Robert Neill
Main Page: Robert Neill (Conservative - Bromley and Chislehurst)
Robert Neill (Bromley and Chislehurst) (Con)
It is a pleasure to follow the hon. Member for Sheffield South East (Mr Betts), the Chairman of the Communities and Local Government Committee. I have much sympathy with many of his points, but I welcome his generous and well deserved tribute to my hon. Friend the Member for Hertford and Stortford (Mr Prisk). I am delighted to see him in the Chamber. He did a great deal in the sector in his time as a Minister and his work is appreciated on both sides of the House.
I declare an interest—it is in the register—as owner of a single property that I let out. That puts me in the same position as many private landlords, the vast majority of whom have a small property portfolio—it is generally fewer than 10 properties. I am also interested in the debate as a London MP. The private sector is particularly important in London, where housing costs are acute. I will then deal with the last point made by the Committee Chairman, which is on recommendation 30 of the report, on rents and affordability. I welcome the Select Committee’s view that rent control is not the answer, and I also welcome its view that what is really important is increasing supply. That is certainly critical to us in London.
The Government have taken commendable steps. The establishment of the Build to Rent fund, along with the raising of that fund to £1 billion, is a tribute to the work of my hon. Friend the Member for Hertford and Stortford, and to the continuing work of his successor, the current Minister. The £10 billion in loan guarantees for the building of homes specifically for private rent is another important step. So the Government are doing a great deal, but we should be prepared to think outside the box and think about other, more imaginative ways of leveraging private as well as public money into the private rented sector.
We all know that it is important for us to produce not just good-quality homes—and the quality of private rental stock is variable—but homes that will give people a degree of stability. An interesting comment was made in the pre-Budget submission by the London Chamber of Commerce and Industry, which pointed out that a lack of affordable housing for rent in the private rented sector, and the difficulty experienced by many people—including many young professionals in London—in moving into market housing are increasingly presenting a potential bar to London’s economic competitiveness. It quoted a designer in London—very sensibly, I think; after all, the creative industries are an important part of the economy—who said:
“When my employees see their rents shoot up, they come to me for a pay rise that I can’t afford to give them. This means I am always at risk of losing my most talented and experienced staff.”
I think that many London business people will recognise his problem.
Jeremy Corbyn
I, too, represent a London constituency. Rent levels in the private sector are rising astronomically all the time, out of all proportion to the value of the properties involved. Does the hon. Gentleman not think that the solution must be a rent regulation scheme of some kind, possibly beginning in London? Would that not stabilise the situation, and enable us to retain the diversity and population of our city?
Robert Neill
Although I agree with the hon. Gentleman about rents rising in London, I do not agree with his conclusion. I do not believe that trying to manipulate the market in the way that he suggests can be a long-term solution to the problem.
Mr Prisk
My hon. Friend has rightly drawn attention to the role of individual landlords, but the key element of the Government’s present strategy is encouraging institutional investors, not dissimilar to those in Germany. Does he agree that that is the best way in which we could increase supply, choice, quality and indeed the longevity of terms in the manner he has described?
Robert Neill
My hon. Friend is entirely right. That is the main point that I wanted to make in my speech. It is precisely because there have not been funding models to attract institutional investment that money has not been invested for long enough periods to underwrite the longer-term, more stable tenancy arrangements that we would all like to see. I think that what has been done so far is an important step forward, but it is ironic that under Governments of both political persuasions we have lagged somewhat behind other countries when it comes to leveraging institutional money into the private rented sector. REITs—real estate investment trusts—have never taken off in this country as they have in many others, and I think that that is a shame. Some adjustments to the fiscal treatment of those vehicles would be helpful.
Robert Neill
I think that this is a classic case of “It is not an either/or scenario”. We certainly need to take steps to improve the image of the sector, which I believe is often unfairly castigated. A good deal of action is suggested in the report, and I would probably agree with the hon. Gentleman on some helpful steps that we could take. However, I think that we must do that in parallel with creating mechanisms that will bring in the institutional money. The two go hand in glove: they are two sides of the same strategy that we should be adopting.
I want to say a little about what we could do to improve institutional investment in the private rented sector. There are obstacles, and this brings us back to the point made by the hon. Member for Islington North (Jeremy Corbyn). In some cases land for private sale may be worth more than land for long-term rental. There are issues with speculative costing and valuation methods. We also need to look at whether there is some scope for using the private rented sector to create an income stream that could generate a source of cross-subsidy for affordable housing units, particularly in regeneration schemes, as rents rise. The current models we have tend to put the subsidy at the beginning of the system, in effect through the planning gain being taken out, with the consequence that the landowner takes a lesser price on the sale or the market housing will be inflated a little to pay for the subsidy that comes via section 106 or the planning gain.
That does not help in respect of the longer-term funding streams we would like to see, however, and I hope the Minister will think about the following. I recently had the opportunity to talk with representatives of the New Economics Foundation. They have been doing some very interesting work in this field, and I commend the work in particular of Alicia Weston who has been doing some very interesting research. They have come up with a model that merits further consideration. It is a model for a defined income scheme that is designed to bring forward more rented housing. It allows private rental incomes to subsidise the rents of affordable units on a rolling basis and therefore gives the ability to have a long-term income flow. Indeed, it almost gives a bond that can be available to back up the investment.
The housing that is created stays in the rented sector for the life of the scheme. One cannot guarantee beyond that, but that would none the less give valuable supply increases. A new form of contract would be required, which would be perfectly doable within current English law, between the local authority and the housing association, so that rather than setting a specified level of affordable housing on the site, the allowable income from the site is what is set. That income is made up of a combination of market and affordable rents and their levels are allowed to flex in order to make up the defined income. Provided there is the income, which is guaranteed and is therefore a quasi-bond, there is the stream to cross-subsidise. Under those circumstances, if market rents were to rise, as they have in London recently, the excess income would cross-subsidise more affordable housing. Conversely, if there is a revenue shortfall some affordable units can be switched to market rent, but the integrity of the income stream is preserved, and therefore the integrity of the investment model. That will give local authorities a semi-guaranteed stream that is not guaranteed by the public purse, but which creates something almost as good as a bond. I hope the Minister will look seriously at that. There are some practical issues that we will need to deal with, but pilot schemes are being considered around the country and I hope the Department will give schemes such as this one a fair wind.
There is an advantage for housing associations there, too, because that more stable income stream is worth more to them and the increase in value will allow them to subsidise more housing or to unlock further sites and land for rented housing, either using a mix of the private rented sector or just affordable. This also encourages housing associations into the private rented sector, co-operating with institutional money, which might be an interesting approach to pursue.
If applied sensibly, this scheme could lead to increased institutional investment in the private rented sector. I hope the Minister will look at that and encourage it. That can be done in respect of the whole scheme or simply the section 106 element. There is a degree of flexibility. I do not pretend it is a silver bullet, but we do need to think outside the box in leveraging in institutional money. There are a number of possible routes, and I think this particular one may be very timely.
Overall, a healthy private rented sector is an important part of the housing mix, especially in large cities such as London, where the nature of the population frequently means that for a period of their lives people may well want the flexibility of living in the private sector before moving on to house purchase. They are likely to be earning incomes that mean they would never qualify for social rented housing, but they cannot at the moment access the market readily. Finding models that produce adequate housing supply for people in that situation is crucial for the health of London, my city, and of all the major conurbations in this country. I hope the Minister will think about that as a model that is worth pursuing and that this report will generally find favour with the House. I also commend the Government’s response to it, which is a constructive one.