Siobhain McDonagh
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John Redwood
I very much agree, and I will go on to look at how we deal with that, at the Government’s answer and at what more can be done. The hon. Lady is absolutely right that the figures exaggerate the homeowner percentage. Given the way the figures are calculated, if a group of young adults co-rent and share a property, for example, that does not appear as a series of independent rented households, but as one rented property. The figures therefore understate the number of people living in the rented model compared with those living in the owner-occupied model, because it is measured by housing units rather than individual households. The Government should bear it in mind that we are probably dealing with more people whose aspirations are not being fulfilled, rather than fewer, because the overall 64% figure undoubtedly overstates the reality.
We all know from our own experiences that many under-35s not only cannot afford to own a home, but find it extremely difficult to afford a rented home in London and the south-east because rents are extraordinarily high. They may still live with their parents, but it would not be their preferred way of proceeding; it may not be their parents’ preferred answer either, but family loyalty and love come before individual preferences, given the financial positions people find themselves in.
That decline in official home ownership—from 71% to 64%—is more pronounced when looking at the age-related figures. According to the official figures, 54% of under-34s owned their own house or flat in 1996, but that fell to just 34% by 2016. We have gone from a majority of the under-34s being able to afford their own home—so we know it can be done—to a minority of around a third in the more recent figures.
For most people, the financial case for owning is extremely strong. By definition, at the moment it may be cheaper to buy a house and pay a mortgage at very low interest rates than to pay rent, because rents are so high. Looking at it over a lifetime, it is obviously much cheaper and better to make the effort and buy a house, if people can, because they may have only 25 years of paying the mortgage, whereas they may have 50 or 60 years of paying rent, which will cost an awful lot more. Rent is a good way to keep people poor.
Siobhain McDonagh (Mitcham and Morden) (Lab)
To give the right hon. Gentleman a picture, in my office in Portcullis House, I have Ross, who bought his own home and pays a mortgage of £600 a month, and Dan, who pays £650 a month to rent a room in a flat. For the first it is an investment; for the second it is an impediment to ever owning his own home.
John Redwood
That is a very powerful individual illustration that bears out my general point that maybe half of people today would be no worse off month by month if they were able to get a deposit and buy a property, compared with renting. If we look forward 30, 40 or 50 years, they should be massively better off, if for no other reason than that the mortgage stops once it has been repaid, whereas rent carries on.
Worse still is the cruelty of renting for those in old age, when the rent will be at its maximum, because rents are likely to carry on inflating as they have done in recent years. Not only is rent paid for many more years, but people are charged the maximum rent when they are deep into retirement and least able to pay it, and when they will worry about how far their pension will stretch to meet their daily bills. That leaves out of account the possibility that, if someone buys a property, its value will go up, which is an added bonus. As I pointed out, that has been true since 1980. It might not always be true, but if it were true again over 25 years, the owner would be the double winner: they pay less by purchasing rather than renting, and their asset rises in value.
That rise in value gives homeowners more freedoms. If they buy early enough in life, that asset is there, normally rising in value, as possible collateral if they want to raise a loan for some other purpose—to help their family set up a business or whatever it may be—but it is not there for the person in rented accommodation. It is undoubtedly true that a person who manages to buy a property is, rightly or wrongly, usually treated as a better proposition for loans and business activities, which is another injustice for the person continuously paying rent.
I detect some cross-party agreement, which is excellent, that home ownership is the preferred form of tenure for many people—for very good reason—and that we need to make more efforts to get people into it, to deal with their high rental costs.
Siobhain McDonagh
Does the right hon. Gentleman agree that the other advantage of owner-occupation is security? In the private rented sector, where an increasing number of families with children are living, a landlord simply needs to secure a possession order for eviction. That has become the main route for the eviction of families, leading to children being insecure and living in temporary accommodation, far away from their homes and schools, with all the consequences that holds for public services.
John Redwood
I entirely agree, and I mentioned security for families at the beginning. That is a point well made.
We need to ask what we can do. House prices in many parts of the country, most especially in London and the south-east, are extremely high, and it is very difficult even for someone on average earnings, let alone below-average earnings, to raise a sufficiently large deposit, meet the requirements to raise the loan and meet the interest payments on it. One driver of these very high house prices is undoubtedly the big imbalance between demand and supply in housing. I know the Government accept that and are trying to work on the supply side. If more houses can be produced, all other things beings equal, that should help ease the house price pressures.
There is also the question of demand. I think all of us wish to be generous to refugees and to invite in people of talent who can make a good contribution to our community. There is everything to be said for allowing companies investing here to bring in their executives and so forth, but Government Members feel there has to be some control on overall numbers. When we are being generous, as we should be, we have to take into account the strains being put on the housing market, which may mean that the people coming here cannot get the quality and price of housing that we would regard as important for the lifestyles we wish for all the people in our country.
We need to look at the number of people who need housing vis-à-vis migration, as well as supply. I know the Government are considering that and will be freer on it in due course, once we come to debate in the House of Commons a UK migration policy that meets demands for decency and labour mobility for business, but that also understands the stresses placed on housing and other services if we have very large numbers. Those stresses run the risk of us not being able to offer people the standards we think are appropriate for anyone settled here in our country.
The Government have attempted to tackle the housing problem by driving the construction of more homes and to tackle the issue of affordability by working particularly with first-time buyers on how to get the first deposit and raise sufficient money to buy what are expensive properties. I welcome the Government’s initiatives. They are all well-intended, and some have been doing good things. My main purpose today is to raise two questions. Can the initiatives that already exist be beefed up and better advertised, so that we get more people to use them? It is still slower than we would like. Secondly, are there new initiatives we should add to them, given the general imperative to get on with solving the housing scarcity problem in general and the shortage of affordable housing to buy in particular?
Through the help to buy ISA, the Government are offering a £3,000 top-up to someone who can save £12,000 for a deposit on a house. Although £15,000 is a lot of money for someone on a low income who is trying to save, it is not a lot of money for a house deposit. I wonder whether, through the Minister, the Chancellor might think a little more about those figures. The more help that can be offered, the faster someone can get a deposit and the better that is for their ability to access the housing market.
The Help to Buy equity loan scheme is admirable, but it is limited to new homes only, and I wonder why. Most people buy a second-hand home. By definition, the stock of those homes is massively bigger than the new supply in any given year. I know it would be a lot more expensive if we opened up the scheme to a wider range of houses, but it would also be a lot more useful, because many people buy a second-hand home as their first home. Indeed, for some, the pleasure of buying a first home is in buying a second-hand home that is not in great shape, so that they can put their stamp on it. It may be a way to have a more affordable home, because they may wish to spend their own time and effort on improving the house, rather than spending money to get others in to improve it for them. It might be worth looking at whether we can provide more of a bridge for people who want to buy second-hand homes.
The affordable housing fund was set up to generate more construction of affordable housing. Again, that is a great initiative. I would like the Minister to give us more up-to-date information on how many homes that scheme might achieve and what the approved build rate under it is. One issue with the affordable housing fund is the cost of building the properties and the quality of their construction. I am all in favour of really good-quality construction, and modern homes are built to a much higher standard in many ways than older homes. However, one way to match the need for higher quality and affordable cost may well be to build on the initiatives of the house building industry, by having more construction in the factory before things are brought to site. None of us wish to recreate the old prefabs. They were a necessary and welcome development in the immediate post-war crisis, when so much of our cities had been devastated by bombing, but they are not the kind of thing we want to build today. People want elegant, well-insulated homes that meet all modern standards.
Siobhain McDonagh (Mitcham and Morden) (Lab)
The figures are these: home ownership among under-25s has dropped by 50%, and home ownership among 25 to 34-year-olds has dropped from 58% in 1997 to 37%. The multiplier between income and property price was 3.5 in 1997; today, it is 8.5. That is the reality.
In my very brief time, I will share the story of my constituent Jonathan, who is doing well in HR. He earns £38,000, which is £10,000 more than the London average. He thought that he could benefit from a London and Quadrant Housing Trust shared ownership scheme, only to find that a one-bedroom flat in Morris Court in my constituency would cost £500,000. That scheme is supported by the Government. Affordable by whom? Not Jonathan on £38,000 a year.
We need big thoughts, not little thoughts. We do not need to tinker; we need to think about the impact of buy to let on our economy, and particularly on our housing market. London is the only capital city in the world that does not restrict international investment in its residential property market. How can a young first-time buyer ever fight their way through?
We need a crusade in the public sector for councils and public sector bodies to make it a priority to use their land for low-cost home ownership and social rented accommodation. As long as they can sell it to the highest bidder, they will do so to subsidise their other services. I am not saying that they are wrong; I am saying that that is a consequence of what is going on.
The person I would like to pray in aid is not a natural ally; it is Paul Smith, CEO of Haart estate agents. He said in City A.M. yesterday that
“as the average loan size increases whilst the average income decreases”,
despite first-time buyers’ desire to buy, young people are being forced
“beyond their means, and government should intervene with a tax break as a quick and straightforward way to help them get onto the ladder…Theresa May’s legacy on home ownership has so far been a disaster. The ‘just about managing’ are further away from owning their own home than they ever have been, and the government’s feeble housing white paper did not go anywhere near enough to get housebuilders building and the market moving.”
I could not have put it better myself.
The Minister of State, Department for Communities and Local Government (Alok Sharma)
It is an absolute pleasure to serve under your chairmanship for the first time in this Parliament, Mr Bone. May I start by declaring an interest, in that my wife is the owner of a property that is rented out? I congratulate my right hon. Friend the Member for Wokingham (John Redwood) on securing this debate. I agree with other Members that we are debating an incredibly important subject. As ever, he made an incredibly thoughtful and intelligent speech, which has been the hallmark of his contributions since he entered this House in 1987. I would like to take some credit for helping him win that first election, because I was his bag carrier at the time.
I think the housing White Paper is a rather good piece of work. I was not involved in it, but it makes clear that there is no silver bullet, while acknowledging that for decades we have not built enough houses in the United Kingdom. I agree that every credible analysis says that we need to build between 225,000 and 275,000 homes a year to keep up with demand. There is a reason the White Paper is titled, “Fixing our broken housing market”. I hope colleagues will acknowledge that it is not just a question of individual Governments; successive Governments have tried but not succeeded in getting the house building market going. We have seen some progress: in 2015-16, some 190,000 homes were delivered, but I fully acknowledge that there is a lot more to do.
Whether housing is for sale or for rent, it is increasingly unaffordable, as we have heard from Members today. To give some statistics, to buy an average home in England costs almost eight times average earnings. Twenty years ago, it was three and a half times average earnings. I agree with my right hon. Friend that in this country people value owning their own home. A very large percentage of people want to do that. I also agree with the hon. Member for Linlithgow and East Falkirk (Martyn Day) that there is an element of social mobility to home ownership. The Conservative party commitment in our manifesto is absolutely clear: we want to deliver a million homes by the end of 2020 and half a million more by the end of 2022. We need to do better, and that means tackling the failures at every point in the system. I know that Members have talked about those failures, and I will try to address them in my speech.
As one or two colleagues have noted, I am new to this brief. I have heard many of the suggestions that have been made, and I will take an opportunity over the summer to think carefully about much of what has been said, but the start has to be building more houses. In October, we launched the home building fund, which will provide £1 billion of short-term loan funding for small builders, custom builders and innovators to help diversify the house building market. The fund is versatile. It provides £2 billion of long-term loan funding for infrastructure, which we all agree is incredibly important. Many communities are happy to take more homes, but want the infrastructure to go with them. Although it is too early to see homes completed through the fund, I am confident that, over time, it will unlock up to 200,000 homes, with an emphasis on brownfield developments. I would encourage Members to spread the word to businesses in their areas that may benefit from that fund.
We are supporting communities by ensuring that they can get involved in local planning through neighbourhood planning. I do not know whether the hon. Member for York Central (Rachael Maskell) has had an opportunity to talk with her local communities about neighbourhood planning in the context of the local plan, which she expressed some concerns about.
As we have seen with neighbourhood plans that have been adopted and made, local communities are willing to take more housing. In fact, in the areas where plans have been adopted, an average of 10% more housing has been accepted than was the case under the plans of the local authority. What people do worry about is infrastructure, so we have introduced a £2.3 billion housing infrastructure fund to make sure that infrastructure is put in first, which is vital. The prospectus was launched on 4 July and I would again encourage hon. Members to bring the fund to the attention of their local councils. If every local council put forward high-quality proposals, I believe we could make a real difference. As my right hon. Friend the Member for Wokingham mentioned, we are talking about more roads, healthcare facilities and schools. Getting local people to accept housing means giving them more infrastructure.
On public sector land, we are taking direct action to release public sector land for development. Since 2011, we have released land or identified land to be released with the capacity for almost a quarter of a million homes. That is incredibly important and I want to get to grips with it in my brief. The accelerated construction programme will ensure that those homes are built quickly on surplus public sector land. The programme will also encourage new entrants to the market to deliver more homes overall.
We also need councils to plan for the homes that people want to live in, where they actually want to live. As we set out in the White Paper, we intend to consult on a new standardised approach to provide a transparent and consistent basis for the preparation of local plans, which is more realistic about the current and future housing pressures in each place and is consistent with the modern industrial strategy that we have set out.
Many colleagues talked about support for home ownership. I want to make it clear that the Government are absolutely committed to supporting home ownership and we are taking action to help first-time buyers. We have helped more than 400,000 households buy property through schemes such as Help to Buy and right to buy, and 80% of those we have helped through Help to Buy have been first-time buyers. The number of first-time buyers is at a nine-year high. I agree that we need to be doing much better, but it is at a high. My right hon. Friend asked why the Help to Buy scheme applies only to new homes; the reason is that that helps to drive up supply.
Our shared ownership offers an important route in to full home ownership, by allowing purchasers to buy a minimum 25% share in a new-build home. We have also raised the income cap on shared ownership in England.
Siobhain McDonagh
What would the Minister say to my constituent, Jonathan, who earns £37,000 a year but cannot be part of a shared ownership scheme built by London and Quadrant Housing Trust, because the cheapest one-bedroom flat is half a million pounds? My constituency is one of the cheapest in London!
Alok Sharma
As I have acknowledged, we need to be building more homes—there is no doubt about that. I am happy to discuss with the hon. Lady that particular case. I am not here making excuses; I acknowledge the tone of this debate, which is that we need to be building more houses.