Housing and Planning Bill

Lord McKenzie of Luton Excerpts

Thursday 3rd March 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, while listening to this debate I have been trying to get my mind around the mechanics of how some of this might work. Perhaps the Minister might comment. It seems to me that on day 1 the discount is met by the developer, not by the Government or the purchaser. Other things being equal, you would expect that discount to be represented as a charge against the property. If nothing else changed, should that property be sold it would be sold at market value and the vendor would have an obligation to account for the discount—presumably, in this case, to the Government. If Amendment 41A were accepted, the detriment of that charge would gradually reduce over a number of years, and if there were a disposal there would be a smaller amount to be repaid.

The issue arises as to who the amount gets repaid to—who the charge is discharged in favour of. The Government presumably get some sort of windfall along the way. If they do not, how does it work? Should there be a residual recovery of the charge, who would get the benefit of it? If the charge is written off on the basis of Amendment 41A over a period, in a sense there is nothing to recover. It seems that that is a mechanism to address the issue the noble Lord, Lord Horam, and my noble friend Lord Campbell-Savours were pursuing about how the market will work. It would be relatively straightforward if that were the mechanism.

But where are the Government in this in terms of scoring against public expenditure? They do not take a hit on day 1, but do they anywhere along the line? Presumably not if the discount is on some basis fully written off. But if it is not and it is recovered by the Government, that has got to be reflected somewhere. Perhaps the Minister can help us with that.

[Baroness Gardner of Parkes (Con)]

My Lords, I really like Amendment 41A but I believe the money should go to the local authority in which the property is based, to be used for further housing benefit or whatever else is needed. Local authorities are very hard pressed for funds and all the local communities benefit from anything that goes to them.

It is not at all unreasonable to ask for a certain amount to be repaid. It would be just,

“1% for each year of occupation”—

or is it 1/20th? That is where I am slightly lost. If you occupy a property for 20 years and pay 1% for each year does that mean—my maths are not good enough to work this out—that you have reduced the whole lot at the end of 20 years? If you have not stayed the whole 20 years do you pass it on to the next person, so say after five years that person has a 15% discount, which they can then keep for 15 years? And will they lose that when they pass on the property? I believe that is what is intended. It seems to be the fairest amendment which has been put forward on this.

[Lord McKenzie of Luton]

I accept entirely that the recovery could be by the local authority rather than the Government.

[Baroness Williams of Trafford]

My Lords, I thank the noble Lords, Lord Kennedy and Lord Beecham, for Amendments 38 and 39, and the noble Baroness, Lady Bakewell, and the noble Lord, Lord Shipley, for Amendment 46. I will address them together.

I am very clear that starter homes are a new product. They are a manifesto commitment designed to serve a pressing new need. Clause 2 sets out the key parameters: a starter home is available to first-time buyers, under 40—the very gap that the noble Earl, Lord Lytton, referred to—at a minimum discount of 20% of market value and are subject to a price cap.

The proposed amendments would replace the minimum 20% discount on the open-market value with affordability criteria based on average local household income. Any discount would remain in perpetuity. This amendment would remove the 20% discount on local market values. I cannot support that as 20% is a minimum discount and, if they wish, councils would be free to negotiate with developers for a higher discount if that was best for the area. There is evidence that they do that at the moment for affordable housing.

Much was said at Second Reading and on Tuesday about the affordability of starter homes. Research on affordability by Shelter and Savills for the Local Government Association was based on median house prices in each region. I question whether first-time buyers access the market at average house prices, as I pointed out the other day. Starter homes will be valued to align with local house prices for first-time buyers aged under 40. We are working with the sector and professional bodies to ensure that a transparent process is agreed for valuation.

The noble Lord, Lord Kerslake, talked about the Shelter report, which is not out yet—he must be a very important person, as I have not seen it yet. I will be interested to see it when it is published but I must point out that we all agree that London is expensive. I do not think that anybody denies that. In response, I would point out that we estimate that starter homes will be accessible to those with a gross household income of £45,500 in the south-east, as I added up badly yesterday, and of £39,500 in the east of the country.