Construction Industry

Lord Borwick Excerpts

Thursday 23rd October 2014 Lords Chamber

[Lord Borwick (Con)]

My Lords, I declare an interest in several housebuilding projects: in Bicester, in Scotland and in Sussex. The scheme in Bicester is for 2,600 houses, and because it was not controversial, it took only 10 years to get through planning and cost only £4 million in professional fees.

I welcome this debate, as building more housing will probably do more than anything else to help poor people. Relaxing planning laws is the key to unlocking real growth in housebuilding. When I was a building contractor some time ago, I used to argue that the best thing for expansion is contracting. Some very good work has been done by the Government in this area. The National Planning Policy Framework has simplified planning policy down from 1,500 pages to fewer than 50 pages. I congratulate my noble friend Lord Taylor of Goss Moor, who I know worked extremely hard for many months to get this done. The new practice guidance has consolidated 7,000 pages of guidance into simple guidance available online.

Simplification is always welcome, but at present we still have planning laws that are too restrictive. Of course, the resulting lack of housing supply raises the cost of rents and mortgages. It costs taxpayers dear, too. In 2013, the Government spent around £24 billion on housing benefit—almost double the sum paid out 10 years earlier. By limiting the supply of new homes and subsidising rents through housing benefit, the only people who benefit are landlords and homeowners who are looking to sell—not to mention the civil servants who administer it. It is those on lower incomes who lose out. So if we were to relax the most restrictive planning laws, we would see construction companies build houses where people actually want and need them. This would cut housing costs, which make up a quarter of outgoings for those on the lowest incomes.

There is evidence from overseas that restrictive planning increases poverty as well. The US Census Bureau has produced state-by-state estimates of poverty, which account for various types of benefit programmes and cost of living differences. Once we adjust for a range of variables, states such as Texas, with fewer restrictions on housebuilding, have a lower rate of poverty than those such as California that have restrictive housebuilding laws.

Housing is simply too expensive. A recent report showed that the ratio of median house prices to median incomes is lower in Washington DC and Chicago than it is in Swansea and Stoke-on-Trent. Perhaps we have the previous Government to thank for that. Between 1997 and 2010 the ratio of median house prices to median incomes rose from 3.5 to 7. Since 2010, the ratio has gone down, but by only a little, to 6.72. So relaxing planning and encouraging more housebuilding could therefore lower house prices and rents directly. This, of course, would be a huge boost to the construction industry, too, which is a sector that did not pick up nearly as quickly as others through the recovery.

There are reasons to be positive; 480,000 new homes have been built since April 2010. Equally impressive is the fact that the Government have helped to get construction on sites restarted where it had previously stalled, which has led to more than 80,000 new homes. Lots of work is being done to improve our infrastructure, too, which will be a shot in the arm for the construction industry. The Government have set out plans to improve roads, energy infrastructure and more to provide certainty for investors and businesses in the supply chain. That is to be welcomed. But in the housing sector there are still a few things to improve. The reason for localism is for people to have a say in where houses are built—but it is being misused by people to decide whether houses are built.

For most people, the investment in their house is by far the biggest in their life. They feel, therefore, that the creation of new houses must reduce the price of their biggest investment. If I live next door to an open field, I have a great view that I do not own. If the owner of the field applies for planning permission to fill it with houses, I will object because that proposal will reduce the value of my house and remove my calm and peaceful view. There should be some way in which negotiations can take place between the field owner and his next door neighbour to encourage agreement. Unfortunately, however, the Government’s planning laws take so much benefit for the state that that never gets done.

The planning system is a yes/no structure. One can effectively either object to a planning application, or stay silent. The truth is that change is not a black and white decision. There should be ways in which neighbours could say that they accepted a proposal, provided they had some specific benefit from it. Not a benefit to their local council, which they do not feel part of, but to them personally.

The new homes bonus is an extra payment introduced to encourage local authorities to give planning permission for new houses. Like any bonus, it is supposed to change short-term behaviour; but I am not sure that it has worked well. Perhaps the reason is that it is paid to a council over a period of six years, rather than all at once. The department has a bonus scheme for high-performing civil servants, which is absolutely right. Can the Minister tell me whether any bonus paid to civil servants has been paid in the same way as the new homes bonus—that is, over six years?