My Lords, I congratulate the right reverend Prelate the Bishop of Salisbury on a wonderful speech and I look forward immensely to the maiden speech of the noble Lord, Lord Kerslake. I declare an interest as chair of Broadland Housing Association.
I fought Great Yarmouth in the 1970s. Then, every large village and small town in its large rural hinterland had a dozen council homes, sustaining the village school, shops and local services. They are virtually all gone, sold into the private rented sector or as second homes. Most have not been replaced. Without my housing association, many local people would have nothing to rent at all. This matters because, although we have three types of housing tenure in this country, we have one housing market and one housing crisis. With owner-occupation, between 1997 and 2012 wages went up by 55% but house prices by 200%, so people have lingered longer in the private rented sector, which has become mostly a parasitic tenure of buy to let, not build to let, and the stock that we need has not been added. If anyone needs right to buy, it is private tenants.
As for social housing, 2.5 million homes were sold under right to buy and only one in 10 has been replaced, so waiting lists approach 5 million. Therefore, we have across all sectors a crisis of scarcity.
Housing associations have taken the strain. Mostly they are charities, some with roots going back to 19th-century philanthropy, and they are framed by charity legislation going back to the days of Elizabeth I. Half of housing association property was built by traditional housing associations such as mine, sometimes on land from bequests by local benefactors. The other half of housing association property was transferred from local authorities, becoming what we call stock transfer housing associations.
Housing associations were originally favoured by Tory Governments over council housing precisely because as private bodies they were, according to the then Minister, William Waldegrave, in 1988, freed “from the inevitable constraints” of being within the public sector and public accounts. Yet in the last five years we have been battered. In Norfolk, our capital grant was cut from £40,000 a property to less than £16,000, which does not even pay for the land, so few can build. Our tenants struggle with arrears and evictions as they face layers of cuts to their housing benefit, their prospective disability benefits and their council tax support—the same people hit three, four or five times over. With a more fragile rent roll, the banks that fund us are queasy. It is going to get worse because the Government plan to seize our assets—the assets of independent charities.
The Queen’s Speech proposes right to buy for housing association tenants who, after three years of perhaps £5,000 a year rent—£15,000 in all—qualify for a discount of £40,000 to £50,000, rising to 70% of the house value. I repeat: 70%. As housing associations cannot fund these discounts and remain solvent, they will instead be financed by the forced sale of the best council houses. The Daily Telegraph has denounced this as,
“economically illiterate and morally wrong”.
Councils, council tenants and the desperate on waiting lists will be asset-stripped to fund huge discounts for those who are already better off and better housed than they are, simply to change their tenure, adding not one extra home. On the contrary, two social homes to rent will be forcibly sold to fund the discount on the purchase of just one of them.
There are 220,000 tenants who could exercise their RTB, costing £11.6 billion in discounts. Maybe many more will buy, if middle-aged children use their pension freedoms to help their 80 year-old parents buy. They would enjoy a huge capital windfall on the death of their parents.
Let us stay with that £11.6 billion figure. Think of it. It is enough to fund three years of the Barnett formula. It is enough to increase defence spending by 6%. It is enough, indeed, to protect the vulnerable from £12 billion of welfare cuts. If local authorities really could realise and keep £11.6 billion from sales, would they—would we?—really want to spend it on unearned giveaways to the well-housed and their children? Would they instead want to build a million shared-ownership homes, helping five times as many families to buy? Or might they even want to help fund social care for the elderly, relieving huge pressures on the NHS? If localism means anything at all, councils should have that choice.
It gets worse. Within five years, those homes will start to be sold for quick gains, just like council houses before them. Less than a third—only 29%—of council houses sold under right to buy are still occupied by former tenants. The rest have been sold on, half into the PRS. Therefore, councils pay for tenants to live in their old housing stock at treble the former rent and hugely increased housing benefit bills.
Housing associations are charities, not public authorities. Their £60 billion mortgage debt is not on the public accounts any more than landlords’ mortgages are. They are independent charities, many of which are a century old, financed often by gifts from local benefactors. Would we accept the Government asset-stripping Eton or Winchester to fund academies? Perhaps the NHS would like the endowments of medical charities to pay for the drugs bill. Or perhaps we would accept National Trust assets being used to restore this Palace of Westminster. Consult your lawyers—that is my advice.
The answer to the housing crisis in all tenures is simple: double our housing starts to meet our rising birth rates, smaller households and increased longevity. We all want as many who wish and can to buy. As council leader, I built for sale with attached mortgages.
But those earning £14,000 a year in a minimum-wage job also need decent, affordable homes. HAs must build, not be forced to sell two rented homes to finance one RTB discount.
I have 10 questions for the Minister—not for today, but I would be grateful for the fullest answers in writing as we consider further action. What is the legal basis of the Government’s right to seize the assets of independent charities, given that they will have to unpick myriad overlapping laws that go back centuries?
As this turns HAs into public bodies, do the Government accept that we would have instantly added £60 billion-plus to the PSBR?
What estimates have the Government made of the additional HB costs that follow and will that have to be funded by still further welfare cuts beyond the £12 billion?
What costings have the Government done on the viability of funding HA discounts by forcing local authorities to sell off their best council house property? What do the Government assume about turnover? Only £5 billion may be raised in forced sales to meet that £11.6 billion cost, because the most attractive council houses do not become vacant.
What happens to those local authorities, half of which have no council houses to sell because they have stock-transferred them already into housing associations? Who then pays for the discounts? The Government have said that RTB will be funded by council house sales in their area. Is that a district, a county, a region, or will the wealthier London postcodes fund us all?
Will local authorities still owning council housing be subsidising those without any or, instead, will the stock-transfer housing associations have to sell off their own more valuable property, thus losing two of their homes to fund the discount on one of them?
We currently have two discount schemes, right to buy and right to acquire, with very different discounts. Will the Government scrap the right to acquire or run both schemes alongside each other, with identical tenants getting hugely different discounts?
Will there be a cost floor, so no housing association is required to sell below its cost of provision, a problem if an older tenant moves into a new property with accumulated discount rights?
Will compensation be paid on the open market value of the lost property? What about the landlord’s stream of income underpinning their business plans? Who covers the time gap between a HA sale and council sales required to fund the discount?
Will there be protection for rural communities with, let us say, a population of under 3,000 and for areas of outstanding natural beauty, where every sale will soon become a second home? Answers, please, in writing.
Finally, a few verdicts: the CBI says that right to buy,
“doesn’t solve the problem of … the supply of affordable homes”.
The IFS is withering, saying that the scheme is,
“a significant giveaway to … tenants”,
“would worsen the UK’s underlying public finance position”.
As for the credit rating agencies, Moody’s says that the measure could,
“potentially impair housing associations’ balance sheets and future borrowing capacity”.
Boris Johnson describes it as “the height of insanity”. Finally, Peabody’s chief executive says:
“Peabody’s assets belong to us. They are not the government’s to sell”.
I hope that this Bill never makes it to the Lords. If it does, I hope that this House will take it apart.