Building More Homes (Economic Affairs Committee Report)

Lord Shipley Excerpts

Thursday 2nd March 2017 Lords Chamber

[Lord Shipley (LD)]

My Lords, I first declare my vice-presidency of the Local Government Association. I strongly welcome the report of the Economic Affairs Select Committee on building more homes. I detect from the contributions this afternoon a broad unity of view about many of the conclusions of the report, which is welcome.

There have been—and reference has been made to this this afternoon—a very large number of reports in recent times on housing supply and the rising cost of housing, both for purchase and for rent. I think that the Government have finally realised that the time for just talking about the housing crisis must come to an end. I think that the White Paper is moving us in the right direction, although it does not itself provide a solution to a number of the problems affecting the housing sector. I will return to this later.

I pay tribute to the committee, of which I used to be a member, for its evidence-based report. It has been several months since it was published, but at least it has enabled the new ministerial team to examine why existing government housing policy has been failing and to adapt some of the committee’s conclusions.

We have heard a lot this afternoon about the context of rising homelessness and of homes being called affordable when they are not affordable to very large numbers of people in work. We have very high house prices when compared internationally and very high rents in the private sector. The private sector is building only around 150,000 homes a year. We have low numbers of self and custom-build homes. We have declining space standards and large numbers of planning permissions granted but not carried through. The planning system is underresourced. Reductions in social rents may have helped the Government’s finances, but they have impacted negatively on the affordability of building new social homes for rent and on supported housing. As has been pointed out, it can be difficult for local authorities to develop brownfield sites without higher levels of remediation grant.

I say to the Minister in particular that reference has been made to the sale of high-value council homes. I had hoped that, by now, the Government might have told us that that proposal had been kicked well into the long grass and would not be proceeded with. The White Paper is not helped in its intentions if the Government are to continue with their proposal to sell high-value council homes. I hope that the Minister may be able to tell us, if not this afternoon then sometime soon, that that damaging policy will cease.

The committee’s conclusion in this report is that 300,000 homes a year should be built. Reference has been made to the Government’s target of 1 million new homes by 2020, but the word “target” is incorrect. It is not a target but a commitment; it became a commitment in the last Queen’s Speech. The difficulty for the Government is that the private sector can build only half of the 300,000 homes that the committee believes are needed. So there will be a requirement on everybody else to build the additional homes that I think we now generally recognise are needed—and, be that in the Government’s figure of 225,000 to 275,000 or the 300,000 of the Select Committee, it is significantly higher than what we are building.

The committee rightly pointed out that the Government are helping those on the verge of being able to afford home ownership, whereas those who need secure low-cost rental accommodation have not been helped sufficiently. This is correct; the Government’s focus on home ownership, while valuable and important, has been too great in comparison to that on the social rented sector. The Chartered Institute of Housing has said that the Government commit only 4% of their housing budget on below market rent social housing. That 4% is simply not high enough.

The committee said, as many of your Lordships have said this afternoon, that local authorities must be incentivised to do more. They should be able to borrow using the prudential borrowing code; I entirely subscribe to that. There are ways in which local authorities are doing good things. Bristol’s new housing company is a good example of what can be done. However, while the Government will impose a new housing delivery test on local authorities, that test is mainly about planning, not building. Local authorities need greater powers over borrowing if they are to build.

Indeed, if local authorities and housing associations build more, that will reduce demand for housing benefit, which now stands at a very high level. In the interests of good public policy, it seems to me that building more homes for social rent would save on the total amount being spent by a different government department.

I was struck by the comments of the noble Baroness, Lady Wheatcroft, about the Public Works Loan Board. Of course, some local government pension funds may be investing in property for perfectly good reasons. For the rest, I would not wish to comment, not knowing the facts. However, the Minister might consider writing to all those who have taken part in this debate about the issue. It is about the future role of the Public Works Loan Board, it is about the powers of local authority pension funds to invest and what they can invest in, and it is about the powers of councils to borrow now against, first, their housing revenue account but, secondly, their general asset base. At the moment, there is not clarity about that in local government. It might help if the Government made a formal statement.

I am taken by the proposal for a senior Cabinet Minister to get more public land released. The figure has been cited that 3 million homes could be built on land that is currently publicly owned. That is a very large number. I subscribe to the view that there should be a Cabinet seat for the Housing Minister and I subscribe to the committee’s recommendation that the best-market-value rule when releasing public land should be relaxed. I shall return to that in a moment.

The Government’s proposals of an increase of 20% in planning fees will probably suffice for the time being. I have certainly been impressed by the work about new towns that the Government are now undertaking under the Neighbourhood Planning Bill, now approaching Third Reading. Useful comments were made about the National Infrastructure Commission and its role to ensure that housing is considered as part of our infrastructure.

The White Paper has some good things in it. I like the fact that the rule about the 20% starter home requirement in larger new developments has been relaxed. I like the proposals for build to rent. I like the proposals to make the affordable homes programme open to all tenures and to promote custom-build and self-build. These are all helpful, as is the housing infrastructure fund.

The problem remains finance. House prices are running at eight times average earnings, and fewer and fewer young people can afford to buy. Less than 40% of those under the age of 35 can now afford to buy, when just 10 years ago it was two-thirds. In the north-east of England, my home region, more than 70% of working renting families cannot afford to buy a new home, even with Help to Buy. Across England, that figure is 83%.

This takes me, almost finally, to land values. The planning system encourages speculation. Land is sold to the highest bidder, even by the Government. Developers can outbid other developers, then sit on the land to wait for values to rise so that they get their money back and generate profit. Where they build, they regularly succeed in getting the affordability element reduced. Unless this issue is addressed, the White Paper will not increase housebuilding by very much. I draw two conclusions.

First, we should tax undeveloped land. The committee said that powers are needed for councils to levy council tax on developments not completed within a set time. I concur with that. I also support land value taxation. It is time for the Government to review the tax system for undeveloped land. Secondly, I should like to think that public bodies, including government departments, should be prepared to sell their land at below market value to break the cycle of ever-rising prices. Treasury rules need to be re-examined because they do not work properly for the medium to long-term.

The latest British Social Attitudes survey states that 56% of people would support more building of homes in their area. That figure has doubled in the past decade. The Government have an opportunity. They should grasp the opportunity of that rising public support for home building.