Moved by Lord Kennedy of Southwark
57: Clause 62, page 28, line 10, at end insert—
“( ) A grant made under subsection (2) must include a condition that, if the dwelling to which the grant is applied is sold under the right to buy, money equivalent to the market value (disregarding any discount) of the dwelling is spent by the private registered provider on the provision of affordable housing in the same local authority area or London, including at least one new home replacing that sold which is—
(a) of the same tenure, and
(b) located in the same local authority area or London borough,
in accordance with assessed local housing need.”
My Lords, the amendment is in my name and that of my noble friend Lord Beecham. It would make a grant made to a private provider conditional on the equivalent market rate for the property sold under the right to buy being spent on the provision of affordable housing in the same local authority area, including at least one replacement home of the same tenure and in the same locality.
We have heard a lot from the Government about this policy not reducing the number of affordable homes, but I am not so sure. One problem we must grapple with when debating this Bill is the term “affordable housing”, because I think it means different things to different noble Lords. When many noble Lords from the government Benches speak, they see affordable housing through the prism of a discounted rate of up to 80% of the market value. In many parts of the country, especially London, such housing would more accurately be described for people on low and modest incomes as unaffordable. There are not many noble Lords on the government Benches, with the exception of the noble Lord, Lord Horam, who have so far put the case for social housing and the need to build more of it. That is why we make specific reference to “tenure” in our amendment, otherwise we would be letting the Government off the hook when they say, “Everything is fine. We have provided so much more affordable housing. Haven’t we done a good job?”, when, in fact, if we look in more detail at what has happened, I fear that we will see an erosion of social housing, of council housing, and its replacement with “affordable housing” that is a very different product.
Amendment 60, in the name of the noble Baroness, Lady Bakewell of Hardington Mandeville, and other noble Lords, will be spoken to shortly and has the full support of these Benches. It would put in the Bill a mechanism to ensure that the tenure of a replacement property was the same as that of the property sold, unless on the basis of local need a different tenure could be justified. This seems a good, sensible example of delivering a national policy with an element of localism included. I will probably intervene again as the debate progresses. I beg to move.
My Lords, I shall speak to Amendment 60, to which the noble Lord has just referred and said he will fully support, as will colleagues on his Benches—so I start off from a good place. Before I do so, I draw attention to my entry in the register of interests: I am vice-president of the Local Government Association and a councillor in the metropolitan borough of Kirklees, which, for those who do not know, is in West Yorkshire.
I am very pleased to be able to support Amendment 60, because looking back at the evidence from the right to buy of former council properties during the past 35 years is very instructive in determining whether there is any genuine, realistic hope of like-for-like replacements.
The example that I would like to share with noble Lords is from Kirklees. Prior to the right to buy, there were nearly 40,000 council properties in Kirklees. Now there are fewer than 24,000. Only a very small minority have been replaced by what we now call social housing. Indeed, in the last two years and within the period when councils have had the ability to enable replacements —which is rather different from ensuring that they are enabled, of course—403 homes in Kirklees have been sold under right to buy and only six have been built to replace those that have been lost. What provision is being made to ensure that we can get like-for-like replacements? Without them, we are pushing many people, particularly families, into private rented accommodation.
The provision of decent-quality housing for rent is vital. A particular case was brought to me by a local family. It illustrates why I am particularly concerned about the diminishing stock of social housing for rent. A young family with four children was renting a former council house which was subsequently run by a private landlord. It had what I would describe as 2.5 bedrooms and was semi-detached. It was about 50 years old. The rent was £600 a month—this is in West Yorkshire, not London and that is a lot of money in West Yorkshire.
The other half of the semi next door was still in council ownership under the ALMO that was set up when I was leader of the council, I am pleased to say. It was rented out at £320 per month, so the private rented accommodation was nearly double the price. That was not the only difference. The council house was in a good state of repair. The ex-council house had a leaking roof, which was why it was brought to my attention. The roof had been leaking for a while and the walls were damp, there was mould and the wallpaper was peeling off. The children had health problems, which the GP determined were partly caused by the state of the house. Obviously my first question to the mother who brought this problem to me was, “Have you spoken to the landlord? They should keep the house in a good state of repair. They have a responsibility to do that”. “Yes”, she said. “The only problem is that he lives in South Africa”, and getting action through the agent to the owner was well-nigh impossible, despite the so-called responsibilities and duties of the landlord to do so. Fortunately, I was able to help her find good-quality social housing for her to move into.
That account paints a picture of what is going on. So when the noble Lord, Lord Porter, says, “Don’t worry. We’ll gain one when one is lost because the house is still there”, yes, but what he did not say is that the tenure of that house can be just as important. The selling off of housing association homes will start once this Bill wends its way into law, and the experience of selling off council houses shows that we are pushing families who cannot afford to buy into private rented accommodation. Despite what the Minister and other noble Lords on that side have said, which is that it is important for people to have the right to home ownership, someone needs to explain to me how families that in my experience are often—not always—pushed into poor-quality and poorly maintained private rented properties will ever be able to own their own home. If that conundrum can be explained, I might have more faith in what is being done here. But currently all I can see is that those at the bottom of the income pile are pushed into low-quality accommodation, paying high rents that are not always covered by housing benefit, with little opportunity to put down roots in the community because the length of the lease is short and they have to move on. I know that we passed a Bill which said that if you complain you would not be pushed out, but it does not seem to have worked. I hope that the Minister will be able to explain that conundrum away for me.
No family should be put into such a position. I taught history for many years and whenever we talked about the period of regeneration and innovation after the end of the Second World War, I would point out that the country decided as a principle that there would be a progressive housing policy in the sense that no matter who you were or what your income was, you had the right to live in a home of a decent standard. That was what was established and it continued to exist until the past few years under Governments of all colours. This is not a party point. But we are now in danger of creating a situation where families will be transient, with all the effects that will have on children in terms of their education. The quality of the homes they live in will not be as good as the homes of those lucky enough to be homeowners.
We know that one of the factors affecting the quality of children’s lives is the standard of the homes they live in. That can affect their future health and certainly their future educational outcomes. I plead with the Government to think very hard about what we are doing to families that will be forced into private renting. How are they ever going to achieve what is said to be the aim, which is that of home ownership?
I shall respond briefly to the noble Baroness. The point I made was that if I was living in that property paying rent for the next 74 years, or if I bought it and released the equity in it so that the landlord could invest the money in a replacement, it cannot be said that there would not be additional units because clearly there would be. The equity that was tied up in that unit was freed. It makes no odds to the country whether I was living in it for 74 years paying rent or whether I was paying Mr Bradford and Mr Bingley a mortgage on it. We got the money out and we could reinvest it in new properties. If the noble Baroness thinks that her record of selling 400 and replacing with six was a marker that we should all aspire to, I am a little confused. Surely she should have been looking at why they replaced the sale of 400, to free up the equity, with only six.
The arguments today should be about the size of the discount, not the principle of right-to-buy sales. There is a strong argument to make that the discount needs to be sufficient to stimulate demand and not excessive, but that is not a debate that I have seen any noble Lord choose to make. The noble Baroness has missed the mark with where she is playing the amendment. If I was on the Benches opposite, I would have come at this with a completely different pack. It is really important that we give everybody equality of tenure. If some social tenants have access to right to buy, they should all get it.
My Lords, I have a lot of sympathy for what the noble Lord, Lord Porter, said, but what we have been trying to say repeats to some extent what he said. The argument is about not just right to buy, although we can have different views on that, but who funds the discount. I agree that the proportionality of the discount matters and we want it to be only enough to help people realistically into home ownership, but to screw local authorities for it seems to me an issue about which many of us would worry. I include the noble Lord in this, but he can disagree if he wishes.
I largely agree with the noble Baroness: it is not right that local authorities are funding inefficient RSLs to make the discount up. The money should come first and foremost from the RSLs, but again, nobody on the other Benches is making that case. The case should be made that RSLs should be forced to sweat their assets properly. They are sitting on more than £2.5 billion on their balance sheets in cash, plus the unsecured money that they have that they could take out against those properties.
That is where we should be coming from. If we do not stick to taking just them on, then we could come back to the Government and say, “Actually, the state’s sitting on a lot of land that is redundant and not used for the purpose that it was originally bought for. It is sitting there undervalued”. We should then purchase it or give it to local authorities to increase its value and then use that money. Again, nobody is making that point. Noble Lords are challenging the right to buy itself; that is not where the fire should be. The country voted to extend right to buy. We should be challenging the Government to find a way to fund it that is more appropriate and sustainable.
The noble Lord, Lord Porter, has not listened to what I said. Not one word did I say in opposition to right to buy. I did say that there was not the opportunity, once you have released that equity, necessarily to house a family. What happens, certainly under right to buy, which is the experience we have for council housing, is that councils are fearful—in fact, they would be foolish—to build houses subject to future right to buy because they will be constantly losing the equity value of it. It would be under right to buy constantly. Certainly in my experience of councils in West Yorkshire what is happening once a house is sold is those councils are either building properties that are not subject to right to buy or putting the equity into a community housing group so that they cannot be subject to right to buy. That is one of the problems that I have urged the Government to look at.
Can we come back to the amendment for moment? It is on how the housing association spends the money it gets from selling a house. With the best will in the world, I am afraid that the amendment in the name of the noble Lord, Lord Kennedy, presents a problem. He knows London very well, as do I. The fact is that it is more or less impossible to replace a house sold in, say, Westminster with another house—certainly two houses, but even one house—in Westminster. It is simply impossible to do that in London, and nor is it necessary, because people who have lived in Westminster do not necessarily need to live in Westminster. They can live in Kensington, Surbiton, Lewisham or Bromley for all we know. The distances are not that great.
I do not know whether the noble Lord heard—he probably did—the very interesting evidence given by Philippa Roe, the leader of Westminster Council, at the hearings in the other place. She was saying that it is absolutely impossible to have a like-for-like replacement within a similar London borough. It cannot be done, because of density and because of cost, but you do need to do something in London. Clearly, we would be in favour of something in London, but she was hoping, in her evidence, that some sort of mechanism would be established between, say, a rich central London borough such as Westminster and, I will not say a poor outer London borough such as Lewisham, but another London borough, whereby they could agree a housing policy between them which would make sense by way of some sort of replacement in a cheaper area. They could thereby get very good value for money; they could get not only one but two or three houses for the price of one sold in Westminster or Kensington. So I think the noble Lord is barking up the wrong tree, if I may say so, in this particular aspect of his amendment, though I agree with what he was saying about tenure.
The problem with that is that you end up with a borough entirely of owner-occupied houses. In other words, you have a single tenure and it is one which effectively excludes people on modest incomes who cannot afford to buy. The suggestion that the noble Lord effectively makes is that we export those people to outer London somewhere.
This is what ordinary people who do not have access to social housing have to do. If they have a job in Westminster they cannot actually afford to live in Westminster. We are putting people who have been in social housing in the same position as the ordinary person who does not have access to social housing.
That means that everybody is excluded from certain parts of the city; we lose a mix. I do not think it is a very good justification to say that because one group is unfortunately unable to do it, the rest must also be unable to do it. My daughter lives in Islington, which has been transformed now, as so many other boroughs have, with very high prices. Really, the city is being hollowed out, because people on ordinary incomes—teachers, police officers, street cleaners—cannot afford to buy or to rent these days. We are effectively creating a monoculture of better-off people in the heart of the city. That does not strike me as all that great—people will effectively have to move out, with the kids changing schools and all the rest. This is potentially a very disruptive process.
It is not quite as brutal as the noble Lord says: there is already quite a mix in London. There is a much better mix in London, for example, than in, say, Paris or New York. All right, the mix may be somewhat lessened if we go down this path—I accept that—none the less, Philippa Rowe was saying that she will make special allowance in her housing allocation for people who, for example, have to work in the local hospitals in Westminster. Clearly, you have to make some allowance in your housing policy for key workers and so forth, who you need in your borough. They will still keep doing that; there will still be a mix. The mix might be slightly different from what it is now, but there will still be a mix.
My Lords, I will try to be brief, given the hour. Very grave concern has already been expressed about the right to buy causing a shortage of homes in certain areas. We all understand that the voluntary agreement between the Government and housing associations is for replacement dwellings to be built, but there is no certainty, as has been said, that these will be anywhere near the home that has been sold. Amendment 60 seeks assurances, as does Amendment 57 in the name of the noble Lords, Lord Kennedy and Lord Beecham, that the right to buy will ensure a steady, increasing supply of homes and not a declining one. It is not going to be acceptable to promise jam tomorrow. Housing associations must identify where the replacement dwelling will be before the right-to-buy one is sold off.
It is extremely important that the tenure of the replacement property is not only in the same location as that sold off but also of the same type. This tenure can only be varied based on legitimately identified local need in that area. We debated earlier in Committee the thoroughness with which local authorities research, plot and assess the housing needs in their areas. This housing need must not go unmet. Replacement homes must fit the gap in the local community created by the right to buy.
The powerful arguments made on the previous group are now on the record and do not need repeating, but they should be taken on board and acted on. However, I will just read the comments made in November 2015 by the beautifully named Yetminster and Ryme Intrinseca Parish Council, which is just over the Dorset border and about six miles from where I live. This relates to both starter homes and right to buy. The council says:
“The Bill gives housing associations with properties in a community of less than 3,000 the right to opt out of the Right to Buy scheme as it may be difficult for them to replace the houses in a rural community. The implication for our rural community needs further exploration.
The principle behind the starter homes idea is good, but after 5 years all the houses could be sold on and we will be back to a situation where young people cannot afford to buy. Surely homes identified as starter homes should remain so when they are sold on with the next purchaser able to apply for the same government-subsidy.
For Y&RI, we agree there is a need to provide low cost affordable housing for young people within the village but the Bill needs to address how our youngsters can afford to buy a house costing up to 200k (the amount may be wrong—but whatever it is—it is too much).
In summary, the policy implications for rural housing in this Bill are very worrying. There is an inherent danger that land owners will cease to provide land at charitable prices for the Hastoes of this world and the only land which will become available will be at commercial value which will reflect in the unit price of the houses. It is hard to see how this Bill will enhance the provision of affordable homes for our young people in rural areas.
We really hope this Bill will come in for serious scrutiny before it comes into force”.
I think we are doing that this evening.
My Lords, I have some difficulty with all these amendments. I was not going to speak because it exposes my difficulty; however, I will do so briefly. When the then Conservative Government decided to introduce the right-to-buy policy in the early 1980s, I was one of a very few Labour MPs who had reservations about opposing it. That was because my constituency at the time was in quite a deprived area with a lot of property in very bad condition, and the only way round that problem that I could see was to incentivise people on estates to buy their homes and thereby spread a culture of prettifying those estates and making them look pleasanter and nicer to live in. Under that scheme, gardens were done up, windows and doors were changed, roofs were redone—all sorts of changes took place. When I look back over the years, I see that that scheme worked. However, the problem was that while I was living up there I was also living in London and I could never understand the justification for selling local authority housing in London. That has been an absolute disaster.
When I checked this morning, I found that 43% of all the local authority property in Westminster has been sold off. A lot of it is now in the hands of private landlords—we are trying to get the statistics for that in Westminster—who very often charge four times the rent levied by the local authority. This Bill will denude London of most of its public housing stock. That will be the product of the Bill. I consider the estimate that 76% of this housing in Westminster will be sold to be an under-estimate. I think that a lot more housing will go from the public sector than anyone ever imagined. Therefore, I have a dilemma: in parts of the country I can see the justification for this measure, but in other parts it will be an absolute disaster.
The Government say that we should leave this issue to the housing associations to decide. However, as cuts are imposed and as housing associations find that they have reduced resources, they will feel under pressure to sell. Therefore, what may appear to be a voluntary arrangement now will become a de facto mandatory measure because the housing associations will need to draw in this money to enable them to invest further.
My noble friend has moved an amendment which is particularly important in many ways. I disagree with the noble Lord, Lord Horam: I think it is possible to replace stock in the same borough—you just build high rise. If you compare high-rise and low-rise property, the figures stack up. I think I read somewhere that Boris Johnson—or was it Goldsmith?—had extracted an agreement from the Government whereby they were going to have to replace two for one in London. That is what we are talking about. Obviously, the Government have calculated that it is possible to do it, so my noble friend’s amendment must surely be in order. The reasoning of my former noble friend, the noble Lord, Lord Horam, must be wrong. The Government believe it is possible.
I see. If that is the case, and they are not in the same borough, it does not comply with the spirit of my noble friend’s amendment.
If you get up at 6.30 or 7 am and get on a Tube train or a bus, it is full of people of going to work. They are the people who service London and they cannot be coming in from Watford or outer London. They have got to have homes in central London because they service it. There is a whole world, which many noble Lords do not even know exists, of people getting up at unearthly hours of the morning to go to work. I wonder where they are going to live if 43% of Westminster is already sold off. Camden expects to sell off a huge amount of its property portfolio. Where are these people going to live? They are going to have to come in from the outskirts on Tube trains and buses. They will be exhausted. The whole arrangement is wrong.
Although people like me can see the case for the right to buy and believe it does work in certain areas, there are some parts of the country where it should not be allowed. If it is allowed, it must be on the basis of replacement by like property in the area where the property is being sold off. Otherwise, we totally disrupt the demography of central London in a way which is contrary to the public interest.
My Lords, a few minutes ago, the noble Lord, Lord Porter, began to introduce a debate about the broad principles of right to buy and whether people supported them or not. It is interesting to reflect on the history of the whole process. The Minister may be interested to know that the first time right to buy was proposed was by the Liberals—who subsequently opposed it on a number of occasions—way back in 1947. The Labour Party, which has a long track record of opposing the right to buy at various times, first introduced the proposal in their manifesto for the 1959 election. The Conservatives were very late to the party, until Horace Cutler proposed it for the Conservative-controlled GLC. It stopped briefly when Labour took control of that body, and was then reintroduced. All the political parties represented here have, at some time or another, been in favour of the principle of right to buy.
I continue to believe that the broad principle is correct. The issue has always been about the detail. The noble Lord, Lord Horam, was absolutely right to chide the noble Lord, Lord Porter, and say: “Let us get back to the specifics of the amendment”. The specifics of Amendments 57 and 60 are very important. Looking at some of the details of the right to buy in relation to council housing, the coalition Government were absolutely correct to introduce a requirement for one-for-one replacement. The Minister should note that I have not said “like-for-like”. However, since that was introduced in 2012, for every nine council houses that have been sold off, we have so far only had one replacement. It is inevitable that there will be a drag: it takes time to consider where a new home is going to be; to get planning permission; to gather together the finance and so forth; and then to have it constructed. I am hopeful—the figures give grounds for optimism—that the one-for-one policy initiative will gradually deliver, but it will take a very long time.
There are some 1.7 million council houses left, but there are 2.3 million housing association houses. If we are now to introduce a voluntary scheme for the right to buy housing association houses, depending on the decisions of the housing associations a very large number of properties could be involved. So it is important that we get right the issues that concerned us about the right to buy council housing.
We need to introduce at least a replacement scheme of one sort of another. Amendment 57 seeks to introduce that; it raises two issues and, very interestingly, does not raise, as I might have liked, the issue of size in the one-for-one replacement scheme. Amendment 60 would develop a way of speeding up the process so that a replacement plan would be in place, something that housing associations are more than capable of doing even before they get to the point of selling off any houses. We have a package of two measures on housing association properties that make sense in terms of the principle of having a replacement policy and a system of ensuring that housing associations have replacement properties coming on board. That is why I support both amendments.
Having sat in a similar position to the Minister and seen the sort of briefings that she gets, I know that she will come forward with reasons why there are technical problems with the amendments. I accept that there probably are technical problems with both amendments, but it will be very good to hear that in principle the Minister supports the idea of a one-for-one replacement scheme. We know that she does because it has been said already that for London it is going to be even better. Does she agree that the principle behind Amendment 60—that housing associations should get organised so that they can do a quick replacement—makes sense, and is she prepared to look at ways of improving any technical deficiencies there might be?
My Lords, the noble Lord, Lord Foster, has referred to the many attempts over the years to introduce a right-to-buy policy, which eventually came to pass. It is one thing to have a right-to-buy policy when you are building a lot of houses anyway; it is quite another when you are falling far short of demand and of meeting need for new houses. That has been a chronic situation for the past few years, and it has not materially improved. That is the context in which the issues have to be considered.
Having said that, I agree with the noble Lord that the wording of Amendment 57 may not be perfect; it is a question of replacing like for like, not just one for one. Unfortunately, the way in which much new housing has taken shape over the last few years means that we are looking at very small units. I keep saying this, but it is a fact—housing units built in this country are smaller than in any other major country in Europe. We are looking at, frankly, expensive housing offering little in the way of space in the market generally and, equally, in the event of a replacement scheme. I rather regret that my noble friend and I did not include like for like in the amendment. We may have to revert to that, because it would not do much good to replace a two-bedroom or three-bedroom house with a one-bedroom house or something equally small. The temptation to do that, I suspect, given the high land prices in London, would be very great.
It will be interesting to see whether the Minister agrees that we have to look at what we are replacing, rather than purely the numbers.
My Lords, I thank the noble Lord, Lord Foster of Bath, for voicing Lib Dem support and enthusiasm for right to buy—the first party to do so. I thank all noble Lords for their amendments and for taking part in the debate. I fully understand their desire to ensure that affordable housing is not lost from an area through the sale of properties under the voluntary right to buy, and the particular concerns relating to rural areas.
Amendment 57, in the names of the noble Lords, Lord Kennedy and Lord Beecham, will limit how housing associations are able to use the proceeds from sales under the voluntary right to buy by requiring the replacement to be of the same tenure and in the same area as the property sold. I thank noble Lords for their comments on this matter. However, we think it is important that housing associations should have flexibility and not be restricted in replacing like for like when this may not be the best solution for the area. One-for-one has never been on a like-for-like basis. We have always given that flexibility. By seeking to constrain housing associations’ discretion from Whitehall, we are limiting their ability to manage their assets to deliver their business and charitable objectives. We believe that these decisions are best taken by housing associations in the light of local conditions and need. My noble friend Lord Horam mentioned Westminster, which is very cognisant of its key workers, and the interventions it is making in conjunction with its local housing associations. This is the type of freedom we wish to see.
The noble Lord, Lord Kennedy, said that the replacement homes will not be affordable. Not everyone can live in exactly the location they wish to regardless of cost, be they social housing tenants, private renters or home owners. The best way to make homes affordable is to build more. I do not think any noble Lords disagree on that point. Our reforms will ensure that social housing is prioritised for those who need it most. Obviously, tonight we are talking about one-for-one replacement but there are all sorts of tenures of housing—for rent, for purchase, for low-cost rent—and housing associations will take all those issues into account when determining what types of houses to build.
Noble Lords asked whether we had achieved one-for-one, and made the point about two-for-one in London. In 2013 there were 3,054 sales under right to buy and by 2015 there were 4,017 starts, so I think noble Lords can agree that that was on an approximately one-for-one basis in terms of sales and new constructions. In London in 2012-13 there were 632 sales and in quarter 2 of 2015-16 there were 1,240 starts. I appreciate that noble Lords will immediately pick up the three-year time difference but under that agreement there were three years in which to replace the houses sold. In the rest of the country that figure has been achieved and in London it has been exceeded.
The noble Lord, Lord Kennedy, said that the flexibility around the tenure of the replacement units will erode the housing stock. Housing associations should be free to replace the properties sold with alternative tenures—they have done and they will do, I am sure—where this may be appropriate for the community they serve. This can include shared ownership, which we talked about in previous debates. Obviously, a much lower deposit is required for a shared-ownership property.
The question was asked: what does the deal mean for London and social housing in the capital? The largest London housing associations have all signed up to the agreement. As with the rest of the country, receipts from the sales will be reinvested in the delivery of new homes. I will say again that these are additional homes and, as noble Lords have said, the homes sold remain homes for the people who have bought them.
I now turn to Amendment 60. I fully understand the desire of the noble Baronesses, Lady Bakewell and Lady Pinnock, to ensure that the replacements promised under the terms of the voluntary agreement are realised. This amendment would also require the replacement property to be in the same area and of the same tenure as the property sold. The agreement reached with the housing association sector is that, nationally, for every house sold a new one will be built—I am happy to confirm that again—which will increase the overall number of much-needed houses in this country. However, the type of home and where it should be are decisions that are best taken by those housing associations, many of which will be local and will want to replace those homes locally.
Does the noble Baroness think it is regrettable that if this carries on, we will lose social housing in the centre of London? The risk is that it will go to the outer London boroughs, and here in the centre of London there will be less social housing for rent.
My Lords, we have been through the various types of social housing products that are available for housing associations to bring forward. Obviously, shared ownership schemes may be very attractive for them to build. The figures that I gave noble Lords about starts and replacements in London demonstrate that over the last three years, the delivery has been two for one. I would imagine that local housing associations, including those in London, will want to provide a mix of tenure. I do not deny the point the noble Lord is making about London being so expensive.
The noble Baroness mentioned the figures for starts. Does she have the figures for where those starts are in London? They may not be available now, but it would be very helpful if she could provide them.
I do not know by borough where those starts are but will, if I can, provide the noble Lord with the figures. It would be interesting to see exactly where they are.
The Minister emphasised, perfectly sensibly I think, that housing associations should have some discretion in how they meet local needs and what types of housing they provide. I also take the point about shared ownership. Will she extend that same freedom so that housing associations can replace housing with social housing at social rents rather than at affordable rents, given that affordable rents are nearly double social rents? At the moment, they are not allowed to by the Government. Given this new localist agenda for housing associations, will she restore their freedom to them?
My Lords, affordable rent for low-cost houses is certainly a lot cheaper than market rents, but I will take that particular point away and perhaps we can return to it on Report. I will need to think about it.
I am very grateful that the Minister has agreed to look at that issue. She will be aware that the current default tenure for new rental properties is the affordable rent model, under which the rent is about 80% of the market rent, whereas social rent is about 50% to 60% of the market rent. The concern of many of us is that if we do not have some control over this, all social rent properties will just disappear.
That is the point that I am going to take away and confirm with the noble Baroness. However, I am making the assumption that if local housing associations felt that there should be some property for social rent, they would be at liberty to provide it. I will take the point away and come back to the noble Baroness and the noble Lord.
Perhaps the Minister could help me out on this. Great faith is being placed in housing associations. I accept that—they have a great track record—but in reality there will not be enough housing to deal with all the need in every area of the country. How does she expect housing associations to deal with that constraint?
The noble Lord is right: in different parts of the country, there will be entirely different needs across different types of tenures. Housing associations will make a judgment on that, probably in consultation with the council, residents and possibly the local plan. I suspect that there are a number of mechanisms through which they will consider the types of housing to provide in that area. That is how they usually operate, and I do not see this to be any different. I promised to get back to noble Lords on the point about socially rented properties.
That is helpful, but in so far as they do not fully cover the position, the residual risk and obligation will fall on the local authority to pick up the homeless, those who are disadvantaged and those who cannot access properties via housing associations. Is that right?
There was a Question yesterday about homelessness. There are a number of government grants, some of which are directed through councils, either to prevent homelessness or to aid those who are homeless. Various mechanisms, including grants, already provide for certain types of housing, and I assume that that will continue.
On the basis of our discussion before the dinner break, we identified that councils were picking up the tab for this policy. It seems that they will also have to pick up the tab when it fails people who have housing need.
I would expect councils to work with the Government, housing associations and through the planning system to identify where needs are emerging. The noble Lord is absolutely right: there will be people in crisis need who the council will deal with through the various payments that they receive, such as discretionary housing payments. I would expect all those providers to be involved in meeting the needs of those in their area.
We should not be trying to constrain the freedom of housing associations to make sound business decisions about how to deliver their part of the agreement, or judgments about what is needed in various communities. Neither should we require them to identify replacement before a property is sold, because that would slow up the process for the tenant and in many cases would be impractical at the point of sale.
The noble Baroness, Lady Pinnock, made a point about right to buy at the expense of other tenures. I have made the point that we remain committed to build more affordable housing over this Parliament than from many years, including shared ownership and other forms of affordable housing. It is really important that hard-working people can buy affordable houses and get on the housing ladder. She also made a good point about the quality of the private rented sector. As we discussed under the rogue landlords clauses, the vast majority of landlords in the private rented sector are decent, law-abiding people who want to provide decent-quality accommodation for their tenants. I have a statistic here: 84% of private renters are satisfied with their accommodation. I appreciate that that means that 16% may not be but, generally, the private rented sector provides good-quality accommodation.
I just made the point that 84% of tenants are satisfied with their accommodation. I do not know where the noble Baroness gets her figure from.
I thank the noble Baroness for that statistic. One of the points that we made back in the group of amendments on rogue landlords was that the vast majority landlords are decent landlords.
My Lords, I thank all noble Lords who have contributed to this short debate. It highlighted the problems we have with this part of the Bill. The noble Lord, Lord Horam, said that we are not like Paris or New York where people have been priced out of parts of those cities. They are unable to live there because they cannot afford to be there. I agree that we are not there, and I would never want us to get to that situation. London is one of the greatest cities in the world, and it works because you have rich and poor people living on the same street, living side by side and getting on very well together. That is how London works. It may not be the Government’s intention, but the Bill could create a situation where people are driven out of whole parts of London, which would be bad. We cannot have everybody doing key-worker jobs or in modest or lower-paid jobs all living in outer London boroughs. That would not be right. It worries me that we will get to that situation with the policy we are pursuing today.
We will come back to this on Report. I look forward to the information on housing starts that the Minister said she will send us. It will be very interesting to know where those starts are.
Talking about looking forward to information, last week, we were promised some statistical information on starter homes, but we have not received it. I wonder what is happening.
My Lords, I did promise the noble Lord information on starter homes. I will be bringing it forward in due course, but I have not got it ready for today. I have not forgotten my commitment to him.
My Lords, I should confess that this amendment is not well drafted—I blame my noble friend for that—because the intention is not clear from the terms of the amendment. It would add a fourth provision to Clause 62 in relation to grants by the Secretary of State, the effect of which would be, allegedly, to prevent property sold under right to buy being converted into buy-to-let dwellings for a period of 10 years. I do not think that the way it is worded achieves that objective. The objective is clearly to avoid a situation in which properties bought under right to buy are sold within 10 years for buy-to-let purposes. The wording does not achieve that. If we revert to this on Report, it will have to be revised.
I suppose a better way of putting it would be that if such a house were sold the grant made in respect of the original purchase should then be repaid—in other words, putting it the other way round. The noble Lord, Lord Young, is nodding, so that must be right. The reality is that we are talking about potentially very large rents being charged for properties of this kind. I can illustrate the situation. I have referred to Islington before. My daughter now lives there and my son used to live there. The flat that he occupied was all of 286 square feet and is now on the market at a rent of £1,500 a month. It is quite extraordinary. So unless there is some sort of provision for preventing the maximisation of rents by private landlords ultimately moving in on properties acquired from housing associations under rights to buy, this economic cleansing, as I think we might reasonably describe it, will continue and we will have precisely the hollowing out of parts of the city to which others have referred, both here and abroad. I hope that some consideration will be given to preventing the situation advancing by this recoupment suggestion, even if it has not been properly expressed in the terms of the amendment as tabled. I beg to move.
My Lords, I am grateful to the noble Lord, Lord Beecham, for clarifying the position that explains the difficulty that we might have had with the amendment. In summing up, though, could he explain the period of 10 years? There is a view that it could be a longer period. It would be helpful to know how that figure was decided upon when it could be on some other timescale.
My Lords, I am sympathetic to the intent of my noble friend’s amendment although, like him, I have reservations about the way it is drafted. I want to put the question back to the Minister. I do not think that anyone would wish to undermine the capacity of people, particularly young people, to become homeowners, and that is not what we are debating today. The problem is that, given that the scheme is being baited—I use that word deliberately —with huge discounts in some cases, with some people who have spent five or 10 years in housing association property getting a return of 300% or 400% on the rent that they have already paid coming back to them in the form of a discount, how is the Minister, who must share our concerns about this, going to inhibit the rapid recycling of that property into the private rented sector?
The Chancellor has accepted that this has been abused in various forms and has sought to put some financial controls over the tax reliefs and so on that private landlords may receive. No one doubts that there are many good landlords trying to do a decent job by their tenants and charging them a reasonable rent, but this is such high-profit territory that I know that there are scores of wide boys out there just waiting to take advantage of housing association tenants in order to produce sales back into the private rented sector at inflated prices—and then who pays the bill?
Those people may or may not have gone on to buy another home, but the process turns the house into a private rented house. We have seen what has happened with our own eyes when that has happened on council estates: it has sent some streets skidding downwards, to the resentment not only of council tenants who did not buy but of council tenants who did. They see their estates contaminated by the spread of precarious, insecure and low-paid but high-rent-paying tenants on the one hand and students on the other, with no leverage over their landlords to get them to maintain the property or keep it up to a decent standard, for fear of eviction.
How is the Minister going to ensure that the purpose of all of this, which is, after all, to give housing association tenants the same rights as local authority tenants to buy their own homes in which they have lived, is not exploited and abused for a quick buck to increase numbers in a tenancy that will, ultimately, be of poorer quality and infinitely more expensive for the rest of us? On the first round, the local authorities will be financing the discounts; on the second round, the taxpayers will be funding the increased housing benefit bill as those properties get cycled into the private rented sector. How does the Minister expect to control that abuse—and it is an abuse, because that is not what this is all about—if she cannot come forward with some scheme, not necessarily the same as what my noble friend has identified, but some form of control?
My Lords, there will be abuse, and the incentives are very substantial. I have some figures on what is happening in Westminster which might be of interest to Members of the House. The average cost of a one-bedroom council flat in Westminster is £113.78 a week. When it is sold off and in the private sector, that same flat now fetches £480 a week. That is nearly four times as much. A two-bed flat is £128 a week in the social sector and £450 a week when it is sold off. A four-bed flat is £157 a week in Westminster and £738 a week when it is in the private sector. We are talking about former council flats here. That is £38,500 a year after tax for a former council flat that would be rented out today at £157 a week if it was still in the public sector. These figures are an absolute scandal. The Government are promoting all this in the Bill, and we cannot see why they insist on doing it.
Westminster City Council has its own residential department, CityWest Homes, which at least tries to bring some sanity to this market, but its rents are very high as well. The problem is essentially that private landlords and estate agents in London market these properties at silly prices, and they have a market. Who is the market? People I have discussed this with now tell me that these flats are not being taken by former council tenants in receipt of housing benefit because of the cap. I am told that 70% of all Westminster council flats that have been sold off now go to overseas tenants, because, obviously, they have the money. In other words, we are shifting people out of London into the suburbs and using the properties in which they formerly lived as private accommodation, which is being let to people from overseas who come to London. This is an absolute scandal, and I cannot see the sanity in what the Government are doing. That is all I need to say at this stage of the debate.
I will ask two questions. To go back to the same principle, what difference does it make whether somebody exercises the right to buy and then occupies a property or whether they free up the equity they have in it, buy something else, and then put that property back into the private rented sector? If somebody is living in it, they are living in it, so I am not sure that the noble Lord has the right end of the stick as regards the properties.
Can the noble Lord, Lord Beecham, say whether anybody has asked the mortgage providers whether they would still be happy to provide a mortgage if the use of that property was restricted in the way that is being proposed?
And on top of that, some people object to the fact that people can sell in London a council flat—for which they have perhaps paid a low rent for a number of years—leave London, retire to the countryside and live off the income that was gained simply by selling what was essentially public property. Sometimes—it gets worse—they move abroad. People from abroad, who are not even British citizens, buy this property and then live abroad on the rental income gained from tenants who are overpaying within the United Kingdom. The whole thing is ludicrous.
If people are moving in, paying the private rent and relying on housing benefit, that is a cost to the Exchequer, and if they pay the sort of rents that my noble friend referred to, they are likely to be in a much better position than other people in greater housing needs who cannot afford it.
My Lords, I shall be brief because the hour is late. I do not want to be here at midnight because there is a problem on the Tube line that I travel home on.
I wish to speak to Clauses 65 and 66, which I oppose. As far as we are concerned, the part of the Bill on right to buy is not acceptable as it stands, and that is why we have given notice of our intention to oppose the clauses. It is quite clear to us that if the Government’s ability to make grants were removed, the right-to-buy voluntary deal would collapse and be off the table. If housing associations are not fully compensated, they will not carry out right to buy. Therefore, the removal of these clauses would stop the right to buy extension from going ahead, and I shall say why we think that that is really important.
For us, it is absolutely not acceptable for the extension to be funded by the sale of high-value council housing. This will be detrimental to local councils and will mean that there will not be enough houses for the 1.6 million households—especially those with large families—on social housing waiting lists. For us, it is also vital that one-for-one and like-for-like replacements are written into the Bill. For that reason, we oppose the clauses.
My Lords, I shall speak to what I think is the amendment of the noble Lords, Lord Beecham and Lord Kennedy, and I am sure that we will come back to it if I have not quite got that right.
We have already discussed today the grant-making powers. Clause 65 will prevent an overlap of provisions in respect of the payment of grant by the HCA to housing associations and it will prevent grants being required to be paid twice under separate provisions. The clause does not place any additional duties on the HCA and will help streamline existing legislation. Clause 66 will ensure that everyone is clear about to whom and to what the clauses in this chapter apply.
I thank the noble Lords, Lord Kennedy of Southwark and Lord Beecham, for their amendment. We understand the wider concerns about more homes being bought as buy-to-lets, made clear in Amendment 58. As noble Lords will know, we are addressing those concerns through the new rates of stamp duty, which will be 3% higher on the purchase of buy-to-lets.
For the reasons that I set out earlier, we do not think there is a case for specific restrictions to be put in place for properties sold under the voluntary right to buy. The right to buy is about giving individuals the opportunity to buy a home of their own, and tenants who do so should have the same freedoms as any other homeowner. They are not vultures or wide boys; they are decent people who have worked very hard and who aspire to own their own home, and it would be wholly unfair to housing association tenants who buy their home to be prevented from letting it out if they want to or need to for family, work or any other reason. It could restrict their mobility and we do not think that that would be reasonable.
Furthermore, with a commitment in the voluntary agreement to deliver additional homes through new supply, it is not necessary to impose controls of this sort or to restrict the use of the properties being sold. I therefore hope that the noble Lord will agree to withdraw the amendment.
Can the Minister help me out? She said that the solution to stopping properties being turned into buy to let was the new stamp duty provisions. However, if somebody acquires a property under the right to buy and then in due course vacates it and enters into a letting agreement, where does the stamp duty bite on that?
My Lords, I was referring to people who bought homes as second properties. In other words, I think the general market in second properties as buy-to-lets will be dampened somewhat by the new stamp duty rules.
I was in a round-about way, but I do not think that the noble Lord accepts that. In a round-about way I was talking about the whole dampening of the market.
My Lords, when the Minister has a chance—perhaps over the weekend—to look at the “Dispatches” programme, would she like to reflect on the information given to that programme by experienced housing professionals? It concerns the implications of illegal deferred sales, in which the money does indeed come from the wide boys and is given to an older person to buy, and many of these people will be pensioners. The arrangement then allows the house to be reclaimed five or eight years on when the pensioner dies. It is a malign form of equity release—if you like, a rolled-up mortgage payment. I hope that she will look at that. Socially, the housing professionals—obviously, it was a television programme and I do not know what the other side of the argument might have been—scandalise me, and I think the Minister, as a local authority person, will also be scandalised at what is being reported there.
My Lords, I think that the Minister overlooks the impact of allowing these properties to be re-let, particularly in London but also in other places of high demand where what had been, effectively, social housing will become housing on the market for the maximum rent that can be extracted from it. That is effectively at the cost of those who cannot afford that kind of rent or that kind of property, and who will remain stuck. They are the people who suffer from that regime. I do not think it a great hardship to require of people who are getting a substantial benefit not to then turn themselves into landlords making the maximum profit on a building they have never paid the market rent for. I find that, frankly, rather distasteful. However, clearly, the amendment that I moved is not quite up to the mark, so I beg leave to withdraw it.
Amendment 58 withdrawn.
Amendment 59 had been withdrawn from the Marshalled List.
Clause 62 agreed.
Debate on whether Clause 63 should stand part of the Bill.
My Lords, I rise to speak to my Amendment 59ZA, which proposes a new clause after Clause 63. We now move in earnest to the issue of financing the extension of right to buy. We have had a long debate about the extension of right to buy under the voluntary scheme for housing associations and we now consider how this will be financed. In moving this amendment, I should declare again my interest as president of the Local Government Association and chair of Peabody.
The issue we have been grappling with is that, whatever people may feel about the extension of the right to buy, there is deep disquiet, as we have heard from all parts of the House, about the mechanism for financing that extension. This is a crucial issue because it concerns a lot of people. Given a choice, everybody, including perhaps the Minister, would want to decouple these two policies that have been put together: the extension and the high-value sales. My amendment would enable that to happen without a huge additional burden on the government deficit.
My amendment would replace grant funding of the discount in voluntary right to buy with an equity loan. That equity loan would sit alongside the current right-to-acquire discount that is available for housing association purchases. The loan would be similar in kind to that of Help to Buy for private, newbuild sales: it would be a loan that stands behind the mortgage as security and is interest-free for five years, after which a lower rate of interest is paid. The right-to-buy loan would be funded by the Government. As we discussed in the last Committee day on this Bill, equity loans are regarded as financial instruments and therefore score as debt in the Government’s accounts but do not count towards the annual deficit, in contrast to direct funding from government. The coalition Government approved a budget of just under £10 billion to support Help to Buy up to the year 2020, so already a significant amount of money has been set aside to cover equity loans. In this instance, the equity loan would be up to the discount that is available under the current right-to-buy policy for local authority stock. Therefore, it would replace the grant funding that is currently proposed.
I put forward this amendment for the following reasons. First, under the current proposals, as a number of noble Lords have already said, a central government policy is being funded by a levy on local government. The recent report of the House of Commons DCLG Select Committee, an all-party committee, rightly took exception to this, arguing that if the Government want to do something, they should pay for it. Funding the discount in the way proposed in my amendment would address this issue: local government would no longer be required to fund a central government policy.
Secondly, the amendment would address the fact that, incredibly, even at this late stage, we do not have a set of numbers that add up in terms of the receipts that would be achieved, the replacement of local authority sales, the two-for-one policy in London, the funding of the discount as well as a contribution to the £1 billion brownfield regeneration fund. Indeed, an independent report from the Chartered Institute of Housing suggests that this is not possible. Shelter has calculated that there would be a shortfall of £2.45 billion in the financing. If it is correct that the numbers do not add up—as I have said, this late in the process, we still do not have a set of figures that demonstrate that they do—a number of things are likely to happen. First, demand may be managed through restricting eligibility. In the current pilot, a person has to have been a resident for 10 years. So the first potential option is to restrict demand by eligibility. The promise that people could have a “right” to buy will no longer be a right; it will be a right if they have lived in their property for 10 years. The second option for managing this imbalance in funding is essentially to have a policy of saying, “If we’ve run out of money for a given year, you can’t buy in that year, or even the year after”, so there will be a waiting-list policy to make the sums balance. That is equally problematic as far as potential purchasers are concerned. A third option is for the levy on local authorities to be set high—higher than would truly be acceptable and eating not just into absolutely higher-value properties, as a number of noble Lords have said, but into relatively higher-value properties; in other words, into the very core of stock that becomes vacant for local authorities. So a third way in which demand might be managed is essentially by levying a very high sum that goes beyond what any of us would reasonably call high-value properties. The last option, which I suspect will form part of the policy, is that instead of local authorities being truly funded on a like-for-like basis, they will get a proportion of the value of the new property and will have to borrow the rest. In the current right-to-buy policy, that is a third—the proportion may or may not be the same. Local authorities will then need to borrow. One reason why a number of local authorities struggle with the replacement policy is that they do not have the borrowing capability within their caps.
I suggest to noble Lords that any one of these options will be problematic. If we restrain demand, we will cause very unhappy housing association tenants. If we put a huge charge on local authorities, we will denude them of even the very limited remaining capacity for re-lets they have on vacant properties. So we start with a policy where, at the moment, any analysis in the public domain that I have seen suggests that the numbers do not add up. The alternative of the equity loan would avoid this difficulty.
The third reason why the amendment is worth considering is that under the current proposals higher-value areas—I emphasise “higher”, because this is relative and not absolute—will suffer a double whammy. First, these are areas where housing association sales are more likely to happen. They are the more desirable areas in which it is more likely that there will be voluntary sales. Secondly, they are the areas where the higher value, local authority properties are likely to be located, so over time these higher value areas will be denuded of social rented properties. That is an inevitable consequence of the funding mechanism that we are using alongside the extension of voluntary right to buy. This will move completely in the opposite direction to that of the mixed-income, mixed-tenure areas that we have aspired to for the past 50 years. The real consequence of this policy would be an acceleration of the move towards areas that are denuded of social rented properties. That will be particularly acute in London.
The amendment would avoid that and avoid the rather contorted policy of one-for-one replacement. We have had a lot of numbers bandied about this evening on this issue of one-for-one replacement, but the document that sets it out most clearly was published by the National Audit Office, which I commend to all noble Lords, called Extending the Right to Buy. Unusually, the NAO has assessed a policy before it is implemented. The critical passage in the report is as follows:
“One-for-one replacement does not necessarily mean like-for-like: replacement properties can be a different size, and built in a different area, compared to those that have been sold. The pace of replacements will also need to accelerate to keep pace with the target in subsequent years”.
This is talking about the reinvigorated right to buy. The report continues:
“Under the Department’s objective, housing providers have up to three years from sale of a council property to make a start on using the receipts to provide replacement homes. The Department has taken the housing starts and acquisitions funded by this policy for the three years 2012-13 to 2014-15 together”.
In other words, we are comparing three years of build against one year of sale. The report continues:
“This yields a total of 3,387, which roughly equates to the approximately 3,054 additional sales attributable to the reinvigorated Right to Buy in 2012-13. To meet the target of replacing the roughly 8,512 homes sold in 2014-15 by the end of 2017-18, however, would require quarterly housing starts to reach around 2,130”.
This is the key point. That is,
“a five-fold increase on recent figures of approximately 420 per quarter”.
In other words, this is an accelerating challenge. If you take the first three years of your build against the one year of sales and say that that is the comparison, you miss the point that as the sales accelerate the build rate has to accelerate as well. The calculation by the NAO is that it has to be five times faster than at present. That is pretty definitive evidence that one-for-one is already proving on the current right-to-buy policy very difficult to achieve.
If we went down the alternative route of an equity loan, local authorities would be free to manage their assets according to their own needs and reinvest the high-value sales where sale is appropriate—and they would make the choice—back into their own stock and new supply. That is exactly what the noble Lord, Lord Porter, was talking about. We would let local authorities make the right decisions on their assets.
There is one final reason that is crucial. Local tenants would still, just as they are through the right-to-buy policy, be able to acquire their properties. Their access to a mortgage would be equal through the loan model because it stands behind the mortgage as through a grant. But of course it will be a loan rather than a cash gift. This is a key point. The value of the cash discount now is much higher than in real terms than when right to buy was introduced in 1980. Then, the discount for a home was £7,787 while the discount for a flat was £10,382. If you uprate that for inflation, you reach a figure of £30,120 for a home and £49,000 for a flat. Compare those figures with the scale of the discount that we are now offering in the right-to-buy scheme, and it is clear why the issue of fraud and risk has come to the fore, as mentioned by other noble Lords. Moving to an equity loan would reduce the temptation as regards fraud and in my view would make it much more likely that people will stay in the property in which they have invested a mortgage and a loan on than they will if they are given a cash gift. This represents a fairer balance and is much more likely to lead to stable communities in the areas where properties are bought.
The Minister will no doubt argue that this policy represents too great a departure from the Conservative manifesto commitment. But I would say that we have already departed from it. We have not agreed to a right-to-buy policy: it is a voluntary policy for housing associations to sell their properties if they choose to do so. Indeed, as I said earlier, because the finances are unlikely to add up, it is not going to be a level playing field with local authority tenants because there will have to be some way in the process of restricting demand. So we have already moved away from that bold manifesto commitment. An equity loan instead of a grant will deliver equivalent opportunity for tenants who wish to buy, put the cost where it should properly lie, which is with Government, and will avoid a damaging sell-off of higher value council stock.
Let me quote again from the NAO report because it is crucial to this. The report looked at the impact assessment and formed a view about it:
“The department has carried out internal analysis to establish the value for money of extending the Right to Buy, including an economic and business case assessment, and this work is ongoing. When reviewed against good practice, however, the published Impact Assessment to the Bill has weaknesses. For example, it does not present alternative options for delivering the policy objectives or a summary of other options that were considered at an earlier stage”.
If this job is going to be done properly, we should give serious consideration to alternative options that deliver the opportunity for right to buy for housing association tenants.
Could the noble Lord explain the theology of the public financing of his proposal? I think he said at the start that this would not add to the deficit, but it would add to the PSBR. If that is right, is it the case that if the Government wanted to stay at the current level of PSBR in order to fund his ingenious proposal, something else would have to give?
The noble Lord’s interpretation is correct. Because there is a third-party asset against the expenditure, it shows as debt on the Government’s balance sheet, but it does not show as deficit spending. That was the means by which the Government were able to rapidly expand the Help to Buy initiative; it does not score as expenditure in the traditional way. If the Government were to fund this initiative, they could either take a view about how much they are likely to spend on Help to Buy—and as I said last time, something like £3.8 billion of the £10 billion has already been committed in terms of Help to Buy, so there is still some headroom there—or, alternatively, they could look at whether they would take additional debt on to the balance sheet. Those are the two choices. We are between a rock and a hard place here. We are tying together two policies which, on the face of it, at best, it is a struggle to add up. The alternative is to go straight on to deficit. That is a third option which allows the Government to deliver the opportunity in a way that does not destroy the Chancellor’s intentions in relation to the deficit.
My Lords, I support the amendment that the noble Lord, Lord Kerslake, put to us and commend to the Minister the devastating critique he made of the Government’s financial options. I invite her to have a good night’s sleep and come back and tell us how she thinks the Government could best respond to it.
I will pick out one particular element of what the noble Lord put to the House: the impact on what he described as richer areas, the probability that high-value homes in the local authority and housing association sectors would be most prevalent in the same place, and that those places would have higher property values in general. As he mentioned, London is the outstanding example, but we need to remember that “high-value areas” is always a relative concept. I come to this House from Stockport, which is one of 10 boroughs in Greater Manchester. As the Minister will be very well aware, it is one which might be described as “well off” among those 10, as would the borough of Trafford.
As a borough, we have a higher proportion of right-to-buy sales because we have more attractive property to sell. We have a waiting list that means that for every remaining council house there is another family waiting to go into it. Anything that reduces that stock and makes a replacement policy more difficult is to be very much regretted and will certainly lead to increasing pressure. If we add on top of that, as the noble Lord outlined, that there is likely to be something not far off forced confiscation of void properties—exceptionally so in Stockport compared with other Greater Manchester boroughs—the impact is increased and multiplied.
As well as the very thorough and detailed rebuttal that the noble Lord, Lord Kerslake, gave of the scheme and the various cul-de-sacs into which the financial planning might take it, there are some real additional problems, in particular for what we might describe as the richer areas, or the areas that have higher housing markets relative to those nearby. If one looks at one other aspect of the Government’s plan that is not yet revealed to us—what they mean by “high value”, whether that is within an authority, across Greater Manchester, across the whole of the north-west or across the whole country, and whether it is an absolute or some kind of relative figure—all these things can compound the problems highlighted in this aspect of the plan.
I hope very much that the Minister can respond in a helpful way to the amendment. If she takes some time to do so, fair enough, but a helpful response is essential.
My Lords, I also congratulate the noble Lord, Lord Kerslake, because it is possible that he has found a way to square a circle. Whether you support right to buy or have reservations about it in terms of the implications for waiting lists and so on, nobody today has defended the argument that local authorities should not find their stock sold to fund the tenants in another tenure. As the Camden Association of Street Properties said, why should they? They are not their tenants and it is not their property.
The noble Lord, Lord Kerslake, suggested—I understand that this is supported by Boris Johnson, the mayoral candidates and the like—a way to make it attractive, feasible and possible for people in housing association properties to buy and to take advantage of the opportunity to acquire that home, but to do so in a way that is not to the detriment of local authorities, which are expected to sell their stock, first, to fund the discounts, secondly to sort out brownfield sites, and thirdly to replace their own loss of property that has gone in sales.
The figures do not stack up. We know that it will take three years or more for receipts to flow from selling high-value property in authorities such as Cambridge and there will be a queue of would-be buyers knocking at the door to take advantage of the right to buy in housing associations. That means that the levy is going to have to be imposed, not just on local authorities with retained stock, but on local authorities which do not have a single council house left to sell, because they have gone over in stock transfers, so they will have to be levied appropriately.
Either way, local authority tenants, local authority council tax payers and local authority councillors will be outraged at being asked to fund very large Christmas presents which are so high that they will induce a lot of abuse and some fraud, when alternatively, as the noble Lord, Lord Kerslake, has suggested, we already have the very good example, which this Government have modelled, of Help to Buy. We can extend Help to Buy to housing association tenants and, as a result, the Government will achieve their objective of extending home ownership, and housing association tenants will achieve their objective of being able to acquire their own home, but local authorities will not be clobbered and penalised unfairly to pay for other people’s Christmas presents which invite abuse.
I very much hope that the Minister will hear the concerns around this Committee, not about right to buy so much as about the funding of the discounts, which have been expressed by almost everyone who has spoken tonight. Nobody has defended the method of funding these discounts tonight. In three hours before supper and now, nobody has defended it. All those who have spoken think it is wrong, in one way or another, but the noble Lord, Lord Kerslake, has found a way to do it, modelled on the Government’s own schemes, which would seem to most of us to be fair, equitable and reasonable. It helps people into home ownership, but not at the expense of clobbering poorer council tenants who will never be able to afford to buy. I very much hope that the Minister will take this away. If so, she may, working with the noble Lord, Lord Kerslake, be able to come forward with proposals for funding this which achieve consensus in your Lordships’ House.
My Lords, I join other noble Lords in congratulating the noble Lord, Lord Kerslake, on his ingenious approach. I am, however, slightly disconcerted by the fact that the Mayor of London is, apparently, very much in support of this. No doubt, by tomorrow he will be claiming that it was his idea in the first place.
Well, yes—it might bring it to a rapid end. It does appear to be a very useful way forward. I also endorse my noble friend Lady Hollis’s reference to Help to Buy as another avenue through which it should be possible to assist people into home ownership without making difficulties either for local authorities, or, more importantly, for other people who are in need of rehousing. I hope that the Minister will be sympathetic to the amendment.
However, I am slightly puzzled by the description by the noble Lord, Lord Kerslake, of the difficulties of replacing homes on the basis of the numbers being very hard to achieve. I think he said that something like 5,000 a year would be needed to replace and it was difficult to see how that number could be built. That 5,000 houses would be something like 2.5% of the Government’s annual target of 200,000.
My Lords, if I can just explain, this is from the National Audit Office report. Part of what the NAO has looked at is the impact of the reinvigorated right to buy. Has one for one actually happened? What the NAO report essentially says is that the equivalent number that the Minister has referred to comes from comparing three years of build, effectively, against one year of sale, because local authorities have had three years in which to build. However, if one looks at the rate at which sales are accelerating, the rate at which build numbers have to accelerate is very rapid indeed. The analysis concludes that essentially, in order to make the one-for-one policy a reality over time, you effectively have to achieve a fivefold increase in the rate of build. I commend the report to the noble Lord for him to read because it sets out this issue in very clear terms.
Am I wrong about the numbers? I thought the noble Lord referred to a figure of 5,000 cited by the NAO. I am not saying that it is his figure.
The key point I am making is contained in the following sentence, which I will read out again:
“To meet the target of replacing the roughly 8,512 homes sold in 2014-15 by the end of 2017-18, however, would require quarterly housing starts”, to go from their current rate of 420 a quarter to 2,130 a quarter. In other words, we would have to speed up by five times to achieve a true one-for-one policy.
That sounds like a lot, given the record of the last few years. However, when I was first elected to the council in Newcastle in 1967, the city council built 3,000 council houses in a year. That was one authority. It cannot be beyond the capacity of the construction industry to achieve this, given the resources to invest. I obviously concede that it cannot be achieved overnight because we are starting from next to nothing, but over a three-year period I would have thought we could build—literally—up to that sort of figure, given the investment.
I am conscious of the late hour but I will make one last point. I think the NAO report is on to something and I commend it to colleagues to read. It is saying essentially that it is a question of the ability to find both the land and the finance. Under the current right-to-buy policy, local authorities get to keep only a third of the receipts for any of the additional sales made. They have to borrow the balance to make the numbers add up. That in turn creates difficulties because it bumps up against their cap on HRA. So there are three reasons why the policy is challenging in terms of delivering one for one. The first is to find the land in higher-value areas to achieve true like for like, as I said earlier; the second is to get the momentum of construction under way; the third—this is crucial—is to make the finances work, given that you have to borrow and you have a cap on your borrowing.
The cap is imposed. It is not a cap that the authorities choose. That is in the Government’s hands. If they altered that, local authorities—and, indeed, housing associations for that matter—could gear up to provide the relatively modest number that we are talking about against a government target of 200,000, which is any case inadequate, over the next few years. So I think that the noble Lord is being a little conservative in his approach—heaven forfend—and I would have thought it would be more ambitious to look to the Government to facilitate that greater rate of replacement. However, that does not in any way invalidate the amendment to which he is speaking, which is in a rather different context. I certainly support that, but I hope the noble Lord will not let the Government get away with using his other comments to get off the hook in facilitating the number of houses we need.
I will have one last go at this. The point I was making is that it is often said that we are now achieving the delivery of the one-for-one policy. We are not. That is the definitive point I am making. Indeed, that is what the NAO says. The delivery of the one-for-one policy is very difficult to achieve in its current form. You would have to change fundamentally the way you think about the financing, and you would go back to the question of whether the numbers add up.
My Lords, I thank the noble Lord, Lord Kerslake, for both his endeavours and his amendment, which proposes an equity loan scheme for housing association tenants in place of the voluntary right-to-buy discount. I understand that part of the reason for introducing this amendment was to reopen the debate about the funding of the right-to-buy discount.
An equity loan, by its nature, is not a discount and has to be repaid by the tenant. This is a very different offer—more akin to the Help to Buy scheme than to an extension of the right-to-buy scheme. This will inevitably make home ownership less attractive to the very tenants we are trying to reach: those on lower wages who are being priced out of home ownership because of high house prices.
We had a clear manifesto commitment to extend the right to buy to housing association tenants, and the voluntary agreement with the sector will give 1.3 million families the chance to purchase a home at right-to-buy level discounts. Our extension of the right to buy is about offering housing association tenants the same opportunity as council tenants. Providing equity loans to tenants, as proposed under this amendment, would not provide the same offer to them. We have been clear that housing associations will be fully compensated for the right-to-buy discounts offered to tenants and that this would be funded through the sale of vacant local authority high-value assets. They will be fully compensated. There are billions of pounds locked up in local authority housing assets. It is only right that when they become vacant they are sold, enabling the receipts to be reinvested in building new homes and supporting home ownership through the right to buy.
Why is it only right that they are sold? They should be used for other families who need social housing.
In your remarks, you said that it is only right that these houses are sold to provide receipts. Why are they not just used for other families who need a large council house?
The money is not going to stretch that far. We have already established that it is supposed to pay for expensive discounts, brownfield sites, and a replacement for local authority stock. The Minister says that local authority tenants have the right to buy: we did not expect housing associations to pay for their discounts, but we now expect local authorities to pay for the discounts on not only their own property being sold but housing association property being sold as well. I can see no fairness in that at all.
The noble Lord, Lord Kerslake, has produced a pathway forward. Indeed, if the Minister wished, one could add to it to make it more attractive. A right-to-acquire discount, which runs from about £6,000 to £9,000, could be an incentive before adding in equity loans. This can be modelled in different ways to make it attractive and reasonable, but not to clobber poorer local authority tenants to fund the giveaway discounts for people who are better off.
My Lords, as I said earlier, this amendment is about replacing the discount with an equity loan. The mechanism for using high-value assets to fund both the discounts and investment in new properties will be considered in another grouping. Given how late in the evening it is, I hope noble Lords will indulge me and stick very purely to this amendment.
The Government are selling off assets they do not need and we expect councils to do the same—
My Lords, I hope that the Minister did not get the impression that, if a high-value house becomes free in Stockport, it is then not ready to be let to another tenant on the waiting list. It is not surplus property, it is empty property in the course of transition from one tenant to another. If the incoming tenant is to be told that the property is not available because it is being sold to participate in some government confiscation scheme, that does not provide the social welfare outcome which this House wants.
I grew up in a large council house in Southwark and my family benefited very much from that. Denying other, larger families that is just wrong.
My Lords, as I said, we are coming to the detailed mechanism of high-value assets soon and that is certainly one thing we will be discussing. It is very important that noble Lords make these points at this stage in the Bill, because they will form part of the Government’s consideration. I am not, in any way, dismissing the points made. We will need houses and dwellings of different sizes, but the mechanism of how that will work will be set out in due course.
This is probably not the best hour or the best group of amendments in which to start discussing this, but I should like to address the points of the noble Lord, Lord Kerslake, about the value for money assessment. We are clear that we have done the right level of analysis to support the decision-making at each stage and to ensure that proposals would offer good value for money. We have done an economic analysis for the right-to-buy extension, taking into account the fact that that would be funded from the receipt of vacant high-value asset council sales, which shows that there would be a clear economic benefit. We have also undertaken an analysis for the voluntary right-to-buy pilot.
I apologise as I recognise the lateness of the hour. Will the Minister acknowledge that many Members of your Lordships’ House and many members of the public have already had a pretty good sight of the proposal of the noble Lord, Lord Kerslake? What we have heard from the Minister so far is that the Government are rejecting it merely on the grounds that they want the scheme for housing association tenants to be identical to the scheme for council housing tenants. Will the Minister tell us—perhaps she could write to us between now and Thursday—what assessment the Government have made of the noble Lord’s scheme and what assessment they have made of the likely drop in take-up were the noble Lord’s proposed funding scheme introduced rather than the one proposed by the Government, so hated by Members of your Lordships’ House?
I understand that point. As far as I am aware, the Government have not made an assessment of the proposal of the noble Lord, Lord Kerslake, simply because they made a manifesto commitment on the mechanism that I have just outlined.
The amendment of the noble Lord, Lord Kerslake, seems to represent a way forward. The noble Baroness indicates that it might not work or may not be necessary. I do not understand why she should reject it out of hand on the basis of her hypothesis rather than facilitate its introduction and test it. What is wrong with that? It would not necessarily replace the proposition that is contained in the Bill but it would allow a proper test of a proposition that she is sceptical about. The noble Lord is confident about it, and with all due respect to the Minister, some of us might be a bit more inclined to put our money on him than on the Minister’s advisers and those who have prepared her for this debate. I do not know what the noble Lord thinks, but I do not find the Minister’s response particularly encouraging.
Moreover, Clause 63 relates specifically to London and the Greater London Authority. That illustrates one of the difficulties of this debate, because London is a special case. It is arguable that some of the proposals in the Bill fit better in other parts of the country, as the housing pressures in London are very distinct. Can the Minister explain why Greater London should be singled out for special provision in Clause 63, whereas other local authority areas are not treated discretely, as it were? By the Greater London Authority I suppose we mean the mayor. Is London getting particular consideration? Why should that be the case when in the country as a whole there are the same demands and pressures to a greater or lesser extent? Why should London be treated differently for the purposes of this Bill?
My Lords, the clause is necessary because the Homes and Communities Agency does not have the locus to make payments in relation to housing association properties sold in London. It is not being singled out for special treatment, but that is why the clause is necessary.
The reason I have rejected the amendment in the name of noble Lord, Lord Kerslake, is, first, because of the very clear manifesto commitment. The amendment departs in nature and in aim from the manifesto commitment. Secondly—
My Lords, the equity loan is not a discount. It is an equity loan. It is an entirely different mechanism. The discount gives an upfront reduction, whereas with an equity loan after five years you would have to start to repay it with interest. It is not comparing like with like. They are two different mechanisms.
My Lords, I am very conscious of the hour, so I will keep this very short. I will make three points. First, the amendment was tabled in a genuine effort to deal with what I think is one of the most substantive problems with the Bill in its current form: namely, the decoupling of the right-to-buy opportunity from the means of funding it, which remains a running sore through the Bill which has not been resolved. It is a running sore because it is unfair and because we do not yet know—and, indeed, I think there are big doubts over—whether the numbers work.
Secondly, as the noble Lord, Lord Campbell-Savours, said, we have already departed from an absolutely like-for-like policy for housing associations and local authorities. That bridge has been crossed in what is in front of us now. It seems to me that the critical policy intent here was to give people in housing associations the opportunity to buy. The amendment does that, but it does not do it in a way that causes huge ructions and difficulties in other ways.
My third and final point is that it is clearly possible to deliver one for one in a different world. That was not the point I was making. The point I was making was that according to the numbers that we have, which have been tested by the NAO, we are not delivering one for one in the current arrangements. I have no confidence that we will do better on it given that nothing else changes within the proposals. So I ask the Minister to revisit this. I am confident that it is technically doable. It fits with the intent of the Conservative Party manifesto and it addresses some real difficulties with the Bill in its current form. Having said all that, I will of course not move the amendment.
Clause 63 agreed.
Amendment 59ZA not moved.
Clause 64: Monitoring
Moved by Lord Kennedy of Southwark
59A: Clause 64, page 28, line 32, at end insert—
“( ) In carrying out the duty to monitor compliance under subsection (1), the Regulator must make a report where a community-led housing provider, as defined in Schedule (Community-led housing schemes), or a tenant management organisation, as defined in section (tenant management organisations), has used grants made by the Secretary of State to facilitate or meet a right to buy discount.”
My Lords, looking at the time, I intend to be very brief in moving my amendment, your Lordships will be pleased to know. Amendments 59A and 82B in this group are in my name and that of my noble friend Lord Beecham. Amendment 59A seeks to add a duty on the Regulator of Social Housing so that, when monitoring compliance,
“the Regulator must make a report where a community-led housing provider … has used grants made by the Secretary of State to facilitate or meet a right to buy discount”.
Amendment 82B would put in the schedule exactly what is meant by community-led housing scheme, for the avoidance of doubt.
Noble Lords all around the Chamber have expressed support today for co-operative and community-led housing, but without my Amendment 59A we would have very little information about what is happening in this part of the social housing sector as a result of the policies being implemented in this part of the Bill. The group also includes a clause stand part debate. With that, I beg to move.
My Lords, I will be equally brief. Amendment 59A, in the name of the noble Lords, Lord Kennedy and Lord Beecham, would require the Regulator of Social Housing to monitor and report where a community-led housing provider or TMO had used grants made by the Secretary of State in respect of a right-to-buy discount.
Let me be clear again that TMOs are not part of the right-to-buy arrangements. Under the voluntary right to buy, the landlord/tenant relationship is with the property-owning landlord as a registered provider, and the tenant would exercise their right to buy against that landlord. The amendment does not make sense in that landscape. If the concern is about different tenures—social tenants and owner-occupiers—being part of a TMO, there is no reason to believe that tenants and owners could not come together in this way.
I appreciate that the noble Lords, Lord Beecham and Lord Kennedy, want to protect TMOs and other community-led organisations that are not landlords so that they continue to help tenants to play an active role. The voluntary right-to-buy agreement contains protections that allow housing associations discretion not to sell properties that are important to their communities and clients.
The purpose of Amendment 82B is to create a definition of community-led housing, but there is no need to, as it is a colloquial umbrella term to cover a range of different and distinct structures and organisations, such as fully mutual co-operatives, community land trusts and tenant management organisations. The Government very much support community-led housing, and these bodies have distinct and specific legal definitions. Fully mutual housing associations are defined in Section 5 of the Housing Act 1985. Community land trusts are defined in statute in Section 79 of the Housing and Regeneration Act. TMOs are defined through the Housing (Right to Manage) (England) Regulations 2012, Part 1 Section 3.
Additionally, the organisations are different in nature. Fully mutual housing co-ops will generally own their homes, community land trusts may or may not, and TMOs will generally act as a managing agent for housing owned by a local authority. Imposing an additional overarching definition would be unnecessary. I ask the noble Lord to withdraw his amendment.
I apologise but have an incredibly quick point to make. There is also a clause stand part debate in this group on Clause 64. I have read Clause 64 and the Explanatory Notes on it many times. It seems, basically, that the Secretary of State will draw up a set of criteria and tell the regulator to check what the housing association is doing against those criteria. The criteria will probably be those contained in the deal between the National Housing Federation and the Government, but they may be different and could be changed. Could the Minister provide a more detailed briefing in the fairly near future on what all of this means?
I thank the Minister. That is very helpful. We put the amendments down because there is concern in the housing sector about what is happening in this clause, so her comments are very useful and welcome. I am very happy to withdraw my amendment but again place on record my thanks to the Minister for the way she handled the debates today. I beg leave to withdraw the amendment.
Amendment 59A withdrawn.
Clause 64 agreed.
Amendment 59B not moved.
Clause 65 agreed.
Amendments 60 and 60A not moved.
Clause 66 agreed.