Housing and Planning Bill (Sixteenth sitting)

Chris Philp Excerpts

Thursday 10th December 2015 Public Bill Committees

[Dr Blackman-Woods]

I am sure that that clarification is helpful.

[Chris Philp (Croydon South) (Con)]

Will the hon. Lady give way?

[Dr Blackman-Woods]

I will give way to the hon. Gentleman and then I am anxious to conclude because other Members want to speak.

[Chris Philp]

The hon. Lady is very kind to give way. Of course Conservative Members agree that we should build more social or affordable housing, and the Bill will achieve that. Does she agree, however, that cases such as that of the former Member for Holborn and St Pancras, Frank Dobson, who occupied a council house for 30-odd years despite being a Cabinet Minister, are poor use of housing stock, and that a family in Camden on a low income would have been much better off occupying that council property?

[Dr Blackman-Woods]

The hon. Gentleman needs to turn his attention to what the Local Government Association has said on the matter:

“The Localism Act 2011 introduced flexible tenancies in acknowledgement that ‘a one size fits all model on rents and tenancies is not the best answer to the wide range of needs and circumstances’”.

Local authorities already can offer flexible tenancies if they want to. The provisions before the Committee would force all councils to do it, and do it in a particular way, whether or not that accorded with local circumstances and met tenants’ needs.

My right hon. Friend the Member for Wentworth and Dearne said that the provisions are a continuation of a “vendetta against council tenants”. The manner in which they have been tabled, and the lack of consultation with the housing sector, tenants or anyone who might be affected, show that he is probably right. I look forward to the Minister’s having the good sense to withdraw them and to allow proper discussion of such a key issue before a decision is made.

--- Later in debate ---

[Mr Thomas]

I beg to move, That the clause be read a Second time.

New clause 9 would add to the Bill a duty to promote lending to small and medium-sized house builders. There has already been some conversation in Committee about the need to do a little more to help a sector of the house building industry that has been struggling in recent years. Small firms lack many of the advantages of scale of larger house builders, particularly in terms of access to finance and access to land and other assets against which to borrow that finance on good terms.

Small builders are often very dependent on a smaller number of land sites and face, in the words of an economics report,

“lumpy, volatile cash flows as land is purchased, sites developed and sales made”.

Equally, small and medium-sized house builders are surely a crucial part of the sector, given their appetite for developing smaller sites that larger firms often do not want to develop themselves. SME house builders can often be more agile players in the housing market and can use local knowledge and expertise to make the most of small sites. In that way, the contribution of SME house builders also provides an opportunity to increase the number of jobs, to help economic growth and, obviously, to ensure that additional homes get built.

The National House-Building Council has charted the decline in the number of SME house builders from the mid-1980s. It notes that, in the mid-1980s, there were some 12,000 SME house builders, which by 2013 had declined to just under 4,000. Evidence presented to Labour’s Lyons review by the Home Builders Federation suggested that there were some 7,600 dormant SME house builders that were doing other kinds of construction work. The crucial point is that there is capacity that could be drawn back into the housing market to build additional homes in the right circumstance. The Lyons review heard that access to development finance, and its cost, was the key problem preventing many SME house builders from coming back into the market.

The current Federation of Master Builders survey, which came out in September, continues to highlight the scale of the problems that many house builders have in accessing finance. The responses to that survey from different house building firms might give hon. Members an additional indication of the scale of the difficulty. One talked about the disproportionate and high interest charges in relation to security held by lenders. One simply said that there is no finance available for small companies. Another said, “Unless you are an established developer with at least five years of profitable developments under your belt and are cash rich, there really isn’t any finance available to grow. The banks just aren’t interested.”

[Chris Philp]

I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests. What the hon. Gentleman says is laudable, but I am unsure how the Secretary of State for Communities and Local Government can promote bank lending when he has no power to direct banks. Moreover, banks are constrained by Basel III, a set of international banking regulations, so I would be interested to hear the hon. Gentleman’s commentary on how the Secretary of State can influence bank activity.

[Mr Thomas]

There are a number of ways in which the Secretary of State for Communities and Local Government can intervene and promote lending to small and medium-sized businesses. Simply convening meetings with banks to encourage them and talking through the issues that they have in lending to small and medium-sized construction companies would be a start. The hon. Gentleman raises a separate point about Basel III, which I accept was a sensible reform, but the Secretary of State’s friend in the Treasury has introduced other measures that have also had an impact on the availability of cash for lending to small and medium-sized house builders, which the Secretary of State might be able to challenge more easily if the duty were in the legislation.

One way to help small firms to access the credit that they need might be to provide more guarantees for bank lending. A guarantor bank is one suggestion and would guarantee certain tranches of loans to small and medium-sized builders with the condition that funding be used to develop homes, helping to lower the cost of finance as well as increasing the availability of finance to small and medium-sized builders. That was proposed by Capital Economics to the Lyons review and mirrors the Government’s existing Help to Buy scheme. It would essentially be a help-to-build scheme—[Interruption.] I hear the hon. Gentleman heckling me from a sedentary position. If he wants to intervene to make a point, I am happy to take his intervention.

[Chris Philp]

The funding for lending scheme is already doing very effectively exactly what the hon. Gentleman describes.

[Mr Thomas]

I say gently to the hon. Gentleman that I have not made up the Home Builders Federation’s concerns. The quotes that I have just given are real. There is a real problem preventing many small and medium-sized house builders from accessing finance. I suggest to him that more needs to be done and the new clause is a way of doing that.

Finally, there is one other option available if a guarantor bank or a help-to-build scheme were not acceptable. Government and Opposition Members will be familiar with the regional growth fund. A series of community development finance institutions occasionally work with construction firms but have difficulty in building their capital base. Regional growth fund moneys might be better used in increasing their ability to lend money to small businesses in their communities. In the context of the new clause, some of that financing could be directed at helping small and medium-sized house builders.