Housing Market (London)

Brandon Lewis Excerpts

Tuesday 18th November 2014 Westminster Hall

[The Minister of State, Department for Communities and Local Government (Brandon Lewis)]

Thank you, Mr Robertson. It is a pleasure to respond to the debate under your chairmanship. Certainly towards the end of the speech by the hon. Member for Hackney North and Stoke Newington (Ms Abbott), I found an issue that we agree on—this is probably one of the rare times when we actually agree on something. I am referring to defence of the green belt, on which I absolutely support her comments, particularly in terms of urban sprawl. She makes a very good point on that.

Going backwards from there, I start to disagree with the hon. Lady somewhat. I do not entirely disagree that London is the greatest city in the world, although as a Norfolk Member of Parliament I make a very strong pitch, as I am sure she would appreciate, for the great assets of Norwich. I encourage others to come and see Norwich.

To take the comments this afternoon more generally, it is important that we ensure that there is good-quality, affordable housing for everyone. An effective housing market has been and is a really important priority for the Government. Specifically in London, the Mayor of London has set himself a target of delivering 42,000 new homes a year, a figure that has not been matched in London by any Government since the 1930s. I am pleased that we have devolved power to the Mayor of London, who can look at what is right for London and make decisions for London.

When I visited City Mills development in Hackney this summer, I saw some of the really good regeneration and development that are being done. The development is creating more homes for people—I believe that the total number is going from some 450 to around 750—while getting rid of some ugly tower blocks and bringing back street scenes and community in attractive properties that people can be proud of, so that they can start to build a community again.

Since 2008, with 18 months left of his second term in office, the Mayor of London has already delivered more than 5,100 affordable homes in Hackney. That represents a considerable increase on the 4,220 affordable homes delivered during the previous Mayor’s eight years in office.

[Ms Abbott]

May I remind the Minister that the Mayor has much broader housing powers than the former Mayor had? That is a consequence of the former Mayor’s campaigning. I also remind the Minister that affordable housing, as the current Mayor defines it, means 80% of private sector rents. That is way out of the reach of ordinary people in Hackney.

[Meg Hillier]

rose

[Brandon Lewis]

I give way to the hon. Lady.

[Meg Hillier]

I point out that on the Colville estate, which is, coincidentally, opposite the New Era estate, the council is building homes for tenants. It is good quality social housing, just as the Minister described. That is a model for what can be achieved with good local leadership and the right funding, and it delivers long-term affordable homes. Surely the Minister can see that as a model, too. Hackney has the answers.

[Brandon Lewis]

Yes, and I am proud that more council houses are being built under this Government than under the previous Government. Councils are building council houses again. The hon. Member for Hackney North and Stoke Newington spoke about councils being able to deliver more and to borrow more.

At the start of self-financing, councils had borrowing headroom of £2.8 billion, which has not been entirely used up. I encourage councils to go ahead and progress with developing new housing. We have also recognised that some councils needed extra borrowing powers, so we have already announced £122 million of additional borrowing headroom for 22 authorities, to support the delivery of more homes in their areas. We have consulted on proposals to increase local transparency about the value of local authorities’ social housing assets. That is an important step forward.

We have had to rebuild the housing market in this country. There are now more than 4 million households in the private rented sector, and that number is increasing. Private rented sector rents in England—I appreciate that I am talking only about England—have fallen in real terms every year under this Government. Last year, the average increase in England was 1%, which is below inflation, for the 12 months ending in September. In London, rents increased by only 1.5% over the same period, with inflation at 1.2%. Local authorities are responsible for ensuring that standards are met, but the Government are taking steps to improve quality and choice in the private rented sector.

I want to see more people investing in the private rented sector. Landlords who own 10 properties or fewer make up by far the majority of the sector, and it would be good to see more institutional investment and professional experience in the sector. That is why we have established the £1 billion build to rent fund, which will have delivered contracts by March of next year for up to 10,000 new homes.

Some of those contracts are already in place for homes across London, and I expect more to follow. We have established the private rented sector taskforce to encourage more entrants into the sector, and we are determined not to jeopardise that investment by increasing red tape and unnecessary regulations, such as rent controls. Rent controls demolished the market last time they were introduced and reduced it to about 8%, although we are rebuilding that.

We recognise that standards must continue to improve. We want professionalism in the sector to increase, to make it more attractive to investors and tenants. We have taken action to tackle bad landlords so that they either improve or leave the sector. That is why I entirely support what the Mayor is doing with the London rental standard. We are also giving tenants the know-how, through our “How to rent” guide, to get rental deals that meet their needs.

Hon. Members have raised a couple of questions and suggestions. The hon. Member for Hackney North and Stoke Newington said that she supports the mansion tax in principle. I am sure that she will not be surprised to hear that I do not support it, not least because the effective delivery of a mansion tax would involve the revaluation of many homes. When that has been done elsewhere, it has caused problems for people right across the scale and tended to hit the most vulnerable. A mansion tax would also risk penalising people—in the main, pensioners—on low incomes whose properties have appreciated in value. The Opposition’s policy seems to change every day, however, so I have no doubt that it will develop and change further.

Hon. Members have said that they believe that foreign investment in the housing market is having a negative impact, and I think that we need to put that in context. Foreign investment in new housing has been helping to provide the finance required to build the housing that we need, particularly in a global city such as London. Without such up-front investment, financiers would not have released the cash needed for development to go ahead, and building would have completely stalled. The developments that we now have would not be in place.

Not only do those developments provide homes in which people can live and work, but they unlock associated affordable housing development. Even where property is foreign-owned, much of it is rented out, which generates an ongoing return for the investor. A good example is Battersea power station, which has been derelict and undeveloped for about 30 years. Development is now going forward thanks to a combination of private investment from Malaysia and public infrastructure support from the Government. To put the situation in perspective, the Bank of England recently estimated that foreign buyers represent only 3% of all residential property transactions in London.

[Meg Hillier]

I understand that something as intractable as Battersea power station may have needed a kick start from someone wealthy, wherever they were in the world. In Hackney, however, new developments are being bought off plan by landlords who will never set foot in the country. They were originally built to provide homes for local people, but they never reach the hands of local people. I do not think that that is what the Minister is talking about, and I hope that he does not support that approach.

[Brandon Lewis]

We sometimes also see British institutional investors—British companies—investing in the private rented sector overseas. In places where that has happened, they tend to be grateful to have good management. I want to see good management, good landlords and good institutional investment coming into the private rented sector. The Mayor of London has recently launched a mayoral concordat on new homes in the capital. Key developers have been contacted and asked to commit to selling new homes on every development to Londoners before, or at the same time as, they go to overseas buyers.

A couple of hon. Members spoke about properties being built and left empty. The number of empty homes across England is at its lowest rate since records began. The vacancy rate in London has dropped to below 2% for the first time ever. Hon. Members have touched on the question of how we improve the private rented sector by looking at letting agents. Although landlords and letting agents are free to set their own charges, they are prohibited from setting unfair terms or fees under existing consumer protection legislation.

[Mr Slaughter]

The Minister is talking about support for affordable housing and even social housing. Can he explain why he sat on, and subsequently overturned, the Planning Inspectorate’s report on the Shepherd’s Bush Market compulsory purchase order, which will destroy social housing, a 100-year-old market and small businesses simply to build more than 200 luxury flats on the site?