Affordable Housing: London

Rupa Huq Excerpts

Tuesday 14th June 2016 Westminster Hall

[Ruth Cadbury]

I thank the right hon. Gentleman for his intervention. Of course, in his constituency he has many people working at very high salaries. We know there is a crisis when people on almost £100,000 a year cannot afford a home in London.

The problem goes to the heart of London’s ability to function and to serve the rest of the UK. Let us look at the problem from the perspective of a few people who want to live and work in London and see what their choices are. In the teaching and social work professions, there is a chronic shortage and a recruitment and retention crisis, as all of us who have recently met headteachers or directors of social services know. Inner London salaries range between £27,000 and £37,000. If we take a mid-point of £32,000, someone could get a 25-year mortgage with a 5% interest rate and they would be able to afford between £87,000 and £131,000, but in my constituency a teacher could not get anything. The cheapest home for sale in my constituency, apart from a boat, is £190,000, and that is for a one-bedroom flat in a house that is in a shocking condition.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

Is my hon. Friend aware that in the W4 postcode, which is in her constituency and mine, just to have a chance at having a one-bedroom flat—a so-called starter home under the new scheme designed to alleviate the crisis—someone would need a salary of £90,500? Starter homes have been misnamed. They are not starting anything, but ending dreams for a generation.

[Ruth Cadbury]

My hon. Friend is absolutely right; I will move on to that subject shortly. Certainly a salary of more than £90,000 is not the average mid-point for a teacher or social worker.

Time and again when I talk to employers, housing is the issue. For some nurses there has been some key worker housing, which was introduced to deal with market failure and to provide cheap housing, but that is all but disappearing. Those entering nursing will also face a mountain of student debt now that the Government have announced the scrapping of the NHS bursaries. The Royal College of Nursing survey recently showed that many nurses will leave London if they cannot afford anywhere to live, which will add to the problems in the NHS.

At the lower end of the pay scales are people who are essential for London to work. A daycare assistant is paid £6.70 an hour to work in a nursery here in London; that is about £1,000 a month. No one with a family can do such work when the average rent is around £1,500 a month. Even renting a room takes well over half the daycare assistant’s take-home pay. I have a specific example of a hard-working man and his family in my constituency. Since coming to London he has worked full time in two jobs. He has rented privately for years, taking multiple loans to cover deposits and rent up front, and is now in considerable debt as a result. His landlord has now raised the rent as it is the end of the tenancy, so he now cannot stay there with his family. Letting agents and private landlords will not accept claimants of housing benefit, which he needs to top up his rent, and he cannot borrow any more money for a deposit. Despite never missing a rent payment and despite two previous letting agents confirming that with good references, he cannot rent privately. He has had to apply to the council as homeless in order to get housing.

But my constituent will not get a council home. The current series of “How to Get a Council House” is filmed in my borough of Hounslow. None of the families in that series has ended up getting a council home. If they have been lucky and got through the hoops, and if they have been accepted under the council’s duty to house, they are placed in temporary accommodation, as my constituent and his family will be. Temporary accommodation is private rented housing where housing benefit may contribute to housing costs, but even then my constituent is not out of the cycle of escalating rents. He may dream of owning a home—a Government objective—but what he needs is a home at a rent he can afford on his low wages.

He is not alone. The ending of a private tenancy now accounts for 39% of homelessness acceptances in London. According to the Department for Communities and Local Government statistics, 32,000 people in London made an application to their council as homeless in 2014-15, which represents an increase of 38% over five years. DCLG statistics reveal that right-to-buy sales between October and December 2015 accounted for 26% of sales. Right to buy is for people who are already fortunate to be council tenants, but, with a Government discount of up to £100,000, it is taking valuable stock away from local authorities, hence their dependence on temporary accommodation.

In the council housing sector, like-for-like replacement is not happening for the council homes bought under right to buy. The new replacement homes that the Government announced could be shared ownership or low cost sale rather than rent. At least 36% of all homes sold by councils across London are now let by private landlords, many of them subsidised by housing benefit because the rents are so high. The sale of high value vacant council homes will have the overall effect of restricting the number of affordable houses for rent. London Councils is concerned that the objective to replace two homes for every one sold may not be sufficient to cover construction costs and land purchases in the right mix of housing. So already we have examples of the failure of the housing market in London that is causing the affordability crisis.

I have not yet mentioned employees in the private sector on middle incomes. Fuller’s Brewery in my constituency is a thriving business with an international reputation. Having spoken to the directors, it has become evident that the housing crisis is affecting their business and their ability to recruit and retain staff. So who can truly afford to buy a home in the area they want to live in, grew up in or want to work in?

--- Later in debate ---

[Ruth Cadbury]

The right hon. Gentleman is absolutely right. Many business organisations are raising housing as an issue. Two years ago, the London Chamber of Commerce and Industry wrote a significant, ground- breaking report on housing costs and the housing shortage. That does not appear to have been taken into account when the Housing and Planning Bill was drafted. I understand that the LCCI will be launching another report in a couple of weeks to highlight the problems again.

A shortage of the total number of homes in all sectors—council, social rented, intermediate and market rented—has driven up open market sale and rental values. Several organisations, particularly the London Housing Commission, have estimated that London needs at least 50,000 new homes a year just to begin to deal with the shortage, and stated that a significant proportion must be affordable, particularly when wages have not kept up with prices. The average Londoner’s salary is £33,000, but the average home now costs 16 times that. As more people are priced out of home ownership, they are putting more pressure on the rental market, in which rents are continuing to rise. In my borough, Hounslow, the rent-to-salary ratio is 58%, and rent levels are out of reach for average earners, let alone those on low wages.

Until around five years ago, councils relied on Government support to add to the stock of council and housing association homes so that they could provide decent-quality, affordable homes to those in acknowledged housing need who were unable to rent or buy in the private sector. In 2011-12, some 12,000 new social rent homes were delivered, thanks to the Labour Government policies that supported housing associations, and later councils, to build, but that figure has been declining, and only around 2,000 new social rent homes will be built this year. That shows how the pipeline supply is declining. The number of council homes and housing association social rented homes built this year will be lower than the number of council homes lost through the right to buy. The total stock of homes for social rent is going ever downwards.

There was always the intermediate market of shared ownership—part rent, part buy—but less of that stock is now coming on stream as the Government focus on starter homes and Help to Buy. Relying on the private sector to deliver affordable homes has meant that in new developments across London, only 13% of homes given planning consent last year were considered “affordable” under the official definition. We are losing social rented homes faster through council house sales than section 106 agreements with developers are delivering new homes.

What are the Government doing about affordable housing? Let us look at their flagship policy: starter homes. When the policy comes on stream, it will apply only to brand-new properties, which, at current prices, are unaffordable to most working Londoners, as the right hon. Member for Cities of London and Westminster (Mark Field) said. Someone needs to be earning £97,000 to buy an average-priced starter home. Starter homes will also cut the delivery of all other homes. A third of councils that responded to an Inside Housing survey revealed that their entire affordable housing requirement could be consumed by starter homes if the threshold is set at 20%.

Charities such as Crisis are concerned that the policy will require councils to prioritise starter homes for higher earners and so reduce councils’ scope to meet the full range of housing requirements identified through their local planning processes. London Councils agrees that starter homes should be in addition to other forms of housing, so that councils can still secure the necessary tenure and price mix in accordance with the needs in their area, and can discharge their homelessness responsibilities by providing truly affordable housing.

[Dr Huq]

My hon. Friend is being very generous in taking interventions. She mentioned her own experience as a parent; has she seen the Aviva research that shows that 1 million more people aged between 20 and 30 are going to be living at home with their parents in the next 10 years? We have all heard of the bank of mum and dad, but does she agree that the Government have not only messed up the housing market but seem to be stunting young people’s growth?

[Ruth Cadbury]

Young people whose parents live in a house in London big enough for them to have their own room, or even to share a room, at least have the advantage that they can ask us to carry on housing them—for I do not know how long—but what about mobility? How can young people from other parts of the UK or other parts of the world come to London? They do not have the landlord of mum and dad to turn to.

Let me return to the implications of Government policy and the Housing and Planning Act 2016. Many London councils, particularly those in inner London, believe that in future there could be areas where there are no affordable rented homes, because the Government expect 20% of all new developments to include starter homes on sale at 80% of market value. Couple that with the right to buy, the decline of housing association stock and the forced sale of vacant council homes, and there will be yet more of a crisis.