Housing and Planning Bill

Lord Stunell Excerpts

Tuesday 8th March 2016 Lords Chamber

[Lord Cameron of Dillington (CB)]

My Lords, I had not really intended to intervene in this debate because better, more knowledgeable people than me have spoken. However, I add my voice in support. I have built houses in Scotland and England in the past 10 to 12 years and therefore put in a very low-carbon spec. No consumer of any intelligence would build a house without a low-carbon spec because the annual savings in heating that you get give you a nearly 50% return on your money, but unless builders and developers are obliged to give the consumer what they really want, it is unlikely to happen in all cases.

It is interesting that this debate should follow the one on self-build because I cannot believe that anyone who is building their own house would ever dream of not putting in a very good low-carbon spec. The Government should ensure that consumers—also known as voters—get what they want.

[Lord Stunell (LD)]

My Lords, I support the amendment. I do so as somebody who in the other place proposed the Sustainable and Secure Buildings Act, which was the foundation for the changes to Part L which were introduced in 2006, and also as the Minister who preceded my noble friend Lord Foster in the department in 2010.

I am disappointed to find that the arguments that were going on between the Department for Communities and Local Government and the Treasury at that time appear still to be burning. Those arguments were repeatedly put and repeatedly refuted, yet this time the Treasury has come out on top. This amendment provides an opportunity to revisit that, and I hope that the Minister will take away the spirit of this debate as well as the substance of the amendment. The problem is that there is a completely false tension between quantity and quality in housing. There seems to be a very firm grip in the Treasury on the concept that, if it is cheaper to build, more homes will be built and, as good building costs more than bad building, it is obvious that you have bad building rather than good building in order to get more building.

The Minister gave us some figures on Thursday which she described as the,

“implied first-time price of new build”.—[Official Report, 3/3/16; col. 1014]

She went on to distinguish that from “demand price”. I am not quite sure what the difference is, and I am not quite sure what the first-time price of new build is, but for the south-east of England she gave an implied price of £352,000 for a property which would be affordable and within the scope of the starter homes project. That is an interesting figure because it highlights the fact that something approaching £250,000 of that price is nothing to do with the construction of the house, which will be about £100,000, and everything to do with the land price, which is actually what drives house prices universally. The construction cost is a minor part of the house price cost that the retail purchaser has to pay. It does not set the retail price, let alone whatever the demand figures are, which I strongly suspect would be higher sums of money than the Minister gave us last Thursday. The costs of complying with this amendment per house are trivial in relation to the construction costs, let alone the total retail price at which a house will be put on the market.

I will be interested to hear what the Minister’s brief tells her is the right figure for the extra cost of zero-carbon homes. I would be astonished if it did not have such a figure in it; mine always did. If there is one thing that history tells us, it is that that estimate will be too high. I say that because back in 2010, when the original improvements were made—I say “original”; perhaps I just mean original to me—and that 30% rise in building standards that took place in that five years was initiated, the UK Green Building Council, which has already been referred to, estimated that a typical cost addition would be £5,000 per home. The Treasury disbelieved those figures and believed that it would be an additional £10,000 per home, and it was those figures that were hotly debated between the departments and which formed the basis of impact assessments and so on at the time.

Actually, the cost per home has turned out to be £3,000 lower than the Green Building Council assumed and only one-third of the cost that the Treasury assumed. A £3,000 price differential in building a house is absolutely lost in the noise of housebuilding, purchasing and disposal. The cost is marginal, as the noble Lord, Lord Krebs, rightly said—something around 1% of that south-east London house going on the market, at a time when house prices in the south-east are rising by something like 6% a year. Indeed, if they were not, there would be some kind of political backlash because people would fear that their houses were losing value.

So the barrier to more private sector building is not construction costs. Rather, it is the knowledge that, if a home is completed next year rather than this, the seller will be 6% better off because of the rising price of land and of sales. The very last thing that a developer wants to do is to produce so many houses that the price falls next year; indeed, you can see with some building in the centre of London that that is exactly what is happening. So the quality versus quantity argument, which is the only slightly tenable point of view in this U-turn, is not actually credible or realistic.

On the other side, there is the reputational risk to the Government. “The greenest Government ever—not!” is the message that seems to be coming through, and that is a really sad outcome, both for the present Government and for the country. There is an environmental risk because so much CO₂ comes from our housing stock. As the noble Lord, Lord Krebs, eloquently put it, if we put up another 1 million homes alongside the 22 million that we have at the moment, and deliberately make them of lower quality than we could, then that affects not just the environment but our international reputation regarding, for instance, last year’s Paris agreement.

There are economic and social risks as well. Poor energy efficiency means higher costs to those poorer householders who are going to be moving into the starter homes that the Government want to see built. People whose income is so stretched that without the starter home they would not be able to get into the market are going to be saddled with an extra £1,200 a year of running costs simply because of this U-turn. It occurs to me that this sort of process usually takes longer than Ministers hope, and that those starter homes will start to come on to the market in a significant way in about 24 months’ time, which is of course pretty much the time when interest rates will no doubt also be rising, so their mortgages and fuel prices will go up but their energy efficiency will be deliberately lower than it needs to be.

I ask the Minister to have a rethink, to go back and yet again have a good push back at the Treasury, and to ensure that by Report we have a rather better picture of what the Government intend to do to be the greenest Government ever.

--- Later in debate ---

[Viscount Younger of Leckie]

Yes, I was just coming to that point. The noble Lord, Lord Stunell, raised the issue of costs. Research by the Zero Carbon Hub indicates that, for an average semi-detached home, the lowest cost of meeting the proposed standard would add almost that sum of £3,000 to the construction costs. Originally we thought it would be £10,000—indeed, I think that figure was mentioned by somebody in this debate.

The new clause proposed by the noble Baroness, Lady Parminter, would increase the bill cost for all housebuilders, irrespective of their size. With regard to small builders, the availability of small sites is declining and extra regulatory costs would impact on the viability of these developments, leading to even fewer small sites.

[Lord Stunell]

Will the Minister reaffirm that his brief tells him that the additional cost would be £3,000 per dwelling of the type he just described? If so, I am absolutely delighted to see that that reflects reality rather more closely than some of the Treasury’s figures.

[Viscount Younger of Leckie]

That is the figure I have mentioned and I am very happy to reaffirm that. However, in the same breath I would also say that it is deemed to be a step too far in adding costs to housebuilders, particularly given that the focus is on the smaller housebuilders who need the breathing space to build such houses.

--- Later in debate ---

[Viscount Younger of Leckie]

I listened carefully to the evidence produced by the noble Lord, Lord Foster. Of course, I am very happy to make available whatever I can to the noble Lord and to copy in other noble Lords who have taken part in this debate.

Perhaps I may come back to the noble Baroness, Lady Hollis, on purchaser research. But I make the point that we are talking about the costs of building a house, which is a housebuilder matter. Whether those costs can be passed on to the owner of the house will depend on the area and on the prices, but this is to do with stimulating the building industry to build more houses—that is extremely clear.

I would like to move on if I may to a similar theme raised by the noble Lord, Lord—

[Lord Stunell]

Before the Minister does so, could he tell us what evidence he has taken on the connection between construction costs and the number of homes built, either over the last five years or any interval of time that he has statistics for, and whether he regards the argument that I advanced, that land costs are the overwhelmingly important factor in house sales, as having validity?

[Viscount Younger of Leckie]

The evidence is pretty strong from the Federation of Master Builders, but in the same letter that I shall write to other noble Lords I will include any further evidence that can be produced to back up the evidential information that we have.

The noble Lord, Lord Krebs, asked about the scrapping of the zero-carbon element and where else carbon savings might come from. I reassure him that we are already starting to look at heating systems in existing homes. As noble Lords will probably be aware, heat accounts for around 45% of our energy consumption. More than 1.2 million new boilers are installed in our homes every year and we want to consider whether the time is right to raise standards upon boiler replacement, and what the benefits and risks are if we do.

I will also make a point that I wanted to raise slightly earlier in this debate about being overzealous in protecting homes. There is an issue which I know has cropped up in previous debates about overheating homes. There are concerns about making homes so energy efficient and airtight that they can contribute to health issues, so DCLG is looking at that. We need to create a balance between stimulating the building of new houses and making sure that they are user-friendly for people to live in.