Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)
Lord Whitty
To move that this House takes note of the amount of affordable housing in all forms of tenure and the case for increasing the supply of affordable housing.
Lord Whitty (Lab)
My Lords, the stark demographics that lie behind this debate and the general dysfunction in the housing market are clear and well known. For at least the past decade, and likely to continue for the next decade, it is estimated that household formation in the United Kingdom has been running at about 250,000 a year. On the other hand, the rate of new build of new dwellings of all sorts and all tenures has been running at about half that level. The inevitable consequence of this is that prices rise in all forms of tenure, in mortgage conditions, house prices, private and social rents and leaseholds costs, and it hits all parts of the country. However, the reality is that it is particularly harmful to those on average and lower incomes and probably far worse in many of the big cities, particularly to the south of England, although it also applies in many rural areas.
We need a massive increase in the supply of new housing, although I do not see any sign of that coming. Supply and demand are in clear imbalance. In particular, we need affordable housing available to lower-income groups. I should point out that in this debate I am using the word “affordable” in the sense that most people use it—that is, that ordinary people can afford it. I do not use it in the Orwellian newspeak used in social housing these days, whereby affordable rents are deemed to be 80% of private rents and therefore in many parts of the country totally unaffordable to people on middle and lower incomes.
This is a Labour debate and I shall be challenging the Government, but I hope that the Minister does not respond simply by pointing to the Labour record. I am glad to see her either shaking or nodding her head. Noble Lords may experience a bit of déjà vu in my speech, because they may recall that I have been fairly critical of the policies of at least the last three Governments on housing, and I continue to be so. The situation at the end of the last Labour Government was poor, the coalition made it worse and the current Government look to be making it worse still.
Many commentators expected housing to feature large in the recent election campaign. In practice, it did not really do so. All parties made a vague commitment to produce 200,000 houses a year by about 2020, without much indication of how they would do it. The only thing that got any mileage during the election was the Labour Party proposal for some form of rent regulation, which was attacked by the Conservatives as being Venezuelan or Vietnamese socialism when, as no less an organ that the Sun pointed out this week, most other cities in Europe have some form of rent regulation and a much larger private rented sector, and the net result is that rents are about half those in Britain. The Tories’ main commitment was to the right to buy for housing association tenants, which is due to be presented to this House in legislative form shortly. I and other speakers will, no doubt, revert to that.
Neither of these measures that were debated in the election even pretended to tackle the central problem of housing: the need to provide more housing and thereby to bring down the cost and availability. Right to buy is about change of tenure; it does nothing in relation to supply or availability. The coalition Government at times appeared to be taking housing seriously. Indeed, about a year ago I asked the Minister’s predecessor to list all the schemes introduced by the coalition Government. I would read it out, but I have only limited time and there were at least 18 or 19 of them. Some of them had some benefit for a few people and no doubt they had marginal benefits all over the place, but the net result was that they did not change the overall level of supply or bring supply and demand into better balance. Some increased pressure on the demand side, and none tackled the problem of supply. Fundamentally, the situation has not changed.
I shall say a few words about the right to buy for housing association tenants, although I see from the list of speakers that there are speakers who are more qualified and knowledgeable than me to comment on that area. This week, the Times revealed how strongly the Government were advised against going down this road. Indeed, the cost to the Exchequer seems to be £5 billion. In one fell swoop the Government seem set on undermining the finances of housing associations, local government and, eventually, the Exchequer. Almost everyone in the housing world has asked them to think again, and we will debate that in due course. I am not an opponent of right to buy, but this particular measure seems fairly cack-handed and not thought through. My main concern about it in relation to this debate is that it will undermine the finances of housing associations, reduce their ability to borrow and therefore their ability, and local government’s ability, to invest in new housing stock or improve older stock. It will therefore do nothing to alter the balance of supply and demand and will, indeed, make it worse.
The net result of all this reflects the dual problem of high costs for those seeking first-time buys and a lack of availability in many parts of the country for any access to social housing. That means that real strain is put on the private rented sector, which is rather inadequate and unstructured. Families who, two decades ago, would have got social housing are now either paying for themselves in the private sector or are being paid for by the local authority in the private sector. Families who, two decades ago, could easily have afforded a mortgage are, unless they have the bank of mum and dad to turn to, likewise dependent on the private rented sector. The Government are trying to help landlords in this area by giving tax breaks to buy-to-let landlords, but supply is still well behind demand and, moreover, much of the supply is inadequate and in some cases unsafe. Many of those in housing emergency and other crisis situations end up in the private rented sector, even though they may be paid for out of the public purse. Ultimately—this is the biggest problem, politically—the cost of all this falls on housing benefit.
In recent years, the growth of the housing benefit budget has become a serious issue. It has gone up tenfold over that period, but four-fifths of the increase has been due to escalating private sector rents and only one-fifth has been due to an increase in the number of people seeking housing benefit. The pernicious effect of this is that the escalating cost of housing benefit looks scandalous to those who are not receiving it, and the Daily Mail is able to find all sorts of examples where very high housing benefit costs are paid for by the Government and use it as an attack on the welfare system as a whole. It is no coincidence that most of the housing benefit scandals are in areas of high-cost housing, mainly in central London. I say in passing that the real scandal is that housing benefit eventually ends up not in the pockets of small struggling landlords but of large companies, overseas investment trusts and corporations.
We need a root and branch review of housing benefit, but that will involve us in a root and branch assessment of the total intervention of government in housing. Thirty years ago, the expenditure side of government intervention in housing was very heavily geared to the supply side, to council housing, grants for home improvements and so on. Indeed, 80% of government expenditure was on that side. Now, more than 90% of the expenditure is on the demand side—in other words, using housing benefit to meet escalating costs in the social and private rented market.
The social costs of all this are pretty evident. Even people on reasonably high incomes cannot get a mortgage until they are in their late 30s. People are living at home with their parents. There is overcrowding. There is strain on families. There are many people living in bed and breakfast accommodation and in inadequate private rented spare rooms. There is multiple occupation, with several people living in the same room. At the worst end, there are beds in sheds. Indeed, the London Fire Brigade this week issued figures showing that in recent years it has had to deal with more than 400 fires in accommodation that was not appropriate for habitation. Those are the social costs.
The economic costs and the costs to the Exchequer are evident in the housing benefit costs. What is needed is a rethink that will redirect those costs to the housing benefit budget into the provision of new and improved housing. The escalation in housing benefit needs to be seen as a failure of the housing market rather than as a failure of the welfare system. Even at this late stage, I urge the Government to take housing benefit out of the move to universal credit—indeed, that might ease the introduction of universal credit—because it needs to be seen as a whole. Public support for housing and for those seeking housing who are unable to afford it needs to be seen as a whole. I suggest that that needs to be seen as part of a new overall strategy. I want the Government to come up with a clear White Paper proposing a whole new approach. I can make certain suggestions about what should be in that approach, but it is an emergency. It is a serious problem, and it is one that, in their five years in office, the Government will have to tackle or it may well be the failure of this Government.
I suggest that they set a clear target of 250,000 new homes, of which perhaps a quarter should be social housing. There should be an emphasis on local delivery, and we should amend the Cities and Local Government Devolution Bill and the Localism Act so that the new combined authorities and unitary authorities take clearer responsibility for housing and have the means of delivering it. Policy on housing ought to be concentrated in one Whitehall department under one Secretary of State, covering housing benefit and construction as well as the traditional areas of CLG. We need a long-term strategy to switch expenditure on housing benefit into areas to improve housing supply, which will take 20 years. There are some immediate things that we need to do. We can integrate and redirect the Help to Buy schemes into a help to build scheme. We need to end the ability to overturn Section 106 agreements providing for social housing and instead give back to local authorities the ability to negotiate with developers for improvements in affordable housing in their areas. We need a fundamental review of the affordable rents policy. We need to ensure, perhaps most of all, that local authorities are in a position to go to the market to borrow to create housing assets. This should not be regarded as part of the central government borrowing requirement, but as something with which local authorities can build and provide the housing that is needed for their communities.
There are other ways of dealing with this in terms of finances; there are ideas about housing bonds and about corralling the pension funds into providing more private investment in affordable housing. There need to be discussions with the banks and with the construction industry, particularly about bringing some of the smaller builders back into the housebuilding market.
All this will require new legislation. I hope to see in the next Queen’s Speech, if not before, a major Bill from the Government—incorporating many of my ideas, of course, but perhaps a few others, too—that would be indicative of their intention to tackle this problem, which affects millions of our fellow citizens, not just in central London, where at this moment some of them face the demolition of their homes, eviction or the buying off of leaseholders and tenants, but across the country. It will become a political problem for the Government if they do not do something substantial about it. I beg the Minister to talk to her colleagues, including those in the Treasury, to ensure that they do just that.
Lord Whitty
My Lords, I thank the Minister for that comprehensive reply. Although comprehensive, it was not entirely comprehensible because when I add up all the figures and work it out, I am not sure what the degree of ambition of the Conservative Government now is in terms of overall delivery. The means of that delivery, despite all the various schemes to which the Minister referred, do not add up to the step change in the delivery of housing supply that we clearly need.
When the Minister looks back she is right to say that the council waiting list was 1.4 million when the coalition Government came to power, but of course, the figure is exactly the same now. All the interventions during that period, which the noble Baroness was praising, made no difference: at the end of the line, there were still a huge number of families who were entitled to affordable housing but did not get it, and far more still never got on the housing list in the first place.
The debate has been characterised by a lot of knowledgeable contributions from people such as the noble Lords, Lord Best and Lord Kerslake, and my noble friend Lady Warwick, who know about housing associations. Housing associations will be required to deliver a large part of whatever targets the Government eventually come up with. It is therefore particularly unfortunate that they are being hobbled by what I referred to earlier as a cack-handed intervention, in terms of the right to buy, in their finances, borrowing credibility and business plans, a point that has been underlined by many speakers.
We have had a good lesson in economics from my noble friends Lord Desai and Lord Haskel. The economics of housing are distorted by two things: first, by the fact that, as my noble friend Lord Desai said, housing is not just a home but an investment. That is a distortion of the British economy to a degree that does not apply everywhere else in the world, and it is probably something we ought to be able to get over, but probably not in the next five years. That benefits home owners—a decreasing proportion of the population. The next generation will not have it as easy as my generation and the previous generation in getting on to the housing ladder.
I thank all noble Lords who took part in the debate. Rural housing and the housing situation in London are important matters for the Government to take on board. The right-to-buy initiative in housing associations is a difficult issue, to which we will return. I say to the noble Lord, Lord Palmer, that my support for the principle of the right to buy is based on the fact that a lot of people have benefited who would otherwise not have been able to get on the housing ladder. However, he is absolutely right that the basic flaw in successive right-to-buy policies has been that we have not replaced the housing stock that they displaced. I do not believe that there are the means of doing so in this policy, either. One-for-one replacement has been impossible in the previous phase of selling council properties, and it will be equally difficult to make the economics and finances work out for housing associations. That is therefore a major hole in the Government’s policy.
I was also surprised, given her background, that the noble Baroness did not emphasise more the role of local authorities. The reality is that if we look back over the period to which my noble friends Lord Hamworth and Lady Wilkins referred—after the war—it was largely the local authorities, with government backing, that delivered. I do not believe that we can get back to that level of housebuilding without the major involvement of the larger local authorities. I hope, therefore, that the Government’s plans for devolution and the enhancement of the role of London will play a central role in dealing with the housing gap that we need to address.
I thank all my noble friends on this side of the House. I notice that the noble Baroness did not have huge numbers on the Conservative Benches showing an interest, which is a problem for the Government. I am very glad that the noble Lord, Lord Horam, is here, and I agree with much if not all of what he said. It almost reminded me that he was not always a Tory.
This has been a good and very important debate, to which we will undoubtedly return on many occasions when considering the relevant legislation, and I thank everybody who has participated in it. If the Government fall short, millions and millions of our fellow citizens will suffer.