Affordable Housing

Lord Kerslake Excerpts

Thursday 25th June 2015 Lords Chamber

[Lord Kerslake (CB)]

My Lords, I declare an interest as chair of Peabody, chair of the recently formed London Housing Commission and president-elect of the Local Government Association, to follow the noble Lord, Lord Best.

The defining question for this Government on housing is how they can substantially increase the level of supply and, crucially, hold that high level of supply for a sustained period of time. This should be the Government’s overriding priority and they should invest considerable time and effort into meeting housebuilders, local authorities and housing associations to discuss the ways in which it can be achieved. Other noble Lords have spoken about this, but by any reckoning, to meet the country’s need for new housing we should be building well in excess of 200,000 new homes a year.

This agenda is not just about affordable houses for rent and affordable houses for sale, and it is certainly not just about housing for market rent—it is about all of the above. Unless we address housing shortage and lack of supply in every way possible, we are unlikely to move from our current level of building around 140,000 new homes per annum. It ought to be the Government’s most important and defining priority, and I hope very much that we will see proposals that will address the issue on this basis.

The issue is significant across the whole of the country, but it is particularly acute in London, where the price of housing and levels of rent are increasingly moving away from Londoners’ incomes. Indeed, the current calculation is that the average price of a property is now 14 times the average salary. That is an unsustainable position, and that is why I am delighted to be taking on the role of chair of the commission, whose aim is to identify how we might more than double the supply of housing in London over the next five years.

When we look back at what has worked and what has not worked on housing supply, we can see that one of the triumphant successes—I think it can be described as that—has been the model whereby housing associations borrow privately and, with support from government grant, deliver new housing and fund the borrowing through rental streams. This has been an enduring success in the new supply of affordable homes. We have seen the level of government subsidy come down and the level of cross-subsidy from houses for sale under Section 106 agreements go up. We have seen innovative new schemes around shared ownership. It is a model that we know works. After an initial wobble, it is interesting to note that the last Government not only committed to a programme of affordable housing but actually invested in growing the programme by making two crucial decisions which I think will be critical to the future stability of supply.

The first decision was to commit to an increase in rent by CPI plus 1% from 2015-16 for a period of 10 years. This has given housing associations confidence about their rental income streams and enables them to borrow for the long term. The second decision has already been referred to: a commitment to a programme over the whole of the Parliament of capital investment to deliver 275,000 affordable homes. These are two crucial additions to the way in which affordable housing works and I would be grateful if the Minister would confirm that both will remain in place for the duration of this Parliament under the new Government.

The question noble Lords might think was on the minds of delegates at the Chartered Institute of Housing conference that I attended this week was how they could play their role in delivering new supply and how they will respond to the challenge I have just described. Sadly, the debate was entirely dominated by the extension of the right to buy to housing associations and the forced sale of council homes. This risks becoming an overwhelming distraction from the underlying task we face in this country. As time goes on, the contradictions and challenges of this policy will grow. For example, there is a big issue around not just whether the sums add up but whether funding from the sale of council homes will come through in time in order to fund the discounts for housing associations. If those two things do not match, who will pick up the difference? There are major issues around rural housing where land has been set aside to deliver affordable homes in perpetuity. There are also major issues around Section 106 planning agreements, which again identify affordable housing in perpetuity.

As each day passes, we see more issues and more challenges. With those challenges, people are coming forward with ways in which the policy could be addressed and improved. Potential ideas are to replace the cash discount with an equity loan; to exclude certain types of properties, such as those in Peabody, where the funding came from private sources; to exclude rural housing; and, crucially, to decouple the council house sales policy from the policy of funding right to buy in order to develop a more sensible policy on this issue. These are creative solutions to try to improve a policy that, as I have said, is wrong in principle and wrong in practice.

I hope that the Government are open to new ideas and that we do not see what the French describe as the politics of the stiff neck. This House will have a significant role to play when the legislation comes forward.