Housing (CSR)

Mark Field Excerpts

Wednesday 27th October 2010 Westminster Hall

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

I am pleased that we are meeting under your chairmanship this morning, Mr Gray. At the outset, I wish to draw attention to my interests in the Register of Members’ Financial Interests. I am grateful to have this opportunity to raise an issue of huge importance and very real concern to our constituents and the whole country: the impact of Government policy and the comprehensive spending review on housing investment and supply.

I have been closely involved with housing for almost all my working life, during which I have seen a number of ups and downs. However, at no time during the past four decades can I recall there being a bleaker outlook for people looking for a new home or a solution to their housing problems. As MPs, all of us know from our constituency surgeries and our wider contacts in our communities how many people face housing difficulties, whether that expresses itself in the despair felt by many prospective home buyers who cannot find a home at prices they can afford or in relation to those people who think they have found a home at a price they can afford only to have their hopes dashed when they cannot obtain mortgage finance. Such despair might also be reflected in the anxiety of tenants and home owners, who fear that they will no longer be able to afford to stay in their home against a background of rising unemployment and harsh cuts in housing benefit. Alternatively, there is the desperation felt by families living in overcrowded or squalid conditions who have an urgent need for a move but see no prospect of getting an offer of a social tenancy and are nervous about whether they can afford the cost of a private one.

All those and many other problems are familiar to us, but what is particularly alarming is the prospect—I fear it is a very real prospect—of things getting much worse in the months and years ahead as a consequence of the coalition Government’s policies and the comprehensive spending review. We have just come through the most serious recession of my lifetime, and housing was inevitably badly affected. Private house building in England fell from just over 150,000 new starts in 2007 to just 60,000 in 2009. That clearly has had a serious impact on the situation, but things would have been far worse if the then Labour Government had not taken a series of bold measures to counter the downturn.

As a result of the fiscal stimulus and more specific policies targeted at the housing market, repossessions, which had been forecast to rise to similar levels to those seen in the recession of the early ’90s, peaked at around half that level. Investment was made through the Homes and Communities Agency in schemes such as Kickstart, the national affordable housing programme, and HomeBuy Direct, which meant that social and affordable housing programmes were maintained and confidence began to return to the market.

In the early months of this year, house builders were reporting month-on-month improvements in house sales and in the output of new homes; it appeared that we had turned the corner. Then came the general election and the formation of the coalition Government. Since then, a series of ill-considered, unco-ordinated, untested and, frankly, irresponsible policy initiatives and cuts have destroyed the prospect of recovery, brought the housing market to the verge of a double-dip recession and spread alarm and concern around almost every sector of the community that is in need of better housing.

Two weeks ago in this Chamber, my right hon. Friend the Member for Barking (Margaret Hodge) highlighted the disastrous consequences of the housing benefit cuts announced in the June Budget. As we had a full debate on that subject then, I will not go over the same ground again. However, I will reiterate her words on the spectre of rising homelessness, indebtedness, insecurity and forced migration, all of which have been prompted by the coalition Government’s policies. Of course, since then, the already bleak prospect has been compounded by the announcement of further benefit cuts and caps in the spending review. It is hardly surprising that fears for the future viability of the private rented market are being voiced by landlords and tenant representatives alike. The situation would be bad enough if that was the only policy change emanating from the Government, but there have been many more.

Confidence in the private house building industry has been severely damaged over the past five months by ill-thought-out changes to the planning regime, a continuing mortgage famine, fears about rising unemployment and severe cuts to the Homes and Communities Agency budget, which had been supporting many new housing and regeneration schemes. Last week, on 20 October, The Times reported that Bellway—Britain’s sixth largest house builder—had

“delivered what one analyst described as an ‘unremittingly bleak’ assessment of the housing market. The Newcastle-based company said that while it had enjoyed a strong spring selling season, consumer confidence had ‘slowly ebbed away’ after the general election and subsequent media discussion of how the Government planned to tackle Britain’s budget deficit.”

The Daily Telegraph reported last week on 22 October that the Bank of England is warning that home prices are likely to remain static or decline in 2011, as home loans become harder to secure after the spending cuts. The article goes on to state:

“The warning will add to growing fears about the fragility of the housing market after values dropped last month by the biggest monthly amount ever recorded.”

The Guardian also reported last week on 22 October that:

“Britain’s struggling housebuilding industry is ‘bewildered’ by government plans to radically change the financing of new council houses as experts warn the measures could have a ‘devastating impact’ on the future supply of social housing.”

[Mr Mark Field (Cities of London and Westminster) (Con)]

I have some sympathy with what the right hon. Gentleman has said. Clearly confidence is fragile, but that is partly because there has been a reality check since the election and the Government have been upfront with the public about the need for austerity. However, I share—I hope that he does, too—the positivity that lies behind the very determined strategy for growth that the Prime Minister has been articulating in the aftermath of the comprehensive spending review. His comments and that strategy will help to restore confidence. The austerity message is important given the fact we were living far beyond our means.

[Mr Raynsford]

I cannot agree with the hon. Gentleman, whom I know well and for whom I have a lot of respect. The truth is that the economy was recovering during the early months of this year, as the figures show. I am not giving my own opinion; I am talking about the opinion of experienced business people, house builders, lenders and analysts who all say exactly the same thing: the housing market was recovering and there was the prospect of growth. In the past five months, that has been taken away by a series of measures—Budget measures introduced by the Government, changes in planning policy and changes affecting institutions that have been summarily abolished. A series of ad hoc, poorly co-ordinated and ill-thought-out proposals have damaged confidence in the market. Any person who is seriously worried about housing should feel very alarmed about that.

--- Later in debate ---

[Mr Mark Field (Cities of London and Westminster) (Con)]

I congratulate the right hon. Member for Greenwich and Woolwich (Mr Raynsford). As he rightly says, we have not so much crossed swords as spoken on many occasions on various Bill Committees and in Westminster Hall. Like him, the issue of social housing lies close to my heart. On one level, I was disappointed to see that the capital grant funding has been halved, although I entirely understand the reasons behind the Government’s decision given the deficit that we face—I suspect that the right hon. Gentleman will not follow me on that.

I am delighted at the introduction of further rent flexibility to generate a greater borrowing capacity. I take on board the point raised by the hon. Member for Sheffield South East (Mr Betts) and I hope that the Minister will indicate whether the powers are mandatory or, as I suspect, part of the panoply of options open to housing associations.

In January 2009, I initiated a debate in Westminster Hall that highlighted the need for social landlords to be allowed to use their stock more flexibly. At the time, I argued that the current economic climate—which I suspect has not changed much over the past two years—provided us with a once-in-a-lifetime opportunity to create a more flexible rental market. I advised:

“Housing associations are often frustrated that the income they receive from renting a property barely covers maintenance costs and that the rental income from a four-bedroom house is only slightly more than that from a two-bedroom flat… A relaxation in rent policy will increase incentives to build to higher standards and reflect the relative value of a social tenancy.”

My hon. Friend the Member for Banbury (Tony Baldry) referred to that point in his comments.

“Rent differentiation would also provide an incentive for a couple to downsize when they no longer need to stay in a large property when their children are grown up. That would hopefully free-up valuable family-size accommodation to address the problems of overcrowding.”—[Official Report, 14 January 2009; Vol. 486, c. 76WH.]

Such problems of overcrowding are particularly acute in the middle of cities such as London.

I went on to use the example of the housing arrangements of one of my constituents who had recently passed away. She lived as a secure tenant on the Peabody Wild Street estate, at a rate of £75.50 a week, which included services. That estate is moments away from Covent Garden piazza, and the market rent for such a flat would be around £320 a week, probably more by now. When she passed away, the flat was re-let at £116 a week to a tenant with support needs. The difference between the social and market rent was £200 a week, or £10,000 a year. That situation has been worsening over the past couple of years.

With the neediest households receiving priority for housing in my constituency and many other constituencies in the capital, my worry is that such places have become home almost exclusively to either the super-rich or the very poor. That polarisation is not a healthy state of affairs. I do not want to be too London-based; I am sure that the same point applies in Sheffield and many other big cities. All hon. Members will have constituents who earn multiples of the average national wage, who cannot get on the property ladder or afford inner-city rents, but who are regarded as far too wealthy to qualify for social housing. The gap between social and market rents and the inflexibility of the social rent structure has meant that the cost of renting in London remains a significant issue.

I accept that some of the Government’s policies are still in gestation. One hopes that they will take on board some of the concerns reiterated over the years by myself and the right hon. Member for Greenwich and Woolwich. Too often in these debates we end up talking about the interests of existing tenants who are understandably anxious about the idea of their situation changing. In doing so, however, we ignore those less vocal people who make huge sacrifices of time and money to commute to their jobs in the inner cities, or those whose families have been in a local area for generations, but who are forced to move away because of the unaffordability of city centres, particularly in London. It is right to identify the interests of those who will be affected by the new policy, but we should not forget those who have suffered under the existing regime.

The polarisation of our inner cities is a direct result of decades of well-meaning Government intervention from parties on both sides. If some of the Government’s proposals make it easier for young, hard-working people on middle incomes to afford to live in the centre of London, that is a good thing. This week, the right hon. Member for Barking (Margaret Hodge) warned that the Government’s policy will create middle-class ghettos in our inner cities. In truth, the young middle classes have been virtually excluded from my constituency over the past decade. We have the absurd situation where the taxpayer massively subsidises the unemployed to live in the centre of London, while working people pay extortionate amounts to commute to their jobs because they find rent levels unaffordable in the centre of town.

Some of the G15 housing associations have come up with a number of new schemes. I hope that some of that innovation will allow young people and young families, who are particularly important, to live at affordable rents while being able to save so as to move to another property or perhaps to buy a share in one in the future.

However, I also accept that the speed at which the cap is being put in place perhaps ignores some of the logistical problems for local authorities—huge logistical problems for some local authorities—in arranging new accommodation, but also coping with a sudden influx of new claimants. About 80% of the people living on housing benefit in my constituency receive a sum in excess of the housing benefit cap. I suspect that that is relatively unusual, but we are still talking about relatively high percentages even in other parts of the capital. For those individuals, this is an incredibly unsettling time. For the areas to which they will move, there will be huge social upheaval, which will affect health services and education as well as, obviously, the basic housing in the locality.

It is likely that, given the option of being able to rent out central London properties at 80% of the market value, social landlords will, to a large extent, choose to do so. At one level, that is no bad thing, because it will allow them to invest in new stock and improve the derisory levels of house building seen in recent years, but equally, as a number of hon. Members pointed out, some unintended consequences may come into play.

[Mr Raynsford]

I will not detain hon. Members, because others want to speak, but will the hon. Gentleman clarify whether he agrees with my view that it is right to encourage tenure diversity, as I said in my speech, but it is wrong to substitute the new near market rent tenancies for social tenancies at low rents, because then the poor will be excluded?

[Mr Field]

I think that there is a real risk of that. We want diversity; we want diversity of communities. The right hon. Gentleman is right to say that the issues will have to be properly identified and nailed down before we move forth.

I appreciate that other hon. Members want to speak, so I shall just make two quick observations. With regard to provision of housing by my own local authority, Westminster city council remains confident that local authorities can deliver more affordable housing, even in a period of economic austerity, provided that they are able to think and act creatively. For too long, as we know, local authorities have over-relied on section 106 agreements and registered social landlords to deliver social housing. In that respect, the establishment of the Westminster Community Homes charity locally and its development arm, Westminster Homes Development, will be critical.

My other observation, which slightly concerns me, is that a number of local authorities look on the revolution that is about to take place as an opportunity to welcome the practice of housing finance being treated as off balance sheet, bringing Britain into line with much of the rest of Europe and allowing local authorities greater flexibility to borrow against the existing stock. I confess that I would not support that. I put on record in this Chamber as long ago as 2007 my grave reservations about off balance sheet financing for private finance initiative and public-private partnership projects by the previous Government. The cost of those will become apparent over the next 25 years. At a time when we need to improve our infrastructure, we have huge costs for schools, hospitals, prisons and road building that have already been put in place. I therefore think that we should above all try to avoid that technique.

[Mr James Gray (in the Chair)]

It may be helpful to hon. Members to know that I intend to call the shadow Minister at 10.40 am.