Baroness Williams of Trafford
Main Page: Baroness Williams of Trafford (Conservative - Life peer)Housing and Planning Bill
Baroness Williams of Trafford Excerpts
Lord Campbell-Savours
May I ask one question? We were told on Monday, I think, that there were so many hundred thousand people listed as wanting starter homes. Is there any information available on where these people are located—which counties and local authorities—and could we have that information quite early, perhaps even today? It might help us in our debates.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con)
My Lords, we have started today with another interesting debate on starter homes. I am conscious that this is the third day in Committee and we still have some substantial issues before us.
Baroness Hollis of Heigham
Is the Minister aware that, in the other place, they took 17 Committee days to discuss this Bill?
Baroness Williams of Trafford
I am not disputing that at all. I was going to give a bit of a recap of Tuesday if that is okay by your Lordships. Anyone who read Hansard for Tuesday will not be in any doubt that your Lordships’ House is passionate about social housing and the need to make sure that the most vulnerable in our society have safe and secure housing. The Government’s position is not as far removed from that as some noble Lords may believe. We, too, believe that social housing should continue to house those who need it most.
Some noble Lords suggested that the provisions in Chapter 1 mean that we no longer believe in anything other than home ownership, which is not the case. As I have said before, there is a gap in the market. An additional product is required to fill that gap and that is why we are legislating for starter homes. We are helping people to access homes that they can afford in a number of different ways and this Bill should not be seen in isolation. The Government have committed £4.1 billion in spending reviews to deliver 135,000 shared ownership homes and £1.6 billion to deliver 100,000 affordable homes for rent.
With help to buy, shared ownership, the affordable rental sector and social renting, market-priced housing and private rented sector housing, as well as the retirement housing that is coming forward, there is a whole range of tenures available and starter homes will rightly be a part of that mix. Just because this wider range of affordable housing is not mentioned in this part of the Bill, it does not mean that local authorities will not provide it. Local planning authorities know their market. We would also expect them to seek other forms of affordable housing, such as social rent, where it would be viable. Councils have the option to release more land for housing to ensure that they are delivering as much housing of all tenures as is needed.
Baroness Hollis of Heigham
My Lords, in that case will local authorities be able to claim Section 106 land which has now been earmarked for starter homes and which in the past has funded more than 50% of social housing in this country? The Minister says that they can do it but she is denying them the powers, the authority and the revenue base by which to do it.
Lord Beecham
Before the Minister replies to that, how does this aspiration match the Government’s imposition of cuts in rents for local authority social housing, which will restrict their capacity to invest?
Baroness Williams of Trafford
My Lords, to go back to the first question from the noble Baroness, Lady Hollis, the councils will provide through various mechanisms different types of tenure, as they always have done. We fully expect that this will be the case in the future and I have outlined some of the funding mechanisms.
Baroness Hollis of Heigham
I am sorry, my Lords, but that is not good enough. In the past, local authorities and housing associations have relied on Section 106 but that is largely going to disappear unless some of the amendments that we will discuss later are taken into account. It is no use the Minister saying that she has no reason to think that this will not continue when it will not—unless she can tell us how local authorities will make good their loss in rents, their loss in capital grant support and their loss in Section 106 land.
Baroness Williams of Trafford
My Lords, Section 106 can still be used for infrastructure but cannot be used where it would damage the viability of providing those houses on the site. Local authorities will continue to use Section 106 and a variety of other mechanisms to provide mixed tenures on their sites.
Baroness Hollis of Heigham
My Lords, I have been chair of a modestly sized housing association across Norfolk, and virtually all our new building was under Section 106. Take 106 away and the building will stop—full stop.
Baroness Williams of Trafford
My Lords, if it is viable developments can use Section 106, for example to provide infrastructure on those housing developments. The £1.6 billion that we have provided for affordable rented properties is purely grant-funded.
Baroness Hollis of Heigham
But, my Lords, the infrastructure in rural villages is already largely in place. We are talking about modest pockets of 10 or a dozen houses here and there. Infrastructure is not the point; that land has come through Section 106 from other private development which is already happening. How are local authorities going to add to the social housing stock when they face huge pressures with no land and no resources?
Baroness Williams of Trafford
My Lords, as I have said this will happen through a variety of mechanisms. I appreciate that we are in disagreement at this point but if noble Lords will indulge me, I would like to make some progress.
Lord Beecham
I am grateful to the Minister for giving way but broadly speaking, it is right to say that in terms of Section 106, authorities have been accustomed to accepting some 15% of houses in development under that scheme. Can the Minister give any indication of what she thinks the future likely percentage will be under the regime which the Bill introduces? In percentage terms will it be around the same, less or more, and on what basis does she advance her opinion? I accept that she may not have an answer immediately across the Dispatch Box and if she does not, can she write to us about that?
Baroness Williams of Trafford
I cannot say at the Dispatch Box what the percentage will be, because it will be out for consideration, but I can give my opinion. In my experience, it will not be too dissimilar from the affordable homes expectation that was previously in place. The noble Lord, Lord Beecham, asked me another question in following the noble Baroness, Lady Hollis, on the previous point and I have completely forgotten what he said. Perhaps he could repeat it—it is going to be a long day.
Baroness Hollis of Heigham
My Lords, we need to know whether these are affordable homes for rent. Otherwise, what the Minister is doing is using starter homes to embrace the whole concept of affordable homes. That entirely ignores the need for affordable homes to rent. Following my noble friend’s question, can she say specifically whether the percentage of social housing for rent will continue?
Baroness Williams of Trafford
My Lords, all I can say is that local authorities know their market, and they can use Section 106 for other types of housing on sites, whether for sale or for rent, in addition to starter homes where viability allows, as well as for infrastructure. I cannot answer more clearly than that at this time.
Lord Kennedy of Southwark
The Minister is right to say that local authorities know their market. The core problem with this Bill and its provisions, which has not been taken account of, is that of the powers being taken to the centre of the Government.
Baroness Williams of Trafford
Those powers are a specific type of power for the Secretary of State, but that does not take away from any of the other powers that local authorities might wish to use, viability allowing, when agreeing Section 106 for development in terms of other affordable homes for sale or for rent.
If I may, I wish to make a bit more progress. Our analysis has shown that in regions outside London, we expect that, on average, up to 60% of eligible households currently renting privately would be able to secure a mortgage on a starter home. Within London, we expect that up to 47% of eligible households currently renting privately would be able to secure a mortgage on a starter home. For example, 59% of eligible households currently renting privately across London would be able to secure a mortgage on a starter home in Hammersmith and Fulham.
Lord Campbell-Savours
Does the Minister know what the remortgage payments are on a mortgage of £450,000?
Baroness Williams of Trafford
My Lords, I do, because I have a rather large mortgage myself. I think the noble Lord may be referring to the cap on a starter home, which is £450,000.
Lord Campbell-Savours
Yes, but £450,000 is the price at which most developers are going to build houses in London.
Baroness Williams of Trafford
My Lords, the first-time buyer price of a house in London is currently £356,000. I appreciate that that is not the average house price in London, but that is the average first-time buyer price in London.
Baroness Williams of Trafford
It includes all sorts of properties, and that is for first-time buyers. But the price cap is a cap; it is not an average. We can and we will argue statistics today, but the cap is not the average, and the average first-time buyer price of a home in London is £356,000.
Lord Beecham
I thank the Minister. I referred to this when we discussed similar matters the other day. The suggestion—I was quoting Savills as my authority—is that new-build homes are going to be more expensive than houses on the market, so the £350,000 figure is likely to be an underestimate—if I recall rightly, by around 10%. We will be looking at nearer £400,000 for a new-build property, which makes it a different story.
Baroness Williams of Trafford
I apologise to the noble Lord and to the noble Lord, Lord Campbell-Savours, because the figure that I gave was the implied first-time buyer price of a new-build in London. I think we will all get a bit confused with prices and statistics today, so I hope the noble Lords will accept my apology.
I turn now to the amendments. I thank the noble Lords, Lord Kennedy and Lord Beecham, for Amendments 43 and 44, which suggest limiting starter homes to local people, and for Amendment 40, which would prevent starter homes being sold to buy-to-let investors.
I thank the noble Lord, Lord Shipley, for his amendments, which seek to restrict starter homes to those purchasing via a mortgage, and to require first-time buyers to occupy starter homes as their principal residence. Finally, the amendments in my name introduce some modest flexibility to the age 40 cap.
Lord Campbell-Savours
I have just looked this up. The cost of a £450,000 mortgage on a new house in London, at 4%, is £28,000 per annum—out of after-tax income. How is it possible for her to say, as I think she did, that 40% of private owners in London can afford a mortgage like that? These figures cannot be right. With £28,000 after tax, we are talking about income of something like £45,000 a year before tax just to pay your mortgage. This is not affordable.
Baroness Williams of Trafford
My Lords, first, if someone is paying 4% on a mortgage, they might not be getting the best deal on the market. Secondly, I just repeat my point that £450,000 is the cap on a starter home and £356,000 is the implied price of a new-build first-time buyer property. I do not think we are necessarily talking about the same thing.
Lord Kennedy of Southwark
But the point is that the figures she referred to are for the whole of London. The price of a property in the Elephant and Castle, around where I grew up, is £450,000 or more. This may apply on the edge of London, but not anywhere near here.
Baroness Williams of Trafford
My Lords, I recognise there are vast variations in house prices in London. We talked about Lewisham the day before yesterday, and we could talk about every borough in London today, but I am simply giving an average implied price. I accept that Westminster and Kensington and Chelsea are more expensive—I could not afford to live there—but there are places in London that are more affordable than others. This is simply an average price.
Amendment 37B would restrict who could buy a starter home to those purchasing with a mortgage only. We are allowing starter homes to be purchased only by qualifying first-time buyers under the age of 40, with limited exceptions. The noble Baroness, Lady Royall, asked whether this fits in with the Equality Act. I confirm that an equality impact assessment has been prepared for the starter homes provisions in the Bill, and this will be kept under constant review in line with the duties under the Equality Act. In addition, a further assessment is being prepared to accompany the Government’s consultation proposals for starter home regulations.
We need to prioritise our assistance to the generation of people in their 20s and 30s who have been disproportionately affected by the increasing affordability pressures over the last 30 years. My noble friend Lord Young of Cookham made the very good point that this is a very popular product and significant interest is already being generated on these homes. He was correct that this is done on a first come, first served basis. He also made the point about it being a good way of increasing mobility in the social rented sector and for those currently on waiting lists. I totally agree with that point—it is. We will be ensuring that resale letting restrictions are included in our regulations. The aim is to provide a place to live in. We are consulting on these requirements for the regulations shortly, to seek wider views and to ensure that they operate fairly and effectively.
Baroness Hollis of Heigham
Does that mean that the proposed draft regulations will be available to noble Lords before Report, so that we can see how the Minister ensures to target starter homes on those who most of us would accept need them most, given income and occupations that some may have which our society needs?
Baroness Williams of Trafford
My Lords, I do not think that I can undertake to provide the regulations by Report, given that the consultation will be happening shortly. As I have done with regulations on many occasions, I will elect to give noble Lords as much detail as I can possibly can, but I cannot give an undertaking that they will be ready by Report.
Baroness Hollis of Heigham
I am sorry; it may be a matter of when Report happens. The Minister should recognise that noble Lords all around the Chamber are floundering, because we do not know enough. We are not challenging the Minister’s good intent; I am sure that she is telling us everything she knows at the moment and that she does not wish to mislead the Committee, nor to pre-empt decisions that her department may go on to make. Some of us have been there and know the situation that she is in. However, the response to that should be to delay Report until we have those regulations, because otherwise most of this debate will continue on Report with questions such as, “What does this mean?” or “What does that mean?” and the Minister will say, “We have to await the regulations”. Then we will have an argument about whether those regulations will be affirmative or negative, and whether we can go back and amend legislation, given that we will then see the intent of the Government’s proposals, which the Minister was not able to share with us when we were discussing the Bill itself. She recognises this dilemma, as does the whole House—it is not unique to this Bill. Easter Recess is coming up. Either she must delay Report stage or she must get those regulations to us. For the sake of good scrutiny, we cannot afford to have the same sort of debate as we had on the previous day in Committee on Tuesday—and, so far, today.
Lord Campbell-Savours
My Lords, let me add that the danger is that the Bill will be treated as a skeleton Bill under the Cunningham report. I always oppose voting on fatals, but we may find ourselves having to vote on fatal Motions because it is the only way we will be able to deal with amendments that we should have been able to deal with in primary legislation.
During my modest contribution, I mentioned a number of abuses. Will the Minister assure us that each of those that I quoted will be considered and dealt with by officials, and that if they believe my comments were accurate, they will be dealt with in the regulatory arrangements?
Baroness Williams of Trafford
I hope to answer the noble Lord’s points as fully as I can. I know that if I do not, he will intervene again.
Lord Greaves
My Lords, perhaps it is my fault that I have not noticed yet, but while we are on the question of the 40-year age limit, will the Minister tell me whether the cut-off will apply to a person trying to buy a house at the time they make an offer or the time they complete?
Baroness Williams of Trafford
My Lords, it will be at the time they complete. That is when they become the owner of the house.
Lord Greaves
That is an interesting answer and I am grateful for it. May I suggest that we find a way of discussing this and thinking about it further, because if we think about the practicalities of buying houses, the answer that has just been given has all kinds of implications?
Baroness Williams of Trafford
I appreciate that. I keep coming back to the point that this is to address a specific demographic in the market that has been disenfranchised from home ownership.
To return to the point made by the noble Baroness, Lady Hollis, I understand the frustration of the Committee. I understand particularly that when the House is frustrated by not receiving regulations, that then takes time that we should be taking to discuss the Bill. However, I also see the need for the consultation to be meaningful. I would not want to delay Report but I am happy to meet noble Lords once the consultation has been published, which they might find helpful.
Baroness Williams of Trafford
I expect that it will be in the next few weeks. I will keep noble Lords posted. As I say, I am happy to meet Lords once the consultation has been published.
Baroness Hollis of Heigham
My Lords, does that mean that the consultation period will be through by the end of March, the end of April or what?
Baroness Williams of Trafford
I hope the noble Baroness will forgive me if I cannot give her an exact date. What I have elected to do, once the consultation has been published, is to meet noble Lords to discuss it.
Baroness Hollis of Heigham
My Lords, if that means we will not get the results of the Government’s response to the consultation until after Report, I suggest that through the usual channels they consider delaying Third Reading, or at least the use of Third Reading to take Report-style questions that we would not have been able to ask on Report because of the Government’s handling of their own timetable.
Baroness Williams of Trafford
I can only reiterate my commitment to sharing the consultation once it has been published and to ensuring that as soon as regulations can be brought forward, they will be.
Lord Kennedy of Southwark
Can the Minister not go a bit further than that? Can she not just agree here today to go through the usual channels to explore the point that my noble friend has made about the possibility of having further process at Third Reading?
Baroness Williams of Trafford
My Lords, matters may have been resolved by Third Reading, but I will speak to officials to see what can be done to expedite the detail of the regulations as soon as possible. I can do no more than that today.
Lord Beecham
My Lords, I would like to revert from this dreadful series of process issues and assert that the Committee has every sympathy with the Minister; it is no fault of hers that we are in this dreadful situation. To go back to the last substantive thing that she said, which was about making sure that the houses are not let after being bought, what mechanism will there be for monitoring the situation? Unless it is effectively monitored it becomes a meaningless provision, and I am not sure how it might be monitored.
Baroness Williams of Trafford
My Lords, there will be a power to stop letting because this is a very important aspect. For the intention of what is being provided through starter homes to be flouted in that way would undermine the policy altogether.
Lord Beecham
That is obviously right. The question is how it is going to be done. Will someone be going around and checking letting boards or with estate agents to see whether properties bought under right to buy are to be let? Or is it going to be an obligation, although how it would be enforced is another matter, for an owner of a right-to-buy property to notify someone about letting? Again, how could that be enforced? There are real practical difficulties here to which I find it hard to come up with an answer. I am not expecting the Minister to come up with an answer just like that, but I hope that someone in the department is giving some thought to how they can make a reality of the aspiration, which the Government and the Minister no doubt have, that the principle of not letting these properties is actually enforceable.
Baroness Williams of Trafford
The noble Lord gets to the heart of some of the issues on which we shall be consulting and which we shall try to ensure do not happen—for example, abuse of the facility. The regulations will be subject to the affirmative procedure, so there will be time to debate them, although I am not losing sight of noble Lords’ frustration.
I have completely lost my place. The English housing survey, which was published in February, found that 83% of first-time buyers funded their first property with savings; 27% had help from family or friends, while 10% used inheritance. Many first-time buyers used a combination of sources and 96% required a mortgage to buy. I am not convinced that a mortgage requirement will prevent the gaming that noble Lords suggest, although I can see exactly where they are coming from. People can play all sorts of games with mortgages. They can get a mortgage and, six months later, pay it back. I am keen to prevent local gaming, but I do not know that this would actually prevent it. We will keep implementation under review and issue further regulations if necessary.
The noble Lord, Lord Campbell-Savours, talked about resale in the first five years. This is a very important point. For example, what would happen to any money from the 20% discount? If a property were resold in the first five years, it would be sold at a 20% discount during that period, so it would remain a starter-home type of product.
Lord Campbell-Savours
In a free market, how do you calculate the 20% discount within the first five years? Take year three. Who would decide the market price, and the subsidised—discounted—price? Would it be the estate agent; would there be some sort of independent valuer; or would it be the department? Who is going to do it? At that point, we would be interfering and trying to prejudge market values. I do not think that it will be possible.
Baroness Williams of Trafford
The noble Lord is right. Market values can go down and they can go up. I would expect that an independent valuation of the property would be made and the 20% discount applied to the next person buying that starter home. It is true that the market might go down, in which case the price to any subsequent starter home purchaser would also go down.
Lord Campbell-Savours
I cannot see how you can calculate it. I am the purchaser. There is a house—a discounted property. How do I work out what I should pay? I might be competing with a queue of six people all of whom want to buy the house. Who is going to be the winner? In these conditions, there will be competition and one would have thought that the competition will take it above the discounted price. Unless there is some sort of preferential system built in, I cannot see how it can possibly work. We need a lot of information on this before we get to Report.
Baroness Williams of Trafford
If the noble Lord is happy, we can discuss this further. There are all sorts of complexities in it and I am very happy to meet with him. I think that the noble Lord, Lord Campbell-Savours, and I are likely to be meeting a lot over the next few weeks to discuss various things. But that would be the mechanism: money would not go anywhere but the property would come back on to the market as a starter home.
The noble Lord, Lord Campbell-Savours, also talked about a charge on a starter home, which is another good point. We will consider this issue further and will engage with lenders, developers and local authorities on the detailed implementation of starter homes, which will include such issues. The noble Lord also talked about the length of leases allowable on starter homes, which, again, is another good point. The Bill specifies that a starter home may be held as a freehold or a leasehold interest. The regulations will not specify the length of any lease but in practice they will be of a market-standard length so that it would be possible to obtain mortgage finance—that is, it would be very difficult to obtain mortgage finance on, for example, a leasehold property of 10 years—even if the purchaser does not intend to obtain a mortgage.
Lord Campbell-Savours
Why not simply say, “No 99-year or 125-year leases?”. Why not just say that they should all be 999-year leases?
Lord Campbell-Savours
A 999-year lease is a virtual freehold, is it not? Why not have those extra-long leases? Why have short leases, which force up the enfranchisement costs when people buy their leases if the ground rents are high as well?
Baroness Williams of Trafford
I get the noble Lord’s point entirely. We expect that if these properties were leasehold, the leases would be of market-standard length.
Lord Campbell-Savours
But market-standard length at the moment can be anything from 99 to 999 years. I am just saying, why not go for the longer lease?
Baroness Williams of Trafford
I entirely take the noble Lord’s point. As I say, that is our expectation, but we will continually monitor this. It is a new product and we will monitor it as time goes on.
I think I have answered the questions—or some of them—before I have introduced the amendments. Amendment 41B would not allow buy-to-let investors to buy a starter home but would require first-time buyers to occupy a starter home as their principal residence. I assure noble Lords that it is not our intention to allow those people who buy a starter home to become buy-to-let landlords, and nor do we want the properties to be second homes.
The noble Lord, Lord Campbell-Savours, brought up the point about what happens if someone inherits a house. If that happens and they sell it on, clearly they do not own that house, but once they occupy that house they own it and therefore they would not be a starter-home purchaser. I do not know what would happen if someone purchased a starter home and then one year into that purchase inherited a house. I can get back to the noble Lord on that.
Lord Campbell-Savours
What worries me is where someone inherits a house in the area where the noble Lord, Lord Greaves, lives, at £40,000, and then is disadvantaged because under the provisions in the Finance Act 2003, if they have acquired it—not purchased it but acquired it; in other words, inherited it—that would then deny them the right to have a starter home. That should be sorted out.
Baroness Williams of Trafford
It would, but it would give them a very good deposit on a home if they were to then sell that property, and in the north-west, the implied first-time buyer price of a new build is £144,000. I am just giving an example which relates to the one the noble Lord gave, but in that case the properties would be well within the affordability range for a new-build first home.
Lord Campbell-Savours
It is defined in the 2003 Act. If you have acquired a house by way of inheritance, under this legislation that is your first home and therefore you cannot buy a starter home. That is what I was driving at.
Baroness Williams of Trafford
My Lords, if you have acquired a home and then you live in it, you are the owner of that home. You own it.
Lord Greaves
I am not qualified to take part in these legal technicalities but this is clearly something that needs sorting out. If the Government are going to stop people buying a starter home and letting it during the five-year period, will they also be prevented from keeping it empty? For example, if I bought a starter home worth £250,000, having received a discount of £50,000, and with two years to go I unavoidably had to move somewhere else and could not live in that house, it would be altogether financially more beneficial to me to simply leave it empty for two years and pay the council tax on it rather than to sell it and lose the £50,000. What will the position be in that situation?
Baroness Williams of Trafford
Theoretically a person could, within the five-year period, have to move somewhere else and therefore the house could be left empty for two years. The question is whether they sell that property within the five years. The person that the noble Lord is talking about would not sell the property; he would simply go elsewhere for work or for whatever purpose.
Lord Greaves
My Lords, there are all sorts of theoretical circumstances that we can put ourselves in but people may well move permanently—they may move to another part of the world or to another part of England where there are some jobs, unlike in parts of the north of England. Under those circumstances, they would not come back to the house and it would clearly be in their interests to leave it empty for two years. Therefore, the number of empty properties in that area would increase for purely bureaucratic reasons. All you have to do is leave the house empty for a couple of years, then sell it and make a profit of perhaps £45,000. That does not seem sensible. If the Government have not thought out the problem, they ought to do so and come back and tell us whether there is a solution to it.
Baroness Williams of Trafford
My Lords, the matter here is resale. I will certainly write to the noble Lord to clarify the issue if that is okay.
Baroness Hollis of Heigham
On that last point, we want to help people to buy a starter home if they have a good chance of affording it. On the one hand, we want to stop abuse but, on the other hand, we do not want to stop appropriate geographical mobility. The core of the problem is that after five years the 20% discount ends. I hope that the Minister will understand the overlap between a lot of these discussions and the subsequent amendments relating to trying to keep that 20% discount in perpetuity, because at that point the possibility of abuse reduces very sharply.
Baroness Williams of Trafford
My Lords, I am sure that we will go on to talk about “in perpetuity” today. The Government are quite clear that not making these homes discounted in perpetuity allows mobility up the housing ladder and frees up property for other people to live in. Also, it does not restrict the person who has bought the starter home in making progress up the property ladder.
Lord Beecham
I want to revert for a moment to the conundrum posed by my noble friend Lord Campbell-Savours, to which the noble Baroness has endeavoured to reply—with some difficulty, which I quite understand. His question is predicated upon a single person inheriting a house. However, if two or three siblings inherited a share in that house, on the face of it that would also invoke the problem he raised. Again, I do not ask for an answer now but this is yet another area that needs to be explored by those advising the Minister. On the face of it, one out of the three, four or however many siblings might have a share in this notional property would be disqualified.
Baroness Williams of Trafford
I think that the noble Lord is right. If the noble Lord, Lord Campbell-Savours, will indulge me, I will write to him on this further. It starts to raise questions, particularly when there are two or three—
Lord Campbell-Savours
All I am saying is that where the Bill states:
“’First-time buyer’ has the meaning given by section 57AA(2) of the Finance Act 2003”,
that should be amended because it is an insufficient definition.
Baroness Williams of Trafford
Perhaps I may take that point away because, like other noble Lords, I am no legal expert. The noble Lord, Lord Greaves, asked about the Help to Buy scheme being used to purchase a starter home. We are certainly exploring whether it can be used but as yet no decisions have been made.
Lord Greaves
Just to wrap up this point if we can, when might decisions be made? The point is that if there is a 20% discount on a starter home and a potential 20% discount in certain circumstances through the Help to Buy scheme, somebody could get a 40% discount out of public funds on the house they buy. That seems rather a lot, and I would like an answer to that question before we finish with this Bill.
Baroness Williams of Trafford
My Lords, Help to Buy is a government loan guarantee scheme as opposed to a discount, but I shall be happy to discuss that further and, as I said, to bring forward in due course government thinking on Help to Buy being used for a starter home.
Putting the sales and letting restrictions in regulations will give us flexibility to amend the restrictions, should this be required in the future. It will also give the opportunity to consult with key stakeholders to ensure the regulations operate fairly and effectively, which is what we all want. Restrictions in any legislation will not prevent gaming at the local level, much as we would want it to, but I reassure noble Lords that we will be working with builders, lenders and local government to secure the best possible mechanism to ensure that starter homes are for owner-occupiers only. We are working to secure a practical mechanism that can be agreed with all parties to ensure that starter homes are real homes for those who will enjoy living in them.
The noble Baroness, Lady Royall, asked a question about second-home owners. I cannot remember what it was but I have something written down in my notes. Would she mind repeating the question?
Baroness Royall of Blaisdon
It was how to ensure that, once the starter homes are sold on, having been occupied for two or however many years, it is not possible to sell them on to second-home owners or to people who are going to rent them out to other people. It was about second homes and holiday homes.
Baroness Williams of Trafford
My Lords, unfortunately you cannot really stop that, much as we would like to see a perfect housing system in which there is no abuse. Noble Lords have given many examples of when, once the five or however many years are up, in subsequent years some of these houses could be used as second homes. I wish it were not the case but, unfortunately, it is. The point is that they will go back into the market as a supply of houses for people to live in in the future.
Lord Greaves
My Lords, I apologise, but these are new houses and therefore subject to new planning permission. Could it not be attached to the planning permission that they should not be used as second homes?
Baroness Williams of Trafford
My Lords, I think the idea is that we want to make the system as simple as possible, but I completely accept the fact that we do not want to leave it open to abuse. There are examples of that under right to buy, where properties might have been used as second homes. Of course, we hope that the second-home stamp duty should deter some people—noble Lords included—due to the quite substantial price now involved in buying a second home.
Baroness Young of Old Scone (Lab)
Could I just challenge something that the Minister said? The nub of this is a point that we are going to come on to debate later: the in-perpetuity issue. A lot of these potential misuses, both at point of purchase and at point of sale subsequently, could be resolved very simply if the Government were to relent and see these starter homes as being starter homes in perpetuity with a permanent discount. I was very unconvinced by the Minister’s argument that, otherwise, people in these starter homes would be unable to get on to the next rung of the ladder in the housing market. Do we really want to be persuading people to go up the housing market ladder in an inflated way? That is partly the problem with the housing stock at the moment: prices are inflated, and the steps between a small property and the next rung up the ladder are huge, particularly in areas of high housing cost such as London. What is the harm of them staying in the smaller property, if they have to, until such time as they can either achieve their aim with additional savings to buy into the next higher grade or get to the point at which they have a sufficient income level to be able do it? It seems to me that the system will struggle in the future with the sorts of abuses that the Minister is struggling with, because of the inability to control what happens after the first sale.
Baroness Williams of Trafford
I take the noble Baroness’s point, but the Government’s wish is that people who want to move—and there are many reasons why people would want to move in the future—will be able to do so without being restricted by the same problems that they faced when buying before the starter home discount came in. Also, that mobility introduces a supply into the market. Noble Lords from all round the House have talked about the lack of supply and the lack of supply at a certain level. So it has a dual purpose, in allowing other people to come on to the market but also introducing supply when those people choose to move on.
I now move to non-government Amendments 43 and 44. Over the last 20 years, we have heard that the proportion of those under the age of 40 who are homeowners in England has declined by over a third, from 61% to 38%. There has been a 26 percentage point increase in the proportion of that age group who rent homes in the private sector, from 18% to 44%. Therefore, as one has declined, so the other has gone up. This is a problem faced by an entire generation. It would be wrong to say that some people cannot benefit from starter homes and buy a home in the location that works for them simply because they are currently living or working elsewhere. They could, for example, currently be priced out of the neighbourhood of their choice, or they could be relocating for work or other personal reasons. The effect of a local connections test on starter homes would be to restrict access for some people for no good reason. A starter home purchaser must commit to living in the property for five years and there will not be the opportunity to rent out the property, as we have already discussed. This must be a better test of commitment to an area.
It is also important that there is consistency, in order that our reforms and the commitment to deliver 200,000 starter homes are widely understood. This is particularly important for lenders and developers, and their support and engagement are critical to achieve delivery. Putting differential requirements in place as a matter of course, such as a local connection test, would introduce complexity that we do not want in getting housing delivery on the ground. However, my noble friend Lord Young brought up the point that a local connection may be warranted, and I recognise that. It has long been a common feature of rural exceptions sites, where opportunities for new housing supply are very limited. As part of our consultation on national planning policy, we sought views on whether local planning authorities should have the flexibility to introduce a local connection test for starter homes on rural exception sites. This would reflect the particular needs of some rural areas, where local connections are important and access to the housing market for working people can be extremely difficult. It would also be consistent with existing policy on rural exception sites. We are currently considering consultation responses on this point.
Lord Beecham
My Lords, I wonder whether it might not be sensible also to look at possible urban exception sites. Take the case of inner London—there may be other places as well—where there are very high levels of demand and very high prices, and even these homes will not exactly be cheap. Would it not be sensible to allow the local planning authorities in those areas to have the discretion to require a local connection, having regard to the pressures they are already experiencing with their existing population? I certainly support the rural exception point, and presumably it may be possible to have a similar mechanism for urban areas. Perhaps in conjunction with discussions with the LGA or combined authorities, the Government could reach an agreement about which areas should have that. Some element of discretion ought surely to be provided for in urban areas. The Minister represented part of Greater Manchester where, I suspect, there will be areas with precisely the same problem.
Baroness Hollis of Heigham
I support my noble friend in what he says. This morning, I was sent briefing data from the city of Cambridge. The average house price in Cambridge city, based on February 2016 data, is £483,625—in other words, £484,000. The lowest quartile price is £315,000, and there has been a 17% increase in the last 12 months. South of Cambridgeshire—so people would have to travel in, but none the less—the average price is £385,700. In the east of England, it is £303,000. These figures confirm the point that my noble friend was making: we are going to need exemptions for urban sites of high demand just as we will in rural areas. Cambridge city and university cities across the country face this sort of price explosion.
Baroness Williams of Trafford
My Lords, as I said, we are keen not to introduce complexity generally. The reason I homed in on the rural exception sites was for those very reasons: lack of supply generally and people who want to work locally to whom that test could be applied.
I move on to government Amendments 42A, 44A, 44B and 45B. These amendments would allow for some modest flexibility on the under-40 age cap. Amendments 44A and 44B allow the Secretary of State by affirmative regulations to exempt the under- 40 age cap for specified categories of people. It would allow the Secretary of State to specify circumstances where a property may still be classified as a starter home if it is purchased by joint purchasers, not all of whom are under 40. Both exemptions would allow limited flexibility in the age threshold, for example, where joint first-time buyers wished to buy a starter home and one was over the age of 40. We consider that a reasonable amendment.
Amendment 45A would require the Secretary of State to consult local authorities, the Mayor of London and any other person the Secretary of State thinks appropriate, such as professional bodies, before amending the price cap for starter homes. A requirement to consult before amending the price caps was one of the amendments tabled by the Opposition in the other place.
I have made it clear that price caps are not an expectation of the going price for starter homes, and I am sure that I will reiterate that point again. The price cap framework has been set nationally to ensure that there is a clear and consistent product that first-time buyers, lenders and developers all understand. However, I expect that there will be regional differences, as we have discussed. We want the policy to work effectively across the country. That is why we have taken powers to amend the price cap through affirmative regulations, which will ensure that the provisions remain up to date. The Secretary of State can adjust the limit to reflect movements in the property market generally. Following further consideration, we have decided to amend the Bill so that it is a requirement for the Secretary of State to consult local authorities, the Mayor of London and any other person that the Secretary of State thinks appropriate, such as professional bodies, if we decide to change the price caps in future.
I hope that that provides reassurances that local authorities will be able to make representations before any change to price caps is made through regulations, and we will consider any responses carefully. Although I thank noble Lords for tabling Amendment 45, the government amendment makes it unnecessary.
Amendment 45B is linked to Amendment 45A and allows regulations under the clause to amend the starter homes chapter of the Bill. For example, if the Secretary of State were to use that power to create a list of different categories of people to whom the age requirement does not apply—for example, a specific professional group—the list could be inserted into Chapter 1 as a new section. This will add further flexibility, should it be required.
Amendment 42A is technical, amending the Secretary of State’s power in Clause 2(3)(c) to make regulations which specify the characteristics that an individual must possess to be considered a qualifying first-time buyer for the purposes of Clause 2. We consider that the term “criteria” more accurately reflects the imposition of things such as a minimum age requirement that an individual must meet to be a qualifying first-time buyer.
Baroness Hollis of Heigham
My Lords, I understand why the Minister has been unable to pick up all the questions that have been thrown at her, but one question I asked was: have the Government considered an income cap as well as an age cap? If they have rejected that idea, why?
Baroness Williams of Trafford
My Lords, we have not considered an income cap; we have considered the age demographic that has been priced out of the housing market. Therefore, we wanted the whole age group to be able to access starter homes.
Baroness Hollis of Heigham
If there is the demand that the noble Baroness thinks that there will be, how will she reconcile that with the fact that many people on a higher income who could afford to go into the open market—those in jobs with a professional qualification, such as accountancy, law, medicine, teaching and so on—will not start earning their salaries until their late 20s, at which point they will be thinking to buy? They could go into the open market but now—sensibly—will choose to go into a starter home because there will be no limitation on them. Two such people may well have an income of £70,000 or £80,000 outside London and could well afford to go into the open market but, if they acquire a starter home, will be displacing someone else who is possibly in greater need. Why have the Government not explored that? There may well be good arguments on the other side, but it is odd to have an age restriction but not an income restriction; frankly, it is not age that stops people going into the open market, it is income.
Baroness Williams of Trafford
My Lords, if you look at the demographic, you see that it is this age group that is restricted. I take the noble Baroness’s point about accountants and doctors, but it takes quite a long time to earn a decent salary in either of those professions—I am married to someone in one of them. It is the age group that has been so badly restricted, and that is why the age group was selected.
Baroness Blackstone
My Lords, I am very sorry to interrupt the Minister yet again, but on various occasions during this debate she has talked about abuse. The biggest abuse of all, which will be a consequence of the Bill, is very highly paid young people in their 30s benefiting from a very large discount—in London, it could be £80,000 or £90,000. Surely the Government should be concerned about that. It will bring the legislation for starter homes into disrepute, and rightly so. I reiterate the concern around the House about this issue and ask the Minister to reconsider whether there should not be a government amendment on this issue.
Baroness Grender (LD)
My Lords, the Minister has ruled out a mortgage but, in this context, perhaps the Government could right here, right now, today rule out cash buyers. That gives us something more specific to hold on to here. Or can the Minister envisage a cash buyer in this scenario who would not have an unnecessary advantage?
Baroness Williams of Trafford
My Lords, I hope that I have demonstrated—I do not think anyone is disputing it—that if this market was so open to people of this age, they would be buying. The fact is that, over the past 20 years, they have not been buying; purchasing has hugely declined. Yes, we may be talking about a few people in London on a high salary, but the statistics show us that that is not the case. We should not be restricting it geographically or by income, because it is a problem facing an entire generation. That is why we do not want to restrict them from being able to buy, should they wish to.
Baroness Hollis of Heigham
The Minister is happy later in the Bill to have an income restriction for council tenants but not, apparently, on the donation of a very large subsidy to people in the purchase market.
Baroness Williams of Trafford
My Lords, I do not think it is correct to say that we want an income restriction for council tenants. I do not think that that is a statement of fact.
Baroness Hollis of Heigham
Yes it is, my Lords, because under “pay to stay”, two tenants—a couple—each earning £15,000 a year, possibly with three or four children, will not even be eligible for housing benefit, but will have to pay market rents to stay.
Baroness Williams of Trafford
The noble Baroness made the point that they would not be able to access these properties; they will.
Lord Greaves
My Lords, I am sorry to keep saying this, but I shall keep saying it until the Government start to engage in the discussion. There are parts of the country where the housing market is stagnant, where there are real housing problems, but they are not the inability of a particular demographic—in this case, people under 40—to access the market. As I demonstrated earlier, where a lot of good-quality properties are already available for the same price as new two and three-bedroom semis would sell for, if they were starter homes and attracted the 20% discount, the introduction of starter homes is likely to have a severely disruptive effect on the whole housing market. There may be answers to this, but for the Minister to suggest that the demographic of under-40s is excluded in the same way in all parts of the country is simply not true. Moreover, the solution being put forward is, as I say, likely to have a severely disruptive effect on the whole housing market and potentially do more harm than good.
This is not particularly my view; it is one that has been put to me strongly by our local council officials who are involved in all this. They are the ones dealing with empty properties and trying to get new build going right across the field: housing officers, planning officers and senior council officers. They say that this proposal as it stands will do more harm than good, possibly far more harm than good, and actually will not seriously improve the prospects of the under-40s to get their own homes.
Lord Campbell-Savours
Perhaps I may ask the Minister an Andrew Neil-type question, one that is very simple: why should a cash buyer benefit from a Section 106 subsidy?
Baroness Williams of Trafford
My Lords, I shall take the point made by the noble Lord, Lord Greaves, first. He has talked today, as he did the other day, about empty homes in Pendle—I am assuming he means Pendle or Colne or Brierfield—
Lord Greaves
I am sorry; I do refer to the place I know best, but this is not about a single place in England. We have the same sort of housing market across a range of areas, many of which are in the north of England, but there are some in the Midlands, the south-west and others in amazing places where I did not really know that this problem existed. It is generally those places where the housing market is stagnant, and there are quite a lot of them about.
Baroness Williams of Trafford
My Lords, I shall reiterate the point I made the other day. The noble Lord is absolutely right to say that the housing market is stagnant in some parts of the north-west of England and employment is not like it is in the rest of the country. I think that the interventions that the Government have made in, for example, transport and infrastructure will put some of those areas back on their feet again, playing their economic part in the country.
Coming back to the point made by the noble Lord, Lord Campbell-Savours, about cash buyers, I do not know a single person aged under 40 who is a cash buyer, although of course there will be some. But our overriding principle here is that we do not want to disenfranchise people who work hard from the housing market.
Baroness Grender
My noble friend Lord Shipley has tabled this amendment on mortgages for precisely that kind of reason. No, of course there are not many people aged under 40 who are cash buyers, but if someone subsidises them to become cash buyers in order to acquire a property, that is the loophole we are concerned about here.
Baroness Williams of Trafford
I think I have explained that having a mortgage will not stop gaming. There are always going to be abuses of the system, but we are trying to address an age group which has been disenfranchised from the purchasing market. I hope that what I have said gives to some extent reassurance to the noble Lord and that he will feel content to withdraw his amendment.
Lord Kennedy of Southwark
Can I push the noble Baroness a little further on this? I do not think it is good enough to say that there are always going to be abuses; we need a little more than that. There will be scams and shams, so we have to make sure that we will be able to identify them and sort them out.
Baroness Hollis of Heigham
Perhaps I may add to the point made by my noble friend. Many of the abuses will indeed be made if not by the mortgage principle then by continuing the discount in perpetuity. Can the Minister tell us why she thinks, if the discount in perpetuity were to apply, that would disadvantage first-time buyers in the future: those who bought the first time round, the second time round or the third time round? The only people it would disadvantage are those who seek to pocket a profit.
Baroness Williams of Trafford
My Lords, I was trying to articulate my point about housing mobility. People buying starter homes who want to move on to the next rung of the ladder would be disenfranchised at a further point down their aspirational route.
Lord Beecham
My Lords, if you have served your five-year term, as it were, and you make your £100,000 or so profit, you will have more money to spend on the second house. Surely the effect of that will be to push up house prices.
Baroness Williams of Trafford
My Lords, the effect of introducing 1 million more new homes into the housing market by 2021 will be to increase supply, which should, first, deal with some of the problems of demand and, secondly, start to moderate house prices in a way that has not been the case over the past few decades.
Lord Greaves
My Lords, I realise that I am ploughing a different furrow from other noble Lords in these interventions, but I have to say with all due deference to the Minister that my concerns about our local housing market and that of many other areas are not answered by her saying that the Government are going to introduce better infrastructure and invest at that sort of level. If that happens it will be extremely welcome. There is not much sign of it in east Lancashire at the moment, but even if there were, investing in infrastructure takes time. There is no doubt that it takes 10 to 15 years and has a long-term payback. As I understand it, we are talking about the housing market over the next few years. Building new roads, reinstating railways and doing all the other things that people are talking about under the heading of the northern powerhouse will not have any significant effect on our housing market and that of many other parts of the north of England in the next five years. Meanwhile, we have to deal with the problems that result from a stagnant, fragile, flat housing market next year, the year after and so on.
I am not trying to be awkward about this. If starter homes are a wonderful thing, I am all for them. But what I am saying is that in these parts of the country the introduction of starter homes risks having a disruptive effect on the existing housing market. While starter homes might be built if anyone can be found to build them, which is a question in itself, the result may well be that the rest of the housing market in the area becomes even more depressed than it is at the moment. That will mean more empty properties and a general reluctance on the part of developers to build, whether for social rent, private rent or owner-occupation. If the return from building houses either through selling them or from rents is less than all the costs put together of building them, they are not going to be built. Because of this bonus—this subsidy—we might get some starter homes, but that will put a severe damper on the rest of the housing market.
All I am asking is for the Government to discuss this with people on the ground in areas like those I have mentioned. We should set up a mechanism for doing this and see how it works, and then perhaps bring forward different rules, exceptions or whatever it might be—or just reach an understanding between us—to see how things can be improved. There is no point in having a starter homes policy or anything else in areas where it is actually going to make things worse.