Property Market

Grant Shapps Excerpts

Tuesday 25th January 2011 Westminster Hall

[The Minister for Housing and Local Government (Grant Shapps)]

I start by congratulating my hon. Friend the Member for Watford (Richard Harrington) on securing the debate, to which there has been an absolutely terrific response. There has been a great deal of support, particularly from Conservative Members, for the subjects being discussed. As my hon. Friend mentioned, I did not just go to school in Watford; I was born and brought up there. As I said, it has been a good and intelligent debate. I will try to address as many of the points made as I can, but I put hon. Members on alert that because some of them went into quite a bit of detail, I will study the transcript of the debate and get back to hon. Members on some of the specifics raised if I run out of time. I am particularly thinking of my hon. Friend the Member for Waveney (Peter Aldous), who raised a series of detailed points that I do not think I will have time to cover.

[Alison Seabeck]

Will the Minister provide that correspondence to other hon. Members who are present?

[Grant Shapps]

Yes, by all means. I have no objection at all to making this a completely open exercise, and my officials will have noted my comments.

As to what we know about the old system, several Members mentioned that it had completely and utterly failed. We did not get to the lowest house building levels since 1923 under the new system, but under a top-down, almost Stalinist approach, which said that we would be able to build the top number of homes that we had set out in the 10-year plan. The pledge was to build 3 million homes by 2020, but the number built crashed through the floor.

The problem was not just the total number of homes being built, but the number of affordable homes, which was derisory, and I know that the Opposition housing spokesman, the hon. Member for Plymouth, Moor View (Alison Seabeck), agrees. Concern was expressed about the amount of affordable housing that would be built under our plans, but despite the £17 billion pumped into affordable house building over 13 years by the previous Government, the impact was a net loss of 45,000 affordable homes. I can assure the hon. Lady that the coalition Government will do better than that every single year.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will the Minister not accept that one reason for the net loss in housing is the right to buy? Is he at all interested in the steps being taken by the Scottish Parliament to restrict the right to buy with a view to increasing supply?

[Grant Shapps]

I cannot answer for the 13 years of the Labour Government, but they had adequate time to make whatever changes they wanted on that front. However, the argument about the right to buy is very much yesterday’s argument; it is literally about the ’80s and ’90s. This year, no more than 2,000 people nationwide are likely to exercise their right to buy. The issue is not the right to buy, but the pathfinder schemes—the housing market renewal that destroyed homes and neighbourhoods. It was partly responsible for our ending up with fewer homes than we started with after 17 years.

I want now to make some progress and to answer the substantive points raised in the debate, which were really about whether the new homes bonus will be sufficient to ensure that we get out of the hole we were left in and back to a world where we can build a sufficient number of homes to look after our population. I accept the comment by my hon. Friend the Member for Watford that the new homes bonus will not be enough. Before I address that, however, I want to point out how powerful an incentive it will be.

The new homes bonus represents nearly £1 billion, which is funded through the spending review programme. It will ensure that, wherever a home is built for the next six years, the same amount as is collected on the average council tax band there will be paid to the local authority. Where an affordable home is being built, an additional £350 is proposed in the consultation document, which is currently in front of me and which I am considering. The new homes bonus is therefore potentially an incredibly powerful incentive to get out there and build homes.

For the first time, there is some real benefit for the community of the individual authority. My hon. Friend the Member for Rugby (Mark Pawsey) mentioned a potential development that I went to see a few years ago. That development could build homes, bring money and facilities in for local people and be a win-win. My hon. Friend the Member for Peterborough (Mr Jackson), who is not called Peterborough’s champion for nothing, rightly said that housing can have a dramatic and important influence in terms of improving an area if it is done in the right way and not imposed from the top, but not if it is driven by a regional spatial strategy that takes no account of local needs and requirements.

The new homes bonus will be a powerful incentive. As my hon. Friend said, the billion will run out at some point, so the answer is to go and build homes and use as much of the money as possible now. It will then be top-sliced from the formula grant. That, in itself, will be an important incentive to ensure that areas are not left behind as their neighbours develop.

[Graham Jones]

In my constituency, we have 2,500 empty properties. The new homes bonus will not benefit us when the top-slicing comes in. I did not really want to go down this road, because the debate is about under-supply, rather than over-supply, but the housing market renewal pathfinders, which the Minister has just described as disastrous, removed empty properties where few people were living in areas with an over-supply. Will the Minister briefly comment on that?

[Grant Shapps]

The hon. Gentleman and I have regular discussions on this subject in the Lobby. I can assure him that the new homes bonus will in no way disadvantage a community that finds it is having a net loss of population. In other words, it does not penalise it when its council tax base reduces from one year to the next, but it massively aids and helps when the base increases. Let us take, for example, a constituency in which a number of homes have been empty for a period of time. Sefton borough council, which I recently visited, has an area in which there are about 450 empty homes. When those homes are rebuilt and reoccupied, it will be able to claim the money from the new homes bonus. As that will be a guaranteed income stream for six years, it can borrow against that potential income and regenerate an area for which, I am afraid, the housing market renewal money has now dried up. It is possible, therefore, to use the new homes bonus in constituencies in the more heated parts of the country, which are perhaps not the most obvious locations.

In the remaining few minutes, let me return to the central theme of today’s debate, which is that the new homes bonus is not intended to be the be-all and end-all. There is a whole variety of other mechanisms by which we intend to ensure that the housing market and the housing supply are increased. Let me take a few moments to list them. First, and most critically—the hon. Member for Plymouth, Moor View raised this herself—mortgage finance has been incredibly restrictive. If we look at the root of the problem of housing undersupply and oversupply, or rather of a heated-up market, we would find that between 1997 and 2007, there was no one calling time on the banks. They continued to lend even after they no longer had the balance sheets to sustain such activity. We can pin the blame on a number of factors. One factor in particular that has to be included is the moment at which the Bank of England was given control over interest rates while nobody was given control of regulating the banks. We need to ensure that the supply of credit from the banks is available. At the moment, it has gone completely the other way. The hon. Lady referred to my conversations with the FSA. I can tell her that I say exactly the same thing to the FSA that I say to this House and to the public, which is that there needs to be an adequate supply of lending, particularly to first-time buyers who are the motor that drives this whole issue and who are particularly relevant to housing supply. House builders are unable to build their product and sell it to anyone if there is no competition in the market place. Mortgage availability, therefore, is a very big issue.

Planning reform is another very large area. My hon. Friend the Member for Waveney mentioned the importance of reforming it. Let me reassure the House that the Localism Bill intends to do precisely that. There will be sweeping reform of planning rules. We will no longer have a system in which we go backwards and forwards and in which local communities are overridden by a planning inspectorate. Instead, plans will be put in place by the local community. Let me give one example. The local development frameworks were only filed by 20% of councils because they were too complicated and they did not have local consent. Once local consent is built in to the heart of the system, there is every opportunity for planning decisions to be made much more quickly.

Let me refer to an intervention made by the hon. Lady with regard to whether this Government will be pro-development. The answer is that we will absolutely be pro sustainable development. We have never said that such an aim would be in the Bill; it would be the wrong place to put it. We have always said that it will be in the planning policy framework and that will make it absolutely clear that this Government are in favour of sustainable development. In fact, that is the default assumption.

The changes will create a new attitude towards planning. It will not be us against them—the developer against the local community. It will be people working together to try to improve their local communities through neighbourhood plans. We barely touched on the issue of community right to build, but local communities will be putting forward plans to develop their local areas. Ideas such as affordable rent and reform of the social housing market will help attract private sector finance for the first time. There is a whole range of options; I wish that we had more time to investigate them in greater detail. I will certainly write to all Members present with detailed answers to the points raised. I congratulate my hon. Friend once more on raising this important issue.