Housing (London)

Diane Abbott Excerpts

Wednesday 5th February 2014 Westminster Hall

[Heidi Alexander]

I have met nurses in my constituency who might be able to afford to buy a flat elsewhere in the country, but in London that is simply impossible. I have not dreamt up the nurse, the rough sleeper on a bench in a railway station or the others whom I have described; they are real people whom I have met and spoken to in the past few years. I am not surprised when I read that 82% of Londoners think that the capital is in the grip of a full-scale housing crisis, or that 27% believe the affordability of housing to be the most important issue facing the capital, because I hear the same thing week in, week out.

One of the most common conversations that I have at my fortnightly advice surgeries is about the huge mismatch between the demand for and the supply of affordable homes in London. I see family after family living in overcrowded conditions who want to move to a suitably sized property at a rent that they can afford. I say “rent”, because the idea of buying a home is completely out of reach for many. Someone on a minimum-wage job lucky enough to be working full time—that is quite a big assumption—earns less than £12,000 a year. The idea that there is any property in London that they could afford to buy is laughable.

The truth is, as my hon. Friend the Member for Erith and Thamesmead said, that if I had not been in the fortunate position of buying a home with my husband, many parts of my constituency—that is Lewisham, not Kensington or Chelsea—would be unaffordable for me as an MP on a salary of £68,000. I do not say that to plead poverty; I recognise that I am very well off. However, my situation demonstrates that the housing market in London is such that people in many different walks of life cannot afford the modest home that they would like.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

My hon. Friend says that there are parts of Lewisham that she cannot afford on an MP’s salary. Is she aware that there is nowhere at all in Hackney where I can afford to buy a property on an MP’s salary?

[Heidi Alexander]

My hon. Friend makes an excellent point. I am quite lucky that my husband and I bought a terraced house in Lewisham a few years ago, because if we were buying today, I am not so sure that we could afford it. House prices have gone crazy. The Government are stoking up demand with their Help to Buy scheme, but they are simply not doing enough to increase supply. The result is a potentially massive housing bubble.

With fewer and fewer people able to buy, more people end up living in properties in the private rented sector, even when that would not be their first choice. There is increased demand at both ends of the private rented market, because people are not buying and homes to rent from councils and housing associations are so few and far between. The rents of thousands of working people in London, many of whom rent from private landlords, are subsidised through housing benefit.

Since 2009, the number of people working in London and receiving support from housing benefit has increased by 110%. That has happened on the Government’s watch. Ministers claim that they want to reduce the housing benefit bill, but unless they invest in building significant numbers of homes to be rented at social rents—not so-called affordable rents—that bill will continue to rise.

What needs to change? First, money must be made available in the form of capital grants. The Government’s decision in 2010 to slash the affordable house building programme by 63% was just plain wrong. Housing associations need finance to deliver homes. Councils must be given greater borrowing powers so that they, too, can once again build on a reasonable scale. We must lift the cap on borrowing on the housing revenue account.

I know that the Government have made minor changes, but they do not go far enough. London councils estimate that if the cap was lifted, 14,000 extra homes could be built by 2021. We should also explore the idea of setting up a London housing corporation to build homes directly, as suggested this week by Labour London assembly member Tom Copley. The simple truth is that we need to invest now to save on revenue costs in the longer term. Taxpayers’ money is being used to line the pockets of London’s private landlords on a massive scale. That cannot be right, and the solution is to build more social housing.

Secondly, we must take a more strategic approach to public land. Londoners know only too well that the shape of their public services is changing. Fire stations are closing, changes have been proposed to police stations, and virtually every hospital faces some form of reconfiguration. Such buildings and the land that they sit on are precious public assets and should not be flogged off to the highest bidder simply to end up as expensive flats for overseas investors to leave empty. When there is such housing need in the capital, that is scandalous and should not be allowed to happen.

Thirdly, we must take some difficult decisions about our planning policy, in both London and the areas around it. Do we build up or out? How can we finance comprehensive regeneration schemes on brownfield sites in London? How do we ensure maximum benefit to existing communities? Politicians at all levels have a role to play. If we are to deliver the homes that London needs, there will controversial planning applications time and again. Politicians are going to have to step up to the mark and argue the case as to why something is the right thing to do. It is notable that recent figures from the House of Commons Library show that Labour-run councils in London have built five times as many affordable homes as Tory councils.

Councils need proper powers to deal with developers who sit on land waiting for house prices to rise, and they need to be able to negotiate hard with developers about social rented housing provision. That comes back to my first point: financing mechanisms must be put in place for social housing to be delivered. I do not pretend that solving London’s housing crisis is easy, but we must understand the scale of the challenge and act now to do something about it. I do not want to be stood here in five years’ time making the same speech again.

If we have a Labour Government after 2015, I believe that they will be committed to doing something about the situation; I am afraid that the present Government do not fill me with the same optimism.

--- Later in debate ---

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

I congratulate my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) on securing this debate. As colleagues have said, housing is the most important issue facing Londoners. To those on either side of the House who think that the solution to the housing crisis in London is market-based mechanisms like more supply, I say that we have to start from the basis that the housing market in London is broken. Normal market remedies will not fix things.

The housing market is broken because of the limitless flood of non-domiciled buyers who are buying properties in zone 1, where upper middle class or even middle class Londoners once lived. They are being driven out into areas like Hackney, Walthamstow and points beyond. People who would never have dreamt of living in Hackney 30 years ago are buying three-bedroom family houses there for upwards of £1 million, and that means that I could not buy a family house in Hackney on an MP’s salary if I was starting out now.

In some cases, the non-domiciled buyers leave these properties vacant. Last week, we all read about the millions of pounds of unoccupied property in The Bishops avenue, where 12 houses in a row are completely unoccupied. One of the residents said he thinks that only three houses in the avenue, one of the most expensive roads in London, are occupied all the time, all year round. There is a limitless supply of such buyers, but what is the effect of that and why do they want to buy in London? Yes, London is a fantastic place to live, but those buyers know that even if they do not occupy the house or do anything to it, they will make a profit year on year because of increasing land values. Homes in London and in zone 1 are becoming land banks, investment vehicles for overseas buyers who, if we are lucky, come here a few weeks a year, but if we are unlucky, do not come here at all.

[Glenda Jackson]

I entirely agree with my hon. Friend, but the issue of absentee landlords is not limited to the top end of the market. In my constituency since the right to buy was introduced, many properties originally built as affordable, with a social dimension, have been changing hands again and again. Nine times out of 10, the landlords do not live in this country and have no interest whatever in maintaining the properties, with any responsibility handed over to managing agents. There is also a constant surge in tenants, with the rent going up every time the tenant changes.

[Ms Abbott]

I was of course talking about the top end of the market to illustrate how the effect ripples out to the homeless in Hackney or homeless families in Greenwich. There is constant pressure driving up house values in London, and that is what is behind the spiralling cost of rent.

Colleagues have spoken about what is happening in the rental market—my hon. Friends the Members for Eltham (Clive Efford) and for Lewisham East (Heidi Alexander) did so with particular vividness—and about spiralling rents which mean that families do not have security of tenure.

As for the social cost, London is increasingly becoming a city in which people have to be extremely wealthy or quite poor to live. That leads to a society that is inherently unstable. If we leave it to the market, to live in Islington or Hackney people either have to be able to afford a house that is worth upwards of £1 million, or be so poor that they are eligible for what social housing there is. That is an essentially unstable society and one in which it is extremely difficult to recruit public sector workers.

In Hackney, there is a generation of head teachers who originally bought at the end of the 1970s or beginning of the ’80s and who are now approaching retirement. Now, head teachers of that calibre, willing to stay for as long as they have stayed, will be hard to recruit, because no one can now buy a house in Hackney on a teacher’s salary. Young teachers who are very committed to Hackney and similar areas find themselves having to move outside the M25 in order to own a family house.

The housing problem is not only about bricks and mortar or destitution, but about what sort of society we want to see in London. How do we ensure that that society is stable? How do we recruit for the public sector in future, if increasingly people on an average public sector worker’s salary are scarcely able even to rent in the centre of London, let alone buy anything?

What is the answer to the problems that my colleagues and I have set out? We have to begin with what is happening in the private sector and at the high end of it. Something needs to be done about the non-domiciled overseas buyers—by looking at some sort of levy perhaps—and at the same time we need to make it easier for British buyers to buy off plan, although this is not the whole answer, of course. Let us remember that even flats in Dalston are being bought off plan by buyers in Hong Kong, but British buyers who wants to buy off plan two years ahead cannot get a mortgage. We need to look at the availability of mortgages to people here who are prepared to buy off plan one, two or three years in advance; otherwise, they will always be crowded out by foreign buyers who are able to get mortgage finance, which will continually drive prices up.

We need to have a financial levy on the non-domiciled buyers, but we also need to look at private sector landlords and how they are managed. It would be sad indeed if the boom in the right to buy was to turn into a new Rachmanism. Rachmanism gave private rented housing a bad name when I was a child in north Paddington. It would be extraordinary if, half a century later, through an unwillingness to exercise the right controls on the private sector, we went back to the bad old days of Rachman. I am not saying that we are there yet, but that is where the cycle is taking us. Furthermore, although the idea is unpopular, we also need to have rent controls. I do not care what we call them, but we have to bear down on spiralling rents.

My colleagues and I are saying that the crisis in London is a crisis not only for the homeless and for those who are having to rent for longer and later in life than they might otherwise have done, but for perfectly well housed people who are worrying about whether their children will ever be able to afford a house within the M25. Government could do a range of things, and Labour Members are shocked by the unwillingness of Government and of the Mayor of London, Boris Johnson, to take effective action to fix for the well-being of ordinary Londoners a London housing market that is broken.

[Mr George Howarth (in the Chair)]

I will call Meg Hillier in a moment. Two more Members wish to speak and I will be calling the Front Benchers from 10.40 am, so if the hon. Lady does the maths she will know what it takes to get her colleague in.

--- Later in debate ---

[Emma Reynolds (Wolverhampton North East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) on securing this important debate. She spoke eloquently about the problems faced by tenants in the private rented sector.

There is a housing crisis across England, but it is clear that it is particularly acute here in London. We have heard both passion and anger from Opposition Members about that acute shortage of housing and of affordable homes in London. It is no surprise that four out of five Londoners think that the capital is in the grip of a full-scale housing crisis. Earlier this week the economic forecaster Ernst and Young warned, very worryingly, of “bubble-like” conditions in the London housing market. The average house price in the capital is £437,000 and is predicted to rise to an eye-watering £600,000 by 2018. That is simply unaffordable, not only for people on low incomes in London but for people on middle incomes and decent salaries as well. Many of my hon. Friends have made that point.

Moreover, as many of my hon. Friends have underlined, there are massive problems in the private rented sector. As my hon. Friend the Member for Erith and Thamesmead highlighted, whereas 10 years ago one in 10 Londoners was renting, now it is one in four, and that number is growing rapidly. Rents are at record highs, are rising much faster than wages and consume more than 50% of average family incomes in London.

Homelessness and rough sleeping have both risen sharply since 2010, and the number of families in temporary bed-and-breakfast accommodation is, tragically, at a 10-year high. My hon. Friend the Member for Westminster North (Ms Buck) spoke eloquently about the shocking circumstances in which those people have to live. The housing benefit bill is rising and the problem is compounded by the cruel and unfair bedroom tax, which a Labour Government would scrap.

Those facts are symptoms of a wider failure to supply the number of houses that we need. In England we are not building even half the number of homes we need to keep up with demand; in London, we are building barely a third. The Mayor of London does not seem to understand the problem. He keeps talking about numbers, but he is not delivering on any of the targets that he sets himself.

[Ms Abbott]

Does my hon. Friend agree that supply on its own will not solve the London problem because of the relentless upward pressure on market prices?

[Emma Reynolds]

My hon. Friend pre-empts the next section of my speech. The problem is not just about numbers but about affordability. All of my hon. Friends have talked about the distorted notion of affordability that the Government have introduced. The idea that 80% of market rent in London is affordable is plainly ludicrous. It is plain stupid—it just is not the case.

I will give the Minister some figures. In Westminster, to be able to pay 80% of market rent for a three-bedroom home tenants would have to earn an annual income of £109,000. In Southwark, renting a two-bed flat at 80% of market rent would require an income of £44,000. The severe shortage of affordable housing is accelerating what many of my hon. Friends have been talking about, which is social segregation here in the capital and, if we are not careful, a hollowing out not only of central London but of London more generally. My hon. Friends have talked about midwives, nurses, teachers, policemen and firefighters not being able to afford to live in the communities where they work. That was not the case 10 or 20 years ago.