Affordable Housing (Devon and Cornwall)

Derek Thomas Excerpts

Wednesday 27th April 2022 Westminster Hall

[Derek Thomas (St Ives) (Con)]

I can only echo all that has been said so far about the challenging situation in Devon and Cornwall. This acute problem particularly affects Devon and Cornwall, and I commend my hon. Friend the Member for North Devon (Selaine Saxby) for securing an extremely timely debate.

The lack of good-quality, affordable housing for local people is not new, but it is not helped by significant population growth. In the past couple of years, Cornwall has had the highest net internal migration of any local authority area in England and Wales. I do not want to say this, but I know it is a fact as I do a lot of work on empty homes in my constituency: the problem is not helped by the fact that the Church of England, the Methodist Church, Cornwall Housing, an arm’s length company of Cornwall Council, and LiveWest, which we all know in Devon and Cornwall, have a lot of empty homes across Cornwall. The Methodist and Anglican Churches have empty homes in my constituency, and I am trying to get them used to address the significant need that hon. Members have set out clearly. Nor is it helped by the fact that long-let homes are being flipped to holiday lets at an alarming rate.

I refer the House to my entry in the Register of Members’ Financial Interests, and to my housing debate in December, when I had more time to set out the difficulties and potential solutions. During the debate, I called—more ambitiously than has been done so far—for devolved powers to local authorities such as Cornwall Council through the levelling up and regeneration Bill. I believe I have the support of Cornish colleagues in suggesting that all new homes be restricted for permanent residents only in perpetuity, and for a licence requirement if someone wants to use a home that is lived in as a holiday let, a bolthole or for any other business purpose.

Since December, the Government have not done a great deal to resolve the problem, although I appreciate that legislation is to be announced in the Queen’s Speech, but they have sought to address the exemption of second homes from business rates and council tax. From next year, as a consequence of lots of work that many have done—I have raised the issue twice in the Chamber over the years, and the Government ran two consultations—people will have to prove to the local authority that they have rented their house for 70 days before they qualify for the exemption. I still think council tax should be paid on all homes built to live in. That would be very good for our police and our town and parish councils, which at the moment are losing that income.

[Anthony Mangnall]

If the Government decide not to take up my hon. Friend’s suggestion, they should extend that 70 days to 140 and make it more rigorous.

[Derek Thomas]

And stop the opportunities for fraud. At the end of the day, it is fraud for someone to say they have a business that they do not have. I would happily welcome that.

Today, I want to explain why the pressure on housing has intensified in recent months and years. Regrettably, that is in part an unintended consequence of Government policies. I want to pick on two of them. Government policy is effectively driving landlords out of the market. We hear landlords saying—I could use some French, but I am not going to—“We’re not going to do this anymore. We are going to flip our homes into holiday let or do something else with our property,” and they are partly supported by Government policy, such as changes to long-let allowable tax benefits. Since April 2020 —not that long ago—landlords have no longer been able to deduct any of their mortgage expenses from their rental income to reduce their tax bill. The new system means higher or additional-rate taxpayers can no longer claim tax back on their mortgage repayments. Less obviously, the new rules could force some landlords’ total income into the higher or additional-rate tax bracket, depending on their pension or other income. I do not particularly object to that if it is fair across the board, but at the moment it favours holiday lets and does not help private landlords.

[Neil Parish]

I very much welcome what my hon. Friend is saying. We need to set up a rental system that encourages people to have private, long-let properties. We have made a mistake by targeting them too much, taking away the interest rate and the ability to claim that back against the property. We want private landlords who let good quality properties on long-term rentals, so the Government should reverse some of that policy and look at ways to encourage the private sector to put up good properties for long-term lets.

[Derek Thomas]

I completely welcome and agree with that intervention. I do not believe the Treasury deliberately intended to force private landlords out of the market, but that is certainly what is happening.

Energy performance certificates are a pet subject of mine and a debate on their own. Rental properties now require an E rating, which does not sound particularly ambitious until we try it on a property that was built in the 1800s. Since April 2020, landlords can no longer let or continue to let properties covered by the MEES regulations if they have an EPC rating below E, unless they have an exemption, which is not easy to get and costs over £3,000. The landlord has to spend money on the house before they even apply for the exemption. If they are planning to let a property with an EPC rating of F or G, they need to improve the rating to stay within the law. Again, every landlord has to get an EPC rating of E.

The Government’s plan to make rented homes greener is not in itself a bad thing, although we can have a wider debate about whether an EPC is the right tool to deliver the desired outcome. It is a computer system that invariably says no, without the ability to understand or appreciate the diverse nature of the built environment. I do not object to improving homes, making them warmer and their upkeep cheaper, with less of an impact on the environment, but my concern is that landlords seem to be subject to the EPC requirements in a way that holiday lets are not, and the situation is expected to get much worse because the Government have consulted on a compulsory energy performance certificate rating of C on new tenancies by December 2025—three years from now if they pursue it—and on all rented properties by December 2028. If we think the problem is bad today, it will be disastrous for somewhere such as Cornwall, where buildings were constructed in a very different era compared with today, and I would not even say that our buildings today are that modern. We will not get properties up to EPC rating C, so they will be lost to the rental market.

Those are examples of legislation that applies to long lets, as my hon. Friend the Member for Tiverton and Honiton (Neil Parish) has clearly demonstrated. We are losing valuable homes that people enjoy—we have heard about tenants of 10 years—because the legislation that applies to private landlords does not necessarily apply to people who own holiday lets. I largely agree with the requirements, but I do not believe there is a level playing field. Irrespective of Government policy, we must avoid a situation where we drive private landlords out of the market. There are people who do not wish to own their own home, and there are lots of people who, because of how we manage the term “affordable”, find it difficult to get on the ladder.

I hope the Minister understands the severity of the problem for Cornwall and the Isles of Scilly. It is urgent. I have many constituents in a desperate situation, and we need rapid and effective intervention that provides a secure home for life, whether it is owned or rented.

--- Later in debate ---

[Sir Gary Streeter (South West Devon) (Con)]

Thank you, Mr Hosie, for chairing the debate. I start by congratulating my hon. Friend the Member for North Devon (Selaine Saxby) on securing the debate and making her case so forcefully. It is about time that Government realised that one of the solutions to our energy problems in this country is to plug my hon. Friend into the national grid. Her energy could power many homes over the coming months.

I would like to draw the House’s attention to my entry in the Register of Members’ Financial Interests, as a non-executive director of Rentplus-UK Ltd, a company started in Plymouth that provides affordable rent-to-buy homes for local people, especially key workers.

The housing market is complex and challenging. Throughout my 30 years at Westminster, there has never been enough affordable housing to rent or buy to meet demand, and there probably never will be, especially in hotspots such as Devon and Cornwall. Because the area is such a delightful destination, as we have heard, many people seek to retire to our region, pushing prices high, often out of reach of local people. The recent spasm of people selling their homes in cities and moving to the countryside in the pandemic years has exacerbated the problem.

That has resulted in many local people being unable to save the necessary deposit and fulfil their aspiration of home ownership, as recognised in paragraph 43 of the recent House of Lords report, “Meeting housing demand”:

“Given that average deposits are £59,000, ‘saving for a deposit is impossible for many renters on lower incomes’, especially as research before the COVID-19 pandemic showed that 45% of private renters in England did not have enough savings to pay their rent for more than a month if they lost their job…Although it may be the case that preferences have shifted towards renting in the short term as a lifestyle choice, the main constraint on achieving home ownership remains an inability to save the required deposit, a goal that becomes increasingly out-of-reach if house prices rise faster than savings.”

That is exactly what we are seeing. The deposit barrier problem remains a significant challenge in the south-west.

I have maintained an interest in social rented housing ever since I was housing chairman on Plymouth City Council in the late 1980s. As I said, there has never been enough of it—not when councils were the main providers, not under 13 years even of a Labour Government, and not under the last 25 years or so when housing associations have been the main providers.

During those years, there was always a buoyant private sector rented market for those who could not afford to buy and could not access social rented housing. That is an insecure way to live—I would hate to live like that—because renters are at the whim of a landlord who might decide to sell the property and or for whatever reason evict them on just a few months’ notice. But at least there was plenty of it in our region. Many people had a second property that they let out as an additional or retirement income. It was a buoyant market until two years ago.

The impact of covid-inflated prices and the rise and rise of Airbnb have meant that in our region, landlords have been quitting the private rented sector in droves, either selling their property to catch the rising tide or turning their properties over to Airbnb where they can make three or four times the return. That has decimated the market, meaning that many key workers—as we heard from my hon. Friend the Member for North Devon, who led the debate so well—simply cannot find accommodation near their jobs or at all. This unprecedented shift in market conditions is putting enormous pressure on families desperate for a home in our region.

Naturally, the market has responded to scarcity as it always does: by rising prices. A two-bedroom property in Plympton in my constituency, which two years ago would have been £650 to £700 a month is now £850 to £900. When added to spiralling energy costs and council tax always creeping up, many are simply priced out of the market. The housing allowance of £550 has not kept pace.

[Derek Thomas]

My hon. Friend raises an important point about the housing allowance. The average price in Cornwall of three-bedroom rental is £1,400 a month; does he agree that that is completely out of reach for most working families on an average Cornish income?

[Sir Gary Streeter]

I do agree. People used the word “crisis” earlier—none of us likes to use it, but this is a crisis. Many constituents are struggling to find a suitable home.

I want to add some questions to the others posed to the Minister. Let us be honest: we know this Minister has the intellect and stamina to grapple with these complex problems. What is the Government going to do about this current gross distortion of the private rented market in regions such as Devon and Cornwall to ensure our constituents can access reasonably priced housing? Is he having discussions with the Treasury about taxation policy on Airbnb? Is his Department looking at new regulations to ensure that Airbnb standards and safety are at least as high as in the general rented market, to ensure a level playing field? Why has the consultation on these issues taken so long? We are Conservatives and we believe in the market, but where it moves so dramatically and quickly against our constituents, we have to find effective ways to intervene.

On the wider long-term affordability problems, the Government appear to be placing their trust in two main pillars: First Homes and shared ownership, with very little between. I wonder whether the First Homes policy, with an in-built discount to be handed on in perpetuity, will survive the test of time. I must confess that I foresee tremendous problems when owners of their first house have to pass on the discount when they sell it. How will they then make the jump to their second house, which will be priced in the open market? I have never understood how that is going to happen, so I question that policy.

Then there is the continued focus on shared ownership, which few people like and where few people ever end up owning the whole property. It has not delivered the scale of accessible homes that was originally envisaged.