Part of the debate – in the House of Lords at 2:30 pm on 12th May 2004.

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Photo of Lord Best Lord Best Crossbench 2:30 pm, 12th May 2004

My Lords, I declare my interests as chief executive of the Joseph Rowntree Foundation which undertakes a continuous programme of research on housing matters, with a long list of reports on housing supply to which references are made in Kate Barker's review, and as chief executive of the Joseph Rowntree Housing Trust which tackles problems of housing supply, in particular in relation to affordable homes, and which is currently planning a sustainable new community as an urban extension to the city of York.

I am extremely grateful to the noble Lord, Lord Lucas, for bringing forward this debate on a subject that is now near the top of the political agenda. I am deeply appreciative of the hard work and skill that Kate Barker has applied to her task and which I have witnessed first hand at a number of meetings with her and her colleagues. I think a word of appreciation should also go to the Chancellor for commissioning the review in the knowledge that it would be bound to put pressure on the Government to address the problem of inadequate housing production and the requirement for more support from the Treasury.

From the many recent reports from the Joseph Rowntree Foundation on the issues raised in the Barker review, I thought it might add most to the debate if I drew upon the findings from three new studies which we shall be publishing in June. The first research project that I want to cite is currently being concluded by Professor Steve Wilcox of York University. It looks at the facts on affordability—who can afford to buy a home and who is left out. The Barker review explained the position nationally: only 37 per cent of new households could afford to buy in 2002 compared with 46 per cent of new households in the late 1980s. The number of homes bought by first-time buyers has declined markedly, even though at least as many people aspire to home ownership as ever before. As Kate Barker puts it,

"this brings potential for an ever widening social and economic divide between those able to access market housing and those kept out".

Steve Wilcox first demonstrated, on the basis of 1998 house prices and incomes, that it was not just in London and the south-east that home ownership was beyond the reach of many new households. As incomes may be relatively lower in relation to house prices in some other places—for example, in the south-west and in other rural areas—affordability was just as great a problem there as in the over-heated London and south-east regions. Now this evidence has been updated to 2003 and—this comes as a surprise to no one—it is clear that the problem of affordability has worsened dramatically and more areas are seriously affected.

The tip of the iceberg is the rise in homelessness. Thank goodness that no longer leads to families being placed in unsavoury bed-and-breakfast accommodation because of sterling efforts by the Government and local authorities to use privately rented accommodation instead. But the B-and-B success story is at the expense of other groups who can no longer rent the same private property. Unless the supply of affordable homes is addressed, the misery is just moved around. Shortages of affordable housing destroy quality of life for more households than those declared homeless by local authorities—those forced to share into middle age; those in miserable, over-crowded flats; and those who have a two-hour commute that ruins family life.

Steve Wilcox's latest research illustrates the extent of the affordability problem. In 100 local authority areas working households with average incomes now need a mortgage of five times their earnings to buy the average house. In places like Penwith in Cornwall, south Lakeland in the Lake District, and east Devon, as well as in Westminster and Islington, those on average earnings need a mortgage of over seven times their income, which is clearly impossible.

The second piece of work commissioned by the Joseph Rowntree Foundation to which I want to draw your Lordships' attention relates to the position of parents. While all of us homeowners may feel a warm glow from the increasing value of our home—even if we think current figures are unrealistic in the longer term—those of us who are homeowners with children are coming to recognise that high house prices are not quite such good news after all. We asked MORI to do a poll for us to determine how parents with adult children are being affected by the problems of affordability.

The MORI poll shows how more and more parents will need to dip into their own pockets to support the next generation in meeting current levels of house prices. Two-thirds of those with adult children under 30 are affected. That takes no account of the impact of bigger student loans in the future. Parents of such adult children who have not yet purchased overwhelmingly believe that their children will want to do so, but over half of the parents feel that it is unlikely that their children will be able to buy without parental support. Although three-quarters of these parents would be willing to help, only half of them will have the resources to do so. Parents reckon that each of their children will need an average of £17,000. To raise that money a fifth of parents thought it likely that they would need to borrow themselves—for example, by remortgaging their own house. More than half of the parents fear that without parental funding their adult children will never be able to buy.

It may help to change hostile attitudes towards new housebuilding as more homeowners recognise that just when they might be finishing with their own mortgage, they may be forced to borrow again to help out the next generation; or, at least, be required to give away much of any capital they have saved.

This brings me to a third piece of work supported by the foundation and undertaken by the Cambridge Architectural Research organisation. This report, which will be released next month, looks at public attitudes to new homes and has tested the notion that "we are all nimbys now". The study involved interviews with over 1,400 people in areas of potential growth in the south-east and discovered that, when faced with reasoned argument, opposition to new housing was not universal or total. Consultation can work; people make reasoned choices and compromises if presented with information about a range of options. They are prepared to see development on open land, not just on brownfield sites. Mostly they agreed that the region must be allowed to grow. While they remained opposed to the thought that many more homes should be built, there were clear worries about the shortages of affordable housing.

Of course, rational and sensible public views in relation to a region or city may not hold good when it comes to the potential development of the site next door. I have been shocked at the level of opposition to our proposals for creating a sustainable new community on the edge of York. This is intended as a model in terms of design, traffic calming and accessibility; an integrated mix of renting, part owning and owning; and with heavy expenditure on environmental aspects. But, despite 36 local consultative meetings, those who live nearby have had exaggerated fears and misapprehensions about the consequences of any such development.

This case, in microcosm, reveals the pressures that vocal opponents of new housing bring to bear upon local councillors. There is a democratic deficit in that those people who will be delighted to occupy this new community in the future are not yet in a position to make their views known. Clear and forward looking local leadership can be hard to exercise—although we detect it in York—in the context of the constant round of local elections, particularly where the strength of the political parties is finely balanced. To me, this suggests more decision taking at the more distant regional level, rather than expecting sensible local councillors to incur the wrath of their electorate if they speak in favour of new housing.

Having indicated that research in the Joseph Rowntree Foundation's pipeline underlines a picture of worsening affordability, of new pressures on the parents of those in their twenties and of the importance of local opinion, perhaps I may end with two conclusions.

First, the problem of an inadequate supply of affordable homes can be addressed only by more supply. It cannot be overcome by paying subsidies to special groups. If subsidised mortgages are made available to nurses or teachers—as with the starter homes initiative—these worthy people may be able to outbid others in the market place. But if there is no increase in the number of homes, the extra cash will pour fuel on the flames and simply push up the prices of existing homes beyond the reach of other people. The taxpayers' money needs to be used to increase supply, and that suggests targeting grants on the production line of the registered social landlords—the housing associations.

As Kate Barker has made clear, it is not a decline of private sector house building that has reduced housing output to the levels of the 1920s despite rising household numbers; it is, as other noble Lords have emphasised, the reduction in grant-aided housing—homes previously built by local authorities and now by housing associations.

Kate Barker estimates that it will cost perhaps another £1.5 billion each year to increase sufficiently the output of subsidised or affordable housing—with, of course, the new homes pepper-potted among owner-occupied housing, not put into segregated ghettos. This call for funding is an uncomfortable reality but it is one which the Chancellor really must address in this summer's spending review.

My concluding point is that the private renting sector also deserves a boost. The current buy-to-let lending boom— with nearly £40 billion of loans now going mostly to new small landlords—represents only additional demand for existing property, not the commissioning of a supply of extra homes. The Chancellor is looking at the opportunities for property investment funds—which could bring in new money and an increase in new supply—and we need to address that issue.

I greatly welcome Kate Barker's excellent review. I hope that it will lead us into addressing one of the great challenges still facing this country.