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I start by declaring my housing interests in the Register of Members’ Financial Interests. They include a significant involvement in shared ownership, which it is almost impossible not to speak about in such a debate.
I want to focus on starter homes, on how they interact with other affordable home ownership products and, more importantly, on how they will affect my constituents. I am intrigued by the idea, in amendment 1, that someone would repay the 20% discount over 20 years. It is unclear how it would work in practice—I apologise for not having studied the Lords Hansard for a lengthy explanation. Would the money be repaid on the sale of the property only, or would it be a credit agreement repaid annually? If, on the sale of a property, someone’s circumstances had worsened or they were unemployed—people sell their properties when their circumstances change—would they still have to repay the equity discount from which they had benefited? We must remember that whenever we add complexity to a home ownership product, lenders do not like it and are less likely to be involved. I make that impartial observation as a former mortgage broker.
My other point about amendment 1 is that we must remember that it is relatively unprecedented in affordable home ownership products to have repayment of the subsidy from which the homeowner has benefited. With shared ownership, grant is implicit, but when someone sells their share, they do not repay the part that came from the Government grant. They have become a homeowner, and they benefit or otherwise from the increase in the value of the share.
Under the Labour Government, there was a product called “price discount covenant”, and I remember dealing with it when I was a broker. There was a perpetual discount there, which meant that there was less of an argument about whether it should be repaid. The problem was that mortgage lenders do not like perpetual discounts, and there were only two active lenders, who required a much higher deposit than would otherwise have been the case.
We do have equity loan products. The largest scheme for funding home ownership at the moment is an equity loans scheme, whereby people receive a loan for a 20% deposit, and with their own 5% deposit, they can buy a 75% loan to value on a new-build property. The beauty of the discount scheme, as I understand it, is that it does not include an equity loan; it is paid for by taking affordable housing allocations on a development through a section 106 agreement. In that sense, it is an eminently sensible policy.
Probably the most important amendment on starter homes for Conservative Members is Lords amendment 9. It looks very innocent:
“An English planning authority may only grant planning permission for a residential development having had regard to the provision of starter homes based on its own assessment of local housing need and viability.”
I can understand why Labour Members, including Mr Betts, the Select Committee Chairman, would want more clarity on how starter homes will mix with other affordable housing tenures. To that extent, we might say that we can understand why the amendment was tabled. Government Members, however, ask ourselves whether it is because of some commitment to localism and giving local areas a say, or is it because their Lordships do not like the idea of starter homes, and this is a wrecking amendment, which would mean that many councils would ensure that these schemes never saw the light of day. That is our concern, and it is why I believe that most of my hon. Friends are likely to vote against the amendment.
The interaction of starter homes with other products is important. The most extraordinary point that I have heard in the debate is the criticism of the affordability of a starter home. By definition, it is singularly the most affordable product. Let me explain why. I have had a lot of experience with shared ownership, so I know it is a good and sustainable product that has lasted a long time. With a shared ownership property, people buy a share and put down a deposit in respect of it. They are tenants, engaged in a process of “part buy, part rent”—a stepping stone towards full ownership. Here is the key point. The person pays the market price for the property. Yes, they buy a share in it, but the full market price is paid in total.
As part of my business interests I used to run a website in conjunction with the Greater London Authority, which displayed all the shared ownership properties in London. I can tell Members that the average price is £450,000. In places such as Notting Hill, shared ownership properties have been re-sold at £800,000 or £900,000. We have received emails, saying “This isn’t an affordable housing website because these properties are £600,000 or £700,000”, but that is not the point. Shared ownership does not affect the market price. The property is still sold at the prevailing market price. It simply provides a mechanism to pay a lower deposit.
I see that you are calling me to conclude, Mr Deputy Speaker, so let me finish with one final point—an extraordinary statistic—about South Suffolk. It is predicted that by 2035, there will be 4,000 more people in the starter-home age bracket in my constituency— aged 25 to 39—while there will be 84,000 more people aged 65 to 90. As I say, it is an incredible statistic. I return to the point made by my hon. Friend Michelle Donelan—that the most important benefit from starter homes is that it will encourage more young people to remain in constituencies such as South Suffolk and will attract people in that age bracket so that we can make our communities more sustainable.