Housing

Baroness Blackstone Excerpts

Thursday 6th June 2013 Lords Chamber

[Baroness Blackstone]

My Lords, I declare an interest as I have just taken over the chairmanship of a large housing association. I am the chairman of the Orbit Group board.

We face a worsening housing crisis due to a very serious lack of public investment over recent years, the absence of a long-term strategy and, more recently, the financial crisis. As my noble friend Lord Dubs said in his excellent speech, around 230,000 new households form annually, but in the 12 months to March 2013 there were fewer than 102,000 new home starts. Housebuilding has dropped to its lowest level since the 1920s. Housing completions in England fell from 175,000 in 2007 to 115,000 in 2012, an astonishing 34% drop. Instead of proposing credible ways of reversing this decline, the coalition Government reduced the budget for the provision of affordable housing by 63% in the 2010 comprehensive spending review. That is the biggest single cut to any capital budget right across the Government.

We need to consider the social and economic effects of the housing crisis that we now face. Millions of people are being priced out of owning or renting a home. House prices increased from 3.6 to 6.5 times the average salary between 1997 and 2011. Home ownership is in decline. It now takes 22 years for the average low to middle income family to save for a deposit. Some 1.3 million families are struggling to pay their mortgage or rent, spending over 35% of their net income on housing costs.

There are 1.8 million families on waiting lists for social housing. In 2011-12, more than 643,000 households were living in overcrowded accommodation, and a quarter of homes—5.4 million—failed to meet the decent homes standard. Poor housing conditions have a direct impact on residents’ health outcomes and on their educational attainment, particularly for children and young people but also for older people, limiting access to lifelong learning.

In 2011-12, 108,720 households in England applied to their local authorities for homelessness assistance, a 22% rise from just two years earlier. Last autumn there were 2,300 rough sleepers on any one night in England, a rise of 31% from 2010. This is utterly deplorable. One of the measures of a civilised society is that it provides decent accommodation for people, somewhere they can be proud to call home. A failure to do so is deeply damaging to the quality of life of those affected and it is inexcusable in a country as rich as ours.

Despite all the main political parties acknowledging this housing crisis, the lack of a political solution suggests that the Government have not fully grasped its scale. The first fundamental policy change that is needed is a shift from subsidising rents to capital spending. Housing benefit is currently costing £23 billion a year. That is unsustainable and does nothing to address the root cause of the housing crisis, which is that demand for housing far outstrips supply. In 1975, more than 80p in every £1 of public spending on housing was on supply-side capital funding, with only about 20p going on cash benefits to help people pay their rent. The composition of spending has changed dramatically since then. At present, for every £1 spent on housing, only 5p is spent on capital funding, while 95p goes on housing benefit. This is a ridiculously inefficient use of public resources. Without a rebalance, the Government risk fundamentally undermining their own aspirations, which I fully acknowledge, for a housebuilding-led recovery. Perhaps the Minister will comment on how the Government intend to reach a more sensible balance between capital and revenue expenditure.

So far, their main solution—perhaps the Minister will say that it is not their main solution—looks pretty inept. Help to Buy allows anyone, not just first-time buyers, to access a government loan of up to 20% of the value of a property and is available for existing properties, not just new-build ones. The IMF has raised concerns that, by boosting demand without addressing the supply side, Help to Buy may actually drive up prices and put home ownership further out of the reach of most renters. One high-profile City strategist, quoted in yesterday’s Guardian, said that the scheme will artificially prop up the market and prevent prices falling to affordable levels. He said that buyers need cheaper homes, not just available debt to inflate house prices even further. His quip was, “This is madness”, and I cannot disagree.

Moreover, many commentators have questioned why this scheme has a cap as high as £600,000. Perhaps the Minister can tell your Lordships’ House why there is not a much lower cap, consistent with helping first-time buyers from middle and lower income groups who will never be able to afford mortgage repayments on such expensive housing. Does the Minister accept that this scheme will do very little to create additional affordable housing? After all, the NewBuy scheme, which preceded it, led to only 1,500 completions in its first nine months of operation. Have we learnt anything from the housing bubble that helped to create the financial crisis? The Governor of the Bank of England clearly thinks not. The £3.5 billion invested in Help to Buy could have been much better spent delivering 175,000 affordable homes and creating £19 billion gross value added to the economy. Will the Government therefore now look at how they could develop new schemes to support the delivery of affordable housing rather than just home ownership?

While I accept that there is a need to find ways of reducing the large bill for housing benefit, there has also been justifiable criticism of the so-called bedroom tax. This was referred to by my noble friend Lord Dubs but I want to underline what he said. There is concern over the impact and likely hardship that some households will suffer as a result due to no fault of their own. Even if a household wants to move, as my noble friend said, there is often very little prospect of doing so due to the unavailability of suitable smaller properties. Where people move into the privately rented sector, the cost to the Government in housing benefits is simply likely to go up because of higher rents there. Does the Minister accept that a full evaluation of this policy is needed, and that, if it confirms that not only are the savings from it negligible but it is causing hardship to households that are unable to access alternative accommodation and cannot meet their additional costs, the Government should then withdraw the scheme?

Tinkering around in this way does not address the real causes of the vast increase in spending on housing benefit. While unemployment and low incomes clearly contribute, the root of the problem lies in the failure to increase the supply of affordable housing, which drives people into the more expensive privately rented sector. What is needed is a new commitment to a long-term housing strategy, which focuses on at least a five-year programme, giving both local authorities and housing associations a chance to plan their capital expenditure. The IPPR’s recent paper proposes a new affordable housing grant for local authorities, with a legal duty to use these resources to improve access to affordable homes. Its goal would be to increase local authority scope to get housebuilding going, with a longer term outcome of keeping rents more affordable, which would, in turn, reduce the cost of housing benefit. I do not know whether the noble Lord, Lord Tope, who is a great advocate for local authorities, and has just demonstrated that in his speech, has seen this report, but I recommend it to him and other Members of your Lordships’ House.

Nick Pearce is the director of IPPR, and I want to quote him because, although I cannot go into the detail of what is proposed, what it is suggesting is a very interesting solution. He says:

“Combined with local control over planning, social housing allocation and regulation of the private rented sector, this new strategy would be a far more ambitious institutional reform than the coalition’s half-hearted localism. Councils would be required to forge a consensus for their spending plans and housing strategy among a balance of local interests represented on an affordable housing panel—made up of providers, landlords, tenants and owners”.

I hope that the Government, too, if they are not yet aware of that report, will consider it.

Investing in affordable housing is not just socially necessary but, as my noble friend Lord Dubs said, economically sensible. The Centre for Economics and Business Research has calculated that every affordable home built creates 2.3 jobs in England and generates an additional £108,000 in the wider economy. For every £1 of gross value added as a result of investment in new affordable homes, an additional £1.41 of gross value added is generated in the wider UK economy. The IMF and the OECD have both recently called on the Government to boost infrastructure investment and drive economic growth in doing so. The coalition seems hell-bent on ignoring this advice.

My criticisms are not just of current housing policy. I do not simply want to be politically partisan. Many of the problems go back a very long time. They are deeply embedded, with demand outstripping supply for many years. There needs to be some radical new thinking in Whitehall to get away from the lack of a joined-up approach across several departments. We need a medium to long-term strategy with a very strong focus on supply. For too long, central government has believed that it holds all the keys—and noble Lords will forgive me the metaphor. Can we now move towards more local solutions as proposed by the IPPR and touched on by the noble Lord, Lord Tope, while focusing on making home ownership a real possibility for the many who aspire to it but currently cannot attain it? We need to be careful not to neglect those who rent, whether in an under-regulated private sector or in social housing, which should be seen as a genuine alternative and not just a fallback for those who cannot own. Above all, we must now focus on increasing supply to reduce the unmet need to which my noble friend Lord Dubs has so rightly drawn attention.