Housing: Affordable Housing

Lord Beecham Excerpts

Monday 22nd February 2016 Grand Committee

[Lord Beecham (Lab)]

My Lords, the noble Lord deserves our thanks for securing this curtain-raiser to Committee stage of the Bill, when we will be considering the Government’s proposals. This debate provides a welcome opportunity for an initial exploration of the Government’s proposals in relation to right to buy and starter homes, which will of course be subject to much more detailed scrutiny as the Bill progresses.

Ministers trumpet their policies as making more affordable homes available for purchase for both council tenants and social housing tenants under right to buy, although for the time being housing associations will not be compelled to sell. If this Government remain in office, I believe that they will ultimately extend compulsion to that sector, as they have in the municipal sector. In addition, there is the starter homes scheme, with its attendant 20% discount, to be funded, effectively, by the sale of existing high-value council housing.

The claim is that affordable homes will therefore become available for purchase. But, as the noble Lord has implied, affordability is an elastic concept. The coalition Government drove up council rents, deeming an affordable rent to be 80% of private sector rents. But given the chronic housing shortage and the boom in buy to let, which dramatically drove up prices and rents in the private sector, the definition of affordability is fundamentally flawed. Affordability must surely relate to what the would-be owner-occupier or tenant can reasonably be expected to pay, having regard to his or her income, not an artificial comparison with the market rate.

At Second Reading the Minister told us, in true Candide fashion, that all was for the best in the best of all possible housing worlds, because the average price of starter homes for first-time buyers was £226,000—or, after the discount, £169,000. The London figure after the discount was £291,000. But of course these were 2014 figures. Already they will have increased, I suggest, by around 5%. The noble Lord, Lord Shipley, has pointed to likely future increases. Under Help to Buy, the average price was £186,000.

I pointed out at Second Reading that in Newcastle the 5,900 applicants on the council’s housing list have average earnings of £20,000 a year, which would be enough to support a mortgage of only £70,000, leaving an effectively unbridgeable gap between that and the discounted purchase price which would apply outside London. Even the national average income of £26,000 would fall short of the amount required to obtain and sustain the required mortgage—and that is at the present historically very low levels of mortgage interest rates.

Ironically, in passing, we should note that a household income of £30,000 outside London, which could be a couple on the national minimum wage, would invoke the “pay to stay” provision for council housing. So what is the Government’s definition of affordability for both house purchase and rent relative to income? The LGA quotes a report by Savills that starter homes would be out of reach for all the people in need of affordable housing in 220 council areas.

What, furthermore, will we be getting in terms of space and energy efficiency in the 200,000 starter homes, given the contrast between what has been built here in recent years and what has been built on the continent? It is a question not just of numbers but also of quality.

In all of their claimed ambitions for more new homes the Government make no mention of council housing. Is it not the Government’s intention to phase out such provision completely through the right to buy, while at the same time forcing councils to cut rents, with dire consequences for the maintenance and improvement of the stock? In Newcastle's case that amounts to a loss over time of £593 million which could have been devoted to improving the stock. What are the Government’s intentions in relation to new council housing, and what is their assessment of the impact of the proposed alteration to the planning system, including permission in principle and the emphasis on starter and so-called affordable homes?

The implications, which are dire for councils, are also dire for housing associations. Inside Housing magazine’s survey of 135 English associations found that 53% think it likely that they will seek to renegotiate existing agreements to build homes for affordable— sub-market, as they would define it—rents. Already a small scheme in my own ward has fallen through, and another has been preserved only by changing the type of housing and reducing the size of the property.

There will also be an impact on what councils can achieve under Section 106 agreements. The Government’s own figures suggest that for every 100 starter homes built, between 56 and 71 affordable council and social rented homes will not be built. This represents, over the four years of the starter homes scheme, a reduction of around 50% compared to the previous four years.

Reference was made at Second Reading to the position of supported housing and specialist housing, where the LGA—I declare my interest as a vice-president, along with my other local authority interest—is calling for Government, councils and housing associations to identify categories of properties to be exempted from the right to buy. What is the Government's response on this issue? Will the Government require housing associations to consult local councils on the exercise of right to buy in their sector, given that, for the time being, this is voluntary—not compulsory—and given the need in many areas to ensure that replacements are provided in the locality?

Last Friday the Select Committee on National Policy for the Built Environment published a report with the apt title of Building better places. It affirms that:

“We do not believe the Government can deliver the stepchange required for housing supply without taking measures to allow local authorities and housing associations each to play their full part in delivering new homes”.

The committee calls on the Government to ensure that councils are able to fulfil their potential as direct builders of new mixed-tenure housing and to review the restrictions on borrowing and the effect of social housing rent increases. It also calls for a revision of the proposal to require starter homes on every developable site, and argues that councils should have the right to prioritise long-term affordable housing over starter homes where appropriate. Will we have the Government's response to this important publication before we reach Report on the Bill? Perhaps the Minister could also tell us when we might expect to see the draft regulations through which it intends to implement so many of the provisions of this highly controversial measure.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con)]

My Lords, I thank all noble Lords who have taken part in this debate, particularly the noble Lord, Lord Shipley, for securing it at what appears to be a very timely moment. I am sure waiting for three months has been worth it.

This Government have a good record on affordable housing delivery. Between 2011 and 2015, 193,000 affordable homes have been delivered in England, which exceeded our target by 23,000. The spending review announced that we will invest £8 billion to deliver a further 400,000 affordable housing starts. Councils will continue to support delivery of a range of affordable housing. A number of noble Lords brought this point up—it is not just about starter homes but about a range of different types of affordable housing. Councils are in the best position to bring forward more land for affordable housing.

I think it was the noble Lord, Lord Beecham, who brought up council housing and asked what our aspirations were for it. More council housing has been built since 2010 than in the previous 13 years, and 2014 saw the highest number of council housing starts for 23 years. However, we are clear on prioritising support for low-cost home ownership. We want current and future generations to experience the benefits of owning their own homes, and I believe our reforms are the best way to achieve this.

The right to buy has already helped 2 million families to realise their dream of owning a home. We reinvigorated it in 2012, and as a result sales have jumped from 2,600 in 2011-12 to 12,300 in 2014-15. This shows that these realistic discounts have enabled significantly more people to realise their home ownership dreams—I see my noble friend Lord Young to my right, who asked a Question earlier about housing. A question was asked in Committee about the decline in home ownership. Last week saw a report that said that, for the first time, decline had halted. Hopefully, we are on an upward trajectory.

[Lord Beecham]

Could the Minister tell us how many of the houses that were sold were replaced?