Housing: Availability and Affordability

Viscount Hanworth Excerpts

Thursday 12th October 2017 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, the tenets of a political ideology can endure for a very long time, even when they have become utterly inappropriate to current circumstances. The nostrums of Margaret Thatcher were absorbed by members of the present Conservative Government when they were adolescents or young political aspirants and they have been followed by some of them without a second thought. One of the aims of Margaret Thatcher’s Government was to ensure the growth of a so-called property owning democracy. The idea was a simple one: by giving ownership of their houses to council tenants, a significant number of erstwhile Labour supporters could be converted to property-owning Conservative voters.

Under the Housing Act 1980, which established the right to buy, local authorities, which had hitherto been responsible for as much as a third of the nation’s accommodation, would have their responsibility for housing radically curtailed. Their role would be taken by commercially orientated housing associations and by a building industry no longer entrammelled by the interference of government. Half the proceeds from the sales of council houses were paid to local authorities; but, instead of being allowed to spend the money on building more homes, they were compelled to use it to reduce their debt. It is remarkable that, in spite of this programme, the objective of increasing property ownership is now further from being realised than at any time in recent history. According to official figures, the proportion of home ownership in England has fallen to its lowest level since 1985, while the number of people privately renting is now higher than it was in the early 1960s.

The Government’s reaction to the difficulties of first-time buyers, in the face of the scarcity of accommodation and exorbitant house prices, has been to establish the Help to Buy scheme, in pursuit of the Thatcherite nostrum. In 2013, George Osborne set aside £7 billion for this purpose and, on the eve of the recent Conservative Party conference, a further £10 billion was promised. It is extraordinarily inappropriate to address the scarcity of affordable properties and the problem of inflated house prices by a scheme that can serve only to stimulate demand.

We also need to ask who is being helped to buy. The truth is that many people who can well afford to purchase property from their own resources are being helped with their mortgages. No less an authority than the Daily Mail has recently drawn our attention to this extraordinary misdirection of public funds. The paper has asserted that four in 10 recipients have been earning more than £50,000 per annum and one in 10 has been earning at least £80,000. More than 5,000 purchasers have had six-figure incomes.

It is also reported that the major housebuilding firms have made unprecedented profits as the housing crisis has worsened. Together, the four most powerful companies—Persimmon, Taylor Wimpey, Barratt and the Berkeley Group—made more than £2 billion in pre-tax profits last year. Much of this money has come from Help to Buy. Moreover, these developers have been able to evade their responsibility to provide a modicum of affordable housing by exploiting the provisions of the Growth and Infrastructure Act 2013, which has allowed them to appeal against the requirements of the local authorities.

At a time when housebuilding has been at its lowest level, the private rented sector has ballooned in size. It now accounts for just over 4.5 million households—nearly double the 2.3 million of 2004. The new figure represents 20% of the total, whereas in 2002 it was only 10%. On average, those buying their home in England with a mortgage spent 18% of their household income on mortgage payments, whereas rent payments were 28% of household income for social renters, and swallowed up 35% of the household incomes of those renting privately.

Of course, many properties in the private rented sector are former council houses that were once provided by councils at affordable rents. The inflated costs of renting such properties are being met in part by the payment of housing benefit, which makes a major demand on the Government’s finances. The Office for Budget Responsibility has forecast that spending on housing benefit in 2016-17 will amount to £23 billion.

There is a clear need for a far greater supply of affordable properties. The only effective way of providing this is to give local authorities the remit to oversee a major housebuilding programme. The Government have at last become aware of this necessity. They have plans for a new generation of council and housing association homes and they have set aside £2 billion for the purpose. The inadequacy of this provision is stunning. It should be compared with the far greater sums of money that have been devoted to Help to Buy and it is dwarfed by the size of the annual budget for housing benefit.

It will not be an easy task to revive the housebuilding activities of local authorities. Most of the organisational structures that served the building programmes of the 1930s and 1950s have been lost. The architects’ offices have closed and the direct labour force has evaporated. It will be perilous to rely on the services of the large contractors, which have hitherto profited hugely at the public’s expense. I also observe that the planning regulations, which had been developed and refined over many years, have recently been junked by the Conservative Government in the act of vandalism that established their National Planning Policy Framework. The next Labour Government will face a gargantuan task.