Housing: Affordable Housing

Lord Kennedy of Southwark Excerpts

Monday 22nd February 2016 Grand Committee

[Lord Kennedy of Southwark (Lab)]

My Lords, first, I congratulate the noble Lord, Lord Shipley, on securing this Question for Short Debate and declare an interest as a local councillor in the London Borough of Lewisham. Everyone here supports the concept of being able to buy your own home if that is what you want to do, but that must be part of a wider policy of providing homes of different tenures to meet people’s needs, underpinned by homes of good quality.

We are in the midst of a housing crisis in the UK and are considering the Housing and Planning Bill, which is a generally dreadful piece of legislation and a politically motivated attack on social housing that will do little of what the hype says it will deliver. I very much agree with the points the noble Lord, Lord Shipley, made in that respect.

The Question before the Grand Committee today is about the affordability of homes under the extension of the right-to-buy scheme and the starter home proposals. The first challenge for the Government is to make sure that their sums add up. Measures to help people own their own homes are to be welcomed, but the starter homes programme has hit a number of problems and appears to be a one-off gimmick rather than a thought-through policy that will remain in place for many years, as my noble friend Lord Beecham said. I would have hoped that the starter homes programme, a flagship policy of the Government, would enable people on modest or low incomes to own their own homes, but it plainly does not do that in its present form.

Research from Shelter, to which the noble Lord, Lord Shipley, referred, has shown that the programme will not help the majority of people on the new national living wage, which is another flagship policy of the Government. Starter homes for families earning average wages will be unaffordable in more than half of local authority areas across the country in 2020. Families on the new national living wage will be able to afford a starter home in only 2% of local authority areas. Single people on low or average wages will struggle to afford a starter home in 2020 in the majority of local authority areas. Even those on a higher than average salary will be restricted from being able to afford to buy in three-quarters of local authority areas. London, the south-east and the east have the lowest number of areas where affordable starter homes could be built under the scheme, despite being among the highest areas for demand.

There is a conflict in the scheme. Behind the hype, the reality is that it is a complete failure in helping people on modest incomes to buy their own home. Can the noble Baroness explain to the Grand Committee how this policy helps people earning the Government’s flagship living wage to own their own home? Can she further confirm for the record how the scheme is to be funded? Is it by diverting funding from other forms of affordable housing funding, such as shared ownership or social rent, with no additional funds being made available? Can she also explain why the discount is not for a much longer period or in perpetuity, to have a long-term effect in delivering the Government’s objectives?

Looking at the term “affordability” in a wider context, when sites are being considered in the green belt or on brownfield sites, what thought has been given to the provision of services such as roads, buses, shops and schools and to other infrastructure? Who will pay for all those essential requirements? Can the noble Baroness also set out her views on the desirability of having mixed tenure rather than developments all of one type of housing?

Moving on to the extension of the right to buy to housing association tenants, again, I support people being able to own their own homes, but the funding method here makes this programme of very questionable affordability for the wider community, as well as for individuals, due to rising prices. As a matter of policy, this should be funded by the Government directly, not by a smash and grab raid on so-called high-value local authority housing. There must be a duty on housing authorities carefully to consider the local housing need and make decisions accordingly. Forcing councils to sell homes and requiring them to make regular payments to fund another flagship government scheme does not seem very fair. It certainly does not seem very localist but, like the big society, localism is rarely mentioned by Ministers these days.

We must also not forget that a significant proportion of properties sold under the statutory right to buy have found their way into the private sector. In August 2015, Inside Housing published an analysis based on FOI requests, which found that 40% of ex-council homes were now in the private rented sector. That is not exactly a great achievement in terms of getting people to own their own home. It also has a detrimental effect on the housing benefit bill, which is paid for by the taxpayer.

I suggest that selling public sector housing only for it to become more expensive in the private rented sector—and of lower quality, with more people living there and with upkeep and maintenance issues—runs contrary to everything that the Government say about the dream of owning your own home. The dream of owning your own home is being thwarted by the nightmare of ever-increasing rents in the booming private rented sector, thanks to government policy which is preventing people from living in a more affordable home and saving for a deposit to own their own home, something to which the noble Baroness, Lady Thornhill, referred.

The scheme is another central government policy that should be funded from central government resources. Why do the Government think it is acceptable to fund these housing policies in the way they propose? How is reducing social rented sector housing, with its fairer rent levels, and increasing the private rented sector, with its soaring rents, helping individuals to own their own home? How is it helping the wider community to thrive when people are forced out of certain communities as they become unaffordable to live in for people on low or modest incomes? How does it help London, for example, to remain one of the greatest cities in the world if we create a London of two halves?

It would also be helpful if the noble Baroness could confirm who thinks up these policies and schemes— I would like to meet them. We all want to increase home ownership, and colleagues on these Benches want to help people on low and modest incomes achieve that dream. It is regrettable that nothing in the Government’s proposals suggest that they want to do the same.

--- Later in debate ---

[Baroness Williams of Trafford]

I will come to the figure on replacements during my speech, if the noble Lord would bear with me.

Until now, the discounts available under right to buy have been available only to tenants in local authority properties and some former council properties. Extending these discounts to housing association tenants in England will end that unfairness and mean that up to 1.3 million more families will get a realistic chance to own their own home. Working with the National Housing Federation, we have secured a voluntary agreement with housing associations to give their tenants the opportunity to buy their own homes with an equivalent discount to the right to buy.

As set out in the voluntary agreement with the National Housing Federation, tenants of housing associations will be eligible for the equivalent discounts that are available under the right to buy of up to £77,900, or £103,900 within London. The extended right to buy will make home ownership affordable for the first time for many more housing association tenants. The Government have been clear that the sale of high-value vacant council housing—I stress vacant—will pay for the cost of compensating housing associations for the discount.

Starter homes will provide an affordable step into home ownership by offering young first-time buyers a minimum 20% discount on a new home. This model gives purchasers the benefit of immediate ownership and, importantly, will help them achieve the step up to their second home in due course. A number of noble Lords made the point about securing that discount in perpetuity. We do not want people five years down the line—or however long it is before they sell their house—to suddenly be at a disadvantage and find there is another cliff for them to overcome. We have decided not to insist on that in perpetuity discount to allow people to step up on the housing market.

We expect starter homes to be valued at below the average first-time buyer price for the local area. Developers must build them for sale to young first-time buyers and will ensure that they price them for this market. With a 20% discount, average market prices for homes bought by first-time buyers in the third quarter of 2015 could be reduced to £145,000 across England, excluding London, enabling more first-time buyers to buy their own home. We have examined affordability of starter homes to those who are currently in the private rented sector. If they were to buy in the lower quartile of the first-time buyer market, outside of London, up to 60% of households, currently renting privately, would be able to secure a mortgage on a starter home, compared with 45% who could buy a similar property at full market value.

There are a number of different points to make about the market, including saving for a deposit through a Help to Buy ISA. We are also looking at the possibility of allowing a Help to Buy equity loan to be offered on a starter home to ensure that a first-time buyer needs only a 5% deposit.

Starter homes are just one part of our package of affordable housing options. They will help to address a real problem of access to home ownership for the under-40s, the one demographic excluded from this market.

The noble Lord, Lord Shipley, asked about affordable rent. As we have discussed already under the housing Bill, £1.6 billion has been put aside for houses for affordable rent. That will be grant funded, so they are absolutely guaranteed to come on to the market. These are minimum positions for this sector, because local authorities may well do a deal with developers to produce more—and, of course, there is the £4.1 billion that we have put aside for 135,000 shared ownership houses, which will require a deposit of something like £1,400. That may be unaffordable for some people, but I think for most people it will be within the scope of what they can afford.

The noble Lord also made a point about garden cities. The Government are certainly not closed to suggestions about proposals for garden cities; they are a very good way to build a lot of houses and, in fact, to build sustainable communities within certain areas. I know of a number of areas where people are very keen to bring such proposals forward.

A number of noble Lords made the point about the £450,000 cap in London and £250,000 cap outside of London. A cap is precisely what it is—it is not an average house price. Many properties will fall well below that cap, and the Government will keep an eye out to make sure that housebuilders do not abuse that provision for first-time buyers for starter homes.

The noble Lord, Lord Shipley, made the point about the forced sale of high-value assets. The high-value assets sales will not be for occupied properties but for vacant properties at the very top of the market, and details of that will come out in due course. He also made the point about homelessness going to 1980s levels. Homelessness is at less than half of the 2004 peak, and the Government are maintaining spending centrally and locally on homelessness prevention. The noble Baroness, Lady Grender, talked about continuing to discuss this issue and bear it in mind as we go through the housing Bill. I think that the last time we had a debate on this matter, I mentioned the rough sleeping social impact bond, which we intend to bring forward. We have brought forward a homelessness SIB, which was the first in the world.

The noble Lord, Lord Shipley, also talked about replacement of property in the local area. This is what we fully expect: that a housing association will want to build in the local area.

The noble Lord, Lord Beecham, talked about 53% of housing associations renegotiating right-to-buy agreements. If that happens he will, I am sure, reiterate his words to me; we have, however, no evidence that it will. This agreement was made in good faith and the first five pilot housing associations are already starting on it. He also asked how the exemptions on the right to buy would work. We are very keen that these exemptions are negotiated and agreed locally in a form that is best for the local area.

The noble Baroness, Lady Thornhill, talked about starter homes being the only game in town. They are a priority for the Government because of the demographic group that has fallen out of home ownership, but they are not the only game in town. Affordable homes for rent, shared ownership, custom build—these will all be promoted in the housing Bill. She mentioned flexibility for councils, and I totally agree—other than the duty in relation to starter homes, councils will have flexibility on what is best for their areas.

I am conscious of the time, but I had better answer the questions of the noble Lord, Lord Kennedy, before I get told off again. He asked about the quality of housing. That is a very good point. Design quality will be a focus of my noble friend Lord Heseltine in estates regeneration. We are not trying to gentrify estates; we are trying to give people on regenerated estates the quality of life that they deserve.

The noble Lord also asked whether starter homes are a gimmick. They are not a gimmick. We recognise that the under-40s are being increasingly precluded from the housing market and we want to reverse that position. He rightly made the point that historically, London and the south-east have been the hardest areas for people to own their own homes. That is why we are focusing so much on providing not just one-for-one replacement, but two-for-one replacement, for people accessing their own homes in London.

Finally, the noble Lord, Lord Kennedy, talked about infrastructure funding in connection with some starter home projects. Infrastructure funding can be accessed through Section 106. He is right that CIL is not applicable here, although local authorities can negotiate Section 106 infrastructure funding if it is viable—we do not want to push developments out of viability. Finally—because I have gone well over time—he talked about social rented sector rents versus private sector rents. In fact, the percentage increase in the social rented sector has got far out of kilter with the private rented sector, and we have tried to address this through the Welfare Reform Bill, although some noble Lords will not agree with that approach at all.

[Lord Kennedy of Southwark]

Would the Minister come back to me, perhaps in writing, with regard to people on the new national living wage, a big policy of the Government? They have no way of affording a starter home—a number of organisations have said so. How will the Government address that? The Minister also referred to the fact that, in addition to starter homes, other forms of housing would be supported. Will the Minister write to me about the sums involved?

[Baroness Williams of Trafford]

I will certainly write to the noble Lord about the sums of money involved. I agree that not everybody will be able to afford a starter home, which is why we have so many products we intend to bring forward. For shared ownership, which I mentioned earlier, it could be that one needs a deposit of £1,400, which would suddenly make the prospect of home ownership—even if it is part ownership —far more of a possibility. I appreciate, however, that certainly in London the housing market is very expensive.

With that I will finish because I have gone three minutes over time. I did not want to neglect the noble Lord, Lord Kennedy, because I did before, but I have a load of questions I have not answered, so perhaps I could write to noble Lords.