Localism Bill

Lord Best Excerpts

Wednesday 7th September 2011 Lords Chamber

Moved by

[Lord Best]

82: After Clause 172, insert the following new Clause—
“Community land trusts and leasehold enfranchisement
(1) The Housing and Regeneration Act 2008 is amended as follows.
(2) After section 302 insert—
“302A Community land trust and leasehold enfranchisement
(1) Regulations may make provision for securing that in prescribed circumstances—
(a) an enfranchisement right is not exercisable in relation to dwellings owned (whether freehold or leasehold) by a community land trust as defined in section 79 of this Act, or (b) the exercise of an enfranchisement right in relation to that land is subject to modifications provided for by the regulations.(2) Each of the following is an “enfranchisement right”—
(a) the right under Part 1 of the Leasehold Reform Act 1967 to acquire the freehold of a house (enfranchisement),(b) the right under Chapter 1 of Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993 (collective enfranchisement in case of tenants of flats), and(c) the right under section 180 of the Housing and Regeneration Act 2008 (right to acquire social housing).(3) The regulations may—
(a) confer discretionary powers on the Secretary of State, a community land trust or any other specified person, and(b) require notice to be given by a community land trust in any case where, as a result of the regulations, an enfranchisement right is not exercisable or is exercisable subject to modifications.””

[Lord Best]

My Lords, this amendment is about community land trusts and enfranchisement. Community land trusts acquire land from benevolent landowners or public bodies with a social concern free of charge or at a much reduced price. They then build homes for renting and shared ownership using the cheap or free land as the subsidy that makes the homes affordable. This means that they can keep the homes as affordable to those on modest incomes for present and future generations. They are very local, although they may use a housing association to help them; they work with the planners, the parish council, the landowner and volunteers. Very often they are self-help organisations in which future residents play a major part.

The community land trusts are real big society stuff. However, they have a problem in relation to the Leasehold Reform Act 1967, which entitles the occupier to acquire the freehold and remove thereby the opportunity for others in future to benefit from the initial gift or concession on the land price. Similarly, the right to acquire under the Housing and Regeneration Act 2008 can remove the property from its original purpose. This amendment seeks to protect the homes built through community land trusts from legislation that can undermine the whole basis on which they are set up to operate. It is not a denial of rights of tenants or shared owners, because those moving in are very willingly, indeed enthusiastically, signing up to getting homes that they could not otherwise afford. They do so in the full knowledge that they will benefit from the excellent accommodation, but any capital gains that they might make will not include the appreciation of the land value.

The community land trust approach, which is being used in east London as part of the Olympic legacy measures, as well as in rural areas, where benevolent landlords are making land available on highly beneficial terms, deserves our support. Removal of the enfranchisement arrangements, which were never intended to cover circumstances of this kind, seems essential to secure their future. Homes developed under the community right to build, of which I am also very supportive, will have the benefit of an exemption from the leasehold enfranchisement arrangements. This amendment would give the same exemption to community land trusts. I understand that the National CLT Network Board, which seeks to promote local community land trusts, has been advised that the local projects could convert into community right to build organisations, which would solve their enfranchisement problem. The community right to build schemes require a majority of the governing body to be local residents. This might not be an insuperable problem for a community land trust, as they are often extremely local, but the community right to build route requires that the project must eventually go to a referendum before proceeding, even if the parish council and planning authority and everyone else is very happy with it. That can be very worrying for landowners, local volunteers, prospective residents and lenders to the project. It means uncertainty, delay and possible local conflict. It would seem far simpler, less bureaucratic and more likely to encourage gifts of land and engage those big society volunteers locally if community land trusts could be taken out of the enfranchisement legislation, as this amendment proposes.

I know that Ministers are supportive of the community land trust approach and I assure them that acceptance of an amendment along these lines would be enormously important and greatly appreciated by all the supporters of this excellent way of creating affordable housing and guaranteeing its affordability in perpetuity. I beg to move.

[Lord McKenzie of Luton]

My Lords, I thank the noble Lord, Lord Best, for introducing this amendment and for his description of the Community Land Trusts approach. We have a good deal of sympathy with the thrust of this because we have seen the benefit of the Government’s reply to the amendment in the document they issued in August. Of course, this was one of the amendments that was withdrawn at the last stages of Committee.

As we have heard, these powers seek to replicate provisions already in the Bill relating to community right to build orders. The amendment seeks to remove enfranchisement rights in respect of dwellings owned by CLTs, and enfranchisement rights give leaseholders the right to acquire freeholds in certain circumstances—legislation, as the noble Lord referred to, that was started by the Leasehold Reform Act 1967, but I think those opportunities have been greatly extended since.

As I understand it, the gist of the Government’s position appears to be that CLTs do not necessarily have the same level of community engagement as bodies do under the community right to build provisions, which are proposed by the community, supported by the community, subject to a community referendum. However, where the CLT does satisfy the level of community engagement, it will be able to apply for a community right to build order and thereby obtain the benefit of disapplication of enfranchisement rights. But I am bound say, therefore, that I am not sure why, where there are circumstances that permit this, they could not be described in the prescribed circumstances that the noble Lord is seeking in his amendment. Proposed subsection (1) says,

“regulations may make provisions for securing that in prescribed circumstances, an enfranchisement right”—

et cetera. So why could what the noble Lord describes not be encompassed in that way?

I think that the noble Lord makes a good point about referendums in relation to community right to build orders. In circumstances where there is clearly a very high degree of support for a project, why indeed put the project through the process, cost and challenges that this entails? It does appear that one way or another there is a route to the result that the noble Lord is seeking, which is all well and good, and I agree that we should not be seeking to remove enfranchisement rights lightly—these are important rights. I think that he has described fully why they should be removed in these sorts of circumstances.

I therefore support the thrust of the noble Lord’s amendment. I believe that they should not be forced through the community right to build process just to achieve the outcome here and that it could be dealt with by regulations that, as his amendment suggests, fully cover the situation.

--- Later in debate ---

[Lord Best]

I am willing to withdraw the amendment but I am not entirely reassured. The removal of rights implies that the people moving in believe themselves to have earned new rights—the right to enfranchise and make capital gains—which is entirely contrary to the position that they in reality face. They know that they are entering this scheme, acquiring an affordable home that they could never possibly afford otherwise, and the terms are that they will not gain from the capital growth in the value of the property. That is a very fair deal for them to be part of, and I do not think that it is a removal of rights to say that they cannot enfranchise thereafter. It is a willingly-entered-into arrangement. So, although at this late hour I am very happy to withdraw this amendment, I am not entirely reassured by the noble Earl’s reply, for which I am grateful, as I am for the support from the noble Lord, Lord McKenzie.

Amendment 82 withdrawn.