Lord Jackson of Peterborough
Main Page: Lord Jackson of Peterborough (Conservative - Life peer)New Housing Supply
Lord Jackson of Peterborough Excerpts
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 Stewart Jackson (Peterborough) (Con)
Has the hon. Gentleman given any thought to the problem in the planning system of land banking, whereby many approved planning applications remain unactioned? Local authorities have put significant amounts of money into those sites, for example via supplementary planning documents, but they are now idle. Were they to be actioned, it would go some way towards ameliorating the housing shortage.
Mr Betts
The hon. Gentleman helpfully anticipates my next point.
The Committee concentrated on funding issues because that was the remit of the report. However, we said in passing, as we did in our report on the national planning policy framework, that we did not believe there was evidence that planning was the obstacle to growth. We accepted the point, which the Local Government Association has made again recently, that there are 400,000 planning permissions for new homes that have not been activated. Getting at those is a major challenge that we should talk about. I do not believe that the measures in the Growth and Infrastructure Bill will deal with that problem, although that did not form part of our report because it has been published since our inquiry. The LGA also says that 87% of all the planning applications made last year were given permission. Planning is therefore not the problem.
There is a potential long-term problem, which I have raised with Housing Ministers on a number of occasions, if local plans become the heart of the planning system, as they ought to be. Many local authorities ought to speed up the process of getting those plans in place, because they are a crucial part of the planning system. The problem is what we should do if the housing numbers in the local plans do not add up to a figure that meets the national housing requirements. I asked the previous Minister for Housing that question on a number of occasions and he never seemed to have an answer.
I congratulate the new planning Minister, the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles), who came to the Select Committee a couple of weeks ago with Lord Taylor of Goss Moor, who was reviewing the supplementary planning guidance. At the top of their list of issues that were not addressed properly in the supplementary planning guidance was the need for a consistent measure of housing need that could be incorporated into local plans on a consistent basis. That will be a helpful move. It will take time for it to be effective, but there is a recognition that the abolition of regional spatial strategies and the total reliance on local plans has created a disconnect with the national targets.
Mr Jackson
The hon. Gentleman is being most generous in giving way. Does he agree that when developers have made a value judgment to bank a portfolio of land because the market is failing, there is no fiscal incentive for them to develop that land? We know about housing need, but the Treasury and others are giving no incentives in terms of supply. Perhaps we should consider tax changes as a catalyst for development.
Mr Betts
That is not something the Select Committee looked at. I will pass it over to the Treasury Committee, just as Ministers pass matters over Treasury Ministers.
There is, however, a worse problem in certain areas. I have been advised by Les Sturch, the director of planning at Sheffield council, but this is also happening in other councils. Because of market changes in housing, many developers are saying that although certain sites have—or could get—planning permission because the land is owned for housing in a local plan, they are not developable in economic terms. Local authorities therefore have to revisit their local plans and look for new housing sites in more favourable areas. That is a real problem and will put pressure on green open spaces because developers will say, “These sites are much more attractive to develop in the current climate.” Ministers must address that problem in the planning system, or else Members will be knocking on ministerial doors and saying, “Why do I have to provide lots more housing sites in my constituency when so many sites have not been built on, even though they have planning permission or could get it if developers applied?” That is a longer-term problem.
We recognised that public funding will, of course, be limited for the foreseeable future, so we looked at the private sector and markets to see what was available. There is a long-term problem. Everyone has said that such housing is an obvious form of investment, but sums have traditionally shown that investors believe they can get a 6% return, although they need 8%. There is therefore a gap, and evidence to the Committee suggested that that is why developments have tended not to happen.
However, there is increasing evidence that developments are beginning. The Greater Manchester Pension Fund is working with Greater Manchester council to provide homes, and Aviva pension fund and Derwent Homes are coming forward with schemes. Places for People gave evidence to the Committee.
George Hollingbery (Meon Valley) (Con)
I have the unenviable task of following the eloquence of the Chairman of the Select Committee, the hon. Member for Sheffield South East (Mr Betts), who spoke without notes and made extremely important points about the report. If he will excuse me, I will not be quite as rigorous or eloquent.
Housing is obviously an incredibly important issue for us all, not just for getting future generations somewhere decent to live, but for this country’s future economic prosperity. Without substantial improvement in our building rates and the production of new housing supply, our economy will struggle to grow, and we need it to grow. The Chartered Institute of Housing released a report just this month that said that home ownership was unachievable for many young people. The report suggested that since 1992 it is down 67% among those aged 25 to 34. That is a pretty stunning statistic. The average age of the first-time buyer is now approaching 40, at 37.5. It now takes 83 months to save the deposit required to buy a house, compared with the 30 months it took 10 years ago.
At present, investors, builders and the market seem reluctant to invest in new housing, despite large waiting lists. Locally, we have 3,000 people on the housing waiting list in Winchester, 2,900 in east Hampshire and 4,500 in Havant. These are prosperous areas of the country, where one might expect the lists to be rather shorter. The current economic cycle has led us to a situation in which lenders are reluctant to lend, builders find it difficult to build and buyers find it difficult to buy.
Mr Stewart Jackson
My hon. Friend is making a powerful point. Does he agree that a key issue is not that lenders do not wish to advance moneys, but that they do not have the appropriate flexible intermediate products to support intermediate housing across the country? Those unable to lay their hands on a 30% deposit, for instance, are therefore in a difficult position and are having to look at social rent or affordable rent, rather than an intermediate product.
George Hollingbery
That is indeed the case; my hon. Friend will forgive me if I come to that in a moment.
Several Government schemes are helping. They have been slow to start, but they are now moving forward. With the exception of areas such as London, uncertainty has also meant that potential buyers have been unwilling to take on what is frankly one of the biggest financial decisions of their lives. If we look rationally at the decision to buy a house at the moment, is this really the time to take on, say, £200,000 of debt? People might not be sure about their job or their future. Can it be an enormous surprise that an awful lot of people are very reluctant to take on such a commitment at this time? Frankly, I do not think so.
Despite low interest rates and a number of Government schemes—such as Firstbuy, NewBuy, “Buy now, build later”, intermediate rent and others—there is an acceptance that more still needs to be done. To date, nearly 3,000 homes have been sold through the NewBuy scheme, but, at a time when we are deleveraging our economy, the financing of new housing is undoubtedly going to continue to be a challenge.
Some reports suggest that up to 50% of new starts being contemplated by certain major house builders are down to NewBuy. The scheme seems to be taking effect, with 60 house builders now offering products through it. The figures for January 2013 show that new housing starts under NewBuy are 30% up on the same time last year. The progress is definitely slow, but there is some encouragement. Given the fact that taking on a debt is a serious commitment at this time, that is not bad going.
An article in the Financial Times today alludes to that point, and to some of the other measures that the coalition plans to introduce, and I shall quote from one or two parts of it:
“The prime minister and his deputy are set to make a joint appearance on the eve of the March 20 Budget to make several announcements, including shared equity schemes, social housing and support for first-time buyers…At the housing launch, Mr Cameron and Mr Clegg will flourish the promise of ‘garden towns’, more flats above shops and an expanded private rented sector. Ministers have discussed the radical option of extending an existing scheme, NewBuy, which allows people to buy homes with a deposit of 5 per cent, from new developments to older homes.”
I would just comment that a couple of those announcements do not seem to be that new, but I hope that when they are made in a couple of weeks’ time, they will be made with a little more commitment and determination than they were before.
George Hollingbery
Indeed.
The coalition has rightly taken a localised approach that incentivises housing policy, and good work is taking place on freeing up public land and opening up new opportunities to increase supply. Changes to the housing revenue account devolve real power and budgets to local councils to deliver housing, although, as the Chairman of the Select Committee pointed out, some freedom in relation to the caps on borrowing requirements would be welcome.
Areas such as Denmead in my constituency have become pilots for the Government’s neighbourhood planning approach, and some are contemplating more housing than has been allocated to them in the local plan. That is to be welcomed. The new homes bonus has also been a welcome incentive to encourage extra housing. To date, Winchester city council has received £1.5 million under that scheme, East Hampshire has had £1.4 million and Havant has had just shy of £500,000. This financial boost, allowing councils to invest directly in new homes, has also benefited the two unitary authorities of Southampton and Portsmouth, which have received £2.5 million and £1.7 million respectively. Those are only a few examples from the package of measures included in the Government’s housing strategy, which is designed to help increase supply. It has to be admitted that the measures have had a slow start, but they are welcome. They are the right idea, and the Government are doing a great deal to try to push the market forward.
What more should the Government do? The report that we are examining today concluded that there is no panacea or silver bullet to solve the problem of our housing deficit. I have no doubt that the Committee’s 33 recommendations will have been looked at more carefully by now, and I look forward to the Minister clarifying which of them he is considering.
At the heart of the report lie two themes: encouraging institutional investment and promoting action from local authorities. The Select Committee’s report is clear on the first theme of encouraging institutional investment, and I shall quote from it at some length:
“Institutions and structures that have traditionally ignored housing should be encouraged to invest. Increased investment from large financial institutions and pension funds may not be a panacea, but could make a significant contribution to the building of new homes in both the private and social rented sectors. Public sector bodies and housing associations should take steps to encourage institutional investment. Vehicles such as Real Estate Investment Trusts should be revamped to encourage investment in housing. The Government should also consider whether the remit of the Green Investment Bank can be expanded to cover housing and, potentially, wider infrastructure projects.”
As we have heard, the local authorities in the Association of Greater Manchester Authorities area are working to leverage their pension funds into investing directly in housing. That is something that their pensioners should welcome. Pension funds need long-term, steady returns and if public moneys can be leveraged to produce more of that in such a creative way, we should all welcome it.
The Select Committee’s report also builds on the good work that organisations such as the Joseph Rowntree Foundation have been doing. The Committee believes that we should be unlocking institutional investment and allowing for real delivery into the sector. It was noted, however, that progress in that area has been slow, and that institutional funds were somewhat difficult to access. The Government recently commissioned the Montague report, which focused in particular on the private rented sector. The report reinforces the concept of push and pull factors that can serve either to incentivise or to discourage investment.
Locally to Meon Valley, Winchester city council and Grainger, which I think is one of the more innovative suppliers in the private sector rented market, have been working on managing these factors while delivering the west of Waterlooville development right in my constituency. I was the chairman responsible for the delivery of the vehicle for this development while a city councillor in Winchester. The council has been looking at section 106 and community infrastructure levy obligations among many other factors to make sure that this development is a success. I know that planning and housing Ministers are looking into this difficult area of policy to try to free up the rules to ensure that the build-to-let market is freed up, allowing more accommodation to be built.
Mr Jackson
My hon. Friend is making a polished contribution, but does he agree that the big hole in the report is the issue of extra care? Given the demographic time bomb, the number of over-85s will double in the next 20-odd years. At the moment, housing associations shoulder the burden for producing appropriate accommodation for elderly people in extra care facilities without any particular tax incentives or assistance from any other agencies, including institutional investors.
George Hollingbery
I am grateful to my hon. Friend for making that point. I chaired a conference in Winchester only six months ago on exactly that issue, and I have made representations to the planning Minister, my hon. Friend the Member for Grantham and Stamford (Nick Boles), saying that at the very least we need some incentives or recommendations in the national planning policy framework for local authorities to examine the need for provision for older people. It seems to me that in the long term that is the way to get the very best out of existing housing stock, let alone to provide good housing stock for older people in the longer term. I agree wholeheartedly with my hon. Friend the Member for Peterborough (Mr Jackson) and believe this area needs to be looked at across government to make sure that we plan more carefully for the needs of older people.
The second theme is the importance of local authorities and how much more can be done by them and by housing associations. In Hampshire, we are starting to see local authorities make a real difference in housing provision. In February, Isle of Wight council introduced a scheme to help first-time buyers, while Southampton has an estate regeneration project that is making great strides. Real differences are emerging in housing starts and in some areas schemes are proving seriously successful—in fact, occasionally, too successful. I have not encountered this personally, but I have recently been told that Wigan council had to close its £1 million scheme to help first-time buyers after only a month because all its funding had been used up. Further afield, the Scottish Government are introducing a £20 million scheme to help people with shared ownership. This is another way of incentivising supply that should not be ignored. The Government need to get behind local authorities and create a repository of knowledge and good practice that can be shared right across the local government community. I have no doubt that the Local Government Association will be involved in work of that sort.
The Select Committee talks about two areas that could make a real difference. It makes suggestions on looking at increasing the borrowing limits for housing revenue accounts, as well as on promoting the right to buy. The Select Committee Chairman has covered the increase in borrowing limits reasonably thoroughly so I shall not go back there, but the latest figures show a slight increase in right-to-buy requests in Southampton, Portsmouth, Fareham and Winchester. Much remains to be done in this area, but we discussed at some length in the Select Committee the need for one-for-one replacement to be guaranteed in certain circumstances, particularly in small rural villages. If we do not replace a social house with another social house—and nowadays, frankly, it might be the only social house in a small village—there will be no social housing left at all, which is an important issue.
Another area of note is provision of housing for older people, but I have covered the issue and as I said it was mentioned in today’s Financial Times article.
Housing has a significant potential to help economic growth. In 2009, the Chartered Institute of Housing wrote a report suggesting that buy-to-let alone contributed £5.2 billion to the economy in just the south-east of England. The importance of housing in respect of the general economy cannot be underestimated. Realising the growth required in the housing supply market is tough, given the economic circumstances we face, but it is vital that we encourage housing associations and local authorities to take action to promote growth.
The Government are making real strides. Lots of schemes are beginning to work, and I welcome them all. The issue is not just about the need for more housing, however, as it is about the future of our economy as a whole. It has to remain absolutely at the heart of Government policy if we are to get our economy back on its feet and if growth is to be achieved. I hope that the announcements mentioned in the Financial Times prior to the Budget genuinely provide a kick-start to the industry. As far as I am concerned, it is very much needed for all of our futures.