Lord Best
Main Page: Lord Best (Crossbench - Life peer)Housing and Planning Bill
Lord Best Excerpts
Lord Best (CB)
My Lords, I support my noble friend Lord Kerslake—although he does not need very much support—and the thrust of the amendments in this group. I think it sensible at the beginning of our discussions on this part of the Bill to set out my thoughts on the Government’s policy for requiring councils, first, to consider selling their higher-values homes and, secondly, to pay a levy to central government based on the assumption that they actually do sell these properties whenever they become vacant.
Of course, we know few details about the calculation of the levy, which makes our debate problematic. We do not know what limits and exclusions there are on the levy, over what geographical area “high value” is to be assessed, whether the calculation is for homes of different sizes or simply on the basis of highest value, and so on. But we do know that it is intended to raise £4.5 billion per annum, so it represents a significant new tax on councils, which, in almost all cases, could be paid only by fulfilling the Government’s assumption and selling the vacant homes. As I understand it, a figure equivalent to around a third of the proceeds from sales is to be retained by councils to pay for the replacement of sold stock and cover the related administration costs, but around two-thirds of the £4.5 billion per annum will go to pay discounts for housing association tenants.
This robbing of Peter to pay Paul, as it has been described—this taxing of councils to give discounts to housing association tenants—is extraordinarily unhelpful. Instead, government needs to support local authorities as part of the drive to increase housebuilding. The underlying objection to the approach being taken by the Government is that it seeks to support increased home ownership—this time in paying for discounts to enable housing association tenants to buy, just like the earlier policy of building starter homes—but by switching resources from one budget to another instead of injecting new investment.
I see in today’s papers that Professor Wren-Lewis, professor of economic policy at Oxford, discusses the reasons why central banks are seriously thinking about setting negative interest rates in a somewhat desperate attempt to get the economy going. He says that economists around the world, including at the OECD and the IMF, are urging investment in infrastructure. Housebuilding is just the kind of infrastructure that makes so much sense while interest rates are so low. Taking money from one part of the housing budget—that concentrating on affordable accommodation for those on lower incomes—and switching it to support the entirely worthy aim of assisting first-time buyers, ignores the economic advantages of substantially increasing investment in housing.
This is not to say that the practice of selling some vacant properties to fund new development is wrong: it already represents an important means of recycling assets to deliver more homes. For example, I know of terraced houses in London that were “municipalised” in the 1970s—bought by the council for a few thousand pounds and modernised—which now need heavy remedial work but are worth about 70 times as much. It may be entirely sensible to sell one of these terraced houses when it becomes vacant and avoid the upgrading costs, using the proceeds to build four excellent retirement apartments on the site of now dilapidated garages on the council estate nearby: the four new homes could accommodate four elderly households from the estate who are struggling to cope with a three-bedroom flat, or are under pension age and need to escape the dreaded bedroom tax. When these older people downsize, four families can move into the previously underoccupied three-bedroom council homes. Encouraging local authorities to make use of the opportunity to sell a vacant property, as some are doing very creatively, is one thing; to force sales and then to remove two-thirds of the proceeds is another matter altogether.
Under the proposed compulsory sales policy in the Bill, local authorities will lose control over most of the funds where they do make a sale, and this change means several are having to rethink their important plans for building new homes accordingly. When we debated the Government’s policy for starter homes, I made the point that if subsidies to new buyers were covered by new resources, rather than by taking the resources from affordable housing for rent, the scheme would be greeted with acclaim by many of its current critics. The same considerations relate to the Government’s approach to the voluntary right to buy for housing association tenants. If the discounts were funded by central government, the arrangements would be far less contentious. It is the fact that the payment for this support must come from councils, who will lose their best homes to pay for it, that causes the extreme disquiet.
Today’s local authority housing departments and arm’s-length management organisations are demonstrating high-quality management and are far removed from some of the ineffective operations of yesteryear. The phenomenon of hard-to-let properties on council estates is a rarity today. Many councils, often through those arm’s-length management organisations, are using the freedoms now given to spending through the housing revenue accounts to do imaginative work with their local communities, creating apprenticeships and jobs, tackling anti-social behaviour and so on. Yesterday, I was judging entries for the landlord of the year award from Inside Housing magazine. I was reminded by the quality of these entries of just how far many councils have come over the past 15 years or so. However, they are now suffering the imposition of a 12% real-terms rent cut over the next four years, and hopes for increasing numbers of new homes to help the crying need for more affordable housing will be disappointed.
At every turn local authorities that have the capacity and aspiration to help in the struggle to get more homes built seem to face blockages. There is the cap—the ceiling on prudential borrowing to invest in new homes; the current restrictions on the use of right-to-buy receipts; the rent cuts over the next four years; and now the confiscation of most of the proceeds from selling vacant homes. Bristol City Council says that,
“loss of these receipts is a further loss of income to our Housing Revenue Account and compounds the impact of lower than planned rents. We have raised £3 million p.a. from the sale of these”,
vacant homes,
“and were relying on this income in our business plan. It will impact even further on our ability to build new homes—as these receipts have been a key source of income and one of the few flexible sources”—
that is, without so many government rules. I am afraid those rules have now arrived with a vengeance.
The noble Lord, Lord Porter, expressed the view on Tuesday that, while he strongly supported the right to buy for housing association tenants, the cost of their discounts should not be borne by local authorities. There was support for this view from all sides of the House. He went on to suggest, however, that since housing associations were generating an annual surplus of some £2.5 billion, they should pay for their tenants’ discounts from these surpluses. I detect three problems with this suggestion. First, the annual sum required for the discount is estimated at some £3.5 billion, so even if every pound of the housing association surpluses were sequestrated not enough would be raised. Secondly, the Government are already raiding the housing association coffers by requiring the 12% real-terms reduction in rents over the next four years, at a cost to the housing associations of around £1.3 billion per annum. Thirdly, these surpluses are not simply cash bonuses; they must be seen alongside the outstanding debt of some £63 billion that housing associations owe to cautious lenders. The lenders require housing associations to build up reserves in case of future problems and want to see housing associations making a reasonable margin on their operations instead of just breaking even each year. If associations become less profitable in the eyes of lenders, those lenders will not lend so much and will charge higher interest rates, diminishing the development programmes of these bodies. I know the noble Lord, Lord Porter, shares the view of many of us that the overriding priority is to see more new homes built, especially those affordable to people on average and below average incomes. With that priority, scaling back the output of housing associations would not be wise.
The nub of the problem remains that the imposition of a levy that has the effect of requiring councils to sell their most valuable homes when they become vacant is a bad idea. This wrong cannot be righted by switching the burden to the housing associations. I am very much aware that the Government are keen to have their cake and eat it—to achieve the new right to buy for housing associations, but without any cost accruing to the Exchequer. But just as with starter homes, they can achieve this miraculous feat only by diminishing affordable housing to rent to generate the resources that will help different people to be home owners. This leads me to join forces with those who oppose Clause 67 in principle and to support these amendments.
Baroness Hollis of Heigham
But councils with retained stock—and that stock is not coming forward as fast as government would wish—will have a levy in view until their own vacant stock is forcibly sold. That levy has to come from somewhere. Why on earth should some local authorities be expected to fund RTB discounts out of their money when other local authorities are not? What is the basic fairness in that? I absolutely take the noble Lord’s point that this is a redistribution from some local authorities but it means that those with retained stock will have to pay double the size of the levy or double the number of sales to make good the fact that a very large proportion of more rural district councils do not have any retained stock.
Lord Best
My Lords, the noble Lord, Lord Porter, and the noble Baroness, Lady Hollis, are in agreement on this. They both oppose the fact that this levy will be solely on those authorities that have retained stock and a housing revenue account, and that it will be a very large sum of money—£4.5 billion per annum on those councils that have retained their stock, and nothing on those councils that have transferred their stock. The noble Lord, Lord True, can read my script at his leisure. He felt I was saying that housing associations should not contribute but councils should. I am absolutely not saying that councils should carry the burden of the right-to-buy discounts for housing association tenants, as he thought that I might be. I am saying that neither councils nor housing associations should pay for this new policy and that we should see new investment, which is what we need to replace homes that are lost, and to build new homes. We need new investment.
I happen to know a bit about the Richmond Housing Partnership, which is the body to which the stock of Richmond has been transferred. It is a really excellent example of a housing association that has received the council stock and is doing extremely important things to build more homes. It is doing exactly the right thing. It would be a terrible shame if, instead of councils or the Government paying for these discounts, that organisation were taxed with a levy—that would be very detrimental to the interests of Richmond—and had to pay for the right-to-buy sales. It is making some serious economies at the moment. It is having to make efficiency gains on a big scale because its rents have been reduced due to welfare reform pressures. Nevertheless, it is doing a great job. It would be a very big shame if the idea gained any momentum at all today that housing associations were the cash cow from which could be extracted the resources to pay the £4.5 billion per annum. That would simply take resources out of the development programme for the very people for whom we need to build the new homes of tomorrow.
Lord True
My Lords, I do not want to delay the Committee on a specific point, but since the noble Lord, Lord Best, has identified a housing association which I have tried not to identify, I should say that of course I have great respect for that housing association in many respects. It has done certain things that I would not have done but this is not the place to discuss that. I am sure that he has friendly views towards local authorities. Indeed, I know that he has and welcome that. But it is a fact—he has confirmed this—that the noble Lord, Lord Porter, is correct in saying that housing associations will not make a contribution to this policy.