Housing: Availability and Affordability - Motion to Take Note

Part of the debate – in the House of Lords at 2:12 pm on 12th October 2017.

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Photo of Lord Young of Cookham Lord Young of Cookham Lord in Waiting (HM Household) (Whip), Lords Spokesperson (Cabinet Office) 2:12 pm, 12th October 2017

My Lords, I join others in thanking the noble Lord, Lord Smith of Leigh, for selecting this subject for debate and for bringing to his opening speech his wealth of experience as leader of Wigan Council for 26 years—a local authority with major housing challenges. I thank all those who contributed, some of whom have taken an interest in housing for many decades. I first discussed housing with the noble Lord, Lord Best, when I was chairman of a housing association in the early 1970s. All those who spoke in the debate have been motivated by a sense of impatience—and a sense of anger, at times, from the noble Lord, Lord Cashman. That has run right through the debate: impatience at the lack of adequate progress over recent years to meet the legitimate aspiration of every family to have a decent home to live in.

I am conscious that I cannot respond to all the points that have been made in the debate—and when I do not of course I will write. As the noble Lord, Lord Smith, said in his opening remarks, and as others, too, have said, successive Governments have failed to provide the homes that we need. As a result, whether for sale or rent, housing is increasingly unaffordable. As the noble Lord, Lord Smith, told us, an average home to buy in England now costs almost eight times average earnings. Twenty years ago it was three and a half times average earnings.

The right reverend Prelate the Bishop of Chelmsford told us of the social consequences of moving towards a more polarised housing market and the dislocation for families who have to move, and my noble friend Lord Kirkham reminded us of the frustration of young people who cannot get a decent home of their own. Our manifesto commitment is clear: we want to deliver 1 million homes by the end of 2020 and 500,000 more by the end of 2022.

The noble Lord’s Motion has two themes—availability and affordability—and I will address each in turn. I agree with what my noble friend Lord Kirkham said: housing is more important to the man in the street than Brexit.

On availability, in the last Parliament we set out over £25 billion of spending on housing up to 2021 and last week at the party conference we announced another £12 billion of spending up to 2021 in order to tackle the failures at every point in the system. This includes a further £10 billion of new funding for Help to Buy—I will say a bit more about that in a moment—which could help around 135,000 more people to buy their homes, and another £2 billion in additional funding for affordable housing in England.

As a former Treasury Minister, I will say that at a time when there has been intense downward pressure on departmental budgets, the figures that I have mentioned represent a very substantial commitment by the Government to investment in housing and show our determination to do better. As the noble Lord, Lord Stunell, said: yes, we will have to pay and yes, we are paying. I will pass on to the Chancellor of the Exchequer my noble friend Lord Horam’s suggestions about the division of spending into capital and current.

If we want new homes to be built by councils and housing associations, we recognise that they need a stable investment environment. The noble Lord, Lord Stoneham, said that continuity was what his chief executive really wanted. That is why we have recently set out a long-term rent deal for social landlords in England, limiting increases to CPI plus 1% for five years; an announcement welcomed by David Orr, chief executive of the NHF, as,

“a huge change in tone and approach”.

I am grateful to the noble Baroness, Lady Warwick, for her generous comments on some of the recent announcements.

What everyone in this debate wants is to see these extra resources spent effectively and promptly and targeted at those in greatest need. Our policies are already having an impact. In 2015-16 we delivered nearly 190,000 homes in net additions. That number was up 11% on the previous year and was the highest level since 2007-08. We do not yet have the net additions figures for the most recent year, but measures of new-build starts and completions are up again. In the year to June 2017, new-build dwelling starts totalled 164,960—up by 13% compared with the year to June 2016 and the highest for nine years. During the same period, completions totalled over 153,000, an increase of 11% compared with last year. For the year ending March 2017, the planning system granted permission for 304,000 new homes, up 15% on the year ending March 2016 and up 70% on the year ending March 2012. We have policies, which I hope to come to in a moment, to ensure that these permissions are translated into homes for families more promptly than in the past—a point mentioned by the noble Lord, Lord Smith, in his speech.

The message from today’s debate is that, however well we have done and however much better we may have done than our predecessors, it is not enough. We know that there is a lot more that needs to be done if we are going to address today’s unmet needs, such as on waiting lists, mentioned by the noble Baroness, Lady Warwick, and at the same time keep up with future demand while ensuring that we also deal with affordability. Our housing White Paper, which we debated earlier this year, sets out how we will: make more land available and help local areas plan for the right homes in the right places; build homes faster, giving local authorities the tools they need to drive new housing and hold developers to account and assisting local authorities where necessary with extra infrastructure; bring new players into the housing market, reducing the dominance of a few major housebuilders, as mentioned by the noble Lord, Lord Best; and champion modern methods of construction and support new investment, hopefully driving up productivity—a point mentioned by my noble friend Lady Neville-Rolfe. We also want to give local people a say over new development and ensure that they feel the benefits of new infrastructure.

Many noble Lords spoke about planning and the constraints it has imposed on securing the necessary consents. I may be wrong, but I think that there has been a shift in public opinion about the imperative for more homes, as more and more families have children or grandchildren who struggle to get a decent home. I detect a growing, but not universal, impatience with unjustified nimbyism. Of course we should be alive to the need to avoid development that is inappropriate, but in my last years in another place I detected a recognition of the need—and at times a welcome—for well-designed, appropriate development on sites that might have generated a more hostile response in earlier years, particularly if it was targeted at meeting local needs.

Often, the concern has been not so much about the development but about the infrastructure—a point made by several noble Lords in this debate, including my noble friend Lady Neville-Rolfe, who spoke about roundabouts. That is exactly why we have introduced our new £2.3 billion housing infrastructure fund to make sure that the infrastructure is put in first. We launched our prospectus on 4 July and applications closed on 28 September, with the ambition of reaching as many councils as possible. The fund is oversubscribed and we expect to start announcing successful bids in early 2018. The money will be focused on areas of greatest housing need, helping to deliver up to 100,000 new homes.

My noble friend Lady Neville-Rolfe mentioned the release of public land. Again, we are taking direct action there. Since 2011 we have released land or identified land to be released with the capacity for up to 249,000 homes. Once permission has been granted—I think it was the noble Lord, Lord Stunell, who said that there were 600,000 extant planning consents—we are proposing greater scrutiny and transparency of a site’s delivery prospects. This includes more streamlined completion notice procedures and new guidance encouraging more active use of compulsory purchase powers by local authorities at stalled housing sites. Those are just some of the measures we have introduced to secure a step change in the volume of new starts.

Affordability is the other subject of the noble Lord’s debate. Affordability has to be a priority for any Government. Traditionally, affordable homes were provided by local authorities and many questions have been raised in the debate as to why we cannot do what we did in the 1950s. If we could build nearly 200,000 council houses in 1953, why can we not do so now, when the country is more prosperous? The House is grateful to my noble friend Lord Horam for his historical intervention explaining how that commitment came about.

The time has come to think again about our approach to social housing, not least in the wake of the Grenfell Tower tragedy. The noble Lord, Lord Stoneham, made the point that we need that review. In a speech to the National Housing Federation conference, the Secretary of State recently announced that the Government will be bringing forward a Green Paper on social housing in England—a wide-ranging, top-to-bottom review of the issues facing the sector. It will be the most substantial report of its kind for a generation, tackling head-on the issue of affordability—which was the motivation for the social housing movement several generations ago—and looking at the role of social housing in society today. I will ensure that all the contributions of noble Lords in today’s debate are fed in to that review.

However, the context has changed since the 1950s and 1960s, and I will spend a minute looking at this. Housing associations were not significant players then and historically have been classified as private sector bodies. As a result, Governments of all parties have routed public funds for social housing to housing associations rather than local authorities, because housing association borrowings did not score as public debt. That meant that for every given public pound, the Housing Minister could get more social housing through housing associations than local authorities. I will avoid a theological debate as to whether that should score as public expenditure, but that is the reality and that has been a significant change.

There has been another since the golden years of the 1950s. Section 106 planning obligations were not there then; they mean that local authorities can secure the direct provision of, or financial contributions toward, affordable housing, with the cost borne not by the public purse but by landowners securing less of a windfall gain when they get planning consent. In 2015-16, over 12,000 affordable housing completions were fully funded, and 350 partially funded, through Section 106.

The final change is that local authorities are no longer the significant landlords they were. Since 1988, through large-scale voluntary transfer, some councils, with the support of their tenants, voting in a ballot, decided to transfer their housing to a housing association. They did this because it helped improve the standard of their housing stock, with faster access to investment. In many cases it got them a more benign rent regime and additional benefits such as greater tenant choice and participation. So the context has changed; but, having made those points, the Government do see a significant role for local authorities again. More than twice as much council housing has been built since 2010 than in the previous 13 years and more affordable homes overall delivered in the last six years than in the last six years of Labour government. The numbers of new council homes have been increasing year on year, and they are now an important source of new supply. In 2014 we saw the highest number of council house starts for 23 years.

We want to go further. We want to see a new generation of council house building and housing association homes. The extra funding and rent certainty we have just announced will further support councils and housing associations in areas of acute affordability pressure, where working families are struggling with the costs of rent and some are at risk of homelessness. We will be looking to the sector to show that it can make the best possible use of its resources and make a substantial contribution to building the homes that all noble Lords want to see built.

The chief executive of the National Housing Federation said:

“The additional £2 billion will make a real difference to those let down by a broken housing market. Building homes for social rent will make work pay and help bring down the housing benefit bill in the long run by moving people out of costly private lets”.

Those announcements build on the flexibilities that councils already have, following the self-financing settlement in 2012, which will enable them to build more homes to meet housing pressures.

A number of noble Lords mentioned the borrowing capacity of local authorities and wanted the ceiling lifted or abolished. There is still around £3.4 billion of borrowing capacity available to local housing authorities. Some £300 million of additional borrowing was made available to councils in England in 2013, but only £144 million was taken up by councils. There are also substantial reserves, not just in the housing revenue accounts of local authorities but in the reserves of those councils that have transferred their stock over to housing associations. The Government responded to the Economic Affairs Committee’s report. We had a debate on it, which I think I may have answered. In response to the noble Lord, Lord Kennedy, and others, on the issue of raising the capital on local authority borrowing, we will look seriously at any request from councils that will result in a significant investment in additional housing.

On the second prong of the Motion—affordability—we have plans to increase the output of affordable homes. Affordability is an issue for home buyers as well, as my noble friend Lord Kirkham mentioned. We are supporting first-time buyers to achieve their ambition of home ownership. That is why last week we announced £10 billion of new funding for the Help to Buy equity loan, which could help around 135,000 more people to buy homes by 2021, on top of the 400,000 households that have been helped by government-backed schemes—over half of them through Help to Buy.

We ran into a bit of headwind during the debate on Help to Buy; it was criticised by the noble Baroness, Lady Donaghy, and others. Some 39% of buyers had an annual household income of less than £40,000. An independent evaluation report of the Help to Buy scheme concluded that Help to Buy does not materially impact on house prices, it has helped to improve market access, especially among first-time buyers, and has encouraged more lenders into the new-build market. Help to Buy customers are satisfied with the buying process. The £10 billion for Help to Buy is different from the £2 billion referred to earlier, in that the Government will get money in Help to Buy back. In effect, it is a loan that the Government get back, possibly with additional funds— depending on the movement of house prices—whereas the Government will obviously not get the £2 billion investment in housing back.

I want to touch on one or two of the points made by noble Lords. There has been a lot of focus on homelessness from the noble Lord, Lord Smith, my noble friend Baroness Neville-Rolfe, the noble Baron, Lord Cashman, the right reverend Prelate and others. We are committed to doing more to prevent more people becoming homeless in the first place. I am grateful to the noble Lord, Lord Best, for piloting through this House the most ambitious legislative reform in decades: the Homelessness Reduction Act. On resources, a point raised by the noble Lord, Lord Kennedy, we have allocated £550 million until 2020 to tackle homelessness and rough sleeping, as well as supporting the Homelessness Reduction Act. We are protecting £350 million of funding for local authorities and £149 million of central government funding for homelessness programmes.

There was much comment on Section 106 and the issue of viability assessments. I think there was a case, after the economic downturn, for having another look at some of Section 106 where, if no change was made at all, no houses would have been built. I take on board the criticisms made in the debate by the noble Baronesses, Lady Donaghy and Lady Young, the noble Lord, Lord Best, and others. Viability assessments are necessary to make sure that plans and individual proposals are deliverable, but we are aware—even more so now because of the debate—that their use can add complexity and uncertainty and lead to delays in and the reduction of affordable housing.

We are consulting on a new approach to viability with a view to speeding up the decision-making process by reducing the use of VA at the planning application stage. In response to demands for increased transparency, we are consulting on increased transparency so that local communities know what contributions are expected. The plans should set out how developers can contribute to infrastructure and affordable housing.

The noble Lord, Lord Best, spoke about the broken housing market being dominated by a small number of big players. Our housing White Paper set out our plans to encourage new players into the market through loan funding for small builders, custom builders and innovators. We are also improving transparency on buildout and proposing to make developers publish data on how quickly they build after getting planning consent.

A number of concerns were expressed about supported housing, a matter of great interest to this House which has been debated on many occasions. As noble Lords know, we announced proposals for a new funding model for supported housing, to kick in in April 2019. There have been a number of responses to that. We understand that the sector needs certainty now to plan delivery. We will announce next steps shortly in response to the consultation process.

I am conscious that I have about 15 pages of notes in front of me responding to the many very valid points that noble Lords have made. If the House will accept it, I should like to write to them, in no way devaluing the importance of their contributions.

We have so much to do. Successive Governments have failed to provide the homes we need. Progress has been made, but it is not enough. This Government are determined to work with every local authority, organisation and business with a role to play to ensure that we build more of the good-quality homes this country needs, and help more people to achieve their dream of home ownership and help more people into good-quality rented accommodation at a price they can afford. We are committed to deliver on our promise of 1 million homes by 2020 and a further half a million by 2022, and the action that I have set out in this debate shows how we propose to achieve it.