Committee (3rd Day) (Continued)

Housing and Planning Bill – in the House of Lords at 2:32 pm on 3rd March 2016.

Alert me about debates like this

Amendment 38

Moved by Lord Beecham

38: Clause 2, page 1, line 12, leave out from “a” to end and insert “price no higher than is affordable to a household receiving the median local household income, with affordability to be determined by the relevant local authority,”

Photo of Lord Beecham Lord Beecham Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Justice) 2:47 pm, 3rd March 2016

My Lords, I shall also speak to Amendments 39, 39A and 40 in this group.

“There is no specific shortage of social housing, or private rented accommodation, or homes for first-time buyers, but an overall shortage of inexpensive housing across all tenures. Government solutions … are all a step in the wrong direction … Boosting homeownership should not be a policy aim in its own right. The government’s aim should be to improve affordability in general”.

These are not my words. They are contained in a briefing which I have just downloaded from my computer from that unregenerate Marxist body, the Institute of Economic Affairs—which tells us something about the peculiarity of the Government’s position.

Amendment 38 addresses the critical issue of affordability. In an earlier debate, I declared that affordability is an elastic concept, and we debated at some length the implications of that condition on Tuesday. Rather than beginning with a figure reflecting current house price averages—unaffordable to a large proportion of the population and varying widely not just between London and the rest of the country but within London and, as we have heard already in some areas, within other parts of the country—the approach comes to the issue from the other end. The criterion for affordability should be the income levels of the potential beneficiaries of the scheme. I am afraid I will cite figures again from my own authority: in Newcastle, the average two-bed property is marketed for £135,000 and the average three-bed for £160,000—those are existing stock. The discounted prices under the starter homes scheme would therefore be £108,000 and £128,000. As we have heard in relation to other figures which have been quoted, new-build properties would presumably cost more than current average prices. In any event, either would be out of reach for the majority of applicants on the city’s housing register and for a sizeable proportion of other people seeking to purchase a property. In the existing areas of what we call lower-quartile properties—flats or terraced houses—the average asking price is around £78,000, or £92,500 for slightly bigger homes.

The scheme we are debating today has little to offer in places such as Newcastle. By contrast, in areas of higher value in the city and elsewhere, its potential would be limited to those with higher incomes, who will in addition benefit of course from the ability to cash in eventually not only on the 20% discount but, as my noble friend Lord Campbell-Savours pointed out in some detail this morning, on any rise in house prices. At the top end, there is clearly the potential for very large windfall gains to arise from the scheme, amounting to well in excess, in some areas, of £100,000—ironically, enough to allow the lucky first-time buyer in London to invest in a buy-to-let property in Newcastle of the kind I have described.

It cannot be fair to facilitate, after only five years, such significant untaxed gains for buyers whose incomes are likely to be substantially higher than those of people buying cheaper properties.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

Once again I express the need for us to see, at a very early stage today, this document that sets out the Government’s estimate of regional demand, based on the number of people who have applied. We need to see those figures and where they are coming from. If they are available in the Chamber now, why can they not be circulated during this debate?

Photo of Lord Beecham Lord Beecham Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Justice)

I cannot answer that question, of course. I am not sure the Minister will be able to either, but she will have a little more time—probably quite a lot of time—to perhaps get some information from the Box.

My Amendment 38 indicates that the starter home should be sold at a price not higher than that which would be affordable to a household on the local median income rather than creating an artificial discount irrespective of the means of the buyers. That seems a more sensible approach. Amendment 39 looks at the position in a slightly different way, and deals with the length of time in which the 20% discount applies. The Bill provides for a five-year period, after which the property can be sold and any gain accrues to the original purchaser. Amendment 39 would retain the 20% discounted price in perpetuity, so that the property would always be sold at 20% less than what by that time would be the market price. The benefit of the 20% discount would therefore go to successive purchasers of the property, which would remain at a discounted price, rather than it effectively disappearing into the pockets of the first lucky first-time buyer.

Amendment 39A would extend the categories of properties which might be purchased, by including properties bought under a rent-to-buy agreement as well as those purchased directly. This seeks to cater to buyers who might find it difficult to obtain or service a mortgage by allowing them to participate in the rent-to-buy scheme; it could be extended to shared-equity purchases. The Minister might look into these possibilities before we return to these issues on Report. The thrust of the amendment is that prime consideration needs to be given, in terms of affordability, to the means of the buyer and not simply to the price of the house. That is cardinal to achieving greater access to genuinely affordable houses on the private housing market. Accordingly, I beg to move.

Photo of Baroness McIntosh of Hudnall Baroness McIntosh of Hudnall Deputy Chairman of Committees, Deputy Speaker (Lords)

I have to inform your Lordships that if this amendment is agreed to, I cannot call Amendment 39 owing to pre-emption.

Photo of Lord Best Lord Best Chair, Communications Committee

My Lords, it is time for the Cross Benches to join in. Amendment 41A is in the names of the noble Lords, Lord Kerslake, Lord Cameron of Dillington and Lord Beecham, as well as my name. It also relates to this key component of the Bill—the Government’s flagship policy of starter homes—and is all about reducing demand for this new product so that starter homes are not such a cuckoo in the nest. Just to reiterate, these are homes for first-time buyers under 40 sold at a 20% discount, with the costs borne by housebuilders, who in return are now excused the normal requirements to provide a percentage of affordable rented or shared-ownership homes and to pay a community infrastructure levy.

I preface my remarks with an overarching comment on where we have got to in relation to the starter homes initiative. If only starter homes were all additional to the affordable rented homes that would otherwise be provided, I am sure there would be far less concern. However, they would then of course need to be funded separately, instead of replacing accommodation for those on lower incomes. What would that cost? If the average discount was something around £40,000, the total cost over five years for 200,000 of these homes would be £8 billion. The Government have already pledged something over £2 billion to assist with the programme, leaving under £6 billion—rather more than £1 billion a year—to be found if only the scheme was intended to add starter homes while serving the same number of people. However, this is not where we are.

On Tuesday we talked a lot in Committee about the losers from this policy: the people who would have obtained those rented or shared-ownership homes that will not now be built. Today we are talking more about the winners from the starter homes policy and whether this scheme is rather more generous than it needs to be. Who are these winners, and does the nation get value for money from rewarding them in this way? A big group of beneficiaries will be those of my generation. This is not because I am under 40, but because the starter homes initiative will benefit parents of buyers, since the bank of mum and dad will not need to be drawn upon so heavily. Over a quarter of first-time buyers have been dependent on this source of funds, so a lot of parents can now draw a sigh of relief that government will pay instead.

Secondly, of course, the main gainers from the policy will be those lucky buyers who can receive up to £112,000 towards their purchase in London and up to £62,500 elsewhere. These discounts take the form of grants after five years; the purchaser can then keep all the money alongside keeping 100% of the increase in the property’s value, of course. That is great for these buyers.

Owner-occupation does indeed provide a level of security, a source of pride, an encouragement to maintain and improve the home, and a degree of freedom that renting does not. But because these discounts represent a hefty subsidy to the buyer at the expense of a relatively worse-off household, who will not now get the affordable rented home which starter homes have replaced, we need to ask whether this trade-off represents good value for money for the nation.

Now comes a rather startling additional factor, to which some reference has been made today: the Housing Minister has stated his hope that buyers will be able to combine the new 20% starter homes discount with the current 20% Help to Buy interest-free loan. In London that Help to Buy equity loan is now to be set at 40%, meaning that a London buyer with both a starter homes discount and a Help to Buy interest-free loan would get 60% off their purchase price. So the buyer of a property costing, say, £500,000, would actually pay only £200,000, getting the other £300,000 from the government schemes.

I note that I am addressing some of the questions that came to the noble Lord, Lord Campbell-Savours, at 3 am. This level of support to one young person— 60% of the cost of a London apartment—is surely over the top, sympathetic as I am to their desire to escape very high rents in London. It provokes a sentiment expressed by an American colleague: “If the cream is too rich, the cat dies”. Enabling anyone under 40 who can raise a mortgage of £200,000 to buy a property costing £500,000 sounds like a recipe for rapid inflation of property prices and some weird distortions in the market. The Help to Buy scheme’s 20% equity loan has already been criticised for increasing demand more than supply, but it has not been remotely as generous as the 40% interest-free equity loan plus the new starter homes 20% discount. I wonder whether the Bank of England has a view on this. It is that cash discount which really takes the package to absurd lengths. Unlike the Help to Buy equity loan, which after five years attracts 1% interest, rising annually thereafter, and must be repaid at its new value whenever the home is sold, the 20% starter homes discount simply converts into an outright grant. This means that it is the culprit for making the cream too rich.

In terms of value for money for the taxpayer, these hefty grants benefit just the one initial purchaser, if they stay for five years or more—and they are unlikely to move out any earlier, since they would then forfeit this huge windfall gain. The next buyer then pays 100% of market value and obtains no benefit from the initial subsidy. By contrast, if the same level of grant had been used for an affordable rented or shared-ownership home, rather than for the starter home that replaces it, the benefit of the initial grant would have gone on indefinitely, helping all future occupiers. We should bear in mind that there is a lot of dead weight here: currently, tens of thousands of households become first-time buyers without generous grants. In future no one, whatever their income or the wealth of their parents, will be advised to buy a new home without collecting a starter home grant. So the gains to society from this redistribution are short-lived and benefit only one buyer, who may, or may not, need the money.

Concern about the cost and displacement effects of the starter homes initiative comes not only from those who worry about the displacement of affordable rented accommodation. The mortgage lenders are worried by the dangers of distortion to the market. The Council of Mortgage Lenders says that the starter homes offer to potential buyers,

“is likely to stimulate excess demand including from those who may already be able to use existing schemes, and will increase the potential for driving up house prices”.

The Building Societies Association says:

“Our concern is that the 20% discount is just there for five years. We think it should be built in”.

In another words, it should be there in perpetuity to assist other buyers later on.

As others have noted, lenders also have the problem that no one knows how to value a product that comprises both a property and a large cash reward in five years’ time. Jones Lang LaSalle, a valuation expert, envisages real difficulties, as noted by the noble Lord, Lord Campbell-Savours. I have the quote from it that he was seeking:

“80% of Market Value sounds simple; but what is the Market Value of a home where conditions are attached to its purchase”?

The bonus of 20% after five years certainly ups the real value, but by how much? The housebuilders, too—who might be expected to support any measure that raises the demand for, and increases the prices of, the homes they build—are equally alarmed. They want stability and consistency; they see the dangers of people clamouring to buy because of the huge rewards from the big bonus of a non-repayable discount. This rich cream may push up prices initially but is likely to have a depressing effect on both adjacent new homes and on the second-hand market all around, where no such bonus is available. There may be a further depressing effect when the big numbers of starter homes are five years old and come back on the market with no discount. The major housebuilders developing the really large sites will still be selling new homes in five years’ time. If they have to compete with a glut of resales by starter home buyers, this undermines their forward planning. I know that some of the big players feel they would have to move away from building anything for the first-time market except starter homes, and that might mean a decline in their overall output of new homes.

Already an impact may be beginning to emerge, as people postpone any buying decisions until the starter homes deal is available to them. Meanwhile the fact that the first timer collects all the subsidy for themselves after five years is particularly problematic for landowners wanting to make land available to help local people, as we shall hear on later amendments. A key criticism therefore, and I think it is a universal one, of the starter homes model is that if the one-off windfall is too advantageous—if the cream is too rich—the positive features of this initiative will be completely undermined.

I come to the solutions, or at least the partial solutions, to the problems which the starter homes initiative raises. There could be tough eligibility criteria, limiting access to people not able otherwise to purchase at all; and/or to people such as teachers, NHS staff or other key workers who are needed in the locality. These are ways of securing public benefit from the initiative while dampening the excess demand.

Amendment 41A seeks to get better value from the starter homes proposal by retrieving a proportion of the subsidy on a sliding scale over 20 years when the buyer sells up. I certainly commend the alternative suggestion that there should be a covenant on resales in perpetuity, to lock in the 20% discount to keep helping future buyers. That would convert the discount into an interest-free loan, to add to the support available under the Help to Buy scheme. If that approach fails to find favour, however, my amendment, supported by the noble Lords, Lord Kerslake, Lord Cameron and Lord Beecham, provides an option which I hope appeals to the Government. Under the proposition in this amendment the purchaser would repay the 20% discount less one-20th—that is, less than 1% of the original figure—for each year of occupancy. Therefore someone who left after 10 years would retain half the discount and pay back the other half. Purchasers are still helped to buy by the discount, still keep some of it and still get the capital gains on the whole of that proportion of the value; but they cannot walk off with all the subsidy after a five-year term.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour 3:00 pm, 3rd March 2016

That is an area that confuses me. When we talk about repayment, who is actually being repaid? I cannot work it out.

Photo of Lord Best Lord Best Chair, Communications Committee

The Bill and my amendment leave open whether repayment would be to the local authority where the home has been built—which I would support—or to the Homes and Communities Agency, to be used for housing elsewhere.

By making the offer a little less generous—by making the cream a little less rich—the excessive stimulus and distortion of this market is reduced, I hope, and the cost to the nation in losing out on affordable rented homes is made a little easier to bear.

Photo of Lord Kerslake Lord Kerslake Crossbench

My Lords, I support Amendment 41A, spoken to so ably by the noble Lord, Lord Best. I declare my interest as chair of Peabody, president of the Local Government Association and chair of the London Housing Commission.

The focus in our debate on Tuesday was on the impact of proposals on social rented housing. As the noble Lord, Lord Best, has said, there is a price to be paid in the current model for that sort of housing. We also spent considerable time debating the one-size-fits-all approach to planning that is envisaged to support starter homes. Today we have focused on starter homes as a product in itself; indeed, we might say that we have spent most of this morning on what might be described as product design, and the Committee might agree that this has been a rather unsatisfactory process. The reason why this is the case is quite clear: with starter homes we are going from a prototype to full production by missing out the stages in between, so it is hardly surprising that we are struggling to make sense of something that, in truth, has not been fully designed.

If we ourselves are confused, struggling with this, frustrated or indeed concerned, it may be some consolation to the Committee that such confusion, concern and frustration are shared equally by the house builders and lenders. Before we come to the amendment, it is important to explain the context for why this issue is so difficult for them and for us. There have been products to help first-time buyers to access home ownership for 30 years now. It is not a new concept; it has been around under both Governments as something that they aspired to achieve. The aims have been twofold. The first has been to help people with the deposit. People often have the income to enable them to pay the mortgage but not essentially the wherewithal to pay the deposit on the property. That was one key element of helping people into home ownership. The second reason why we went down the road of promoting home ownership products was to sustain demand, particularly following the financial crash in 2007. So there were two reasons why, as I say, Labour Governments as much as Conservative ones have gone down this route.

Up to 2013, the cost of these products came essentially from departmental budgets—in this case CLG and, before that, the ODPM. Because budgets were tight, accessibility to these products was constrained and in fact linked to income, as was talked about earlier. That was our basic model prior to 2013. In 2013, though, it was established by the Treasury, and there was some very clever thinking on this, that in fact these forms of support, in the shape of equity loans, could be regarded essentially as financial instruments and held against a third-party asset. As a financial instrument, they scored as debt but not as deficit. The Chancellor therefore thought that he could expand them in a pretty unconstrained way, so income requirements came off and the size and value of the property that you could buy went up substantially.

That was a crucial shift to making these schemes much more widely available. In fact, in 2013 a large sum was assigned—it was expanded to £10 billion later on—to take this through to 2020. In addition to that, there was £12 billion to support an additional product, Mortgage Guarantee, which underpinned mortgages. So there were two products that effectively helped people to get over the deposit problem, Help to Buy and Mortgage Guarantee. Since 2013 there have been something like 126,000 purchases using one or other of those products, and £3.8 billion of government money has been put alongside that. I cannot say how many of those people who bought are under 40 because I do not think those data are held, but I am willing to bet that a large number were in that age category.

I say all this because it raises the question: what market gap are we trying to fill here? We have an existing product that helps people to access the market. If there is an issue of home ownership, it is essentially because of the wider issue of supply and house prices rather than the absence of what has been a pretty effective product that has worked very well for those who have purchased. This is a crucial point in our debate and in how we think about the amendment.

That set of products, Help to Buy and Mortgage Guarantee, was introduced very quickly and very well, partly through the skills of the department and the Homes and Communities Agency but also because they were building on existing products that involved equity loans. Starter homes is an entirely different product because it does not give people a loan linked to the value of the property; essentially, as the noble Lord, Lord Best, has said, it gives them a significant cash benefit. When you give people cash benefits of such generosity in this form, you are likely to see distortions of the market and issues of fraud. That is a logical consequence. The reason why we could be confident about equity loans not creating the same problem was that they were a loan that the individual would ultimately pay off, rather than getting a cash gain. This should drive and inform all our thinking on this product.

I have talked here about the issue of what this product is and why there are concerns about it, but we should also work harder on the issue of who benefits from this product. I am very fortunate to have had some advance information from a forthcoming publication from Shelter on this, which I think will become the definitive publication on the question of who can access this product. I shall give the House the numbers for London. In terms of market sale properties, the estimated annual household income that you would need in order to purchase a market property in London now is £83,000. That makes a market sale property inaccessible to 90% of private renters; on Shelter’s calculation, 90% of private renters in London could not access market purchase properties. For London Help to Buy the figure becomes an income of £68,000, but it is still inaccessible to 80% of private renters. Starter homes, at the medium price for houses in London, not at the cap that has been talked about, requires an estimated annual household income of £62,000 and in fact is inaccessible to 70% to 80% of private renters. Shared ownership scores better but is still an issue because of difficulties in accessing mortgages, and you have to pay the rent on the bit that you do not own. You would still have to have an annual household income of £38,000, and in London it would still be inaccessible to 68% of the population.

I give noble Lords all these figures to put it beyond doubt that, at least in London, those who will benefit from this gift are a very small proportion of private renters. As we have heard, outside London the position is much more complex but, in summary, in the areas where there is high demand, such as the south-east, the east and the south-west, it would be reliably available only for those who were high earners—that is, in the 70th percentile. It would be out of reach in those high-demand areas for people on average incomes; and, in fact, for virtually the whole of the country, those who are on low incomes will not be able to access the starter homes product. It is crucial to have this sense of how big the gift is and who will be able to benefit from it.

We should be clear that, unlike Help to Buy, which could be funded through financial instruments, this effectively requires direct cash from government—either in the form of a direct grant to housebuilders or of benefits forgone in relation to affordable housing. Effectively, as taxpayers, we are directly paying for the full cost of this subsidy.

This amendment does not wholly address all the issues that I have raised. It is arguable that a better route for the Government to have gone down would have been to improve and tweak Help to Buy, as they are now doing in London, rather than to introduce a wholly new product that requires direct government funding to make it work. However, we are where we are; it is in the manifesto and we have to accept it.

The amendment does address quite a few of the problems. First, as my noble friend Lord Best said, it can address dead weight. You are not giving people something; they only have to wait five years to get the full benefit from it. It will prolong the period in which they would have to wait to get that benefit. Potentially, going for in perpetuity would mean they would not gain it at all.

Secondly, it creates a genuinely differentiated product. This is a big issue for the housebuilders because they say, “On one site over here we have built no starter homes; on another site over there we have built starter homes. Which are people likely to go for”? It is absolutely clear. So you can create a genuinely differentiated product. It is a lot fairer. You do not simply give a huge amount of money to people already on higher incomes. As my noble friend Lord Best said, you can hold the affordability for a much longer period—potentially in perpetuity.

It creates what I would call a tradeable product. If somebody chooses to leave after 10 years—according to the amendment we have tabled—then they would effectively give up or pay over half of the 20%, based on the market value at that point. That money could go into the local authority and could provide it with an incentive—which the Government are seeking—to support starter homes. It creates a direct financial link and it repays at least some of the money that the Government have put in to making this scheme work.

Given we are where we are with starter homes, in my view this is a massively better way of delivering them. It is fairer, a more distinct offer and could genuinely address a need that might be out there. I want to ask the Minister why we have not done a proper options appraisal on the option of 20 years tapered over the period, or indeed in perpetuity. It would help the Committee if noble Lords could see a proper cost-benefit appraisal of these alternatives.

Photo of Lord Young of Cookham Lord Young of Cookham Conservative 3:15 pm, 3rd March 2016

My Lords, before I speak briefly on Amendment 39A, I want to touch on the point that both the noble Lord, Lord Kerslake, and the noble Lord, Lord Best, raised about the issue of dead weight. This is something that has dogged housing policy for a very long time. There is dead weight in the right to buy in that many local authority tenants might have purchased without the discount. There is dead weight in transferable, portable discounts. In both these cases, Administrations of all colours have taken the view that the overall benefits of the policy of promoting home ownership and diversity of tenure have justified a bit of dead weight. In the earlier debate a number of suggestions were put forward to minimise the risk of dead weight in that, in so far as this product is oversubscribed, there is a way of prioritising. In his speech, the noble Lord, Lord Best, mentioned a number of ways of doing this. The noble Baroness, Lady Hollis, mentioned one. There was one in an amendment and I mentioned others. If there is an excess of demand, one can tackle the issue of dead weight by prioritising it to those for whom the dead weight issue is not there because they would not be able to afford it without it. Or they are moving out of social housing and therefore freeing up a tenancy. I take the point about dead weight but there may be ways through. It is something that has been there for a long time.

I turn to Amendment 39A, in the name of my noble friend Lord Lansley, who is in Brussels today. During the debate on Chapter 1 on Tuesday, a number of noble Lords suggested that we should have had this debate on definition first before we had the debate on Clause 1. I note with some satisfaction that we have now moved from line 11 on page 1 to line 12—so progress is being made. My noble friend Lord Lansley was seeking to stretch the definition of starter homes to include Rent to Buy. In her winding-up speech, my noble friend the Minister referred to the definition of the starter home. She said that Clause 2 talks about the criterion for a starter home and then went on to define it. When pressed for a slightly tighter definition, she said:

“That is fine. I just thought I would set that out now. I know we will be talking about it later”—[Hansard, 1/3/16; col. 766]— in response to what my noble friend Lord Lansley said about Clause 2.

At the moment we have a product—Rent to Buy—which is a hybrid, in that it sits between affordable renting and affordable home ownership. It is a product aimed at those who are renting but who cannot afford a deposit. In return for paying a lower rent, they are allowed to purchase their home after a set number of years. Under the current definition of a starter home, the insertion of the word “purchase” means that they would be excluded in that they have not—

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

The noble Lord, Lord Young, said that in return for paying a slightly lower rent, they would effectively acquire an equity stake. Does he not mean a slightly higher rent as part of the Rent to Buy process?

Photo of Lord Young of Cookham Lord Young of Cookham Conservative

I am reading from the briefing from Rentplus:

“The affordable rent to buy tenure addresses this, enabling tenants to save more through paying lower rents and allowing them to purchase their home after a set number of years”.

In other words, the money is put on one side to enable them to buy the product at a later date. That is from Rentplus, and I am very happy to let the noble Baroness have the briefing. It was debated in another place and, in response to a question, the Minister replied:

“Higher income tenants in a Rent to Buy scheme will not face increased rent under proposals for pay to stay. This is because the rent they pay is an intermediate rent”— this may answer the noble Baroness’s question—

“which is excluded from social rent policy”.

The purpose of the amendment is to see whether this product—and there may be other products, such as shared ownership—will qualify as starter homes under the definition. Or, if it does not qualify under the current definition, whether the definition could be looked at so that products that promote home ownership will be included in the starter homes definition. We had a bit of this debate on Clause 1. I hope it will not be so narrowly drawn that a number of worthwhile products, such a Rent to Buy, will be able to score as starter homes. Again, just looking at the brief from Rentplus:

“Affordable rent to buy is a new ‘hybrid’ housing tenure, sitting between affordable rent and intermediate housing. The tenure enables working households to save for a deposit whilst renting at an affordable rate (80% of market rent …) allowing tenants to purchase their home after a set number of years”.

I hope that explains to the noble Baroness what the product is. I am surprised that, given her interest in housing, she may not have come across this particular product.

I very much hope that, in her response, my noble friend can give some comfort to those aspiring home owners who cannot access a deposit which is necessary for starter homes but who are seeking to enter home ownership through a different route.

Photo of Baroness Bakewell of Hardington Mandeville Baroness Bakewell of Hardington Mandeville Liberal Democrat

My Lords, I will speak to Amendment 46. I support all the amendments in this group and the comments that were made by the noble Lords, Lord Kerslake and Lord Best. I support the Government’s aim to provide more homes for those who cannot currently afford them, but fear that the time-limited discount of 20% will be seen as unfair by those not able to access it, and will be unlikely to increase the housing supply in the future.

I do not support the discount remaining in place for the limited period of five years. This is a very sizeable discount, as other noble Lords have explained, and it should be enjoyed by others looking to gain access to the housing market in the future. This is a discount which should be available in perpetuity so that the same home can be within the reach of others, despite the inevitable rise that inflation will cause to the price of the property over its lifetime. Have the Government thought about what will happen if a purchaser fails?

Who will get the discount if that initial purchaser defaults? Perhaps there is a bit of a perverse incentive for a lender to repossess after year 4.

Why should the first purchaser receive the discount, live in the dwelling for five years and then sell it, keep the discount and the uplift in the value of the house due to inflation and not pass that discount on to the next person? This discount is to be funded from local taxpayers, via the sale of high-value council homes. I feel certain that those taxpayers would wish their hard-earned money to be used wisely and to be recycled wherever possible.

The Bill proposes that starter homes can be resold or let at open-market value five years after the initial sale. The restrictions on resales and letting at open-market value should be in perpetuity, as is often the case in many council-run, low-cost home ownership schemes, or extended to a longer period—for example, 20 years—to discourage speculation and enable more households to benefit, generating maximum returns from public investment. Further delivery of starter homes through the planning system will create significant burdens on council planning teams, so they should be fully funded by reforms granting local planning authorities the flexibility to set planning fees locally.

Like others in your Lordships’ House, I have received many briefings from a variety of organisations, all saying more or less the same thing. The 20% discount should not be a one-off. It should attach to the property in perpetuity and it should not be a one-off windfall for the first purchaser. I have heard the Minister’s rationale for the discount being a one-off but I regret that I am not convinced, and neither are those who have contacted me on this issue.

None of those lobbying believes that this policy will help to solve the housing crisis the country is currently undergoing. My preference is for a discount in perpetuity. Failing that, I support the sliding scale proposed by the noble Lords, Lord Best, Lord Kerslake, Lord Cameron and Lord Beecham, in their amendment. I urge the Minister to encourage the Government to reconsider this aspect of the Bill.

Photo of Lord Horam Lord Horam Conservative 3:30 pm, 3rd March 2016

My Lords, I will comment very briefly on the remarks made by the noble Lord, Lord Kerslake, who made a significant point about the existing instruments we have to help people in this situation—the Help to Buy method and so forth. He made the point that this is a financial instrument and therefore the debt/deficit equation, which is so important to the Government, is resolved by using these sorts of methods. As he pointed out, no fewer than 126,000 people, with total costs of £3.8 billion, have been helped by these methods.

The simple point is that it has not been enough. As the noble Lord also pointed out, you have to have an income of no less than £83,000 to be able to afford a house in London, and 90% of people cannot do that. So the plain fact is that we need to do more—which is what Government are trying to address with starter homes. We dealt two days ago with the question of whether we are helping the right people when we addressed the question of whether you can help people who are in a different category but who are even more disadvantaged than people who might benefit from starter homes. We dealt with that issue—or at least we tried to. Now we are dealing with whether this is the right kind of instrument in the circumstances to deal with the fact that we have a crisis, particularly in London, and the present instruments do not help enough. That is the fundamental point.

Photo of Lord Kerslake Lord Kerslake Crossbench

I am grateful for the opportunity to come back on this point. The noble Lord is entirely right to say that we need to do more—there is no question about that. I strongly hold the view that we need to put a lot more into the building of new housing. If there is an issue about the existing products, as there was in London with Help to Buy, we should look to revise and amend the products themselves rather than introduce a new product which essentially competes in the same market and, instead of giving people a loan to help them with their deposit, gives them a very substantial gift. I am most concerned about that issue. I said that we had to make choices about priorities and doing more. As my noble friend Lord Best said, we have this cash, so I would put it into affordable rented accommodation. Nothing you will do in relation to these products will make housing accessible for people on middle or low incomes. We have to build an awful lot of houses for an awfully long time before they will benefit.

Photo of Lord Horam Lord Horam Conservative

I entirely agree with that. My way would be to recognise that the sort of lift in the cap on borrowing for local authorities, for example, is perfectly acceptable in the context of the Government’s overall economic strategy. If you look at what is now being said worldwide by the International Monetary Fund and the OECD, at the moment they are calling for more capital investment of this kind, and there is no better capital investment than housing. It is interesting that insurance companies, for example, are now going into the build-to-rent market in a fairly big way in London, because the sort of regular, sensible rents you get from that sort of market precisely match the sort of income streams they need to service insurance bonds. That is a very interesting development, which I am sure the Government will welcome and which shows how the market, if left to itself, can itself resolve some of these questions.

To digress for a moment, the reason that insurance companies are going into this area is not only that it is a very interesting way of solving their problems but that the price is high enough for them to be able to produce buildings at a cost which enables them to rent them out to young people at a price they cannot afford. So the very high price is producing a supply consequence which is very favourable. None the less, the noble Lord is right that what is proposed here is a new product, and there is always a danger with a new product that it will lead to distortions of the market. If you try to interfere in a market situation with a product that has not been thoroughly thought-through, you risk unintended consequences—and that is what we are worrying about in this situation.

If that is the case, Amendments 38 and 39, put forward by the noble Lords, Lord Kennedy and Lord Beecham, are frankly impractical. They are not the way to deal with this problem. They are putting into the system the local authority having to decide what the level of affordability is in a particular area, when the market already decides what affordability is in a particular area. Frankly, therefore, I do not trust local authorities to second-guess the market as to what the right level of affordability is.

Secondly, on the idea of having a discount in perpetuity, as the noble Lord, Lord Campbell-Savours, rightly pointed out, how on earth do you value it in the future? Indeed, how on earth do you value it now? There is no way you can value something which has been separated from the rest of the market, which is determined by market forces, and which has a value discount attached to it. You cannot do that—there is no way an accountant could work that out over a period of time and make any kind of sense of it. Inevitably, if you try to put in something in perpetuity, it will disappear into the general market in due course, probably in some way you do not expect.

So the right answer is the amendment put down by the noble Lords, Lord Best, Lord Kerslake and Lord Beecham—two minuses and one plus, from his point of view—whereby you pull back some of the discount over a period of time from the people who benefited from this government largesse. You are achieving what you want to do, which is to get them into a new house and to start a home and so forth, but you are pulling back some of the advantages you gave to them to achieve that.

However, I point out that even that has its impracticalities, because you will be asking them to pay back rather a large amount of money at some stage unknown—they do not know when and you do not know when—in the future. That could be a very considerable amount of money. I do not know how you would do this over a period of time and whether you would do this in one lump sum or whatever it may be, and you and they do not know what their circumstances will be. So there are impracticalities even with this. None the less, we have to have some measure by which you can pull back some of the advantages you are giving to people under this new model, and the Government have to think very carefully about how they handle this.

Photo of Lord Shipley Lord Shipley Liberal Democrat

My Lords, I am a signatory to Amendment 46. I want to refer to the report from Generation Rent, which was published earlier this week and found that public subsidies proposed by the Government will help comparatively few people. That is because very few people in the private rented sector will be able to benefit from the scheme, and the 200,000 people who stand to benefit could receive a huge dividend if they sell up after the five-year discount period expires, with the potential for six-figure profits individually. We have heard a great deal about this but these are very large sums of money.

The consequence is that the scheme will increase inequalities between those who own property and those who do not, and there will be a lack of any sense of fairness between those who can afford a subsidised starter home and those who cannot, driving social inequalities wider and deeper. I wonder whether that is really what the Government want to achieve.

I should like to ask the Minister whether the Government are committed to the statement in Conservative election manifesto that starter homes will be exclusively for first-time buyers. The point is that when the homes are sold on after five years or later, there is no guarantee from the Government that they will be bought by first-time buyers. So these are starter homes for first-time buyers but theoretically only for five years; after that, the benefit that had accrued from defining them as homes for first-time buyers will be lost.

I am still puzzled by the Minister’s statement before the lunch break to the effect that it may well be possible that starter homes will be sold as second homes. I keep thinking about those parts of the country that are short of housing and where starter homes may be important in providing additional opportunities for people. The prospect that they may be sold and lost to the next generation who could take up starter homes I find particularly disturbing.

We need clarity from the Minister. If housing affordability fails to improve, future first-time buyers will find it very difficult to get on to the housing ladder, so having a discount which carried on in perpetuity would help the Government to keep their promise.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

I am sorry to intervene but I cannot understand how this would work. I am not trying to be critical in any way; I only want to know how it would work. Can the noble Lord give us an example of a property purchased at a discount under this scheme? What would happen at its first sale? How would the price be determined? What would be the position of the estate agent selling the property? Would a valuer be involved? I am trying to understand the mechanism here. If it worked then it would be reasonable to consider it but, like the noble Lord, Lord Horam, I cannot see any mechanism that would make it work. Can he please explain?

Photo of Lord Shipley Lord Shipley Liberal Democrat

I agree with the noble Lord. I am as concerned as he is about these matters. Of course, I had assumed that there would be a role for the valuation system. There may be a role for local authorities, or there may be a role for both. That system exists in relation to council tax valuation, for example, but it seems to me that to prevent market abuse—the noble Lord, absolutely rightly, discussed that before the lunch break—we have to be clear about this, otherwise there could be a problem with how properties are valued. For that reason, in my view there has to be an independent valuer.

This would operate in exactly the same way if there were a taper, going down 1% a year over 20 years, or if the 20% discount applied in perpetuity, but there are ways in which that can be done by using local government and the valuation system. I do not wish to say much more. In this group—

Photo of Lord Beecham Lord Beecham Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Justice)

In terms of the perpetual restriction, does the noble Lord think that it would be possible to discount the sale price by the 20% on every sale for perhaps 20 years or in perpetuity so that no money changed hands? The sale price would be paid, and as far as the buyer was concerned the property would be priced in competition with other kinds of property. I would have thought that that would be a mechanism to secure the preservation of the 20% discount.

Photo of Lord Shipley Lord Shipley Liberal Democrat 3:45 pm, 3rd March 2016

My Lords, that is a very helpful intervention and it could well be one way in which we could proceed. However, we are in Committee on the Bill and I would have thought that the Government would be able to explain this to your Lordships’ House, as opposed to individual Members of the House having to come up with proposals for the Government to consider when the Bill has now been in front of Parliament for many months.

There are two approaches in terms of Amendment 46: our approach is the “in perpetuity” one and another one involves tapers. Some further thought has to be given to that. The noble Lord, Lord Kerslake, rightly identified that the Government have not presented any options for consideration. There has been no cost-benefit appraisal and I am very surprised about that. If there has not been, there should have been.

The issue of avoiding dead weight also seems to be very important. I concede entirely that occasionally dead weight will apply, because the overall gain is greater than the loss on dead weight. However, if there is too much dead weight, it means that some are being subsidised at the cost of others.

I agree entirely with those noble Lords who have said that the priority should be affordable rented housing, as so very many people cannot participate in buying starter homes because they either do not have the deposit or do not have the ability to repay the mortgage. I hope the Minister will respond to what the noble Lord, Lord Kerslake, called a gift, and the noble Lord, Lord Horam, referred to using the words “government largesse”. We have to be very clear who is getting the financial advantage here. At the moment, I believe that we are driving a deeper wedge in terms of social exclusion.

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench

My Lords, I put my name to Amendment 41. I was going to list the range of various abuses that I felt the starter homes regime would be open to, but that has been done with much greater expertise and experience by my colleagues, my noble friends Lord Best and Lord Kerslake, and, indeed, with greater eloquence.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I thank the noble Lord for giving way. I just do not want to happen today what happened on Tuesday. Amendment 41 is in the following group, but I am very happen to listen to him and to respond.

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench

I do apologise; I meant Amendment 41A.

The point that everyone has made, including the noble Lord, Lord Campbell-Savours, who I did not mention just now, is that the moment you falsify a market, there will always be someone looking to make a turn. If the Government are experimenting with a new product, I am certain that financiers and traders will be very quick to find new ways of taking advantage.

To my way of thinking, starter homes do little, in the countryside at any rate, to solve the urgent housing problems of those many families in real need. The other big shortfall of starter homes, when compared with, say, shared equity, is their transiency. Unless we continue to build, let us say, 50,000 starter homes every year in their currently proposed incarnation, not only until 2020 as promised by the Government but ad infinitum, then their very small benefit to society will in each case be lost after only five years.

The lack of affordable housing in this, our very crowded island, is not a short-term problem. I cannot see it diminishing, so we need something more permanently fixed in the affordable sector than starter homes as currently planned. By way of a compromise, to assist starter homes to give a little longer-lasting benefit and to avoid, as has already been said, some of the possible abuses, I believe that Amendment 41A is worth serious consideration by the Government.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

My Lords, might I ask the Minister a question following the powerful speeches from the Cross Benches today? Can she explain why the financial instruments we currently have would not address the problems that she has identified? I think we all agree that we need to increase the supply of housing and that we want more people to have the choice of which tenure they occupy given basic affordability rules. We would also wish to avoid huge discounts being a one-off gain for a select few who then pocket them, with the gain being permanently lost to subsequent generations coming behind them. As the Minister has outlined it, those three objectives are incompatible with each other.

My question is to some extent triggered by the comments made by the noble Lord, Lord Kerslake: why is the equity loan system not an appropriate way forward to be expanded? Why should government not assist people with an interest-free equity loan for the 20%, the equivalent of the discount? At the time of sale, that 20% would be repaid, and could then be made available to be attached to a new home or any existing home so that there is a continuing pool of money coming back from the 20% equity loan to finance the next generation? It may well be attached to a starter home, or it may be that, in some places, there are no starter homes but, none the less, there are modest Victorian terrace houses which would attract the same potential buyer? Certainly that would be the case in Oxford and Cambridge and so on.

Can the Minister explain what is wrong with the existing instruments? Why would that not help encourage demand in a way that strengthens the supply side, extends purchase to people who are currently struggling, and recycles that money into—as the noble Lord, Lord Cameron, said—continuous generations of would-be purchasers? What is wrong with that? Why should we not do that? Why is that not the simplest way forward to build on what we have? I have been studying this darned impact analysis: not a single figure about cost, number of people or the ultimate effectiveness of the discounts is anywhere to be found. Can the Minister explain why we need this way of meeting objectives that most of us share?

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

I shall very briefly intervene on this occasion just to say that I only wish that Amendment 89L in my name, a very controversial amendment that comes much later in our proceedings, could have been taken at this stage. It would have provided a very different approach to dealing with this matters. But of course we will not come to my amendment for another three weeks, I understand; it is at the very end, by which time everyone will have made their mind up.

I think that if we are to go down this route, Amendment 41A in the names of the noble Lords, Lord Best, Lord Kerslake, Lord Cameron and Lord Beecham, is the perfect solution. In my view, it deals with the problem of excess profit-taking; it provides for the discount system and, if you are acting honourably, you are not penalised in any way. That is the compromise that Ministers should seriously consider. I know that promises were made in the manifesto, but that amendment does not compromise the commitments that were given. It still provides for the 20% discount system which the British people were promised was on offer. I hope that the amendment is very seriously considered.

Photo of The Earl of Lytton The Earl of Lytton Crossbench

My Lords, I have sat on my hands for a considerable while since we started in Committee this morning. I speak to an intriguing amendment, Amendment 41A. Before doing that, I will try to peel back some of the skins of the increasingly complex onion that we appear to be dealing with.

The first thing to realise is that the housing market is potentially a very volatile animal, and has an enormous number of different subset markets—as we have heard, different parts of the country operate in very different situations. I know that your Lordships’ Select Committee on National Policy for the Built Environment heard evidence that, in certain parts of the country—not the north-east or the north-west— the market simply has not returned to anywhere near pre-peak levels of value. However, I leave that to one side.

Earlier, the Minister cited a gap in the market. I question which market we are referring to. Apart from believing that the gap is vanishingly small—we have heard some reasons why other products would effectively fill it anyway; and apart from the means being adopted to plug it in the Bill being vanishingly transient; and, furthermore that the limited category of people whom this type of starter home would actually benefit is, to my way of thinking, irrelevantly small in the overall scale of things, I have to wonder where we are trying to get to.

We need to be clear about whether society will provide lasting sectoral benefit to that proportion of the population that any social society is bound to try to assist. In that, I include people who may have been property owners at some stage, have fallen on hard times and, for whatever reason, have to depend on the state. When you are dealing with free markets, that sort of thing happens. There will always be a proportion of people—I do not pass judgment on how significant or insignificant—who cannot afford to buy and almost certainly cannot afford to pay a market rent. Are we going to assist those people, or to provide an increasing focus on a windfall gain for the few, without reference to the needs or actual means of the few who will benefit? I question what we are doing here.

In introducing Amendment 41A, the noble Lord, Lord Best, identified that the discount and loan assistance taken together is a huge transfer of asset. It is much bigger than the headline 20% figure that we are led to believe applies under starter homes. As the noble Lord, Lord Young, observed on Tuesday, developers are keen on this. Yes, indeed— they would be. Who would not be as an alternative to the affordable housing regime under Section 106, with the uncertain outcomes and unpredictability that that involves? I am not in the least surprised about that. Purchasers of starter homes would also be keen. Who would not be, offered a windfall gain for the asking? I wonder whether we should be devoting quite so much time and effort to this ephemeral social benefit.

When dealing with the question of housing and the impecunious, I am reminded of a gentleman who once said to me, in connection with council house sales, “If I had that sort of cash, I would put it to a better use than buying this place”. I hope that we do not build the sort of place that he was referring to, but I wonder whether, in circumstances of strapped resources in the public domain, we should be funding the ephemeral and assisting those who have access to a deposit that enables them to gain this discount in the first place. There is certainly no gain to the social budget on the sale of a starter home. The mortgage gets paid off, presumably, and the balance of it goes off down the road with someone to their next home. Or, if they have succeeded in being parted from their money, it goes to someone else—some financier who may have come in on the back of this scheme. It was mentioned earlier today that there is absolutely no end to the ingenuity of financiers of all sorts, regular and irregular, who would jump on this bandwagon and might usefully talk people round into doing business with them on the basis that they would share in some of the largesse being provided by society at large.

I believe that doing more here includes retaining a significant element of social benefit of some sort, and it is a matter for debate how much that should be, for society at large—unless of course you believe that the market will do everything, which of course it will not and cannot. History shows us that it does not.

I turn to the point made by the noble Lord, Lord Horam, who questioned the means of assessing the value of some of these discounted and other types of what might be called interim ownership of one sort or another. My profession is full of guidance on this. There are many mechanisms for dealing with various social assets of one sort or another. Whether it be an opportunity cost or a replacement value, there are mechanisms for getting at it. They may not be perfect and they may not be precisely what you would look at in terms of market value, but they are not insignificant ways of dealing with assets, whether they be on a balance sheet or the assets of private individuals. That is something we need to consider.

The noble Lord, Lord Shipley, referred to the fact that a number of people cannot participate in the purchase of a property. I made the point earlier that there will always be that sector, so I very much agree with that sentiment. But fundamentally, the need to build more houses altogether and to have a suite of tenures is what we must concentrate on. But there are dangers in that too. If it is inferred, as I rather suspected the Minister did earlier, that while building a lot more houses under the Government’s policies would serve over time to ameliorate the huge year-on-year increases in house prices in some areas, which they might or might not, building houses is not the only factor. It is also about jobs, communications, infrastructure and removing the blocks both locational and structural. Much of that has to be provided by public sources such as local authorities and government departments. That is one of the reasons why we should not allow all of the social benefit to just disappear into some sort of market transaction. There is a proper function in devoting this through public means where, in particular, market influences fail.

There are, as I have observed elsewhere, including with one of my children, few votes in the amelioration of house price increase. I ask your Lordships to think about this. Who would vote for a static or slow-growing house price market? Certainly not the Treasury or mortgage lenders, business lenders and insurance companies; absolutely not existing homeowners—oh no—and not property marketers and pension funds either. Developers and housebuilders would say no. They along with landowners like consistently rising values. Be careful what you wish for in balancing out supply and demand to get a form of equilibrium. If we ever did reach that situation, I question what kind of economic world we would be looking at and what would happen when one of the most significant economic drivers in our country actually started to falter. There is a very fine line between a market that is moving forward rapidly and apparently successfully and one that suddenly grinds to a halt. We have seen that in other sectors as well as in the housing sector in the past.

There is a lot of overconcentration on starter homes, which gives the appearance, if it does not reflect the reality, that we are abandoning other things. The Minister has tried to make out that there is no such abandonment; why, then, the particular obligation on local authorities to foster starter homes? Is that not skewing the balance? If we proceed as the Government suggest I can see a starter home market forming its own little market sector bubble in which the purchaser may well find that the benefits—the cream to which the noble Lord, Lord Best, referred—may have actually evaporated when it comes to reality.

The market is so complex and full of price differentials—in terms of finish, the style of house, whether there are white goods or none, or carpets or none, and so on—that the only bit of the Amendment 41A where I think that the noble Lord, Lord Horam, has a point is that as we get down to the smaller percentage equity that remains, as it is written off, we get to the point, at about 10% or a bit less, where we cannot distinguish it from any other factor in the marketplace. In other words, it becomes impossible to value that sort of consideration among a basket of maybe 50 different price-sensitive elements that make up a house price.

I am superficially attracted to Amendment 41A. I am very attracted to the idea of retaining a significant element of social benefit in the public sector, because I think the public sector needs it. There is a very good economic reason. It is not a sort of exit strategy; I have no remit to say, “Public sector good, private sector bad”—I do not take sides on that—but I can see, as vice-president of the LGA, as a former president of the National Association of Local Councils, and as a practising chartered surveyor, that this is something where the role of the state and the role of local government, as part of the community, is a very strong element in favour of strengthening and bolstering that and having a better focus. It is not going to do it if there is a progressive siphoning away of what is, in fact, the chief milch cow behind this, which is the housing market.

At the moment, the housing market finances many things. It is, as I have said, a main driver of our economy, and we will not get affordability unless we have good and consistent market-level sales at significant profit. So I think that there are real issues that the Minister needs to consider carefully, with her colleagues, how we square this particular circle, because we have gone into a lot of detail here and I think we are losing sight of the bigger picture.

Photo of Lord True Lord True Conservative 4:00 pm, 3rd March 2016

My Lords, I apologise: council duties earlier this week led me to miss the extremely interesting discussions about the relationship between starter homes and affordability. I hope that I will be able to make a contribution to that at Report, because clearly there are issues there. I also missed the early stages this morning, but I have listened with tremendous interest all day, as always, to your Lordships on these questions. Clearly, there are issues that need further discussion. What I heard from the earlier extremely extensive intervention from my noble friend on the Front Bench was that she was open to reflect on all the things that noble Lords have been saying.

The noble Lord, Lord Kerslake, with all his authority on the Cross Benches, made the fundamental point, which we have to bear in mind, that this is a manifesto commitment. That was almost the first thing that the noble Lord, Lord Kerslake, came in with. So this House has a duty, in my submission, starting from that point, to look at practicalities and ways forward here, some of which have been put before us in these interesting amendments.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

My Lords, I accept the point about the manifesto commitment—we came in in 1997 in the same way. But what we then did was, where possible, to go for a White Paper to flesh out the details of how it would be done and used the responses to that White Paper to shape the regulations behind the drafting of the Bills. Would the noble Lord agree that that is the most appropriate way forward in this case?

Photo of Lord True Lord True Conservative

My Lords, I respect the noble Baroness. We have heard from her many times today and if she would allow me to pursue my remarks I will try to pick up on that point among others. I have been patient. As a general principle—I have said this many times in your Lordships’ House—policy-making should be progressive. We should have Green Papers, White Papers and so on. But that practice was eliminated in the years when Mr Tony Blair was Prime Minister of this country; it disappeared. So I will not take strictures on that point. Perhaps we could form an alliance and move back, but we are dealing with the situation that we have now.

We do have an artificial market at the moment. I would not choose this particular instrument if I was selecting the first XI to bat for England in solving the housing problem. But we have an artificial market at the moment, parts of which are caused by matters we do not address—for example, the growth in population. The biggest distorter is the London market, because there has been an exceptional rise in London’s population. Currently there is no planned instrument to address or control the problem, and that will lead to continuing high pressures on housing.

Another distortion in the market, generally supported across the parties, is the artificial depression of interest rates. If you depress the cost of acquiring or holding a good, the capital value of that good will increase. At the moment we have an artificial situation in which low interest rates relate to capital costs. The problem then for young people who are trying to save for a deposit or acquire a house at a time when capital values are high is that they have had to live during a period in which, for a time, there have been, effectively, negative interest rates for savers. Now there are minimal interest rates for savers. It is extremely difficult in the exceptional and artificial market that we have now for young people to save. I do not want follow the interesting and reasonable points that have been made about people with high capital assets, but it is not easy to save for a deposit when prices are moving away.

So it is perfectly logical and understandable that the Government wish to look at an instrument of this kind that would help people seeking to be first-time buyers. It may not be perfect. In exceptional local authority areas where capital values are high I would like to see further discussions about exceptions and so on, but it is not unreasonable that an instrument of this kind should be considered. The fact that it may be a skin graft when perhaps the market needs heart surgery is not necessarily material because skin grafts are important and useful and do help certain people.

Your Lordships have reservations of different kinds and I am interested in the arguments that have been put forward. I do not agree with those who say that we do not need this instrument. There is nothing in it which threatens the existence of other instruments that have been commended, some of which also cause distortions in the market. So we should go on in a constructive way, look at this proposal—which was put before the British people and voted for—and, for all its imperfections, see if we can make it better. Maybe some of the suggestions made today will contribute to that, maybe they will not—but that is what your Lordships’ House is here to do.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions) 4:15 pm, 3rd March 2016

My Lords, while listening to this debate I have been trying to get my mind around the mechanics of how some of this might work. Perhaps the Minister might comment. It seems to me that on day 1 the discount is met by the developer, not by the Government or the purchaser. Other things being equal, you would expect that discount to be represented as a charge against the property. If nothing else changed, should that property be sold it would be sold at market value and the vendor would have an obligation to account for the discount—presumably, in this case, to the Government. If Amendment 41A were accepted, the detriment of that charge would gradually reduce over a number of years, and if there were a disposal there would be a smaller amount to be repaid.

The issue arises as to who the amount gets repaid to—who the charge is discharged in favour of. The Government presumably get some sort of windfall along the way. If they do not, how does it work? Should there be a residual recovery of the charge, who would get the benefit of it? If the charge is written off on the basis of Amendment 41A over a period, in a sense there is nothing to recover. It seems that that is a mechanism to address the issue the noble Lord, Lord Horam, and my noble friend Lord Campbell-Savours were pursuing about how the market will work. It would be relatively straightforward if that were the mechanism.

But where are the Government in this in terms of scoring against public expenditure? They do not take a hit on day 1, but do they anywhere along the line? Presumably not if the discount is on some basis fully written off. But if it is not and it is recovered by the Government, that has got to be reflected somewhere. Perhaps the Minister can help us with that.

Photo of Baroness Gardner of Parkes Baroness Gardner of Parkes Conservative

My Lords, I really like Amendment 41A but I believe the money should go to the local authority in which the property is based, to be used for further housing benefit or whatever else is needed. Local authorities are very hard pressed for funds and all the local communities benefit from anything that goes to them.

It is not at all unreasonable to ask for a certain amount to be repaid. It would be just,

“1% for each year of occupation”— or is it 1/20th? That is where I am slightly lost. If you occupy a property for 20 years and pay 1% for each year does that mean—my maths are not good enough to work this out—that you have reduced the whole lot at the end of 20 years? If you have not stayed the whole 20 years do you pass it on to the next person, so say after five years that person has a 15% discount, which they can then keep for 15 years? And will they lose that when they pass on the property? I believe that is what is intended. It seems to be the fairest amendment which has been put forward on this.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions)

I accept entirely that the recovery could be by the local authority rather than the Government.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I thank the noble Lords, Lord Kennedy and Lord Beecham, for Amendments 38 and 39, and the noble Baroness, Lady Bakewell, and the noble Lord, Lord Shipley, for Amendment 46. I will address them together.

I am very clear that starter homes are a new product. They are a manifesto commitment designed to serve a pressing new need. Clause 2 sets out the key parameters: a starter home is available to first-time buyers, under 40—the very gap that the noble Earl, Lord Lytton, referred to—at a minimum discount of 20% of market value and are subject to a price cap.

The proposed amendments would replace the minimum 20% discount on the open-market value with affordability criteria based on average local household income. Any discount would remain in perpetuity. This amendment would remove the 20% discount on local market values. I cannot support that as 20% is a minimum discount and, if they wish, councils would be free to negotiate with developers for a higher discount if that was best for the area. There is evidence that they do that at the moment for affordable housing.

Much was said at Second Reading and on Tuesday about the affordability of starter homes. Research on affordability by Shelter and Savills for the Local Government Association was based on median house prices in each region. I question whether first-time buyers access the market at average house prices, as I pointed out the other day. Starter homes will be valued to align with local house prices for first-time buyers aged under 40. We are working with the sector and professional bodies to ensure that a transparent process is agreed for valuation.

The noble Lord, Lord Kerslake, talked about the Shelter report, which is not out yet—he must be a very important person, as I have not seen it yet. I will be interested to see it when it is published but I must point out that we all agree that London is expensive. I do not think that anybody denies that. In response, I would point out that we estimate that starter homes will be accessible to those with a gross household income of £45,500 in the south-east, as I added up badly yesterday, and of £39,500 in the east of the country.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

The noble Lord, Lord Kerslake, challenged the Government’s figures on this question of affordability. I think that he quoted a figure of 68% in one case, which is different from the figures that the Government are giving. The Minister said that she was going to have a look at the report. Will she come back at the next stage, when she has seen that report, and give us an explanation of why there is a difference in the stats?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I can, my Lords. We can all argue about statistics and, given that I have not seen the report, it is very difficult to make a comparison of the different figures. However, I will do so.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

In her earlier remarks, the Minister said that authorities could negotiate a higher discount on the property with developers. If they can do that, why can they not negotiate a lower discount as well?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

Because the whole point of the starter home is that it will be available at a discounted level to those under the age of 40. I will give the noble Lord the workings out of why that was arrived at. I am guessing that it was derived for a similar reason to that for the affordable homes discount, which has now been going for many years.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

That is very helpful, thank you. We used to hear from the Benches opposite about how local authorities knew best but it has all gone very quiet now. I am thinking of the Localism Act, which was never mentioned again from the Benches opposite.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I do not think that anything changes there. Nobody would promote any louder than I the view that local areas know best but local areas also know that government have certain expectations of them, and it has ever been thus.

The noble Lord, Lord Campbell-Savours, asked me for a breakdown of demand. I elected earlier on to provide that in due course and I will write to him. I do not have it at my fingertips at this point.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

Will it be there next week?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I will try for next week and see what is in the art of the possible.

We have examined the affordability of homes to those who are currently in the private rented sector. If they were to buy a new-build property in the lower quartile of the first-time buyer market outside London, up to 60% of households which are currently renting privately would be able to secure a mortgage on a starter home, compared with 45% who could buy a similar property—

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

That is the figure being challenged.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

That is the figure being challenged and we will return to it later but in the absence of seeing the report and its figures, I cannot comment on that report at this time.

Photo of Lord Beecham Lord Beecham Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Justice)

Can I remind the Minister of my request to see a comparison of newly-built first-time purchases and any other housing that might be bought by a first-time buyer? I suspect that there is a difference.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

I take it that the letters will be circulated to all Members taking part in the debate?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

Absolutely, and they will be placed in the Library. I have the implied first-time price of new build—not the demand figures—by region, which might temporarily satisfy noble Lords. In the north-east, it is £138,000; in the north-west, it is £144,000; in Yorkshire and Humberside, it is £144,000; in the east Midlands, it is £152,000; in the West Midlands, it is £148,000; in the east of England, it is £220,000; in London it is £356,000—no surprises there; in the south-east, it is £352,000; in the south-west, it is £179,000; and in the whole of England it is £216,000. I hope that is all right as a starter for ten, but I will endeavour to get those demand figures for next week.

Within London, up to 47% of households that are currently renting privately would be able to secure a mortgage on a new-build starter home—in the lower quartile of the first-time buyer market—compared to 37% who could buy a similar property now, priced at full market value. This demonstrates that starter homes, at a 20% discount, will provide a genuine opportunity for home ownership for many more households and help them to get a lasting foothold on the property ladder. The noble Lord, Lord Best, talked about the equity loan scheme as being a discount; the very nature of its name implies that it is a loan—it has been extended to 40% in London. But the whole of the debate so far has talked about the inaccessibility of the housing market, particularly for first-time buyers, and London is a really hot case in point. Either we want Londoners to access the London market or we do not—I think that all noble Lords do want Londoners, particularly the young ones, to access the London housing market.

The noble Lord, Lord Best, also said that Help to Buy distorts prices and drives down supply. A government research report that came out last week stated that, actually, Help to Buy does not distort prices but drives up supply. Government research found that 43% of additional new homes built were as a result of Help to Buy. It has, understandably, been an extremely popular product.

Photo of Lord Best Lord Best Chair, Communications Committee

I am not saying that the current 20% Help to Buy support has not been helpful in the marketplace. What I am saying is that the increase from 20% to 40% Help to Buy assistance in London, coupled with a 20% discount—that is where the discount comes in, a cash discount—adds together to 60% of the value of the property. The Minister is right to say that I commented that others have criticised the 20% Help to Buy support—I think we have yet to see it, but we can guess that 60% help to people buying in the form of 40% Help to Buy plus 20% discount really is an extraordinary level of assistance to people, much as we sympathise with their need to move out of rented homes if they can.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I thought that the noble Lord had said discounts, so I apologise if I misheard him. I think I need to reiterate that point: the 40% Help to Buy loan equity plus the 20% discount do not add up to a 60% subsidy. Effectively, 40% of that 60% is in fact a loan and has to be paid back.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

In that case, why does the Minister think she needs a 20% discount on top of a 40% equity loan—which is, frankly, an interest-free bridge, if you like—which then gets repaid and recycled on to the next, so that, as the noble Earl, Lord Lytton, said, it is not just a one-off windfall for the lucky first-time accessors to that particular property?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government 4:30 pm, 3rd March 2016

My Lords, I think I have been over the arguments many times. As I say, this is a new product introduced by the Government, a manifesto commitment to help that demographic which has been so disenfranchised by the buyers’ market, and it will help those people to get on the housing ladder. I know that we disagree, but everyone in this Chamber has talked about the particular difficulties of London, and that is why the equity loan guarantee scheme is being extended to 40% in London.

The restrictions imposed by permanent discount can make it more difficult to sell and to move on—I have gone through that earlier today. If a property can only ever be sold at a discount, can the owner easily move upwards to a larger home or to a new area? We want to ensure that the opportunity of home ownership comes with future choices and mobility, and not with more constraints. This is central to our vision for first-time buyers: a genuine discount that provides a genuine opportunity for the long-term future. As I have said, this is particularly important for young people, and we intend that starter homes will continue to be provided until 2020 and well beyond—obviously, we cannot commit a future Government to the priorities of the current Government, but that is our intention. A new supply of starter homes will become available for future first-time buyers, who will benefit from the same opportunities as the earlier buyers.

I will now turn to Amendment 41A, which introduces an alternative to the Government’s five-year restriction on sales, and the in-perpetuity model put forward under Amendment 46. This proposes that a 20-year taper is attached to starter homes where a buyer secures an uplift in value of 1% for every year of ownership. However, under this amendment, a couple in their mid-30s buying a starter home as their first house would need to stay there until their mid-50s to realise the full uplift in the value of their property. This seems like a significant restriction on their future mobility and does not support our ambitions for starter homes. Such long-term restrictions would make it more difficult to sell and move on. If the property is sold at a discount, can the owner easily move upwards to a larger home or to a new area? If people find it more difficult to move on, I question whether long-term restrictions will benefit future occupiers.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

Would not such people still get the benefit of house price inflation, irrespective of the discount?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, they would. But the principle behind the Government’s initiative is that within a few years people can start to move up the property ladder, but we want to help them to move on rather more quickly than the noble Lord suggests.

Photo of Baroness Blackstone Baroness Blackstone Labour

My Lords, I am puzzled by what the Minister is saying. There are hundreds of thousands of young people who have had to buy a small flat early in their lives, at the point when they need to have housing. Very often they have got married and they may have a baby. They then have a second child. They make some savings and move to something larger. They do not have big discounts. So why is the Minister saying that this very small group of people should have such a very large sum of money thrown at them? It really is very difficult to understand.

The Minister has said throughout this debate that she is concerned that other forms of housing and tenure should all be provided with support as well, yet everything she says in response to this debate suggests that starter homes have become of such enormous significance to the Government’s policy that very large sums of money are being promoted to be provided for a relatively small group of people who will, very often, not be the really poor or even middle-income young people but relatively well-off young people. I cannot understand why the Minister thinks that, when it comes to wanting to move to a larger house, this group is not capable of doing what everybody that has been in this group before without a starter home benefit has been able to do? It just does not add up. It is also incredibly inequitable. In fact, the whole scheme is incredibly inequitable. I would have thought that the Government would want to look at the distributional consequences of a scheme of this sort: not just the costs and benefits, as was suggested earlier by the noble Lord, Lord Shipley, but who benefits and who does not benefit. The Committee deserves to know something about this, and we have not been told.

At face value, it looks to me as if a large number of people, including young people who want to buy homes, are going to get nothing out of this while a very small number are going to get a great deal and will continue to get a great deal. The Government and the Minister refuse to see that a perpetuity provision such as that proposed in this group of amendments would help to counter some of the criticisms that Members of the Committee have given in the debate this afternoon.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, the noble Baroness asks who will benefit. Young people will benefit, and history shows us that it is young people for whom home ownership has been out of reach.

Photo of Lord Kerslake Lord Kerslake Crossbench

There is a critical point here, which has perhaps been missed. When a couple or an individual seek to buy, they will make choices about what they can afford and, accordingly, where they can buy. In some situations, they will choose somewhere, as was said earlier, of lower value, because that is what they can access by way of mortgage; in other places they will gofor somewhere of higher value but with a discount offered. They will make a choice about their purchase at that point. What they are essentially doing, when you put a second charge on a property, is making a trade-off between the discount—and the length of the discount—and the price they have to pay. That is what they are doing.

If you make it five years, anybody will go for that, whether or not they need it, as that will be the only way they can access the property. If you make it 20 years, it is much more likely to be the people who genuinely cannot access full market value who go for the property. This is a crucial point. If you really want to avoid deadweight squeezing out the people who might be able to purchase only with the discount, you have to have a longer taper than five years.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I think we are going to have to disagree on this. The noble Lord, Lord Campbell-Savours, made the point that owners would get the uplift from house price inflation. However, that could be the other way round, as after five years, a house could be worth less. The housing market is cyclical—prices go down as well as up—so there will not necessarily be an increase in the house price after five years.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

So people in this particular group who might be subject to deflation are again picked out to be treated specially: they will have their deflation subsidised by others.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, this is all relative. When house prices come down, the next house up on the ladder will also be cheaper. Under the proposal of the noble Lord, Lord Best, after five years the couple in question would benefit from a quarter of the discount. I accept that after 20 years they would benefit from the whole discount. I know there is not agreement in the Committee about this, but we want people who work hard and want to move up the housing ladder to be able to do so.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

We all want people who work hard to move up the housing ladder, but the problem here is that this is such a small group of people.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

Can the Minister explain something? I think most of us would sympathise with trying to find the best way to help people into owner-occupation, particularly given the pressure of house prices. We could argue whether it should be equity loans, starter home discounts of 20% or anything else, but why this sudden fixation with mobility for people who are no longer first-time buyers but second-time buyers and maybe, subsequently, third-time buyers to be free of any discount so that they can enter the market without having had to save, as my noble friend said, in the way that everybody else has? Why do the Government consider it to be part of their responsibility to help people become second-time buyers?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, housing is an issue for government and there is a huge demand on housing in this country. This scheme is not to the exclusion of other products—I must stress that it is not as though we have switched off the tap to all other products. Sitting on these Benches, one might think that there were no other products on the market, but there are. This is one way of helping that demographic for whom home ownership has been so out of reach.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

I asked a Question this week about people on the living wage for whom homes are out of reach—people who are trapped in the private rented sector. This is not helping those people.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I did not disagree with the noble Lord. I pointed out the various things that were available, such as shared ownership and affordable rented properties.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

There is Section 106, if it is viable for the scheme. There is £20 billion going into the housing market, of which £8 billion is for starter homes. It is one of a number of parts of the jigsaw, but the Government are very keen to promote it. We do not shy away from that: we want people to get on and move up in a reasonable time.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

For all the reasons I have outlined, because of the gap in the market. However, if people find it more difficult to move on, I would question whether long-term restrictions would benefit future occupiers. Allowing first-time buyers to benefit from a genuine discount will increase the vibrancy of the housing market, while the next generation of first-time buyers will benefit from new starter homes coming through the planning system in years to come.

Those homes will provide first-time buyers with the opportunity to move up as their family grows—as the noble Baroness said—or their circumstances change. We are consulting on the five-year restriction for affirmative regulations shortly, and will consider all responses carefully.

Our proposals would prevent starter homes being sold on the open market at full market value for a period of five years after they were first purchased by a first-time buyer. We believe this is important to ensure that starter homes are sold to those who are genuinely committed to living in an area and not to those who would simply wish to sell to secure financial uplift. We want to be clear that a starter home could be sold during the first five years of occupation—that point relates to the question of the noble Lord, Lord McKenzie—but it could be sold on only at 80% of market value to a qualifying first-time buyer. Therefore no money moves anywhere during this period. After that time, the property may be sold at full market value. This proposal will be set out in affirmative regulations following consultation.

Photo of Lord Shipley Lord Shipley Liberal Democrat

My Lords, could the Minister please explain who would be responsible for assessing market value?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, as I said this morning, we would expect an independent valuation to take place. That would be the fairest way to do things. A number of noble Lords have mentioned that this afternoon.

Our consultation will provide the best opportunity to test our proposals with the sector, including developers and lenders. We need to wait for the outcome to ensure that post-sale restrictions can work well in practice. Introducing tapered discounts over such a long period is complicated and including them in the Bill would limit the flexibility to make adjustments to the way they work in practice if necessary.

On Amendment 40, I assure noble Lords that it is not our intention to allow those people who buy a starter home to become buy-to-let landlords. We will ensure that letting restrictions are included in our regulations. The aim is to provide a place to live in, not a place for absentee landlords to profit from.

Unfortunately, restrictions to any legislation will not prevent gaming at the local level, but I assure noble Lords that we are working with builders, lenders and local government on the best possible mechanism. We will consult on the details for the regulations in a technical consultation to be published shortly.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour 4:45 pm, 3rd March 2016

I ask the Minister to imagine a sale where a house is being sold on the second occasion. After the valuer has said, “This is the value of the property and that is the discount, so you have to sell it at this price”, a person buying finds that he is one of eight people who all want that property. Is there not a danger that one of them will come along and say, “I’ll give you an extra £3,000 but don’t tell anyone about it”? Are those not the conditions that are going to exist in reality? Estate agents will be party to it, too. They will say, “Yes, that’s the price, but I understand that Joe Bloggs is prepared to pay you a few extra bob round the back to make sure that he gets the deal as against the other seven in the queue”.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

The noble Lord makes an extremely valid point and I will ask about what the mechanism would be there. People will be queueing up for these homes anyway because they are going to be appealing for first-time buyers, but I will ask about the precise mechanism by which that would work—whether, effectively, there is competition in the market. That is a valid question.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

My noble friend indeed makes a valid point. If people went on to do that, it would be fraudulent activity, so I presume that there would be appropriate penalties. People need to know that, if they behaved like that, they would get caught and pay a heavy price.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I do not disagree. We would not want to introduce a system that was fraught with potential fraud.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

But the easy way around that is that you pay £20,000 or £25,000 for the white goods and the carpets. There is no problem in doing that; it is easy.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I turn to Amendment 39A, which would enable Rent to Buy products to be considered as starter homes. We know that there is an appetite among housing providers and developers to deliver more home ownership in new and innovative ways. We know that we need a wider range of products to assist young first-time buyers to access home ownership when a generation is increasingly being priced out. The Government are supporting people who cannot afford a discounted purchase outright through the separate schemes that I have mentioned, such as Rent to Buy, Help to Buy and shared ownership.

Our commitments through this spending review will provide households that cannot yet afford a home on the market but aspire to home ownership in the medium term the opportunity to save for a deposit. It is a good product and, like other valuable products that support access to home ownership, affordable Rent to Buy can be considered by councils as part of their wider affordable housing requirements for their area. The clause will not prevent those developments from coming forward.

This is a new product. Our manifesto was clear that we would build 200,000 starter homes and this is central to our housing ambitions. The electorate will expect us to deliver on our commitment. The starter homes policy is a product for outright purchase that gives people the benefit of home ownership and, importantly, helps them to achieve a step up the ladder. I have tried to answer all noble Lords’ questions.

Photo of Lord Kerslake Lord Kerslake Crossbench

Before the Minister sits down, I understand that Shelter will publish its data very shortly. I was keen to have the latest data for this debate. It would be helpful if the Government could also publish not just their data but the underlying assumptions behind them so that we could have a true like-for-like comparison.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I can say to the noble Lord that we will certainly request that—he has been teasing us all afternoon. I am looking forward to seeing that report and I am sure that we will debate it in full, comparing those data and the Government’s data. I ask noble Lords not to press their amendments.

Photo of Lord Beecham Lord Beecham Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Justice)

My Lords, I express the thanks of the House to the noble Baroness. She has had a long, difficult and, if I may say so, lonely day in terms of support. Over the lunch break, I suggested to her that she should have a word with the Whips’ Office to ensure that somebody else could take some of the load of replying to the debate. Perhaps the noble Lord was sent in for that purpose, but I do not know how well he would have been prepared for it. For the rest of our discussions on the Bill, I hope that the noble Baroness receives more visible and audible support. It is unfair for her to have to deal with all these complicated matters on her own. I compliment her for her patience and good nature, if not for the policies that she is supporting.

In speaking to his amendment, the noble Lord, Lord Best, came out with a rather delightful phrase:

“If the cream is too rich, the cat dies”.

It is not quite appropriate in this case because, effectively, the cat is the public purse. The public purse suffers because money is being pumped into this scheme—and it is not just the public purse, but other potential uses for that funding in the housing sector. So it is a rather strange cat that we are looking at.

The noble Lord also referred to the concern of the building industry in that regard. The noble Baroness did not refer to that but seemed to imply that this was a great thing for the industry. However, that is not, apparently, the view of the industry. It would be interesting to see, as we go through the Bill, whether more information comes from that sector.

The noble Lord, Lord Kerslake, referred to Help to Buy and the Minister made some reference to it, too. It is not clear whether and to what extent the relationship between the two concepts has been thought through and whether the impact of the one on the other has been assessed as to eventual outcomes. As usual, there is little in the impact assessment to help us. This clearly needs to be addressed. Help to Buy might decline in the light of this arrangement. Of course, Help to Buy is not confined to this particular age group, but it is not at all clear what the impact of the change would be. The noble Baroness gave some figures for the amount that the scheme costs. It may or may not be cost-effective. On balance, it looks to be a sensible proposition.

Amendment 39A, tabled by the noble Lord, Lord Lansley, who is not in his place, has a good deal to commend it. I hope that the noble Baroness will look at it slightly more sympathetically than she appeared to be doing, although I am not sure if I have read her intentions correctly. The amendment seems a sensible proposition.

The noble Lord, Lord True, referred to distortions in the market. Of course there are distortions in the market, particularly in the capital, with a vast amount of investment flowing into very expensive properties and buildings, many of them apparently for the benefit of overseas citizens who want to park their money somewhere safe. That must have a distorting effect on the whole housing market in the capital. Nothing in the Bill, or anywhere else, appears to address that issue, but the issue surely needs to be addressed—not necessarily in the Bill—as it is a factor in the huge price rises in the capital. It also uses the resources of the industry, which could be building more affordable homes elsewhere but, for obvious reasons, is investing heavily in these hugely expensive and unwanted developments. As the noble Lord rightly says, or implies, this distorts the market.

The amendments to which my noble friend and I have subscribed our names have two potential ways of dealing with the discount. We have signed up to both of them because they are both potential runners and we need to discuss them in further detail, perhaps before we get to Report. One is that the discount should be regarded as being there in perpetuity, which would hold the price down in perpetuity, while the other would taper the discount. They would not necessarily lead to money being paid by a seller as opposed to the price having to be retained at the discounted level—while of course allowing for the house inflation to which my noble friend Lord Campbell-Savours has referred more than once.

This is a hugely complicated area. We all need time to reflect and I hope that that period of reflection will be materially aided by as many answers as the noble Baroness and her team can provide and by advice from those in the industry and those concerned with the problem nationally, bearing in mind that there will be different approaches in different parts of the country, which we very much need to take into account. Having said that, I beg leave to withdraw the amendment in my name.

Amendment 38 withdrawn.

Amendments 39 to 40 not moved.

Amendment 41

Moved by Lord Kennedy of Southwark

41: Clause 2, page 1, line 13, after “cap,” insert—

“( ) is built on under-used or unviable brownfield sites not currently identified for housing on public and private land, as determined by the local authority,”

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

My Lords, when I first spoke today I should have drawn the House’s attention to my declared interest as a local councillor in the London Borough of Lewisham. I apologise for not doing that sooner. I also echo the comments of my noble friend Lord Beecham and add my genuine thanks to the Minister. This is obviously very difficult and we very much appreciate the way in which she is handling the debate, so we thank her very much for that.

Amendment 41 in my name and in the name of my noble friend Lord Beecham seeks to put in the Bill a requirement for starter homes to be built on underused or unviable brownfield sites that are not currently identified for housing, on land determined by the local authority. The amendment simply seeks to put in the Bill what we believe was the original concept of starter homes. The Government have widened the scope of these starter-home proposals to include every reasonable size of housing site, to be defined in regulations—which, of course, we have not seen as yet. I contend that this goes too far and our amendment leads to a more realistic option, leaving local authorities with greater flexibility for this policy to be delivered alongside what they think is needed to meet the local housing needs.

Again, this seems to be the sort of thing we were being told from the government Dispatch Box not so long ago: “Let local people and local authorities decide”. But here again we have more regulations—which, again, we have not had sight of—and the views of local people and local authorities are not taken account of, local flexibility in determining local housing needs is not given priority, while the views of the Secretary of State and Whitehall are. It all seems at odds with the Government’s stated policy of localism that was trumpeted from the government Dispatch Box not that long ago. It would be useful if the Minister could address the conflict I see between the policy we are debating today and the Government’s policy on localism when she responds at the end of this debate.

Amendment 42, in the names of the noble Baroness, Lady Doocey, and the noble Lord, Lord Kerslake, will be spoken to shortly, but I can say that I am supportive of its intention to keep starter homes separate from dwellings which are part of a housing regeneration scheme. I will make further comments on that during the course of the debate. I beg to move.

Photo of Baroness Doocey Baroness Doocey Liberal Democrat 5:00 pm, 3rd March 2016

My Lords, I shall speak to Amendment 42 in my name, which would exempt councils that wish to regenerate estates from the duty to provide starter homes. If councils are forced to put starter homes ahead of replacing council homes when they regenerate estates, resources will be sucked away from replacing council units and existing tenants will be priced out. This would put at risk the Prime Minister’s own stated ambition, which is to see 100 of the most run-down estates transformed, with tenants protected.

The reality is that balancing the protection of tenants and unlocking land is extremely difficult. Sometimes a local authority can convince tenants that everything from crime to damp is endemic in the estate’s design, and indeed sometimes that is correct. But even if a council manages to persuade people that regeneration is both necessary and desirable, it must then meet two further challenges.

The first is persuading tenants that there will be enough units for everybody who wants to move back to the estate once it has been rebuilt. This right of return is crucial if tenants are to be persuaded to back the regeneration proposals. The second is agreeing a scheme which releases land to build properties for private sale in order to fund the regeneration. This inevitably means an increase in density and raises real concerns that the newly built estate will give pride of place to private dwellings, relegating social housing to less desirable locations.

Councils also have to joust with developers over what is and is not viable in their battle to have social rented units reprovided. Residents are rightly suspicious, because the viability studies which underpin the assumptions about what will and will not stack up are often commercially confidential and hotly contested. Then there is the question of ensuring that leaseholders get a good deal. They should get the market value for their property and they, too, should be able to return to the estate if they wish after the regeneration is complete.

Taken together, those are immense financial, logistical and political headaches, and there is clear evidence that some councils are already having great difficulty. In Southwark, for example, the Heygate estate, which has more than 1,000 council properties, is being redeveloped at the moment. Of the 2,500-plus homes being built, only 79—less than 3%—will be social rented property. These situations can only get worse if the Bill gets on to the statute book unamended.

A recent report of the London Assembly Housing Committee showed that on regenerated estates across London, the number of social rented units has reduced from 30,000 to 22,000. By contrast, the number of private market housing units has increased from 3,000 to 36,000. These figures show the difficulties that local authorities face in the negotiations for these regeneration schemes.

Any local authority with a serious commitment to social housing will be asking the developer for what may well turn out to be a quite impossible mix: to rebuild the estate, to build enough private housing to fund the scheme, to reprovide all the social rented, shared-ownership and leasehold units, and also to provide starter homes. As we have seen from Shelter’s research, starter homes are not going to make the situation any better. In practice, the Bill will make the vital principle of a right to return almost impossible to achieve. This means that estates either will not get regenerated or, if they do, it will be done in a way that means not just decamping existing tenants but permanently evicting them from the estates concerned—and some tenants have lived on these estates for generations.

So I ask the Minister to consider how the Government’s twin priorities of the provision of starter homes and the regeneration of 100 of Britain’s most difficult estates, with existing tenants protected—that is the promise that the Prime Minister made—will sit together. My amendment aims to help the Government to ensure that both objectives are met, and I hope that the Minister will be able to give a constructive response.

Photo of Lord Kerslake Lord Kerslake Crossbench

My Lords, I add my support to what I think is an excellent amendment from the noble Baroness, Lady Doocey. It absolutely goes to the heart of the practical challenge of estate-based regeneration. Typically, in those situations, you are dealing with stock that is either time-expired or very badly designed, and the only solution there is to redevelop and re-provide on the site. Anybody who has been involved in such schemes will know that the viability of doing this is extremely hard. It is compounded, as the noble Baroness said, by the proper requirement—I emphasise the word “proper”—to ensure that those who live on the estate at the time of the redevelopment can stay on the estate when the development is completed. It typically involves a phased process of redevelopment, decant and then development of the properties that have been freed up.

Yesterday, I was at the unveiling of public art for a scheme in St John’s Hill, where the leader of the council, Councillor Govindia, was in attendance as well. That is the first phase of a scheme there. What we have secured on that site is an increase in supply from 351 homes to 528. Of those homes, 249 are for sale and 279 are affordable. The point I make is that that scheme took over five years to get to a point of viability. We had to provide for those who were already living on the estate and we had to cross-subsidise the whole initiative through the market-sale properties on the site. We have there a scheme that we at Peabody can feel genuinely proud of. However, I can tell the Minister that if another requirement was superimposed on that scheme that itself involved the loss of value in the form of starter homes, I do not think that we could have delivered both a viable scheme and met the needs of the tenants. These issues will be replicated up and down the country. We have had a long debate about the pros and cons of this, but it is crucial that in the introduction of starter homes we do not inadvertently create a problem for the practical regeneration of estates that so desperately need it.

Photo of Lord Horam Lord Horam Conservative

My Lords, I add my voice to the support for Amendment 42 in the name of the noble Baroness, Lady Doocey, and the noble Lord, Lord Kerslake. I am aware, as they have said, that there are many chief executives, of big London boroughs in particular, who are very anxious to regenerate their existing—very often large and troublesome, I must say—estates in an interesting and innovative way. But the first thing they have to do is get the support of the people on the estates. They have votes, and it is no good not giving them the sort of right of return that this amendment involves—you simply would not get the support that you need to go ahead with the kind of development that is necessary.

Although it encapsulates a very important idea, this particular amendment is not right, and perhaps I can anticipate the Minister’s response in this respect. I do not think that you can exclude any starter home-type development. It would be wrong to do that, as the amendment appears to, because some sort of mix is needed. None the less, I think that the right of return for existing tenants should be guaranteed. Indeed, that is essential if you are going to get these schemes off the ground.

Photo of Lord True Lord True Conservative

My Lords, I also agree with the underlying force of the amendments. They do not apply only to large developments. In some developments there is pocket regeneration and smaller examples of where a decant and a return is needed. It is a question of where in my first 11 for solving the problem, as it were, starter homes come. Some of these schemes are extremely delicate at the edges, not only as my noble friend said in terms of selling and carrying the support of existing tenants and leaseholders but also on finance.

I was interested to hear my great friend, Councillor Ravi Govindia, the leader of Wandsworth, yesterday. I could testify from my local authority’s concern that we need to think about this very carefully. Whether it is rightly addressed by this sort of prescriptive amendment, or by a more concessionary approach to exceptions, which we might discuss between now and Report, I do not know, but I hope that my noble friend will think carefully, because it would be a great pity to lose delicate developments of social housing and estate improvement on the margins. I speak from personal experience when I say that some developments are balancing on the margins at the moment.

Photo of Lord Deben Lord Deben Conservative

My Lords, I remind the House of my interest of chairing a company which tries to help people to develop sustainably. I come back to the amendment tabled by the noble Lord, Lord Kennedy, about the areas on which such housing could be built. I do not want to restrict it to this kind of housing, starter homes, but I would not like the Committee to miss the fact that this is a housing Bill which does not make some of the fundamental statements which we ought to be making.

Every time anyone tries to deal with a housing problem, those clever people who dislike planning of any kind suggest that we should build on greenfield sites or move into the green belt. We have had another such statement recently. I have been Minister for Housing, and many of us recognise that if you allow people to build on easy sites, they will never build on difficult ones. That is part of the nature of things.

I am disappointed that we bring forward yet another housing Bill in which we do not reiterate the fact that there is plenty of land which has been used on which such housing can be built. Yet again, we give opportunities for largely right-wing think tanks to suggest that we should build on the land which we have no more of, the land which we were given and which needs to be protected. I say that because another interest of mine is sustainability for climate change. We will need this land, and we will need it to be productive, because we will not have enough, unless we are very tough.

Sometimes, a Bill is characterised by what it leaves out rather than what it puts in. This is my only opportunity to raise this matter, so I hope that the noble Lord, Lord Kennedy, will not mind that I do not want to restrict my remarks to what is in the amendment.

I say to my noble friend that we have to start getting real about the limits of a very small island, or series of islands. The only way that we can do that is to say that when land has been used, it must be reused. We are wrong at this time to allow government institutions, quasi-government institutions and former government-owned institutions to retain the land until they can get a better price for it. I have often thought that we should release the whole lot at once to lower the price and say that the public will carry that cost in order to lower the basic price of land—you must have all sorts of protections to do that.

I am deeply disappointed that there should be a Bill about housing which does not at any point approach the crucial issue, which is that we are wrong to despoil any more of our land, whether it be, as one organisation suggested, our parks, our green spots in towns or our green belt and greenfield sites. We have to make sure that once-used land must be developed, and if you allow people easier options, they will not do that. It is time that we faced that fact. Anyone who has been a Minister for Housing knows perfectly well that that is what happens: if you say that 50% of a site will be greenfield, then the bit that gets built is on that while the 50% that is not built is the more difficult area which has to be redeveloped.

I say this to my noble friend: please can we take more seriously this fundamental part of the kind of mix that we are trying to put together?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government 5:15 pm, 3rd March 2016

My Lords, I thank the noble Lords, Lord Kennedy, Lord Beecham and Lord Kerslake, and the noble Baroness, Lady Doocey, for their amendments. They give me an opportunity to explain our key parameters for the delivery of starter homes, particularly in relation to unviable and underused brownfield land and housing regeneration schemes.

Perhaps I may start by addressing Amendment 41, which seeks to restrict starter homes to underused and unviable brownfield land in line with our original starter homes exception site policy, as the noble Lord, Lord Kennedy, has said. Let me be clear that we still expect exception sites to make a significant contribution to starter home delivery, and the first planning applications have been submitted under the exception site policy which has been in place since March 2015. We expect these to deliver a substantial number of starter homes, boosting the overall housing supply, and we have consulted on planning policy changes to extend and strengthen this policy, as well as bringing forward more land for starter homes, building on the exception site policy. We want to ensure that sufficient appropriate land is brought forward to meet housing need.

This planning reform will be further strengthened by the £1.2 billion starter home land fund which was announced by the Prime Minister in January. The fund forms a significant part of the £2.3 billion allocated to deliver more starter homes in the spending review and will support further brownfield site preparation, delivering at least 30,000 starter homes. It builds upon £36 million made available this year to secure and prepare more land for a first wave of starter homes, and it includes £8 million offered to councils to support starter homes on 27 underused or vacant brownfield sites across England. The HCA is using the remaining funding to acquire further suitable brownfield sites to drive up housing delivery.

But we also need to deliver starter homes on more conventional housing sites so that first-time buyers across the country can benefit from discounted home ownership. Limiting this would limit the opportunity for home ownership. It will also bring the benefit of a new mix of housing types on site: discounted properties for first-time buyers alongside wider market housing and any shared ownership or rented housing secured on the site. It is our view that the opportunities for first-time buyers have too often been neglected. Starter homes provide for a new model which should be delivered alongside other housing types. My department will be consulting on proposals for starter homes requirement on conventional sites in a technical consultation to be launched in the near future, and we want to look carefully at the proportion of starter homes required.

Photo of Lord Kerslake Lord Kerslake Crossbench

I apologise for intervening again, but there is a critical point to be made here. When you consider the viability of a regeneration scheme, you can juggle the mix between market, sale, affordable rent and shared ownership, but in the case of the proposals for starter homes, we will have a number dictated by central government that in effect will be required to be delivered. That will have an impact, whether we like it or not, on the viability of a scheme. The issue is the ability to deliver a scheme and the flexibility required to make it viable. That will be significantly impacted by an absolute requirement to deliver starter homes regardless of the other requirements.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I take the noble Lord’s point that the requirement to deliver starter homes might affect the viability of a site. That would be absolutely counterproductive, but it will often be the case that not only will the starter homes requirement be able to be met, but the council, in consultation with the developer, may well be able to provide other types of housing. I particular refer to houses for affordable rent, because they are quite often the grant-funded houses that effectively act as a pump-prime for the construction of homes.

Turning to my noble friend Lord Deben’s point on the green belt, we are very committed to protecting the green belt, despite what noble Lords might read in the newspapers, and we are maintaining the strong safeguards that are set out in national planning policy, which allow for development only where special circumstances exist. I agree with my noble friend that once it is gone it can never be got back.

Photo of Lord Deben Lord Deben Conservative

I just hope that my noble friend will remember that it is not just the green belt that I wish to defend: it is green fields and it is the need to build on land that is already built on, or has been built on, in order to get the homes we need. This is very important part of it; I do not want to restrict our building.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

Yes, I understand my noble friend’s point. Under our proposals in the NPPF national planning policy consultation, small-scale development in the green belt for starter homes could take place, but only where it is endorsed by the local community. I take my noble friend’s point, certainly in light of recent flooding, about the need to have this very finely balanced and for green belt not to be used as a sloppy method for builders to be able to build willy-nilly.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

On that point, the idea for this policy was originally to build on brownfield sites and get them back into use, but the policy has now been widened. As the noble Lord, Lord Deben, said, people will opt for the easier options. I am worried that we will end up with a situation where we will still have the old brownfield sites, because no one wants to build on them, and other options, in our towns and elsewhere, will become more attractive for people to build on.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I am in total agreement with the noble Lord and with my noble friend. One thing we are testing is whether there should be more flexibility on developing brownfield that is in the green belt—that exists, of course, but it is 0.1% of all green belt. It has been suggested that there should be a bit more flexibility on that, but not on the green belt itself. The noble Lord and my noble friend are absolutely right that these will become go-to sites for developers unless we are very careful.

Amendment 42 seeks to prevent housing regeneration schemes from incorporating starter homes. In January the Prime Minister announced an ambitious new programme to regenerate public sector estates, to tackle deprivation and build more homes. As I announced at this Dispatch Box a couple of weeks ago, £140 million of loan support funding has been made available to support regeneration and encourage investment from the private sector. My noble friend Lord Heseltine has appointed his estates regeneration advisory panel and its first meeting was held in February. Clause 2 is very clear on the definition of a starter home, which we need to ensure our reforms are widely understood. Clause 4 sets out the requirement for the provision of starter homes for residential development. My department will be bringing forward a technical consultation on the requirement so that we get it right.

The consultation will recognise that there are some developments where the inclusion of starter homes could help to secure a diversity of tenures and support mixed communities, but that compulsory inclusion could alter the viability, as my noble friend Lord True pointed out. But as my noble friend Lord Horam said, we should not exclude it at the outset—I think that that is absolutely right. I reassure noble Lords that our consultation will invite views on whether these schemes should be subject to the minimum starter homes requirement. As my noble friend Lord Horam absolutely rightly pointed out, engagement with tenants is crucial.

My noble friend Lord Heseltine was very keen to make sure that this is a truly genuine engagement with tenants, as well as other people involved in the scheme. So we need to wait for the outcome of the consultation to enable us to take into account the views and expertise of the sector. We need to work with those who will make this work on the ground to ensure that we get it right. Setting the requirement through regulations will help us to keep this operation under review and give more flexibility in the future.

Given my comments, I hope that the noble Lord will feel content to withdraw his amendment.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

My Lords, I thank all noble Lords who have spoken in this short debate—the noble Baroness, Lady Doocey, the noble Lords, Lord Kerslake, Lord Horam and Lord Deben, and, of course, the Minister.

I agree with virtually all the comments that were made, including those of the noble Lord, Lord Deben. The amendment seeks to put the homes policy back to its original intention. In a debate earlier this week, I think it was the noble Lord, Lord Kerslake, who said that we had gone from a concept, to a policy, to an expanded policy and that we have now added more—and we have not yet put a brick down. It is disconcerting to find ourselves in a situation where we do not know what is going to happen. I have voiced my concern in previous debates about how we get these policies, how they are developed and how they find their way into Bills. I do not know whether it is through a right-wing think tank or anything else, but there is an issue about what ends up here for us to discuss. I am supportive of the proposal for the regeneration of estates. Having said that, I am happy at this stage to withdraw my amendment.

Amendment 41 withdrawn.

Amendments 41A to 42 not moved.

Amendment 42A

Moved by Baroness Williams of Trafford

42A: Clause 2, page 2, line 4, leave out “has any other characteristics” and insert “meets any other criteria”

Amendment 42A agreed.

Amendments 43 and 44 not moved.

Amendments 44A and 44B

Moved by Baroness Williams of Trafford

44A: Clause 2, page 2, line 16, after “regulations” insert “—

(a) ”

44B: Clause 2, page 2, line 17, at end insert—

“(b) disapply the age requirement in subsection (3)(b) in relation to specified categories of people;

(c) specify circumstances in which a dwelling may still be a starter home even if it is available for purchase by joint purchasers not all of whom meet the age requirement.”

Amendments 44A and 44B agreed.

Amendment 45 not moved.

Amendments 45A and 45B

Moved by Baroness Williams of Trafford

45A: Clause 2, page 2, line 21, at end insert—

“( ) Before making regulations under subsection (8) the Secretary of State must consult—

(a) each local planning authority in England,

(b) the Mayor of London, and

(c) any other person the Secretary of State thinks appropriate.”

45B: Clause 2, page 2, line 21, at end insert—

“( ) Regulations under this section may amend this Chapter.”

Amendments 45A and 45B agreed.

Amendment 46 not moved.

Clause 2, as amended, agreed.

Clause 3: General duty to promote supply of starter homes

Amendments 46A to 48B not moved.

Clause 3 agreed.

Clause 4: Planning permission: provision of starter homes

Amendments 48C to 50 not moved.

Amendment 50A

Moved by Lord Cameron of Dillington

50A: Clause 4, page 3, line 16, at end insert—

“( ) Through regulations the Secretary of State shall require that local planning authorities only allow starter homes on rural exception sites where these are subject to locally agreed “in perpetuity” arrangements and will contribute to delivering a significant increase in the supply of affordable homes to meet local needs, including those for rent.

( ) Rural exception sites—

( ) are small sites in or adjoining rural settlements of less than 3,000 people;

( ) are used for affordable housing in perpetuity where sites would not normally be used for housing;

( ) are sites which seek to accommodate households who are either current residents or have an existing family or employment connection with the community where the development is occurring.

( ) Affordable rent is defined as a rent at or below 80% of open market rents in the locality of the development.”

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench

My Lords, the two amendments in the group concern exception sites and, for the purposes of clarity, they contain definitions of such sites. If you agree with the definitions of affordable housing in perpetuity to accommodate local households and so on, then the amendment needs little explanation. However, this is the House of Lords and so I shall proceed to give one anyway.

The key point is that these,

“sites would not normally be used for housing”.

They are outside the village envelope and are usually ordinary farmland or open countryside. In terms of planning, our countryside has two major conflicting pressures. First, there is the desire to keep England both green and pleasant—for the fifth most densely-populated country in the world, we do very well at that. Secondly, we need to resolve the biggest worry of many rural families, namely where on earth their children are going to live.

Housebuilding is restricted, obviously. Eighty per cent of the population want to live in the countryside—at least the last survey I saw of southern England indicated that—and many people who have worked all their lives in cities want to retire there. So, market forces dictate that rural homes are very expensive. As we all know, average rural wages are lower than their urban counterparts. There is a conflict in priorities here. As a result, exception sites have been born, allowing building outside the normal restrictive rules of planning. This has happened with the strong support of the CPRE, whose very aim is to preserve our green and pleasant land.

These sites are almost always limited in occupation in perpetuity—that is a very important word. They are limited to people who either live or work in the parish or contiguous parishes. Sometimes there is a cascade of choices rippling out from the parish in question, but usually one with a limit. I should add that the houses are usually occupied either as tenancies with affordable rents or under some form of shared equity or shared ownership arrangement. In my village the site is on a 50:50 basis.

Landowners who value the integrated and diverse mix of their communities donate the land, either for free, or for a little over its agricultural value. Occasionally they donate it in exchange for a cottage to house a keyworker, or on some of the larger sites for the right to build one or even two commercial dwellings. Meanwhile, the parish supports these sites because they are assured that the new properties will be for locals in perpetuity, and are not—to quote a phrase I heard at a village meeting—“cheap housing for city misfits”. They do not want that.

Sometimes elderly parish councils or communities are the most difficult to persuade. They are terrified that some organisation—dare I say some thoughtless organisation, although I am not trying to point any fingers?—will undermine all the commitments that have been given or are being demanded. As I said at Second Reading, unless there are rules about the permanency of the purposes of these exception sites they will no longer exist. Neither landowners nor parishes will agree to them. That, for instance, is why a decade or so ago we fought so hard to ensure that tenants involved in shared equity deals were not allowed to staircase above 80% equity. If they had been, and had been allowed to get full ownership so that they could sell, it would have killed this very important supply of affordable housing stone dead.

In an ideal world I would not allow starter homes on exception sites at all. This is not only because landowners and parishes would be reassured if this were in the Bill, but also because they serve very little purpose for the normal exception site candidate. They will merely reduce the availability of genuine affordable homes on these small, typically four to 12-house sites. In the spirit of compromise normal to this House, we have proposed that either local planning authorities should be able to ban starter homes from their exception sites, as in Amendment 50C, or else—but preferably in addition—the legislation should insist that all houses on exception sites should be subject to “in perpetuity” arrangements, as in Amendment 50A.

Exception sites provide a much-needed service in rural villages. In 2014-15, some 45% of affordable housing in rural areas was delivered on exception sites. When a village is relatively cut off due to intermittent public transport, or is truly remote, the importance of being able to retain family members within a community is vital for making that community tick. Family members and long-term neighbouring families are able to look after each other and thus save social services and the local health service unnecessary expense.

Young families housed in these exception sites also tend to be the ones who do all the voluntary work around the parish—running and repairing the village hall, for instance, and mowing the children’s play area or the graveyard. There is no one else to do that sort of work in the countryside, where there are rarely council workers to be called on or seen. Exception sites are also vital for providing housing for key workers who need to be nearer their place of work, enabling much-needed local businesses to survive within a rural community. When I say “much-needed”, these businesses often provide the only jobs available to local people who are without their own transport.

I hope that the Government will look favourably on our message in these two amendments. We all want to create many more affordable homes in rural areas, if we possibly can. Our point is that exception sites are an important source of such homes. They have an invaluable and proven track record, so please let us not do anything to upset that record. I beg to move.

Photo of Lord Young of Cookham Lord Young of Cookham Conservative 5:30 pm, 3rd March 2016

My Lords, it will come as no surprise to my noble friend when I indicate that I have some support for these two amendments. What we are basically seeing is two worthwhile government initiatives coming into contact. On the one hand, there is the rural exception sites policy and on the other hand the starter homes initiative. I quite understand why the Government take the view that they do not want to deprive rural communities of the benefits of starter homes. However, the interface between the two policies is quite difficult. If I did not conceive the rural exceptions policy, I was certainly one of its midwives when it was brought forward in the 1980s. To use an analogy used earlier by the noble Lord, Lord Best, the real risk about this is that the cream will disappear in the form of the sites becoming available.

I know from my own experience of representing a rural constituency in the other place that there were villages where a benign local landowner made land available under the rural exception site policy, in the confidence that the homes provided would be available in perpetuity, as the noble Lord, Lord Cameron, has just said, and at affordable rents. If the landowner feared that those homes would disappear into the market, I am not sure that those sites would ever have been made available.

The features of the rural exception site policy were that, first, you have to do a survey to establish a local need for affordable homes for rent. Secondly, those homes have to be available in perpetuity—normally, for rent through a housing association. In some cases, they are for sale but with a lock such that the discount has to remain there in perpetuity. The starter homes initiative is different in that 80% of market value will still be beyond the reach of many local people, who would have been able to afford an affordable rent under the rural exceptions policy. Also, under the starter homes initiative, after the first time the second purchaser need have no local connections at all.

I understand that the Government are aware of the sensitivities on this. The briefing that we got says that their proposals included,

“using rural exception sites to deliver starter homes in rural areas”, and allowing,

“the flexibility to require a local connection test on these sites”.

That is an important concession and, as we heard in earlier debates, it is not a requirement for the starter homes initiative anywhere else. None the less, some extra flexibility is required by either giving discretion to the local authority, as in Amendment 50C, or exempting sites below a certain level from the requirement to have starter homes.

When my noble friend replies to these amendments, I hope she can indicate that the Government are aware of the risk of losing the additional supply which the rural exception sites can provide and of the sensitivities in local areas to the change in the occupancy of these sites via the starter homes initiative, which were well represented by the noble Lord, Lord Cameron. I hope that there can be some flexibility in response to these two amendments.

Photo of Lord Deben Lord Deben Conservative

My Lords, as another of those involved in getting this policy in the first place, I remember the battle to try to get townspeople to understand the particularity of the problem in the countryside. Just in case—although I look at your Lordships and realise that all will have understood it—I want to repeat the fact that many of our villages, and some would say most of them, are in danger of becoming middle-class, middle-aged and middle-income groups, with hardly an opportunity for anyone else at all. This is a serious social problem. It also creates a community unable to sustain itself. Communities are about all sorts of different people doing different kinds of things and contributing in different ways.

In my former, very rural, constituency, one of the biggest difficulties is that, because there is a large number of older people and a need for a large number of carers, the social mix having been altered because people buy up houses in the countryside, it is more difficult to get carers in those circumstances than it often is in the towns. This never used to be true, but it is true now and it is to do with the social mix that has now been reduced for so much of rural England.

There is a bigger issue here, which hangs round this individual concern for the protection of exception sites. When we had the argument originally—this really is history—we managed to convince people that, because of the planning system itself, we had created a particular kind of shortage in the countryside. Every little house that used to be the house of a farmworker is, once it comes to market, an ideal, bijou residence for the part-time—very often for someone who will retire there. I am not suggesting that second homes are necessarily a bad thing, merely that such houses are so attractive that the price means that they are well out of reach of people living on agricultural wages or the lower wages in the countryside. I do not think that this is something that is bad just for that section of the community—it is bad for the whole community. It creates an artificial community of the kind that many of us deplore in the towns, and it is becoming more and more true of large areas of the countryside. I therefore think that this is a social problem for all of us.

The one way that we managed to get people to be able to gift and to sell at an agricultural land price, or something of that kind, was, as my noble friend Lord Young and the noble Lord, Lord Cameron, said, because they were convinced that we meant it when we said that it was in perpetuity, for local people, and that it would not be changed. It was not only a concept but something that we felt we had committed ourselves to. I am concerned, as are others, that once you undermine people’s trust—and I think that the present circumstances without the amendments does undermine that trust—there will be no more land provided in that way. I put it to my noble friend that, if the land does not come forward because we were hoping to have some extra starter homes, what we will have done is to reduce the number of homes all over, not just starter homes but other opportunities.

So trust is a crucial part of this in order to achieve the end, which the Government have done. In discussing this, it is probably true that all sides of the House understand precisely what the Government are about, and we do not have the kind of clash of disagreement that we have had up to now. If it were possible to have starter homes in this mix in a way which did not reduce the other homes and which provided an opportunity in certain areas, I suspect that the House would be very supportive of it. That is why I think both amendments are really very helpful.

One of them enables us to have starter homes, but in the areas where local people recognise that as a need. In the original agreement, that was precisely why we had the survey to which my noble friend referred. We wanted local people to see that there was a local need and then get other local people, particularly the parish council, to accept that need and to support the building, which otherwise they might have opposed. So it is in that spirit that we say that there should be a local lock on this. That is a reasonable sort of localism, which the Government might well feel they could back.

The last thing I will say is that however we do this, the only thing that really matters is to ensure that land goes on coming forward. Therefore, an absolute determination to show people that we are not weakening the “in perpetuity” element is necessary. It is so necessary that almost anything else does not matter, because that is the reason that decent people who care about their community give their land, which is very often a real cost to them. They are genuinely giving up some real value, but they do it for the sake of the community. We owe it to them to ensure that, having given their land for the sake of the community, they do not feel that we have undone the promise that we made both directly and implicitly.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour 5:45 pm, 3rd March 2016

I want to intervene very briefly. In the old days—certainly when the noble Lord, Lord Deben, was a Minister in the Department of the Environment, if I remember rightly—in the

Lake District we had what were called Section 52 agreements, whereby the planning authority placed a requirement on planning permission that people had to live within either a parish or some other defined area. In so far as Amendment 50A deals with,

“affordable homes to meet local needs, including those for rent”, surely locals-only agreements could apply in the case of starter homes in small rural communities. Rather than planning authorities simply saying, “We will not have them. We will exclude them in particular areas”, could they not exist within those areas but subject to locals-only agreements?

Photo of Lord Deben Lord Deben Conservative

They certainly could; the noble Lord is absolutely right. But they would have to exist in a way which meant that they were not lost when the next tenant comes forward. You would have to have them in perpetuity as well. As long as that is the case, I do not mind two hoots.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

If I remember rightly, under Section 52 agreements, that was precisely the case: the permission attached to the property was carried forward to subsequent buyers. In this mix of debate whereby it is being suggested that we should be more careful about their inclusion in these rural communities, if you have that kind of restriction in place, I cannot see that there is such a great problem.

Photo of Lord Stoneham of Droxford Lord Stoneham of Droxford Liberal Democrat

My Lords, I remind the Committee of my interests as chair of Housing & Care 21. The noble Lord, Lord Cameron, has moved this amendment very fully. I will just mention a local example that illustrates the issue to which the Minister has to respond.

It is a village near where I live in Hampshire on the edge of the South Downs National Park called Wickham—the birthplace of William of Wykeham, the famous Lord Chancellor in the reign of Edward III. It is a nice rural village. A friend of mine who is a local landowner and farmer decided, in the interests of the village, to donate some land as an exception site for approximately 11 properties and a doctors’ surgery on the edge of the village. That was done, and the houses were divided between a housing association and a community land trust. When he heard about the right to buy, he was incandescent, because he had given this land in good faith. Despite remaining a substantial landowner in the area, he vowed that it would be the last piece of land he would give up for an exception site.

This is the issue that needs addressing, and that is why I support the amendment. We will come on to other aspects of this particular site when we get to the amendments on community land trusts, but I raise this as an example of why the issue needs to be addressed. That is what the Minister needs to respond to and why it is so important.

Photo of The Duke of Somerset The Duke of Somerset Crossbench

My Lords, I support both these amendments and declare my interest as a rural landowner. Although the idea of encouraging home ownership through starter homes is a very laudable aim, I do not believe that these clauses will be successful in the wider context of rural home provision without the promotion of other tenure models, such as those we heard about in the earlier groups, which remain in perpetuity. This is the point with the discount.

One of the aims of the Bill should be to keep a balanced mix of tenures, particularly in rural areas, with both rented and owned—partially or entirely—properties. I think the Government have confirmed this is their intention. Despite what the Minister said in an earlier group, the Bill does threaten the future success of rural exception sites, which have delivered many lower-cost homes in communities where local families, often already employed nearby, and supported by the wishes of the community, can find a more affordable house. Such sites make the group with these two amendments different from the earlier ones, but many of the same principles apply.

As we have heard, these sites are provided through the altruism of the landowners selling them. Various figures have been suggested, but this is normally at 10% of the development value. Very few landowners will want to continue to offer this, if after five years the house can be sold on in the open market, perhaps to an incoming second-home owner. If I understood the Minister correctly, we have had slightly contrary answers to this question. In one reply I think she said that the Government were going to take measures to stop purchases by second-home owners, although perhaps I have got that wrong.

Photo of The Duke of Somerset The Duke of Somerset Crossbench

I was under the impression that we had had two contrary replies. On one occasion the Minister said that the Government accepted that second-home owners would be able to purchase such houses eventually, while on another occasion she said that the Government were going to take measures to stop that from happening.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I think the noble Duke is referring to when I talked about second-home owners purchasing starter homes.

Photo of The Duke of Somerset The Duke of Somerset Crossbench

I thank the Minister. Surely it must be sensible to protect the 20% discount in perpetuity, as the amendment suggests, or to use a tapering mechanism; or else to exclude starter homes from rural exception sites. They should also be kept for first-time buyers after the five years.

We have heard various statistics, particularly from Shelter. One published piece of research shows that in order to buy in the countryside, an applicant would need a salary of at least £50,000, with a deposit of £40,000. Those figures are after tax, which is a point that has not been made very much; so they are very high and would probably have to apply to two people in the household. Self-evidently, that is not widely affordable.

The old Section 106 affordable home requirement would be made largely redundant. Perhaps that would mean higher profits for developers, because they would not need to provide a percentage of affordable housing. In the past, that has often been 30% to 50% of the total. This is also going to mean less rental accommodation. Will the council tax banding be based on the open market value, or on the discounted value?

It is important to point out that prospective owners must consider the extra cost of the maintenance of their new houses. That is often included in the rent, and can amount to a large sum. I also want to take the opportunity to suggest that in the past so many new houses have been built to an abysmal standard of appearance and greening. Perhaps this Bill allows a chance for planners to have more say over that. Low-cost and efficiency are not mutually exclusive.

Rural villages need organic, holistic and good-quality growth. Vital assets of infrastructure—transport and medical—pubs and shops all need to be planned together, as I proposed in my Second Reading speech. I may be anticipating a slightly later grouping, but that issue is important.

Let me return to where I started. The main problem is the contention that government funding, especially in rural areas, should be spread equitably between shared ownership, starter homes and renting—that is, mixed tenures. That is why in perpetuity is such an important concept. I support both these amendments.

Photo of Lord Best Lord Best Chair, Communications Committee

My Lords, my name is on Amendments 50A and 50C and I rise to support my noble friend, Lord Cameron, to whom I pay tribute, not just for his eloquence today but for setting a perfect example of a landowner who has made available land on very favourable terms, to ensure that local people get decent housing. There are other Members of your Lordships’ House who have done the same; all of them deserve absolute credit.

I was delighted that the noble Lords, Lord Young and Lord Deben, have also joined in. If tribute has to be paid to the actual founder of the feast, Nicholas Ridley, as Secretary of State at the time, must get the laurels for inventing this particular piece of policy. It is the hope in these amendments that local authorities would not be required always to insist upon starter homes on rural exception sites, knowing that these will be lost to the locality five years later if the purchasers sell up, perhaps to second-home owners, for holiday lets or to better-off commuters.

Last year I chaired the Rural Housing Policy Review, which was conducted with the noble Lords, Lords Cameron of Dillington and Lord Taylor of Goss Moor. This review was promoted by Hastoe Housing Association, which is a leading player in the housing association world in this regard. It joined forces with the Campaign to Protect Rural England and the Country Landowners Association to take forward these issues. Our report set out the special position of rural areas, which others have outlined today. From the report I would only add the following additional points.

First, promoting home ownership in rural areas, where people often put down roots and stay for a lifetime, is particularly important. However, a 20% discount will not, on its own, do the trick for affordable starter homes. Shared ownership can be of particular value in those circumstances, with young households buying for half or less than the market value and paying affordable rent on the remainder. The problem, as in so many other cases, would come from the Government requiring local authorities to push out other contenders to make way for starter homes.

Secondly, as the statistics have made so clear, many of the people whom rural areas require to sustain local economies and local communities are not going to find even shared ownership to be within their means. Good old-fashioned affordable housing for rent is of special value in rural areas because the level of affordable rented homes, council houses or housing association properties reaches only 8% of the stock in these localities, compared with 19% in the country at large. The right to buy has led to a greater loss of rural council housing than urban housing. I know that there are many villages where all the council housing, often on the edge of the village, has now been sold. Where housing associations can obtain land at a substantial discount from its open market value, and maybe also where they cross-subsidise with some profits from sales of one or two homes sold outright, the rented option can still be feasible, and we must have the opportunity to continue to pursue it.

Thirdly, since we are not able to have one of our colleagues from the Bishops’ Benches with us today, I should add to the comments about helpful landowners by saying that the churches can be invaluable players in rural areas. We know that the Church of England and other denominations can be persuaded to part with sites on excellent terms, but only if the resulting homes are kept available for local people in perpetuity. Glebe land can be ideal for small infill schemes of cottages for local people, and redundant church buildings, such as the church hall that is no longer fit for purpose, may represent the only available opportunity for development in the village. Like other responsible landowners, though, the churches are likely to be unsympathetic if they are asked to make over land on the basis that the initial occupiers can sell in five years to more affluent people and outsiders of the village itself.

Fourthly, the support of the village—not least through the production of the excellent new neighbourhood plans, of which 1,600 are now in the pipeline—as opposed to vociferous opposition will be forthcoming only if housing is being developed for local people and can be held for that purpose in perpetuity. As the noble Lord, Lord Deben, says, without that opportunity it may be that we do not see development at all, and the Government, in quite properly going for greater numbers of new homes being built, will be thwarted by that local opposition, which, as we all know, can be so incredibly powerful.

Lastly, I note that the Government are consulting on the issue of whether starter homes should be required on rural exception sites, and are thinking about an additional test that only those with a local connection can buy these properties. Simply requiring a local connection but still switching the supply from shared ownership and affordable renting to starter homes would, I fear, be of very limited value. We know that in many villages the relationship between the value of village homes and the earnings of those wanting to live and work there are so out of kilter that a continuing insistence on the starter homes model would miss the target in most places. I strongly support the amendments.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs) 6:00 pm, 3rd March 2016

My Lords, I am fully in support of both these amendments. I agree with virtually all the contributions that have been made by noble Lords. The noble Lord, Lord Deben, very eloquently—certainly more eloquently than I could—set out why the Government should accept these amendments, or at least reflect on them carefully and possibly bring back their own amendments on Report. We on these Benches are very supportive of the point that he made about localism. Obviously the exception sites policy is very important, and to lose this opportunity would be very regrettable for the rural areas. That is why in perpetuity is so important.

We have all heard about keeping rural communities alive and thriving, with people of different ages and occupations, or none, all coming together to build a community. What we do not want to see, as the noble Lord, Lord Deben, explained, is a group of 60-plus people living there, with no other services. That is the route to that community dying and not being sustainable at all.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

My Lords, I also support these amendments. As a child and as a teenager, I was brought up in a village in south Devon of what we used to call “150 souls”. For some time in the 1970s and 1980s I was a parliamentary candidate in a constituency with a large number of rural villages. As we went round from village to village, there were half a dozen council houses here and half a dozen there—hopefully and usually, but not always, having Labour stickers in their windows. Every one of them has gone. What is left are housing association villages. Obviously housing associations are on a voluntary basis but, as the noble Baroness will know, we are going to have a somewhat similar debate over the problems of rural exception sites with right to buy. There will then be the question of whether there is a portable discount, as opposed to the sale of those particular houses, because government recognises that stripping out affordable rented housing from villages or ensuring that new housing is not of that sort will kill those villages.

It is worth reminding ourselves of how poor, how low and how modest some incomes are in such areas. In much of the parts of rural Norfolk that are not occupied by retirees from Essex, by second home owners from Islington or by reasonably new purchasers on the outskirts of Norwich, incomes are exceedingly low. As the noble Lord, Lord Deben, said, many of the people connected to the agricultural and food processing industries, some manual public sector and building and construction workers—and they are mostly men here—will be lucky if they are taking home £20,000 a year before tax. What about their wives and partners? I was checking when we were doing amendments on previous Bills and found that women in those situations, because they did not have a car, were dependent on their locality and were lucky to piece together an income of £5,000 a year. From what? They cleaned caravans, boats and houses. They picked mushrooms and, occasionally, in summer, they might pick fruit.

They amplified that with bar work in the local pub on a weekend. If they could take home £5,000 or £6,000 in total in the course of the year, they regarded themselves as fortunate.

Such people will never buy. What they would like to do is to enjoy an attractive home in which they can keep their roots; where the children can go to the local schools and all of the community virtues, values and emphases that the noble Lord, Lord Cameron and the noble Lord, Deben, have expressed so well are continued. The Government seem to have a conflict of issues here. I am sure that they respect and support the need for communities—particularly viable communities—in more rural areas. The Government also support the philanthropy of landowners, as we all do. At the same time, the Government are also calling for social mobility—for people who actually want to stay, put down roots and make their community thrive. This is inconsistent with the philosophy of starter homes, where you keep your discounts, sell on and make those houses unaffordable to the local community, but you are none the less allowed to buy your next home up the ladder.

I think the Government have to accept that small rural communities are different from the cities, where you have a choice of housing, a choice of occupation and can, to some extent, construct your income. If the Minister does not understand—which I am sure she does—the physical and social immobility and, to some extent, the mental immobility by virtue of family connection, then those villages will die. Certainly, in Norfolk, they are already dying. If all new developments are increasingly monopolised by starter homes and we find, as a result, landowners drying up their donations, particularly to housing associations, then this Government will have the honour of seeing the death of so many of our villages.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

My Lords, I wonder if I might intervene again. In some ways I find myself at odds with much of this debate. I do not think that people understand what happens with Section 52 agreements. The noble Lord, Lord Deben, understands them, but I think he was in the department when they were brought in. The effect of a Section 52 agreement is that the smaller the locality that applies to a particular planning permission, the lower the demand for the property, which affects the price. Therefore you can have a house in a village which is free of any restriction that is identical to a house which is covered by a Section 52 agreement, where the locals-only agreement is so containing that it might cover only a few hundred yards, depending on the parish, and one house might be half the price of the other.

I thought that the objective of the people behind this amendment was to ensure that local people were provided for long term in property within their community. I would be a little concerned if we concentrated on development in villages which was simply about rental. I have no problem at all with people buying in villages as long as they do not come in as outsiders and inflate the market, driving up the price. However, if you can create an arrangement whereby, because of Section 52-type agreements, the price is contained within very restricted localities, you can then contain the price and stop huge price inflation bringing in the very people to which some Members of the Committee have taken exception during this debate.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I thank the noble Lords, Lord Best, Lord Cameron, Lord Kennedy, and Lord Stoneham, and thank all noble Lords who have spoken in this debate. They give me the opportunity to set out how we think starter homes can contribute to the important rural housing agenda.

Noble Lords have articulated very well how rural areas have a series of challenges, including being dominated by perhaps a certain age group or second-home owners, and seasonally dominated—I can think of one place in Cornwall, Mousehole, which I am sure the noble Lord, Lord Cameron, knows well, which is almost deserted in the winter and packed so full in the summer that you can hardly move. Further challenges are how the few people that live there sustain themselves during other times of the year and how key workers can be brought in to fulfil certain essential jobs, and so on.

Amendments 50A and 50C are both concerned with rural exception sites. Young first-time buyers face significant affordability pressures in many rural areas, so we want the development of starter homes to make a significant contribution to housebuilding in these areas. The use of rural exception sites is an established means for supporting sensitive housing growth where it is locally supported and meeting local needs. It is very important to underline that. We do not want to undermine the operation of rural exception sites.

Our rural productivity plan, which was published last August, set out priorities for growing the rural economy and the need to increase the availability of housing in rural towns and villages to help them thrive. In our consultation on changes to the NPPF we have consulted on amending the policy on rural exception sites to allow starter homes to be included. The current policy allows for some market housing on rural exception sites to enable some cross-subsidy of affordable housing, and we have tested at consultation whether this mix should include starter homes.

We also consulted on allowing local planning authorities to have the flexibility to require a local connection test on rural exception sites. This reflects the particular needs of rural areas, where local connections can be important and access to the housing market for working people can be difficult, as a number of noble Lords have pointed out. It would also reflect the current local connection tests on rural exception sites.

My noble friends Lord Deben and Lord Young talked about philanthropic landowners; the question of whether they will continue to bring forward their land for the best-intentioned purposes needs to be addressed. We have absolutely no wish to switch off the operation of these sites. They can provide a really good mix of tenures, including private housing for cross-subsidy, and starter homes might be another tenure type.

I would like to make several points here. First, many of the sites that come forward in rural areas are small. When we start to deliberate about the site size for starter homes, it may well be that many sites will not be relevant.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour 6:15 pm, 3rd March 2016

Does the Minister have any idea yet whether she is talking about sites accommodating 12 or 20 homes?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I do not know but, as I said either earlier today or on Tuesday—the days are rolling together—I expect that the size of the sites will be roughly what we see now in terms of affordable housing. However, that is my guess rather than something that I have been informed about.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

I thank the noble Baroness for giving way—she has been very kind in that respect. Part of the problem is that you may agree a certain size for a site but then a rumour goes round that that is not the case. Although it may not be the intention, people will fear that these sites will be lost, in which case they will not bring the land forward for use.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

Perhaps I may make another point about covenants, which many philanthropic landlords attach to their sites. We appreciate their benefits. Sometimes sites are donated to the local community and, if the donor wants to put a covenant on the land prohibiting its use for starter homes, that is within their gift. Although, again, we stress the benefits of starter homes in communities that are looking to create homes, we also appreciate the other factors that are in play.

We want to see policies working together. My noble friend Lord Young of Cookham highlighted how well-intentioned policies working together can in fact conflict with each other. We know that we need growth in rural areas to allow young people to stay in the communities in which they grew up. However, we also want neighbourhood planning to play a role in identifying the sites on which starter homes should be built so that there is collaboration between the landowners, the developers and the communities that they serve. That is an important point. One of the benefits of neighbourhood planning has been its collaborative nature, and that must be a factor in the doubling of acceptability of housebuilding that we have seen. Local people feel far more in control in terms of what is put in their community than perhaps they did 10 or 20 years ago. That is not a political point; it is something that we have all learned over the years.

However, we do not agree that starter homes on rural exception sites should be in perpetuity rather than having the five-year restriction that we are proposing. We believe that there should be a consistent model for first-time buyers. Why should rural workers not have the same opportunities as workers in towns and cities? They, too, need to move and grow.

We are currently considering all representations and will issue our formal response to the planning consultation in due course. Any changes to national planning policy will be a material consideration which a local planning authority must take into account when making planning decisions and developing planning policy. If changes are made, starter homes will be an additional, not a replacement, type of affordable housing which can be delivered on these sites following consultation with the local community.

Amendment 50C would allow local councils to ensure that the requirement for starter homes did not have to be met on rural exception sites. We will consult separately on the starter homes requirement for suitable, reasonably-sized sites for the regulations. We will also test in the consultation any exemptions from the requirement. Again, it is right that we discuss this with the housing industry and ensure that we achieve the best outcome.

I want to be clear that the consultation will include a minimum site size for the starter homes requirement. Any sites, urban or rural, below the size threshold will not, as I have said, be subject to the starter homes requirement. Starter homes can be delivered on sites below the threshold but this will not be a compulsory requirement; it will be a matter for local determination.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

Forgive me for interrupting, but can the Minister tell us when we will know what the minimum size is? Will it be measured in hectares or by planning density? Can the Minister give us a feel for this? Are we talking about an acre?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I would strongly imagine that we are talking about numbers of units.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

Does the Minister have any idea what sort of numbers she is talking about?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I do not. What I have said is that I strongly expect—although I do not know—that it would be very much in line with what was expected through the affordable housing duty. However, that is just a guess from me at this point.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

The Minister said that people living in rural communities should have the right to benefit from the starter homes policy. I am absolutely fine with that, but the whole issue is about how much people earn and whether they would be able to afford these starter homes. My noble friend Lady Hollis has mentioned a number of times that these homes may be unaffordable. During the debate a couple of days ago my noble friend talked about an area in Norfolk where building two or three bungalows in the village would free up some of the family homes in order to get people to go there. It is regrettable that that is going to be the case here. If we stick with this policy, we are not looking at the wider implication that, actually, it is unaffordable for most people in rural areas.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I do not agree with much of what the noble Lord said. Obviously, the mix of tenures is essential, whether it is starter home level, shared ownership, affordable rents or social rents, and a number of funding streams are available for the different types of tenure. I think that the noble Lord and I may be saying the same thing but in a different way. I hope that the noble Lord will feel happy to withdraw the amendment.

Photo of Lord Greaves Lord Greaves Liberal Democrat

Before the noble Lord does that, and I have no doubt that he will, the Minister made some interesting remarks about the importance of neighbourhood planning in relation to starter homes.

At some stage in Committee, she said that there are now 1,600 neighbourhood plans at some stage of gestation. A few of these have been adopted but none of them will be busying themselves at the moment with starter homes, because starter homes are still being discussed in this Committee. What will be the process of neighbourhood planning in relation to starter homes? Will starter homes be put into the mix of that large number of neighbourhood plans that are still being worked out and will go to inspection and referendum, et cetera? Or will it require a process of amendment and change in adopted neighbourhood plans to cater for starter homes, which is, of course, a time-consuming and bureaucratic process? Will there be a presumption that in areas with neighbourhood plans, which are strongly biased towards rural areas and places with parish councils, there will be no starter homes until the neighbourhood planning process has dealt with how many there should be and where they should be?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I think it will be done through amended neighbourhood plans. It also may be done through the NPPF. I will need to come back to the noble Lord on that, because the mechanism is important. I probably would have known the answer about six hours ago but, at this time of the day, I do not know.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

Under the starter home arrangements, I envisage in a village half a dozen or a dozen terraced houses sold under this principle, subject to strict locals-only Section 52-type arrangements, whereby there is no great market when you sell at the end of five years and where people have the right of ownership. That enables young families to stay in villages in properties that they own, rather than having to rent.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, six terraced houses would be quite a small site size. It is important for noble Lords to know in due course what the site sizes will mean, and I will let the noble Lord know. I am guessing at this point, but six sounds like a very small site size, and therefore probably exempt.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

Just one final point. I was pleased to hear that we may be agreeing after all; I am not sure that we are, but that would be great. The point about rural areas is not just what happens in 10 years—the important issue is the people who are living there.

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench

My Lords, I thank all noble Lords for their participation in the debate and for their nearly universal support—especially the noble Lords, Lord Young and Lord Deben, who are both old hands in this area—even if they only assisted in the birth of the site, not being the rightful daddy, as the noble Lord, Lord Best, said.

I was reminded when the noble Lord, Lord Deben, was speaking of a phrase that I believe he did conceive when he was Secretary of State at the DoE, “executive ghettos”, which is what we are all trying to avoid. I have heard another phrase recently in planning philosophy, which is “place making”. What we are trying to do here is place saving, because I hope that, mostly, we already have reasonably good places in the countryside.

The noble Lord, Lord Campbell-Savours, talked about Section 52 agreements. I am not too concerned how we organise the exception sites or homes for locals; the real point about the exception sites is that they are outside the planning system: the land would not normally get planning permission of any sort. It is the cheapness of the land and the way that the house can be built by the housing association which enables houses to be very good value for locals, not only the control of the marketplace, as the noble Lord rightly says, which the Section 52 agreement dictates. They start off being of very low value. I would be very keen on trying to maintain the houses being owned by a housing association; in that way, no one owns them outright so that they can sell them, whether at a low value or not.

I repeat that 45% of all rural affordable houses built in the past year are on exception sites. Without the amendments, the supply of exception sites will dry up; neither landowners nor parishes will accept them. The noble Baroness, Lady Hollis, said that, without them, we could easily kill the village. It depends what your definition of village is, but it would definitely kill the community, which is perhaps the major point, as they very possibly revert to the said executive ghettos.

I am glad that the Minister supported the sentiment behind the amendments, even if she did not totally accept them, but I was very dismayed when she said that starter homes could be allowed on exception sites, and would also still fall out after five years and be sold as homes. That very statement will kill exception sites stone dead. I cannot see parishes or landowners agreeing to continue on that basis. It is all very well saying that the landowner can place a condition of sale, but conditions of sale are very difficult and expensive to enforce, particularly after the first sale.

I hope that we can continue to discuss the arrangements between now and Report so that these executive sites will be able to continue to come forward, but at the moment I do not think they will.

Photo of Lord Best Lord Best Chair, Communications Committee 6:30 pm, 3rd March 2016

Perhaps I may intervene and say that before we go home in a really gloomy state of mind, I did catch the point made by the Minister that below a certain number of homes on the site, there is likely to be an exclusion from this whole system. If that number is high enough, an awful of rural exception sites will still be possible. Before the noble Lord concludes his remarks, I should say that I cling to that hope.

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench

As I say, I have no doubt that we will be able to discuss this between now and Report. In the mean time, I beg leave to withdraw the amendment.

Amendment 50A withdrawn.

Amendments 50B to 50E not moved.

Clause 4 agreed.

Amendment 50F

Moved by Lord Kennedy of Southwark

50F: After Clause 4, insert the following new Clause—

“Infrastructure requirement: provision of starter homes

(1) Prior to the first occasion on which planning permission is granted for a site involving starter homes, the Secretary of State must produce an infrastructure plan to be implemented as part of the starter homes programme.

(2) The plan must outline—

(a) which services (such as hospitals, doctors’ surgeries and schools) will be built alongside new housing developments involving starter homes, and

(b) where funding for the new infrastructure will come from.

(3) The infrastructure plan must be laid before both Houses of Parliament.”

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

My Lords, I am conscious of the time. The amendment, tabled in my name and that of my noble friend Lord Beecham, seeks to place a duty on the Secretary of State to produce an infrastructure plan to be implemented as part of the starter homes programme. This is only a probing amendment but it is particularly relevant to the larger brownfield sites where new housing developments are taking place. We cannot just build a group of houses and have no plans to address the services that are required to make the scheme viable. Those services include access to health services, doctors’ surgeries, dentists, schools, shops and transport including bus services—I am not even going to mention rail services. They are all important and need to be taken into account on these brownfield sites.

Amendment 51 in this group seeks to improve the quality of the information that is to be provided under Clause 5. I beg to move.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

My Lords, I support my noble friend in his Amendment 50F. If we do not do what my noble friend says and ensure that infrastructure and community support are built alongside housing, we will not be building communities, we will be building estates—and many of us know what that problem has meant. Back in the 1950s, Plymouth City Council built estates. It did not build the infrastructure to go along with the housing: community centres, doctors’ surgeries, pharmacies, shops and the like. As a result of things like the Essex Design Guide, steered in part I suspect by the noble Lord, Lord Deben, in the 1980s, local authorities were encouraged when building developments—in the case of Norwich it was the Bowthorpe estate with something like 15,000 people on it—to build the infrastructure in with the first homes. This included not only shops, community halls, chapels and churches, and of course bus routes and so on, but also small units for industrial use to try to develop to some extent a self-sustaining community.

Within those developments half of the properties went to social housing and half went for sale. In Norwich we could not get builders to build or building societies to lend, so I went to Companies House and got a company from the books in order to make sure that we had a balanced community. To my delight, once when I was in one of the leading stores in Norwich, I heard someone say to someone else, “I see you’ve bought one of those new houses up at Bowthorpe. What’s it like?”. She said, “Oh, it’s very nice with lots of support and amenities. There’s only one thing wrong with it. You can’t tell the difference between my home and a council house”. That was exactly the compliment I wanted to hear.

What we learned from that development and from the Essex Design Guide, which stressed respect for the local environment, was that if you do not put in the infrastructure along with the housing, what you get are soulless estates that are empty during the day and problematic at night. It is deeply important that any developer or local authority which is seeking to develop extensive sites for starter homes should take this into account. I am sure that the Minister knows very well indeed, given her local authority background, that if you do not, you will be building a problem estate from the day you begin.

Photo of Baroness Grender Baroness Grender Liberal Democrat

My Lords, Amendment 53, in my name and that of my noble friend Lord Shipley, calls for an annual report by the Secretary of State containing information on the construction and sale of starter homes in the area, and a report on the composition and incomes of people who have purchased starter homes in each area during the relevant period. The amendment has two purposes. The first is to assess progress and the second is to understand who is benefiting from it. I also take this opportunity to say that we support the other amendments in the group. In particular, 50 years on from Shelter being started, the fact that children are still in temporary accommodation reflects a failure for all of us.

Shelter calculates that the starter homes scheme is a significant public subsidy of £8.4 billion, working on the assumption that starter homes sell at 20% less than the average price paid by first-time buyers in England, and that the subsidy per home will be worth about £42,200. Other noble Lords have raised concerns about starter homes being in place of social housing. The noble Lord, Lord Kerslake, set out in some detail how inaccessible this product may be, particularly to families on low wages currently in the private rented sector. But it is worth reminding ourselves that Shelter calculates that the average starter home will be unaffordable even to families on average earnings in some 58% of the country.

Given that starter homes will be sold at a discount from the market price and that this discount will be paid for through a reduction in the usual obligations, and with such a large amount of public subsidy going to the buyers of starter homes, it is vital that the Government and regulators such as the National Audit Office have good evidence as to who is benefiting from such subsidy. This will help them and others to assess whether public money is being well spent in the context of the wider housing crisis.

We have already explored possible abuses of the scheme in some detail. It is critical that the Government take steps to know who is living in them—that is the second part of the amendment—what their incomes are and whether we are reaching the all-important gap in the market that the Minister described today. Given that we already know that 40% of right-to-buy sales are now buy-to-lets, we do not want the same thing to happen with starter homes. I welcome the Minister’s reassurance earlier this afternoon that there will be some kind of mechanism to ensure that that does not happen: I am glad that we have learned that lesson.

I shall talk very briefly—I know it is getting late—about the market confidence among developers in this area. I promise I shall be brief. We have already heard Jones Lang LaSalle referenced a few times as part of the development sector. It says that the UK housebuilding sector will need to see a near 50% increase in capacity if it is to meet the ambitions of the Government’s 200,000-plus homes per annum. The jury is very much still out for the Council of Mortgage Lenders: while it is working with the Government to try to make this happen, it worries terribly about this being such a distortion of the market.

There was a very interesting report by Pocket, which is exactly the kind of innovative, private-sector thing that we should be encouraging in London and which produces the kind of homes that starter homes actually look and feel like. It is a highly innovative company, but it says that there is a real danger that this could put off developers such as itself. Its report states:

“For lenders, it is virtually impossible to value a product that only has a five-year shelf life. Lenders will, as a result, limit their exposure to developments with Starter Homes, which, without sufficient credit, will fail to grow in number”.

I am sure we will explore issues of market distortion and how developers are feeling—whether they have full confidence in starter homes—over the next few days, but I felt it important to raise it now because it is one reason we believe in this amendment: there should be some mechanism for annually looking at how this is progressing.

Photo of The Earl of Lytton The Earl of Lytton Crossbench

My Lords, I generally support both amendments, up to a point. On Amendment 50F, so ably moved by the noble Lord, Lord Kennedy, the question of infrastructure clearly goes beyond starter homes alone. For example, in certain coastal towns along the south coast it has become evident from my travels to and fro that the amount of development in what I call the suburban areas has now produced difficult traffic conditions—not because of the development process but because of the subsequent use which is causing an overload on feeder roads. This, I fear, will become an increasing problem because alternative forms of transport for journeys to work have not had the necessary investment and it does not look like they are going to get it any time soon. For instance, the high-quality rapid-transit type of bus such as you have in large parts of central London—where you can see when the next bus is coming and where it is going to—is not there. It is a considerable problem.

We know that doctors’ surgeries, schools and other infrastructure are not keeping pace with the state of development. The noble Lord, Lord Kennedy, is right that we have to look at the broader picture of the setting—otherwise we will be creating the latter-day slums of tomorrow while we are trying to create high-quality homes. I say high-quality homes because I had the privilege of serving on the Select Committee on National Policy for the Built Environment, which looked particularly at the need for decent quality and not just building anything at any price with all that that means.

On the amendment in the name of the noble Baroness, Lady Grender, I understood her to be referring to what I know as post-occupancy evaluation. I hope I have not used the wrong term. Some years ago, an All-Party Parliamentary Group on the Built Environment—which is not the same thing as a Select Committee, I hasten to add—on which I also had the privilege to serve, produced a report on procurement. It identified various shortcomings in the procurement process. First, the people who were doing the procuring—they might have been a particular subsector of local government, school governors or parish councillors—did not have the tools or the ability to deal with the procurement themselves and were not bringing in the necessary skills required to do that properly. What they were procuring ended up not serving its proper purpose, not having any reuse value, being over budget and not being properly controlled. That failure, in particular, identified a complete absence of post-occupancy evaluation—in this respect, it pointed the finger rather pertinently at many government departments. You did not have any feedback as to where you were going wrong and so you made the same mistakes all over again the next time round. We have got to do better with this.

The noble Lord, Lord Deben, referred to the scarcity of the precious space that is available for development without impinging on the green spaces outside. I say hooray to that. However, the process is getting much more demanding than it used to be. If you do not want to create cramming; if you want to create greater density and the best use of urban, previously developed land, then we have got to be smarter about how we do it. The two amendments seem to address aspects of being smarter about it and I support the principle that lies behind them. I hope the Minister will consider them in that tone.

Photo of Lord Greaves Lord Greaves Liberal Democrat

My Lords, I support a great deal of what the noble Earl, Lord Lytton, has said about the importance of infrastructure in relation to housing. I am greatly worried that there is now such a housing crisis in this country that we are doing exactly what the noble Earl suggested and failing to learn the lessons of the past. At times in the past in the post-war years, large numbers of houses were built but infrastructure and services were not put it and local authorities spent a long time playing catch-up. In some cases they did not succeed because of the problems which existed on those estates. So what has been said is absolutely right. There is a huge danger that under the pressures to find ways of building more and more houses the proper overall planning of houses as part of future communities is being forgotten in too many areas.

However, I do not think that Amendment 50F is the right way forward. It is an extraordinary amendment which would give the Secretary of State the duty to produce an infrastructure plan for every new estate built in England, which must then be laid before the House of Commons and the House of Lords. I am huge believer in the importance of the House of Lords and the work that we do here, and I do not think that our powers should be reduced, but I really do not think that we should be scrutinising infrastructure plans for every new estate. I forecast that this is not an amendment that the Labour Front Bench will bring back on Report.

Photo of Baroness Young of Old Scone Baroness Young of Old Scone Labour 6:45 pm, 3rd March 2016

My Lords, regardless of whether the Labour Front Bench brings this amendment back on Report, it still encapsulates an important principle. Perhaps I can draw the Minister on the issue of infrastructure provisions.

It is true that the dash for the development of starter homes at all costs runs the risk of producing poor-quality homes that are inadequately served by infrastructure. Although we are not yet at the point in the Bill where we talk about permission in principle and, in particular, brownfield registers, it is important that we hear from the Minister, before we reach that point, how those provisions will take account of the need for planned infrastructure alongside fast-track provisions to get starter homes and new housing developments on to small-scale brownfield sites quickly. We need to hear how they will do so without transgressing the very important requirements for good infrastructure and principles of design.

I have asked the Minister in several ways and on several occasions—I keep promising her a letter which I have not yet written—for a flow chart on the “permission in principle” issue that shows when various factors will be taken into account and when various consultations will take place on the provision of infrastructure such as schools, doctors’ surgeries, roads, sewerage and plumbing, as well as an assessment of the downside of development on these sites, taking into account biodiversity conservation, flood risk management and an assessment of whether there is enough water available to flush away sewage.

I remember volubly—although I should not at this stage, on this day and at this time, give an anecdote—how in Basingstoke at one stage of its housing development there was enough water to allow people either to clean their teeth or to flush away their sewage but not enough for both. We have got to get these infrastructure issues right well before the fast-track development processes are put in place. Perhaps I may also press the Minister to give me my flow chart before we come to discuss the “permission in principle” part of the Bill. I will be extremely grateful if she does.

Photo of Lord Deben Lord Deben Conservative

I support the noble Baroness opposite. This is not a sensible amendment and I am sure that my noble friend will not accept it. It is not sensible for the reasons that the noble Lord, Lord Greaves, put forward. It also reminds us that we are going to come on to the whole question of infrastructure. Again, this is a Bill that does not say what I hoped it would about greenfield sites. It has also not faced a number of infrastructure issues. It is, therefore, going to have this kind of amendment—whether good or bad—because these issues have to be faced. For example, I do not see how we can go forward with the starter homes concept—which I agree with; I am very supportive of my noble friend on it—if we go on having a situation where, whenever anybody gets a planning permission, not only does the local water authority not have the right to be consulted but it has to connect any new property to the sewage system even if that causes a flooding risk. We have not faced that issue and yet we have a Bill which is about all of that.

It seems that there is quite a lot of work to do between now and the point where we get to that issue. I feel that I ought to warn my noble friend that we will have to discuss those issues in detail if we are to give her the support which many of us would like to give, because they are not yet in the Bill and we need to have them there.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, this has been an interesting debate and I thank all of your Lordships who have taken part. Perhaps I may start by addressing Amendments 51 and 52. Clause 5(4) already makes provision that an authority must make these reports “available to the public”. The clause also provides that the Secretary of State may make regulations “about their timing” and whether they should be combined with the local authority’s authority monitoring report. The authority monitoring report is an existing requirement, which must be published on at least an annual basis. We do not want to introduce unnecessary burdens and it would be sensible to combine starter-home reporting with this existing requirement. We will be consulting on the monitoring requirements associated with starter homes shortly. We want to understand wider views on what the reports should contain and their arrangements for publication.

Furthermore, local planning authorities are already required to report on affordable housing delivery. They must report on the extent to which their planning policies are being achieved through their authority monitoring reports. This is a statutory requirement in Regulation 34 of the Town and Country Planning (Local Planning) (England) Regulations 2012. Measures under this amendment are already covered by the legal framework.

Amendment 52 would require all local planning authorities to demonstrate that these sites were not otherwise needed for employment, retail, leisure, industrial or distribution use. Our planning policies look to encourage the productive use of brownfield land. Our starter homes exception site policy has a crucial role in delivering starter homes by providing new and cheaper land to be used for housing—and, because the land tends to have a lower value, this helps to improve the viability of starter home developments. This is why we have consulted on extending and strengthening this policy as part of our national planning policy consultation. Let me be clear: this is not about building houses at the expense of all other types of use but about releasing land where there is no reasonable prospect of it being used for its original purpose.

As part of the consultation, we invited comments on evidence to be used to justify the retention of land for commercial or similar uses and on whether there should be a fixed time limit on land retained for commercial uses. We expect local authorities to be proactive in identifying and publicising these exception sites and, where applications for starter homes come forward, in being prepared to give planning permission. The intention behind the new duty to promote starter homes in Clause 3 is to encourage local authorities to do this. Before they grant that permission, of course, local authorities will need to assure themselves that this brownfield land is an exception site and, in particular, that it is underused and unviable in its current land use. I believe that local authorities are capable of taking this decision using our guidance without the Government monitoring them. For this reason, Amendment 52, which would require all local planning authorities to report in detail about the appropriateness of sites, is unnecessary and bureaucratic.

Amendment 53 would require the Secretary of State to prepare a report on an annual basis containing information on the construction and sale of starter homes in the area of each local authority. As part of this, the report should contain information about the household composition and incomes of persons who have purchased a starter home in each area. As the noble Lord, Lord Greaves, put it rather articulately, this would not be a particularly proportionate approach to reporting on the operation of the policy. Any monitoring requirements should not be overly onerous or waste precious resources. I believe that reports should be published at local level, to ensure that first-time buyers can access them easily and that local councils can be accountable.

Photo of Baroness Grender Baroness Grender Liberal Democrat

My noble friend Lord Greaves was actually talking about the main Labour amendment and not Amendment 53, just to be clear.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I do apologise—I was trying to give him credit because I disagree with him on quite a lot of things. But he knows what I mean.

Photo of Lord Greaves Lord Greaves Liberal Democrat

I think that the Minister was trying to stir up trouble on these Benches—I would not dare to contradict my noble friend Lady Grender.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

I was not trying to stir up trouble—honestly, my Lords, it is getting a bit late for that. Amendment 50F is, I think, the appropriate one, which the noble Lord articulated very well. It would seem to be quite strange for the Secretary of State to produce an infrastructure plan as part of the starter-homes programme.

We particularly want to see local authorities and infrastructure providers planning positively for the broad infrastructure needs of their areas as part of local plan-making, and our starter homes reforms will not change this. In particular, local planning authorities will still be able to secure Section 106 contributions—which we spoke about earlier—for site-specific infrastructure improvements required for development, including new roads or financial contributions to local schools. Finally, we have announced a £1.2 billion fund to ensure that sites are prepared and have suitable infrastructure on site. This will support delivery of starter homes on brownfield land.

A couple of noble Lords talked about design, and I wholeheartedly agree about innovative and energy-efficient design. The Government have a design panel looking specifically at avoiding, I suppose, some of the mistakes of the past and providing far more innovative designs for the huge number of houses that we are expecting to deliver.

I thank the noble Lords, Lord Kennedy, Lord Beecham, Lord Kerslake, and Lord Best—in fact, the noble Lord, Lord Beecham, has gone so I will not thank him—for explaining why they have concerns about Clause 6. This direction would state that the incompatible policy must not be taken into account when certain planning decisions are taken. The remaining local development documents would not be affected and the local planning authority may still have regard to these in its decision-making in the usual way. The compliance direction would not apply to policies forming part of neighbourhood plans and the local plan. Communities would continue to shape development in the area. This is a reasonable and balanced approach.

The compliance direction must set out the Secretary of State’s reasoning for making the direction and must be published. A copy must be given to the local planning authority and the compliance direction would remain in force until revoked by a further direction given by the Secretary of State. We will set out very clear guidance on the operation of the duties so that all local planning authorities are fully aware of what they need to do to comply with them. I will reassure noble Lords at this point that the compliance direction is a backstop provision. It will only be used in limited circumstances where the local planning authority is in breach of its starter-home duties and we envisage that it would be rarely used

The Secretary of State will decide whether to issue the compliance direction based on information within the monitoring reports that local planning authorities are required to produce under Clause 5. There will be the opportunity for councils to submit further evidence to the Secretary of State and any exceptional circumstances could be considered at this point. It will only be revoked by a further direction if the Secretary of State is satisfied that the local planning authority has taken adequate steps to meet its duty.

Turning now to the amendment to Clause 7, Amendment 53D seeks to place a duty on the Secretary of State to publish a strategy that includes targets for reducing the number of children living in temporary accommodation with their families. Under the Homelessness Act 2002, all local housing authorities must have in place a homelessness strategy and must consult public or local authorities, voluntary organisations or other persons, as they consider appropriate.

Each housing authority records information pertaining to its statutory homelessness activities under Part 7 of the Housing Act 1996. This includes the number of households and children in different types of temporary accommodation on a quarterly basis. The data are published on the GOV.UK website and allow comparison at a local authority, regional and national level. I think that it is unnecessary. Local housing authorities already record the number of children in temporary accommodation. They have clear duties to secure settled accommodation for them and must produce a homelessness strategy setting out how they will tackle the issue.

To conclude, I think that the Government’s current proposals strike the right balance. At this stage, I hope that the noble Lord will be happy to withdraw his amendment.

Photo of Lord Greaves Lord Greaves Liberal Democrat 7:00 pm, 3rd March 2016

Before the noble Lord speaks, I have a question for the Minister. I am trying to work out how the compliance directions will work. Are they intended to apply to future development plan documents, including the core strategy or whatever and site allocations, or retrospectively to development plan documents that have already been historically agreed and which have things in them that conflict with the concept of starter homes?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, I think that they will be for future plans, because they will include starter homes, but I will correct that if I am wrong.

Photo of Lord Greaves Lord Greaves Liberal Democrat

In that case, why is it necessary to do this? Why cannot any defect in relation to starter homes be dealt with during the inspection?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, that is a very good question. Can I come back to the noble Lord on that?

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

My Lords, I thank everyone who has spoken in the debate this evening. My amendment was only a probing amendment, although I fully accept that it is not the best that I have ever proposed from this Bench or elsewhere in the House. It is important that we had a debate on infrastructure, and we will discuss that further in the days ahead. It is very likely that it will come back to us on Report.

I very much agree with the noble Baroness, Lady Grender, on her concerns about developers having these proposals. I am also grateful to the noble Earl, Lord Lytton, for his support, as well as my noble friends Lady Hollis of Heigham and Lady Young. With that, I beg leave to withdraw the amendment.

Amendment 50F withdrawn.

Clause 5: Monitoring

Amendments 50G to 53 not moved.

Clause 5 agreed.

Clause 6: Compliance directions

Amendments 53ZA to 53B not moved.

Clause 6 agreed.

Clause 7: Interpretation of this Chapter

Amendment 53C not moved.

Clause 7 agreed.

Amendment 53D not moved.

Amendment 53E

Moved by Lord Kennedy of Southwark

53E: After Clause 7, insert the following new Clause—

“Sunset provision: sections 1 to 7

(1) Subject to the following provisions of this section, sections 1 to 7 of this Act are repealed at the end of the period of three years beginning with the day on which this Act is passed.

(2) The Secretary of State may by regulations made by statutory instrument provide that the provisions of sections 1 to 7 are not repealed in accordance with subsection (1) but instead continue in force indefinitely, or for a specified period of time.

(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

My Lords, I will be as brief as I can. This amendment is in my name and that of my noble friend Lord Beecham. No one can deny that the sections of the Bill on starter homes are not without their critics. They include an interesting policy idea for building homes on brownfield sites that had not previously been considered for housing, having transformed overnight into the main housing policy for the Government to the exclusion of all others. This has been done without a Green Paper, without a White Paper, without any pre-legislative scrutiny or proper consultation and without any testing to see if this is the right way forward to deliver the homes that we all agree need to be built. I hope that noble Lords, whatever their view, can all agree that it is a bit risky and not the way to roll out a new policy. The saying “Act in haste, repent at leisure” could not refer to a more suitable policy.

On top of that, we must not forget that we have not seen a regulation yet, and we are not going to see the regulations perhaps until the autumn—which, when we consider the implications of this Bill, is nothing short of outrageous.

To try to bring some order to the whole process, we put down Amendment 53E for consideration by your Lordships’ House. It would provide for a sunset clause to bring an end to the programme unless the Secretary of State makes regulations for these clauses not to be repealed. That statutory instrument would have to be laid and approved by both Houses of Parliament. The period of three years was selected because we are in a fixed-term Parliament, so the Government can accept this amendment in the full knowledge that they will be able to get the regulations through Parliament without the risk of a general election getting in the way—unless of course some unforeseen circumstances arise. This is a useful device for the Government to consider, and I hope the noble Baroness will look at it carefully. I beg to move.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, the noble Lord has just left me with a very horrible thought, but I thank him and the noble Lord, Lord Beecham, in his absence, for their amendment to introduce a sunset clause to the starter homes provisions. The effect would be that the starter homes provisions would be repealed unless affirmative regulations permitted them to continue.

I am sure the noble Lord will not be surprised that I strongly resist this amendment. This Government made a manifesto commitment to deliver 200,000 starter homes. The electorate supported the manifesto and expect the Government to deliver. We intend starter homes to be a new but enduring aspect of housing delivery. We have heard how first-time buyers are increasingly unable to access the housing market, and we want to ensure there are new opportunities for home ownership and to support young people into home ownership.

A sunset clause would introduce uncertainty to delivery. It would cause developers to pause as the sunset period approached and would be unhelpful not only in starter home delivery but in overall housing supply. If we want to achieve the uplift in housing supply we need, we must give clarity about the future rather than uncertain messages.

I accept that starter homes are new and we are embarking on a new journey in affordable housing delivery. We have made provision in regulations that give us flexibility for the future in setting the starter home requirement, the minimum site threshold and any exemptions to the requirement. With that assurance, I hope that the noble Lord will withdraw the amendment.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Spokesperson (Housing), Opposition Whip (Lords), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Home Affairs)

I am very happy to withdraw my amendment, but want to place on the record our thanks from these Benches, and from the whole Committee, to the noble Baroness. She has handled the debate today and all the questions from around the Committee with great skill. We appreciate that she has been very kind to us all and thank her very much for that. With that, I beg leave to withdraw the amendment.

Amendment 53E withdrawn.

House resumed.

House adjourned at 7.08 pm.