Housing and Planning Bill (Third sitting)

Matthew Pennycook Excerpts

Tuesday 17th November 2015 Public Bill Committees

[The Chair]

Thank you all for coming. We have until 10.15 am—45 minutes, or thereabouts—to hear your evidence.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

Q 224224 We know we need to build more homes, and I think that there is a broad consensus that we need to build homes across all tenures to meet the demand. Can you give us your view as to whether the Bill as a whole will increase the supply of housing across all tenures? Specifically on starter homes, what do you think the consequences for affordable housing will be? Do you think there is a risk that starter homes will crowd out other forms of affordable housing?

[The Chair]

Answer as you will, but all four of you do not have to answer every question.

Trudi Elliott: We commend the Government, and indeed all parties, for their commitment to solving the housing crisis, which is one of our big national challenges. We have not done a detailed analysis of the implications of each of the clauses. We have seen the impact assessment, and certainly the aspiration is that the Bill as a whole will improve supply. Having said that, from our members’ perspective, a lot of the challenges of housing delivery are outside the issues in the Bill, including access to finance and a skills shortage right through the supply chain. We are in a position now where, as a result of previous changes, planning permissions per year are up to 242,000, whereas completions or starts have got up to only between 131,000 and 133,000. So it is the other stuff in the system that will help us to deliver homes that we have to focus on.

I also have to say that there is a massive challenge in local government regarding resourcing in planning. We have recently instructed Arup to undertake a review of all the authorities in the north-west, which is a microcosm of the country. There has been a 37% cut in resource going into planning, particularly development management. Although the officers have managed to keep the statutory targets on target—the granting of permission—there is an impact on both pre-application work and post-planning permission work. Arup summed up the situation to us as being that the system is being kept going on the good will and integrity of planning officers, and that is not sustainable in the future. We have to work collaboratively with local government, Government and the profession to look at how we can address this resource challenge. One of our concerns about the Bill is that we need to ensure that it does not inadvertently increase the burden on local authorities either through complexity or additional demands that are not resourced.

In terms of starter homes, 100 years of planning has demonstrated to us that what successful places need is a range of tenure and homes. We absolutely understand and commend the Government’s concern about home ownership. It is a massive aspiration in this country, and the number of people owning their home has gone down. But from the way the starter home provisions in the Bill look as if they are going to be constructed, they have the potential to squeeze out other forms of affordable housing. If the regulations are too rigid, they could reduce the flexibility of local authorities and reduce finance. So in the implementation of starter home provision, we urge the sort of flexibility that enables local authorities and developers to generate mixed communities and ensure that as many schemes as possible are viable and have, both in the long term and short term, a mix of housing tenure.

[Matthew Pennycook]

It would be nice to hear from the other witnesses as well, if we have time.

Dr Hugh Ellis: Very quickly, our biggest concern about starter homes is simply the fact that they are not affordable. In many areas, particularly rural areas, the affordability gap between 80% market prices and lowest quartile median income is very stark. We are creating a new powerful legal duty in planning—the first one on housing—that is very much focused on a particular tenure that is not affordable to many people on medium and low incomes. That is a significant issue.

The second issue is more general. Briefly, the Bill is a missed opportunity. This is a nation that pioneered place making for new and renewed communities, at scale, very effectively in the post-war era and has gone on doing that. However, the Bill does not get at the heart of housing delivery. It does not challenge the dominant housing model, which has largely failed, particularly in England. Nor does it deal with things like the objectives for place making or high quality standards, particularly compulsory purchase issues, nor does it create a framework, for example, for garden cities, which this nation pioneered and of which it should be justly proud.

So there is a great sense of a missed opportunity in the Bill. The tools are at our hands, and the evidence, advice and resources are well developed to put forward a programme that could put us into the delivery of the post-war totals—300,000 to 350,000 homes a year. But that can only be done by recognising that planning is a powerful solution to housing and place making, and is not the problem.

Mike Kiely: I agree with what colleagues have said. We have a significant housing crisis, and we need to use all the tools at our disposal. I think a number of elements are missing from the Bill. There are sites out there that are not coming forward, and local authorities need the ability to unlock those sites. The compulsory purchase provisions in the Bill are welcome, but they do not go far enough to enable us to CPO sites that are capable of being developed for housing, but where the landowner is sitting on those sites and speculating on their increasing value.

The other area that is missing, if you look at other more successful cities in Europe and America, is the private rented sector. For some reason that does not fly in this country. The money is out there willing to invest in the private rented sector, but we need to try to unlock it.

My final point is that it is important to assist the bringing forward of affordable housing through varying subsidy means, but subsidising starter homes by 20% for just five years and then allowing that person effectively to get a 25% windfall is very short-sighted. That money will go into the housing system and will inflate housing prices further because it is additional capital that will be at the disposal of people to buy homes, and that will drive up prices. The homes are not affordable to start with, and then they make housing in general less affordable because of the increase in capital going into the system.

Terrie Alafat: We also find that the focus on building new homes is positive, and we support all the measures that try to ensure that the planning system enables more house building. We also support the ambition to improve access to home ownership, but it is fair to say that we are a bit concerned that starter homes may crowd out both more affordable rented accommodation and shared ownership. We think starter homes are positive—it is another product for the housing market. We know that we need a variety of products for people on different incomes and with different aspirations, but we also find that that particular product will only be able to help a certain group in the population.

Savills did some research that showed that a normal couple on a median income would struggle to afford a starter home in 48% of local authority areas, and only about 10% could afford a home in London. So we think this should be an addition to the housing supply, not instead of.

Finally, it is important to look at the affordable rented sector. We support measures to increase the private rented sector, but we have done some analysis to look, within current policies, at the loss of the social rented sector between now and 2020. We looked at existing stock, at existing policies around the shift to affordable rent, at right-to-buy projections—these are all projections—and we could see a loss of about 400,000 units at social rent.

So we would say we are quite supportive. We are looking forward to seeing the detail on section 106 and how that will operate in practice. We suggest there should be as much flexibility as possible at a local level to be able to look at local housing needs, to make certain that they get the right mix of provision on the sites they develop for housing.

[Matthew Pennycook]

Q 225 We know that effective place making requires decent infrastructure. Do you have concerns, if starter homes are exempt from the community infrastructure levy, that the necessary infrastructure to build sustainable communities will not be there?

Mike Kiely: Almost certainly. It seems an odd public policy to take money away from necessary infrastructure and subsidise a five-year reduction, and then that individual gets the benefit of that public subsidy. When you set your CIL, there is always a huge gap between the moneys that you can bring in through section 106 and CIL and the necessary infrastructure bill. It is always a challenge to provide the infrastructure, and we need to try and get as much money as we can into the public purse to deliver that supportive infrastructure. This will clearly reduce that, and will mean we are less able to provide the schools, highway improvements or whatever that facilitate the functioning of communities. It will be harder for us to do that.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Q 226 Ms Alafat, you mentioned in your submission the need for local planning and development teams to have more resources. Do you not feel that the changes contained in the Bill on the planning system—to require a local plan by 2017, to make time timely decisions, and on planning in principle—will effectively ensure that local authorities properly provide the resources for their planning departments and prioritise that to ensure economic development?

Terrie Alafat: As Trudi has already mentioned, the reality is that local authority planning departments have been under significant pressure already. It is worth thinking about the implementation of this, given how important planning is, to try to make certain that we have the right resources at local level, but also the right skills. I think that is an important implementation issue. In terms of the Housing and Planning Bill, there are other very good measures being taken—for example, in the private rented sector—that require local authorities to do more on enforcement, but we need to look at the resourcing of that as well.

--- Later in debate ---

[Maria Caulfield]

Q 276 To return to the point about delivering one-for-one in the right to buy sector, I asked in a previous evidence session about housing associations looking at other models of house building—not just traditional house building but perhaps things like modular house building—but we did not really get an answer from the housing associations. What are your thoughts about alternative ways of building? Also, on pay to stay, we have heard that housing associations are worried about the 1% cut in council housing rent yet they could not say why they are not implementing the pay to stay measures that are already in place for those who earn £60,000 a year or more. That would bring them some income, so why are they not doing that to fund new house building?

Brandon Lewis: There are a few points in there. On build-out rates and different types of building, I absolutely agree. The reality is that, generally, we still build homes in the way we did 20 years ago—sorry, 100 years ago—which means it takes, on average, 20 weeks to build a house, if the weather holds out. Modern technology means you can build a house much quicker. I have seen two two-bedroom semi-detached homes built in a day. Modular homes can be built in a couple of weeks. They are high quality and have very high energy efficiency. I highlight that, because they do not need any more regulation on zero-carbon homes—those kinds of homes deliver that. That really speeds up the rate of delivery.

The National Housing Federation, on behalf of its members, has been talking to us with some very ambitious plans for going further. We are already seeing organisations—Sanctuary, L&Q, Gemini and others—looking to be quite exciting with what they are building. They already build a mix of tenures, with market properties to sell as well as affordable private rented sector and social sector properties as well. They are looking more and more at that kind of modern technology. If we can do that, we will see a dramatic sea change in the way we deliver housing, certainly in terms of the scale and speed at which we can do so. One of the biggest challenges we face—I appreciate that this is slightly outside the remit of the Bill, but it highlights my earlier point about the Bill being part of the solution—is that we still have house builders building out on sites at an average of 50 homes a year. With modern technology we could easily convert that to 200-plus homes a year. That is where we should be looking to go. There is a real opportunity there.

The extension of right to buy through housing associations will help housing associations release capital and get access to capital. That allows them to build homes that would not otherwise exist; hence David Orr’s point, which he made quite clearly, that this will drive up housing supply. Every time a home is sold, that creates an income and a generation of asset that that housing association can use to build more homes. The reinvigorated right to buy scheme was introduced in 2012. There have been three years to build homes, and at the moment we are ahead of schedule in terms of building one for every one sold. In London, it is closer to two. We can expect to see that with the extended scheme. In some parts of the country, that will mean more than one home built for every home sold.

[Matthew Pennycook]

Q 277 Minister, this is not in the Bill, but you have indicated previously that regulations will allow starter homes to switch to full market value after five years. I am struggling with that logic, and I wonder whether you can help me: at a time when you are asking for Government, across all Departments, to make greater savings, and given that the rationale is to ensure an affordable home ownership offer, what is the logic for giving people that windfall rather than ensuring that starter homes remain in perpetuity as affordable homes?

Brandon Lewis: I am happy to answer. We went through this at the Communities and Local Government Committee, so you might want to have a look at the transcript. There are schemes selling homes at a 20% discount in perpetuity—Pocket Living, a super product in London, is a good example. We are saying something slightly different for two reasons. First, this is not about building any number of starter homes—they stay in perpetuity and therefore you can slow down building, which is what happened with social housing under the previous Labour Government. We will need to build starter homes and to keep building them. We want to build 200,000 in this Parliament, but not stop there. We need to keep building them for first-time buyers going forward and to see that number grow and grow.

There is a clear logical reason for mortgage lenders, bearing in mind that we want people to be able to buy these homes. Most people buying a home will need to get a mortgage. It is not a discount if a 20% on market value discount is available but market value can never be realised.

[Matthew Pennycook]

Q 278 What assessment has the Department carried out on the number of people who are currently unable to buy their own home but will be able to do so under the starter home programme? I asked a previous witness about this but did not get a satisfactory answer. In essence, I am trying to get at what estimate you have done of the widening of the home ownership pool that the Bill and the starter home policy in particular will create. What are the numbers over and above those already in a position to buy their first home?

Brandon Lewis: We have already said we want to see 1 million new home owners in this Parliament. The 200,000 starter homes are part of that, but only part of the picture.

[Matthew Pennycook]

Q 279 Can I push you on what assessment you have made?

Brandon Lewis: I am not going to publish here the advice we are looking at on taking policy forward. We don’t do that. Our policy is to make home ownership available to more people with 200,000 starter homes. The clear evidence is that first-time buyers were the hardest-hit through the recession under the previous Labour Government and we want to do what we can to help them. We have already doubled the numbers and we want to go further.

To finish with your query on five years—the issue applies to right to buy as well. Why should somebody who owns their own home that they have bought through one scheme be treated any differently to anyone else who owns their home? They should have the same rights over their home as other people. I have very little sympathy with the argument that, just because somebody has bought their home through a scheme, they should have different rights of ownership to anybody else. Once somebody owns their home, they should have the same right to do what they like with it in good time as any other home owner.