Housing Market Reform

Gareth Thomas Excerpts

Wednesday 30th January 2013 Commons Chamber

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I beg to move,

That leave be given to bring in a Bill to amend section 157 of the Housing Act 1985 to extend the use of local occupancy clauses to certain urban areas with the permission of the Secretary of State; to increase the qualifying period of local occupancy clauses from three years to either five or ten years; to place a duty on the Homes and Communities Agency and local authorities with housing and planning responsibilities to promote co-operative and mutual housing options and report annually in this regard; to require the Homes and Communities Agency, local authorities and the Land Registry to identify land available for housing development which has not been developed and to publish a report on the available options for development of housing on such land; and for connected purposes.

For far too many people, the housing market is not working. Not enough homes are being built at a price that is within reach in many areas of the UK, particularly in London. The drastic cut in the budget for new affordable homes has unsurprisingly led to a considerable fall in the amount of new social housing. My right hon. and hon. Friends have set out a series of initiatives to build 100,000 more affordable homes, which I strongly support, but even if the Chancellor were to start listening and house building and construction were to begin to return to good health, it is questionable whether sufficient homes would become available to challenge the shortage of supply in key parts of the country at a price that more people can afford.

London is in danger of having a housing market that has priced out those who live and work in our city. It is already virtually impossible to envisage that someone on average earnings could afford to buy a property within the Circle line area and to live in it. In Westminster, average earnings were almost £43,000 last year, while average house prices pushed close to £800,000—a ratio of price to earnings of 18:1. The suburbs of London are heading in the same direction as house prices continue to creep up. In Harrow, where my constituency is, average earnings last year were £30,000, while the average house price was £309,000—10 times average earnings.

Although no set income is required to secure a 90% mortgage on an average property, the scale of difficulty facing people in the suburbs and inner London when trying to buy a property is revealed by the rough-and-ready guide offered by online mortgage calculations, which suggest that an individual income of around £80,000 or joint income of around £90,000 would be required to secure a mortgage of £280,000. That is a challenge for many families, to put it mildly, particularly in London.

This Bill would give urban local authorities the opportunity to create a more affordable market in the sale of former social housing by extending the use of local occupancy clauses, which were allowed under the original right-to-buy legislation. Under the original rules, local authorities in areas of outstanding natural beauty were allowed to include a covenant limiting the freedom of the tenant to sell on property that they purchased to people living or working in the area, so creating a second tier to the housing market in those areas that allows more affordable house sales and helps to ensure local people have the opportunity to get on to the property ladder at an affordable price in the area in which they have strong local connections. My Bill seeks to extend that exemption to other areas of the country where the huge rise in house prices has made a house purchase extremely costly.

Surely, helping local people who are not rich, who have lived and/or worked in an area for a considerable period and who are an integral part of their community to afford to buys, by allowing local authorities to designate sales of former social housing to be just for local people, was a sensible measure in the 1980s for those living in national parks and would be again now for many other areas of the country, particularly London. It does not alter the fundamental principle of the right to buy, which I have always supported, but it recognises the reality of the difficulties that too many people face in wanting to buy a home. Estate agents in national parks, where the exemption operates, are clear that it makes a significant difference to the price of some ex-local authority housing of between 5% and, in some cases, 30%—and typically between 10% and 20%. To qualify to buy such properties one has to have lived or worked or done both in the area for three years prior to purchase.

The exemption makes the price more affordable and essentially restricts the sale of some homes to people on lower incomes and those who have strong ties to an area. My Bill would increase the restriction to help more explicitly those who have a long-standing connection to the community that they live in. Clearly, such a change would need to be phased in, as new tenants move into new social housing and consider whether they want to buy the property.

The second part of the Bill deals with co-op housing, for too long the forgotten part of the housing sector. It makes up only 0.6% of the UK’s housing supply, compared with 18% in Sweden, 15% in Norway and 6% in Germany. Tenant-run co-op housing has especially good satisfaction rates, but co-op housing also offers additional options for those who are working, who want to get on to the property ladder and who cannot completely afford to buy their new dream home. My Bill would require local authorities to promote co-op housing options.

The Bill requires Government to consider afresh the problem of land banking by housing developers, where land is deliberately not developed, often because the developer is waiting for prices to rise. That slows the supply of affordable housing, and the undeveloped sites are often a considerable blight on local communities. If a developer does not want to develop the land, there are few incentives to change its mind, which in turn exacerbates the shortage of affordable homes and affects the amenity for local people.

The Barker review, initiated by the then Chancellor, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), made an important contribution to that debate at the time, but recent work by the Joseph Rowntree Foundation and a review of the tax system by the Institute for Fiscal Studies and led by Sir James Mirrlees of Cambridge university have again focused attention on the issue. Their reports suggest options including a land value tax, amending council tax criteria and imposing levies on land identified for housing but not yet brought to market. Those ideas—there are others—are worthy of serious Government scrutiny, and I urge the Government to support the Bill to tackle the lack of incentives for housing developers to get on with development.

We need to make housing, particularly but not exclusively in urban areas, much more affordable than it is now. I believe that the measures in my Bill would help us to achieve that objective, and I commend it to the House.

Question put and agreed to.

Ordered,

That Mr Gareth Thomas, John Cryer, Stephen Pound, Mike Gapes, Mr Andrew Love, Ms Diane Abbott, Ms Karen Buck, Jonathan Reynolds, Lyn Brown, Margaret Hodge, Jim Fitzpatrick and Nick Smith present the Bill.

Mr Gareth Thomas accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 1 March, and to be printed (Bill 129).