First-time Buyers

Owen Smith Excerpts

Wednesday 14th March 2012 Westminster Hall

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for Winchester (Steve Brine) on securing the debate. The subject is important in a week when the Prime Minister has made two significant announcements. At a time when the Liberal Democrats are taking policies in my manifesto and planting a nice yellow flag on them as though they had always owned them, I want to ensure that we claim both those policies as having been born, brought to fruition, made aware and brought to life in the Conservative party, with a big blue sticker on them.

I am proud of what this party has done for first-time buyers, not just since I have been an MP but since I was born, and even since the party was founded. We have always been the party of the first-time buyer. I make no apology for that, and I am proud of it. I know that our critics—sadly, they could not arrive today—normally say that we are opposed to social housing and that we look down on it. Far from it; as my hon. Friend the Member for Milton Keynes South (Iain Stewart) pointed out, we see the importance of the tenancy escalator. We see social housing as a springboard or trampoline, not quicksand from which one should never escape.

There is a reason why that is in our party’s DNA: we are real people with lived experiences. In my family, on my mother’s side, I had relatives living in Myrtle Gardens, a modernist estate in the heart of Liverpool. It was rather like the Karl Marx-Hof in Vienna but, in that part of Liverpool, possibly more left-wing. In the 1930s, it was a model of its time, but by the 1980s and the Toxteth riots, it was a shadow of its former self. What happened? Along came Lord Heseltine, who made sure that Myrtle Gardens was rebuilt and sold off to local people at prices that they could afford, which turned that estate around. In the heart of Liverpool, the Conservative DNA flickered, and we should be proud of that as well.

Council estates should be more than just assemblages of houses where we put people for social engineering purposes, as many on the left have always sought to do. My home village of Weaverham, where many people bought their houses in the 1980s, was two-thirds council estates, mostly for people working in the local Imperial Chemical Industries plant. Looking around, I found that they built a community from within the houses that they bought; they did not rely on someone else to do it for them.

It is clear that after 13 years of Labour rule, the challenges that we face are far different. As other speakers have pointed out, numbers of first-time buyers are falling sharply, from 50% of all house buyers in May 2009 to only 20% now. My hon. Friend the Member for South East Cornwall (Sheryll Murray) cited the age of the average first-time buyer as 35. I heard 37. Maybe we will hear an upwards bid from the Labour spokesman, although I doubt it. That is Labour’s legacy.

Perhaps the most shocking legacy that we inherited was 50,000 statutorily homeless people. We do not mention that figure often enough, as my hon. Friend the Member for York Outer (Julian Sturdy) pointed out. Because the social housing market did not work as it should, we inherited 50,000 people trapped in temporary, substandard accommodation. That is not a legacy of which the Labour party should be proud for one second.

It is no wonder that groups such as Priced Out exist to campaign for people of my generation—20 to 35-year-olds—who are being priced out of the housing market, unable to afford a first house. I was fortunate. I bought in the last housing development in Greater London where prices were still under £100,000. I got in just in time. Another year or two and I would have been the sort of sofa surfer that my hon. Friend the Member for Winchester discussed.

Why should my generation be denied opportunities that previous generations had? We should enable people, not tell them how to live their lives. It is a cultural battle as much as a political or economic one, because it is about the belief that housing policy is somehow about social engineering. It most certainly is not. It is about enabling people to choose how to live their lives. Home ownership is a natural objective for 86% of people, according to the Department for Communities and Local Government. We should not sneer at that or think that it prevents our wider dreams of creating a new Jerusalem. Far from it. True communities come from families having a stake in the society in which they live. That is the nub in terms of policy.

When those on the left criticise our NewBuy policy, I want to take them to Westminster Gardens in Bispham or Hawley Gardens in Thornton in my constituency. The criticism is that we are doing it just for the sake of the house builders. I want to take them around those new estates. Westminster Gardens was being built five years ago, when I was first elected to fight the seat. It is still being built; it is what is called a stalled development. Those who think that we are just trying to benefit house builders should speak to the residents of that estate and find out what is actually going on there.

A stalled development means that the local council will not adopt the roads, so they are left with substandard paving and road quality. They are left with dangers to small children from building sites and higher numbers of road traffic accidents and injuries. Merely to say, “Oh, you’re just doing it for the sake of the house builders” shows once again the failure of the left to engage with people’s lives as they are lived. Once again, it is only seeing the schematics, which is deeply unfair to the people investing in those estates who want them to be completed.

More concerning still is how our social housing market is blocked up, as my hon. Friend the Member for York Outer said. Many social tenants now are not moving through the system. That is why large numbers are stuck in temporary accommodation: there is not sufficient turnover. Labour has almost destroyed the right to buy by tweaking criteria, lowering thresholds and trying to prevent people from buying their council homes. I am sure that Labour Members pay lip service to the concept, but they do not believe in their hearts that owning one’s own home is a good thing. They look on it with suspicion, distaste and almost distrust, which angers me.

I could easily do cheap politics—

[Owen Smith (Pontypridd) (Lab)]

You have been for the past half hour.

[Paul Maynard]

I am sure that the hon. Gentleman will get a chance to have a go at me later, and I look forward to hearing it, but since he encourages me, I will talk about union leaders occupying social housing and the fact that here in the royal borough of Westminster, there are 2,000 social tenants who earn more than I do as a Member of Parliament. Perhaps that should give us pause for thought. Perhaps we should reconsider how we use social housing and what it is for. I do not think that it is there to give Bob Crow a pleasant place for life.

--- Later in debate ---

[Paul Maynard]

I agree entirely. Perhaps we would like to see a gesture from leader of the National Union of Rail, Maritime and Transport Workers as to what he will do in future.

We need to use our social housing stock better, which is why I welcome the Prime Minister’s announcement on enhancing the right to buy. We have to stop seeing our social housing stock as ghettos that we create. When I first moved to London, into the housing development that I mentioned, as ever, the housing developer built the required proportion of affordable housing at the end of a cul-de-sac; there were two rows of cheaper housing. It became ghettoised and stigmatised, as is always the case. We need to move beyond that and to think of social housing as a resource for the use of the community, not areas of a town or village that are regarded as somehow less worthy. That has always been my concern about the social engineering aspect of housing policy, which many Labour Members seem to want to create—communities that they can somehow control. That strategy is desperately wrong.

[Owen Smith]

I am listening with interest to—perhaps “enjoying” is the wrong word—the hon. Gentleman’s comments. In his tour de force on the history of the left and its attitude to social housing, will he return to Nye Bevan and the great period of the invention of social housing in the aftermath of the second world war, and point to who on the left, in the Labour party, thinks of social housing as just a matter of social engineering?

[Mr James Gray (in the Chair)]

With regard to first-time buyers, of course.

--- Later in debate ---

[Owen Smith (Pontypridd) (Lab)]

As ever, it is a pleasure to serve under your chairmanship, Mr Gray. It was a slight disappointment to me that you forced us to forgo what I am sure promised to be a stimulating aside on my great hero Nye Bevan, but perhaps we can hear that another day. I, too, congratulate the hon. Member for Winchester (Steve Brine) on securing a very entertaining debate and on giving me the opportunity to spend so much time with so many entertaining, warm and welcoming Government Members.

The debate is prescient given the announcements—or perhaps I ought to say re-announcements—earlier this week about the NewBuy scheme. I will come on to that in a moment. We have had an interesting range of passionate contributions. There has been a rerun of the golden greats of the Tory past—Thatcher, Heseltine, Eden—and I even heard about building a new Jerusalem. There were times when I could almost hear “Jerusalem” playing as the backing track to some of the tales of bucolic English home owning.

We have also heard some facts today, and I would like to add to some of them to provide some context. Let us be clear: there is a crisis in housing and home building. It is not new. It did not start under this Government. It has been going on for a long while and it is certainly getting worse. We need to be honest. Some of what the Government are doing is intended to help the crisis, but it is far from certain that they will be successful. As the Opposition, we intend to ask searching questions about what is intended and what will be achieved.

The facts are that, under this Government, house building is down, homelessness is up and it is harder to get mortgages. Rents in the private rented sector, where many have been forced to go, are climbing. In part, that is because the Government’s broader economic strategy is not working. The construction industry is being hit particularly hard as an effect of that failure to get the economy moving. Far from criticising the Government for seeking to assist the construction industry, the Opposition are urging them to go further.

Total construction, in terms of output, has declined by £2 billion since the Government came to power. New work output by the construction industry is down almost a quarter, by 23%. It is not getting better—it is getting worse. The previous two months, December and January, were the worst two months since May 2010. Compared with the last 18 months of the Labour Government, all house building has fallen by 11%. Completions, where a house builder finishes a house and brings it to market, are now at their lowest levels since the second world war, having fallen by 10% under this Government. That is not a new trend; it is an ongoing trend, but it is getting worse. The 60% cut to Labour’s affordable homes programme has meant that only 454 affordable homes were built in the past six months. Most shocking perhaps is that homelessness rose by 14% and rough sleeping was up by 23% in 2011. Those are the facts and Government Members need to remember them.

First-time buyers are key to getting the market moving. Government Members noted that the number of first-time buyers has decreased significantly over a long period, down from 700,000 per annum in 2004 to 350,000 in 2010. Why? There was a lot of comment about that. Ultimately, it is due to a squeeze between incomes and prices. House prices are high, and incomes have been depressed over a long period. As the hon. Member for Rugby (Mark Pawsey) pointed out, the reason for that is supply—we are not building enough houses. The number of houses in the market is very limited and successive Governments, including mine, have not done enough to arrest that. The current Government should not kid themselves that they are getting anywhere near arresting the problem.

There is also a problem of affordability, caused by the squeeze on earnings, limited supply and the contraction in mortgage lending that has occurred since the credit crisis. All those factors have combined to drive up the average deposit required by first-time buyers to approximately £100,000 in London and more than £50,000 across the UK as a whole. The average age of unassisted first-time buyers has risen from 37 to 44 right across the country in that same time period.

Labour understands—and understood—that something needs to be done to address that, which is why we set out to address supply. Between 2005 and 2010, we delivered 256,000 additional affordable homes in England. Contrast that with the scale of ambition shown by the current Government, who propose to build just 170,000 affordable homes—80,000 fewer affordable homes—in a comparative five-year period between 2010 and 2015.

What about helping first-time buyers get on the ladder? Hon. Members will have no doubt read in The Daily Telegraph this morning about the effect of the stamp duty holiday, which was introduced by Labour and is being cut by the Government. Although a couple of months ago, the Chancellor dismissed the stamp duty holiday as wholly ineffective, it has led to a 20% increase in recent months in the number of first-time buyers applying for mortgages. That indicates clearly that, far from being an ineffective measure, it was working and the Government needed to give it time to bed in and not abandon it, which is what they have done.

The Government have also abandoned Labour’s HomeBuy Direct scheme, which was funded to the tune of £380 million and designed to help 10,000 first-time buyers by providing a 30% reduction on the loan over five years. The Government have replaced that scheme with their own far less generous scheme, which is worth just £250 million, and offers only a 20% reduction. Other than that, the two schemes are largely similar.

The latest wheeze is the mortgage indemnity scheme, which was re-announced this week. It was first announced in November. It is designed to help a further 100,000 mortgage holders get on the property ladder through effectively giving them a 9% reduction—or indemnity—in the volume of their mortgage, thereby reducing the cost to the lenders and allowing them to offer 95% mortgages. There are many problems with that, but one is that 95% mortgages were already being introduced into the market at lower interest rates, in certain instances, than the ones announced by the Government. Barclays, Nationwide and some of the other lenders involved are lending at an average of 5.3% and 5.4% over the period on the 95% mortgage, whereas 5.25% was already available from the Leeds building society on precisely the same terms. We need to ask whether the scheme does what it says on the tin.

What guarantee is there that the scheme will actually assist first-time buyers? It is open to all prospective buyers up to £500,000. How can the Government be sure that this will help first-time buyers? How can they be sure that it will go to those families who are most hard pressed, as opposed to those who are slightly better off and can perhaps afford to raise a mortgage?

Finally, how can the Government reassure us that this will address the underpinning cause of the crisis in our housing market—the lack of supply? Can the Minister offer us any guarantees that this will lead to a dramatic increase in the number of houses being built, or will it simply displace activity, both in the mortgage market and in the house building market, that would otherwise have happened naturally as the economy bounces back?

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I start by joining the round of congratulations to my hon. Friend the Member for Winchester (Steve Brine). He has not only secured an important and topical debate, but spoken with real passion. I pleased to respond on behalf of the Government, both to him and to those who have also contributed with passion, whether from Blackpool, Milton Keynes, Cornwall or elsewhere. We have heard about homes, homelessness, history and our hopes for our children. We have heard about stalled development and proper community development, which I will touch on briefly. If Mr Gray will forgive me, I will also insert a small piece of history from my own constituency of Norwich North. I believe that the Mile Cross estate was the first council estate in England built outside London, something that I am very proud about. I shall stop there, before Mr Gray tells me to sit down.

My hon. Friend the Member for Winchester highlighted the package of support that the Government have introduced to help people own their home, and I will set out our progress on that. Before I do so, I will deal with some of the questions that were asked about the detail, principally by my hon. Friend. He asked whether NewBuy could be extended to existing properties, not just new properties. NewBuy builds on an industry-led scheme. That is very important, because it builds on support from both builders and lenders. It makes homes affordable, it stimulates economic activity, and, crucially, it increases supply.

The Home Builders Federation estimates that new build could deliver 25,000 additional homes in three years, supporting in turn up to 50,000 additional jobs, which I think all hon. Members will agree represents a real boost to the economy at a time when it is most needed.

On new versus existing, it is important to state that home building and the supply of new homes at present is not meeting the demand in the economy, so there is a pressing need for new build in that sense. A scheme focused on existing homes would be different and could have different financial consequences.

My hon. Friend also asked about the first-time buyer discount on stamp duty land tax, as did the hon. Member for Pontypridd (Owen Smith). Hon. Members will be aware of a review by Her Majesty’s Revenue and Customs in November 2011, which brought forth some staggering numbers that they may not be aware of. The review indicated that only 1,000 of the additional first-time buyers who bought a property between April 2010 and 2011 would not have purchased it without the relief. That 1,000 figure is derived from the 118,000 first-time buyers who used the relief, of whom it is believed 117,000 would have done so anyway. Hon. Members will agree that those remarkable numbers suggest that the relief was not effective in increasing the numbers of first-time buyers entering the housing market.

[Owen Smith]

Will the Minister give way?

[Miss Smith]

Before the hon. Gentleman asks me further questions, I must address his point about the cost of furthering the relief for a year being estimated at £150 million. I hesitate to give way to him, because in his comments and the questions that he asked me, he once again showed his party’s rather tenuous grip on credibility—if he thinks that such a sum represents value for money in helping first-time buyers and other purchasers. He then quibbled about whether the scheme that I shall outline really helps first-time buyers. He must ask serious questions if he thinks that £150 million spent in that way furthers that aim with no dead weight.

[Owen Smith]

rose—

[Miss Smith]

If the hon. Gentleman would like to justify that, I am happy to hear him.

[Owen Smith]

I would have to look at the numbers before lending them any credibility. It would also make sense for the Minister to concede that her comments are based on numbers predicated on a scheme that has not yet ended. She is talking about November numbers, whereas the scheme runs through to March. The Council of Mortgage Lenders suggested that there has been a 20% increase in the intervening period, which will radically change the figures.

[Miss Smith]

The hon. Gentleman knows as well as I do that the scheme ends on 24 March 2012. No doubt some will try to get in before then. Indeed, a review has to take place at a certain point and, on the broad thrust of a year, if figures such as those I mentioned have been achieved, it is unlikely that it would continue to be a sustainable way to support first-time buyers.

Let me turn now to the point of the debate, which is to query how we can best support those who wish to enter home ownership. There has been a clear correlation in recent decades between wider economic problems and volatility in the housing market. The best thing that we can do, first of all, to support the housing market is improve the country’s financial and macro-economic stability. That is why we are taking action to get public finances back on an even keel. Only through that action will we give people the confidence to invest in new homes and allow the building industry to go ahead and build the homes that we need.

We need to tackle the underlying structural issues that have had such negative consequences for the housing market. That is why the Government are taking action to improve stability in the credit markets and are reforming the planning system. Without such reforms we will face cyclical problems, time and again, of the sort experienced in recent years. However, we understand that we need to help people now, which is why we are taking action to help first-time buyers and other purchasers own their own home.

The effects of the recent financial crisis were particularly pronounced for first-time buyers, as mortgage lenders have cut back on low-deposit products. I can confirm, from Government figures, that the average age of an unassisted first-time buyer is 37, compared with 33 before the crisis. The Government are taking action now to help first-time buyers and others to attain home ownership.

On Monday, the Prime Minister launched the NewBuy scheme, which will deliver a significant increase in housing supply—I have already put numbers to that—and access to affordable mortgages for those without large savings who wish to purchase a new home. The scheme is not aimed at borrowers who cannot afford the mortgage, but at borrowers who lack the savings to fund a deposit, giving creditworthy borrowers a leg-up in the property market. I should like briefly to note hon. Members’ comments about second-steppers, who are important and have serious contributions to make in our effort to get the housing economy moving.

Detail on products is available to Hon. Members who wish to look for it, but I can confirm that although prior to Monday there were no 95% loan-to-value new build mortgage products on the market, today buyers will now be able to purchase a new build property with a 5% deposit. Builders are partnering with lenders to offer 90% to 95% mortgages. Three lenders are offering new mortgage products in that arena. We expect more builder-lender relationships and associated mortgage products to be confirmed over the coming weeks and months. Therefore, in total, the Government have made provision to help up to 100,000 families and young people to buy their own home.

We are committed to invigorating the right to buy, which hon. Members have applauded in today’s debate. On Monday, the Prime Minister announced that we will support social tenants who aspire to own their own home, by raising the discounts to make it attractive to do so across England. Right to buy has already helped nearly 2 million people since its introduction, but discount rates were reduced by the previous Government and the number of sales fell dramatically. From 2 April, the discount limit will be raised to £75,000 across England, so in London, for example, it more than quadruples the current limit. It will help thousands of people realise their home-owning aspirations. However, we are also committed to ensuring that it does not erode the social housing stock, which is why for every home bought under right to buy a new affordable home will be built.

NewBuy and right to buy sit within a broader suite of options intended to help first-time buyers and others into home ownership. Firstbuy, which was announced in Budget 2011, is a fixed-term measure designed to support the housing market, given constrained credit availability and challenging economic conditions. Under that scheme, the Government and around 100 house builders are together providing some £400 million to assist almost 10,500 first-time buyers to purchase with a 20% equity loan a new build property in England by spring 2013. We have had more 4,250 reservations since the scheme opened in September. The three largest participating house builders have reported sales of more than 1,200 homes in the first four months. Hon. Members will agree that those results show that the Government are taking action now, as needed, to support those who wish for the first time, or indeed at other times, to be a home owner and to continue to build the kind of communities that we all aspire to see throughout the country for our children and grandchildren.

Once again, I thank my hon. Friend the Member for Winchester for his reasoned, thoughtful and passionate contribution to the debate that he has given us the opportunity to participate in. I thank other hon. Members who have made equally passionate and inspiring contributions on what we all hope for those we represent.