New Housing Supply

Jack Dromey Excerpts

Tuesday 5th March 2013 Commons Chamber

[Jack Dromey (Birmingham, Erdington) (Lab)]

The Select Committee’s report was produced on an all-party basis, under the admirable chairmanship of my hon. Friend the Member for Sheffield South East (Mr Betts), and we welcome much of it. As for the Government’s response thus far, it is not all bad and not everything has failed to work, but when it comes to rising to the challenge outlined in the report, the facts speak for themselves.

House building fell by 11% in 2012, the number of housing completions has fallen in both years since the general election, and homelessness is up by a third. We have a mortgage market in which people struggle to obtain mortgages, and a rapidly growing private rented sector in which there are many good landlords but also big problems relating to affordability, security and quality. As was pointed out by the hon. Member for Folkestone and Hythe (Damian Collins), that has serious implications, including for the members of “Generation Rent” and their ability to save to realise their dreams of buying a home.

I am the first to acknowledge that the biggest housing crisis in a generation does not date back to May 2010, but, having said that, I should point out that in 2010 we warned what the consequences of the crisis would be. My hon. Friend the Member for Lewisham East (Heidi Alexander) was absolutely right: the £4 billion cut in affordable housing investment resulted in a 68% collapse in affordable house building and a 97% collapse in council house building, at the worst possible time. That serious mistake, combined with the economic mismanagement of the economy more generally, has created a real problem of public confidence. People must decide whether or not to risk taking out a mortgage, and those who are prepared to do so struggle to obtain one.

As was pointed out by my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), the impact of those cuts in public investment has been extremely serious. The number of housing association starts has fallen by 23% to 19,500 in the last year, and the uncertainty created by changes in the planning system has not helped. The planning system was in need of reform, but it is clear that it was never as big a problem as some have pretended. Indeed, the hon. Member for Peterborough (Mr Jackson) made the very good point that, although there is land with existing planning permission capable of sustaining 470,000 homes, those homes are simply not being built.

We understand that, after a succession of initiatives, which I shall say more about shortly, a further Get Britain Building launch may be imminent. We are told that the Prime Minister and the Deputy Prime Minister may well don their wellies and high-visibility jackets to visit a building site. Thus far, however, the facts speak for themselves. Overwhelmingly, the Government’s approach has not worked: it lacks ambition, and it has been ludicrously spun. If we had a house for every press statement issued by the last housing Minister, the right hon. Member for Welwyn Hatfield (Grant Shapps), we would not have a housing crisis. It is downright cheeky, for example, to claim that the proposal to provide 170,000 affordable homes was realised as a consequence of this Government’s actions, when the National Audit Office has made the very good point that 70,000 of those homes were commissioned and paid for by a Labour Government.

Not all the Government’s measures are bad. On the contrary, Firstbuy has been a modest success, and, in principle, the guaranteeing of balance sheets for institutional investment in the private rented sector is a welcome step in the right direction. Although I felt that my right hon. Friend the Member for Greenwich and Woolwich was right to inject a note of realism into the debate by pointing out that there had been painfully little progress so far, we support the measure on a cross-party basis, and believe that it should proceed to its subsequent stages. However, we need to look at what has been trumpeted. When NewBuy was launched it was said that 100,000 homes would be provided, but according to the latest figure just 1,500 have been provided. Had we had the same rate of progress as we saw in the first tranche of figures, it would have taken 200 years to realise that 100,000 homes objective.

My right hon. Friend, in his typically forensic fashion, dissected the original claim about the new homes bonus, which was that

“there will be at least 400,000 additional homes as a direct result of the bonus.”—[Official Report, 4 February 2013; Vol. 558, c. 12.]

Based on the figures thus far, it is not possible to detect a growth in the number of planning permissions or total approvals, the output of new homes or the starts. Indeed, the new homes bonus has other problems: it is both unfair, in terms of transferring public moneys from north to south, and inefficient, in terms of the amount of money that actually gets spent on building homes.

In a difficult situation—I stress again that the facts speak for themselves—there is a real risk that some of the Government’s next stage reforms will make things worse. Let me give two examples of such reforms, the first lot of which are the changes to the planning system. The Select Committee is right to say that the issue of whether or not to vary the requirement in terms of social or affordable house building is best left to the local level, but instead, rejecting localism in favour of Leninism, clause 5 of the Growth and Infrastructure Bill introduces review mechanisms that might rob local authorities of the sensible ability to renegotiate where appropriate. The point was put to me in Plymouth, Exeter and Bristol last week that there is the additional danger of delay, as some developers wait for the new arrangements to kick in.

My second example is the total impact of welfare reform, which I saw in Plymouth in some detail last week. Let us consider the bedroom tax. Not only does it have a human impact—one family whose son has been serving in three tours in Afghanistan, going backwards and forwards, will be hit by the bedroom tax, as will the disabled and the carers—but it will have perverse outcomes. If people are pushed into the private rented sector, there is the potential for rents to be higher, which increases the housing benefit bill and the potential for greater homelessness. In Plymouth alone, the totality of the changes will take £30 million out of the local economy. There is growing and disturbing evidence of the potential of this now to have an impact on new builds—on supply—because of write-offs of bad debt and the burden of cost being imposed on housing associations and local authorities.

The hon. Member for Meon Valley (George Hollingbery), in one of the many thoughtful contributions that have been made by hon. Members from across the Chamber, rightly made the point about the importance of house building to the economy. History tells us that from the depression, through war and the building of modern Britain in the ’50s and ’60s, to the recovery from recession in 2008, a major programme of house building has always been at the heart of economic recovery in our country—public and private—and that it is not possible to have a sustainable economic recovery without a major programme of house building. The CBI rightly makes the point that the 100,000 affordable homes will see 1% added to GDP.

Let me deal with some of the Select Committee’s recommendations. It rightly makes a number of intelligent points about how we finance a major uplift in supply. It is right to argue strongly in favour of post-2015 certainty, including both rent models, making a crucial point about the need to commit grant and investment. It is right to say that we need progressively to shift from what we have at the moment—plenty of public investment in housing but 95p in every pound going on housing benefit—to bricks and mortar. It is right to recognise that, over and above what we commit to by way of grant and investment, we need innovatory forms of funding housing supply and therefore the potential, for example, for institutional funding. I have been involved in some interesting examples in that regard. The hon. Member for Folkestone and Hythe mentioned Barking and Dagenham, to which I would add what Manchester is doing and what I just heard about in Enfield, where local government pension scheme moneys are being used to build 200-plus council homes.

The Select Committee is also right to advance a debate that we badly need to have about the potential for what local authorities can achieve if we set them free and if we have a true localism approach. Earlier, reference was made to the potential for 60,000 homes to be built as a consequence.

The Committee is also right to argue in favour of a debate that we now need to have about a housing investment bank. In the summer of last year, the leader of my party proposed a British investment bank with a focus on manufacturing and housing. The Committee discusses the potential for a housing investment bank, pointing out some of the international experience that shows why that can help.

The Committee is also right when it talks about innovation by housing associations, such as retail bonds, greater leverage of assets and equity sharing with local authorities, as well as when it makes the point that it is important that we have the admirable G15—the big—while realising the potential of the small. I see that in my constituency through the admirable Castle Vale community housing association. My hon. Friend the Member for Lewisham East was also right about the important and neglected role of small and medium-sized builders in providing the capacity to ensure the uplift in supply we need to see.

On land, the Committee is right to advance the argument that we must reduce the up-front costs of building. The notion of build now, pay later therefore has a great deal to recommend it. The Committee is right to refer to Government land, which thus far has been something of a holy grail. Things have not happened quite as has been suggested time and time again, but no doubt the Minister will convince the House that he is determined to put that right.

On innovative forms of supply, the Committee is right to advance the potential of self-build, the interesting experience in Holland and the role of small and medium-sized builders in that process.

The Committee’s next inquiry will be into the private rented sector, a subject that was also referred to in this inquiry. That fact is very welcome given the clear problems of affordability, security and quality in the sector and, as the hon. Member for Folkestone and Hythe said, the clear problems associated with too many rogue landlords and too many rogue letting agents. That is important both in its own right and in the context of a more stable sector enjoying greater security and more affordable rents because of the impact on supply. Let me quote briefly from a startling Scottish Widows report, which is out today:

“The property market is becoming out of reach for many renters. Our latest research found that at people’s current savings rate, a first time buyer will take almost 13 years to save the £27,984 required for the average deposit.

With property ownership seeming like a distant dream, our research suggests that many renters may have given up on property ownership with just 29% actively saving to put a deposit on a home.”

I refer to those figures because I think that the Committee is wise to move on to the issue of a very different model for the private rented sector for the future—the sector undoubtedly has a role to play in meeting housing need, but it must change if it is to do so.

In conclusion, let me return to what was said by my right hon. Friend the Member for Greenwich and Woolwich and many others. All people should have a decent home at a price they can afford to rent or buy, at all tenures, but the crucial point is how we locate it in the context of economic recovery in our country. Sustainable economic recovery will not happen unless we have a major programme of public and private house building.

There are other outcomes in areas such as health and well-being and educational attainment, and an interesting debate took place about housing options for older people, but all roads lead back to housing. We have the biggest housing crisis in a generation and an economy that is bumping along the bottom. The Government badly need to come forward with a serious strategy for getting Britain building, and not yet another false dawn.