Building More Homes (Economic Affairs Committee Report)

Lord Best Excerpts

Thursday 2nd March 2017 Lords Chamber

[Lord Best (CB)]

My Lords, I maintain the long tradition of beginning by saying I do not want to repeat anything anyone has already said, then repeating everything that everyone has said. I hope there will be some slight changes of emphasis in my remarks. The Economic Affairs Committee’s report is a really impressive analysis. I congratulate the noble Lord, Lord Hollick, the committee members—I used to be one; it is a great committee to serve on—and the very well-chosen special advisers, Professors Christine Whitehead and Geoff Meen.

I hope almost everyone has now accepted the core message of the report: we have to build a lot more new homes. Relying on a handful of large housebuilding companies will not do it, so we must dramatically boost building by all the other providers: councils, housing associations, SME builders, retirement housing providers, Build to Rent developers, self-build and custom housebuilding, and more.

Since publication of the committee’s report there have been some radical changes to the position facing us when your Lordships debated the then Housing and Planning Bill last year. In what seemed like an endless tussle over that legislation, with one of the Government’s heavy defeats featuring in this week’s BBC2 documentary “Meet the Lords”, we argued for more affordable homes to rent, not just homes to buy. Now we have the Government’s housing White Paper. Although some regard it as insufficiently radical, I recognise that it represents a shift in housing policy in absolutely the right direction. I also congratulate Gavin Barwell, the Housing Minister, on his leadership. Not least, the White Paper fully acknowledges the requirement for affordable rented homes and the new version of starter homes for sale will no longer replace all the homes so badly needed for rent.

On the Economic Affairs Committee’s views on excessive dependency on a few very large housebuilders, there is plenty of good stuff in the White Paper on diversifying the housing market. I welcome the encouragement for the fledgling Build to Rent sector, which draws in funds from institutional investors to create new, well-managed additional homes, in contrast to buy-to-let speculative investment, which simply acquires homes already there.

Local authorities are rightly disappointed that the Government are not planning to fully relax opportunities for them to borrow to build new council housing. I doubt whether the Government’s stance is really because the Treasury believes local authorities will go wild and borrow excessively, having now seen councils behaving cautiously and prudently where they have had the chance to borrow to build. Rather, it is the continuing reluctance by government to follow international practice and define investment in new housing as being outside the definition of public expenditure. This means housing investment would add so much less to the annual deficit if non-public bodies, such as housing associations, did the spending.

The White Paper helpfully emphasises government intentions to see more publicly owned land released for housing—it’s the land, stupid. Other changes beyond the White Paper also give hope for the future. I am keen on the creation of whole new settlements—those garden villages or garden towns that are beginning to come forward. The signs are good that an amendment promoted by the noble Lord, Lord Taylor of Goss Moor, and a number of us from across this House will obtain government approval at Third Reading of the Neighbourhood Planning Bill. This amendment would give councils a greater say in the development of major new settlements, thereby incentivising more local authorities to get behind the creation of these mini new towns, where capturing the land value at the outset enables lots of homes to be developed in high-quality, mixed-income new communities.

On the subject of good news to fulfil the hopes expressed by the Economic Affairs Committee, a new report from the National Housing Federation, Demise of the NIMBY, strongly suggests widespread acceptance of the value of building more homes in place of the endless opposition to any new development which has characterised the debate for years. The biggest housing association concentrating on rural housing, Hastoe Housing Association, similarly reports an increase in the number of parish councils asking it to come to develop homes for locals in their village. Of course there will remain stiff opposition to housebuilders simply adding a lot of “executive housing”, with no additional infrastructure for the community, on the edge of the village. But the need for homes for locals is now accepted in many areas, with neighbourhood plans helping determine the location for them, and this means less hassle to build extra affordable homes.

Perhaps it is worth noting that, in terms of getting the extra homes built, it is very often the housing associations that can make things happen: they are well placed to expand the new Build to Rent market, being in a position to borrow on rather more favourable terms than speculative developers; they can partner local authorities in joint venture companies; they can be central to the master plans for new settlements; they are ideal retirement housing providers since they can be trusted, rightly, by older people wishing to downsize; and they can pursue their core role of providing affordable rental homes, and creating communities which include housing for shared ownership and sale, this time often in partnership with the housebuilders.

I am delighted to see that the Government have found an extra £1.4 billion in hard cash to support this work. More of the same would mean more new and affordable homes. The housing association sector really does have the potential to double its output and to generate the very large numbers of extra homes that we know will not be forthcoming otherwise. Their non-profit, social purpose means they add social value by taking in the most disadvantaged, by working with smaller charities locally, by working with health and social care providers, by investing in training and employment, and by generally supporting every kind of community activity.

Sadly, I have to conclude on a sour note. The positive approach of the Department for Communities and Local Government, which I am applauding, is not matched by the actions of the Department for Work and Pensions. The DWP is undermining housing policy by vainly trying to cut the costs of housing benefit before market conditions make this a sensible option. When supply more nearly matches demand, government can exert downward pressure on rent and therefore reduce housing benefit. But that cannot happen yet. The compulsory 1% per annum real reduction in rents for housing associations and councils means an accumulated 12% revenue cut over four years, which of course impacts on their ability to create additional affordable homes.

All the DWP’s other new benefit caps and ceilings, and the freezes on local housing allowances, mean tenants on the lowest incomes getting less government help with housing. Time does not permit me to speak about the DWP’s latest plans to limit rents charged for specialist supported and sheltered housing, which I fear, if taken forward, will undermine the excellent work of the DCLG in supporting—magnificently—the Homelessness Reduction Bill, which I was honoured to take through its Second Reading last Friday.

However, I must draw attention to the even bigger concern for everyone in the housing world: the reductions in help for tenants in the private rented sector mean fewer and fewer landlords will take in anyone who relies on government help with their housing. Shelter figures show that, by 2020, the local housing allowance will not cover rents for even the cheapest properties in over 80% of local authority areas. Landlords already face the inherent risks of poorer households finding deposits and rent in advance, as well as the DWP’s insistence on paying housing support to the tenant not the landlord. The result is not simply that, in seeking to prevent homelessness, councils and charities will find fewer and fewer landlords willing to accept the people they want to assist. The even greater anxiety is that, gradually, more and more of the 800,000 existing private sector tenants who receive housing benefit will find their landlords ending their current shorthold tenancies. Unless the DWP recognises the need to lift the freeze on local housing allowances and returns to paying housing benefit on the cheapest market rents, a major calamity awaits.

So, there are plenty of reasons to be cheerful about the opportunities for building more homes, as the EAC report advocates so powerfully, but also serious difficulties for poorer households needing somewhere to live, because DWP welfare reforms are undermining constructive DCLG housing policies. I end therefore with a plea for the Government, collectively, to reconcile these conflicting trends so that the good intentions of the Housing Minister and of the housing White Paper—echoing so much of the Economic Affairs Committee’s thinking—can be fulfilled.