Housing: Underoccupancy Charge
Lord Best Excerpts(12 years, 3 months ago)
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Lord Best (CB)
My Lords, I am grateful to the noble Baroness for giving way. I thank the Minister for putting this research in hand, as he promised when the ping-ponging on this measure stopped between us and the other place. I am afraid that one cannot take very much comfort from the figures. The Minister said that the figures are pretty bad; they are, in fact, awful: 60% of people getting into arrears with only 4.5% of people making a move as a result of the measure. He said that there are some more recent figures that are better; I fear that they are not very much so. Five hundred thousand families are affected by the measure and the position remains dire, with a third of landlords—
Lord Best
Will the Minister confirm that when the space standards were introduced in the private sector, the measure was not retrospective and did not apply to all people already occupying the properties? Does he accept that it is quite different in this case, where it was applied to the lettings of existing tenants, which is why it has been so harmful and so hurtful?
Lord Freud
My Lords, I have told the House on previous occasions that the difference here is that there is very little changeover or moving within this particular group, so there is no way in which one could introduce this kind of policy on that kind of basis. It therefore has to apply to stock. I remind noble Lords that the impact assessment for this measure envisaged moving or downsizing on the part of about 50,000 people. Nineteen thousand people have moved during the first eight months, which is on the trajectory of our expectations.
Housing: Discretionary Housing Payment
Lord Best Excerpts(12 years, 6 months ago)
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Lord Best (CB)
My Lords, has the Minister had a chance to see the Joseph Rowntree Foundation report released today, which provides a fairly definitive analysis of what has been going on with the so-called bedroom tax over the past six months? If he has, did he note that—sadly, from one perspective—savings were about £115 million less than had been hoped for during the course of this year? About 6% of people have moved home, but another 22% have been trying to move home but have not been able to downsize, because there is not accommodation for them. Although the Rowntree report from Professor Wilcox predicts that over £330 million will be saved this year, sadly, that is at a pretty great cost to both tenants and landlords.
Lord Freud
The savings that we are looking at—which are running on the Budget scoring at £490 million—are both observable and unobservable; in other words, from people moving or from people taking up jobs and coming off benefits. There are various figures around. The BBC last week talked of 6% of people moving in 11 months; the JRF report, which the noble Lord has just cited, talked about 6% in six months; a report a couple of months ago from Harry Phibbs, doing a similar job, found that 11% had come off benefits because they had gone into work. We will have proper returns on discretionary housing payments in May, and are working on getting a proper report on all of this.
Apprenticeships
Lord Best Excerpts(12 years, 7 months ago)
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Lord Best (CB)
My Lords, I am grateful to the noble Lord, Lord Young of Norwood Green, for instigating this debate and for stealing half my thunder by drawing attention to a report on construction industry apprenticeships which was released recently from a cross-party group of parliamentarians from both Houses, chaired jointly by the right honourable Nick Raynsford and myself. It was entitled No More Lost Generations: Creating Construction Jobs for Young People. If I only manage to impart one suggestion tonight to this House and to those outside who are following our debate, it is that everyone with an interest in the subject of apprenticeships should google “no more lost generations” and look at our report. It was written by Denise Chevin, supported by the Chartered Institute of Building and the Construction Industry Training Board, with input from the excellent charities doing great work—albeit on a small scale—to get young people into fulfilling construction jobs.
Our report highlights three stark facts. First, there are still well over 950,000 NEETs—young people between 16 and 24 years old not in employment, education or training. That figure was quoted by the noble Lord, Lord Young. Secondly, the construction industry is now expanding once again and will be creating 182,000 extra jobs alongside the need to recruit 400,000 building workers to replace those retiring over the next four years. Thirdly, despite these big numbers, there were only 7,280 completed apprenticeships in the sector last year, which was half the number of the year before. So we have 7,000 apprentices for a £100 billion-a-year industry that needs to draw in nearly 600,000 new workers by 2018.
In the absence of sufficient numbers of home-grown employees, the contractors—as they did for the construction of so many of the Olympic Games facilities—will import their labour from other countries, particularly from eastern Europe. I bow to no one in my admiration of building workers from Poland and the other A8 countries—the globalised labour market of the 21st century means that the skills of overseas workers can provide the construction industry with a labour force that provides quality at relatively low cost—but turning our backs on our own young people has huge financial and social costs. At the launch of our report, the deputy chair of the Construction Industry Training Board, Judy Lowe, quoted the extra cost to society of a NEET who never obtains a qualification or acquires the skills to hold down a proper job: £165,000. For young people who need the self-respect and sense of purpose that comes from being in employment, failure to acquire the necessary skills can lead to pretty miserable lives.
With the economy now recovering and the nation investing in construction in infrastructure—for example, Crossrail, HS2, power stations and, most labour-intensive of all, housing—we can get a double benefit by also creating the jobs that the young of this country need. Government support is vital. Training objectives need to be incorporated into public contracts. Moreover, the Chancellor has extended government support for housebuilding through the Help to Buy scheme, resulting in big jumps since the Budget of the share price of Persimmon, Bovis Homes, Taylor Wimpey and others. Perhaps the tit-for-tat should be a commitment from the housebuilders to skills training for home-grown talent.
Local authorities and housing associations can insist that companies bidding for their work must employ more apprentices. The use of planning requirements can support this. Local authorities also have the local contacts and local knowledge, crossing boundaries through the local enterprise partnerships, to be a focal point for initiatives that are tailored to the particular employers’ requirements in their locality.
To bring all this together and take forward the recommendations from the No More Lost Generations report, we called for a summit of construction leaders, convened by the Construction Industry Training Board and the Department for Business, Innovation and Skills. This could do for training what the 2001 construction summit did for safety. That summit led to a sea-change in attitudes to accidents and fatalities on building sites, to very great effect. A construction training summit would agree a new apprenticeship strategy, bringing together industry leaders, specialist contractors, housebuilders, local authorities, social landlords and central government. The response Nick Raynsford and I have received from the Construction Industry Training Board’s chairman, James Wates, has been very positive. The CITB is setting up an apprenticeship commission to take forward this plan and report to a construction training summit.
We have also had a positive response from BIS Secretary of State Vince Cable. His sympathy for these aims is well known and I hope he will agree to jointly sponsor the construction leaders summit later this year. What is certain is that it would be the height of folly not to use the revival of construction in the UK to provide fulfilling careers for tens of thousands of our young people who must not be another “lost generation”.
Olympic and Paralympic Legacy Committee
Lord Best Excerpts(12 years, 7 months ago)
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Lord Best (CB)
My Lords, I, too, had the privilege of serving on the Select Committee. I pay tribute to the noble Lord, Lord Harris of Haringey, whose hard work in keeping us all up to speed was an invaluable component in the success of this venture, as was the extremely impressive input of our officer team and the diligence of my committee colleagues.
If I have a criticism of this experiment in the use of the Select Committee approach for a short, sharp, focused exercise, it is a positive one: a report with this much good material in it deserves more widespread publicity and dissemination. A few newspaper articles are not enough to spread the word and while this debate tonight is more than helpful, a more extensive follow-through over a sustained period would make the whole exercise better value for money.
I turn to the content of the Select Committee’s excellent report. My special interest is in the legacy promised by the Games for the regeneration of east London and beyond. Just how successful has this huge investment been and are there lessons, positive or negative, that we should take for regeneration projects both here and elsewhere in the future? A number of our witnesses explained how installing the transport and developing the sites of the Olympics and Paralympics meant compressing decades of much needed investment into a few years. The incredible facilities, the transportation systems and extensive infrastructure, and the housing—the Olympic Park alone will eventually house more than 10,000 new households—have all magically accelerated the regeneration of east London. Certainly there has been a speeding up of the hoped-for convergence between the position of the East End boroughs and the rest of London as measured by a number of key indicators.
So is this a story of unmitigated regeneration success? It is important to see what has worked and why, because of the implications for the regeneration of other post-industrial areas of the UK and, indeed, for other large-scale housebuilding projects, including the development of whole new settlements like the “garden city” of Ebbsfleet, announced earlier this week. What this whole exercise has demonstrated is that a particular set of organisational structures, a particular governance framework and a particular modus operandi can be hugely successful. The key components are central government support for a devolved local agency that crosses local authority boundaries with a powerful co-ordinating vision and a clear master plan, with powers—compulsory powers, if necessary—to acquire, assemble and control land use. Like the London Docklands Development Corporation which gave us the phenomenon of Canary Wharf, like the new town development corporations, and like so many international examples of large-scale regeneration from Amsterdam to Singapore, these are the characteristics for successful outcomes. What is then achieved is what was positively planned, in this case including high-quality buildings delivered on time and within budget, not the least of which is well designed, sustainable, affordable and accessible housing.
These are the things we hope for in other places but so seldom achieve. Indeed, the usual approach to development in the UK is almost the exact opposite. By and large we sit and wait for speculative developers to come forward for planning permission with projects that we hope will fulfil all the economic and social objectives an area needs, and we are invariably disappointed. The model of the Olympic Delivery Authority and now the new mayoral London Legacy Development Corporation, show how we can do so much better. These lessons can be transferred not just to the new town of Ebbsfleet, but to major regeneration projects far from the south-east of England, and indeed to the vital task of doubling the nation’s supply of new homes.
I come now to a less positive lesson from the regeneration legacy of 2012. Despite all the brilliant outcomes from the Games, I feel that there is an Achilles heel in this success story. It is that the economic development that produced thousands of new jobs largely bypassed Londoners born and brought up in the East End. As the noble Lord, Lord Harris, said, the Select Committee met with local community groups and heard the sense of grievance that there had been so few opportunities for them. This is confirmed by statistics suggesting that despite there being 104,000 unemployed people in the Olympics boroughs, convergence with the rest of London on the employment criteria has lagged behind, even though more than 10,000 new jobs were created by the Games. Counting as a “local”—someone who has lived nearby for the last 18 months—misses the point. Waves of workers from eastern European countries moved here over the several years of the Olympics development, and they did a great job. I accept the point made by a manager on one of the projects we visited. He agreed that it was a pity that no one on the site was truly a local, but asked, “What did you want—the Olympic village built on time and on budget or a construction training scheme for local residents?” He had a point.
In a world of globalised labour markets and with a major problem in this country of poorly targeted skills building, we cannot blame the leadership of the Olympic and Paralympic Games for failing to engage enough home-grown talent. Some useful efforts were made to persuade contractors to take on apprentices and the results were better than for most construction sites, but largely the opportunity was missed. However, the massive regeneration effort kick-started by the Games will run and run. I note in today’s Budget, for example, that extensive housing and development is to be supported in Barking and that some 6,000 new jobs are likely to result. It is not too late to change our ways and use investment in regeneration to skill up many young people—there are still nearly 1 million under 25 year-olds who are not in employment, education or training—so that we can gain not just buildings but jobs for local labour. It is wasteful to pull in the next cohort of eastern European building workers while the unemployed of east London remain unskilled and dejected.
I commend the report released two weeks ago following an inquiry by a cross-party group of parliamentarians jointly chaired by the right honourable Nick Raynsford and myself called No More Lost Generations: Creating Construction Jobs for Young People. The report, which was backed by the Construction Industry Training Board and the Chartered Institute of Building, calls for work in schools and for careers advice about the opportunities in an industry that reckons it will need over 500,000 more workers over the next four years to replace those retiring and to cope with the current expansion of building activity. Yet, as the report notes, only 7,200 apprenticeships were completed in the construction industry last year. I was encouraged by the Government’s and the mayor’s response to our firm recommendations that this issue should henceforth be given real priority in order to take forward the legacy of the Games, and I hope that the LLDC will see this through.
In conclusion, the regeneration legacy of the 2012 Games is truly wonderful and demonstrates what a proactive, empowered and devolved development structure can deliver. But as we continue to regenerate east London, and indeed take the legacy lessons elsewhere, I hope that we can use the resulting investment to achieve a double benefit, not just the infrastructure and new homes we need, but the apprenticeships, the training and the jobs that the construction industry can so importantly provide for our own next generation of workers.
Housing: Underoccupancy Charge
Lord Best Excerpts(12 years, 9 months ago)
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Lord Freud
My Lords, this is a substantial saving, as my noble friend says. Our central estimate is that we will save £500 million a year on this programme, which makes it an important contributor to the Government’s deficit plan. If the Opposition maintain their policy, they need to look at how to find that money back. Not only that, they will run the risk of having to have a similar policy in the private rented sector.
Lord Best (CB)
My Lords, has the Minister had a chance to read the report from the Defra Select Committee, chaired by Anne McIntosh MP in the other place? It recommends that rural communities should be exempt from the bedroom tax because it is so difficult for people in rural areas to move down to smaller premises. Staying put means they can be paying £25 a week that they were not paying before, creating a great deal of hardship. Has the Minister had a chance to read that report and react to it?
Lord Freud
My Lords, I have looked very closely at the issue of rural communities. That was why, this year, we put in an extra £5 million a year to handle the subsidy arrangements, which buys out a substantial proportion of the cost of this policy.
Housing: Underoccupancy Charge
Lord Best Excerpts(12 years, 10 months ago)
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Lord Freud
My Lords, my noble friend is absolutely right that personal debt in this country is a major problem. There has been a series of important reviews of that in recent weeks. I am looking at it very closely in the context in particular of the introduction of universal credit. That is one of the factors in the review that I mentioned in response to the last question and I will keep it very much in mind.
Lord Best (CB)
My Lords, will the noble Lord join me in correcting a mistaken view that some have expressed that reducing support for people in council houses and housing association properties who are deemed to have a spare room is only repeating a measure already in place for private sector tenants? Does he agree that the arrangements for private sector tenants are quite different, in that people are given a sum of money—the maximum that they can spend—and are sent out to find a property on the private market, balancing the number of bedrooms against the location and other factors? In particular, a major difference between the two sectors is that in the private rented sector these measures apply only to new and future tenancies and have not been applied retrospectively to people in existing tenancies—namely, the 660,000 people who find themselves covered by a measure that relates to the past and not, as in the private sector, one that relates to future tenancies.
Lord Freud
My Lords, clearly there is a difference between the structures of the social and the private rented sector arrangements but the objective is the same. The taxpayer provides the appropriate amount of money to house that individual or family in the same way in the private rented sector as in the social rented sector.
Housing: Under-occupancy Charge
Lord Best Excerpts(13 years ago)
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Lord Freud
My Lords, it is simply premature to come to any conclusions as to the level of arrears. We will, of course, provide that information when we have the kind of reliable information that this House requires me, as a Minister, to deliver. There have been various surveys, but the samples are just too narrow. There are 1.4 million one-bedroom properties in the social rented sector and we are looking to have those managed more efficiently. I remind noble Lords that the scare stories about what would happen to our LHA reforms were very similar to the kind of stories that are being propagated now and we have not seen any poor reaction in terms of homelessness as a result of those reforms.
Lord Best (CB)
My Lords, in relation to the evidence that the Minister mentions, can he give us an update on the consultation with me and others that he promised when noble Lords rejected the so-called bedroom tax repeatedly and firmly? When will that research programme be the subject of consultation with us? When is it likely to be concluded? Will he accept the evidence if it shows that what he calls the “scare stories” turn out to be true and that a good deal of disruption and hardship are caused by this measure?
Lord Freud
My Lords, as the noble Lord knows, an elaborate programme of research is going on around this measure and will take place over a two-year period. Regular reports will be provided. I believe that the first interim reports are coming out in the spring. I will, of course, be pleased to talk to the noble Lord about the research and will give a great deal of attention to what we find. If there are concerns, we will match them. As noble Lords will know, we have made changes to the discretionary housing payments system this year to reflect some of the early concerns that have developed and we have found an extra £35 million for that.
Queen’s Speech
Lord Best Excerpts(13 years, 5 months ago)
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Lord Best
My Lords, my contribution to this debate considers the issue of housing in the context of health, welfare and several other aspects of the gracious Speech. My theme, to quote a Canadian saying, is that housing is the home of all issues. I declare my interest as president of the Local Government Association, chair of the Hanover Housing Association, chair of the council of the Property Ombudsman and, since I will touch on related matters in the context of the forthcoming Care Bill, a member of the advisory board of the Equity Release Council.
The fundamental housing requirement, which is of equal concern to all the main political parties, is to secure the building of far more homes to reduce the acute housing shortages that are the underlying cause of homelessness, overcrowding, high rents and low standards of accommodation. However, the benefits of a boost to housebuilding go much wider. It is the construction industry that can act as the engine of growth, as it always has done in previous recessions. Within that industry it is housebuilding that delivers the biggest bang in terms of jobs, not least in maintaining, modernising and upgrading the energy efficiency of existing homes. I hope that the Government can strengthen the connection between youth unemployment, now at 20% and carrying the terrible danger of a lifetime of worthlessness if skills are not acquired, and the opportunities for training and jobs presented by investment in new homes.
We have all admired the contribution of migrant building workers, particularly from Poland, but there is much to be said for investment in apprenticeships and training in the building industry for our own young people. To capitalise on this chance of tackling two huge social issues simultaneously, youth unemployment and acute housing shortages, the Chartered Institute of Building and the Construction Industry Training Board, with the Youth Build Trust, have asked Nick Raynsford MP in the other place and me jointly to chair an inquiry by parliamentarians on this theme. I feel sure that the Government will want to support this initiative.
On other occasions I have commended the determination of the Minister for Planning to overcome barriers to much-needed housebuilding, including the obstacle of the seemingly universal local opposition to virtually any development. Recently, the Government have come forward with bold plans for help-to-buy mortgage guarantees and equity loans. There is always the danger that stimulating demand, rather than directly boosting supply, will simply push up prices. But as part of the mix, these financial measures could give the housebuilders confidence to get more homes built and on to the market. However, the private sector housebuilders will construct only around half the number of new homes needed to match the number of new households formed each year. We also need subsidised housing for those who cannot afford to purchase or to pay full market rents. Housing associations could double their output with the requisite funding through the Homes and Communities Agency and the Greater London Authority. This investment really should be a high priority for the Government’s forthcoming spending review. Now is the time to harness the lending capacity of councils, which used to match the output of the private sector and build half the country’s new housing, by removing the unnecessary cap on their prudential borrowing for housing purposes, as the LGA is advocating. This would enable local authorities to finance the building of some 60,000 extra homes, mostly on land that they already own, without the need for subsidy.
Some will argue that one area of housing on which there should have been an announcement in the Queen’s Speech is the regulation of the private rented sector. However, I was delighted that the efforts of your Lordships in support of the noble Baroness, Lady Hayter, led the Government to bring forward an amendment to the Enterprise and Regulatory Reform Bill that will give the consumer greater protection by requiring all lettings and managing agents, who look after about 60% of the private rented sector, to be part of an independent ombudsman dispute resolution scheme.
Sadly, the Government did not listen to your Lordships on another housing issue on which they suffered successive defeats in this House—the issue of welfare reform, which has targeted support with housing costs for those on the lowest incomes. The caps, ceilings and limits on housing benefit and local housing allowances, which are more likely to deter private landlords from letting to poor people than to persuade landlords to reduce rents to help them, have been accompanied by the levy on housing association and council tenants deemed to have a spare room. I have been much criticised for naming this the bedroom tax, but I suspect that Ministers now regret introducing this controversial measure. This levy penalises those in work as well as those who must find the money from their other benefits by cutting back on basic essentials. It is not too late for the Government to moderate its impact through a major increase in the totally inadequate level of discretionary housing payments, which local authorities need to deploy in the many cases of hardship, and where tenants cannot be offered a suitable smaller property.
It should be noted that the housing associations whose tenants are hit by the welfare reform cuts are anticipating major problems of rent arrears. This not only means they must cut back on spending on new housing investment just when the Government need them to do more, but they will be less able to undertake the brilliant community work that so many of them have been doing to provide for those with special needs, to tackle anti-social behaviour—again, something that the gracious Speech makes clear is a government priority—or to support young people into training and jobs.
Finally, I want to note the immensely important link between housing and the Government’s plans for funding social care, which we will be debating when the Care Bill reaches us. The Government’s proposals, in seeking to assist those who encounter high social care costs, are welcome, but the help provided for those in residential care may not go as far as many have hoped. A large proportion of the fees will be excluded because they cover the board and lodging or hotel costs, while the care costs will be met only at low levels, probably well below the average in each area. By my calculations, in a typical case the individual would probably not be assisted until they had spent some £144,000. If their fees reached £300,000, they could expect only some £50,000 in support.
This is where housing issues come in. If an older person’s own home is manageable, warm, accessible, affordable and safe and secure, independent living can remain a sensible option for their lifetime, with care delivered to the home when needed. They can return home from hospital, perhaps after a short stay in a residential setting, and the emotional traumas and heavy cost of moving permanently into institutional care can be avoided. If their housing is right, the Dilnot inquiry’s key recommendation for limiting care costs can work well and vital savings can be made to the NHS and social care budgets. This argues for priority within the hoped for boost to housebuilding to go to developing really high-quality older people’s housing. This has the enormous added benefit of freeing up for the next generation some of the 4.2 million houses occupied by pensioners that have more than two spare bedrooms.
The interrelationship between housing and care also argues for more and better opportunities for safe and sensible equity release schemes. These can enable home owners to recycle some of the wealth tied up in their home to do the improvements that will cut their fuel bills, make the adaptations such as replacing a bath with a walk-in shower, and generally ensure that it is not their home that forces them into residential care. Giving priority to the nation’s housing can not only change the lives of young and old but can support the Government’s wider ambitions for reviving the economy, tackling youth unemployment, reducing social care and health costs and so much more. I hope that the Government are listening.
Welfare Benefits Up-rating Bill
Lord Best Excerpts(13 years, 8 months ago)
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Lord Best
My Lords, I shall speak to Amendment 12A, which entirely supports Amendment 7, so eloquently moved by the noble Baroness. In fact, I think that I prefer her speech to mine. However, my amendment has a slightly different take on the same set of issues, as it has been prepared by the Residential Landlords Association, which represents its member landlords. I have no interest to declare as a member of any landlords’ association, but I draw attention to other housing interests in the register.
It is important to note that the amendment’s call for a review of the impact of capping rent increases in local housing allowances at 1% next year, rather than at the consumer prices index level, comes from the landlord side as well as from those excellent bodies Shelter, Crisis and the others representing tenants. If the case made from the perspective of tenants does not win the argument, perhaps the points made by the landlord representatives will prove convincing.
Why is there a need for a special review of how rent increases in the private rented sector in comparison with increases in help with rent from local housing allowance are likely to work out in the years ahead? I suggest that there are two distinct reasons why the capping of local housing allowance at 1% per annum irrespective of levels of real rent increases in the marketplace is critical. First, the local housing allowance can represent half or even more of the total benefits received by those out of work and can represent most of the support which many of those in low-paid jobs receive from the state. That means that there are huge repercussions for tenants where a gap opens up between the actual rent that must be paid and the local housing allowance received to cover it. Cutting housing support means the tenant finding the money to meet the shortfall on the rent out of income intended for food, heating and other essentials.
High housing costs greatly increase the level of child poverty—the issue of concern to my noble friend Lady Howe. Department for Work and Pensions statistics analysed by the Joseph Rowntree Foundation this month show the child poverty rate in England at 19% before housing costs are factored in, but at 28% afterwards. Where housing costs are lower, that huge impact does not show up. In Scotland, for example, the child poverty rate is the same as for England excluding housing costs, at 19%. It rises to 21% when housing costs are taken into account, far short of the 28% figure for England because of England’s high housing costs. Help with housing therefore makes a very real difference to the number of households in relative poverty.
Not providing enough money to pay the rent for those who rely on income from benefits simply means a cut to the other benefits that they receive. For tenants in the private rented sector, the reduction in living standards in real terms resulting from the Bill could well be doubled: first, from the gap in direct help with income between 1% and whatever inflation turns out to be and, secondly, from the gap in housing help between 1% and whatever rent increases over the next three years turn out to be.
Secondly, there are consequences where support for housing costs is cut not only for those receiving benefits but for the housing market—the availability of accommodation. Obviously, it affects the attitude of landlords towards providing accommodation for those on modest incomes if they are subject to tough rent controls. In most parts of the UK, there are plenty of other people desperately keen to find a rented home—students, mobile single people who share, and, as we know from excellent new research by the Building and Social Housing Foundation, increasing numbers of working families with young children who would have bought a home in times past but now cannot afford the deposit and mortgage costs. The acute housing shortages in so many parts of England mean that landlords are most unlikely to reduce rents to assist those in receipt of local housing allowance. Rather, as the Residential Landlords Association survey cited by the noble Baroness, Lady Hollis, shows, landlords will avoid lettings where LHA rent controls could apply, and will go for lettings on the open market.
Growth and Infrastructure Bill
Lord Best Excerpts(13 years, 9 months ago)
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“Time when development began
In section 56 of the Town and Country Planning Act 1990 (time when development began) after subsection (4)(e) insert—“(f) such works as may be described in a condition attached to the relevant planning permission having been agreed between the local planning authority and the applicant for that planning permission.””
Lord Best
My Lords, I declare my interests as president of the Local Government Association, whose officers have, as always, done brilliant work in preparing amendments for the Bill, and as chair of the Hanover Housing Association, which is a relevant interest for the amendments that now follow and relate to affordable housing. These amendments begin with Amendment 55ZA, in my name and that of the noble Lord, Lord Tope, and continue with those in the next six groupings. All of them address concerns about the provisions in Clause 6, which allow developers to appeal to the Secretary of State—that means to the Planning Inspectorate—for a reduction in the level of affordable housing, which the developer previously agreed to provide. This new right for house developers would be activated if the local authority does not accede to a developer’s demands for such a reduction in affordable housing provision.
As we launch into debates on this new right for developers, I think it is necessary for me to spell out why I believe this clause needs serious modification. If I do this now, the Committee will be spared my making these points under each of the six amendments in my name in the following groupings.
First, developers have freely entered into legal agreements with local authorities pledging that they will allocate a specified proportion of the new homes that they build—perhaps 25% or 35%—to be let or sold on a shared-ownership basis to those who cannot afford the full market price. The developer has signed a deal which he believed would deliver a good profit. In normal circumstances, the agreement, under Section 106 of the Town and Country Planning Act 1990, would have to be honoured if property prices turned out to be lower than the developer had predicted. Equally, the local authority could not amend the agreement if prices went up by more than expected and the developer made a larger profit. For central government, using the Planning Inspectorate to overrule the agreement between the two parties in order to improve the profits for the housebuilder would represent a retrospective intervention to change a legal agreement freely entered into by two competent parties. I do not think it has ever been suggested that Machiavellian local authorities have hoodwinked innocent developers unfairly into signing Section 106 agreements. No, the developers thought they had a good deal and the retrospective tearing up of a private contract by central Government diktat would seem to set a sinister precedent.
Secondly, there is the question of fairness. To say the least, this clause is galling for those would-be buyers of a site who were outbid by a developer who, it now transpires, paid over the odds. The reason housebuilders are now seeking to renegotiate the agreements they signed is that they speculated on property prices rising inexorably, but now find that their profit margins will be less than they hoped. In outbidding others, including the many housing associations which have been prevented from buying land by the exorbitant prices these developers paid, they have taken a gamble which has not paid off. If their rash behaviour means that with hindsight they should have paid less for the land, is it fair on other more prudent housebuilders and housing associations for the Government to bail them out? Is it fair that Clause 6 should reward speculative developers by letting them off their obligations to ensure that they can make a handsome profit from the development?
Thirdly, I can see the argument that it is important to save a developer, even if he has acted foolishly, from going out of business because we need to maintain the capacity of the housebuilding industry through these difficult economic times. However, while property prices have fallen in real terms in some areas, particularly in Northern Ireland although it is not covered by this measure, prices have seldom dropped dramatically, and in parts of the London and the south-east, they have even continued to rise. Far from going to the wall, a number of major housebuilders have recently reported substantial annual profits and their share prices have risen significantly. That does not suggest a need to make concessions to prevent bankruptcies in the sector.
Finally, and most importantly, we should scrutinise Clause 6 with great care because it is likely to lead to a reduction in the amount of affordable housing at a time when there are desperate shortages, fewer and fewer households can afford to buy, and market rents are absorbing disproportionate percentages of average incomes. Local authorities are already making concessions in order to be helpful to developers, and if they have got to the point of saying, “This far but no further”, they have good reasons so to do. Section 106 agreements have been hugely important in securing a high proportion of all the affordable housing built over the past decade. These agreements have meant that the bulk of social, subsidised housing has no longer been built in separate, segregated estates exclusively for the poorest and on the cheapest sites. Rather, it has been integrated into mixed-income communities of tenants, shared owners and owners. Backtracking on the gains for local communities that have been achieved by planners through this route is really bad news.
Moreover, inclusion of this element in a development was a key component in the planning consent being granted in the first place. A block of flats in east London with little or no affordable housing may be sold virtually in its entirety to overseas investors and occupiers and will make little contribution to supporting Londoners who need somewhere to live. In rural areas it is likely that local opposition to development was considerably moderated because housebuilders signed up to some affordable housing on the site so that local people who had been priced out of the housing market could stay in the locality. I know that the rural case has been addressed in relation to the special case of exception sites in the government amendment we will consider with the Minister shortly, but I am making the more general case about all developments in more rural communities: take out the affordable housing ingredient and a significant reason for both local authority and community approval for housebuilding will be removed.
These are the reasons why Clause 6 needs to be amended, and the first amendment for consideration seeks to address the key argument against my list of criticisms. This is the counter-argument that despite the disadvantages I have set out, unless the developers in question are let off all or part of their affordable housing obligation, they will simply sit on their hands, do nothing and leave sites undeveloped. How much better, runs this counter argument, for development to get started, and for at least some affordable housing to be built, rather than for the land to lie idle.
Baroness Hanham
My Lords, I would be very happy to write to the noble Lord, but my feeling is that, if the local authority owns the land and thereby gives it without cost to the developer, by definition everything ought to be lower cost and it ought to be able to have some more control over it. I think this justifies a further look and I will come back to the noble Lord.
Lord Best
My Lords, I am deeply grateful to all noble Lords who have joined in this debate. By covering a lot of the ground on this now, we have saved time later. I will respond briefly to some of the key points made. With regard to the powerful speech by the noble Lord, Lord Deben, I have been discussing these things with Housing Ministers and Planning Ministers for longer than I care to remember; it was the noble Lord, Lord Waldegrave—then William Waldegrave, the Planning Minister—who first introduced the idea of planning gain paying for new housing development. I remember those conversations. It started in Docklands, where there was a need for local people to see something for themselves when lots of new housing was being built that was much more expensive than they could afford; from that came this way of paying for affordable housing for a range of people.
Perhaps it would be better if one simply taxed more deeply the landowners, the house builders and the occupiers, and put the money in a pot to pay for affordable housing, but it would not then be produced in the way that the noble Lord, Lord Alton, was commending—on sites that are now a mix of owner-occupiers and people who are renting or in shared ownership, which are socially very valuable. In a way, the way in which planning gain operates is a tax, and there are really only three people who can pay it. As the noble Lord, Lord Deben, suggests, the purchaser—who may be a first-time buyer—will actually be charged what the market can bear and the market is determined by the 85% of properties that change hands in the second-hand market rather than those that are built new. The developer can charge only what the market will bear, and the purchaser will look at other properties as well. The purchaser is unlikely to see their price increase for that reason.
The house builder themselves cannot operate at a loss—they would just not be in business at all—so they cannot absorb all the cost of this tax themselves. It is, I think, the third party, the landowner, where the tax finally lands, because there is a very wide variation in the value of land for agricultural or other purposes and land for development, and that is where the tax really has been drawn over the years. That system has worked pretty well.
The noble Lord, Lord Davies, makes the point that this could be a double bad deal for local communities unless we get some changes. The noble Lord, Lord Burnett, noted that local authorities already renegotiated a lot of deals, and he approves of the idea of a quid pro quo now if we are to tamper with the Section 106 agreements.
Lord Best
I accept that with some gratitude. The noble Lord, Lord Alton, talked about the social mix on decent sites, which is an important part of Section 106. The noble Lords, Lord Beecham and Lord McKenzie, were supportive, for which I am grateful. The noble Lord, Lord McKenzie, wondered whether this way of approaching the issue would actually not work and one might require a different change to the Town and Country Planning Act. The point of this amendment is that it would enable a Section 106 voluntary agreement —yes, I agree, with some pressure—to be made between two parties, and that could specify the definition of what starting on site and getting going would mean. That would not require legislation; you can put anything into a Section 106 agreement. However, the inspectorate, in reducing the amount of affordable housing, would make that conditional upon agreement being reached about what it means to start on site. I think that it could work.
Clearly the Minister is not minded at this time to go for an amendment of this sort. She very properly applauds the way that Section 106 works and accounts for a lot of affordable housing today. Like her, I approve greatly of the work of Nick Boles, the Planning Minister, in energetically trying to ensure that we build more homes, not just to ease housing shortages but to help the wider economy. She brings some reassurance that the community infrastructure levy provisions might produce ways in which developers were obligated to get on with the job. I am not sure whether that is going to be enough and I reserve my position, but at this point I beg leave to withdraw the amendment.
“(1A) This section only applies in relation to English planning obligations agreed prior to Royal Assent.”
Lord Best
Apologies, my Lords, it is me again. The amendments that follow set out further proposals to moderate the likely adverse consequences of Clause 6. Amendment 55A in my name and those of the noble Lords, Lord Tope and Lord McKenzie, make it clear that Clause 6 relates only to planning obligations agreed in the past, which would usually mean agreed prior to the economic downturn when the foolhardy believed that house prices could go on going up for ever. The amendment, somewhat indulgently, would mean that cases of Section 106 agreement signed right up until the enactment of this legislation could still be subject to appeal and a reduction in the affordable housing component previously agreed by the developer.
I sincerely hope that the Planning Inspectorate would show little sympathy for the developer who has only recently entered into an agreement and almost immediately wishes to renege on it on the grounds that the project is no longer viable. The amendment would fix a clear end date to ensure that appeals, as is obviously the Government’s intention, relate not to the future but to the problems created by the economic downturn of 2008 and the years immediately thereafter. I beg to move.
Baroness Hanham
That is because we are concentrating here only on affordable housing. Putting this in primary legislation means that the provisions come into effect immediately after Royal Assent and we do not have to spend time working out regulations. These provisions are in primary legislation because this is an important aspect of getting sites unlocked.
Lord Best
My Lords, this has been an important debate. My amendment and some of the others in the group are about there being a cut-off point for the provisions in Clause 6. We know that the Government’s target is, as it should be, agreements made before the peak of the market back in April 2010. I take the point that economic uncertainty—the possibility of things getting worse—prevails; however, one would hope that developers will not enter into agreements from now on without recognising the dangers that they can get into.
My housing association is trying to acquire sites even as we speak, and we keep being outbid by people who we think are paying ridiculous prices for the land. They are entering into Section 106 agreements with their local authorities. It would not be fair on those who are playing the game properly if, later, those who go out and pay far more than they should for a site come back and say, “Sorry, the scheme is not viable with this Section 106. Can we have it reduced?”. That is not a fair way to operate and I think that the Government accept that. I take comfort from the fact that on Report we will hear more about this matter. Therefore, at this stage, I am delighted to withdraw the amendment.
Lord Best
My Lords, Amendment 55B in this group, which is in my name and those of the noble Lords, Lord Tope and Lord McKenzie, would enable the planning inspector to rule, after looking at the situation, that the level of affordable housing should be increased, rather than only being able to decide that the affordable housing component must be reduced. Without this amendment, the housebuilders have a one-way bet. They cannot lose by going to appeal, and they might win. This is a recipe for developers to simply “have a go”. The amendment would ensure that there are appeals only where a robust and well evidenced case can be made for a reduction, so it should deter frivolous and unsupported applications.
Baroness Hanham
The noble Lord, Lord Best, has spoken to Amendment 55B, which seeks to allow the modified obligation on first applications to be more onerous than the original obligation. If a developer undertook a voluntary renegotiation, he would neither expect nor agree to more onerous terms. He would expect to come out with something better than he went in with. He would revert to the original, agreed obligation if the negotiation was unsuccessful. Under this application process, we want to replicate these circumstances for the first application. It provides an important incentive for developers to come forward and review their schemes. We need housebuilders to bring sites forward and I hope that this provision will ensure that they do this.
The clause also provides an important distinction between the first and subsequent applications to encourage the developer to proceed quickly. Under the first application, the affordable housing requirement must be reconsidered if it is found to be causing the scheme to be unviable. The local planning authority must modify or remove it so as to make the development viable, and the outcome must not be more onerous than the original obligation.
In relation to a second or subsequent application relating to the same planning obligation, the authority has more flexibility in amending the affordable housing requirement. Where it is justified on the basis of economic viability, the affordable housing requirement could be made more onerous than in the original obligation. The only restriction is that the amended obligation must not make the development economically unviable.
The distinction between first and second applications provides a real incentive for developers to reach a new agreement on their affordable housing requirements on the first application and to get on with building. It discourages repeat applications unless the developer is very clear that viability evidence supports their case. It also provides an important incentive for them to come forward and review their schemes. The purpose of these provisions is to ensure that development goes ahead and is not delayed because of unviable affordable housing requirements.
This amendment prevents a developer requesting the local authority to remove the affordable housing requirement, even if viability evidence justified this. It is not our intention that developers should remove all affordable housing requirements. We want affordable housing to be justified on the grounds of viability. In the clear majority of cases, we expect that evidence will demonstrate that some—probably most—affordable housing is viable
However, there will be some cases where evidence demonstrates that no affordable housing at all can be supported by the development. The developer must have the option to apply for this and the local authority must have the option to agree to this. Stalling development with unviable affordable housing requirements serves no purpose. Stalled development brings no local benefit to anybody. I hope that I can reassure the noble Lord that this clause does not encourage applications to remove all affordable housing but looks to ensure that viable applications are agreed to enable development to proceed.
Amendments 55BB and 55BD propose a review of affordable housing after two years where land value has increased. These amendments aim to put in place primary legislation incentives to ensure that developers build their schemes. They look to allow local authorities some control where obligations have not been delivered within two years. The drafting of Clause 6 does not prevent local authorities agreeing a mechanism with developers to increase obligations should markets improve. I am aware that this is the practice in many local authorities where obligations are “staircased” according to market conditions.
We will be clear in guidance on the options open to local authorities, and I urge that this be allowed to be negotiated locally, according to local circumstances. I do not agree that a fixed period for review in primary legislation would be helpful. I hope that the noble Lord will now think that the clauses are helpful.