Housing and Planning Bill
Debate between Lord Horam and Lord Kerslake
Lord Kerslake (CB)
My Lords, I shall speak in favour of Amendment 62A and the wider group in which my amendment sits. I declare my interests as chair of Peabody and president of the Local Government Association. The purpose of this amendment is to put beyond doubt the financial issue on one-for-one replacement. This is a crucial point and in making it I am following the imprecation of the former chair of the Public Accounts Committee, Margaret Hodge, to follow the money. My background, as noble Lords may be aware, is as an accountant by training.
I shall follow up three issues we discussed on Tuesday which are very relevant to this amendment. The first is the nature of the properties we are talking about in relation to forced sale. I acknowledge that it was very late in the evening, but the Minister referred to these as “surplus properties”. These are most definitely not surplus properties; indeed, they are the antithesis of surplus properties. They become vacant but there is a massive demand to take up those vacant properties. The reasons are very simple. Higher-value properties—I emphasise the word “higher” because this is a relative concept in different areas, not an absolute concept—are either larger properties, or bungalows, as we have just heard, and they are most commonly in areas of higher demand. Anybody who has worked in a local authority, as I have, will know that these are keenly sought after, to the point that tenants who are desperately in need of bigger properties will spot somebody who has left a property and come and say, “Is it possible for me to take that one up?”. So, we must be very clear that these are absolutely the most in-demand properties. That is why they end up being described as higher value, in almost all cases.
We had a long debate about the possibility of an equity loan, which I am absolutely convinced is technically capable of being done. The resistance to this proposal comes from the fact that it does not accord exactly with the Conservative Party manifesto. I am seriously concerned that we are ending up with what might be called manifesto fundamentalism. John Maynard Keynes said, “If the facts change, I change my mind”, and the facts at the time this proposal was developed have now been proved to be palpably wrong. So there is a case for thinking again, creatively and flexibly, to deal with what may be the single most divisive issue in the Bill.
Lord Horam (Con)
I am with the noble Lord on manifesto fundamentalism: I, too, think that we should not go too far down that path, but he was asking people the other night to accept, not a cash discount but an equity loan. If people have expected a cash discount from the manifesto, I do not think they will be very pleased to get an equity loan. That is the problem, if I may explain it to the noble Lord, in terms of popular understanding.
Lord Kerslake
The noble Lord raises a very relevant issue, but just to be clear, what was offered in the manifesto was right to buy on a like-for-like basis, and we are not offering that. This is a sales programme under which housing associations will be able to decide not to make a property available for sale, completely at their discretion. So I am afraid the offer in the manifesto has already been retreated from. What we are seeing now is a very challenging issue. There are two choices for the Government: either they fund this properly through direct funds, or they look for a creative solution. There will be an opportunity to get a cash discount because, of course, right to acquire remains as a policy. If it was felt necessary to move more towards that policy, you could have a mix of the two. However, what we are faced with here is a policy that looked good on paper at the time of the manifesto but simply does not add up. That is why I say that we should be creative and positive about alternatives which address that issue.
My third and final point on the discussion we had relates to our long debate about the fact that, given that we are not losing a property under this scheme, we need to consider what problem arises and what injury is suffered. The crucial point is the change in tenure. The effect of right to buy in its first incarnation in the 1980s, when there was no one-for-one replacement, was effectively a halving of the number of people—between 1980 and now—who live in social rented properties, with all the consequences that have flowed from that for rents in the private rented sector. The consequence of the shift of tenure involved in losing a social rented property and replacing it with a buy-to-let or owner-occupied property rather than another social rented property is very significant indeed, not just in aggregate but in individual neighbourhoods. Anybody who has been round an estate that has experienced a lot of right-to-buy property being turned into buy-to-let property will know just how significant the impact is on such an estate—trust me.
It is important to be very sure about one-for-one replacement in terms of not just intent but finance. We spoke in a previous debate about the experience of what has been described as the reinvigorated right-to-buy policy, which is the point at which the Government committed to replace one for one. It is important to note that this was part of an extensive discussion at a meeting of the Public Accounts Committee yesterday, which I attended. It was also included in the National Audit Office’s memorandum, which I hope noble Lords have now had a chance to look at, which proves beyond doubt the technical difficulty under the current financial regime of local authorities truly keeping up with the one-for-one replacement policy.
Having read the analysis, my personal view is that the barriers in the current model will prevent the delivery of one for one even under the current reinvigorated right-to-buy policy, and most certainly in relation to the extension of right to buy to housing associations. I shall explain why. Under the current policy, local authorities do not get the full value, or the full cost, of the one-for-one replacement; in fact, they get a third of the value of the property sold, and borrow the balance to make up the difference. In some local authorities that is possible; others either hit the cap of their right-to-buy borrowing or have other investment plans for using that funding to fund the maintenance of existing stock. Many local authorities have told me that they already have practical difficulties in delivering one for one. Indeed, a number have handed the money back to government after the three-year period. So unless we can be confident about the financial mechanism that genuinely gives local authorities the wherewithal to replace the property, we are setting this policy up to fail. This is a crucial point for me.
Therefore, the first point to make here is that the current mechanism—we do not yet know what the mechanism is in relation to the one-for-one policy for extended housing association right to buy—will not deliver one for one, never mind like for like. The second point I want to make—again, we are hampered by the lack of detail on deliverability—is that we are dealing with a potentially huge level of purchases. Shelter calculates that 221,000 housing association tenants, out of about 1.3 million who do not already have the right to buy through preserved rights on transfer, would both be keen on buying and have the financial wherewithal to do so. If everyone took up their opportunity, the cost would be more than £11 billion.
Housing and Planning Bill
Debate between Lord Horam and Lord Kerslake
Lord Kerslake (CB)
My Lords, I shall speak also to Amendments 68B and 68C, which are in this group and are connected to my amendment. I declare my interest as chair of Peabody and president of the Local Government Association.
Just before I come to the specifics of my amendment, I want to pick up three things that have come out in the debate—two of them from the noble Lord, Lord Lansley. The first is the title of the scheme that we are taking forward, and I do not think that this is a question of semantics. It is described as “right to buy” but in these circumstances it will in fact be not a right to buy but an opportunity to buy subject to the discretion of the housing association. It would be helpful to know how the Minister intends to deal with that point if we are to avoid there being an awful lot of disappointed people.
Secondly, I absolutely endorse the view that there is a need for more houses. This is the most important issue that we are addressing here, and it is also important to say that we need more houses of all types and tenures. That is because, no matter how fast we build—my London Housing Commission report, which was published earlier in the week, suggested that we needed to double the rate of supply in London—and even if we build for 10 years on that basis, it is clear that it will not be possible to get to a point where every property is affordable for an ordinary Londoner. It therefore follows that you have to look at policy in a more fine-grain way. We need both more houses and more affordable rented houses. If we do not produce both, we will exclude a large number of people. This goes to the heart of the debate that we are having at the moment.
Lastly on this issue, it is very important that we do not have any sense that these properties are surplus. I made that point this morning and I emphasise it because we have come back to this debate again. When I first went to Sheffield as chief executive in 1997, there were parts of the city where you could literally walk into a local authority property. But they have all gone. Almost every part of the country is now light years away from that world. In most areas there is now a desperate shortage, particularly of properties that are likely to end up being sold off as and when they become vacant. We must not lose sight of the heartache that it will cause people who are in desperate need. Examples that I know of involve families with five children in one bedroom who will see properties that they might have occupied being sold off. We must not lose sight of this point.
I come back to my amendment. Before lunch, the Minister said that my previous amendment lacked a requirement for one-for-one replacement. Well, here it is. This set of amendments would put in the Bill the following. First, they would make clear on the face of the Bill the requirement for one-for-one replacement outside London. Secondly, they say that, where practical—I absolutely accept that it will be difficult in some places—the intention of, and expectation on, local authorities should be to achieve not just one for one but like for like. That goes back to my previous point: it is not the same to take away a social rented property in one area and replace it with a starter home 20 miles away. They are not the same. So we are saying that, where practical, local authorities should look to achieve like for like as well.
The third thing that we say—this absolutely goes to the heart of deliverability—is that, if we are in a world where the Government will not wholly grant-fund the replacement process for local authorities, they will give local authorities the ability to borrow in order to do this. It cannot be borrowing within an existing cap, because that funding will almost certainly have been allocated for the renovation and improvement of existing properties and for existing new-build housing programmes. If this is genuinely to be additional funding, local authorities need additional borrowing capacity. It would be helpful if the Minister could say that not only has more money been put in but, if local authorities do not get the full funding, they can have absolute confidence that they will be able to get the equivalent amount of borrowing that they need, in addition to the borrowing capability that they already have. That would go a long way to addressing the issues.
The last point here is that where there is a case for moving around the expectations across a combined authority, exactly as has been said by a number of noble Lords, there should be flexibility within a combined authority area to focus resources in the places where the need is greatest. That is the effect of the amendment.
I say “outside London” because in the Bill there is a requirement for authorities in Greater London to replace not just one for one but two for one. It is a very stark requirement that says those authorities “must ensure” that the number of new affordable houses is at least two for one. For me, it is therefore inexplicable that we would not say the same thing for authorities outside London. I appreciate that demand in London is very high—that was absolutely the subject of my report. But demand is also high outside London as well. Yes, there is an issue of demand in London—there is also the issue of the mayoral election in May, which is worth noting—but that alone does not justify the completely different positioning of housing outside London from housing inside London. Will the Minister explain why we would have a situation where the Bill has a two-for-one requirement for London but nothing for the rest of the country? That is inexplicable to me, and I would be grateful for an explanation.
Lord Horam (Con)
Is not that surely because of the sheer difference between different parts of the country? The noble Lord, Lord Campbell-Savours, was going on about that at some length in previous debates. Things are very different in, say, Cumbria, Lincolnshire, Cambridgeshire and Oxfordshire. On the other hand, we know that London is a special problem with uniquely high prices. Surely the Government are right, therefore, to maintain the possibility of a different approach in different parts of the country.
Lord Kerslake
I am grateful to the noble Lord for his intervention. However, if the Government were really worried about allowing flexibility for individual difference, we might not be debating this top-down policy at all.
Let me deal with the point that the noble Lord raised. The commitment from the Government is to achieve one for one; it does not say one for one in one part of the country and not one for one in another part of the country. It is reasonable to say that, within the boundaries of a local authority, there will be areas of high demand for new, affordable housing that the local authority will want to meet. I do not think we would be comfortable with a situation where some parts of the country made no effort to replace one for one and were given a retention of funding without that requirement while, in other areas, we did expect it. In my view, it would go against the stated intent of the Government to achieve one for one. One for one in a particular neighbourhood may not be exactly right but one for one in a local authority, or indeed in a combined authority, would absolutely be a reasonable expectation of this policy. Indeed, as I said, that is the stated government intent here.
I will conclude by making a number of points. Putting it in the Bill should overcome whatever doubts there are about the intent. I have raised some concerns about how possible it is to achieve this in the current financial regime. The Minister has quoted statistics, which I have some concerns about, as she knows, to show that it is already being achieved. If it is, there should be no difficulty in putting it in the Bill. If we are already confident that it can happen, putting it in the Bill should not create any difficulties at all.
A huge number of people are anxious about this issue and a huge number doubt the Government’s true intent in relation to affordable rented properties, or indeed affordable properties at all. Putting it in the Bill would put beyond doubt the Government’s intent. It would make it clear that they are serious about the policy of one for one. Contrariwise, if it is not in the Bill, people will draw their own conclusions. These are reasonable amendments that would do what the Government say they want to anyway and, crucially, provide the necessary funding for local authorities.
Housing and Planning Bill
Debate between Lord Horam and Lord Kerslake
Lord Horam (Con)
My Lords, I will comment very briefly on the remarks made by the noble Lord, Lord Kerslake, who made a significant point about the existing instruments we have to help people in this situation—the Help to Buy method and so forth. He made the point that this is a financial instrument and therefore the debt/deficit equation, which is so important to the Government, is resolved by using these sorts of methods. As he pointed out, no fewer than 126,000 people, with total costs of £3.8 billion, have been helped by these methods.
The simple point is that it has not been enough. As the noble Lord also pointed out, you have to have an income of no less than £83,000 to be able to afford a house in London, and 90% of people cannot do that. So the plain fact is that we need to do more—which is what the Government are trying to address with starter homes. We dealt two days ago with the question of whether we are helping the right people when we addressed the question of whether you can help people who are in a different category but who are even more disadvantaged than people who might benefit from starter homes. We dealt with that issue—or at least we tried to. Now we are dealing with whether this is the right kind of instrument in the circumstances to deal with the fact that we have a crisis, particularly in London, and the present instruments do not help enough. That is the fundamental point.
Lord Kerslake
I am grateful for the opportunity to come back on this point. The noble Lord is entirely right to say that we need to do more—there is no question about that. I strongly hold the view that we need to put a lot more into the building of new housing. If there is an issue about the existing products, as there was in London with Help to Buy, we should look to revise and amend the products themselves rather than introduce a new product which essentially competes in the same market and, instead of giving people a loan to help them with their deposit, gives them a very substantial gift. I am most concerned about that issue. I said that we had to make choices about priorities and doing more. As my noble friend Lord Best said, we have this cash, so I would put it into affordable rented accommodation. Nothing you will do in relation to these products will make housing accessible for people on middle or low incomes. We have to build an awful lot of houses for an awfully long time before they will benefit.
Lord Horam
I entirely agree with that. My way would be to recognise that the sort of lift in the cap on borrowing for local authorities, for example, is perfectly acceptable in the context of the Government’s overall economic strategy. If you look at what is now being said worldwide by the International Monetary Fund and the OECD, at the moment they are calling for more capital investment of this kind, and there is no better capital investment than housing. It is interesting that insurance companies, for example, are now going into the build-to-rent market in a fairly big way in London, because the sort of regular, sensible rents you get from that sort of market precisely match the sort of income streams they need to service insurance bonds. That is a very interesting development, which I am sure the Government will welcome and which shows how the market, if left to itself, can itself resolve some of these questions.
To digress for a moment, the reason that insurance companies are going into this area is not only that it is a very interesting way of solving their problems but that the price is high enough for them to be able to produce buildings at a cost which enables them to rent them out to young people at a price they cannot afford. So the very high price is producing a supply consequence which is very favourable. None the less, the noble Lord is right that what is proposed here is a new product, and there is always a danger with a new product that it will lead to distortions of the market. If you try to interfere in a market situation with a product that has not been thoroughly thought-through, you risk unintended consequences—and that is what we are worrying about in this situation.
If that is the case, Amendments 38 and 39, put forward by the noble Lords, Lord Kennedy and Lord Beecham, are frankly impractical. They are not the way to deal with this problem. They are putting into the system the local authority having to decide what the level of affordability is in a particular area, when the market already decides what affordability is in a particular area. Frankly, therefore, I do not trust local authorities to second-guess the market as to what the right level of affordability is.
Secondly, on the idea of having a discount in perpetuity, as the noble Lord, Lord Campbell-Savours, rightly pointed out, how on earth do you value it in the future? Indeed, how on earth do you value it now? There is no way you can value something which has been separated from the rest of the market, which is determined by market forces, and which has a value discount attached to it. You cannot do that—there is no way an accountant could work that out over a period of time and make any kind of sense of it. Inevitably, if you try to put in something in perpetuity, it will disappear into the general market in due course, probably in some way you do not expect.
So the right answer is the amendment put down by the noble Lords, Lord Best, Lord Kerslake and Lord Beecham—two minuses and one plus, from his point of view—whereby you pull back some of the discount over a period of time from the people who benefited from this government largesse. You are achieving what you want to do, which is to get them into a new house and to start a home and so forth, but you are pulling back some of the advantages you gave to them to achieve that.
However, I point out that even that has its impracticalities, because you will be asking them to pay back rather a large amount of money at some stage unknown—they do not know when and you do not know when—in the future. That could be a very considerable amount of money. I do not know how you would do this over a period of time and whether you would do this in one lump sum or whatever it may be, and you and they do not know what their circumstances will be. So there are impracticalities even with this. None the less, we have to have some measure by which you can pull back some of the advantages you are giving to people under this new model, and the Government have to think very carefully about how they handle this.
Lord Kerslake
My Lords, I add my support to what I think is an excellent amendment from the noble Baroness, Lady Doocey. It absolutely goes to the heart of the practical challenge of estate-based regeneration. Typically, in those situations, you are dealing with stock that is either time-expired or very badly designed, and the only solution there is to redevelop and re-provide on the site. Anybody who has been involved in such schemes will know that the viability of doing this is extremely hard. It is compounded, as the noble Baroness said, by the proper requirement—I emphasise the word “proper”—to ensure that those who live on the estate at the time of the redevelopment can stay on the estate when the development is completed. It typically involves a phased process of redevelopment, decant and then development of the properties that have been freed up.
Yesterday, I was at the unveiling of public art for a scheme in St John’s Hill, where the leader of the council, Councillor Govindia, was in attendance as well. That is the first phase of a scheme there. What we have secured on that site is an increase in supply from 351 homes to 528. Of those homes, 249 are for sale and 279 are affordable. The point I make is that that scheme took over five years to get to a point of viability. We had to provide for those who were already living on the estate and we had to cross-subsidise the whole initiative through the market-sale properties on the site. We have there a scheme that we at Peabody can feel genuinely proud of. However, I can tell the Minister that if another requirement was superimposed on that scheme that itself involved the loss of value in the form of starter homes, I do not think that we could have delivered both a viable scheme and met the needs of the tenants. These issues will be replicated up and down the country. We have had a long debate about the pros and cons of this, but it is crucial that in the introduction of starter homes we do not inadvertently create a problem for the practical regeneration of estates that so desperately need it.
Lord Horam
My Lords, I add my voice to the support for Amendment 42 in the name of the noble Baroness, Lady Doocey, and the noble Lord, Lord Kerslake. I am aware, as they have said, that there are many chief executives, of big London boroughs in particular, who are very anxious to regenerate their existing—very often large and troublesome, I must say—estates in an interesting and innovative way. But the first thing they have to do is get the support of the people on the estates. They have votes, and it is no good not giving them the sort of right of return that this amendment involves—you simply would not get the support that you need to go ahead with the kind of development that is necessary.
Although it encapsulates a very important idea, this particular amendment is not right, and perhaps I can anticipate the Minister’s response in this respect. I do not think that you can exclude any starter home-type development. It would be wrong to do that, as the amendment appears to, because some sort of mix is needed. None the less, I think that the right of return for existing tenants should be guaranteed. Indeed, that is essential if you are going to get these schemes off the ground.