Lord Foster of Bath
Main Page: Lord Foster of Bath (Liberal Democrat - Life peer)New Housing Supply
Lord Foster of Bath Excerpts
Mr Clive Betts (Sheffield South East) (Lab)
It is with pleasure that I speak to the report produced by the Communities and Local Government Committee, “Financing of new housing supply”, which we published last May and to which the Government responded in July. Today provides an opportunity to consider the report’s recommendations and the Government’s response to them. I hope their response today will be more enthusiastic than the written response they gave in July. A new Minister, the Under-Secretary of State for Communities and Local Government, the right hon. Member for Bath (Mr Foster), is now in place, so he might manage to achieve that. We can also consider certain things that have happened since the report was produced about 10 months ago, and see how they may have changed our recommendations or, indeed, strengthened their case.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
If it is of assistance to the Chair of the Committee, I am prepared, in the light of developments over the past 12 months, to place an update of the Department’s response to its report in the Library of the House of Commons later today.
Mr Betts
I thank the Minister for that and we look forward with anticipation to reading what he has to say. We will do so closely, and the Committee might give it further consideration.
The report, which was signed up to by all members of the Committee on a cross-party basis, tried to consider the issues in the longer term. I am pleased to see in the Chamber several members of the Committee, both past and present, whom I hope will be able to catch your eye, Mr Deputy Speaker.
We started off from the basic position that we have not been building enough homes in this country for a long time. The basic requirement is about 250,000 homes a year, based on household formation, plus an increasing number to make up for the backlog of past under-investment. Since the report was published, we have had the figures for housing starts in 2012. There were 115,620 housing completions, up 1% on the previous year, and 98,280 housing starts, an 11% reduction. Therefore, if our recommendations were correct a year ago, they are probably just as correct now.
This is not a short-term problem. The report acknowledges that even at the height of building in the mid-2000s, we were building a maximum of only 170,000 homes a year, which was not sufficient, either. The private house-building industry has never managed to build more than 150,000 homes a year, so the likelihood of being able to rely on it to deliver the extra homes is probably very small indeed.
We also know that historically, the percentage of owner-occupied properties has been falling since about 2002. That represents a change. The number of private rented properties has been rising considerably and is now slightly greater than the number of social rented properties.
We can also see the consequences of the failures over a long period and of the immediate problems of 2008 and beyond, including young people in particular being unable to afford a mortgage and increasing waiting lists for social housing. People with heart-rending stories who ought to be given a house immediately visit our surgeries every week, but they cannot all have priority because there are not enough homes to go round. Rents in the private sector are also rising. I will not say too much about the private rented sector today, because we are in the middle of a further inquiry into it and what we should do. We look forward to having Ministers before us at the end of that inquiry.
While we were conducting the inquiry into new housing supply, the Government produced their housing strategy for England. It contained measures that everyone could support, such as the release of public sector land. It also included the NewBuy scheme, on which we were promised an update after 12 months. I am not sure how much there is to update us on, but the Minister may be able to give us a few figures.
The Committee concluded that we needed a long-term strategy. There is an issue with homes, but there is also the immediate issue of jobs and growth. The National Housing Federation gave us the interesting figures that every affordable home built in this country provides £108,000 in added value to the economy and creates 2.3 jobs. We should bear that in mind. We also concluded that we needed radical changes. Members of the Committee recognised that we needed to be brave and think outside the box in coming to our conclusions.
We made a number of proposals because we recognised that there was no silver bullet, magic solution or switch that could be flicked in Whitehall that would make everything okay the following day.
Mr Raynsford
I will not prolong this exchange, because we have already discussed the matter at length and I wish to cover other issues. All I say to the hon. Gentleman is that we should watch what happens, but I am not confident that we will see a large upsurge in the number of planning applications and consents.
Mr Raynsford
I am interested by the agreement between the coalition partners but it reinforces my point about the lack of certainty being a deterrent.
Mr Raynsford
When the regional spatial strategies were in place, the housing output was substantially higher than we are seeing now. Government Members sometimes forget that from 2000 to 2007, before the impact of the recession, there was continuing year-on-year growth in the supply of housing. It reached 180,000 new starts in 2007, since when it fell—not because of planning but because of the recession—so that we are now seeing starts of fewer than 100,000. I would not say that the regional spatial strategies were entirely satisfactory, but the output of housing under them was substantially higher than it is today.
I have spent too long, I think, on those issues and I need to move on. Behind the statistics I have talked about are a huge number of human tragedies: all the young families unable to get a home within their means, all the people trapped in hopelessly overcrowded or squalid conditions, the huge numbers languishing on local authority housing waiting lists and the number of homeless households, which has been rising again after many years in the noughties during which the numbers came down.
Quite apart from the human consequences, there are economic consequences, too. As our economy is in difficulty— everyone who has spoken has acknowledged that housing has a critical role to play in helping to boost the economy—we must consider ways of helping to increase the output of housing. What should we do? First, we must ensure that the economic climate is one in which people can feel more confident about investing, in which people are willing to buy homes and in which house builders are willing to invest more in development. That is fundamental. Whatever else we do will make some difference, but it will not make an adequate difference if the economy is not strong. We need to turn around the economy first of all.
Secondly, we must ensure that housing is directly assisted by measures that can ensure that confidence returns and that houses are provided by developers and bought by people who want to get a mortgage. I have talked about the tight restrictions on mortgage availability and the fact that it seems to me that the pendulum has swung too far in the other direction after the boom years when the restrictions were excessively loose. We must send a powerful message that the test should be whether people have the means and the capacity to repay the debt, rather than the loan-to-value percentage that is too often used in a mechanistic way by lenders to determine credit-worthiness. If we focused more on people’s ability to repay, we could relax some of the restrictions that prevent people without the adequate means for a deposit from getting into owner-occupation.
We also need to do a lot more to assist those people who cannot afford outright home ownership but would be happy to buy a share in a property. Over 30-odd years, various schemes for shared ownership, shared equity and low-cost home ownership have had some success, but they have tended to be marginal. Although NewBuy and Firstbuy are perfectly admirable schemes in their way, they are still relatively marginal. The Prime Minister talked about NewBuy helping 100,000 people when it was launched, so when we hear from the hon. Member for Meon Valley that some 3,000 homes have been delivered so far that puts it in context. It is important and significant, but it is relatively marginal.
We must also ensure that there are other options to help people who are not looking for a new home purchase. I am cautious about the idea of extending the NewBuy formula to existing homes. I think about—I am sorry, it is one of the problems of being old—a scheme known as DIYSO, do-it-yourself shared ownership. Those who have long memories of housing will recall it. It was very popular. People liked the idea of being able to go out and select their own home and get a shared-ownership mortgage on that home. It did, however, prove extremely expensive. It also had an element of risk because there was no guarantee that it would be a newly completed home that was subject to the various checks that apply to a new home. In some cases the properties that were being bought under the DIYSO scheme were not suitable. I can hear the attraction of the message. I read it, like the hon. Member for Meon Valley, in today’s Financial Times, but I caution against putting too many eggs in that basket. However, it is important that we renovate existing homes and make them available for people, possibly through shared-ownership/shared-equity means, as well as building new homes.
I shall talk briefly about energy efficiency and housing. This is an area where there has been a great deal of poor information, inadequate information and prejudice. I feel very nervous that the voices that are hostile to improving the energy efficiency of housing are getting in the ascendancy. Some rather pernicious views are being put forward that somehow this is putting an impossible burden on house builders. The example that I will take is a simple one. It is a scheme known as AIMC4, which has been put together with the participation of some of the largest house builders, including Barratt. The purpose was to demonstrate that they could build a code level 4 home under the code for sustainable homes for no more than the cost of a code level 3 home. That scheme has succeeded; they have demonstrated that it is possible.
That is the challenge we should adopt to ensure that our new homes are built to a high standard, that they achieve energy efficiency, that they contribute to our commitments to reducing global warming and that they do so in an economic and cost-effective way. We should not to try to ditch the whole commitment to the greening of our existing housing stock and improving the standard of our new housing. That is a very important message. Also, there is the economic message that this will help the economy, because green investment and the development of some of the industries that will support more energy-efficient housing will be helpful to the UK economy.
I agree very much with the hon. Member for Meon Valley about the importance of housing for older people and providing them with appropriate housing which, in turn, can release homes that are currently under-occupied. There is something rather unfortunate about a Government demonising many tenants in social housing who are occupying one bedroom more than they might need, on some pretty tight definitions of need, when two children of the same sex are expected to share a bedroom right up to the age of 16, and two children of different sexes under the age of 10 are expected to share a single bedroom, so no single bedrooms for children are allowed.
That definition is being used to justify some pretty punitive cuts in benefit while at the same time there is a huge level of under-occupation among older people, particularly in the owner-occupied sector but also in the rented sector, on which no action is being taken. That seems to me to be unfair and it is a policy that will not achieve the effect that it should.
Mr Raynsford
I am afraid the right hon. Gentleman is wrong. Can he tell me whether elderly people are exempt from those rules in the private rented sector? They are not. That is the point that I was making. If this was a serious policy to try to reduce under-occupation, it would apply more widely, as I said, and it would also apply to people over retirement age. The rules being implemented by the Government apply only to people below retirement age, even though the Government know that it is predominantly among older people that under-occupation is a problem. I will be quite open and say that the right policy would have been to consider a deduction, but only if two factors apply. First, there should be an option to move to smaller accommodation, but in many cases there simply is not that option and it is grossly unfair to cut people’s benefit where they have no chance of moving to smaller accommodation. Secondly, it should apply only where people have two bedrooms more than they require because of the tight space and occupancy standards that apply. That should apply to everyone, including those over retirement age. That would be a far more effective policy in achieving the objective of getting better use of our stock than the policy that the Government are pursuing. I make that point in addition to my general point about providing more suitable accommodation for older people in order to free up accommodation that is under-occupied.
I support what the Chair of the Select Committee said about removing the cap on council investment. That is nonsense. When councils have the scope to borrow more under the prudential borrowing regime, when there are safeguards in place through that regime, and when local government debt is at an historically low level, it is absurd to deny the option of creating the means to get further investment in new housing. There should certainly be more support for that and a removal of the cap. There should also be a willingness to engage with housing associations about what happens in the post-2015 world, because they are literally running out of time and running out of scope for continuing development. It will be an utter tragedy if one of the more successful organisations producing housing in this country in recent years simply grind to a halt in terms of their traditional product of social housing because of the absence of a Government programme. There are real needs in terms of the social housing sector as well as the owner-occupied sector.
I come now to the strange beast of the new homes bonus. This is a rather expensive element of Government policy. Already it has cost £1.3 billion. Some of that has been taken from Peter to pay Paul because some of it is recycled from local authorities to other local authorities, but about three quarters of a billion is additional Government money. That £1.3 billion will rise to £3.3 billion because the scheme involves payment over six years. That commitment to £3.3 billion is a lot of money and, at the present rate of growth, the scheme will involve more expenditure than the total Government investment on affordable homes over the lifetime of this Parliament, so it is worth examining how it is operating. I have already referred to the disastrous and declining level of new housing starts, so it is clear that the scheme is not affecting those. The total level of new planning consents last year was 115,000, and in the first three quarters of 2012, 95,000. It seems likely that it might reach a level of about 125,000 when we have the figures for 2012, but that compares with 212,000 in 2007 and 134,000 in 2010. The Government will have been presiding over a lower level of consents for residential planning than ever before, which is extraordinary when they are spending £3.3 billion in supposed incentives to encourage more planning consents.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
It is a great pleasure, as ever, to follow the hon. Member for Birmingham, Erdington (Jack Dromey). I always enjoy hearing his housing speech. Indeed, I heard it only on Friday, when we were together in Bristol. As ever, he makes some interesting and useful points, as did a number of those on the Opposition Benches. If I do not have an opportunity to respond to all the points that hon. Members on both sides of the House have raised, I will write to them.
The hon. Member for Lewisham East (Heidi Alexander) made some very helpful remarks about the need to look at the bundling of land together. I will of course look into the discussions that we have or have not had with the Department of Health in relation to the land to which she refers. Although from time to time I am critical of much of what the right hon. Member for Greenwich and Woolwich (Mr Raynsford) says, I was delighted to hear him make a robust argument for the great value of further improvements in the energy efficiency of our buildings. Although the hon. Member for Hammersmith (Mr Slaughter), who is no longer in his place, was very critical of right to buy, he raised a number of points that the Government would do well to attend to.
Above all, I pay tribute to the excellent Chairman of the Communities and Local Government Committee, the hon. Member for Sheffield South East (Mr Betts), who opened the debate with what my hon. Friend the Member for Meon Valley (George Hollingbery) described as an eloquent contribution. Indeed it was. It was eloquent in giving just praise to the report that the Select Committee produced more than a year ago. As I said to the hon. Gentleman in an intervention, in the light of the fact that a year has passed since that report, I have made available in the Library an updated response from the Government, which I hope he and members of the Committee will consider and, if necessary, quiz us on further.
As the hon. Member for Sheffield South East said, it is important that we acknowledge, as the hon. Member for Birmingham, Erdington did, that the Government have done a number of things that are supported in all parts of the House. Reference was made, for example, to the reform of the housing revenue account and to the greater flexibility given to the many excellent arm’s length management organisations. The Chairman of the Select Committee even praised the Planning Minister for his willingness to accept the need for an agreed methodology for determining housing need. The hon. Gentleman will be aware that this is being addressed by Lord Taylor in his report, which we hope will be available in the summer.
The Chairman of the Select Committee pointed out that the Montague report said that guarantees distort the market. May I tactfully suggest that the Montague report was referring in that instance to rent guarantees? If he reads the report thoroughly, as I am sure he has, he will know that it strongly supports the guarantees to reduce the cost of borrowing, which is part of the Government’s package.
On that point, the right hon. Member for Greenwich and Woolwich asked what has happened to the £10 billion loan guarantee and where it is. He will be well aware that it takes time to work through the details and to put an offer to the market. We have done all that and I am delighted to tell him that we will make a detailed announcement next month about the appointment of people to run it, so progress is being made. He also challenges us about shovel-ready projects, which he is clearly concerned about. As he knows, because he looks at these matters in great detail, the Get Britain Building fund of £570 million has already signed contracts with 120 projects that will provide us with no fewer than 8,600 homes, and more are on the way. Under this coalition Government, shovels are in the ground. We are delighted that more is still to come.
Like all Members who spoke in the debate, we believe strongly in the importance of building more houses, both to meet the housing need and because of the real economic benefit that that can bring. We agree with so many speakers on all sides who said that there is no single silver bullet to tackle the long-standing under-supply of housing. The Government cannot do it alone and we need to work with others.
The report recognised that a basket of measures is needed, covering all tenures of housing, and we are taking action to deliver that basket of measures: the spending review, the Localism Act 2011, the 2011 housing strategy, the housing and growth package and the autumn statement. But as so many hon. Members have said, a new Budget and a new spending round is due shortly, when I have no doubt that further announcements on housing will be made. I was not meant to say more than that, but my hon. Friend the Member for Meon Valley helped to further the leaks that have appeared in newspapers today on what might be covered. We will just have to wait and see what is around the corner. As the Chair of the Select Committee, the hon. Member for Birmingham, Erdington and others on both sides of the House have said, it is important to recognise that more still needs to be done to take a comprehensive approach, making best use of existing stock, unlocking stalled sites and stimulating new housing supply across all tenures.
I remind my hon. Friends the Members for Meon Valley and for Peterborough (Mr Jackson), who raised the issue of ensuring that within all forms of tenure we take account of older people, that we now have the care and support specialist housing fund of £300 million specifically to develop specialised housing for older and disabled adults.
All Members who have spoken agree that we need more housing, but agree that the politics at the local level can often be difficult. That is why I said that the first thing that we have to do is ensure that we make the best use of the built environment that we already have. That means, for example, tackling empty homes, providing for the change of use from commercial to residential referred to by a number of my hon. Friends, and, as has been debated a number of times in the Chamber, tackling under-occupancy and affordable housing. The new homes bonus gives local authorities not only reward for new homes, but also for bringing empty properties back into use. It is a powerful incentive that is really working. From next month, local authorities will have further flexibility to remove or reduce council tax discounts on empty homes, and in some cases where they have been empty for more than two years, to charge even higher rates.
We have £235 million of direct funding to help local groups to tackle some of the most problematic empty homes that would not otherwise come back into use. I was grateful to my hon. Friend the Member for Folkestone and Hythe (Damian Collins), who spoke about the need specifically to address properties above shops in our high streets, and he will be aware that we are seeking to do that. There will always be a number of homes that are unoccupied for a short period, and we obviously need that for the market to operate, but the House will be pleased to know that the latest data show that only 260,000 have been empty for longer than six months. That is still far too many, but the figure is now 20,000 fewer than last year, so we are making progress.
We are also taking action to free up land. It was rightly said that Governments of all shapes and sizes have long argued for the need to free public sector land. We are determined to take action on that. We hope to release sufficient land for 100,000 homes, and wherever possible we will use the bill now, pay later deferred payment scheme to help get that under way, but a further announcement may or may not be made in a few weeks’ time. I was grateful to the Chair of the Select Committee who said, in relation to those issues, that local authorities do in some cases need to be quicker with their planning applications, and he will be aware that we are dealing with that in the Growth and Infrastructure Bill. We are also consulting on a package of measures that I think will be welcomed on both sides of the House to make the planning appeals process swifter and more transparent to reduce wasted time and expense and, I hope, lead to quicker development.
The Growth and Infrastructure Bill, which was referred to only briefly in the debate, is very important because it will allow developers to review with their local authorities the viability of the affordable housing contribution on proposed sites. As the House will know, we are committed to a further £225 million, and to the loan guarantee scheme, to ensure that we can meet any reduction in the number of affordable houses that might result from those renegotiations. In addition, we have the £475 million local infrastructure fund—we published its prospectus only a few days ago—which will help local areas to deliver much larger-scale developments to meet need. We want to go still further. The House will be aware that there has not been a single new development of more than 13,500 homes in this country since the 1970s, so we intend to promote and support larger scale garden cities where there is clear local support and private sector appetite. We are currently working through the details on that.
As my hon. Friend the Member for Rugby (Mark Pawsey) rightly said, we must support home ownership, and we are doing that with a number of measures. Reference has been made to the Firstbuy scheme. Over 10,000 reservations have now been made towards our target of helping 27,000 first-time buyers into shared equity. Reference has also been made to the NewBuy scheme, which gives prospective buyers the chance to buy a home with a fraction of the deposit normally required. As we have heard, there are already 3,000 reservations and the figure is rising rapidly. As he also said, the Bank of England is crediting our £50 billion funding for lending scheme for increasing mortgage availability and driving down the cost of loans for home owners.
However, I accept the point made by the right hon. Member for Greenwich and Woolwich about the need to look at additions to the offers that are made, either developments of existing ones or additions to the products available, and that is what we are doing. We are also looking at the issues that many Members have raised in relation to the right to buy, but it is pleasing to note that sales between October and December topped 2,000, helping to fund the one-for-one replacement of the homes that have been sold.
Mr Betts
I will be brief, because the Minister need give only a one-word answer. Is he prepared to look again at the cap on borrowing to fund housing at local authority level? Why is housing the only form of borrowing that local authorities cannot enter into simply because of the prudential rules?
Mr Foster
The hon. Gentleman knows part of the answer, because that is the same problem his Government faced, and it is to do with difficulties with the Treasury. Having said that, we are looking at the issues and are willing to look at the possibility of having flexibility in the cap and other ways of moving forward. As he rightly said, the consultation we are conducting on the potential use of local authority pension funds to help with investment is also part of the package we are considering. We are looking at all those measures.
We are doing a number of things to help make land available, to provide the resources for houses to be built, to bring empty properties back into use, to ensure that we can move forward and to develop the economic benefits to this country that new housing will bring, but also to ensure that we can provide the much-needed houses for people in this country, not least more affordable housing, because all Members are aware that under the previous Labour Government the number of affordable homes fell by a staggering 420,000. We must do something to make more affordable homes available. That is why we are committed to having 170,000 new affordable homes by 2015. It is why we have put in additional funds and loan guarantees to help secure that.
We want a housing programme that works for the people of this country and for its economy. We have made real progress. Further progress is still to come and further announcements will be made later this month. I am sure that the House will look forward to what those announcements contain.
Question deferred until tomorrow at Seven o’clock (Standing Order No. 54).