Future Homes Commission Report

Lord McKenzie of Luton Excerpts

Tuesday 4th December 2012 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I, too, would like to thank my noble friend Lady Whitaker for the chance to discuss, albeit briefly, the report of the Future Homes Commission. As the noble Lord, Lord Best, said, it is one of a string of important reports on housing that we have received recently. We welcome this report, which contains a number of innovative proposals to tackle the worst housing crisis in a generation.

We find ourselves in a situation where we are building fewer than half the new homes needed to keep pace with new household developments, let alone to address the backlog. There are some 2 million people on housing waiting lists; homelessness is increasing; and the private rented sector has rising rent levels and inadequate regulation where, according to the commission, some 37% of property fails to meet the decent homes standards. As the noble Lord, Lord Greaves, says, there is a shortage of affordable housing, and as the noble Lord, Lord Stoneham, has just told us, housing stocks are actually declining. This is at a time when growth in our economy is weak at best, and is dragged down by the dramatic decline in the construction sector, where every £1 of construction output could generate nearly £3 of demand in the economy. Where people need homes and jobs, young people need skills and apprenticeships, the economy needs growth and the construction sector needs work, the imperative of building more homes should be something on which we can all agree. To increase the number of new homes built every year to over 300,000 certainly sets an ambitious target—indeed, a step change.

However, this is not just a numbers game. It is about the quality of the homes provided; crucially, it is also about how this scale of investment is to be funded—a matter spoken to by my noble friend Lord Whitty in particular. We very much support the emphasis of the commission in highlighting the key role of local councils in helping to create sustainable communities. We share the vision of mixed communities living in well designed and high quality homes in neighbourhoods with good facilities where people want to live. However, sustainable communities will not be helped if people are shunted from pillar to post because of draconian housing benefit rules. What is clear is that in the current climate, traditional forms of finance from the Government and banks will not be sufficient to deliver the scale of funding required. There is a lack of mortgage finance for those who wish to buy and a current dearth of institutional investment for those who want to rent. The Future Homes Commission drew attention in particular to the demand for private sector rental property as being a huge and neglected issue, driven not so much by those who cannot afford to buy, but by those who choose to rent, particularly for job mobility.

As we have heard, the suggestion is that the funding gap can be filled by institutional investors. The analysis seems to show that the percentage of UK financial institutions’ property portfolios held in the residential sector, at 1%, is significantly less than in many other countries. The RIBA points out that typically, for residential property, the institutions do not wish to take on planning or construction risk and that currently there is very little for them to invest in. There is a lack of good quality, large-scale rented and shared ownership schemes.

The commission proposes that there should be a local housing investment fund of £10 billion, created by pooling 15% of the assets of the largest 15 local authority schemes. This 15% is the current maximum of the assets of such schemes which can be invested in infrastructure, although the Government are consulting on increasing this to 30%. Do the Government support this recommendation? We should clearly be mindful that any investment of pension fund assets has to be in the best interests of the members. Following the review by Sir Adrian Montague, can the Government outline what they now consider to be the main barriers to significant institutional investment in housing?

My noble friend Lady Whitaker, supported by a number of noble Lords—the noble Baroness, Lady Maddock, my noble friend Lord Sawyer and the noble Lord, Lord Greaves—alighted on the recommendations about the need to change attitudes to poor design, including space standards. These matters affect not only the well-being of households that occupy properties but their very willingness to buy new homes in the first place. Good design is also a component of getting the acceptance of communities to new developments. We acknowledge that the Government have announced a review of housing standards, but would not wish to see the ability of local councils to set standards being diminished. We certainly subscribe to the concept that local authorities should have a pivotal leadership role at every stage in developing new housing provision. This is essential in tackling what the commission describes as a fragmentation of the development process. However, we remain dismayed at the latest government proposals to bypass local planning authorities which are contained in the Growth and Infrastructure Bill.

The commission concludes that to realise its vision,

“land will be needed in or close to virtually every city, town and village”.

This will certainly test the leadership of local authorities and, indeed, the effectiveness of the duty to co-operate.