Property Market

Lord Harrington of Watford Excerpts

Tuesday 25th January 2011 Westminster Hall

[Richard Harrington (Watford) (Con)]

I have an interest to declare, which is in my entry in the Register of Members’ Financial Interests, because I have for many years been a director of a company involved in, among other things, the development of housing, although I have no active involvement in the company. I thank Mr Speaker for selecting my debate; it is much appreciated.

Housing is on the mind of most Members of Parliament, as much of our correspondence relates to it. I am pleased to see the Minister for Housing and Local Government here; I am sure that he will, as a Watford grammar school boy and former Watford resident—he has gone on to greater things and places—find some of the points I shall make very relevant to that place.

Housing has the attention of the media, and a recent article in The Guardian, following an interview with the Minister, was headed “Minister pledges an end to the housing price rollercoaster”, which I was pleased to read. However, for people who are struggling to get on the first rung of the ladder, things have never been more difficult. In my constituency in 1996, the average price of a house was more than £73,000. By last year, notwithstanding some reductions in prices, it had reached £234,000. It is easy to see how difficult the situation is for first-time buyers whose average age, calculated locally, has risen to 37 years old. I was delighted that it was announced in the comprehensive spending review that the Government will increase housing supply

“by reforming the planning system so it is more efficient, effective and supportive of economic development.”

I am delighted that the Government have recognised the problem and are committed to tackling it.

It is fashionable to place the blame for the current situation on the recession and the banks, but I believe that for many years, from before the recession, there has been a consistent structural problem—a fundamental demand for housing which greatly outstrips the supply. Only an increase in supply will meet demand, tackle the problem effectively and create greater opportunities for first-time buyers.

[Mr Lee Scott (Ilford North) (Con)]

I congratulate my hon. Friend on obtaining the debate. Does he agree that while the blame does not rest totally with banks, they are making things increasingly difficult for first-time buyers and, indeed, for other people who want to move home?

[Richard Harrington]

That is correct, and a valid intervention, which I intend to discuss briefly.

The demand side of the equation is clear. Short-term economic factors may have reduced it, but the fundamentals are as bullish as ever. The south-east, according to all the research that I have seen, is expected to continue the population growth trend, and despite all the incentives that the Government may provide for a change in regional preferences I think that the trend is unstoppable. Without going into too much detail, the factors include migration, the social trend towards more households following divorces, the population getting older and the great predilection for living in small households. Above all, I do not think that anyone can say that the demand side will change much.

My hon. Friend the Member for Ilford North (Mr Scott) mentioned lending. At the moment, one of the biggest obstacles is the decline in lending. The figures show that the contraction in UK mortgage lending since 2007 has been the most severe on record. In 2008 and 2009, about 500,000 loans were granted for house purchase. That is a lower figure than for any year since 1974.

[Mr Stewart Jackson (Peterborough) (Con)]

I congratulate my hon. Friend on securing this debate. Is he as concerned as I am that the review being undertaken by the Financial Services Authority may not only stifle mainstream mortgage products but prevent the development of new products for intermediate housing, such as do-it-yourself, shared ownership and key worker schemes?

[Richard Harrington]

My hon. Friend makes a valid point on a subject that I intended to mention later. The Financial Services Authority is reviewing the mortgage market and, from all the indications that we have received, it intends to bring in, with the intention of protecting the consumer, various restrictions, such as appraising customers and reducing the type of mortgage available, that will significantly reduce the supply. I know that Ministers are aware of that, and I hope that they will bring as much pressure to bear on the FSA as they can. It is fair to say that the lending side is definitely a short-term constraint, but for the purpose of this debate, I will put it to one side. However, I am not trying to reduce its validity.

The core of my argument concerns the supply side of housing—the availability of land with planning permission to build social and private houses. Although I fully support the Localism Bill and its core values of local people and their representatives being responsible for their own actions, I believe that in respect of planning, it could significantly adversely affect the supply of land for housing. If the incentives on offer do not outweigh the anti-development sentiments of residents and their elected representatives, we are in real trouble.

Indeed, the Localism Bill will liberate local communities from stifling Labour targets, especially the well-intentioned but misdirected regional spatial strategies, because it is clear that they have not worked. New homes are being built at the slowest rate since the war.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

Does the hon. Gentleman not acknowledge that since the Secretary of State’s letter went out saying that people could ignore the RSS and everything attached to it, planning applications, and therefore the build for housing, has actually gone off a cliff?

[Richard Harrington]

I agree to an extent with the hon. Lady, and I hope that my position will become clearer a little later.

Watford, like many constituencies in the south-east, is badly in need of housing supply; there is no dispute over that. Even during this recession, there has not been an overhang of unsold properties. If development does not come to such regions, a whole generation of people may find themselves priced out of the market for years to come.

The Localism Bill fails to address a serious issue with regard to policy and planning. A YouGov survey, commissioned by the New Homes Marketing Board, revealed that more than eight out of 10 people believe that Britain needs more housing for sale and rent, especially for first-time buyers. That is very much like a “hands up all those who are against sin” argument. The survey also showed that far fewer people—just about 50%—welcome the construction of more homes in their immediate neighbourhoods. Such a view is significantly understated, because when I send out surveys to my local residents, stopping nearby developments comes back as an important priority.

[Mel Stride (Central Devon) (Con)]

I congratulate my hon. Friend on securing this debate. Like him, I believe that this is an extremely important subject, particularly in the south-west where affordable housing is a real issue. As I understand his argument, he is suggesting that incentives may not always work as a driver of development. Equally, however, does he accept that to go back to the regional spatial strategy scenario that we had under the previous Government, in which top-down diktat told local communities the amount of development that they could have and where it would be, would be a severely retrograde step?

[Richard Harrington]

I agree totally with the Minister with responsibility for planning that we should not return to Stalinist central diktat. My argument will hopefully show that that there are more tools in the box other than just the financial incentives that the Government have bravely introduced as a core of our policy. I am very much against central targets because they have not worked, not to mention the issue of morality or believing in local government, which I do.

[Mr Lee Scott in the Chair]

I agree that the Localism Bill has great potential to free local communities to decide for themselves the housing that they need. However, we must acknowledge the other side of that coin: the Bill will empower those people who are opposed to development in all its forms, so there are two sides to the measure.

[Graham Jones (Hyndburn) (Lab)]

Will the hon. Gentleman explain to the Chamber the difference between a supplementary planning document and a neighbourhood development order?

[Richard Harrington]

Again, if the hon. Gentleman has a little patience that difference will emerge as I make progress.

We have to do as much as we can to ensure that new homes are built, but there will always be people who oppose development. Sometimes, what is needed to meet the needs of the larger community can be stifled by those who, understandably, have their own personal interests at heart. It is not simply a hypothetical question. The issue has arisen in several places around the country, following the letter from the Secretary of State. Although regional spatial strategies were clearly not successful, evidence of nimbyism has also appeared, with the recent departure of those strategies. I will give some examples that right hon. and hon. Members may find of interest. In Bath, for instance, the number of homes to be built around the area has been cut by nearly 50% under the city’s draft core strategy. Previous targets proposed by the South West Regional Assembly envisaged more than 21,000 homes being built during the next 20 years, but that figure will now be cut to 11,000. North Somerset is cutting its target for new homes from 26,000 to 13,000.

[Andrew Griffiths (Burton) (Con)]

My hon. Friend cites a number of targets, saying that one region wanted 21,000 new homes and another region wanted more. However, the reality is that those targets were fantasy targets. Those new homes were not built. We can set targets as high as we like for the building of property, but under the old regime—under the failed Labour policies—houses were not built and, more importantly, the local communities that had those targets forced on them were very upset about it.

[Richard Harrington]

I cannot dispute the validity of what my hon. Friend says, as I am very familiar with his constituency and with my own. The demand for housing in Watford is significantly greater than demand in Burton, but both constituencies offer an illustration of how the RSS and those targets do not work. I am giving examples. My hon. Friend may say that the targets were fanciful, but they were aspirations. Now no one will say that these new targets will be reached, because my hon. Friend’s argument is the same as my own—there is always a presumption against development locally. There are councillors who are elected, one after the other, on anti-development platforms. They come from all parties; I am not picking out one particular party in that respect. However, the fact is that targets have been reduced all over the place, in St Albans, in Wiltshire—I could go on, as I have a list of quite a few areas.

[Stephen Lloyd (Eastbourne) (LD)]

I thank my hon. Friend for giving way; he has been very patient in allowing us all to intervene, which I appreciate. Does he agree that a measure that will help people to find homes is another change that the coalition Government are introducing, thereby moving to a default situation where it is easier for people in receipt of housing benefit to opt for it to be given directly to the landlord rather than having it go via the tenant?

[Mr Andrew Turner in the Chair]

I know that my hon. Friend is talking about property sales, but does he agree that that change is another example of the coalition Government being practical and pragmatic, making it easier for people to have their own houses, even if in this instance they are rented houses.

[Richard Harrington]

I agree with my hon. Friend, except to say that he says that I am talking particularly about private housing. That is true, but in fact it is really the overall supply of housing that I am interested in and for whatever purposes, whether it is housing for private tenants or for social tenants, shared ownership or outright freehold ownership. I think that the principle is the same; we are talking about supply. However, I totally support that measure on rent that the coalition has introduced.

The core of the Government’s strategy is the new homes bonus, which was introduced as an incentive for councils to build. It may well succeed—I hope that it does—but I have spoken to a number of people in the industry. My right hon. Friend the Minister might say that they have vested interests as planning officers, house builders and so on, but whatever their other interests, they certainly have an interest in supply. Their concern is that the bonus will not be sufficient in itself to encourage councils to build.

If a development of new houses is opposed by local residents, local councillors elected on a non-development ticket are unlikely to take action on an issue that might work against them at election time. I do not believe that five or six years of council tax will be a convincing enough reward. I say that not to discount the scheme but to raise obvious concerns to Ministers that other weapons, tools and policies might be needed as well.

My right hon. Friend the Minister believes that residents and their representatives will change their views because of the benefits that their communities will receive from the new homes bonus. He regularly cites a large brownfield site in his constituency of Welwyn Hatfield where the new homes bonus—the money that the council will receive for a housing development on that site—will pay for a renewal of the whole town centre. I can see that—after he mentioned it to me at a meeting in Hatfield, I went to visit the site, and I accept that it is a compelling argument—but most developments are much more controversial than that. In Watford and, I suspect, many other constituencies, the available development land comprises many small sites for which the NHB money would not make a sufficient difference to the community coffers to provide any incentive, although I can certainly see how the big flagship schemes would do so.

I am not negative about the new homes bonus, and I hope that what I am saying will not be interpreted as such. I just do not believe that it will necessarily be enough. I have positive suggestions to make. Some simple considerations might do much to ensure what we want and what the Minister has declared many times that he wants: an increased supply of land with planning permission.

It is crucial that PPS 3, which is under consideration, preserves the obligation of local planning authorities to maintain a five-year housing land supply and to take a five-year view. Although the process is made cumbersome by a lack of nationally accepted guidance on how to calculate land supply—it is a matter beyond my intellectual capacity as a Member of Parliament—I am sure that there are many professional people on different sides of the argument who have views. The implementation of such a measure—not a target, but a measure—would at least ensure an impartial intermediary. I suggest that the Government convene an advisory committee drawn from leading planners, housing and economic experts, Government and local government to draw up a suggested standard methodology for calculating land supply figures. I repeat that it would not be a return to the over-centralised approach of the past, but it could be a sensible way to ensure that best practice is captured so that local councils make informed decisions.

[Justin Tomlinson (North Swindon) (Con)]

I thank my hon. Friend for giving way in this important debate. I understand the thrust of his argument, having represented a new-build area as a councillor for 10 years while the number of houses rose from 1,800 to 8,000. However, does he agree that solutions to housing pressures must not come at the cost of appropriate development? The high-density housing typical under the last Government, lacking open space and parking provision, simply stores up problems for the future.

[Richard Harrington]

I agree that a balance is needed. We have all seen such developments in our constituencies —high-density blocks of flats with no greenery, no surrounding area and no provision for infrastructure. Yes, I agree absolutely.

[Graham Jones]

Will the hon. Gentleman give way?

[Richard Harrington]

May I make a little bit of progress first? I am not trying to ignore the hon. Gentleman; I am just trying to get my flow going.

I am against the centralised approach of the past. I am asking only for effect to be given to a measure proposed in the open source planning document as well as the Government’s Green Paper. We have to carefully monitor the incentives that we are introducing, such as the new homes bonus, to ensure that they in fact do what they are intended to do. If development targets continue to be halved by local authorities, surely we have to consider other ways to encourage the increase of supply that we all believe necessary. It would be much better if the powers were put in place now, rather than when the problem manifests itself, when it might be too late.

It is very clear to me that the Bill must contain a presumption in favour of sustainable development, so that if the local community has not drawn up its own plan for development, businesses can get involved. The economy is a very important reason for increasing the supply and taking the initiative, but obviously it would have to be proved that the proposals were sustainable. I am most impressed by the presumption in favour of sustainable development. It was one of the most far-sighted proposals in last year’s “Open Source Planning” Green Paper, and was reaffirmed with even more vigour in the local growth White Paper later in the year. It is really important that it is brought into effect as soon as possible.

[Alison Seabeck]

I thank the hon. Gentleman for giving way during his very thoughtful speech.

The presumption in favour of sustainable development is not in the Bill, and a number of witnesses have raised concerns about that in the Bill’s first public evidence session.

[Richard Harrington]

I thank the hon. Lady for her intervention, and I hope to sit in on some of the future public sessions of the Bill Committee.

In the Minister’s opinion, does the Bill remain in step with the White Paper statement about its three functions? The White Paper states that those functions are to allow people to shape their own communities—which I think it clearly does; to provide sufficient housing to meet demand; and to support economic development. I am not sure whether the new homes bonus is enough in respect of the second and third functions, and I think that the Government should create a back-up plan to ensure that development continues.

I should like to take this opportunity briefly to consider shared ownership schemes, which are a very important way of increasing home ownership, and of helping the demand and supply sides to meet. On 21 October, I submitted a written question to the Minister for Housing and Local Government about the Government’s plans to increase shared ownership and low-cost home ownership schemes, which, as I have seen in my constituency, are a very affordable and attractive prospect at the present time. The response was very positive:

“We announced in the spending review almost £4.5 billion investment…a new delivery model is expected to deliver up to 155,000 new affordable homes”.—[Official Report, 2 November 2010; Vol. 517, c. 671W.]

To the best of my knowledge, the details that we have been promised have not yet arrived, and I encourage the Minister to give us some information on that. I very much support what the Government are trying to do with shared ownership, and would like to see progress on that as soon as possible.

[Paul Uppal (Wolverhampton South West) (Con)]

I thank my hon. Friend for securing this debate. I have been involved in property for about 20 years, and so this is an area that has concerned and perplexed me many times.

I understand the premise of my hon. Friend’s argument this morning, and have no issue with that; he is wholly correct. On the supply side, however, and particularly in terms of demand, in the UK we suffer from an exceptionally large number of people who aspire to own their own homes, compared with our continental neighbours in Germany and France, where there are much higher levels of renting. I have found that institutional investors often look for avenues through which they can get into the residential market, particularly from a letting perspective, and they have often approached Governments regarding the best way to do that. One area that is particularly talked about is the shared ownership vehicle. I do not know whether my hon. Friend, or the Minister later, will be able to comment on that, but I echo the sentiment of shared ownership as a way of solving the problem—not wholly, but certainly helping.

[Richard Harrington]

My hon. Friend has made an important point about the vehicles that can be used, and I am sure that the Minister will comment on that. I very much supported the introduction of the real estate investment trusts scheme into this field, but my argument today is about the supply of land for housing development, some of which—a greater percentage, I hope—will be for shared ownership; some of it will be for private ownership and private tenants, and the different forms of social housing. I do not think that my hon. Friend’s point, valid though it is, is relevant to that argument.

I remind hon. Members that the lack of accessible housing for first-time buyers is not just a housing issue, or something to do with the idea that an Englishman’s home is his castle, and people’s desire for their own home. It has serious ramifications for the future of Watford, as for many other places. To use Watford as my example, as I should and must, it has for a long time been a popular place for young professionals, people working in and opening new businesses, and families seeking a first step on the property ladder. It is quite near London, and a lot cheaper, and it is a nice place to live. I say that in my capacity as honorary president of the Watford tourist board—but it is a nice place, and people enjoy going there. It is close to London without London prices. However, I have a significant fear that without housing supply at reasonable prices, which is a function of supply—we know that the demand will always be there, or I at least believe it will—the area will have difficulty in attracting young professionals, and attracting people to open or engage in businesses. That is the most significant aspect of what is a serious matter, with huge implications.

I support localism and I applaud the Government’s efforts to introduce it throughout the country, but my central argument, which I hope the Minister will accept, is that it must be part of a balanced package. We must avoid any trap; for the last Government it was their obsession with centralism—the Stalinism that I mentioned before—but that must not be replaced by a similar obsession with localism as the only way to obtain housing supply.

[Graham Jones]

I thank the hon. Gentleman for obtaining the debate; it is a great debate, which is primarily about the south, and under-supply of housing, and I am happy to engage in it. To return to the point about the Labour Government being a centralising Government, could the hon. Gentleman tell me the difference between a supplementary planning document and the new neighbourhood development orders? If Labour were centralising, what was an SPD?

[Richard Harrington]

I do not think that it makes much difference to the argument. In practice there is not much of a difference; I understand there is one, realistically. I look forward to the Minister’s comments and the contributions of colleagues. I feel I have made my point.

[John Stevenson (Carlisle) (Con)]

I am grateful to my hon. Friend for securing this debate, which is very useful. I agree with the general thrust of his argument that we need more supply, but he has not touched on the matter of empty properties, how we could bring them back on to the market, and whether there should be incentives to do that, which would increase supply.

[Richard Harrington]

That is a valuable point. In Watford there are several hundred empty properties. I keep an eye on that. To give credit to the local council, it is also trying. However, there is more to the question of empty properties than meets the eye. Some of them are transiently empty, not empty over the long term. Some are not in the condition that they should be, and some are in areas of town where people do not want to live. I had this very discussion outside the Chamber with my hon. Friend the Member for Burton (Andrew Griffiths), who mentioned that it was a particular problem in his constituency. I do not make it out as of no consequence—it is important—but it is peripheral to the main argument. We shall not merely need 100 or 200 extra homes in our constituencies—which might or might not be obtained by making progress with empty properties. The question is the fundamental supply of new housing land.

--- Later in debate ---

[Mr Jackson]

I will not at the present time, but I might give way to the hon. Gentleman later. I fear that the problem for my hon. Friend the Member for Watford is that he is looking through the wrong end of the telescope. The integral issue is mortgage availability and the fact that mortgage providers have failed to adapt and make progress in the market in terms of providing funding and mortgages to people.

[Richard Harrington]

I thank my hon. Friend for giving way, particularly after I have spoken for 20 minutes. If the banks decided suddenly to lend twice as much money to people who want to purchase houses—we hope that it will happen, so let us pretend for a moment that it will—what effect does he think that would have on the supply of housing?

[Mr Jackson]

As a Christian, I hope that sinners will repent and that the retail banking sector will lend. I think, however, that the issues are much more integral and institutionalised, as my argument will make clear. I welcome the new homes bonus, although I am slightly concerned about its top-slicing element from year three, which could have an impact on the propensity of local authorities to develop its potential—remember that the scheme is about developing housing appropriate for a particular area.

The situation reminds me of the emperor’s new clothes—no one quite knows on what evidential basis we are to decide how many houses are needed. Is it the 2004 Barker report? Is it the misguided views of the then Office of the Deputy Prime Minister and the Prescott sustainable communities plan of 2003? We need to step back and carry out a full analysis of the demographic and social change. The hon. Member for Hyndburn (Graham Jones) has made the point—quite astutely, though in a roundabout way—that this should not just be about the south-east and the east of England and London, but that we should spread our country’s wealth through the housing market throughout the UK. In fairness, we are looking at mechanisms such as the regional growth fund, sustainable transport funding and, of course, high-speed rail, which seeks to bridge the gap between the overheating of the south-east and other parts of the country—the north-east, the north-west and Yorkshire and Humberside. We need to have a much more existential approach to why we think we need more houses.

It is also important to think in terms of the operational capacity of planning departments. One would struggle to find many people who would admit that their local authority’s planning department is completely fit for purpose. The huge bureaucracy and time lags drive local and bigger businesses and developers mad, because there is not a high degree of accountability in this often technical area for local councillors and residents and, in particular, for business. That causes an enormous and inordinate delay to the development of projects.

--- Later in debate ---

[Mr Jackson]

I will not at the present time, but he is always my hon. Friend, especially if he wishes to cross the Floor.

Other operational issues stray into the area of regeneration. It is very difficult to put together a residential and commercial package for brownfield sites because of some of the institutional issues at which the Government need to look. One issue is that of European Commission procurement laws. If there is one thing guaranteed to scare planners off, it is the idea that it will take months and months to put together a package and that they must put the work involved—consultancy and other issues—out to European Commission procurement rules. As I said, that can cause massive delay in bringing forward good projects—for example, shopping centres with associated housing.

The other issue, which was touched on by my hon. Friend the Member for Carlisle (John Stevenson), is that of empty properties. I remain to be convinced that empty dwelling management orders were the right way to go about dealing with the matter. We really need to tackle the issue of empty properties. If we are going to develop on marginal sites—green belt sites and others—we should be able to satisfy ourselves that we have exhausted every other possibility of developing on brownfield sites. We also need to consider the whole area of brownfield remediation. That is an issue for the Department for Environment, Food and Rural Affairs, the Treasury and the Department for Communities and Local Government.

My hon. Friend the Member for Wolverhampton South West (Paul Uppal) made a very astute point about real estate investment trusts. That is a matter the Leader of the House was very keen to take forward when he was Housing Minister in 1996. Some pretty arcane legal and financial rules in the Treasury mean that it has not been possible to develop such a consumer friendly way of accessing private sector capital in the private rented sector. At the moment, such an approach is confined to the student market in university towns. However, we need to have a bigger philosophical debate on whether—I know it is heresy for any Conservative to say this—we have perhaps reached the limit of owner-occupation. If we consider comparative studies in Canada, Germany, Italy and France, people are happy to live in and pay rent for high-quality residential accommodation. We have not exhausted the possibilities of that here.

[Richard Harrington]

It is important that my hon. Friend accepts that although he might be right about housing penetration and such things, those matters are irrelevant to the core argument of the debate, which is that the supply of land is needed—whether it is for rental housing or any other form of housing.

[Mr Jackson]

My hon. Friend has a point. I should not mix my metaphors too much, but if the Government were taking the one-club golfer approach of only putting eggs in the basket of the new homes bonus—we will see from the regulations and secondary legislation how the details of that work out—I would accept the premise of his argument. However, the Government are also looking at community right to build and urban extensions to rural and semi-rural areas because people are very keen to save their post office, their bus service and their local shop. If we can envisage building 10, 15 or 20 houses, housing some key workers and some high-income people, which concurs with, for example, the Sustainable Communities Act 2007—that legislation was passed with cross-party support a few years ago—my right hon. Friend the Minister for Housing and Local Government is absolutely right: people will want to do that. If we do that cumulatively across boroughs and districts, we will drive up housing numbers.

I am mindful of the time, so I will move to a conclusion. We desperately need Treasury buy-in in the housing market to support the new homes bonus and other initiatives such as asset-backed vehicles, in which private sector capital can be accessed for regeneration schemes, including housing; tax increment financing—not just in town centres for retail but for housing-related issues as well—and the important accelerated development zones.

I recognise my hon. Friend’s very sincere concern for those young people who want to get on the housing ladder in Watford, and I see the same in my own constituency. We must not ignore the disparity between the joint income of young couples and the amount that mortgages are proffered at by lenders. That gap is huge, and we need to work with the Treasury and the FSA on the matter. I know that our right hon. Friend the Minister for Housing and Local Government is battling hard to make the FSA understand the practical ramifications of restricting the mortgage market, which will be disastrous for the housing market.

Although I support the views of my hon. Friend the Member for Watford, the picture is technical and very complicated. What we do not want to see is the son of regional spatial strategy. Compulsion has failed, and there is no evidence to suggest that it will work in the future. We all hope that we can build more homes for constituents of all incomes. We all support do-it-yourself shared ownership and intermediate housing to get people on the housing ladder so that we can become a property-owning democracy again.