(6 years, 3 months ago)
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Lord Best (CB)
My Lords, I am delighted to introduce this debate on the performance of the UK’s major housebuilders and, in advance, I thank all noble Lords who are joining in. For some excellent briefings and reports, I also thank our Library, the property analyst Alastair Stewart, Shelter, the Town and Country Planning Association and the Local Government Association. I declare my interest as vice-president of the last two of these. My contribution to this debate is to note that the UK’s major housebuilders are not going to achieve either the quantity or the quality of the new homes the nation needs. I will then suggest ways in which the current situation might be improved.
For well over 50 years, the private sector housebuilders have built something in the region of 150,000 homes a year. That was less than half the total in times past, but with the demise of council housebuilding this contribution has become 80% today with, thankfully, housing associations providing most of the rest. There is no reason to expect this sector dramatically to increase its output. Indeed, it is not in the interests of the industry to end the scarcity of homes that has driven up house prices. Over the five years to 2013, for example, while housebuilding nosedived to a post-war low, the stock market valuation of Britain’s largest housebuilders rose by 342%.
Moreover, the shape of the housebuilding industry has changed dramatically in recent years: there are just half as many small and medium-sized builders as there were 10 years ago. The SME builders have seen their share of the market drop from about two-thirds of new homes in the 1980s to around 37% 10 years ago, and to just 12% today. Meanwhile, fewer than a dozen major housebuilders are responsible for 70% of the nation’s new housing, with just eight companies accounting for well over half the total. It is crystal clear not only that private sector housebuilders will never get us anywhere near the 300,000 homes we need but that relying on this sector now means dependency on a very small number of huge firms. This brings with it the dangers of the market being controlled by a small, powerful oligopoly.
The business model for the major volume housebuilders has let us down. With some notable exceptions, too often these companies appear to do whatever it takes to secure the land, concentrating on pristine greenfield sites. They then promise plenty of affordable housing and developer contributions, but once planning consent is granted, they tell councils that viability means they must renege on agreements made, in particular by reducing drastically the number of affordable homes previously pledged. If the local authority has the temerity to object, the housebuilder may threaten to go to expensive appeal, deploying well-paid consultants who can easily outgun grossly underresourced local authority planners.
The volume housebuilders are also accused of using bog-standard national pattern-book designs, unsympathetic to local circumstances, and of shoddy workmanship and poor customer care. As a member of the 2016 inquiry of the APPG for Excellence in the Built Environment, I was appalled by the tales we heard of defective construction—water cascading through roofs, mould inside and out, inoperative drains et cetera—and the difficulties encountered in getting these problems fixed. We noted that 93% of buyers had had problems with their builders and that customer dissatisfaction had grown from 10% of buyers in 2013 to 14% in 2015, leaving some 15,500 dissatisfied homebuyers that year. Then there is the scam—which I am thankful the Government are keen to address—of the big housebuilders selling houses on a leasehold basis with fiercely escalating ground rents.
Productivity in the industry remains very low, with a chronic lack of investment in modern technology or new materials. All work is subcontracted, very often with bills not paid until as late as possible. There is a disgraceful disregard for the need to replace the ageing indigenous workforce and train a new generation, the industry instead relying heavily on imported labour, mostly from eastern Europe, which may well be a more scarce resource post Brexit.
The response to this dependency on a handful of major housebuilders must be to support alternative providers, and the Government are indeed bringing forward a range of measures to this end. I commend the diversification policies set out by the Secretary of State, Sajid Javid, and my criticism is rather that each of them does not go far enough. They involve, first, backing those councils who are up for it as direct housing providers. After all, councils were building almost 200,000 homes a year when I started in housing. We need to go further than the Chancellor’s latest move to allow an increase in the borrowing limit for certain authorities in as yet undefined places. All councils should be able to borrow freely, as in Scotland, within the existing prudential borrowing rules which protect against any risky borrowing, and to add a further boost councils should be able to keep 100% of their receipts from further council house sales to plough back into building replacement affordable homes.
Secondly, we must boost further the all-important output of housing associations, which could certainly double their current programme of 30,000 to 40,000 homes a year. It was good to hear the Prime Minister announce in October extra money for so-called social rented homes, in contrast to recent policies that have driven housing associations to charge rents too high in many areas for those in severe need, but the level of the essential government grant for this programme is relatively modest, and more of the same is badly needed.
Thirdly, we should be giving life to the more specialist providers like community land trusts, custom housebuilding projects and an exciting new generation of garden town development corporations.
Fourthly, we should be bolstering the smaller, local housebuilders who are well suited to handling small sites and more specialist schemes. Many are run by people living and working locally who are keen to train their own workforce and see their efforts enhancing their own communities, not blighting them. The Government’s announcement that local plans should include 20% of future homes on small sites could be a game changer in favouring small firms, alongside their enlarged guarantee scheme which can overcome the reluctance of banks to extend credit to these firms. They deserve more of the same.
What about the extra costs of government support for all these alternatives to the volume housebuilders? I recommend that funding should come from the Government rapidly phasing out their multi-billion-pound Help to Buy subsidies. That scheme was justified in the wake of the financial crash, but its value is much more questionable now volume housebuilders are operating very profitably. Economists maintain that Help to Buy, by increasing demand more than supply, inflates house prices and boosts housebuilders’ profits. Certainly, when the Government announced their £10 billion extension of the scheme, it put nearly £1 billion instantly on to the share prices of the big builders, reflecting a view in the City that these subsidies help builders more than buyers.
Even more important than money is land. Control of land use is, at least in theory, in the hands of the local planning authority. There is an urgent need to reassert the authority and creativity of the local planning system, restoring its status and latent value. A grossly underresourced planning department means delays that are intensely frustrating for everyone. Even so, although housebuilders blame planning delays for holding up development, it is also true that nearly all planning applications do eventually get approval, and there are thousands of consented sites where nothing much is happening—we await the report on this from Oliver Letwin MP.
Meanwhile, the Government are on the case in recognising the need to rebuild the capacity of planners. Recent support in allowing a 20% uplift in planning fees and providing some grant aid is more than welcome, but there is a very long way to go. Local leadership will be all important, not least through the new metro mayors and in the new combined authorities. Enforcement of good Building for Life design, often respecting local design codes, allocating sites for specific purposes, insisting upon adequate standards for lifetime homes and using proper master planning is also necessary: a confident, determined local planning authority could do so much, if properly resourced.
At the same time, central government needs to be supportive of decision-making by local councils. The Secretary of State should use the current review of the National Planning Policy Framework to overhaul completely the specious “viability” test that is the subject of widespread abuse in evasion of requirements to provide affordable homes. The Greater London Authority is setting a fine example in offering a fast track through the planning process if there are no quibbles over providing the required quota of affordable homes.
Also on the land question, the Government’s public sector land programme is pressing government departments and local authorities to dispose of unused sites for new homes. But I would go further, not simply flogging off these precious assets to the highest bidder—even when the housebuilder promises to include some affordable housing—but instead always giving first option to those providers who can add social value, for example in building tailor-made homes for older downsizers which will save NHS and social care funds and release family homes. For sites not owned by public bodies, a revival by local authorities and Homes England of—hopefully streamlined—compulsory purchase powers is needed, too, where blockages hold up much-needed new development.
Finally, to improve the performance of the major housebuilders—because, at least for the moment, we remain heavily reliant on their output—I am hopeful the Government will progress their interest in creating a new homes ombudsman. Along with a call for improved building control and better on-site supervision, a new homes ombudsman to handle the catalogue of complaints from consumers was the key recommendation from the APPG for Excellence in the Built Environment. But this ombudsman, if it is to stand up to the mighty housebuilders, will need sharp teeth and proper resources.
In conclusion, I appreciate that my various recommendations could mean lower profits for the plc housebuilders, unless they negotiate better prices when acquiring sites and/or step up profit productivity in the industry, but shareholders in these companies have been doing very well indeed over recent years. Share prices for the top eight housebuilders have increased by 127% over the past four years, compared to just 31% for the FT all-share index—four times better than the average. My sympathy for the housebuilders themselves is moderated by the knowledge that current profits have made the bosses of these companies extraordinarily rich. Note that the chief executive of Persimmon, a company selling about half its homes using Help to Buy subsidies, is receiving bonuses this year worth more than £100 million—one individual employee with bonuses of more than £100 million.
On other occasions, I have pointed to the abysmal consequences of the so-called welfare reforms, which have made it tougher for those on the lowest incomes to afford a decent home. While welcoming recent universal credit improvements, I am still fearful that without further changes of DWP policy, the tragic problem of homelessness will get worse. However, in relation to what I am delighted now to be able to call the Ministry of Housing, Communities and Local Government, the Government are espousing some excellent policies. The problem is that they are as yet underpowered and somewhat tentative. What is needed is for these to be backed wholeheartedly by HM Treasury and translated into a powerful package of intervention through financial, land-use and consumer protection actions that could make a really significant impact on the quantity and quality of new homes. I hope that the Minister agrees. I beg to move.
Lord Hunt of Wirral (Con)
My Lords, I first draw attention to my interests as set out in the register, in particular as a partner in the global commercial legal firm of DAC Beachcroft. We are grateful to the noble Lord, Lord Best, for enabling this vital issue to be discussed. I am delighted to see my noble friend in his place, and I know he has no illusions about the scale of the challenge we, as a nation, now face. In their housing White Paper just 11 months ago, the Government candidly acknowledged the housing market as “broken”.
Just as the First World War was breaking out, the American poet Robert Frost mused that home was:
“Something you somehow haven’t to deserve”.
Whatever would Frost have made of the UK housing market today? In just two decades, the ratio between the average cost of a home and average earnings approximately doubled, and the social and economic consequences are far-reaching. Housebuilding in the UK has been on a long-term downward trend for almost half a century now, despite a rising population. The decline has been reversed very recently, with more than 500,000 new homes in the past three years, but the challenge now is: how do we sustain that?
Undoubtedly, one of the damaging developments in recent times has been the stark decline of smaller housebuilders. About 60% of new homes are being built by just 10 companies. The situation is primarily and principally a consequence of the planning system itself so, as we seek greater diversity, I strongly welcome the home building fund, specifically designed to support small, independent builders. The Help to Buy equity loan scheme is also an excellent innovation. Builders are private, commercial companies, but they operate within a highly constrained and regulated market. They are often hampered by a proliferation of pre-development start conditions. It would be helpful for the Minister to set out what the Government are doing to help developers cut through this red tape.
Further, more can and should be done to release further public sector land for development. The Letwin review into build-out rates is welcome, but we all know one major source of delay to housebuilding is a lack of infrastructure. To pump prime the sustainable settlements we all want to see and to make them viable, we need substantial public investment in major, off-site infrastructure, not least public transport networks. Perhaps the Minister might like to explain what the Government are doing to ensure that essential infrastructure is built up in the right place, at the right time.
There are other market failures, too. In light of unfair leasehold practices, might the Minister give us an update on what progress the Government have made on tackling abuses of leasehold? There is some recent evidence of a decline in customer satisfaction with new-build homes. What are the Minister and his team doing to help bring everyone up to an acceptable standard of design?
The housing market will work effectively only if national and local government, the public and private sector, and large and small housebuilders work together in a positive, public-spirited partnership. I strongly welcome the constructive approach the Government are taking to the broken housing market, and I hope colleagues from around the House will seek to work with the major players in the housebuilding industry in that spirit of partnership to deliver the homes that our people need, and, in the spirit of the late, great Robert Frost, to deliver the homes our people deserve.
Lord McKenzie of Luton (Lab)
My Lords, I congratulate the noble Lord Best, on securing this debate and the usual forensic manner in which he has introduced it.
It is fitting that we should focus on the performance of private sector housebuilders at a time when the headlines in the financial press, to which the noble Lord referred, are all about obscene bonus payments by way of share options to executives of Persimmon whose performance has benefited directly from the Government’s Help to Buy scheme—a performance where completions of the majors rose by 48% over the period, but profits by 10 times that rate of increase. That juxtaposition could not be more cruel when put against the desperate plight of the homeless and rough sleepers—whether in Windsor or Luton, Westminster or Lambeth.
We have a housing crisis in this country every bit as bad as the challenges facing the NHS, and one which requires a long-term sustained approach to tackle. Characterising this as fixing a broken housing market is inadequate because it implies that market mechanisms alone can produce the solutions. Not only do we have a growing homelessness and rough sleeping problem, we have sky-high property prices, making it impossible for many to rent or buy, with the dream of home ownership disappearing from the agenda. As the Shelter research, which was shared with us for this debate, sets out, a new-build house is out of reach for eight in 10 working, private-rented families across the UK.
We have had profound housing crises before. At the end of the Second World War, new build had all but ceased, extensive repairs were needed to address bomb damage, materials and labour were in short supply, and by 1950 government debt was over 200% of GDP. By comparison, today’s environment looks positively benign. Yet the Government of the day made the building of new homes—albeit that some were temporary prefabs—a priority. Between 1945 and 1955, government—first Labour and then Tory Governments—delivered 1 million council homes, including new towns such as Milton Keynes and Cumbernauld.
If one looks a little closer to the present, in 1969-70, 378,000 houses were completed in the UK. The UK numbers for 2016-17 were 178,000—about half. In 1969-70, about half the completions were clocked up by private enterprise, a few by housing associations, and about half by local authorities. The provision of substantial social housing is the one feature over this period that enabled overall housing numbers to maintain levels needed to meet demand. The curtailment of local authority provision at the end of the 1970s was never compensated for by placing the onus on housing associations.
So much for the past—what is to be done in future to address the housing crisis? Four minutes does not allow time to critique the entirety of the February 2017 Fixing Our Broken Housing Market White Paper. Nor does it help just to trot out the line that we need to build more houses. Of course we do, but the issue is how and, particularly today, how far we can place reliance on the major housebuilders to play a more significant role. How can we push back against the growing market concentration and prices for land, which edge ever upwards? Certainly, a greater role for local authorities and housing associations should be a catalyst for supporting new and smaller firms into the housebuilding sector.
As for major housebuilders, the analysis provided by Shelter seems to pinpoint the particular problem: they have a speculative business model whereby they buy the land and build homes without knowing who they will sell to and at what prices. This competition for land prices pushes up prices, squeezes out smaller builders and pushes down on development costs and infrastructure provision, affecting the quality of housing provision. If we are to get public benefit from the activities of private sector builders, Shelter prescribes the need for stronger powers for public bodies to masterplan, and powers for development corporations to assemble land and act as master developers. We agree. As the noble Lord, Lord Best, said, what is certain is that a national strategy that relies on the private market sector as currently constituted will not be able to achieve the sustained uplift in housebuilding that the country so desperately needs.
Lord Stunell (LD)
My Lords, I am delighted to contribute to this debate. I thank the noble Lord, Lord Best, for his excellent introduction to it and am in full agreement with his analysis and conclusions. We need a lot more homes—we need them quickly and at a price that people can afford—and we are far from getting that at the moment. All the political parties say that more housing is needed, and there is really just a debate about how they should be provided. The Conservatives have invested a lot in increasing demand through the Help to Buy scheme, and the consequence has been an increase in profits for developers and a rise in prices. I believe, and I think my Liberal Democrat colleagues believe, that there should be much more emphasis on increasing supply by investing in diverse providers and tenures and thus moving towards stabilising prices and improving affordability.
The big companies have something to answer for, because they are the ones that get the big profits, and the noble Lord, Lord Best, has highlighted Persimmon and the chairman’s £104 million bonus. The big companies go for slower production on big sites—and I have cited before the Ebbsfleet development, where 15,000 permissions were granted seven years ago and only 800 houses have been built so far. There is the question of quality as well: 93% of new-build customers reported faults to their homes. In contrast to that, with smaller developers you get multiple starts on many small sites and quicker build, which in turn can lead to stable prices and modest land banking. All those things are surely desirable.
The Chancellor’s Budget makes some progress but, even on the most optimistic reading of his arithmetic, it would raise production only to 200,000 a year, a long way short of 300,000. What needs to happen? First, we need to lift council spending limits. It is surely silly that they are free to borrow at will to buy cinemas, hotels and offices but cannot do so for homes. The sooner that is put right the better. They should be permitted, indeed encouraged, to build for rent—we used to call them council houses. There should be funding for housing associations as well. We need to encourage councils to build to sell on public land at affordable prices with 100% recycling of that money into housing. We need to use public investment and procurement to provide a secure pipeline of work for the industry, which can bring stability to employment and enable the skills, growth and development that are also urgently needed. We can use public investment and procurement to build those homes so that they are green and of a high quality. There are opportunities for innovation and off-site building that can come only from that kind of consolidated, strategic approach.
We need to shape planning and building regulations to deliver a clean environment and green homes. There is a role for the big 10 construction companies, but they must use their scale to innovate, to build off-site, to build prefabricated and to use modern methods of construction. They must use their weight to support training—we need a doubling of the training provision in the construction industry—and they must use their pattern books and repetitive design to drive quality up, not down. They must also stop bullying planners over viability tests, stop bullying SMEs over supplies and discounts and stop treating subcontractors with disdain over retention and payments.
I ask the Minister to take away from this debate the urgent need for the new Housing Minister to get a grip of the problem, break the Treasury’s hold on the purse strings and get building homes again.
Lord Green of Deddington (CB)
My Lords, my purpose in speaking in this debate is to point out that the supply of housing is only half the story, albeit admirably described by my noble friend Lord Best. The other half is of course demand. A major factor in demand is—noble Lords may have guessed—immigration. The Government are in denial on that central issue of this most important debate.
The Secretary of State in the other place said on 7 February last year, in reply to a question:
“Two thirds of housing demand has nothing to do with immigration; it is to do with natural population growth”.—[Official Report, Commons, 7/2/17; col. 248.]
That is simply untrue; indeed, it is even misleading. The starting point is DCLG’s most recent principal projection for England over the 25-year period to 2039, which shows an average increase of 210,000 households a year. Of this, it says that 63% will be down to “natural change”—note that term—and 37% will be due to future net migration. Note the word “future”. This was presumably the basis of the Secretary of State’s statement, but I wonder whether he really understands the basis on which these numbers were drawn up. For a start, immigration has been running at 40,000 or 50,000 higher than the Government’s assumption. Indeed, it has been close to the high-migration scenario, which would mean, if it came about, that we would have to build a new home every five minutes, day and night, throughout the period, just for new migrants.
The really misleading aspect, however, is that DCLG excluded the impact of previous migration on future demand. Instead, it buried it in “natural change”, attributing it to the existing population, rather than addressing it separately. Separate examination would of course boost the figure and the proportion substantially, especially as, under the population projections on the high-migration scenario—which we are close to— 85% of our future population will be due to immigration.
If anyone should doubt that the impact of immigration on housing demand has been played down, they could take a quick look at the past. ONS data from 2005 to 2014 show that of the additional households created in England in that 10 years, the proportion of foreign-born heads of household was 90%. I trust it is now obvious to noble Lords that claims that two-thirds of housing demand has nothing to do with immigration are simply ludicrous.
The only relatively good news in this sad saga is that the ONS is now to take over the preparation of household projections. Furthermore, we have a new and highly competent Minister of State in the renamed department. I hope he will insist on a proper analysis of the true impact of immigration on future housing demand and recognise, in doing so, that demand is a major aspect of the entire housing crisis. We should get this right and we should get the sources of it right.
The Lord Bishop of Newcastle
My Lords, it may be no coincidence of timing that as we debate the performance of the major housebuilders, every day this week in the financial press we have seen the trading results of many of these major companies, the latest being Barratt this morning, the country’s largest housebuilder. There is a consistent picture of extraordinarily high levels of profit and cash being returned to shareholders. However, my first point is that past history tells us this will not last. Housebuilding is a highly cyclical industry and when the next recession comes, new house sales will plummet, as they did in 2003 and 2008. Housebuilders, especially the smaller ones, will fail, and there will be high unemployment in the building trades. Indeed, in 2009, Barratt, which is doing so well according to the press this morning, lost over half a billion pounds and resumed paying a dividend only in 2013. This high level of risk is one of the reasons why so many smaller firms have disappeared and we now have a dysfunctional housebuilding sector that, as the noble Lord, Lord Best, pointed out, is alarmingly oligopolistic.
Government interventions could help, such as guaranteeing bank loans to small housebuilding firms and setting a requirement for local authorities to reserve a proportion of their planning permission grants for land owned or optioned to small builders. Such interventions are worth making but we delude ourselves if we think that, important as it is, sorting out the housebuilding industry is the answer to all our problems. Therefore, my second point is that we already have some outstanding analysis of the complexity and dysfunctionality of the housing market, and, more importantly, we have some answers in the excellent report of the Economic Affairs Committee, Building More Homes, which we debated in this House in March last year. The truth is that our housing crisis cannot be solved by the private sector alone.
In my own area, there are over 22,000 households on council housing lists in the Tyne and Wear region and over 8,000 in the county of Northumberland. This represents tens of thousands of people, including children, without a home that feels like a home. The report highlighted that this country can create enough new homes only when local authorities get back into the business of building them. Key to this is removing the restrictions on local authority financing and borrowing to build homes, as has been mentioned by noble Lords. Therefore, I join them in asking the noble Lord, Lord Bourne, to tell us whether any progress is being made with the Treasury in this area.
My third and last point is that this crisis is not, at heart, about buildings; it is about people. It is about not just housing supply and quantity but, as the noble Lord, Lord Best, indicated, quality. If we are truly to solve the crisis, we need to build communities where people can put down roots and thrive. All too often, our housing developments sit at two ends of a spectrum. At one end is new social or affordable housing, usually very small units—too small for families—that are cramped, with very limited space, and sometimes shoddily built. At the other end sit developments of luxury homes priced beyond the reach of local households. We are witnessing the hollowing out of communities along the fault lines of social class and income. We need to preserve the diversity of our communities, which is such a cherished feature of this nation.
I am delighted that the noble Lord, Lord Best, secured this debate, because it is about something far more important than just the performance of our housebuilding companies. It is about people, and it is on our watch. I hope that we will find the personal determination and that we will support and encourage the Government to work towards honouring the human dignity of every man, woman and child in this country by creating the homes and communities that our children and grandchildren deserve.
Lord True (Con)
My Lords, I am a member of a London borough and a vice-president of the LGA.
We need more housing, but it must be quality housing, built with consent and built to last, not breeze-block office conversions without planning permission—a policy welcomed in some places but disastrous in others. I thank my noble friend for his willingness to address that issue, which I raised, and for the progress made with regulations. But greedy operators are now buying small, two-storey homes and converting them to cramped HMOs. On 19 December my borough put forward ideas to prevent such abuse of tenants, and I hope for a positive response from the department.
Penal stamp duty has eliminated small starter homes in many London suburbs. The problem goes right up the scale. People add boxes rather than pay the taxman to move. Labour mobility and housing variety suffer. More tax cuts are needed, on top of the welcome one we had.
I detest the stench of greed in that Persimmon bonus scheme, but I will not join a lynch mob attacking housebuilders, and I will certainly not line up with Corbynites or their fellow-travellers who reject profit. I was born in a house built for profit, I rented a flat built for profit, our first home was built for profit and we live in a house built for profit. Yes, most of these were built by small entrepreneurs, of which we once had far more and need again. Let us hope the welcome home building fund will help.
We should be grateful for successful housebuilders of any size. Of course, I would like faster turnover of land use, but do not always blame them or councils for that. Look at public bodies, the masters of most of Britain’s brown land. They are a disgrace. To create a big quango to chase other quangos is not enough. I would set councils loose on those bodies—let them challenge and build where public dinosaurs will not. Housing associations, which are always shouting the odds, need to do better, too. Inside Housing’s June survey showed the same as our Library brief: a fall in their completions last year. It was frankly pathetic to read housing association bosses blaming Brexit for not doing their job.
Our green suburbs define Britain, unlike the bleak tenements round many cities elsewhere. We must not destroy their character to—yes—meet levels of immigration the public reject or household formation predictions some consider unlikely. Some housing targets are absurd. The draft London plan proposes 6,300 small-site developments in Richmond in a decade. Back garden protection would go, with a presumption in favour of infill development. We know the environmental and human importance of green space; Sadiq Khan proposes its wholesale elimination. Concrete jungles in place of green suburbs and gardens—no, thank you. Internal space standards that are maxima, not minima—no, thank you. Destruction of local character, for ever.
New homes also need proper infrastructure: employment, surgeries and schools. These things are best achieved with local authority involvement. For example, we have a striking partnership with Lidl to build a primary school above a new supermarket. That was achieved by discussion in the planning system.
I have always found housebuilders responsive. I praise St James for the provision of a new community hall and education facility in a 300-plus development in Twickenham. It is a mistake to focus on numbers alone. Liveable communities are made not in City Hall or Whitehall but by creative partnerships, with local authorities and housebuilders working together.
Baroness Thornhill (LD)
My Lords, I agree with much, although not all, of what has been said. It is clear to me from my experience as a former deputy chair of the LGA and the elected mayor of Watford that there is not only a housing crisis but, in particular, a massive shortage of social and affordable homes, which the current system is clearly failing to fix. In my four minutes I want to touch on one aspect of the planning process which is totally undermining local authorities’ ability to provide those much-needed homes and which has already been referred to by the noble Lord, Lord Best—the viability assessment.
In 2012, the National Planning Policy Framework, for the first time, made the viability of a development proposal a material planning consideration. That means that, if the projected profit on a scheme is less than 20%, developers can begin a process of haggling with planning officers to reduce the level of affordable housing and other community benefits, such as infrastructure, that councils can require through their much thought-out policies. This was meant to be used as a sensible exception to ensure that we did not end up with good housing sites going undeveloped because it was uneconomic to build on them, but instead it has become the rule.
In Watford, year on year since 2012, the number of social and affordable homes provided through Section 106 has declined by at least 50%. Our single example is backed up by more formal research by Shelter. It studied 11 authorities covering eight cities and found that new housing sites provided only 7% of affordable housing, when the authorities’ combined figures should have yielded 28%. The Government’s own figures show that 40,000 social homes were built for social rent in 2010, but in 2016-17 that number had reduced to a mere 5,500.
Local authorities have had to cope with the many and varied ways in which developers present their figures and use viability to evade the obligation to provide affordable homes. They have had to “tool up” to challenge the developers’ figures on almost every major application. It has become an expensive battle, involving the employment of viability experts on both sides. It is a grubby business that contributes to a general negativity in the relationship between planners and developers, and, perhaps more importantly, between the council and the public.
Councillors at planning committees feel frustrated. Their set policies to meet their local needs are being flouted purely because of this national policy. In Watford, we have tried to find ways to work with this process—for example, by designing clawback agreements should the viability improve over the life of the build—but this is whistling in the wind compared to the current need.
There is a growing consensus, evidenced by the recent letter to the Secretary of State from the LGA, the CPRE, the TCPA and others, that the system for assessing viability is weighted in favour of the applicant, leading to inflated land prices being paid at the expense of infrastructure, affordable housing and, as has also been mentioned, design quality. This undermines public confidence in the planning system.
The Government have recently closed their consultation Planning for the Right Homes in the Right Places, of which viability assessments formed a part. My and many other councils, along with the LGA and other esteemed bodies, have responded robustly. I hope that the Government will take on board those responses and recommendations, close this loophole and bring greater consistency and transparency to the process. It is becoming clear that this is a counterproductive and damaging measure, resulting in the loss of many thousands of homes for people stuck in temporary accommodation for far longer than I ever thought we would see on my watch, and with the only winners being landowners and housebuilders, who, as has already been pointed out, are reporting record profits.
Baroness Brown of Cambridge (CB)
My Lords, I thank my noble friend Lord Best for securing this important debate and for his excellent introduction. I want to talk not about the number of homes that we need but rather the quality of homes that we need, and to focus on whether we are building homes that are fit for the future—homes that, as we have heard, our people deserve. I declare my interests as vice-chair of the Committee on Climate Change and chair of the adaptation sub-committee.
I warmly welcome our Prime Minister’s focus on housebuilding and her strong message about the importance of homes in the renaming of the DCLG as the Ministry of Housing, Communities and Local Government. But carbon dioxide emissions from buildings make up a major and intractable part of our carbon budgets, so it would seem madness to build these essential new homes to building standards that mean they will need retrofitting in the near future if we are to meet our carbon dioxide reduction targets. In addition, we know that the climate is changing. We must expect, on average, higher summer peak temperatures and longer periods of high temperatures, leading to a growth in the number of heat-related deaths, especially among the most vulnerable groups, unless we have homes that can be kept cool and properly ventilated.
The studies reviewed by the Committee on Climate Change indicate that the average cost of delivering the proposed—and now withdrawn—zero-carbon homes standard would be an average of between £3,000 and £10,000 per house if it were to be done when the house is being built, and £10,000 to £25,000 as a later retrofit. Indeed, such retrofits would probably never achieve the same low level of emissions. Do we really intend to leave these retrofit costs—approximately three times the cost of building the house well in the first place—to our children? Is this another example of intergenerational unfairness?
Would the extra cost and challenge of higher building standards really be too much for our housebuilders? I do not think so. Let us look at some numbers, which we have heard a bit about already. In 2016-17, the top 10 housebuilders built almost 80,000 new homes, about 45% of the total new houses. They made profits of £4.53 billion on a turnover of £22 billion and paid their chief executives an average total pay of £3.1 million. That excludes the more than £100 million share bonus for the CEO of Persimmon, because it rather distorts the figures. If we take the average figure of £6,500 per house as the cost of meeting a zero-carbon homes standard—the halfway point between £3,000 and £10,000—building all these homes to this standard would cost an extra £0.51 billion, which is only 11% of the £4.53 billion profit. If housebuilders had absorbed all these costs, profits would still have come in at a very healthy £4 billion. As we have heard, Persimmon is the second-largest housebuilder in the top-10 list. Yesterday, the Times reported that it built 16,000 homes in the last year and allocated bonuses to its 140 top managers totalling £800 million. The extra cost of building all these homes to a zero-carbon standard would have been about £100 million. Would not a reduction in that impressive bonus pot to just £700 million still have allowed a motivating enough reward for a very good year for the company?
I have three requests of the Minister to help us move swiftly to future-proof our new housing stock. First, we should introduce as a matter of urgency a strong zero-carbon homes standard, and then ensure that the standard is actively enforced. The figures show that the industry can afford to do this. Secondly, within two years we should make Help to Buy available only on accredited low-carbon homes, thus making sure that the Government’s significant investment is safe in homes that will retain and increase their value in the future without the need for certain upgrading. Finally, we should allow housing associations that build low-carbon homes to finance the additional cost by taking a share of the savings that tenants will see in their heating bills—perhaps half the savings for seven years or whatever is necessary. I understand that this would currently be illegal, as housing associations cannot charge differential rents in this way.
Lord Naseby (Con)
My Lords, in May 1968 I was elected to the London Borough of Islington and immediately given the promotion to chairman of the housing committee and de facto leader. Roughly speaking, 300,000 homes were built and a significant proportion of them—well over 100,000—were council houses. They were not council houses that anyone in your Lordships’ House would want to live in, but they were houses. At that time there were several thousand Victorian blocks, with a water tap on the first or second floor, external loos and so on. They were not happy homes.
In 1974, I was elected to Northampton South with a majority of 179. The great joy was that it was a third generation new town. Every one of the third generation new towns, of which there were six, has been successful. They provided volume housing, mixed tenancies and good social community provision and provided an opportunity for the development corporation, where necessary, to undertake compulsory purchase, although it was clear when the negotiations took place that the land was forthcoming.
We face today a similar problem, with 300,000, or thereabouts, houses needed. It is no good chastising the major housebuilders for not doing ideally what the commentators believe they should be doing. We need a successful private sector building industry. Frankly, it provides the only people building houses in this country. It is no good the Labour Party criticising Her Majesty’s Government because of what happened to council housing when they came to power. I well remember 1997—I lost my seat—but what happened after 10 years of Labour Government? Let us assume it took them four or five years to get going and look at what happened in 2003. How many council houses were completed in 2003? Precisely 180. That reflects the priority that the Labour Government put on council housing, so I do not want to hear any complaints about the current Government and what they are trying to do.
I say to my noble friend on the Front Bench that it is a good start to have three eco towns, but it is not adequate. There was an article in the Daily Telegraph last week listing five further places where we can have new houses—Huntingdon, Winchester, Rugby, Nuneaton and Folkestone—all within an hour of getting here. I congratulate my noble friend on removing stamp duty for over 80% of first-time buyers. It is very good—well done. It was voted against by the Labour Party. Investing £44 million to deliver the 300,000 homes we need is a very good start, as is helping local authorities to do so as well.
I thank the noble Lord, Lord Best, for introducing this debate but the last thing I want to see is an ombudsman controlling it one way or the other.
Lord Whitty (Lab)
My Lords, although I agree with the noble Lord, Lord Naseby, that the crisis did not start with this Government, it is nevertheless one that all parties and all elements within the housing and construction industry now recognise is enormous. On present policies, it will not be resolved within the next 10 years let alone in the next few years of the period of this Government.
We could have made a start on it. This week’s reshuffle was an opportunity to put in place the cohesion of government policies that were referred to by the noble Lord, Lord Best, along with the need for a longer-term strategy, referred to by my noble friend Lord McKenzie. Instead, we have had a marginal change in the name of the department and the removal—or promotion; good for him—of a Minister who was beginning to get an intelligent grip on the matter, but like every Housing Minister over the past 20 years, he has been rapidly moved on.
We need a positive and continuous focus by the totality of government on this central social crisis. There are at least five different areas of policy which overlap here. We have a clear problem as regards the role of local authorities. Whether it is due to an ideological opposition to council housing or Treasury insistence on absurd and illogical caps on borrowing for housing, the fact is that we have to change the role of local authorities. We will not reach the targets without a major contribution from local authority housing to build council houses. Yes, it should be done within the context of mixed tenure in wider developments, but without a big step change in council housebuilding, we will not reach the targets.
There is also a concomitant failure in regional policy. One of the reasons there is so much pressure on housing in some parts of the country, particularly in the south-east, is a failure of regional policy as a whole. There is a failure of labour market policy as well. We do not have enough skilled workers and therefore have to rely to an excessive degree on migrant labour in many areas. I have to say that many of the larger companies in the housebuilding sector have a particular responsibility for this because they have a particular duty given the structure of the industry. As a result of all this, there is also a failure in social policy. The right reverend Prelate referred to the social division which the differences in housing provision leads to. It has directly distorted social security reform in that the escalation of rents and housing costs generally has led to a huge rise in housing benefit payments which is distorting the successful achievements of universal credit reform of the social security system. There has also been a failure of competition policy because in this as in other areas, we are failing to deal with the oligopoly that is made up of a few very large, powerful and exploitative companies.
When we look at Whitehall, the policies are all over the place. Planning and housing is admittedly in the Ministry for Housing, Communities and Local Government, but housing benefit, which is by far the largest expenditure by Government, is in DWP. Construction sponsorship is in BEIS, as is anti-trust policy, and finance for housing is dealt with in minute detail by mandarins in the Treasury. If we are genuinely to tackle the housing crisis, we need to bring these elements together in one powerful Cabinet-level ministry and Minister. For example, I have long argued that the inclusion of the housing benefit element in universal credit was a mistake. It may not be possible to unravel it, but it is making the delivery of universal credit more difficult and it is compounding problems in the housing sector. Actually, we need to provide more money on the supply side and less on the demand side. Whoever the Minister is, there needs to be a new start here. I believe that we need a single ministry of housing with a high-powered Minister who is close to the Prime Minister and changes to be made in Whitehall in order to tackle all of these issues together.
In passing, I would also say that in relation to the structure of this industry, the dominance of a few major companies and the almost total exclusion of small builders in big developments across many parts of the country, we need a CMA inquiry. So far, we have failed in this area. While our competition policy on cartels and monopolies is pretty good, it has failed utterly to deal with oligopoly in sectors like this.
Lord Taverne (LD)
My Lords, this is the first occasion that I have taken part in a debate on housing, which, with the NHS, is one of the two most serious social problems we face. They are both in deep crisis. First, I must declare an interest. One of my sons-in-law is the CEO of a company called Pocket—a private sector developer of intermediate, relatively cheap housing for sale in London, backed by both the Mayor of London and the HCA. It is not a major construction company, but, having won several awards, it is expanding fast.
The industry faces a demographic time bomb. Its workforce is ageing, with retirements greatly exceeding new recruits, who take some three years to be trained to the necessary quality. To meet government plans—building 1 million or more houses in a few years—the industry must expand by some 35%. Well, in the third quarter of last year it contracted by 0.5% and is still contracting. It has become heavily dependent on 200,000 EU immigrant workers, not only for the actual building of houses and factories, but for the pre-manufactured modules, use of which the Farmer review recommends. Some 92% of the workforce building the modular homes that Pocket specialises in are EU immigrants.
But now we face the prospect of Brexit. Many EU workers are going home, not only because of uncertainty about their longer-term future rights of residence, but because they no longer feel welcome. There are numerous reports of Poles, Lithuanians, Romanians, Bulgarians and their families who are being abused in public and told to go home if they speak in their own language. We are no longer a tolerant country.
What Brexit risks is what the industry tells us it needs: common recognition of EU standards and qualifications, common legal systems for contracts, and tariff-free flow of imports from the 27—in fact, frictionless trade with the EU. None of these will survive if we are not in the customs union and single market, yet the Government are adamant that we must leave both.
The implication of the excellent and very important House of Lords Committee report last December, Brexit: Deal or No Deal, is clear, even if not explicit: the only way to achieve the Government’s housing aims, and to promote prosperity of large sections of our industries, to preserve an open Irish border and, indeed, generally to avoid the impoverishment of the British people, is to reverse what almost everyone outside Britain regards as our extraordinary national act of self-harm—the decision to leave the EU. The people should have the final say now the facts of what Brexit means are becoming clear, to decide, if they wish, not to travel one more miserable inch along that path to national disaster—in fact, to stop Brexit.
Lord Borwick (Con)
My Lords, I declare my interests as noted in the register—I am a property developer of housing sites. I am a great fan of the noble Lord, Lord Best, and his pioneering work on accessibility of housing. I am a shareholder and director in mainly residential developments in Bicester, Oxfordshire, Sussex and Scotland.
Our development in Bicester is of 2,400 houses in total, which includes 30% social housing, or 720. Planning permission was completed seven years after we purchased the farm. Despite the help of the local council, which supported the application, and virtually no objections and no requirement for an appeal, the cost of the process was about £4 million in fees, and it was about seven years after we started that we were able to commence building. Our original plan was to sell “oven ready” sites, but the regulations insist that although we have agreed a building code of 200 pages with the council, every one of our purchasers has had to get approval that their plans meet that code. This has taken a further year.
Builders are often accused of land banking, which may be defined as holding non-urban sites after planning permission is granted to get the increase in value over time. The first mistake is to confuse a “resolution to approve” made by the planning committee dutifully raising their hands with “implementable planning permission”. That could be several years later. Furthermore, when building a house, you must do the special construction tasks such as roofing or electrics consecutively rather than concurrently. You cannot build 200 houses simultaneously. A site with planning permission for immediate work is so valuable that public companies do not sit on assets worth millions of pounds for a period of years. The big housebuilders very nearly went bust in the recession—a point made so well by the right reverend Prelate the Bishop of Newcastle—so they are very careful not to waste money now. They are measured by the stock market on return on capital employed. It is planning system inflexibility, and not land banking, that slows housebuilding.
Noble Lords will know that we have a “plan-led” system. We have local plans in each area for a five-year land supply. When this system was first explained to me, I was told that a developer had to prove “housing need”. I said, “That’s easy: we’ll sell forward some houses”. My friendly adviser said, “No, Jamie, you’ve just proved housing demand; that is different from housing need. Housing demand is when the customer says she wants a house; housing need is when the Government says she wants one”.
We have already agreed on all sides of this place at least that central planning of tractor production on a five-year plan is a stupid communist system. So why do we think that it is right for housing? There must be some controls, certainly, but we should not pretend that they will work perfectly. I know of a local authority that is planning for exactly 1,090 houses to be built in the year 2031, and it is working on 2036. Such a precise number is highly unlikely to be right, and calculating it is a total waste of time and taxpayers’ money. I do not know how many noble Lords are making such detailed plans for their own life in 2036. We did not plan for the housing shortage, so the fundamental question for my noble friend the Minister is: why do we think that a central plan is the best way of solving this shortage? I know that this Government have made great strides in simplification of the rules, and I want to give them the credit for that, but there is so much more to do in making them better in opening the system to small builders and increasing competition.
The housing industry is subject to both punitive levels of taxation and generous subsidies. When we want to encourage an industry, we offer tax breaks, but we do the opposite in housing despite all agreeing that we want more houses to be built. Housebuilders pay corporation tax, stamp duty and planning fees. Some 30% to 40% of their output is nationalised as affordable homes at cost. Under Section 106 agreements, they will pay for new schools, new roads, new public art and often a community infrastructure levy. They have to provide expensive bonds that they will perform their obligations, a factor which discourages small competitors. To the person writing the cheques, these are all taxes. At the same time, their customers are given the generous Help to Buy subsidy. It is all too complex and expensive to make it an efficient industry.
Baroness Janke (LD)
My Lords, I want first to give a few statistics about my home city of Bristol. There are 979 homeless people; in 2017, there were 86 rough sleepers, as against eight in 2010; 347 families were recorded as homeless, with 3,000 at risk; and Age UK is supporting 120 elderly people who could not stay in their homes otherwise. People here may not know that house prices and rents in Bristol are extremely high—the highest outside London. Average house prices are 10 times average income; typical rents are 40% of average income. In my city, £6.1 million is spent by the council on homelessness. How must it seem to those people whom we see on our streets every day when they hear of the Persimmon boss, referred to by the noble Lord, Lord Best, who is getting a bonus of £110 million, while Persimmon made a 30% profit in the first part of 2017?
My noble friend Lady Thornhill mentioned the viability loop-hole. Bristol lost 200 affordable homes in a year as a result of the viability loop-hole. As a result, land prices, and so house prices, continue to be driven up. One of the worst things about this loop-hole is that it is very often kept secret: only a few local councils make these viability assessments public, so the public do not realise why the value of housing, the cost, is going up so much and how much developers are profiting out of the public purse, very often.
Affordable homes are no longer affordable in my city. We need social housing, we need high availability of social housing and I think there is a wide consensus across the board—including the House of Lords Economic Affairs Committee, Shelter and even the Centre for Regional Economic and Social Research— that local councils need to be involved much more if we are to achieve the number of homes that we clearly need.
As a former leader of Bristol, I spent quite a lot of time in the Core Cities organisation with other leaders, speaking strongly for government intervention, development and investment in other parts of the country. I very much welcome the northern powerhouse. It is true that when I speak to my colleagues here, while people cannot afford homes in Bristol and their availability is so scarce, there are very many empty houses and houses that cannot be sold in the rest of the country. It seems to me that the whole issue of infrastructure needs to be looked at, presumably through the industrial strategy. There is a huge difference between London and the rest of the country.
We heard from the noble Lord, Lord Best, about powers for local authorities. I certainly support those. The noble Lord, Lord Borwick, said that planning authorities are inefficient. I point out the level of cuts in local government in recent years and the fact that planning departments are skeletons of what they used to be. When I first went into local government, local authorities had their own architects and were proud of the quality housing that they produced. Local authorities need powers to borrow. We have heard of the ridiculous situation whereby they can borrow to build leisure centres or to buy hotels but cannot borrow enough to build housing. They need powers over the use of public land in order to introduce priorities for social use as well as powers to levy penalties on land banks and uncompleted sites. They need stronger powers for compulsory purchase. Who in local government has not been frustrated by the lack of teeth local authorities have on compulsory purchase?
As the noble Lord, Lord Best, said, such measures would mean less profit for the developers, but they would mean hope for so many people that they will not be struggling to afford a home for years to come while a small number of developers scoop up massive profits at the expense of future generations.
Lord Turnbull (CB)
My Lords, I declare an interest as chair of a study by some housing associations into the future of their sector. I do not need to repeat the lengthy charge-sheet against the major housebuilders, which my noble friend Lord Best and others have set out already, I just want to return to one point, the terms for leasehold houses. These do not meet the principles of treating customers fairly now being enforced in financial services. The Government have set out proposals to outlaw these, but I ask the Minister what the Government are going to do to enforce redress for leaseholds already sold on unfair terms. Redress was provided for PPI: the detriment in these cases may be very much greater.
However, in a housing debate we should remember the adage that those who live in glass houses should not throw stones. Many of the problems in the housing sector have been shaped by government policy. Whatever their faults, private housebuilders are building around 130,000 units per annum, getting on towards the pre-2008 peak. So the collapse in total housebuilding is principally the result of shutting down all social housebuilding, with the exception of 20,000 to 30,000 dwellings built by housing associations. In 1978 local authorities built 75,000 dwellings. This fell to close to zero around the turn of the century and has now recovered to the heady heights of about 2,000. Owner-occupation has fallen from 69% to 62%. It will not recover quickly, however hard the Government try to ramp it up. New regulations rightly require banks to be much more prudent in their mortgage lending. Salaries of young people entering the workforce are growing slowly and they will emerge from higher education with a liability to pay 9% of their earnings over £25,000. Saving for a deposit while they pay huge rents is virtually impossible.
A greater priority than the performance of housebuilders, in my view, is to transform the rental sector. With social housebuilding largely closed down, it is the private rental sector which is taking the strain. Since 2000, private renting has doubled as a proportion of all dwellings from 10% to 20%. There are now 2.8 million more privately rented properties but this has not come about by positive choice—quite the opposite. Owner-occupation has become more expensive and less affordable, and social housing has contracted. Nor has it come about because the economics are more favourable; again, it is precisely the opposite. Buying with a mortgage took on average around 20% of weekly income, including benefits, whereas private rents absorbed 42%. The most acute problems are suffered by the poorest families. Their number in temporary accommodation, where housing standards are frankly a national disgrace, is growing. Many families are being evicted even though they are not in rent arrears, simply because landlords are refusing to renew tenancies.
Putting an “H” back into the name of the department will not be enough. We need a renewed effort to expand affordable properties for rent and, as others have noted, this will almost certainly mean relaxing the constraints on housing revenue accounts to bring them into line with other forms of borrowing. We also need to be honest with ourselves about the green belt. Much of it is essential to the beauty of our landscape but a good deal of it is not. We should remember that nearly all of us live in houses that are on what were once fields. Why should this change in land use be frozen where it was in 1948? While a debate criticising major housebuilders may give us a warm glow of righteousness, we should not let this blind us to the even-greater problems elsewhere in the housing market.
Lord Horam (Con)
My Lords, it is indeed shocking that three directors of Persimmon should trouser £250 million in bonuses and salaries in one year. I wonder what they will do with all that money—buy a bigger house? It should also not go without mention that Persimmon—according to the information that I have from people who know a great deal more about the housing it provides than I do—is among the worst in scrimping and scraping and not delivering on the promises it makes, and that it provides quite a lot of poor-quality housing. As has been rightly said, that is simply a symptom—a pimple, if you like, on the bad face of a broken housing market. As my noble friend Lord Hunt of Wirral said in his earlier remarks, the real issue is affordability. The fact is that the ratio between what a person has to pay for a house and their earnings has doubled in the last two decades. That is the real heart of the problem.
The comprehensive speech of the noble Lord, Lord Best, which we all admired, is also brilliantly timed, because this week we have a newly titled department. I realise that a new title is merely a small gesture but it indicates that the Prime Minister, who has already said that housing is the number one priority, takes it seriously. We have a new Housing Minister, who I profoundly hope will last rather longer than the previous two Housing Ministers, who lasted about six months in each case. I hope he will last the full length of this Parliament, however long that may be. We also have a Secretary of State who says all the right things. But again, as the noble Lord, Lord Best, said in his remarks, it is not enough to do only that. All of us have been saying the right things in these debates but we and the Government have actually to deliver well over the next four years that we hope this Parliament will last.
Perhaps I may single out just a couple of things that should be done. I agree that housing associations are now the main provider of social housing and that a huge effort therefore has to go into helping them provide more. I agree with my noble friend Lord True’s remarks about that, and they have not done as well as I had hoped they would. I was once chairman of a housing association and I place great faith in them. They have done reasonably well but, none the less, they could do a lot better. I would make an analogy with Joe Root, the test cricket captain who makes very attractive 50s, 60s and 70s when what we need is centuries—and good centuries, and double centuries from time to time. They need to step up their game in the way that he needs to do if he is to make a major contribution to retaining some future Ashes.
Secondly, as Shelter has repeatedly pointed out in some excellent pamphlets, land is at the heart of this. If land is sold at the highest price, it will inevitably be followed by low quality and compression further down the chain. I therefore think we should stop selling public land for the highest price. That is something that the Government should look into.
As we all know, none of this is rocket science—it is common sense. It has been done in other countries such as Germany and France, and it was done in this country when Harold Macmillan was Minister of Housing. I pray, for young people in particular, that we do more of it in the next four years.
Baroness Maddock (LD)
My Lords, I am very grateful to the noble Lord, Lord Best, for enabling us to debate this very important issue today. I declare an interest as a vice-president of the Local Government Association, a president of the National Home Improvement Council and a vice-president of National Energy Action, which is a fuel poverty charity. I am also grateful for briefings from the Federation of Master Builders, Shelter and, of course, the House of Lords Library.
In preparing for our debate today, the issue that stood out to me most, and shocked me most, was our inability to increase the number of new-build homes in the past five years when, at the same time, the major housebuilding firms saw their profits increase by nearly 500%. The situation is obviously very satisfactory for the housebuilding companies and so there is little incentive for them to do anything other than trade as they have been doing for some time now. But the market is clearly not producing the quantity of new homes we need, the type of homes we need or the quality we need. We have heard about that today. We have also heard that the rise of the big companies has often been at the expense of many of our small builders.
As other noble Lords have outlined, the speculative development model drives down affordable housing and infrastructure provision and results in slow build-out rates which keep up unit prices. In addition, it is an incentive for high prices to be paid for land, resulting in high-density housing, high unit prices and few affordable units. Other noble Lords have mentioned the issue of affordable units on sites, and I am grateful to a colleague of many years ago who now lives in Rugby who has provided me with a couple of instances of what is happening there. The Rugby Gateway site has 1,000 houses planned with only 10% of them being affordable. On the Rugby radio mast site, 6,000 houses are planned with only 3% of them being affordable. As others have said, it is quite clear that a major hurdle when building more homes is the structure of the housing market, which works mainly in the interests of the volume housebuilders.
Several noble Lords have mentioned quality. In his introductory speech, the noble Lord, Lord Best, talked about the quality of new build, but I am particularly interested in energy efficiency, which was mentioned by the noble Baroness, Lady Brown. Between 2006 and 2009, Energy Efficiency Partnership for Homes carried out a survey of building control officers and, somewhat shockingly, it discovered that most of them considered energy efficiency only a medium to low priority as it was not life-threatening and hence not something on which to focus limited resources. The officers also considered that non-compliance with Part L of the building regulations was too trivial either to withhold a completion certificate or to instigate court proceedings. I suggest that that is still a problem for us in local government.
Other noble Lords have already mentioned part of the answer to the quality issue, namely our method of construction. We continue to use the same methods that we have used for more than a century. Houses made from modules built in factories have high standards of finish and are much more energy efficient. In addition, they are much more environmentally friendly—during construction there is less waste and there are fewer vehicle movements on and off sites. We know that we lack a skilled building workforce and that we need to train more people in construction techniques. This is an ideal time to introduce new ways of working, and I hope the Government will continue to encourage homes built in this way. This week I read that Low Carbon Construction is trying to develop this by having temporary modular factories near the sites on which it is building.
Lastly, I turn to small builders. The Federation of Master Builders has sent me a very good briefing which I probably need to give to the Minister as I do not have time to talk about it now. However, it cites four reasons why small builders have problems, including: access to land and planning for small sites, cited by 62% of members; access to finance, with 45% of respondents saying they were involved with sites stalled for financial reasons, up from 35% the year before; and the planning application process being strongly linked to planning resources. We have debated that issue before in this House and I am disappointed that the Government are taking so long to implement provisions that this House has passed.
Like other noble Lords, I have been involved in housing over the years. I have always thought that, given that housing affects every other area, we should have a Minister at the Cabinet table. I have been saying that for 24 years, and the Government have now half-done it. I hope that something will come of it, because we owe it to the people who cannot afford a home or have no home at all.
Baroness Wolf of Dulwich (CB)
I, too, thank my noble friend Lord Best for securing this debate and join him, the noble Lord, Lord Taverne, and others in pointing out that if we do not do something about construction skills, we will not get any additional homes. In fact, we will fall backwards, not move forward.
There has been a dramatic fall in the number of construction apprenticeships in this country over not just the past few years but the past few decades. I shall give a few examples of recent problems. In 2012-13 construction apprenticeship starts fell to only 14,000, whereas in the early 1970s one large construction company alone had three times that number going through its books. This is a real national crisis. Although we have seen a small upturn, so the 14,000 starts in 2012-13 have now crept back up to 21,000, which sounds like good news, the continuing bad news is that only 10% of those are level 3, the level of a truly skilled craftsperson.
This is a true national crisis, but it has been many years in the making. It would be easy to say that it is all the fault of the major housebuilders, who have just decided that it is cheaper and easier to pull in skilled adult employees from eastern Europe, but it is fairer to say that there was an existing crisis and the arrival of the accession states covered it up. This crisis has been a long time in the making and only the large construction companies can make any serious dent in what is going on. They are fundamental to the apprenticeship system and to the development of construction skills. Even if we see a revival of small companies, which I hope we will, the nature of the construction industry is such that if the big companies are not truly involved, it just will not happen.
At this point, I shall refer to a company that has not come up much: Carillion. It has not come up much because it is on the verge of bankruptcy rather than making record profits and it is not primarily a housebuilder, but it is a fundamental part of what is left of our construction skills training system. It was originally made up of the names of my youth—Wimpey and Mowlem—which were central to what is left of the system. They are where I get my numbers from. In the Wimpey training—I do not know quite what to call them—sites, numbers plummeted in the 1970s and 1980s so that where it had been taking on 7,000 apprentices a year, the number went down to about 1,000, most of whom, even now, go on to other companies, not to Carillion.
The problem is no doubt partly the company’s own fault, but it is also very much a failure of government policy. What is truly shocking is that we have had a Construction Industry Training Board and a construction industry training levy all these years. When the other industrial training boards went, it was felt that the nature of the construction industry meant that the levy was important. It is not particularly difficult to come to the conclusion that the Construction Industry Training Board has not done a terribly good job. In fact, in this last year and a half, many of the leading companies have expressed in public real concerns about the performance of the CITB, and a government review stated, “We cannot really see any reason to change; it is all too difficult”. We have had a review of these industrial training boards from the Department for Education, and the main result is that the CITB will increasingly concentrate on enabling others to provide high-quality services, except when intervention is needed to secure the quality and efficiency of services. That gets a prize for a number of things as a piece of prose, but not as a solution to an acute problem.
The other thing I want say quickly before I close is that apprenticeships are among the other respects in which Section 106 is no longer working, and I would be happy to explain at length why this is the case.
In conclusion, I have two questions for the Minister. First, in the context of this recognised national crisis in housebuilding, will the Government consider revisiting the issue of apprenticeships and training in construction, not simply in the context of the narrow view of the CITB but more generally in terms of the evident failure of the combined industry and government policy to produce the skills that we need? That failure impacts particularly on working-class boys. Secondly, in that same context, will they consider having a proper look at Section 106?
Baroness Gardner of Parkes (Con)
My Lords, I congratulate the noble Lord, Lord Best, on this valuable debate today. He paints a harsh, or perhaps a rather sad, picture of the major housebuilders, in terms of their putting profit before people. We should remember that these firms—like many other people, I have had a few shares in them for many years—have done much to advance the construction industry in this country.
When I became a Peer in 1998, we had two Members of the House who each had a long history in the construction industry. One was a housebuilder—Frank, Lord Taylor—the other was Edwin, Lord McAlpine of Moffat, the grandson of the founder of Sir Robert McAlpine and Sons, although they are not housebuilders but a major construction company. It seems appropriate that Edwin’s grandson is taking part in this debate today.
A special memory for me is seeing these two charming elderly men chatting together and obviously enjoying it. I already knew Lord McAlpine. Lord Taylor told me that he had started his building work at the age of 16 in Blackpool. Not only did he see the opportunity to create homes during a severe shortage, but he learned how to build them. He persuaded his bank manager to loan him some £400 to start the enterprise and then sold a pair of properties for a 100% profit.
Taylor was a motivator who had the ability to inspire people with almost unequivocal loyalty. In the early 1930s, he persuaded his entire team to uproot and move south from Blackpool to Hayes in Middlesex. He bought a site which other builders had passed by because of the drainage difficulties. He solved those and went on to build 1,200 homes. By 1935, Taylor Woodrow had become a public company. In confronting these new challenges, Taylor maintained his basic values of hard graft and doing a fair day’s work for a fair day’s wage. Although he had the ability to think on the grandest of scales, he kept his eyes on the small details —he would often check the roof of a house himself. He believed in teamwork, having no staff, only team members. Although knighted in 1974 and invested for services to the UK, he shunned personal acclaim, preferring to recognise his success as the product of a team effort—a team that now numbers around 8,500.
Taylor was one of the last of the old school of entrepreneurs, whose passion was focused not just on the business but on the people within that business. One of his tenets of management was to allow people to take responsibility young and give them the licence to make mistakes—but only once. He did not suffer fools gladly. He stood for good quality at a fair price and wanted everyone to know that was what the firm stood for.
Was it only in the past that it was possible to go from rags to riches? No. Today, Tony Pidgley has a parallel history—a real rags to riches story. Now boss of Berkeley, he was adopted at four and left school at 15, but has had similar success. From personal experience over the years, I know how good he has been at supporting various charitable causes.
My own interest in building dates back from the day when we redeveloped the garage behind the surgery at our little mews house. We were the first, but now the whole mews has now been completely redone, and ours is tiny compared to all the others that have added a floor on top or a basement below. The work was done by the small works department of Bovis Homes, and at that time many major builders had similar departments.
My other venture was in the 1980s, when I bought a central London house for the family to live in. We were shocked to find it suddenly split apart due to subsidence and we were forced to demolish and rebuild. These minor experiences make me appreciate the work of builders and the demands on their skills. Training has always been a big issue and I am glad it has been brought up today.
Lord Kerslake (CB)
My Lords, I first declare my interests as chair of Peabody and Be First, as well as president of the Local Government Association. I should also say that I have worked closely with the major housebuilders and their trade body, the Home Builders Federation, for nearly a decade, in particular when I was the chief executive of the Homes and Communities Agency. I too congratulate my noble friend Lord Best on this debate and his speech. Four minutes is a cruelly short time to speak on this very big subject, so I will say very little about the wider housing issues, other than to observe that the Government have correctly identified the importance of tackling our broken housing market but have so far been nowhere near big enough or bold enough in their solutions.
I came into housing at just the point the housing market fell off a cliff. Supply halved, the workforce was also halved, and profits and share values crashed. Through a combination of their own enormous efforts and substantial intervention by the Government, the major housebuilders pulled through. Sadly, many of the smaller housebuilders were not so fortunate. A decade on, supply has been restored and profitability and share value have returned. This is something we should generally celebrate: it suits nobody to have the housebuilders on their knees. Yet we still have enormous issues of affordability and supply, unacceptable bonuses and, as others including my noble friend Lord Best have commented, customer satisfaction falling to a worrying level.
Something more needs to be done, and here are my top four actions. First, we should recognise once and for all that the task of delivering the new housing that this country desperately needs cannot and will not be delivered by the major housebuilders alone. This was the fundamental mistake of the late, unlamented measures in the Housing and Planning Act. The Government have thankfully moved on from that Act but have not done enough yet to create a genuinely long-term mixed model of delivery. Lifting the borrowing cap on local authorities and substantially increasing the social housing grant would be a good start.
Secondly, a fundamental review is needed of the now £30 billion Help to Buy scheme. It should not be deleted, but should become much more targeted and require much more from the industry in order for it to benefit from it. The scheme should be focused solely on first-time buyers and available only where it is critical to the delivery of a scheme. In return for this, housebuilders should commit to curbing excessive bonuses, delivering more affordable housing and investing in developing a skilled workforce.
Thirdly, a fundamental change is needed in the way the viability assessment works. Currently, land prices are determined by whichever developer is prepared to take the biggest gamble on beating down costs and reducing Section 106 commitments. As Shelter commented, this makes for scheme delays, high legal costs and poorer quality schemes. This is creating real anger and disempowerment at community level, exacerbated by the poor quality of many of the schemes agreed through the permitted development rights scheme.
Fourthly—my noble friend Lady Wolf has been very good on this—we need a new joint plan between government and the sector to address the enormous skills gap. It is not just about bricklayers and Brexit, important though that is. There are significant shortages in professional skills as well, including, crucially, many local authorities planning departments, which are on their knees, frankly. The London mayor’s Public Practice initiative and Bexley Council’s proposed place and making institute, both of which are supported by Peabody, are good examples of what needs to be done.
I put forward these proposals to support, not attack, the housebuilders. We need a thriving and growing housebuilding sector to have any chance of delivering the homes that this country requires, but it is in the interests of everyone, most of all the sector itself, that change is made.
Baroness Neville-Rolfe (Con)
My Lords, I congratulate the noble Lord, Lord Best, on securing this fine debate and pay tribute to his lifelong work on social housing. Although I do not agree with some of his detailed points, I do agree that the present situation is unsatisfactory and has been for far too long. To my mind, to understand what has gone wrong we need to look at both demand and supply.
I start with the demand side, because it always receives much less attention. In 1960, the population was 52 million; by 2000, it was 60 million; and today it is 66 million and growing rapidly. The scale of growth has been very fast, mainly because of the scale of immigration, especially since Labour gained power in 1997 and the opening up of eastern European borders following enlargement. This growth was encouraged by the Government of the day for political reasons, as insiders have since admitted, but its scale was not admitted at the time, nor planned for, despite the party’s advocacy of planning.
Secondly, the average household size has reduced from 3.01 in 1960 to 2.33. Thirdly, add in our ageing population and, fourthly, the purchase of many properties in the south-east by overseas investors and one can understand why we face difficulties. Demand has also been exacerbated by the assistance the Government are giving, notably Help to Buy, and I fear will be further exacerbated by much of the generous £44 billion of support in the pipeline from 2017 to 2022—I cite that from the excellent Library note produced for this debate.
That brings me to supply and some findings from a fine report that Chris Philp MP recently produced for the Centre for Policy Studies. In the 38 years from 1970 to 2007, housing starts averaged 234,000 a year. They declined to 125,000 in 2009 and were still only 192,000 in 2016-17. There is a huge shortage of housing in London and the south-east that has built up for nearly 20 years, with a cumulative undersupply estimated at 439,000 homes. There are now 1 million more people living with their parents than in 2000 and all too frequent cases of immigrants living 10 to 15 in a small house.
Housing costs are very high, especially in and around London and, as has been mentioned, it takes 10 years for a first-time buyer to save for a deposit. Yet home ownership remains a near universal aspiration, and the net present value of owning compared with renting is materially better on all reasonable assumptions, so young people are right to feel anxious.
So what should our Housing Secretary do? He needs to show unwavering leadership and build trust between the key stakeholders: notably between government departments, metro mayors and local government. He needs to use the funding made available to better effect. To take one example, the thinking behind the national productivity investment fund for roads was that it could free up land for housing as well as eliminate blackspots, but the bureaucracy around the funding is delaying investment. He needs to engage the major housebuilders, but I agree with other speakers that we sorely need the small housebuilders, who have melted away since the plan-led system came in in 1990. I have called before for a tax break for small builders, and I do so again. He needs to identify and tackle the barriers to success. Like other speakers, I single out the weakness of construction skills among the UK population and our slowness to develop modular homes.
Planning has got a bit easier, but it is bureaucratic and difficult, and I believe in easing restrictions rather than just imposing duties on councils—for example, planning around stations, motorways and public buildings with build-out clauses in the sale of land to accelerate the process, and allowing taller buildings and schemes on low-density housing estates. Two ideas from the CPS report are to require new developments over 20 units to be 50% purchased by UK residents, and requiring mortgage lenders to extend offers to 12 months for first-time buyers, so that they can buy new homes off plan.
The ministerial team needs to review and report on how it is doing and learn from success and failure. The Budget target of 300,000 homes is a good start, but it needs to grow. Above all, the plan needs to be simple and well communicated. I wish my noble friend the Minister and all those charged with this important task every success.
Lord Shipley (LD)
My Lords, I remind the House that I am a vice-president of the Local Government Association and of National Energy Action.
This debate has been about the performance of the UK’s major housebuilders, and the number of speakers reflects its importance. I thank the noble Lord, Lord Best, for his robust diagnosis of that performance and place firmly on the record that I share it.
Many contributions have been made, and I should like to draw out just a few which I think are particularly important. The noble Lords, Lord Hunt of Wirral and Lord True, talked about the need for public-spirited partnership in housebuilding, and that is absolutely true. The question, of course, is how you get there and, for me, the answer is a civic housebuilding model rather than a speculative building model.
I particularly appreciated the contribution of the noble Baroness, Lady Brown of Cambridge. She raised a number of important issues, such as how to fund zero-carbon homes, and pointed out that the bonuses being paid by Persimmon Homes could have amply covered the delivery of zero-carbon homes built by that company. She also made a helpful point about Help to Buy: that it should apply only to low-carbon homes.
I agree with the noble Lord, Lord Whitty, on the subject of a separate Ministry of Housing, a point supported by my noble friend Lady Maddock. It is a very important suggestion that we have debated before in this Chamber; it is important to raise housing even higher than did the recent reshuffle.
The noble Lord, Lord Turnbull, asked what redress the Government might provide for leaseholders with existing expensive contractual commitments. I hope that the Minister can give a specific answer to that question. I absolutely agree with the noble Lord, Lord Horam, who talked about the importance of not selling public land at the highest prices if we are to solve the current crisis.
We have not been building enough homes for about 20 years, and housing policy has been geared too much to owner-occupation, to which many households cannot aspire. The result of past failures in our dysfunctional housing market has been a lack of supply overall and a lack of affordability caused by the shortage of homes. House prices today are almost eight times the average wage. The number of people under 35 owning their own home has dropped from 59% to just 38% in the past 13 years. According to Shelter, the average new home built today is not affordable for 80% of private renting tenants who are in work, even with the assistance of Help to Buy. We should note that private renting now accounts for one in five of all households in this country. That figure is too high.
From these Benches, we have heard from my noble friend Lord Stunell that government policies have led to increased prices. He made the point that big companies prefer big sites, on which production can be slower; on big sites they can time the rollout of building. He made a very important point that more, smaller builders on lots more sites would mean multistarts on sites, which would mean a greater number of completions. That diagnosis is right. I know that the Government have proposed increasing the number of SME building companies. We need to keep encouraging more builders to enter the market to build on smaller sites because we will end up with more homes being built.
My noble friend Lord Stunell also talked about the need for increased borrowing for housing for rent. The noble Baroness, Lady Thornhill, talked about the massive shortage of social and affordable homes, and raised the issue of viability assessments, which the National Planning Policy Framework has made a material factor in planning. She said that it was meant to be a sensible exceptions policy. Indeed, when the Bill in question passed through this Chamber, that is what noble Lords thought it was but, as she said, it has become the rule. Planners are frustrated locally by their lack of control because viability is being weighted in favour of the applicant and is undermining public confidence in the system.
My noble friend Lord Taverne talked about the importance of small developments, such as pocket developments, and using modular home construction systems. He talked about the demographic time bomb and the importance of having enough trained workers if Brexit happens. The issue of apprenticeships and skills in construction was also mentioned by the noble Lord, Lord Kerslake, and by the noble Baroness, Lady Wolf of Dulwich. That issue, which is not entirely related to Brexit but is made worse by the prospect of it, really matters. We need to have enough people trained to build if the Government are serious about getting to 300,000 completions a year.
My noble friend Lady Janke talked about Bristol, where the price of a home is not eight times but 10 times the average national income. She talked about the £6.1 million that Bristol council spent on homelessness and the lost 200 affordable homes in a year because of the viability assessment loophole. She reminded us that many of those assessments are not made public and that many planning departments operate with too few staff. My noble friend Lady Maddock talked about quality and said that energy efficiency is too often seen as a low priority when it should not be, and she encouraged new methods of modular construction that could be more environmentally friendly. We have had a wide-ranging debate and all the contributions are very helpful.
In my final two or three minutes, let me say what I think the Government should do next. I acknowledge that they have understood some of the dysfunctionality of the housing market—that has been reflected in various announcements in recent months. However, as the noble Lord, Lord Best, pointed out in his introduction, the Government are underpowered in this area. Not enough is being done. The noble Lord, Lord Kerslake, made the same point.
The Government cannot build 300,000 homes a year unless they make more productive use of land, so they should stop selling public land at the highest possible price. Government policy needs instead to be driven by affordability, with 50% of affordable homes on publicly owned sites and at least 30% on privately owned sites. I hope they will pay particular attention to the outcome of the Letwin review and take action in the public interest, as necessary, to reduce land banking.
A number of contributions on planning have dealt with bureaucracy and red tape, but I do not see it as being about bureaucracy and red tape. More planners could speed up the planning process. We need planners who can lead place-based planning. We need a planning system based on fewer large-scale sites and more, smaller sites which in turn, as I said earlier, will encourage smaller builders to enter the market. Planners, too, have a role in reversing the current trend of smaller new homes of poorer quality, which result in rising profits for builders.
The viability assessments process has to be reformed. We have heard a great deal about this, but I hope the Minister can say something further about how the Government plan to make that process better. The Government have to permit more borrowing by local authorities and housing associations in order to build more social and affordable homes. That is essential, unless they are prepared not to hit their 300,000 target. They will do that only if local authorities and housing associations can borrow.
Finally, the Government have to end the speculative housing model that has increased land values and created the dysfunctional housing market we have today. Instead, we have to move to a civic housing model that emphasises place-making, quality and affordability and has at its heart community benefit, not private profit, director bonuses and reducing standards.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, I make my usual declarations of interest as a councillor in the London Borough of Lewisham and a vice-president of the Local Government Association.
Like other noble Lords who have spoken in this debate, I wish to put on record my thanks to the noble Lord, Lord Best, for securing this important debate today. We often talk about housing, but the noble Lord, in changing the focus to the performance of the UK’s major housebuilders, has shone a welcome spotlight on what has been happening with them. As the noble Lord said, they have struggled to either achieve the quantity or the quality of the new homes the nation needs.
The number of homes being built has increased and, while that is welcome, we are still not building enough to meet the demand. That, in itself, has huge consequences for families, on rent levels, affordability of housing, house prices, standards and homelessness. My noble friend Lord McKenzie of Luton referred to the scandal of homelessness. The Labour Government had virtually eliminated the scourge of rough sleeping by the time they left office. It is shameful that walking to your Lordships’ House from any of the nearby mainline stations, we are confronted by people sleeping in doorways or in Westminster tube station. I agreed entirely with the contribution of the noble Lord, Lord Turnbull, about young people struggling to get on to the housing ladder and the whole question of the rising costs they have to endure.
The number of homes we have been building has been in decline for many years under successive Governments of all colours. Even with the welcome increase that we have seen more recently, we still built 200,000 fewer homes in 2016-17 than in 1969-70. Those figures are quite stark and highlight the problem we face as a nation. There is also the issue of building the homes that people actually want, where communities need them and the type of housing that communities need. The right reverend Prelate the Bishop of Newcastle made very important points about building homes and communities, and again made it clear that even more social housing is needed and a distortion has been created in recent years by the failure to deliver that.
To address that issue, there has to be a bigger role for local authorities, as many noble Lords have said, and for housing associations. The model favoured by the Government at present will not deliver the increase that we need, or to which the Government have committed themselves. I agree with the noble Lord, Lord Kerslake, that the major housebuilders will not solve the problem on their own in this housing crisis. As we have heard today, other models need to be developed and used.
As we have heard, the major housebuilders buy land, often competing with each other, which puts up the cost of the land. They then, rightly, want to maximise their return on their investment, often moving towards a model that drives down the element of affordable housing in the developments that they deliver. That is often to the dismay of the local authority, which can have very little power to do much about it. I do not blame or criticise businesses—and housebuilders are businesses with shareholders, seeking to maximise their return. They are not the Government; they are not looking at housing policy and solutions; it is the Government’s job to do that. I agree with the noble Lord, Lord True, that the focus needs to be not just on numbers but on quality; we need to build quality homes.
Like the noble Lord, I have lived in a variety of places. I grew up on a council estate in Southwark, the Aylesbury Estate, and lived there for many years with my family. I then rented in Coventry and Nottingham, in the private sector, and now I am a homeowner living in Lewisham in south London—but still paying my mortgage, unfortunately. These things happen and life goes on; many people move through the same things and move forward. But it is frustrating that the Government are not using all the public policy levers at their disposal to fix, as they term it, the broken housing market.
I sit on a planning committee in Lewisham Council and I have often seen, with much regret, that when we consider planning applications—I have considered hundreds in my time—the affordable element has been squeezed down. The noble Lord, Lord Hunt of Wirral, made reference to the decline of smaller housebuilders and the problems that that has caused—and I agree on those points. However, I do not agree about red tape in the planning process. I have sat on a planning committee for many years, as I said, and have approved hundreds of applications, and I just do not believe that the problem is the red tape with the planning departments. What frustrates me is that the committee often agrees the application and then, weeks, months and years later, nothing much has happened. A sign has gone up that says, “Land available to build 20 houses with full planning permission”, but nothing actually happens—not a brick is laid. That is the issue. It is not the planning department holding things up; it is things not getting built.
The use and cost of land is another issue, particularly in London, with the numerous planning applications being approved with no action being taken. That needs to be dealt with. Many noble Lords have mentioned the cost of public land and how public bodies can dispose of that public land for affordable and social housing, and be able to sell it for best value rather than the highest price. The noble Lord, Lord Horam, referred to that. When we considered the last planning Bill—I think that it was last year—I moved a number of amendments in this House which were supported by Transport for London, which wanted to dispose of some its land other than at the highest price. It wanted to be able to sell it at a lower price for best value to build social housing. We had discussions with the Government about that—the Mayor of London has ambitious targets for building more affordable housing and more social housing—but at the end of the day we just could not get the Government to agree, and it all fell by the wayside. It is very regrettable that we did not do that, and I hope that at some point the Government will look at it again. Disposing of that land at a more reasonable price would enable us to build the different tenancy homes that we need.
The briefing from Shelter talks about using public land more intelligently, which is what we are talking about here, to solve the problem and fix our broken housing market by helping to meet the Government’s own housing targets and actually building homes that people and communities want and need. Building homes that people want and need is of paramount importance. All too often we see the same types of housing built, with the same designs, not taking into account the locality or what the real need is in an area, or seeking to address that need, because it might not fit into the model that the housebuilder wants to supply. So we need to do more, build more and be more ambitious about what we want to build and what can be achieved. Housing associations have a good track record in building homes that people want and meeting community need, but they need to do more—and, actually, they want to do more, as a number of noble Lords have said. I would like the Government to give more focus to the co-operative sector, and to look at offsite manufactured housing with more energy, as the noble Baroness, Lady Maddock, said.
I asked a Question recently on offsite manufactured housing and made reference to the report by the GLA committee chaired by Nicky Gavron about what was being done. Community land trusts and custom housing building projects, as the noble Lord, Lord Best, said, equally have important roles to play in these small developments. I have also recently asked a number of Written Questions about Ebbsfleet and the development corporation, which the noble Lord, Lord Bourne, has kindly answered. On looking at the Answers that I have got, it seems to me that progress is a bit slow there in getting housing built and reaching the growth that the Government were expecting. Perhaps the noble Lord could comment further on that.
We certainly need to do much more to support the small housebuilders. Their market share has been shrinking over a number of years, but they in particular can work on the smaller and more bespoke schemes that are needed, which are more reflective of local communities.
Skills is another big area where more action is needed, as my noble friend Lord Whitty said. Much more needs to be done to get young people in the UK equipped with the skills to become the bricklayers, carpenters, electricians, plumbers and roofers of the future. We have all come across the very skilled workers who have come to work here from abroad, and we are very lucky to have their contribution, but it is a matter of regret that we have not done much more to train our own young people to have a greater share of these new jobs. Major housebuilders need to do more by taking on apprentices on leaving school and giving them the skills. I agree with the comments of the noble Baroness, Lady Wolf of Dulwich, that we have a serious crisis that needs to be addressed.
I also think that local authorities in England need to be able to borrow to build. As the noble Lord, Lord Best, said, their being able to use 100% of their receipts from council house sales to build more homes is long overdue.
I would like to look at the figures that the noble Lord, Lord Naseby, gave us. However, I certainly agree with him that the Labour Government should have built more council housing. But it would be worth looking at the money spent by that Government on the Decent Homes Programme, renovating social housing and making homes warmer, safer and drier. That programme improved our social housing stock with better roofing, windows and heating, making much-needed upgrades throughout social housing.
I agree with the noble Baroness, Lady Brown of Cambridge, on the desirability of building more low-carbon housing using the most energy-efficient standards. That was an issue that the noble Lord, Lord Krebs, from the Cross Benches, as well as the noble Baroness, Lady Parminter, and others raised time and again during the passing of the now infamous Housing and Planning Act 2016. We were unable to persuade the noble Baroness, Lady Williams of Trafford, or the noble Viscount, Lord Younger, of the desirability to do that then. Very small sums of money were required to do it when houses were being built; as the noble Baroness said, it costs many more thousands of pounds more to retrofit houses at a later date. It seems crazy that we are not doing it now.
I do not doubt the sincerity of the noble Lord, Lord Bourne, or the Government, in tackling our broken housing market, but it is very frustrating that some very obvious policy decisions are staring them right in the face and are not taken up. I hope that the noble Lord can look at them now.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, first, I thank the noble Lord, Lord Best, for moving this debate with characteristic breadth and depth of knowledge. It is a real privilege to hear his thoughts on the issue. Clearly, he is a man who knows what he is talking about.
Many noble Lords have talked about this being a debate not just about housing but about people. For example, the right reverend Prelate the Bishop of Newcastle made that very pertinent point. People referred to the new name of the department. In fact, it is now a ministry—the Ministry of Housing, Communities and Local Government, or MoHoCoLoGo, as I am told it is being called in the corridors of power. It makes us sound like a Mexican nightclub. But there is a serious point to this; it is not just cosmetic—it is about the importance that we attach to housing as a Government. Indeed, the Prime Minister has made it clear that it is the number one domestic priority. Points have been made across the Chamber, and I think we all share the recognition that this is crucial; we need to build more and to higher standards and a higher quality design. I shall try to do justice to some of those points.
Noble Lords have referred to the phrase, “fixing our broken housing market”. The noble Lord, Lord McKenzie, referred to it and indicated that it shows that it is not just dependent on the market. I agree with that; I think that the fact that we need to fix the market means that we are looking at regulated markets. Anyone who has been following what the Government and the ministry has been doing knows that we have been taking action to do just that. That is not to say that the market is not important here; it has certainly helped to deliver housing across generations, as my noble friends Lord Borwick and Lord Hunt made clear, along with others—my noble friend Lord Naseby spoke with great personal recollection of his time in Islington and indeed in Northampton South.
We have announced further reforms recently, including planning reforms both to ensure that more land is available for housing and to maximise the potential of our cities and towns to build new homes, while protecting the green belt. Noble Lords, including the noble Lord, Lord Shipley, and the noble Baroness, Lady Thornhill, made points about the viability assessment. We have consulted on this and will be responding to that consultation, but the aim is certainly to make the viability assessments simpler and clearer.
More than £15 billion of new financial support has recently been made available for housebuilding over the next five years, taking the total financial support up to 2022-23 to £44 billion, which will help to boost the delivery of housing. Using funds flexibly will unblock barriers to more housebuilding.
Many noble Lords have referred to the need to assist smaller housebuilders; I share this aspiration, as do the Government, and we have of course been doing this. The noble Lord, Lord Shipley, and my noble friends Lady Neville-Rolfe and Lord Borwick referred to this, as did other noble Lords. We have, for example, recently ensured that there is an extra £1.5 billion for the home building fund for small and medium-sized builders; we will be watching this to make sure that it is having an effect.
The right reverend Prelate the Bishop of Newcastle, among others, referred to the housing revenue account and the borrowing cap. We have recently raised that cap by a total of £1 billion in areas of high affordability pressure for local authorities that are starting to build new council homes. We will be assessing bids in relation to that before long.
Noble Lords may have seen that, this very morning, we launched Homes England. The Secretary of State, Sajid Javid, was at Alconbury to do that this morning. This will drive forward change by bringing together money, expertise, planning and compulsory purchase powers.
Many noble Lords also referred to the importance of new towns—including the noble Lord, Lord Best, and my noble friend Lord Naseby, who spoke with personal experience of Northampton—and have urged expansion of this programme. We are taking that forward; it is central to our thinking and it featured very much in the White Paper.
Taken together with these measures in the housing White Paper, the Budget puts us on track to raise housing supply to 300,000 a year on average by the mid-2020s and to drive up housing supply by the end of the current Parliament to its highest annual level since 1970. This represents clear ambition.
Many noble Lords referred to the need for more social housing—I share that aspiration. We have committed £2 billion, much of which will go towards social housing development, and we will be assessing bids in relation to that. The noble Lords, Lord Best, Lord McKenzie, Lord Kennedy and Lord Whitty, my noble friend Lord Horam and the noble Baroness, Lady Janke, referred to that. The noble Lord, Lord Shipley, expressed it in a slightly different way as “civic building”, which I think is a very good phrase to keep hold of and which describes what we are seeking to do.
We recognise and welcome the contribution made by Britain’s larger housebuilders towards getting the homes that we need built—it is worth putting that on record. Many have done and are doing that to a high standard, though not all, by any means. I will say something about housing design in a minute. We need to recognise that there are market controls and provisions for shareholders to control bonuses and indeed salaries, which are subject to being published.
That said, I understand the particular frustrations that have been expressed in relation to Persimmon. They will note what has been said—not least because we will make sure a copy of the debate goes to all major housebuilders, our partners and all agencies in this area. I listened with great interest to what my noble friend Lady Gardner of Parkes said in relation to the paternalism that was demonstrated by some people who had been here previously. My noble friend has had great experience in this area, so I was interested in what she had to say, which was very pertinent regarding that paternalism of old.
The noble Lord, Lord Taverne, also made some points about smaller organisations, including Pocket, and some good organisations that are really helping to deliver.
Some noble Lords touched upon planning conditions. My noble friend Lord Hunt spoke on this from a different angle, and so did the noble Lord, Lord Kennedy. They will both recall that the provisions in the Neighbourhood Planning Act forbid the use of pre-commencement conditions without the applicant’s agreement. We are now working on the regulations in relation to that, not least on the speed with which these matters are dealt with, which I hope will help in terms of delivery.
Noble Lords also touched on the Help to Buy programme. The noble Lord, Lord Kerslake, talked about possibly having it in a revised form. It is important that we make this provision. It is of course a loan scheme, not a grant scheme, but it is central to the Government’s thinking and noble Lords will understand the aspiration for home ownership. The noble Lord, Lord Kennedy, touched on it himself in terms of his personal journey in the types of tenure that he has enjoyed.
Mention was made of developer contributions and infrastructure in relation to Section 106 and the community infrastructure levy. I will take up some of those points in a write-around, if I may, because time is pressing. There was a contribution made in relation to small and medium-sized builders, which I have touched upon. The home building fund, which we launched in October 2016, provides £1 billion of short-term loan funding for small builders, custom builders and innovators to help diversify the housing market. Some £2 billion of long-term funding for infrastructure is also available to small and medium-sized enterprises, and indeed others. These funds have both proved popular. As announced in the Autumn Budget, we have added an additional £1.5 billion for loans to small and medium-sized enterprises, custom builders and innovators. It is our belief that this will help with delivery and of course also help small and medium-sized builders. I share the aspiration that many have expressed that we need to move the emphasis back to small and medium-sized businesses, which are more flexible and should be able to take up some of the slack here.
In addition to ensuring that small and medium-sized enterprises have the financial support that they need, we have also responded to concerns about access to viable land and the unnecessary planning burdens that the sector faces. Proposals in the White Paper include increasing the availability of small sites through changes to the National Planning Policy Framework. The right reverend Prelate the Bishop of Newcastle referred to this. We have set out that at least 20% of the sites allocated for residential development in local plans should be sites of half a hectare or less. We also want to make information available so that small companies know what land there is to build on through the brownfield registers. Increasing planning fees to enable local authorities to provide a faster and better planning service should also help in that regard.
Further planning reforms were announced in the Autumn Budget, which will help to ensure that local authorities produce up-to-date local plans and take steps to increase density in urban areas by delivering more small and brownfield sites. I think this was something that my noble friend Lady Neville-Rolfe touched upon. We will continue to simplify the planning system in order to reduce the burden on business and to stimulate housing supply.
On leasehold reform, which was raised by my noble friend Lord Hunt and the noble Lord, Lord Turnbull, with few exceptions the Government cannot see any good reason for new-build houses to be built and sold on a leasehold basis. It is for this reason that we have asked all builders who use the Help to Buy equity loan scheme to stop selling leasehold houses with Help to Buy support. We have written to all developers to strongly discourage the use of Help to Buy equity loans for the purchase of leasehold houses in advance of new legislation. Although it is not possible to impose a requirement on developers to stop building leasehold houses under existing contracts, this is an opportunity for housebuilders to get on to the front foot and show that they are putting their customers first by recognising that the unnecessary use of leasehold on new houses has to end as quickly as possible. We will be monitoring the sale of leasehold houses through the scheme and will take further action, as appropriate, if we are not satisfied that builders are working on this important issue—we will be watching like hawks.
A question was about existing leaseholders. We are working with the Law Commission to see what can be done in relation to these matters. I will expand on that in the letter that I will send to contributors to the debate. The Secretary of State has written to developers to make this position absolutely clear.
Housing guarantees were touched on by noble Lords in relation to helping SMEs and providers of purpose-built rented housing. The announcement of £8 billion-worth of housing guarantees at Autumn Budget should help with delivery here. Therefore, we will work to engage the market over the coming months on the most effective way to deploy this guarantee capacity to pursue our housing goals. That, of course, will emphasise the work that we wish to do through the small and medium-sized housing providers.
Mention was made of supporting ambitious housing associations and local authorities to build. In 2016-17, 41,530 affordable homes were delivered. This represented a 27% increase from the previous year. However, I stress that we want to see more. To deliver more affordable homes, including at a social rent, we are investing £2 billion, as I mentioned. That will be subject to an announcement on how we are carrying it forward. As I indicated, we are also raising the housing revenue account borrowing cap. I think that was raised by the noble Lord, Lord Stunell, among others. Local authorities have shown that they share our ambition and we look forward to seeing how that plays out.
Mention of land banking and delivery was made by many noble Lords. Mention was also made of Sir Oliver Letwin’s review. It is important to recognise that a variety of factors can prevent development starting, but certainly sometimes this will be as a result of what is termed land-banking. The housing White Paper acknowledged that there was an issue here and at Autumn Budget we more than doubled the housing infrastructure fund, because this is sometimes an issue, investing an additional £2.7 billion, to take the total fund to £5 billion. This infrastructure issue was raised by my noble friend Lord True, the noble Baroness, Lady Thornhill, and others, including my noble friend Lord Hunt. Therefore, we will ensure that we invest in the right infrastructure, in the right places, so that new housing does not create additional strain on local communities and services.
As I say, we acknowledge that there are concerns that land may be being banked by major developers. We announced in the Budget a review panel, chaired by the right honourable Sir Oliver Letwin MP, to look into build-out rates. This review will provide an interim report in time for Spring Statement 2018 and a full report in time for Budget 2018. The review will have two parts. The first part, which Sir Oliver is working on at pace—he often works within the department—will seek to explain the significant gap between housing completions and the amount of land allocated or permissioned. This will be the focus of that interim review. As I say, initial engagement has already commenced. The second part will make recommendations for closing the gap, and will work to identify practical steps that could increase the speed of build-out. These recommendations will be published in the full report later this year.
Quality design is very close to my heart. I believe very strongly that we need a robust framework to ensure proper design. The Government have embedded design principles into the National Planning Policy Framework and guidance, and this will be further strengthened when we publish the new NPPF early this year. Emphasis is placed on achieving well-designed and distinctive new developments that add to local character and create distinctive neighbourhoods as well as contribute to creating healthy and attractive local places where people genuinely want to live. The essence of this is that it is about not just the number of houses delivered but the quality of the design and of the property. We can all point to poor design, where new characterless, featureless, pattern-book housing estates are the same across the country. This is in contrast to much new housing throughout the country, for example, in Cambridgeshire, where the Secretary of State is today, but in many other places as well.
It is important to say that the department has made great strides. We are creating a team of newly appointed design experts to be led by an architect with a research background. She will be in post by the end of January and will be supported by other design and planning advisers with experience in the sector. There is also a great opportunity to initiate in relation to new town developments. This fresh emphasis will help us to rise to the opportunities and challenges that exist.
To encourage people to put the message out there, the department will hold a major design conference in the spring in central London. The conference is an opportunity to signal to the industry what we seek to do. It will be attended by up to 400 representatives from developers, including large housebuilders, SMEs, local and central government, institutes, community representatives and others. All in all, our approach to raising design quality has attracted widespread support, not least from RIBA’s President, Ben Derbyshire, who said that,
“we see much in the way of promising activity from Westminster; the Design Quality Fund, a major conference on quality, the appointment of architects to advise on policy, a joint working group on modern methods of construction, and of course the creation of the new Ministry”.
The support that has attracted is welcome.
On modern methods of construction, I thank the noble Lord, Lord Taverne, for what he said, not least on the importance of skills. I know that the importance he attaches to this goes back a long way. He has always as a politician—from when he was an MP for Lincoln onwards—signalled the importance of our European partners. That will remain true after Brexit. We will need the relevant skills.
I welcome what was said in relation to climate change by the noble Baronesses, Lady Brown and Lady Maddock. I absolutely accept that it is important. We have international obligations in relation to climate change and so it is important to ensure that these things are built into housebuilding. I noted the work of an impressive housebuilder in Wales—not England—who charges the normal price for a four-bedroom house but builds them as if they were power stations, as it were. They are carbon neutral and British. They have everything that we should approve. The Government are looking at that important initiative.
I will draw to a close. I regret that time is short on this occasion. I will ensure that I pick up any points that I have missed. I will write round and, as I say, I will ensure that a copy of this debate is sent to all relevant people, as it has been first class. I thank all noble Lords who have participated.
Lord Best
My Lords, I know that we must conclude at 2.08 pm, so I have only a few minutes in which to express my appreciation to everybody who has joined in this very good debate. A few extra points were made that I had not picked up sufficiently—for example, my two noble friends mentioned apprenticeships and sustainability. I do not think we have done enough on that. However, nearly all the points were the subject of agreement rather than disagreement, with the possible exception of Help to Buy subsidies. But apart from that I think that broadly we are all agreed on the direction of travel. The list of ways in which government is now pointing in absolutely the right direction was impressive. I think that it was Paul Getty who said: “A billion here, a billion there, pretty soon, you’re talking real money”. Some resources are coming down the track, we just need delivery and a foot on the accelerator to make things happen, not to castigate the big builders but help them perform better in the future. I thank all noble Lords for joining in the debate.