Queen’s Speech — Debate (4th Day)

Part of the debate – in the House of Lords at 6:14 pm on 2nd June 2015.

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Photo of Lord Best Lord Best Chair, Communications and Digital Committee 6:14 pm, 2nd June 2015

My Lords, I am delighted to follow the noble Lord, Lord Kerslake, and I congratulate him on a very significant maiden speech. After a distinguished career in local government, he was an outstanding chief executive of the Homes and Communities Agency before going on to be both Permanent Secretary at the Department for Communities and Local Government and head of the Home Civil Service. These are impeccable credentials for contributing to our deliberations and his speech today assures us that he will be a wise, influential and most welcome addition to this House.

My comments in this debate take forward some of the points on the forthcoming housing Bill made by the noble Lord, Lord Kerslake, and other Peers, including the noble Baroness, Lady Hollis. I am sure that there will be some helpful and positive ingredients in the new housing Bill since I believe that the Government are sincere in their stated aim to increase housing supply and, indeed, to meet their target of adding some 275,000 affordable homes over the lifetime of this Parliament. The problem is that a key component in the Bill is likely to completely undermine their good intentions if it is not greatly modified.

The Bill’s problematic ingredient has two related parts: first, a requirement on charitable housing associations to sell their properties at substantial discounts—up to more than £103,000 in London and £77,000 elsewhere—to tenants who have lived there for three years or more; and secondly, a requirement on local councils to sell their most valuable properties on the open market in order to raise the money for those costly housing association discounts. I see that I am in good company in questioning the wisdom of this two-part policy: the Economist, the Spectator, the Telegraph and the London Evening Standard alongside the Mayor of London are among the critics, as is Martin Woolf in the Financial Times, under the heading:

“Tories wrong to buy votes with housing”.

The Institute for Fiscal Studies has called this right-to-buy extension a “substantial giveaway” and warns of harm to the UK public finances over the longer term.

I shall summarise the objections to this policy initiative. First, in relation to housing policy, there are hundreds of thousands of households that are unable to buy but are crippled by the cost of open market renting. For all these, the target of 275,000 extra affordable homes by 2020 is essential and, with government backing, definitely achievable. However, the National Housing Federation estimates that about 221,000 households, out of 1.5 million identified by the Government as eligible, are in a position to buy—and why should they not take advantage of this sudden lucky windfall? If these tenants purchase over the next five years, and if councils over that period are required to sell thousands of their best properties to raise the funds to pay for the housing association discounts, then the social housing providers will have tried to fill the bath with the plug out. At the end of this Parliament, instead of increasing the stock of affordable homes that the country needs so badly, all these efforts will have been in vain and, at best, we will be back where we started.

Moreover, the whole process of selling some social housing and building elsewhere will have grave consequences. With councils having to sell in the best areas and having to build in cheaper places, a divisive segregation results, separating the better-off and the less affluent, in contradiction to the universally preferred alternative of mixed communities. As the London mayor has pointed out, replacing the homes sold in London with homes built outside will deny London the key workers on which this city depends, while affordable homes sold off in rural communities will often be quite impossible to replace.

Secondly, the financial considerations of this double measure are alarming. The National Housing Federation estimates that the cost could be around £11.5 billion. Do these payments to a relatively small number of people represent the very best use of several billion pounds? A windfall grant to those already in decent affordable housing seems strange indeed when the money could help thousands of others in severe housing need. According to the National Housing Federation, this level of funds would, for example, secure no less than 660,000 shared ownership homes, helping three times as many aspiring owner-occupiers.

Moreover, what happens if selling good council housing as it falls vacant fails to raise all the funds to cover the cost of the new discounts, let alone pay for the councils to replace the homes they sell off? Can the Minister confirm that whatever the cost, housing associations will be guaranteed reimbursement for the loss of their assets? Will the taxpayer pick up the bill, regardless of the impact on the public finances?

Thirdly, and finally, there are some serious legal and practical objections to this policy. In the 1980s this House very firmly rejected the extension of the right to buy to charitable housing associations, principally on the grounds that government should not be ordering independent charitable bodies to dispose of their assets to the benefit of some tenants of today but at the cost of diminishing the charity’s capacity to help others in need in the future.

On the practical side, there are worries about the response of lenders to the new uncertainties that this measure creates. There are also concerns about planning agreements, which have required a proportion of rented homes in private developments to be retained in perpetuity for those on lower incomes, never to be sold. Are these planning agreements now to be torn up, and will the housing associations be forced to renege on promises to landowners who have given land or sold cheaply, on rural exception sites, for the benefit of their local communities? If so, this is surely an end to such concessions in the future.

Clearly there are serious housing policy, financial, legal and practical difficulties to this multibillion-pound initiative. It looks incredibly fraught. I conclude by asking the Minister: will there now be extensive consultation on the new policy, not least with Members of this House, before it is taken to its next stage?