Housing: Affordability and the Underoccupancy Charge

Lord Stoneham of Droxford Excerpts

Thursday 31st October 2013 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, I declare my interest as chair of Housing 21 and offer my congratulations to my noble friend Lady Bakewell on her maiden speech. I hope that it is the first of many contributions to housing debates in the House in future.

At this stage of the debate a lot of the points have already been made, and I do not think there is much point repeating them. I shall concentrate on a few issues. I think there is common agreement that no Government in the past 30 years have had a housing record that they could be really proud of. The housing sector has been dominated by catastrophic cycles of boom and bust. We all recognise that there is a need to build more than 200,000 units annually and consistently to meet the demands of household formation, and we have failed miserably. There has been a huge problem of selling off our social housing stock: 2 million homes since 1979. As we heard from the noble Lord, Lord Shipley, the previous Government saw a net loss of 400,000 units from our social housing stock. Now we are reaping the consequences.

I shall concentrate on supply issues but first I shall make two brief comments on the spare room subsidy clawback. I do not have a problem with the principle of the policy: there is an issue of equity with the private rented sector, and a problem with the imbalance between underoccupancy and huge demand for social accommodation. However, we have warned about the transition problem that results from retrospective implementation of the clawback without the availability of sufficient smaller accommodation. We need to concentrate on the transition, but the principle is right.

Secondly, I pay tribute to the staff in the social housing sector, particularly in housing associations and local councils, who have been grappling with the issue of tenants who have had to incur significant extra expenditure when their household budgets are already tight. The information I am getting is that efforts in that direction, and the extra resources provided for that sort of advice and assistance, are helping to keep arrears at lower levels than might otherwise have been expected. It is an area that we should learn from and concentrate extra resources on.

I turn now to the longer-term issue of housing supply. The issue is how we are going to build more affordable housing in future. If we are going to advocate that, we have to say how we are going to fund it and achieve it. This Government have had to face appalling problems in the housing sector. Let us remind ourselves—I do not think that we have done it much in this debate—that, arguably, the heart attack which our economy experienced was sourced from the overindulgence, credit expansion and speculation in the housing sector. It was inevitable, certainly for the first couple of years of this Government, that confidence, finance and capacity simply fled the housing sector.

In 2009, Tony Pidgley, group chairman of Berkeley Group Holdings, said to me, “Never forget that housing is a cyclical industry and you need two to three years’ cash up your sleeve to survive the years of famine that follow the years of plenty”. In 2009 he had £300 million in cash to keep going for three years with no house sales, if he needed to. In fact he did not need to use it but he had it there. The trouble was that many other developers did not have it and, as a result, capacity has suffered. There are now fewer larger developers and self-builders and thousands of skilled workers have simply left the industry.

Nobody has mentioned the fact that the housing sector is at last showing signs of life. In the past quarter there was a 25% increase in completions, housing starts were up by a third and stamp duty revenues were up. The Government have retained their target of building 170,000 extra affordable homes by 2015. I hope the Minister will tell us what progress the Government are making on that . It is clear that there will be terrific pressure in the next two years to meet that target after a slow start. There are signs of a pick-up, however, and it is still achievable.

How will we fund and build more affordable housing? That is the issue. The first priority in the current circumstances, as the market is beginning to pick up, is to beware of house price inflation. As we know, that is a sign that everything will eventually end in tears, with unfavourable consequences for new buyers and for the cost of building new affordable housing. The Government must watch the market like a hawk and should consider adopting a regional focus for the Help to Buy scheme if there is any sign that the London and south-east property prices are getting out of hand.

The noble Baroness, Lady Blackstone, who is sadly not in her seat, mentioned that 95% of the subsidy to housing is spent on the revenue side and only 5% on capital expenditure. The current government policy of using affordable rents to fund housing for the future is, of course, more expensive in the long term. It is understandable in the short term when there are problems with the borrowing requirement, but this is not a sustainable policy in the long term if we want to have more social housing while reducing the amount spent on housing benefit.

Housing associations have limited borrowing capacity. They certainly have enough, it is said, for the next four-year cycle. However, we will need additional funding beyond this capacity and it should be the role of government to help to find it. One of the areas mentioned in this debate, particularly by my noble friend Lord Shipley, is the borrowing potential of council revenue accounts to add to our funding capacity. I will not go into the detail as I think the arguments have been well made. We simply need a review, particularly with the economy improving, to look at whether this can be done in the near future. It is absolutely essential as we need that funding capacity.

The other thing that the Government have initiated, and on which I would like to hear a progress report from the Minister, is the matter of guaranteed bonds. The scheme has had little publicity but considerable sums have been put into it. It has the potential to achieve lending facilities with lower interest rates for both housing associations and the private rented sector and could be an important tool for funding affordable homes and housing generally in the future. I hope that my noble friend can tell us what extra capacity the Government believe the scheme can provide in the next two years.

Finally, one of the paramount needs is for a long-term and focused government housing strategy. That will depend on finding new funding facilities. We will need help in opening up complicated sites, finding extra sources of land and ensuring that our technical colleges turn out trainees with the skills that the construction industry needs. I have to ask why the Government have downgraded the role of housing in government—we no longer have a Minister of State with responsibility for the subject. Surely we need somebody higher than an Under-Secretary of State to lead in this important sector if we are to improve the performance in building new houses, particularly social housing. Consistency of delivery, a consistent medium-term policy and a strong Minister are the essential requirements for a successful housing strategy.