New Homes: Developers, Housebuilders and Management Companies

Jim Shannon Excerpts

Wednesday 5th January 2022 Westminster Hall

[David Johnston]

The hon. Gentleman makes an important point. I was just about to say that when the taxpayer is subsidising the development of affordable homes and when the profits of house builders are so large—often bordering on 30%, come rain or shine; they are making these profits in all weathers—it is completely unacceptable for them to play this game so that people are unable to get on the housing ladder.

The fourth aspect that I want to talk about is the role of management companies. After someone has purchased one of these new homes, the costs do not always stop. People are often signed up to quite expensive contracts with management companies who purport to provide services to maintain communal areas, and it is often very difficult for residents to find out what is being done for that money. The charge goes up year after year, but their communal area is not maintained. They are told that staff are employed to do things, but they never see the staff. They work hard to try to get transparency about what is being provided for the money, but they cannot get it. They get a basic summary, and that is about it. The people who try to get the information are often well qualified, but they cannot get it.

I know of a management company—the residents do not want me to name them, so I will not—where many of the residents are elderly, sick or vulnerable, and they feel completely bullied and exploited by their management company. Right now they are being pressured into taking a new lease, which they do not want to take because they know it will be bad for them, but they fear the repercussions if they do not or if they go to someone to talk about it. They have talked to me, but, as I have said, they do not want to me to talk about who they are. That is an appalling situation for people to be in. Far too often there is a real problem with the way in which management companies fleece people in new homes when those people have already spent so much money.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for securing the debate. In preparing for it, I looked into leasehold in the United Kingdom. In England, Wales and Scotland, people are unable to buy their leasehold, but Northern Ireland is one part of the United Kingdom where they can. Does the hon. Gentleman agree that when it comes to purchasing the freehold, people certainly get a “fleecehold” in England, Wales and Scotland? In Northern Ireland they have a chance to buy it out. Does he feel that that should happen here on the mainland?

[David Johnston]

I completely agree with the hon. Gentleman, and I expect the Minister will address that point when he speaks later. Most people think that they own their home, but they can often end up feeling like tenants. I experienced that myself until recently. I used to get a bill for £300 on Christmas day every year. The bill, dated 25 December, was £300 for absolutely nothing, but constituents of mine are in a much worse situation.

The fifth aspect I want to talk about is the overall broken system in which the process operates. I do not blame the Government entirely. Councils have some responsibilities: One is if they do not enforce the planning conditions when developers go above the assessed numbers that they are supposed to build. Another is if they allow the same application to be made over and over again, when they could refuse it after two tries. They do not take a bigger-picture view. There are villages in my constituency, such as Sutton Courtenay, that feel hugely overdeveloped because individual applications are all being approved and nobody is looking at what is happening to the whole area and why it might not be a good idea to keep approving those applications.

Ultimately, these companies have to be held accountable for their behaviour. They apply for sites that they know the local plan does not allow them to apply for, as is happening in Grove, in my constituency. They continually try to build on flood plains. They continually fail to adhere to their section 106 agreements and community infrastructure levy agreements—sometimes not building infrastructure at all, and sometimes building pointless things, such as a pathway that goes only halfway across an estate or a bike path that leads to nowhere, just so they can say that they have done it. All those things are going on with new developments in my constituency. I do not blame Government for it all, but it is the Government’s job to ensure that the system does not operate in that way.

If I had to sum up the problems in my constituency, it would be, “Too many homes, too little infrastructure.” The two district councils that my constituency covers are, relative to their size, in the top 10 areas for house building in the country, yet they are in the bottom third for infrastructure spending. That is a huge bugbear. To put that in numerical context, an estimate of the population change between 2017 and 2027 found that the largest town and surrounding area in my constituency, Didcot, will increase from 36,000 to 51,000. The second largest area, Wantage and Grove, will increase from 17,000 to 27,000—that is in a 10-year period. Faringdon is getting thousands more people, and Wallingford is getting thousands more.

The infrastructure is not following that. It is harder to get a GP appointment, the roads in the constituency get more and more congested and it is harder to get a school place. One village has a 220-child school, and 300 houses have been built right next to it; just last year, the catchment area became less than 470 metres. People who have lived there for a long time and who expected their children to go to that school now cannot get in. When my constituents hear that planning reform may mean new houses and that they will not be able to oppose them, or that the Oxford-Cambridge arc may mean more houses, or that the council leaders’ Oxfordshire 2050 plan may lead to more houses, they are not concerned out of nimbyism; they are concerned because of their experience, over many years, of so many houses being built and so many promises being broken.

To conclude, I will talk about a few things that I think should happen. There are lots of things, and there are plenty of experts in this room who I know will talk about other aspects. First, we need a much tougher regime for the quality of new buildings. I know that the new homes ombudsman will deal with some of these issues, but it is completely unacceptable to pay that much money and have that many problems. We need very tight quality conditions, and the threshold needs to be raised. If it is not met within a certain timeframe, there should be penalties; issues must not go on for years.

Secondly, we need “use it or lose it” planning permissions. I know that there are debates about how best to do this, and I am frequently written to about the 1 million permissions that have not been built on. I know that there is a debate about land banking and whether it happens; hon. Members would be hard pressed to persuade me that it does not, at least from the developers’ point of view. We in this place are familiar with the phrase “dig a trench.” The emphasis has been on starting the building: companies dig a trench to suggest that they have started building, and the houses then take years to appear. We need these homes to be completed within a certain period. If they are not, taxes might be levied or fines paid, but I think that the permission should be lost entirely.

Thirdly, I want to talk about environmental standards. If it takes several years for these houses to be built, they should be built to the latest environmental standards, not to those that existed when the developers got permission. That is what is happening at the moment: companies are building houses to an environmental standard of several years ago, when they should be building to a standard of the future. That needs to change.

We have got to make developers and house builders commit to their affordability criteria. Our big house builders are doing completely fine for profits for their own viability, so they cannot keep saying that developments would not be viable if they committed to what they originally promised.

When it comes to management companies, we need a much stricter regime, because the current one is very murky. Companies are getting away with appalling practices, bullying residents into things and fleecing them, year after year, for things that are not being provided. We need a tougher regime under which companies cannot keep hiking charges without an extraordinary set of circumstances. The charges often go up because of things the company itself has done and got wrong, and it passes the cost on to residents who had no say in the first place. Much more transparency is needed, and penalties for such bad behaviour.

I understand that house builders want a level playing field, because an individual company does not want to commit to expensive things if its rivals are not doing so. That is where there is a role for Government in raising standards, so that all house builders have to do the same. I want more of a level playing field for smaller companies, such as Greencore Construction in my constituency. Many such companies are more environmentally friendly and more efficient, and produce higher-quality homes, but they are often outbid by the financial muscle of the big boys. Perhaps we need to reserve a greater proportion of development sites for such companies or give them greater access to capital. I am all in favour of smaller organisations rather than larger ones—I ran small charities, not larger ones. I think we can get a better product from smaller house builders, and we need to help more such companies into the market.

My final point is that infrastructure needs to go in first. It is not right to pile more and more houses and people into an area, but to do nothing to support local services and infrastructure. I have been campaigning for Grove station to be reopened, for improvements on our roads and for better medical facilities. GP surgeries are bursting at the seams because thousands more people have been added to the area—Members have heard the numbers. GP surgeries and school places have not been added along with the people. Infrastructure must go in first. Unfortunately, over decades my constituents have been told too many times that the infrastructure will come with the houses, but it never has, and now they do not believe it. That has to come first. As part of that, we might better capture the land value increase that comes with planning permission. At the moment, the increase all goes to the owner. Some of it ought to go to the local community who will live with the new houses, not to the landowner who has sold the land.

The balance of power is wrong. Management companies, house builders and developers have too much power, and local residents have too little. The Government cannot be blamed for every single thing that a private company does, but they can help to restore the balance, so that local communities do not see new houses as a curse on the area they used to love.

--- Later in debate ---

[Theresa Villiers (Chipping Barnet) (Con)]

I start by declaring my interest as the owner of an investment property held on a long leasehold basis. I congratulate my hon. Friend the Member for Wantage (David Johnston) on securing this important debate.

I have concerns about the plight of owners of freehold homes, who often face unreasonable charges and sharp practices at the hands of developers. So-called “estate charges” for the maintenance of roads and common areas are often levied by the developer who built the estate in the first place. It is unfair that that type of homeowner cannot challenge the reasonableness of those charges, and that they have no access to dispute resolution or tribunals, meaning that they do not enjoy rights equivalent to those granted to long leaseholders under the current rules. I fear that that is allowing inappropriate practices to occur. One of my constituents has told me of his anger and unhappiness at the high level of charges to which he is subjected, with no effective means to dispute or resist them. The Government have indicated a willingness to legislate to give freehold owners some rights similar to those enjoyed by leaseholders, and I think it is time that they got on with it. I urge them to include some additional protections for freehold homeowners in the Leasehold Reform (Ground Rent) Bill.

As others have done, I strongly condemn abusive practices in relation to leaseholders. I very much support the work of the Competition and Markets Authority in investigating rip-off practices such as the doubling of ground rents every few years. As I said on Second Reading of the Leasehold Reform (Ground Rent) Bill, there is a case for allowing the continued use of ground rents in large apartment blocks. The complete exit of professional freeholders from the market, which is the expected consequence of the abolition of ground rents, would leave leaseholders moving into such buildings with extensive financial and legal responsibilities, so as the Bill goes through, it is worth considering whether some leaseholders in some new blocks might want the option of leaving the stewardship of their block to a professional freeholder.

I will turn to the planning system, which others have addressed with great insight. I have put on the record many times my concerns about the proposed reforms in the “Planning for the future” White Paper. I very much welcome the Secretary of State’s indication that he is willing to think again about those plans, and I look forward to a clear public statement about his views on the White Paper. I do not believe that the way to deliver the homes we need in this country is to strip people of their right to have a say in what is built in their neighbourhood.

There is a range of factors that slow down house building in this country but that have nothing to do with the planning system, and I will set out a few ideas on how we can ensure that the right homes are built in the right quantities in the right places. As a principle, any changes we make to the planning system should increase, not undermine, local democracy. They should strengthen and simplify the local planning processes to ensure that development is led by communities, not forced on them against their will. National housing targets should be advisory, not mandatory, and developers should not be able to use them to try to force local councils to agree to inappropriate development. Housing should sit within an integrated long-term development plan for urban regeneration to prioritise the Government’s levelling-up commitments.

[Jim Shannon]

The right hon. Lady is speaking many words of wisdom. In my constituency of Strangford and across Northern Ireland, the council rules are a wee bit more stringent and strict. For instance, if a developer wants to develop a number of houses, they must make a financial commitment to infrastructure, including roads, and set land aside for leisure, shopping and education. That is all part of the integral planning regulations, and the requirements change as they go through each phase of the planning process. Does the right hon. Lady, whom I know has much knowledge of Northern Ireland, agree that when considering changes and how things can be done better, the Minister should look to Northern Ireland?

[Theresa Villiers]

I am grateful to the hon. Gentleman for his intervention. There are certainly aspects of the Northern Ireland planning system that we could usefully learn from, but it has its drawbacks as well. However, I feel strongly that developer contributions should be ring-fenced for the local communities that are directly affected by the new homes. Too often—certainly in England—such contributions end up being distributed to a broader area and those who bear the burden of the new development do not necessarily get the benefit of the developer contributions.

We should use home building as a core part of efforts to regenerate cities and communities in the north and midlands. Many of those areas have seen population declines over the past 50 years, but new housing and infrastructure could help to reverse that trend.

We also need to address land banking. As my hon. Friend the Member for Wantage proposed, we could introduce a “use it or lose it” rule for land-banked permissions. An agreed start-by date could be imposed and permission could be withdrawn if that deadline was not met, and “start-by” should mean significant initial works and not digging a few holes or a trench. We could also impose end-by dates, after which council tax is payable on every home that is planned, regardless of whether it has been built or not. There is also a case for introducing a rule to limit the number of applications that can be made in relation to the same site, which would bring to an end the exasperating practice of developers coming back again and again, with multiple applications being turned down, which effectively turns the planning process into a war of attrition with planners and local residents.

There is a strong case for a character test in planning, so that if people have a poor track record in development or there are other reasons to doubt their ability to deliver, they can be blocked at the planning stage. I believe that sites that have been illegally prepared for building—for example, where tree felling has taken place illegally—should be made ineligible for future planning applications, and I would certainly like to see the penalties increase for illegal tree felling by developers.

Lastly, we could provide tax incentives for elderly homeowners to downsize, for example by reducing stamp duty.

As the Secretary of State contemplates which reforms to take forward and which to reject, I hope that he will listen carefully to the concerns that have been expressed in this debate. We must not let our rush for new homes compromise our environmental commitments or destroy our green and pleasant land, and we must not repeat the mistakes of the 1960s and 1970s, when poor quality high-rise housing blighted the lives of millions of people.