Housing and Planning Bill

Lord Best Excerpts

Thursday 3rd March 2016 Lords Chamber

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)]

I have to inform your Lordships that if this amendment is agreed to, I cannot call Amendment 39 owing to pre-emption.

[Lord Best (CB)]

My Lords, it is time for the Cross Benches to join in. Amendment 41A is in the names of the noble Lords, Lord Kerslake, Lord Cameron of Dillington and Lord Beecham, as well as my name. It also relates to this key component of the Bill—the Government’s flagship policy of starter homes—and is all about reducing demand for this new product so that starter homes are not such a cuckoo in the nest. Just to reiterate, these are homes for first-time buyers under 40 sold at a 20% discount, with the costs borne by housebuilders, who in return are now excused the normal requirements to provide a percentage of affordable rented or shared-ownership homes and to pay a community infrastructure levy.

I preface my remarks with an overarching comment on where we have got to in relation to the starter homes initiative. If only starter homes were all additional to the affordable rented homes that would otherwise be provided, I am sure there would be far less concern. However, they would then of course need to be funded separately, instead of replacing accommodation for those on lower incomes. What would that cost? If the average discount was something around £40,000, the total cost over five years for 200,000 of these homes would be £8 billion. The Government have already pledged something over £2 billion to assist with the programme, leaving under £6 billion—rather more than £1 billion a year—to be found if only the scheme was intended to add starter homes while serving the same number of people. However, this is not where we are.

On Tuesday we talked a lot in Committee about the losers from this policy: the people who would have obtained those rented or shared-ownership homes that will not now be built. Today we are talking more about the winners from the starter homes policy and whether this scheme is rather more generous than it needs to be. Who are these winners, and does the nation get value for money from rewarding them in this way? A big group of beneficiaries will be those of my generation. This is not because I am under 40, but because the starter homes initiative will benefit parents of buyers, since the bank of mum and dad will not need to be drawn upon so heavily. Over a quarter of first-time buyers have been dependent on this source of funds, so a lot of parents can now draw a sigh of relief that government will pay instead.

Secondly, of course, the main gainers from the policy will be those lucky buyers who can receive up to £112,000 towards their purchase in London and up to £62,500 elsewhere. These discounts take the form of grants after five years; the purchaser can then keep all the money alongside keeping 100% of the increase in the property’s value, of course. That is great for these buyers.

Owner-occupation does indeed provide a level of security, a source of pride, an encouragement to maintain and improve the home, and a degree of freedom that renting does not. But because these discounts represent a hefty subsidy to the buyer at the expense of a relatively worse-off household, who will not now get the affordable rented home which starter homes have replaced, we need to ask whether this trade-off represents good value for money for the nation.

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[Lord Campbell-Savours]

That is an area that confuses me. When we talk about repayment, who is actually being repaid? I cannot work it out.

[Lord Best]

The Bill and my amendment leave open whether repayment would be to the local authority where the home has been built—which I would support—or to the Homes and Communities Agency, to be used for housing elsewhere.

By making the offer a little less generous—by making the cream a little less rich—the excessive stimulus and distortion of this market is reduced, I hope, and the cost to the nation in losing out on affordable rented homes is made a little easier to bear.

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[Baroness Williams of Trafford]

Absolutely, and they will be placed in the Library. I have the implied first-time price of new build—not the demand figures—by region, which might temporarily satisfy noble Lords. In the north-east, it is £138,000; in the north-west, it is £144,000; in Yorkshire and Humberside, it is £144,000; in the east Midlands, it is £152,000; in the West Midlands, it is £148,000; in the east of England, it is £220,000; in London it is £356,000—no surprises there; in the south-east, it is £352,000; in the south-west, it is £179,000; and in the whole of England it is £216,000. I hope that is all right as a starter for ten, but I will endeavour to get those demand figures for next week.

Within London, up to 47% of households that are currently renting privately would be able to secure a mortgage on a new-build starter home—in the lower quartile of the first-time buyer market—compared to 37% who could buy a similar property now, priced at full market value. This demonstrates that starter homes, at a 20% discount, will provide a genuine opportunity for home ownership for many more households and help them to get a lasting foothold on the property ladder. The noble Lord, Lord Best, talked about the equity loan scheme as being a discount; the very nature of its name implies that it is a loan—it has been extended to 40% in London. But the whole of the debate so far has talked about the inaccessibility of the housing market, particularly for first-time buyers, and London is a really hot case in point. Either we want Londoners to access the London market or we do not—I think that all noble Lords do want Londoners, particularly the young ones, to access the London housing market.

The noble Lord, Lord Best, also said that Help to Buy distorts prices and drives down supply. A government research report that came out last week stated that, actually, Help to Buy does not distort prices but drives up supply. Government research found that 43% of additional new homes built were as a result of Help to Buy. It has, understandably, been an extremely popular product.

[Lord Best]

I am not saying that the current 20% Help to Buy support has not been helpful in the marketplace. What I am saying is that the increase from 20% to 40% Help to Buy assistance in London, coupled with a 20% discount—that is where the discount comes in, a cash discount—adds together to 60% of the value of the property. The Minister is right to say that I commented that others have criticised the 20% Help to Buy support—I think we have yet to see it, but we can guess that 60% help to people buying in the form of 40% Help to Buy plus 20% discount really is an extraordinary level of assistance to people, much as we sympathise with their need to move out of rented homes if they can.

[Baroness Williams of Trafford]

I thought that the noble Lord had said discounts, so I apologise if I misheard him. I think I need to reiterate that point: the 40% Help to Buy loan equity plus the 20% discount do not add up to a 60% subsidy. Effectively, 40% of that 60% is in fact a loan and has to be paid back.

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[The Duke of Somerset]

I thank the Minister. Surely it must be sensible to protect the 20% discount in perpetuity, as the amendment suggests, or to use a tapering mechanism; or else to exclude starter homes from rural exception sites. They should also be kept for first-time buyers after the five years.

We have heard various statistics, particularly from Shelter. One published piece of research shows that in order to buy in the countryside, an applicant would need a salary of at least £50,000, with a deposit of £40,000. Those figures are after tax, which is a point that has not been made very much; so they are very high and would probably have to apply to two people in the household. Self-evidently, that is not widely affordable.

The old Section 106 affordable home requirement would be made largely redundant. Perhaps that would mean higher profits for developers, because they would not need to provide a percentage of affordable housing. In the past, that has often been 30% to 50% of the total. This is also going to mean less rental accommodation. Will the council tax banding be based on the open market value, or on the discounted value?

It is important to point out that prospective owners must consider the extra cost of the maintenance of their new houses. That is often included in the rent, and can amount to a large sum. I also want to take the opportunity to suggest that in the past so many new houses have been built to an abysmal standard of appearance and greening. Perhaps this Bill allows a chance for planners to have more say over that. Low-cost and efficiency are not mutually exclusive.

Rural villages need organic, holistic and good-quality growth. Vital assets of infrastructure—transport and medical—pubs and shops all need to be planned together, as I proposed in my Second Reading speech. I may be anticipating a slightly later grouping, but that issue is important.

Let me return to where I started. The main problem is the contention that government funding, especially in rural areas, should be spread equitably between shared ownership, starter homes and renting—that is, mixed tenures. That is why in perpetuity is such an important concept. I support both these amendments.

[Lord Best]

My Lords, my name is on Amendments 50A and 50C and I rise to support my noble friend Lord Cameron to whom I pay tribute not just for his eloquence today but for setting a perfect example of a landowner who has made available land on very favourable terms to ensure that local people get decent housing. There are other Members of your Lordships’ House who have done the same; all of them deserve absolute credit.

I was delighted that the noble Lords, Lord Young and Lord Deben, have also joined in. If tribute has to be paid to the actual founder of the feast, Nicholas Ridley, as Secretary of State at the time, must get the laurels for inventing this particular piece of policy. It is the hope in these amendments that local authorities would not be required always to insist upon starter homes on rural exception sites, knowing that these will be lost to the locality five years later if the purchasers sell up, perhaps to second-home owners for holiday lets or to better-off commuters.

Last year I chaired the Rural Housing Policy Review, which was conducted with the noble Lords, Lords Cameron of Dillington and Lord Taylor of Goss Moor. This review was promoted by Hastoe Housing Association, which is a leading player in the housing association world in this regard. It joined forces with the Campaign to Protect Rural England and the Country Landowners Association to take forward these issues. Our report set out the special position of rural areas, which others have outlined today. From the report I would only add the following additional points.

First, promoting home ownership in rural areas, where people often put down roots and stay for a lifetime, is particularly important. However, a 20% discount will not, on its own, do the trick for affordable starter homes. Shared ownership can be of particular value in those circumstances, with young households buying for half or less than the market value and paying affordable rent on the remainder. The problem, as in so many other cases, would come from the Government requiring local authorities to push out other contenders to make way for starter homes.

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[Lord Best]

Perhaps I may intervene and say that before we go home in a really gloomy state of mind, I did catch the point made by the Minister that below a certain number of homes on the site, there is likely to be an exclusion from this whole system. If that number is high enough, an awful lot of rural exception sites will still be possible. Before the noble Lord concludes his remarks, I should say that I cling to that hope.

[Lord Cameron of Dillington]

As I say, I have no doubt that we will be able to discuss this between now and Report. In the mean time, I beg leave to withdraw the amendment.