Housing

Lord Shipley Excerpts

Thursday 19th January 2012 Lords Chamber

[Lord Shipley]

My Lords, I join other noble Lords in thanking my noble friend Lord Stoneham for initiating this important debate. I declare my interests as a member of Newcastle City Council and a vice-president of the Local Government Association.

It is now widely recognised and understood that the housing bubble has been at the heart of Britain’s economic crisis. We know that we must not return to the days of continuously rising house prices. That means that we have to build more homes for people to live in, address the issue of empty homes where too many of them exist and ensure that land with existing planning permissions actually gets built on. Therefore, I welcome the Government’s housing strategy, Laying the Foundations. It delivers a mortgage indemnity scheme to help around 100,000 buyers who are unable to enter the market to do so with 5 per cent deposits on new homes. That will reduce the pressure on the rented sector where we have rising demand and, in several parts of the country, rising rent levels. That policy will help. I welcome the new £400 million budget for the Get Britain Building strategy to help get construction going where it currently cannot do so because of a lack of development finance. That will help. I also welcome plans to reward councils that bring empty homes back into use with the £150 million which is available to councils and housing associations. That, too, will help.

The problem is that buyers are not buying and lenders are not lending, so builders are not building. There were just 115,000 new build completions in 2010-11, when, as we have heard, the number of households is rising at twice that level and is forecast to do so for the next 20 years. These things are difficult to predict, but even if this projection is too high it is still evident that the rate of new building is much too slow. Therefore, we need to break through the barriers which stand in the way of building, particularly the building of affordable homes both for rent and for first-time buyers.

Consider the following: the value of British homes is some £4.3 trillion. It has risen 6 per cent in the past five years but it has gone up 20 per cent in London and the south-east. However, owner-occupation is in decline with a 250 per cent increase in renting in the past 10 years. The south-east now accounts for 26 per cent of housing stock but 36 per cent of value. One of the Government’s stated aims, which I warmly welcome, is their intention to rebalance the UK economy away from overdependence on the south-east and on financial services. However, a key element of this will be to increase housebuilding rates in the north and the Midlands.

However, we cannot escape the inevitable conclusion that constrained public subsidy is likely to be not just a short-term blip but something that is here to stay for the foreseeable future. We still desperately need to generate new affordable homes. However, if we probe a bit deeper, there are examples out there that provide a model of what the future may look like. Increasingly, those within the sector are looking to enter into longer-term partnerships and use public land in an innovative manner. There are examples of pioneering joint ventures between private sector developers, local authorities and affordable housing providers such as Home Group in the north-east of England. Working with Galliford Try and Gateshead Council, Home Group’s Evolution Gateshead project is, at £250 million, one of the largest regeneration projects outside London. Home Group, with Galliford Try, is providing equity and debt, Gateshead is providing public land, and with all sides sharing the risks and the rewards it will allow a whole package of 19 sites to be developed and the creation of around 2,400 much needed new homes.

There is a real danger that long-term regeneration is slipping down the priority list in favour of asset disposals to maintain an authority’s operational budget. We can understand the pressure that local authorities find themselves under yet, through these joint venture models, local authorities can have the vision to deliver long-term regeneration without having to sell off the family silver.

Then there is stock rationalisation. With constrained levels of affordable housing finance, it is not merely a case of achieving the maximum level of development possible from this round of funding. More fundamentally, it is about how housing providers adapt to a future with little or no grant. In looking at this subject over the past few days, I came across a statistic from the Savills affordable housing division. Its research shows that if you were able to alter the stock profile across England by just 5 per cent, you would be able to build an additional 50,000 units on the back of the savings. That involves a transfer of just 125,000 units out of a total stock of more than 2.2 million. That is exactly what innovative housing providers such as Home Group are now actively engaged with. Over a six-year period it plans to dispose of almost 6,000 units and exit in favour of other providers in 71 local authorities. In doing so, it believes that it can concentrate activity in more focused geographical areas, driving up service standards in those areas and generating £150 million of receipts to reinvest in the creation of additional affordable homes. Already, Home Group has disposed of nearly 2,000 units to other housing associations, which may access new ways of financing from new providers. It has reinvested the proceeds to improve the service to its current and potential customers.

Housebuilding makes a crucial contribution to our economy and is particularly crucial for jobs since it accounts for more than 3 per cent of GDP. For every new home built, two jobs are created for one year. Yet over the past four years the workforce in construction has reduced from 2.35 million to 2.1 million today. That is a 10 per cent decline, which is four times higher than the overall workforce reduction.

I have no doubt that housing growth is a prerequisite of economic growth. Housing growth requires barriers to be dismantled, which is what the Government are doing. They have allocated £500 million to the Growing Places Fund and are freeing up public sector land on the “build now, pay later” principle for builders. There is also the build your own home scheme and, as I mentioned earlier, the Get Britain Building investment fund. Crucially, local councils will have greater freedoms in their management of social housing and will play a key role in bringing empty homes back into occupancy, with the £150 million fund to turn empty homes into affordable homes to which I referred.

I wish to mention two overriding principles in the way that I think about housing. First, we should not see a house or a flat as a unit but as a home. In all our thinking about housing—for example, around issues to do with spare rooms—we should keep to an overall principle that if someone is to move from a property which may be perceived by others to be too big, the principle of volunteering to do so should be paramount. Any compulsion should be eliminated from our thinking. I believe that people think of their house or flat as their home. That home will have many memories. When I was leader of Newcastle City Council, one of the things that we tried to do was to get back to building bungalows. If you build bungalows with a little bit of space at the front and back and perhaps a small garden, but on both sides, people are more willing to move from a three-bedroom council dwelling to something that they perceive to be good for them than to be downsized into a block of flats which they do not really want to live in. Bungalow building has been on the back burner for around two decades, but they are now being built and opened in my city and elsewhere. That is extremely helpful.

Homelessness is the second overriding issue that I want briefly to talk about. It has started to increase again. Last year, in 2010-11, just over 100,000 people approached their local authority as homeless. The number of households accepted as being owed the main homelessness duty increased by one-sixth. In addition, there has been an 8 per cent growth in rough sleeping in London during the past year. At the same time, overcrowding has also been rising—reversing a previous, fairly long-term, decline.

Finally, we have heard about housing policy being a challenge. Indeed it is. One can adopt the view of the noble Lord, Lord Whitty, which I interpreted as saying that the glass is half empty. I interpreted the noble Lord, Lord Best, as saying that the glass is half full. I have to say that I subscribe to the latter view because the Government have addressed an issue that for the past four years had not been properly addressed as a consequence of the credit crunch. It has been a major source of concern for many of us since the credit crunch began as we have seen housing waiting lists rise, young people unable to buy and not enough housing units being built. Laying the Foundations has established a clear way forward and a clear set of public investment priorities. I hope and am confident that the Government will keep those priorities under review and be prepared to adjust them if necessary, but we now have a set of investment policies that can be followed to solve some of the underlying housing problems that our country faces.