Building More Homes (Economic Affairs Committee Report)

Viscount Chandos Excerpts

Thursday 2nd March 2017 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, I warmly congratulate my noble friend Lord Hollick on securing this debate and on the work of the Economic Affairs Committee in producing this important report. The subsequent publication of the Government’s White Paper is also to be welcomed, particularly where it has responded positively to recommendations of the committee, even if in other respects it is perhaps longer on hope than on constructive policy.

Housing looms large in British life, whether measured by the value of the housing stock—£6.8 trillion, more than 3.7 times annual GDP and 1.5 times the value of all companies listed on the London Stock Exchange—or by the number of television programmes devoted to the usually more glamorous aspects of the subject. Emotional attachment to a family home cannot and should not be disparaged, and the ambition for ownership should not be discouraged. But, inescapably, the cultural and economic emphasis on home ownership in the UK, in comparison with the perhaps more utilitarian approach in other countries, creates a challenging context within which to pursue a successful housing policy.

The Economist wrote, in response to the publication of the White Paper,

“Part of the trouble with Britain’s housing market is that politicians like to tinker, rather than reform”.


The complex implications of radical reform on intergenerational wealth, and even on financial stability, certainly discourage a politician with any sense of career preservation from pursuing it. The current imbroglio on the revaluation of business rates, for instance, makes even the modest recommendation of the committee’s report for council tax revaluation—let alone more fundamental reform of property taxation, as advocated by the noble Lord, Lord Turnbull—seem like an unappetising invitation to an ambitious Minister.

While the Government’s timidity in this respect in the White Paper may be understandable, if regrettable, the further exacerbation of residential property’s special treatment inherent in the Government’s inheritance tax changes in the summer Budget of 2015 was inexcusable. As the Institute for Economic Affairs—hardly a think tank of Marxist hue—said in evidence to the committee, this was,

“a step in the wrong direction … By treating housing wealth preferentially relative to non-housing wealth, these changes will introduce further distortions, and further inflate demand without adding anything to supply”.

Sad. Against a background, therefore, of the distortions caused by such special treatment of owner-occupied housing and the unambitious targets adopted to date by the Government—at least until the Minister responds—specific measures to improve the situation risk being overwhelmed by the macro-headwinds.

I none the less take a little time at this late stage in the debate to comment on a couple of issues relating principally to social housing. In a report to 13 London boroughs, published in January with the rather indigestible title Viability and the Planning System: The Relationship between Economic Viability Testing, Land Values and Affordable Housing in London, it was disclosed that the delivery of affordable housing in London had fallen 37% since mid-2009. Although the report’s analysis identifies many of the factors already discussed this afternoon as contributing to this reduction, one not otherwise mentioned is the question of the planning obligations on new developments to provide affordable housing though Section 106 agreements.

The report concludes that, as these agreements are currently working,

“this has produced a circular situation in which the more a developer pays for a site, the lower the Section 106 contributions can be argued ... Cumulative changes to planning policies since 2012, as operated in practice, have had the effect of shifting the balance of power between developers, landowners and community with the result that landowners have been the primary beneficiaries”.

Will the Minister say whether the Government will review the workings of Section 106?

As other noble Lords have said, the supply and utilisation of land from both the private and the public sectors need urgently to be improved. The committee’s report recommended that local authorities have the power to levy council tax on developments not completed within a pre-agreed time period. I regret that the White Paper has ignored this. Will the Minister explain why this very reasonable and practicable measure is not being adopted on a basis, I would suggest, whereby the charge ratchets up as time passes?

The White Paper, has, on the other hand, recognised the need set out in the report for flexibility in the application of best value in the sale of public land, as a number of other noble Lords have discussed. However, it only commits to consultation, and giving the public sector bodies greater freedom in relation to best value might not in itself release the land needed without provision for the vendors to at least be partially compensated by central government. Will the Minister say whether a central fund to do this will be considered and vigorously negotiated with the Treasury?

Finally, I strongly support the committee’s report and many noble Lords who have spoken today in wishing to see local authorities enjoying greater freedom to borrow to invest in affordable and social housing. We are truly disappearing down a rabbit hole with Alice and attending the Mad Hatter’s tea party when local authorities are permitted, as the noble Baroness, Lady Wheatcroft, explained, to indulge in what hedge funds term a “carry trade”, buying commercial property from PWLB funds, while being prevented from borrowing to fund social housing.

In advocating this, I should make one caveat. At a time when local authorities are struggling to find the resources to maintain planning departments at fighting strength, we should not underestimate the challenge in building or rebuilding the development teams needed to execute successfully any significant social housing programme to the quality levels advocated by my noble friend Lady Young. Therefore, we need a mixed economy, combining direct building by local authorities with the necessary resources, and partnerships with housing associations and private developers for local authorities without them.