I am grateful for the opportunity of raising today, on the Adjournment, a subject which, despite the rapidly emptying character of the Chamber, is of acute concern to Members in this House, to Members in the other place and also to the public outside. It is the specific subject of young married couples buying their first home, be it a flat or a house, within the context of the anxiety that has been shown in the country at the rate of rise of house prices and house values in recent times, and particularly during the last 12 months.
During public business today we debated a vast public enterprise, the Post Office. In this Adjournment debate we have the opportunity to consider an enterprise which, in its totality throughout the country, is public, is private and is intensely personal to the people whom I have in mind. I raise the matter partly in the geographical context of the South-East, and perhaps the Greater London area in particular, and partly as a national matter, because I believe that airing this subject now is a sagacious move on the part of the House. Therefore, I appreciate the opportunity to raise this matter this afternoon in this short debate—
The present is a suitable time at which to consider this subject because there has been, at least temporarily, a welcome respite since the heat has been taken out of the rise in house prices. The Government should be congratulated on policies which have been partially responsible for this improvement. I must not be led into a treatise on the subject of inflation because I know that it would be unwelcome to the House, but I must stress the danger of accepting any situation which regards the present situation of house prices as satisfactory. Therefore, I should like the Minister to consider the longer-term fundamental ideas of easing the lot of the young married couples who are seeking to purchase their first home.
When we look back at the enormous boom in house values—and this is not only confined to London; it is found in the South-East generally and certainly in most large cities and conurbations—we must all be acutely concerned to see in what way we can assist those who seek to purchase a home and face enormous difficulties.
I could give a great many statistics to reinforce what I am saying, but let it suffice to say that a quarter of all those receiving mortgages are earning under £30 a week. This is in one way a remarkable testimony to the basic underlying health and success of the drive to home ownership for everybody, which is to be welcomed. However, statistics tend to deal in averages, and perhaps in terms of hardship are misleading.
We might perhaps examine the parameters of average income in areas which are expensive in terms of house values and may cause particular difficulty to young married people seeking to buy a house or flat. Home ownership for every married couple is part of Conservative philosophy; it has been hacked by the Government and is accepted as a desirable social end in itself. I am not seeking to criticise the Government in this debate, and I have been distressed that most of the factors which have caused a rise in house prices have been quite outside Government control.
It is distressing to see young married couples not merely in a state of mild frustration but in a state of savage desperation and acute frenzy because any possibility of purchasing their first property has been denied to them by the harsh economic realities of the rise in house values.
To take another specific example, though statistics on these matters inevitably are imprecise and amateurish, it is fair to say that in the inner London area the price of a reasonably small flat is about £8,000 or £9,000. If a young couple are thinking in terms of a small house in inner London the minimum price nowadays will be £10,000 or £11,000. In the outer London boroughs a semidetached house or even a modern flat in a newly developed block which is comfortable but small and modest in size will cost about £9,000, £10,000 or £11,000.
Again taking an imperfect statistic—here the figures are even less reliable—a young couple engaged to be married, or recently married, and working in London will be earning on average between £2,000 and £2,300. That is considerably above the national average for people in that category, but it is commensurate as a figure with the higher cost of living in a capital city like London and some of our provincial cities.
It is axiomatic under the existing rules applying to building society loans, despite the obvious tribute that I pay to the success of the building society movement and the way in which it has tried to ease its rules in recent years to make matters easier for house purchases, that couples with that kind of income are unable to purchase even small properties because of the economic realities of the inflation in house values and the fact that the market in house prices unfortunately is made not by the bulk of people below the age of 30 who wish to buy their first properties but by those in older age groups with higher incomes who dominate the market in our free society. No one will criticise the fundamentals of that, but we do criticise the harsh effects of this kind of economic reality.
In that framework, it will be extremely useful if my hon. Friend is willing to consider a number of proposals that I wish to make, not in any hard and fast way but in a way which might go a considerable distance to solving the problem. What is more, it will be greatly appreciated if my hon. Friend has time to develop the Government's latest thinking on easing the problem.
Before doing that, however, I want to return to examples that have come to my notice. I do not have the time to go into them in detail, and there is no doubt that beyond my own constituency there are many other examples, some of which were enunciated in yesterday's Evening News article about a specific couple facing this kind of difficulty.
We have a situation where even young people on average incomes in a big city like London cannot become the owner-occupiers of even modest properties as matters stand. These are not young married couples with incomes well below the average who are desperately poor and face the problems of bringing up children; they are newly married people earning normal incomes in London.
As a community and to some extent as a Government, we have to look towards institutional ways of easing the problem. If we do not, I feel that the social consequences, let alone the economic ones, will be extremely grave for the future. I hope, therefore, that the Minister will have time to respond to several points that I wish to make.
I believe that the building societies' operational rules could be eased substantially more. Again, I pay tribute to them, but I believe that more can be done regarding the length of repayment periods and by way of special rates of interest for young married couples—of course, they have to be married, so that no fiddling can go on in any future special schemes.
I believe that a lot of value would emerge from a joint Department of the Environment/Building Society Association study of the problem in a detailed way, at the end producing a report.
I should like more consideration given to official assistance which may be provided for deposits. I am sure we would all be delighted to see mortgages which go closer to the 100 per cent. ratio. Even so, the building societies use their own valuations, so mortgages normally do not represent the 100 per cent. purchase price of a house. I should like to see mortgage percentages going up to 100 per cent. combined with deposit assistance of one kind or another. To some extent, this could depend on the purchaser's propensities and ability to pay and whether savings had been possible.
A young married couple in my constituency—all credit to them—had saved about £1,500 to purchase a property worth about£10,500—again a modest price nowadays in London. Yet the price kept going away from them in the boom period, despite having saved well above the average for a deposit, even in the London area, through private savings. This was a tremendous personal achievement, but in the end it came to nothing. There was no light at the end of their tunnel. Therefore, I should like to envisage the possibility of the Government, as in other countries, giving deposit assistance, perhaps on a pound for pound saved basis, to young married couples.
I should like the Government, if it is practicable, to explore the feasibility of engineering additional fiscal incentives for builders developing estates of new flats or houses who are prepared to offer a proportion to young people. I am not referring to schemes which have been tried tentatively in local authority housing in a number of London boroughs, although such schemes are extremely welcome. If estate developers were prepared to offer a proportion of their properties on a new close or road being developed to young people at a discount off the prices they were to charge to everybody else, perhaps they might have a tax-free abatement on the proportion of profits emanating from such sales.
There are many other measures which time precludes me from proposing today. The sum total is that it would be extremely complacent and dangerous for us to say that, because of the realities of the market mechanism and market forces, the fact that inflation in house values has abated for the moment means that we ought not to get so worried about it right now, that the worst is over, that this is a temporary situation and that it will be better in future. We would continue to negate our central responsibility as a Parliament and, by extension, as the Government if we were to do nothing to make it easier for those, particularly in the South-East, who are precluded from buying houses because of the high prices today.
Time does not allow me to go into more detail. I should welcome some answers to the proposals I have put forward briefly today. Above all, whilst acknowledging the work that the Government have already done in discussions with the building societies in trying to begin to solve some of these problems. I should welcome a clearer indication that the Government regard the matter as urgently as I do.
I have listened with great interest to the views put forward by my hon. Friend the Member for Harrow, East (Mr. Dykes) I need hardly say how grateful I am to him for his references to the Government's feeling on this score. The Government are totally in favour of the expansion of home ownership, and I should like to assure my hon. Friend that the Housing Ministers particularly are very sympathetic towards the difficulties of young purchasers.
Owner-occupation is one of the remarkable features of contemporary social history. Only 10 per cent. of households in 1914 were owner-occupiers. The current figure is now about 52 per cent. The Government hope and expect the number of owner-occupiers to continue to grow. I believe few hon. Members and certainly no Member on the Government side, would wish to see anything done to make it more difficult for potential house purchasers to realise their ambitions to become owner-occupiers. For this reason the Government well understand the general concern with the recent sharp increase in house prices.
The origins of this problem were there when we took office in 1970. The demand for owner-occupation was then less strong and mortgages were less easily available. There was little confidence in the future among either builders or buyers. We took immediate steps to restore it. Pent-up buying power was released into the market. The industry responded by regaining its strength and increasing output. But new homes cannot be produced overnight in response to demand. Meanwhile, prices have inevitably risen.
We must put the increase in house prices in perspective however. First and foremost, the Government policies for the private housing market have meant a continuing rise in the number of people who can afford to become owner-occupiers; and here is a point I must stress: the young and the less well-off have not been losing ground in relation to borrowers generally.
We have no separate figures for the number of young married couples purchasing their first home, but the following figures are relevant. As between the first half of 1970 and the first half of 1972, it is estimated that there have been 32 per cent. more mortgages issued by building societies to first-time purchasers; 30 per cent. more to borrowers under 25; and 40 per cent. more to borrowers with incomes up to the average industrial manual worker's earnings. During the same period all mortgages issued have gone up by 39 per cent in number.
These are national figures, and the picture is much the same regionally. In other words, the prospect of home ownership has widened, and not narrowed, in recent years. First-time purchasers and the under-25s—which categories will broadly cover young married couples—are clearly holding their own.
Of course, there are greater difficulties in areas of especially high prices, such as Greater London, as my hon. Friend said. The London Housing Action Group is working away at the London housing problem in general. But it is both significant and encouraging to find that in the first half of 1972 an estimated 61 per cent. of all mortgages issued in Greater London by building societies went to first-time purchasers—much the same percentage as for the whole of 1970.
I have already mentioned that when we came to power we began by stimulating frustrated demand. This was highly necessary both for its own sake and to give back to the builders the will to build. We took a number of measures to bring this about. There was, first, the economic policy, which made credit easier and restored confidence and growth in real incomes generally. Secondly, some specific action was taken for the housing market itself. For instance, the option mortgage scheme was made more flexible. Stamp duty on mortgage deeds, and later on conveyancing deeds up to £10,000, was abolished. Money ceilings were removed on local authority lending to special categories of borrower. In all, a good deal has already been done by the Government to help with the high first cost of home ownership.
Young married couples, like all owner-occupiers with mortgages, already get substantial help. Tax relief on mortgage interest is worth about a 30 per cent. reduction in mortgage interest charges for those on the basix tax rate. The option mortgage subsidy scheme which the previous Administration initiated and which we have improved, is designed to help people with moderate incomes to buy their own houses by giving them a subsidy roughly equal to those available through tax relief to people with higher incomes.
It would, of course, always be possible in theory to give extra subsidy to young married couples, such as a contribution towards the initial deposit on a house or a specially low interest rate for mortgage repayments. But there are dangers in any such course. Extra assistance could well be counter-productive by stimulating price increases for houses, particularly when demand already exceeds supply.
There is little doubt that a more stable flow of building society funds is desirable. Care must be taken, however, to avoid any unnecessary disturbance of arrangements which are, in fact, supporting a steady growth in owner-occupation. The Government are confident that the building society movement is conscious of the need for stability and will do all that it can, within the framework of the investment and lending policies, to secure this.
My hon. Friend mentioned a number of interesting ways in which building societies might assist young couples. There are a number of ways in which the path towards home-ownership for the younger purchaser is being cleared.
One of the problems confronting young married couples is gathering the necessary capital to put down by way of deposit. Consequently, large percentage mortgage advances can be helpful. The option mortgage guarantee scheme is particularly useful in this direction. Under this scheme, building societies are prepared to grant loans larger than they would normally advance—sometimes up to 100 per cent of valuation.
I am grateful for my hon. Friend's complimentary remarks about the useful work of building societies. This is an example of how they try to help. The additional amount of the loan over and above the normal advance is guaranteed by an insurance policy. But the Government share the risk equally with the insurance companies. There is no charge for the Government's participation in this scheme, so that the insurance premium paid by the option mortgagor is less than would otherwise have been the case.
This is a popular scheme. It is estimated that the number of option mortgagors taking advantage of the guarantee scheme has risen from about 15,000 in 1968–69 to about 40,000 in 1971–72. The scheme has been used particularly by the younger and the lower-paid. The building society movement was also advised last year that if a man saves regularly with them for a period as short as six months and at a rate equivalent to his later monthly repayments he could be considered for an advance, which could be substantial.
Some local authorities are already prepared to advance 100 per cent. mortgage loans to people falling within the priority categories of borrower. Young married couples can on occasion fall within these categories—if, for example, they are high on a council's waiting list or are living in overcrowded conditions. About 30 per cent. of all local authority housing loans made to private people for house purchase in England and Wales last year were for 100 per cent. of the valuation of properties.
I recognise, of course, that even the availability of high percentage loans does not solve the problem of the resultant higher monthly repayments. But I am afraid that very extended repayment periods, for example, would not help much. A £4,000 advance of 8½ per cent. requires an annual repayment of £391 before tax relief. A 40-year advance requires an annual repayment of £353. The reduction in outgoings—about 10 per cent—is modest because of the lower rate of repayment of capital, on which interest has to be paid. Also, extending the repayment period beyond a certain point has the serious disadvantage of carrying close to or beyond retirement age.
Would my hon. Friend not agree that most houses are sold eventually, after the purchase, on a much shorter time period than the average life of a mortgage? This must be taken into account as well.
I accept that as a practical point. Statistically, it is about a seven-year period. But, in making their plans, a young couple cannot rely entirely on being in that position.
I am confident that building societies generally are as helpful as they can be over mortgage terms for young couples. Also, some local authorities have shown an interest in the "low start" mortgage scheme advocated by NEDO, under which the mortgagor makes lower repayments than normal in the early years of the life of the loan and higher repayments in the later years.
But there are other developments in housing, apart from mortgage terms, which can assist and are assisting young married couples towards home ownership.
Generally speaking, it is our view that the private builder is best equipped to provide houses cheaply and efficiently for the full range of demand. But there are areas in which it is appropriate for local authorities to sponsor the provision of new houses for sale, particularly to the lower income groups. In the last few weeks a number of authorities have been authorised to build for sale in areas where this would be helpful.
The Government's highly successful improvements drive is particularly helpful when used by purchasers of older houses which they modernise with the aid of Government grants. Many young couples, particularly in industrial towns, are in this way obtaining a house of good standard which may be lower priced than equivalent new houses.
Co-ownership provides a half-way stage between owning and renting. For those who cannot yet afford a house of their own, it provides some of the advantages of owner-occupation with the mobility and low initial costs of renting. The number of houses provided by societies operating with the help of loans from the Housing Corporation—set up by a previous Conservative Administration—is increasing rapidly.
But, above all, we believe that the greatest assistance we can give to young married couples who want to become owner-occupiers—and, indeed, to anyone who wants to own his own home—is to increase the supply of new housing. An increase in supply, coupled with the Government's counter-inflationary measures, should stabilise prices. So far the signs are good.
Thirty-eight per cent. more new private houses were started in the first nine months of 1972 in comparison with the first nine months of 1970. This represents a rise of 14 per cent. over the first three quarters of 1971.
These are encouraging figures, but the Government are not complacent in the slightest degree about the problems of young would-be house purchasers or other would-be house purchasers. We cannot, and shall not, be satisfied until the supply of new houses comes into balance with rising demand. The problem is one of local rather than national shortage. We are determined that enough land should be released, and enough homes built, in the right places, where people want them, to meet the needs of the private market into the foreseeable future.
I would sum up in this way. Homeownership has never been an easily realised ambition for the less-well-off members of our society. The Government inherited a situation of stagnant demand and falling output. Now demand is strong, and the output is growing, and we are confident that the Government's policies will bring home-ownership into the reach of more and more people.