Housing: Rented Sector

Lord Bishop of Chester Excerpts

Thursday 12th July 2012 Lords Chamber

[The Lord Bishop of Chester]

My Lords, the current Reith lectures rightly emphasise the need for a healthy society to promote the intermediate institutions between the individual and the state. Healthy participation in civic society itself depends on the stability and place of families and family life in society, in whatever form family life might take. That in turn depends on the proper availability and provision of housing. People generally relate better to others and to society as a whole when they feel secure in themselves and in their home life. That is why this debate is so important. I congratulate the noble Baroness, Lady Rendell, on securing it and on introducing it so powerfully. I shall follow the contribution of the noble Baroness, Lady Scott, in a slightly different way but very much in the same spirit.

There is little doubt that the UK has a housing crisis and that it is likely to get worse. However, there is also a housing benefit crisis, with 5 million claimants, half of whom are in work. As was said, those who are added to the list are mostly in work. There is a very large annual bill. As I understand the figures, the number of people in work who are forced to claim housing benefit has doubled in the past three years, mainly due to the increasing cost of rent. Around a third of households in the private rented sector receive housing benefit. The problem facing households in the rented sector, especially the private rented sector, is rising rents due to a lack of housing supply and the capital cost of new-build housing. The situation is acknowledged in government documents. In Laying the Foundations: A Housing Strategy for England, launched last November, the Prime Minister acknowledged in the foreword that,

“for decades in Britain we have under-built”,

and that the,

“economic and social consequences of this failure have affected millions”.

The housing strategy’s emphasis is on unblocking the housing market, which will help to address the housing crisis, boost economic activity and create jobs. However, as I read it, it is primarily focused on improving the supply of owner-occupied housing. I acknowledge the efforts that are being made to simplify and free up the planning process and to assist first-time buyers in particular to get on to the housing ladder. However, I very much doubt that the problems we face can be solved by promoting a return to greater levels of home ownership. The rented sector will also have a vital role to play, but how, and where will the capital finance come from? The fundamental problem is the lack of supply of new houses for rent because of the lack of finance to provide them.

The number of houses constructed for rental over the years provides a telling story. The post-war construction of houses by local authorities peaked in 1953 at 198,000. This is a poignant figure for me as I moved into one of the new council houses that were constructed in 1953, when I was three years old and it remained my home for 15 years. Of course, that house has now been sold off and would probably be unaffordable to the equivalent of my parents with a young family.

Local authority construction declined to a low point of 50—just 50—in 1999 and remained very low until last year, when 2,300 units were built by local authorities. To some extent, of course, local authority construction was replaced by housing association new-build units, but that never exceeded 31,000 units and last year was under 25,000 units. Housing associations just do not have access to the necessary capital; I assume that that must be the underlying and main reason.

Private enterprise construction of houses in England has only twice exceeded 200,000 units a year, in the 1960s, and in 2011 it had fallen to 82,000 units. I invite the Minister to comment on these figures, which I have taken from the DCLG website. I believe that the private sector and housing associations alone are unlikely to be able to respond to the housing needs as set out over the next 10 or 20 years.

I am all for market-based solutions if they work. However, sometimes they need augmentation or stimulus by government investment, especially where long-term strategies are needed, and housing is a classic example where a five-year horizon just is not enough; we have to have horizons that go beyond a particular Government. Given that such investment would produce real assets in the form of houses and flats, which in the future, when circumstances have changed, could indeed be sold off and turned into other forms of resource, as many council houses were, is there not a strong economic case for investment by the Government alongside their other schemes and the private sector in general? Is this not reinforced by the argument that the best way to address the burgeoning problem of housing benefit is to increase the supply of rented houses and thereby reverse the remorseless rise in the level of rents? I say that independently of the view one might take of the Government’s policy of introducing a benefit cap.

I speak as a fool, no doubt, but could not some of the money created by quantitative easing be invested in real assets, rather than just being shunted on to the balance sheets of banks and then apparently not being lent? Perhaps we should compare the benefits of investment in social housing with, for example, the £32 billion planned to be spent on the new High Speed 2 railway. The recent housing strategy reveals that, for a government investment of £1.8 billion, some 80,000 new homes will be delivered under the affordable homes programme. When I do my sums, that suggests that a government investment of £32 billion would equate to nearly 1.5 million new homes. These things have to be compared, but what would the benefit of 1.5 million new affordable homes be compared with high-speed rail? At least it stimulates the imagination. No doubt I can be accused of the economic equivalent of heresy. If so, I look forward to a tutorial on economics from the Minister when she replies.

I should acknowledge at this point that the Church of England, through the Church Commissioners in particular, used to provide capital for social housing, especially here in London. I very much regret that we are no longer in a position to do this, although there is a growing number of examples of small-scale, local church projects across the denominations to build affordable housing, echoing many schemes in the past that produced local almshouses and so forth. Whatever the source of capital finance for new-build housing might be, the key issue, I think, is the price of land for development. The difference in value between agricultural or social use and development use is quite staggering; it is of the order of 20 or 30 times more, which, it seems to me, cannot be right. There must be something wrong if the value of land for development is that much more than the value of land for other uses.

Perhaps we will not see the construction of affordable housing on the scale that we need, either for purchase or rent, until the price of development land comes down. Reading through the Government’s housing strategy document of last November, I saw no reference to the problem of the price of land.

Perhaps easing planning controls will lead to the necessary readjustments. For my part, I have long been convinced that our planning policies have been far too restrictive. I accept that there are particular issues in a rather overcrowded south-east of England, but in the north-west of England and Cheshire, the area that I know well, communities would generally speaking benefit from a much more open approach to development, subject to the proper planning process and controls on quality, and so forth. There is now a presumption in terms of sustainable development in the planning process. Most of the communities that I know would best be sustained by having some development and a greater range of housing, especially with affordable housing being introduced.

I end, appropriately for the noble Baroness, on a philological or linguistic note. The Greek word “oikos” meant house, household or home; it gave us the root of two important words—economy and ecology, as well as ecumenical. Homes are vital to how we live and the health of society as a whole. I look forward to the Minister’s reply.