Nick Raynsford
Main Page: Nick Raynsford (Labour - Greenwich and Woolwich)New Housing Supply
Nick Raynsford Excerpts
Mr Betts
Yes, and as well as individuals, some potential larger housing providers, which are going to talk to the Committee as part of our private sector inquiry, are anxious to access institutional investment. They want to build properties and manage them in the long term, which is an interesting way forward for the private rented sector. A housing investment bank could provide a significant push in that area.
The Committee visited the Netherlands, which has a similar arrangement. Interestingly, their Government underwrite and guarantee funding that is raised and borrowed by their equivalent of housing associations, but it does not count as Government borrowing. The Government’s response to our proposal on some form of investment bank was that they would keep it under consideration. So, after a year, what has the Minister considered? I am sure that the answer will form an interesting part of his response.
Since then, the Future Homes Commission, which the Royal Institute of British Architects was instrumental in proposing, has had a similar idea: a £10 billion local housing development fund provided by 15 local authority pension funds. The Government told us in response that they would await the Montague report. Of course, Montague said that he did not believe that guarantees were appropriate because they distort the market. The Government have since introduced their £10 billion housing guarantee. They waited for Montague, heard what he said and promptly dismissed it. That is probably an unfair characterisation of the process.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
My hon. Friend makes an interesting point about the guarantee, but is not the most extraordinary thing that the guarantee was announced last summer as a key measure to get shovel-ready schemes going quickly, and here we are, nine months later, and not a single scheme has benefited from the guarantee? It is simply a fig leaf to cover the Government’s embarrassment.
Mr Betts
I am sure that the Minister will have a response on when the guarantee will get the shovels digging. The idea of a guarantee is not a bad one if it works, but perhaps it should be linked to some wider proposal for an investment bank. Something that came out in our recommendations is that, if there is a limited amount of public money, it can sometimes work for the best by assisting to leverage in private funding and by providing some guarantee for that private funding. We can then make the most of the two sources of funding together.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
Let me begin by drawing attention to my interest as declared in the Register of Members’ Financial Interests. Let me also congratulate the Chairman of the Select Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), on his excellent introduction to the debate, in which he highlighted a number of issues on which I think there is a large measure of consensus.
It is a pleasure to follow the hon. Member for Meon Valley (George Hollingbery). I did not agree with everything he said, but there was also a large measure of consensus between the views that he expressed and those that I shall express in my own speech. It is curiously frustrating that, at a time when there is such a large measure of consensus between those who have looked seriously at the issue of housing and what needs to be done, the housing position in the country is so lamentable.
Our output level is falling. According to the DCLG’s own statistics, in 2012 we started only 98,000 homes. That is not just massively below the 230,000 level that is generally recognised to be necessary, but 11% down on the inadequate levels achieved in 2011. An already bad situation is getting worse, not better. According to the latest figures from the National House Building Council—I received my copy only yesterday:
“NHBC data show private sector housing starts down 13% in the three months to the end of January, compared with the same period a year earlier.”
We must ask why that is happening. A number of contributory factors have already been identified, but I think that four are fundamentally important. The first, on which the hon. Member for Meon Valley focused, is a lack of confidence in the market. People are very cautious about investing at the moment, which is hardly surprising given the state of the economy and their nervousness about whether they will have a job, and also their nervousness about whether the house that they are thinking of buying will be worth as much in a year or two. Prices in many parts of the country—I do not include inner London, where the circumstances are probably rather exceptional—have been iffy. In some places they have declined and in others they have shown modest growth, but there is little ground for real confidence. I am not advocating a return to the hyper-inflation in house prices that we encountered during the booms of the 1970s, 1980s and the noughties, because they were unsustainable, but at a time when there is no confidence at all, it will be difficult to get the market going because people simply will not invest.
Secondly, when people are prepared to take the risk, they face real difficulties in obtaining mortgage finance. It is a classic instance of our reacting to over-generous lending during the boom years by allowing the pendulum to swing too far in the opposite direction, and to get stuck in a position where it becomes a serious obstacle. Anyone who has looked closely at the figures will have noted that many people who are currently struggling with high rents in the private sector could probably support the cost of a mortgage easily if they were able to get one, but the demands in terms of deposit requirements or the interest rates charged in the case of high loan-to-value mortgages make that impossible.
Yesterday the hon. Member for Rugby (Mark Pawsey) and I attended the launch of that much-respected document “UK Housing Review”. Looking through the rather voluminous set of useful housing data, I spotted the latest figures relating to the current mortgage cost-to-income ratios for first-time buyers. They are at a very low level: 17.6%, one of the lowest levels in the last 30 years. The figure was 24.6% in 2007, at the end of a boom, and 26.9% in 1990, at the end of another boom. It is not that house buyers need a disproportionate level of income to pay a mortgage, if they can get one—as I have said, some are paying rather more in rent than it would cost them to service a mortgage—but that we have to find a means of helping people to obtain a mortgage if they are prevented from getting one.
Thirdly, there has been a drastic fall in public investment. The Chair of the Select Committee highlighted the Government’s decision, as part of the spending review announcement early in their lifetime, to cut spending on social and affordable housing by 60%. Output has, inevitably, plummeted, with housing association starts in the latest 12 months totalling just 19,500, which is 23% down on the equivalent period for 2010-11. Affordable housing is doing worse than the housing market overall, which is obviously a particular concern for all those people who depend on obtaining accommodation at a reasonable rate.
The fourth element in this overall package is the very uncertain planning environment, which is entirely of the Government’s creation. They decided to tear up the previous planning framework and to create a new planning system. Many of us warned before the last election that not only was that likely to cause uncertainty, which would be damaging to development and to confidence, but it would open the door to an awful lot of nimby instincts among people who have, for a variety of reasons, been opposed to new housing development. I am afraid that the evidence clearly shows that that is what has happened. Councils are planning 272,000 fewer homes than would previously have been expected, according to Tetlow King Planning, and the level of new planning consents going through remains massively below the level required to meet the country’s needs. So there is a problem with planning as well as with the other factors that I have identified.
George Hollingbery
I am wondering whether the right hon. Gentleman might reflect a little more on those remarks. The provisions of the national planning policy framework make it clear that if a local council does not have a five-year housing supply, a permission is almost certain to be granted, wherever it is. I have just spent three interesting weeks in Eastleigh, where an application was allowed in the middle of the campaign for exactly that reason. Does he suspect that one reason for the number of planning applications being down is that lots of developers know that they cannot actually build the houses so applying for those permissions is a little futile at the moment? When they do want them, the NPPF’s requirement on having a five-year housing supply is making sure that they happen.
Mr Raynsford
The hon. Gentleman makes a perfectly fair point, but I put it to him that confidence is the crucial element in planning. If developers are to do the very expensive work necessary to put a planning application together, they have to feel confident that they have a reasonable prospect of success. A very uncertain climate has been created by the abolition, or partial abolition, of the regional spatial strategies; the lengthy row about what the NPPF would say; and the subsequent chopping and changing that have taken place, including the ill-considered measures in the ill-named Growth and Infrastructure Bill, which, once again, tinker with the planning procedure only months after it was put in place. That inevitably creates uncertainty, to which we can add the uncertainty about whether councils have got their local plans together in time. There has rightly been a lot of pressure on them to get their plans in place, but some have been less good than others at doing that. There is also clear pressure coming from various sources; the hon. Gentleman will have noticed in the context of the Eastleigh by-election that some members of his party were clearly keen not to agree to the particular planning for the housing scheme to which he referred. In that situation, there will inevitably be less scope for securing planning consent—or less incentive to apply for planning consent—than would otherwise be the case.
George Hollingbery
I ought to point out that I actually spoke against that particular application, although I have not done the same in respect of many applications in my own district. The point remains that Eastleigh borough council has not got an extant local plan; its last one expired and its new one has not yet been approved. It does not have an identified five-year land supply and the NPPF’s provision about having one came into effect immediately, so the council recognised that it had absolutely no option but to grant the permission. So the mechanisms are in place, and most councils will find it difficult to resist such applications now.
Mr Raynsford
I will not prolong this exchange, because we have already discussed the matter at length and I wish to cover other issues. All I say to the hon. Gentleman is that we should watch what happens, but I am not confident that we will see a large upsurge in the number of planning applications and consents.
Mr Raynsford
I am interested by the agreement between the coalition partners but it reinforces my point about the lack of certainty being a deterrent.
Mark Pawsey
The right hon. Gentleman referred earlier to the regional spatial strategies. Does he consider them a success?
Mr Raynsford
When the regional spatial strategies were in place, the housing output was substantially higher than we are seeing now. Government Members sometimes forget that from 2000 to 2007, before the impact of the recession, there was continuing year-on-year growth in the supply of housing. It reached 180,000 new starts in 2007, since when it fell—not because of planning but because of the recession—so that we are now seeing starts of fewer than 100,000. I would not say that the regional spatial strategies were entirely satisfactory, but the output of housing under them was substantially higher than it is today.
I have spent too long, I think, on those issues and I need to move on. Behind the statistics I have talked about are a huge number of human tragedies: all the young families unable to get a home within their means, all the people trapped in hopelessly overcrowded or squalid conditions, the huge numbers languishing on local authority housing waiting lists and the number of homeless households, which has been rising again after many years in the noughties during which the numbers came down.
Quite apart from the human consequences, there are economic consequences, too. As our economy is in difficulty— everyone who has spoken has acknowledged that housing has a critical role to play in helping to boost the economy—we must consider ways of helping to increase the output of housing. What should we do? First, we must ensure that the economic climate is one in which people can feel more confident about investing, in which people are willing to buy homes and in which house builders are willing to invest more in development. That is fundamental. Whatever else we do will make some difference, but it will not make an adequate difference if the economy is not strong. We need to turn around the economy first of all.
Secondly, we must ensure that housing is directly assisted by measures that can ensure that confidence returns and that houses are provided by developers and bought by people who want to get a mortgage. I have talked about the tight restrictions on mortgage availability and the fact that it seems to me that the pendulum has swung too far in the other direction after the boom years when the restrictions were excessively loose. We must send a powerful message that the test should be whether people have the means and the capacity to repay the debt, rather than the loan-to-value percentage that is too often used in a mechanistic way by lenders to determine credit-worthiness. If we focused more on people’s ability to repay, we could relax some of the restrictions that prevent people without the adequate means for a deposit from getting into owner-occupation.
We also need to do a lot more to assist those people who cannot afford outright home ownership but would be happy to buy a share in a property. Over 30-odd years, various schemes for shared ownership, shared equity and low-cost home ownership have had some success, but they have tended to be marginal. Although NewBuy and Firstbuy are perfectly admirable schemes in their way, they are still relatively marginal. The Prime Minister talked about NewBuy helping 100,000 people when it was launched, so when we hear from the hon. Member for Meon Valley that some 3,000 homes have been delivered so far that puts it in context. It is important and significant, but it is relatively marginal.
We must also ensure that there are other options to help people who are not looking for a new home purchase. I am cautious about the idea of extending the NewBuy formula to existing homes. I think about—I am sorry, it is one of the problems of being old—a scheme known as DIYSO, do-it-yourself shared ownership. Those who have long memories of housing will recall it. It was very popular. People liked the idea of being able to go out and select their own home and get a shared-ownership mortgage on that home. It did, however, prove extremely expensive. It also had an element of risk because there was no guarantee that it would be a newly completed home that was subject to the various checks that apply to a new home. In some cases the properties that were being bought under the DIYSO scheme were not suitable. I can hear the attraction of the message. I read it, like the hon. Member for Meon Valley, in today’s Financial Times, but I caution against putting too many eggs in that basket. However, it is important that we renovate existing homes and make them available for people, possibly through shared-ownership/shared-equity means, as well as building new homes.
I shall talk briefly about energy efficiency and housing. This is an area where there has been a great deal of poor information, inadequate information and prejudice. I feel very nervous that the voices that are hostile to improving the energy efficiency of housing are getting in the ascendancy. Some rather pernicious views are being put forward that somehow this is putting an impossible burden on house builders. The example that I will take is a simple one. It is a scheme known as AIMC4, which has been put together with the participation of some of the largest house builders, including Barratt. The purpose was to demonstrate that they could build a code level 4 home under the code for sustainable homes for no more than the cost of a code level 3 home. That scheme has succeeded; they have demonstrated that it is possible.
That is the challenge we should adopt to ensure that our new homes are built to a high standard, that they achieve energy efficiency, that they contribute to our commitments to reducing global warming and that they do so in an economic and cost-effective way. We should not to try to ditch the whole commitment to the greening of our existing housing stock and improving the standard of our new housing. That is a very important message. Also, there is the economic message that this will help the economy, because green investment and the development of some of the industries that will support more energy-efficient housing will be helpful to the UK economy.
I agree very much with the hon. Member for Meon Valley about the importance of housing for older people and providing them with appropriate housing which, in turn, can release homes that are currently under-occupied. There is something rather unfortunate about a Government demonising many tenants in social housing who are occupying one bedroom more than they might need, on some pretty tight definitions of need, when two children of the same sex are expected to share a bedroom right up to the age of 16, and two children of different sexes under the age of 10 are expected to share a single bedroom, so no single bedrooms for children are allowed.
That definition is being used to justify some pretty punitive cuts in benefit while at the same time there is a huge level of under-occupation among older people, particularly in the owner-occupied sector but also in the rented sector, on which no action is being taken. That seems to me to be unfair and it is a policy that will not achieve the effect that it should.
Mr Raynsford
I am afraid the right hon. Gentleman is wrong. Can he tell me whether elderly people are exempt from those rules in the private rented sector? They are not. That is the point that I was making. If this was a serious policy to try to reduce under-occupation, it would apply more widely, as I said, and it would also apply to people over retirement age. The rules being implemented by the Government apply only to people below retirement age, even though the Government know that it is predominantly among older people that under-occupation is a problem. I will be quite open and say that the right policy would have been to consider a deduction, but only if two factors apply. First, there should be an option to move to smaller accommodation, but in many cases there simply is not that option and it is grossly unfair to cut people’s benefit where they have no chance of moving to smaller accommodation. Secondly, it should apply only where people have two bedrooms more than they require because of the tight space and occupancy standards that apply. That should apply to everyone, including those over retirement age. That would be a far more effective policy in achieving the objective of getting better use of our stock than the policy that the Government are pursuing. I make that point in addition to my general point about providing more suitable accommodation for older people in order to free up accommodation that is under-occupied.
I support what the Chair of the Select Committee said about removing the cap on council investment. That is nonsense. When councils have the scope to borrow more under the prudential borrowing regime, when there are safeguards in place through that regime, and when local government debt is at an historically low level, it is absurd to deny the option of creating the means to get further investment in new housing. There should certainly be more support for that and a removal of the cap. There should also be a willingness to engage with housing associations about what happens in the post-2015 world, because they are literally running out of time and running out of scope for continuing development. It will be an utter tragedy if one of the more successful organisations producing housing in this country in recent years simply grind to a halt in terms of their traditional product of social housing because of the absence of a Government programme. There are real needs in terms of the social housing sector as well as the owner-occupied sector.
I come now to the strange beast of the new homes bonus. This is a rather expensive element of Government policy. Already it has cost £1.3 billion. Some of that has been taken from Peter to pay Paul because some of it is recycled from local authorities to other local authorities, but about three quarters of a billion is additional Government money. That £1.3 billion will rise to £3.3 billion because the scheme involves payment over six years. That commitment to £3.3 billion is a lot of money and, at the present rate of growth, the scheme will involve more expenditure than the total Government investment on affordable homes over the lifetime of this Parliament, so it is worth examining how it is operating. I have already referred to the disastrous and declining level of new housing starts, so it is clear that the scheme is not affecting those. The total level of new planning consents last year was 115,000, and in the first three quarters of 2012, 95,000. It seems likely that it might reach a level of about 125,000 when we have the figures for 2012, but that compares with 212,000 in 2007 and 134,000 in 2010. The Government will have been presiding over a lower level of consents for residential planning than ever before, which is extraordinary when they are spending £3.3 billion in supposed incentives to encourage more planning consents.
Mark Pawsey
The right hon. Gentleman and I had an exchange on this at the Chartered Institute of Housing event only yesterday. The fact that my local authority will benefit from the new homes bonus has greatly contributed to local people accepting the principle of a substantial new housing development in the community. That is not included in the right hon. Gentleman’s figures because the application has not yet come in, but it will benefit my community because the local authority will have the funds generated by the new homes bonus to put towards facilities for the community as a whole. That is one reason why it is taking a while; the applications have not yet come in. The right hon. Gentleman needs to be rather more patient than he has been so far.
Mr Raynsford
As I said to the hon. Member for Meon Valley, let us look at that in a year’s time, when we will have more evidence. However, I must say that it is taking a very long time for something that is supposedly, to use the Government’s own phrase, a “powerful incentive” for authorities to give planning consent for new housing. I hear what the hon. Gentleman says about his local authority, but I am afraid that the figures do not support his optimism. For the 17 authorities that have received the largest amount of new homes bonus—this is all based on an answer to a parliamentary question I asked the Housing Minister earlier this year—the level of major residential schemes getting planning consent in 2011-12 was 607, compared with 969 in 2005-06, a 37% reduction and 10% below the previous year, so there was no growth at all. It does not look convincing for a very large outlay of public money. The £3.3 billion, if it were applied to direct investment in new housing, would certainly be likely to achieve far better consequences.
I put it to the Government that if they are keen to stimulate house building and the economy, greater investment in housing will be necessary. What has been put forward by the Select Committee and argued for by Members on both sides of the House this afternoon is a way forward that could get us out of the mess we are in and ensure an increased level of house building. That will meet important social needs and help to revive our economy. The case for it is overwhelming. I sincerely hope that the Government will recognise that the current policy is not the right way forward. We need a change of policy and we need some of the policies we have been talking about today to be put into effect to secure that increase in house building.