Lord Beecham
Main Page: Lord Beecham (Labour - Life peer)
Baroness Royall of Blaisdon (Lab)
My Lords, building on some of the things that my noble friend has said about Amendment 41B, what can be done to ensure that starter homes sold with a discount cannot immediately be sold on to second home owners or to people renting them out as holiday homes? As we know, in many areas of the country, especially rural and coastal areas, while properties are sold and people have homes, these homes are not lived in all the time. Therefore, notwithstanding that the homes have owners, the essence of these communities is hollowed out because people are not there all the time; they become real communities only at certain times of the year, and the schools, the pubs and the shops all close. Can anything be done, if we persist with this 20% discount, to ensure that communities still thrive and that people are not able to sell these properties on as second homes?
The Government, in seeking to enable people to buy these starter homes, intend that if a person is under the age of 40, as I understand it, they still qualify to buy one. I do not think that the government amendments go far enough. Is the Bill, even as amended, compliant with the Equality Act? There is discrimination, I would say, against people over the age of 40.
Lord Beecham (Lab)
My Lords, I suspect that the Minister will be grateful that my noble friend Lord Campbell-Savours eventually managed to get some sleep, having burned the midnight oil on what has been an absolutely forensic analysis of these proposals in the Bill and the amendments in the name of the noble Lord, Lord Shipley.
I had intended to ask the noble Lord, Lord Shipley, how much of a mortgage would disqualify and for how long would it have to be held under the terms of his amendments. How would the maintenance of a mortgage be monitored? If a mortgage were paid off after a year or two, or three or whatever, would that change the situation in relation to the discount? How would residence be monitored, for that matter? Is somebody supposed to call every so often to check who is occupying the property? On a lesser topic, would very short lets of the Airbnb kind interfere with the concept that the Government have advanced? I understand the intentions of the noble Lord, Lord Shipley, but there are significant problems in realising the objective, with which the Opposition agree, of ensuring that only genuine first-time buyers are covered.
There is also a question about the meaning of locality. Amendment 44 states:
“The meaning of ‘locally’ … shall be defined by the relevant local authority or the Greater London Authority”.
If the Government are disposed to accept this amendment—which would be sensible because someone has to ensure that this is a locally based scheme—I wonder whether, in addition to the terms of the amendment as it stands, “local authority” could be defined as including combined authorities where they exist. Combined authorities will usually have a strategic role in the housing market and development—certainly some agreements have now been signed—and it would incongruous if, in an area designated as one for which it has some housing responsibility, the combined authority was not included in the process of determining the locality for obtaining a grant of this kind. If the Government are disposed to accept the principle of Amendment 44, perhaps that further refinement could be taken on board.
I agree with the suggestions made by the noble Lord, Lord Young. It would be right to look at the range of issues that he has covered and I hope that the Minister will indicate a sympathetic stance—he has already made the point, so she has had a couple of days to think about it—and apply his suggestions to the scheme as it develops. It is to be hoped that, on Report, the Government will reflect at least that much in their own amendments.
Baroness Hollis of Heigham
My Lords, I have a simple question—this is not a speech—to ask the Minister. As far as I can see, the only effective constraint—apart from the price or value of the property—is the age of the applicant for a starter home, who has to be under 40. We all share a common wish to ensure that home ownership is available to people on modest incomes where it makes sense for their lives, but what about the displacement issue? In quite a number of cities where there are universities, colleges and so on, people do not expect to enter the home ownership market until they are around 30 or so—they are doing PhDs and so on—at which point they enjoy relatively generous salaries and could well afford first-time homes on the open market without taking any advantage of the discount. However, because the discount is there with no income-cap qualification to its retirement, we will see people who have quite generous incomes—and whose income increases will also be quite generous—able to pocket this public subsidy paid for by taxpayers, often with incomes much lower, and then trade up as soon as they get their first promotion. Why is the Minister not considering an income cap as well as an age cap to ensure that people who can buy without discount should?
Baroness Hollis of Heigham
My Lords, in that case will local authorities be able to claim Section 106 land which has now been earmarked for starter homes and which in the past has funded more than 50% of social housing in this country? The Minister says that they can do it but she is denying them the powers, the authority and the revenue base by which to do it.
Lord Beecham
Before the Minister replies to that, how does this aspiration match the Government’s imposition of cuts in rents for local authority social housing, which will restrict their capacity to invest?
Baroness Williams of Trafford
My Lords, to go back to the first question from the noble Baroness, Lady Hollis, the councils will provide through various mechanisms different types of tenure, as they always have done. We fully expect that this will be the case in the future and I have outlined some of the funding mechanisms.
Baroness Williams of Trafford
My Lords, as I have said this will happen through a variety of mechanisms. I appreciate that we are in disagreement at this point but if noble Lords will indulge me, I would like to make some progress.
Lord Beecham
I am grateful to the Minister for giving way but broadly speaking, it is right to say that in terms of Section 106, authorities have been accustomed to accepting some 15% of houses in development under that scheme. Can the Minister give any indication of what she thinks the future likely percentage will be under the regime which the Bill introduces? In percentage terms will it be around the same, less or more, and on what basis does she advance her opinion? I accept that she may not have an answer immediately across the Dispatch Box and if she does not, can she write to us about that?
Baroness Williams of Trafford
I cannot say at the Dispatch Box what the percentage will be, because it will be out for consideration, but I can give my opinion. In my experience, it will not be too dissimilar from the affordable homes expectation that was previously in place. The noble Lord, Lord Beecham, asked me another question in following the noble Baroness, Lady Hollis, on the previous point and I have completely forgotten what he said. Perhaps he could repeat it—it is going to be a long day.
Baroness Williams of Trafford
It includes all sorts of properties, and that is for first-time buyers. But the price cap is a cap; it is not an average. We can and we will argue statistics today, but the cap is not the average, and the average first-time buyer price of a home in London is £356,000.
Lord Beecham
I thank the Minister. I referred to this when we discussed similar matters the other day. The suggestion—I was quoting Savills as my authority—is that new-build homes are going to be more expensive than houses on the market, so the £350,000 figure is likely to be an underestimate—if I recall rightly, by around 10%. We will be looking at nearer £400,000 for a new-build property, which makes it a different story.
Baroness Williams of Trafford
I apologise to the noble Lord and to the noble Lord, Lord Campbell-Savours, because the figure that I gave was the implied first-time buyer price of a new-build in London. I think we will all get a bit confused with prices and statistics today, so I hope the noble Lords will accept my apology.
I turn now to the amendments. I thank the noble Lords, Lord Kennedy and Lord Beecham, for Amendments 43 and 44, which suggest limiting starter homes to local people, and for Amendment 40, which would prevent starter homes being sold to buy-to-let investors.
I thank the noble Lord, Lord Shipley, for his amendments, which seek to restrict starter homes to those purchasing via a mortgage, and to require first-time buyers to occupy starter homes as their principal residence. Finally, the amendments in my name introduce some modest flexibility to the age 40 cap.
Baroness Williams of Trafford
My Lords, matters may have been resolved by Third Reading, but I will speak to officials to see what can be done to expedite the detail of the regulations as soon as possible. I can do no more than that today.
Lord Beecham
My Lords, I would like to revert from this dreadful series of process issues and assert that the Committee has every sympathy with the Minister; it is no fault of hers that we are in this dreadful situation. To go back to the last substantive thing that she said, which was about making sure that the houses are not let after being bought, what mechanism will there be for monitoring the situation? Unless it is effectively monitored it becomes a meaningless provision, and I am not sure how it might be monitored.
Baroness Williams of Trafford
My Lords, there will be a power to stop letting because this is a very important aspect. For the intention of what is being provided through starter homes to be flouted in that way would undermine the policy altogether.
Lord Beecham
That is obviously right. The question is how it is going to be done. Will someone be going around and checking letting boards or with estate agents to see whether properties bought under right to buy are to be let? Or is it going to be an obligation, although how it would be enforced is another matter, for an owner of a right-to-buy property to notify someone about letting? Again, how could that be enforced? There are real practical difficulties here to which I find it hard to come up with an answer. I am not expecting the Minister to come up with an answer just like that, but I hope that someone in the department is giving some thought to how they can make a reality of the aspiration, which the Government and the Minister no doubt have, that the principle of not letting these properties is actually enforceable.
Baroness Williams of Trafford
The noble Lord gets to the heart of some of the issues on which we shall be consulting and which we shall try to ensure do not happen—for example, abuse of the facility. The regulations will be subject to the affirmative procedure, so there will be time to debate them, although I am not losing sight of noble Lords’ frustration.
I have completely lost my place. The English housing survey, which was published in February, found that 83% of first-time buyers funded their first property with savings; 27% had help from family or friends, while 10% used inheritance. Many first-time buyers used a combination of sources and 96% required a mortgage to buy. I am not convinced that a mortgage requirement will prevent the gaming that noble Lords suggest, although I can see exactly where they are coming from. People can play all sorts of games with mortgages. They can get a mortgage and, six months later, pay it back. I am keen to prevent local gaming, but I do not know that this would actually prevent it. We will keep implementation under review and issue further regulations if necessary.
The noble Lord, Lord Campbell-Savours, talked about resale in the first five years. This is a very important point. For example, what would happen to any money from the 20% discount? If a property were resold in the first five years, it would be sold at a 20% discount during that period, so it would remain a starter-home type of product.
Lord Campbell-Savours
Why not simply say, “No 99-year or 125-year leases?”. Why not just say that they should all be 999-year leases?
Lord Campbell-Savours
A 999-year lease is a virtual freehold, is it not? Why not have those extra-long leases? Why have short leases, which force up the enfranchisement costs when people buy their leases if the ground rents are high as well?
Baroness Williams of Trafford
My Lords, I am sure that we will go on to talk about “in perpetuity” today. The Government are quite clear that not making these homes discounted in perpetuity allows mobility up the housing ladder and frees up property for other people to live in. Also, it does not restrict the person who has bought the starter home in making progress up the property ladder.
Lord Beecham
I want to revert for a moment to the conundrum posed by my noble friend Lord Campbell-Savours, to which the noble Baroness has endeavoured to reply—with some difficulty, which I quite understand. His question is predicated upon a single person inheriting a house. However, if two or three siblings inherited a share in that house, on the face of it that would also invoke the problem he raised. Again, I do not ask for an answer now but this is yet another area that needs to be explored by those advising the Minister. On the face of it, one out of the three, four or however many siblings might have a share in this notional property would be disqualified.
Baroness Williams of Trafford
I think that the noble Lord is right. If the noble Lord, Lord Campbell-Savours, will indulge me, I will write to him on this further. It starts to raise questions, particularly when there are two or three—
Baroness Williams of Trafford
I take the noble Baroness’s point, but the Government’s wish is that people who want to move—and there are many reasons why people would want to move in the future—will be able to do so without being restricted by the same problems that they faced when buying before the starter home discount came in. Also, that mobility introduces a supply into the market. Noble Lords from all round the House have talked about the lack of supply and the lack of supply at a certain level. So it has a dual purpose, in allowing other people to come on to the market but also introducing supply when those people choose to move on.
I now move to non-government Amendments 43 and 44. Over the last 20 years, we have heard that the proportion of those under the age of 40 who are homeowners in England has declined by over a third, from 61% to 38%. There has been a 26 percentage point increase in the proportion of that age group who rent homes in the private sector, from 18% to 44%. Therefore, as one has declined, so the other has gone up. This is a problem faced by an entire generation. It would be wrong to say that some people cannot benefit from starter homes and buy a home in the location that works for them simply because they are currently living or working elsewhere. They could, for example, currently be priced out of the neighbourhood of their choice, or they could be relocating for work or other personal reasons. The effect of a local connections test on starter homes would be to restrict access for some people for no good reason. A starter home purchaser must commit to living in the property for five years and there will not be the opportunity to rent out the property, as we have already discussed. This must be a better test of commitment to an area.
It is also important that there is consistency, in order that our reforms and the commitment to deliver 200,000 starter homes are widely understood. This is particularly important for lenders and developers, and their support and engagement are critical to achieve delivery. Putting differential requirements in place as a matter of course, such as a local connection test, would introduce complexity that we do not want in getting housing delivery on the ground. However, my noble friend Lord Young brought up the point that a local connection may be warranted, and I recognise that. It has long been a common feature of rural exceptions sites, where opportunities for new housing supply are very limited. As part of our consultation on national planning policy, we sought views on whether local planning authorities should have the flexibility to introduce a local connection test for starter homes on rural exception sites. This would reflect the particular needs of some rural areas, where local connections are important and access to the housing market for working people can be extremely difficult. It would also be consistent with existing policy on rural exception sites. We are currently considering consultation responses on this point.
Lord Beecham
My Lords, I wonder whether it might not be sensible also to look at possible urban exception sites. Take the case of inner London—there may be other places as well—where there are very high levels of demand and very high prices, and even these homes will not exactly be cheap. Would it not be sensible to allow the local planning authorities in those areas to have the discretion to require a local connection, having regard to the pressures they are already experiencing with their existing population? I certainly support the rural exception point, and presumably it may be possible to have a similar mechanism for urban areas. Perhaps in conjunction with discussions with the LGA or combined authorities, the Government could reach an agreement about which areas should have that. Some element of discretion ought surely to be provided for in urban areas. The Minister represented part of Greater Manchester where, I suspect, there will be areas with precisely the same problem.
Baroness Hollis of Heigham
I support my noble friend in what he says. This morning, I was sent briefing data from the city of Cambridge. The average house price in Cambridge city, based on February 2016 data, is £483,625—in other words, £484,000. The lowest quartile price is £315,000, and there has been a 17% increase in the last 12 months. South of Cambridgeshire—so people would have to travel in, but none the less—the average price is £385,700. In the east of England, it is £303,000. These figures confirm the point that my noble friend was making: we are going to need exemptions for urban sites of high demand just as we will in rural areas. Cambridge city and university cities across the country face this sort of price explosion.
Baroness Williams of Trafford
My Lords, I was trying to articulate my point about housing mobility. People buying starter homes who want to move on to the next rung of the ladder would be disenfranchised at a further point down their aspirational route.
Lord Beecham
My Lords, if you have served your five-year term, as it were, and you make your £100,000 or so profit, you will have more money to spend on the second house. Surely the effect of that will be to push up house prices.
Baroness Williams of Trafford
My Lords, the effect of introducing 1 million more new homes into the housing market by 2021 will be to increase supply, which should, first, deal with some of the problems of demand and, secondly, start to moderate house prices in a way that has not been the case over the past few decades.