Growth and Infrastructure Bill

Lord Beecham Excerpts

Monday 28th January 2013 Lords Chamber

[Lord Burnett]

My Lords, I remind the Committee that we have been through, and probably are still in, the most incredibly severe recession. It is an appalling recession and many building companies have gone broke. They have gone into liquidation. Unfortunately they and other companies have signed up to planning agreements which, because such almost impossible burdens are attached to them, sterilise the sites, development, and the ability to build on them. This clause, the thrust of which I very much support, recognises that fact, and some local authorities, to their credit, recognise it because they are already renegotiating these planning burdens. Local authorities recognise that they want some affordable housing rather than none. The quid pro quo argument made by the noble Lord, Lord Best, is well worthy of consideration as long as there are reasonable time limits.

Another thing that has not been mentioned sufficiently is that, even if you renegotiate a planning permission, that takes a great deal of money, time and effort. Let us get some planning done and let us get some houses built. We are building only about 100,000 homes a year. We need at least 200,000 a year. The noble Lord, Lord Deben, is absolutely right. Let us try to remove some of these burdens and get builders building again. There has been a fundamental change of economic circumstances. That is what the clause is trying to deal with and that is why I support it.

[Lord Beecham]

My Lords, the noble Lord, Lord Deben, made what Ministers are apt to call some interesting points, which usually presages a disinclination to approve them. However, he did make some interesting points, not least the thought that perhaps the Treasury should revisit the issue of how significant housing projects and more generally the construction industry, to take up the remarks of the noble Lord, Lord Burnett, might be supported. However, the argument of the noble Lord, Lord Deben, was too limited in some ways.

The assumption throughout the noble Lord’s speech was that we are talking exclusively about housing, but Section 106 agreements are not, of course, confined only to housing matters. Secondly, he assumed that affordable housing schemes are for owner occupation. Of course that is true of a greater proportion, but they are not necessarily confined to owner occupation. There is also a need—which is one of the reasons for these agreements in any event, as the noble Lord, Lord Alton, implied—for a mix of tenure which would potentially ensure that there is a social mix within the development. In addition, the noble Lord, Lord Deben, implied that we are talking only about first-time buyers. I do not know what the evidence is for that assertion. When new estates are built, wherever that is, there are certainly a number of first-time buyers, but equally there are people who are, as it were, trading up and who are not necessarily first-time buyers. The position is not quite as stark as he suggested.

It follows that we need to be very clear about what the policy objectives are. First, as everyone in this Committee and in the House generally would confirm, we need to build more houses. Secondly, they should be accessible, through one form of tenure or another, to a wide range of people, not least in order to meet the desirable aim of having the kind of social mix that would help avoid a divided society. There are different ways of doing this. Clearly, Section 106 agreements can facilitate matters, and we will debate that issue in greater detail later. However, I recall in the 1970s, when there was a collapse in the property market, that my local authority stepped in to buy up unsold new private housing developments. That may have happened in other places as well but I cannot say whether it did. They were taken into the municipal stock. Subsequently, of course, under right-to-buy, they virtually all left local authority ownership. However, this might be a way of freeing up the industry; if not properties that are currently built and standing empty, then at least local authorities or social housing organisations taking a share of a development, thereby providing initial purchases and helping to ensure that kind of social mix.

[Lord Greaves]

The noble Lord reminds me of what Pendle Council did when I was chairman of the housing committee, back in those days when we were all young. As the noble Lord may recall, it was possible because it was a central government initiative that provided the funding, by some means or other, whereby the councils could do that.

[Lord Beecham]

Precisely. I do not know whether the noble Lord, Lord Deben, would agree but that might be one of the lines of inquiry that the Treasury could pursue and the Government could adopt. The position is not quite as stark as the noble Lord was suggesting and I certainly support the amendment of the noble Lord, Lord Best.

[Lord McKenzie of Luton]

My Lords, let me say at the start that I support the amendment of the noble Lord, Lord Best. I was tempted to follow the Minister’s suggestion that we do not range more widely over this issue but I was sorely tempted by my noble friend Lord Davies, among others, to get into benefits policy, which I am very happy to talk about for a long time. I share my noble friend’s concerns.

Before I get into the detail of the amendment, I say to the noble Lord, Lord Deben, that the component that seems to be missing from the analysis is the value that accrues to landowners on development from the community granting planning permission and agreeing that they want their community to be in a certain way, as a mixed community. An alternative might be to have special taxes that you get from looking at the uplift in value from planning permission—I will come back on that point—and you might then have your national scheme. For as long as that does not exist, you surely need to recognise that by agreeing to grant planning permission the local community is giving value to the landowner and developer, and to those who are going to occupy the houses that are built on that land.

--- Later in debate ---

[Lord Beecham]

My Lords, in September last year Housing Voice, which calls itself the Affordable Homes Alliance, published the report of an independent inquiry into what it termed—rightly, we would all agree—the affordable homes crisis. The inquiry was chaired by my noble friend Lord Whitty and part of its analysis was to stress:

“The social rented sector is becoming increasingly residualised”.

It pointed out that not enough local authority and housing association homes at social rents were being built to meet need. At that point the waiting lists in England stood at 1.8 million and there were concerns about the Government’s policy as to whether current social housing programmes were adequate. In particular, reference was made to the operation of the affordable rent model under which homes are let at up to 80% of market rates and the introduction of shorter-term, less secure tenancies. That again raises the question of what we are talking about in terms of affordable homes. What is the definition of affordability? In particular, what do we mean by affordable homes for rent?

I notice that the Secretary of State dominates the front page of the Daily Telegraph today with his denunciations of councils—some of them Conservative —for having the temerity to raise council tax to the extent permitted by the Government without having a referendum. The same Secretary of State had no hesitation at all in increasing council house rents by 5.1% which is two and a half times the maximum that a council could raise its council tax.

Leaving that aside, it would be interesting to get the perspective of the Government and that of the Minister on what the Government actually mean by affordable homes in terms of price and the income that might sustain that; rents and the income that might sustain them; and in particular the proportions within projects that should be devoted to the different types of affordable housing. The scheme in the ward that I represent in Newcastle—I hope that it is going to appear on the ground as opposed to being a rather subterranean task being discharged by the contractors—will see 25% of houses being allegedly affordable at the moment. Of that only a small proportion—10% or less of the total—will be for rent. In the economy of my city and several other places that strikes me as a rather low figure. Ironically the development will start with the affordable homes rather than the others because at the moment the market is unlikely to sustain those which even the developers would not regard as being within that category. A little enlightenment would be helpful.

--- Later in debate ---

[Lord Greaves]

The noble Lord makes some good points. I will put a slightly different scenario to him and ask what he thinks. In an area where development is difficult to get under way because it is not a growing or economically buoyant area—I am obviously talking about my own area—clearance took place under the old housing market renewal scheme, so there are small brownfield sites. The council will provide those brownfield sites for free to the main local social housing landlord, the RSL which deals with the former council stock. The intention was to build mixed developments of affordable housing on there, some of which would be for sale and some for rent. However, when you take into account free land, the cost of developing the site and the rents which can be charged in a low-rent area over the next 30 years, as against the costs of developing and management during that period or the price that would have to be charged for affordable housing for sale, the figures just do not add up. Those sites remain undeveloped because they are not affordable to the RSL under the existing rules and regulations. Does the noble Lord have a solution?

[Lord Beecham]

If I did, it would not necessarily be one that has as yet been reached by my colleagues at the other end of the building. I cannot be writing Labour’s housing policy, much as I would like to.

We need to go back and consider the point which I thought that the noble Lord, Lord Deben, was implying: the Treasury and the Government have to look at the extent to which public investment is required to meet the housing crisis that we are facing, if only because that will have wider impacts upon the economy as a whole. It is as good and necessary a time for that kind of investment to take place, given low rates of interest in borrowing and the need on the construction and housing sides. I think an element of public subsidy would be desirable, but I emphasise that I am not authorised to make any such pronouncements.

[Lord Greaves]

Of course, they were originally going to stack up because the relatively small gap funding required there was going to come through the housing market renewal scheme. Unfortunately, the coalition’s abolition of that scheme now makes it impossible.

[Lord Beecham]

There is, of course, also £300 million in the Government’s programme for affordable housing. I have today tabled a Question for Written Answer, which might be anticipated by the Minister, as to where that is going.

[Baroness Hanham]

My Lords, I apologise. I was not sure whether the exchange across the House had been totally completed.

[Lord Beecham]

Neither was I.

[Baroness Hanham]

My Lords, within this group of amendments we cover some of the ground we have already covered, so I will try only to fly over the top of that. These are important amendments and I want to do them justice.

Clause 6, as we have discussed, has a clear and specific purpose: to get houses built. It will deliver private and affordable homes where those homes are currently stalled. As I said at Second Reading, stalled sites represent no local growth, no community benefit and no new housing. Across the country, we have 1,400 stalled sites, with the capacity for 75,000 homes, including affordable housing. The noble Lord, Lord McKenzie, asked me whether we could say how much affordable housing was caught up in this. Local authorities hold that information; it is not necessarily passed back to central government. I therefore cannot give him a definitive response to that, except to say that we know that a good percentage of that 75,000 is affordable housing.

We know that many councils are voluntarily renegotiating to bring sites forward; we have discussed how this can be voluntary. We are in favour of this good practice. We are supporting this approach through a mediation service, bringing together local authorities and developers to help unlock sites, so that they can come together, discuss it and see how they can move on. But where authorities and developers are unable to come to agreement, developers should have a right to challenge. Current legislation prevents the developer appealing formally for five years. This is too long when we need homes.

There may need to be a fundamental review of obligations for those agreed at the peak of the market. We intend to make regulations in the coming weeks to allow earlier renegotiation of all planning obligations agreed prior to April 2010. That was a point made by the noble Lord, Lord Beecham: voluntarily, before 2010, you could do that but the regulations will make that part of legislation. These negotiations can take time and be costly and complex, so we are also ensuring that there is a rapid, focused mechanism for a review of the affordable housing element only, where the viability of the scheme is at stake, with a right of appeal to the Planning Inspectorate.

Affordable housing often comprises the largest single contribution on residential schemes, which is why we have focused there. Research in 2007-08 found that about 50% of all planning obligations are for affordable housing. There should also be capacity to vary the affordable housing provision in most cases. The noble Lord, Lord Beecham, asked what we meant by “affordable housing”. That can be found on page 50 of the National Planning Policy Framework. I will give a snapshot and then the noble Lord can look it up for himself. Affordable housing is:

“Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market … Homes that do not meet the above definition of affordable housing, such as ‘low cost market’ housing, may not be considered as affordable housing for planning purposes”.

Those are the three major elements.

It is important to understand that we are not proposing that developers can somehow avoid their obligations, which was suggested by the noble Lord, Lord Davies, earlier. We are simply allowing a review to be made to ensure a viable and deliverable scheme as agreed. Furthermore, we are not proposing that developers can ensure blanket removal of affordable housing requirements for their schemes. We are requiring an evidence-based approach that will adjust the affordable housing requirement by only the amount necessary to bring the scheme into viability. This would not be wholesale removal except in the most extreme cases.

Evidence will be key to this process. Developers will have to submit revised evidence to the local authority to justify why their current planning obligation is not viable. The local authority will be free to respond to this proposal and be able to collect its own evidence if it wishes. Concerns are often expressed about the quality of viability evidence. However, robust evidence must be the best basis on which to make a judgment on the viability.

To assist as much as we can in ensuring consistency in how developers and councils approach this new process, we intend to issue guidance to support this clause. The guidance will not advocate a single methodology for viability assessment, but it will work with industry practice. It will be clear on what developers need to do to support their application for review. We will discuss the guidance with professional bodies and it will be published in due course, but I hope that we will be able to have a discussion about it before Report. The guidance will also be clear on the flexibilities open to local authorities to encourage developers to start on site and to get development going.

Overall, this measure presents a real opportunity to stimulate local housing growth by ensuring that consents are viable and realistic. The provision will not affect those affordable housing contributions that are planned on viable sites; in other words, where the costing stacks up, the developers cannot come back and suggest that they contribute less affordable housing. However, the measure provides for adjusting unattainable levels of affordable housing on unviable sites. Those values may have been estimated during a high point in the market, and we are clearly not there at the moment.

I turn now to the amendments in this group. Amendments 55A and 55CD would limit the life of the clause to those planning obligations in place at the time of Royal Assent or three years after Royal Assent—this is the sunset clause. I understand the arguments being made that the intent of the clause is to address obligations made in different economic circumstances. It is about giving developers the opportunity to review affordable housing requirements and bring forward stalled sites. The difficulty that I have with the amendment, which allows applications in relation to existing obligations only, is that it assumes that we are now in a period of stability in the market and that any obligation made currently should not be challenged on the grounds of viability because we know that all is well in the property market. If we knew all the factors that were to be involved and their impact on a developer’s viability—namely, construction costs, sales values and borrowing costs—and if those were certain and fixed for the foreseeable future, we could focus on the past only. However, evidence from public sources, such as the Office for Budget Responsibility, indicates that we are not actually there yet. Evidence indicates varying performance up and down the country. House price growth remains subdued across most of the country. The recently announced 2.5% house price increases in England were driven by a 5% rise in London and a 3% increase in the south-east. Elsewhere across the country there is still a wide variation in house price growth.

There remains uncertainty in the housing market. The Government continue to provide strong support for housing growth—for example, the NewBuy and FirstBuy schemes—and we are making progress. Net additions are up 11%. Nevertheless, the wider market remains uncertain. While transactions are up year on year, they are down around 47% compared to pre-recession levels. So we do not yet have the certainty that we would like on the housing market and associated viability. The clause already includes, as noble Lords have said, a provision to allow the Secretary of State to switch off the provision by order. This has been drafted in a way that allows for a judgment to be made at the appropriate time, based on the state and stability of the housing market.

However, I am clear from the debate that we have had today that greater certainty on this would be desirable. I am also very conscious of the report published last week by the Delegated Powers and Regulatory Reform Committee of this House. We are giving the report and its recommendations very careful consideration, especially in relation to the suggestion that a sunset date should be considered. Therefore I think it would be more helpful if we return to this matter on Report, and I hope that I can have some further discussions with noble Lords before we get there.