Council Housing (Direct Investment)

Part of Points of Order – in the House of Commons at 5:06 pm on 19th June 2007.

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Photo of David Taylor David Taylor Labour, North West Leicestershire 5:06 pm, 19th June 2007

I beg to move,

That leave be given to bring in a Bill to promote the improvement of all council homes and estates;
to provide for the building of new council housing;
to promote equal financial treatment between local authorities and registered social landlords in the provision of affordable housing;
to reserve certain rents and capital receipts for direct investment in council housing;
to provide for the protection of rights to life-long secure tenancies and of tenants from involuntary changes of ownership and management;
to further regulate and make requirements of registered social landlords;
and for connected purposes.

Next Wednesday, the present Chancellor of the Exchequer will take over as our new party and national leader. He told the Amicus conference yesterday that he plans to review housing policies, and I hope that my modest measure will help to inform that process. Our nation faces growing housing problems that can be met only by building new, and improving existing, council housing, and by having a fair financial balance between local authorities and housing associations in the provision of affordable housing.

Since 1997, fewer than 1,800 council houses have been built in total—in contrast to an average figure of well over 180,000 each year in the decades following the election of the Attlee Government. Despite a great cost to the taxpayer and an enormous loss of accountability, the private sector, including registered social landlords, has built at an annual rate of only 15,000 homes in the past 10 years. It has proved to be incapable of dealing with the increasing overcrowding and homelessness in many parts of our land; only a renaissance in public sector construction can do that.

There is a strong national consensus on the matter. Some 3 million tenants, 1.6 million households on waiting lists, trade unions and councillors of all parties are agreed. The six candidates for the Labour party deputy leadership have said that we must have a new housing policy and three successive party conferences have voted to encourage and finance direct investment in council housing—the fourth option. It is the purpose of the Bill to provide a legal framework for that fourth option so that it can be an addition to, or a replacement for, the current three options, which are all seriously defective.

The option promoted most enthusiastically is stock transfer to a registered social landlord, which, in law and practice, is privatisation disguised under the thinnest of veneers. Legally, housing associations are private companies and they borrow directly from the private market. RSL board members are often paid, banks are in the driving seat, and executives are on inflated pay scales, funded by soaring rents from hard-pressed tenants. Councils that are trying to coerce or bully their tenants into stock transfer will claim that the Government's rent convergence formula ensures that rents will increase by the same amount whether tenants transfer or not, but in reality that formula is worthless. New tenants can be pitchforked up to the target rent immediately, service charges are not included and the valuation method can and will be manipulated to generate much higher rents.

My Bill would aim to protect tenants' rights to lifelong secure tenancies, which are sacrificed following a stock transfer. The assured tenancy on offer is not the same thing at all because a promise by a new registered social landlord not to use its greater powers in law, for example on eviction, is nothing like comparable to the statutory rights that secure tenants have at the moment. Although we are told that transfers will be made to "community based" organisations, that often does not last because landlords can get into a financial mess and be taken over by remote businesses, or can become caught up in the merger mania that is fuelled by the Housing Corporation's drive for mega RSL groupings. We should not forget that tenants have no vote on such takeovers and mergers and that the new owners of the housing have no obligation to deliver on old promises made by others.

The Bill would protect tenants from the scandals that we see when unscrupulous and uncaring councils use large-scale funding that comes from the pockets of local taxpayers to run misleading and unbalanced campaigns to frighten tenants into voting for stock transfers. Together with so-called independent consultants and advisers, they produce dubious glossy propaganda booklets that, in essence, say to tenants, "You have no alternative but to vote yes to transfer." That is an outrage. We need no crystal ball to point to the cracks and stains on the rosy pictures painted by those who are hellbent on flogging off, at a knock-down price, public assets that were built by and for successive generations of tenants and taxpayers.

The track record of stock transfers is often pretty dreadful. Shelter found that homelessness worsened in areas with stock transfers, while the National Audit Office said that it cost thousands more to improve each home after transfer than would be the case if councils were just given the money to do the work themselves, which the Bill proposes. Any genuine consultation on the future of publicly owned housing must, as a minimum, ensure that tenants hear all the arguments, that there is equal access to public funds for both sides of the case to be put, and that there is a formal ballot on any change. As that is just what the Bill spells out, I urge a moratorium on any further ballots until the new Prime Minister's housing policy becomes clearer.

May I turn to my Bill's proposals to ring-fence rents and capital receipts for direct investment and to require equal financial treatment in the provision of affordable homes for local authorities, and for housing associations and other RSLs? The argument of the ancien régime about to leave office is that we simply cannot afford the level of investment in publicly owned housing that is brought in by private finance. There are two fatal fundamental flaws in that approach: first, the theory that there is no cost to the taxpayer in the options for privatisation when there most definitely is; and, secondly, the theory that there is a huge increase in public expenditure with direct investment when there most certainly is not. Tenants are right to demand a level building site for councils on which the fourth option can be constructed, as opposed to the three privatisation options. The same amount of public funds spent on subsidising stock transfers, arm's length management organisations and the private finance initiative should be available in the growing number of cases when council housing is retained.

The Joseph Rowntree Foundation estimates that right to buy sales have yielded almost £50 billion, but that just a quarter has been recycled into improving public housing. The moonlight robbery campaign points out that tenants pay an average of £800 per year more in rents than they get back in management, maintenance and major repairs. That represents a national annual total of more than £1.5 billion. It is unacceptable that money is being leeched from council housing and council tenants in such huge volumes to subsidise private developers who are building houses that are still priced way out of the reach of ordinary, hard-working families.

The unequal financial treatment between unaccountable and often remote housing associations and democratically elected local housing authorities defies belief. For example, making debt write-off conditional on stock transfer is a form of blackmail, and my Bill would bring that to an end. The Auditor General has stated that that form of debt repayment has no net effect on the Exchequer, so why is it denied to local housing authorities, but doled out to RSLs?

Rental income must be ring-fenced in the national housing revenue account and the pooling of local rents for national distribution needs an overhaul. Housing support for hard-up areas should come from the taxpayer, not the tenant. The rigging of write-offs and gap-funding subsidies to make RSL business plans stack up is a stitch-up. A fresh approach that is rooted in real, unforced choice for tenants, and fair financial deals for councils, with the availability of debt write-off and gap funding, would benefit millions of people throughout the land. Waiting lists will shorten, overcrowding will lessen and living conditions will improve. Council estates can again be the stable and mixed communities in which many in the House, like me, have lived. I was proud to stand in the 2005 election on a manifesto that stated:

"By 2010 we will ensure that all social tenants benefit from a decent, warm home with modern facilities."

We have three years to make good on that pledge.

In the Government's response to Kate Barker's review of the supply of housing was a promise, as part of the 2007 comprehensive spending review, to respond

"with an ambitious plan for increasing social housing supply, with new investment alongside further efficiencies and innovation in provision".

Option 4 is indeed a policy whose time has come.

We must defend and extend council housing. No wonder so many people are putting up their hands for it. There is a strong business case for direct investment. There is a powerful social case for constructing council housing to tackle the affordable housing crisis, and there will be a political dividend from reaffirming a core value that council housing is not some obsolete policy from a bygone era, but a key economic activity that adds to our national wealth, promotes social inclusion and is a robust, high value and sustainable solution for one of the most pressing problems that face a new Administration planning their priorities for the next three years.

I am sure that that Administration will recognise that council housing is cheaper to build, manage and maintain than all the alternatives and, most importantly, is more accountable. I hope sincerely that this Bill is a suitable foundation for an overdue and much needed new direction in affordable housing both in theory and in practice, and I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by David Taylor, Mr. Jim Cunningham, Frank Dobson, Paul Flynn, Dr. Ian Gibson, Kelvin Hopkins, Dr. Brian Iddon, Lynne Jones, Andrew Mackinlay, Paul Rowen, Bob Russell and Mr. Phil Willis.