Lord Shipley
Main Page: Lord Shipley (Liberal Democrat - Life peer)
Lord Shipley (LD)
My Lords, I shall speak to Amendment 5. I declare my vice-presidency of the Local Government Association, since we are starting Report. In Committee we had a very lengthy discussion on starter homes; on whether the 20% discount should exist in perpetuity rather than for five years; on whether cash sales should be permitted; and on the impact of Section 106 agreements and the consequent adverse impact on the number of affordable homes for rent. We argued that starter homes should not be the central policy proposal in the Bill since homes of all tenures are needed, particularly for rent. Since then, the Government have conceded that an age limit of 23 and above should be imposed to prevent richer parents buying starter homes for students. They have also conceded that the five-year limit on resale should be extended to eight years with a taper.
Amendment 5, to which my name is attached, proposes that the 20% discount should apply in perpetuity. The other amendment in this group, Amendment 1, which has just been moved by the noble Lord, Lord Best, would increase the length of time for which a starter home should be held from five to 20 years, again with a taper. Either is much preferable to the Government’s current position. Amendment 5 seeks to keep a starter home as a starter home in perpetuity. Amendment 1 would deliver a similar outcome in practice, since a starter home would remain a starter home for very much longer than the Government propose. It would also be potentially easier to implement in administrative terms. We should note that the Government’s two changes will not stop cash sales for those who are over 23. Nor will they prevent rich parents buying homes on behalf of children and then securing a cash bonus when the home is sold.
The context today is important. People expect fairness from our legislation, and that fairness dictates that housing policy should not be about only the 200,000 owner-occupiers who could gain from a cash windfall; it should also be about people on low and middle incomes who cannot afford to buy a home even with a 20% discount, who should be helped to secure a home for rent—and not just in the private sector.
There are two amendments in this group, Amendments 1 and 5—but if the noble Lord, Lord Best, wishes to test the opinion of the House, I believe that he should be supported.
Lord Beecham (Lab)
My Lords, I shall also speak to both amendments, having signed both—which I suppose is by way of an each-way bet. I hope that the odds turn out to be favourable.
Many noble Lords will have received a letter from the Minister of 7 April in relation to starter homes, and I shall return to that later. But I also wrote to her on 4 April with a number of queries and I received a reply some four days later. That reply raises some interesting further questions. I asked about the Government’s definition of affordability in this context and whether it would be determined in relation to average house prices in a given area, subject to the proposed caps, or whether, and in what way, the definition would be linked to income. The reply was that since starter homes would be purchased by first-time buyers under 40, the Government would expect them to be below the average house price for the area and to be offered at a genuine minimum 20% discount, but that,
“the discount may be greater in some locations”.
I do not recall that this latter possibility has been raised before. Can the Minister exemplify the locations in which a greater discount might be offered and indicate who will determine it and upon what criteria?
The Government are apparently working with the industry and valuation professionals,
“to ensure an agreed, transparent valuation process is agreed”,
to demonstrate that the discounted sale price is indeed at least 20% less than the market value. In her letter to Members in general, the Minister quoted the Office for National Statistics price statistics, showing that the new-build average was £291,000 in England—slightly more than the average for all dwellings—while for first-time buyers it was £181,000 excluding London. She expects that the actual starter prices will be lower than the average, even before the 20% discount.
But this of course assumes that developers will not take advantage of the scheme to increase the cost of new homes to buyers, who will be cushioned by the scheme from such increases by the operation of the discount. This is not an industry noted for its philanthropic propensities. At the very least, we must expect developers to build at prices which will, after the discount, meet the current level of new-home prices—that is, at 25% more than the discounted price. What, after all, will be the vaunted “local open market value”? It surely cannot be a simple average, which is what the Minister appears to assume.
I also asked about the size of the deposit that buyers will have to find, to which the enlightening response was that,
“this will be determined by individual lenders”,
with whom the Government are apparently in discussion. As with so many of the concerns about this Bill, Parliament is being asked to establish this scheme with absolutely minimal or indeed no information about how it will work in practice.
Similar concerns apply to my third question about the reviewing of price caps and the geographical areas to which they will apply. This will, like so much else, be kept under review, with local authorities being consulted and with a power to prescribe different rates for different areas—but with no advance timetable.
I asked what standards in relation to building density, space, energy efficiency and special needs—for example, for disabled people—would be required and by whom they will be determined. The opaque answer was that starter homes,
“will be subject to the normal planning considerations and building regulations”,
to be agreed—an interesting word—at local level. So, despite the significant public contribution and the tax-free gains to be made by the first-time buyers, the Government are doing nothing to address these concerns. In fairness, they refer to councils’ ability to require higher levels of accessibility and to apply the nationally described space standards, and they have published,
“an initial set of design exemplars”—
but these will be optional.
In reply to a question about enforcing the prohibition on lettings, the Minister indicated that discussions are in train with the industry, lenders and local government which might involve a requirement on a starter-home owner to provide evidence of personal occupation—for example, in the form of council tax or utility bills. I should have thought that this would not be too difficult to evade and very difficult and costly to oversee effectively.
On tenure, I asked what consideration would be given to the provision of a mix, including affordable social rented housing, for which there is huge demand, as the noble Lords, Lord Best and Lord Shipley, have already said. The reply was less than comforting, stating that planning authorities will,
“need to apply their plan policies, including those on affordable housing, in light of the legal starter homes requirement”.
It went on to affirm:
“We would expect them to seek other forms of affordable housing, like social rented housing, where it would be viable”.
But this formulation begs the questions of what “seeking” means in terms of any power to require such a provision and what is meant by “viability”.
Some other questions are responded to after a fashion in the Minister’s more general letter. Thus, in response to questions raised by me and my noble friend Lord Campbell-Savours, she stated that an individual who had inherited property might still be considered a first-time buyer—a very convenient provision for the fortunate few. And yet another consultation is to take place on how to enforce the requirement to occupy the starter home—a question raised by the noble Lord, Lord Greaves.
It is impossible not to conclude in relation to these and other matters that we are being invited to buy not just a legislative pig in a poke but a veritable herd of such animals. This makes it all the more necessary to improve the Bill, as most of the amendments in the relevant groups that we shall discuss today seek to do. In particular, there is the major question which is the subject of Amendments 1 and 5, which would require a tapered repayment of the discount on sale, in the case of Amendment 1, or, as in Amendment 5, that the discount should last in perpetuity, thus avoiding a double bonus to first-time buyers by way of tax-free gains from both the discount and the inevitable rise in value over time—without even the need for offshore financial organisations to be involved.