of your Lordships’ Economic Affairs Select Committee. In July we produced our report on the housing market, Building More Homes. We concluded that the only practical way of increasing the affordability of housing is to increase supply, and that the only practical way of producing decent, secure homes for those who will never be able to buy is to increase the supply of social housing.

The Government have promised 1 million new homes by 2020. Even if this target is met, it will not be nearly enough to make houses more affordable. The Treasury estimates that even if these 1 million houses were built by 2020, house prices would still rise by 5% or 6% every year—way above the rate of wage increases. But even this target of 1 million by 2020 may not be met. The Government have claimed that starter homes will make the largest contribution to new build, with 200,000 starts. But in July, when we published our report, work on starter homes had yet to begin. I ask the Minister: three months on, have any starter homes in fact been started? Is 1 million new homes by 2020 still the Government’s target?

Whether or not that is still the Government’s target, it is unrealistic to rely on the private sector to build significantly more homes when its business model is, entirely understandably, maximisation of margin, not volume. The Treasury says that we need between 250,000 and 300,000 new homes every year simply to keep the house price to earnings ratio constant—constant, that is, at its currently very high level. If we are to do this and if we are not to neglect those who will never be able to afford to buy, we must involve local authorities and housing associations.

However, housing associations are constrained by George Osborne’s cuts to social rent. Local authorities are constrained by their legal inability to borrow to build houses. It is absurd that local authorities are free to borrow to build swimming pools but not to build new homes. Within normal prudential restraints, local authorities must be allowed to borrow to build homes; otherwise, house prices will rise even further out of reach and the supply of good, affordable and secure rented accommodation will not increase. That would be a social and economic disaster.