Housing

Lord Best Excerpts

Thursday 19th January 2012 Lords Chamber

[Lord Best]

My Lords, I declare my various housing interests as set out in the register. I am grateful to the noble Lord, Lord Stoneham, for initiating this debate and would underline the powerful case that he has made that the nation is facing a daunting under-supply of the homes we need and that these acute shortages are creating a great deal of human misery.

Although I am currently locked in battle with the Government on their plans for radical reductions in housing support for poorer tenants, in the Welfare Reform Bill, I am pleased to congratulate the Government on the direction that they are taking with many of the measures set out in the new housing strategy, Laying the Foundations. I am going to argue that these sensible measures can, and should, now be taken further and faster forward.

I know that the Housing Minister, Grant Shapps, who has a special commitment to tackling homelessness, understands that new home building, with all its knock-on benefits for pulling the wider economy out of the doldrums, should be given greater priority. I believe that the Government have got that message and that most of their policies are pointing in the right direction, but they now need to be bolder.

On the planning side, I am sure that the National Planning Policy Framework can be rephrased to make it more acceptable to those fearful about inappropriate development. But broadly the NPPF takes us in a positive and sensible direction and is commendable in highlighting the need for speed and simplicity in the planning process. I also welcome engagement of local people in sorting out where new homes should go through neighbourhood plans, which should prove to be complementary and not oppositional to the council's own local plan.

Alongside the reformed community infrastructure levy and a new Growing Places Fund, with other measures in the Localism Bill, I welcome the Government's New Homes Bonus, which received the seal of approval from the noble Baroness, Lady Maddock. This will reward those local authorities that show leadership in saying “yes” to the development of additional homes despite local opposition. With housebuilding running at half the rate needed to keep pace with household formation, this nudge is badly needed to encourage councils to support the building of homes, not least for those in rural areas. To quote from Charles Moore writing in the Spectator last autumn:

“Only in Britain—actually only in England—do people believe they are doing country life a good turn by refusing to build houses for the next generation to inhabit. It is a more powerful attack on rural culture and the rural poor than was the Highland Clearances”.

But while encouragement for the development of new homes is very necessary, it is not sufficient to make serious inroads into this country's ever-growing backlog of the homes we need.

A key problem, of course, is that housing is dependent on borrowing—borrowing by first-time buyers, borrowing by housebuilders, borrowing by housing associations, borrowing by local authorities, and, indeed, borrowing by central government itself. Yet this is absolutely not the right time for borrowing. Internationally, an excess of borrowing in the housing market contributed significantly, from the sub-prime mortgages in the US to excessive over-building in Ireland, Spain and elsewhere, to the ongoing financial crisis. In the UK we are spared the blight of millions of unsold and unsaleable homes, since our housing boom, because we have had such difficulty in delivering enough homes, has mostly comprised paying more and more for existing property. However, avoiding a glut of surplus homes has come at a price. Our acute housing shortages mean high house prices and high rents—and therefore high housing benefit costs—and leave hundreds of thousands in overpriced properties and overcrowded and substandard conditions or actually homeless.

All these problems come back to the abject scarcity of decent affordable housing that is the UK’s unique national problem. How can we step up housebuilding when borrowing is now so difficult? I propose five measures. First, the Government’s new housing strategy announces a new build indemnity scheme, which has already received some plaudits—help for buyers who cannot find the huge deposits now required, provided that they are purchasing new, not second-hand, homes. This should encourage the housebuilders to develop more of the extensive land banks that some now hold. I note that the big builders are now making healthy profits—I see, for example, that the largest, Persimmon, has just reported a 50 per cent uplift in profits—but housebuilders will build only if they are quite sure they can sell at a decent profit.

The Government’s help for buyers, along with their build-now-pay-later sales of publicly owned sites and their revival of Labour’s Kickstart programme for stalled developments, now called Get Britain Building, should give builders confidence not to hold back but to get on with the job of constructing new housing. However, I recommend that help with deposits for first-time buyers be extended those to purchasing existing properties, not just new ones. Many of those who are trying to sell—often in a chain of sales that needs to be unlocked—will be buyers of new homes too.

My special interest is in seeing more high quality retirement apartments built, since those moving into such homes will usually be releasing much needed family homes, often with gardens, for the next generation. New retirement apartments do not generate the same opposition as new family housing. They take up less land and do not lead to much of an increase in traffic. Assistance with the deposit arrangements—guarantees are pretty cheap—for those buying existing family homes from older owners could help to get the market moving and address the needs of new buyers while simultaneously assisting the older homeowner to downsize to somewhere more manageable and, indeed, release equity for other purposes.

My second recommendation to get new homes built for those unable to buy or only to afford shared ownership is that a greater stimulus be given to the housing associations. They have had their levels of grant cut by nearly two-thirds, and if they replace the missing grant with additional loans then they have to charge much higher rents, which can force working tenants on to housing benefit with consequent work disincentives, and they will run out of borrowing capacity in approximately two years and their programmes, already too modest, will dry up. An investment in grants to housing associations can be multiplied by their extra borrowing, giving the Government a hearty bang for their buck. The National Housing Federation reckons that another £l billion could mean housing associations raising £8 billion, delivering 66,000 more homes while creating 400,000 jobs, saving hundreds of millions in benefits and boosting tax revenue. Go for it.

Thirdly, I recommend that local authorities be allowed to borrow more against their assets, in the spirit of greater localism. The current reforms to the housing revenue account towards a self-financing regime for councils are very welcome but need to go further. Within the confines of prudential borrowing rules, more housing investment could be unleashed. Many councils have small parcels of land they are keen to develop; for example, for attractive bungalows that entice underoccupying older people out of larger council homes. In other cases, local authorities can work imaginatively in providing land as well as finance in partnership with housing associations, alongside using their hugely important Section 106 planning powers to secure private sector deals for affordable homes.

Fourthly, during the passage of the Localism Bill, the Government, while rejecting my amendment to allow councils to retain 100 per cent of right-to-buy sales proceeds, agreed to a concession that I proposed to allow 100 per cent of the proceeds of sales of vacant council homes to be recycled to new building or regeneration. I recommend that advantage is taken of this important change in the Treasury rules. In my view, sales of vacant properties represent a preferable way of creating a mixed community of owners and tenants on council estates, to the alternative of the Government’s plans for enhancing the old right to buy. Selling selected vacant properties means no discounts, which are windfall gifts to those already satisfactorily housed, so it allows larger sums to be reused for new housing and, indeed, makes it possible to achieve a one-for-one replacement of any homes sold, which seems unlikely where large discounts are doled out. Such sales introduce new home buyers on to council or housing association estates, often with young children who then go to the local school, and achieve a mix of incomes that can avoid these estates being stigmatised as only for the poorest.

Fifthly, I ask the Government to accelerate their consideration of cost-neutral amendments to the arrangements for so-called real estate investment trusts. So far these REITs have failed to materialise in the residential property sector, yet they could draw in substantial investment for housing from pension and other funds and other financial institutions, as in other countries.

These are difficult times for an area of the economy that utterly depends on borrowing, at a time when borrowing is very much out of fashion. Yet I suggest that there are measures that build on the Government’s new housing strategy and could get housebuilding going again—if not yet to make an impact on the horrendous backlog, at least to prevent the gap between supply and demand widening still further. I look forward to hearing the reactions of the Minister, who has herself proved to be a sympathetic and helpful Housing Minister in this House.