Building More Homes (Economic Affairs Committee Report)

Lord Forsyth of Drumlean Excerpts

Thursday 2nd March 2017 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Hollick, and I just take a few moments to pay tribute to the excellent way in which he chairs our committee. The noble Lord, Lord Tyler, in one of these BBC programmes, suggested that this is something of a daycare centre—it feels more like a workhouse under the leadership of the noble Lord: we have produced a report on electricity, we are working on a report on the labour market, we have finished off this housing report, and I believe we are doing something on student loans. We used to meet on Tuesdays; we now meet on Tuesdays and Wednesdays—and Thursdays, sometimes—and, in addition to that, the sub-committee now meets two days a week. So let us have no more talk about how this House is not properly employed.

I found this subject something of a challenge; housing is not an area where I claim any expertise. The last time I thought seriously about housing was when I was on Westminster City Council, which is nearly—gosh, it cannot be that many years ago; it is quite a long time, anyway. I was quite struck when, just after new year, I arrived by train in Glasgow. It was pouring down with what was almost sleet, on a horrible cold night. I went to get a taxi, and sitting in a sleeping bag in the wet was a young girl with a cup wanting money. Around London today we can see more and more examples of people in this desperate situation. Everyone in the taxi queue walked past, pretending not to notice her—if she had been a Labrador, everyone would have patted it, but she was a person and very few people put any money in the cup. It is not just with homelessness that we have a problem; we also have the problem of professional couples earning in good jobs who, in some parts of the country—most notably in London and south-east—cannot afford to get into the housing market. I was very proud to be a member of the Government in which my noble friend Lord Lawson led us with considerable success towards the idea of the home-owning democracy. The fact is, home ownership is falling and our ability to house those on the lowest incomes is non-existent.

If people do not have time to read the report, the only thing they have to look at in it is Figure 1. It shows the housebuilding that has occurred in the various sectors, and outside the private sector—as our chairman, the noble Lord, Lord Hollick, has pointed out—it is failing to meet demand. The demand has increased remarkably. I was quite struck by the numbers reported by the noble Lord, Lord Green. He said that we had to build a house every 15 minutes to meet the demand that was arising simply from immigration. However, it is not just immigration that is increasing demand: it is also rising incomes, the change in the nature of households and the availability of cheap mortgages because of quantitative easing.

Central to this problem, as the noble Lord, Lord Hollick, pointed out, is the supply of land. One of the recommendations in our report is that we should create some incentive. There is no incentive for a health authority or a transport body to make land available for housing if they do not get to keep the proceeds. That would make a difference, but, as we say in our report, there does not seem to be anyone in central government making sure that that land is used effectively.

We had a private session with the Housing Minister, Gavin Barwell, and I found him the most extraordinary Minister. He has been around the country and is absolutely on top of these issues. He understands them and that is very much reflected in the White Paper. That session was, therefore, very cheerful. We were very cross with him at one stage, however, because the Government took a very long time to respond to our report, and produced a response that was, to say the least, derisory. We were cheered, however, to find out that the probable reason for that was that many of our ideas were being incorporated into the White Paper, for which we were extremely grateful. Again, it shows that, in the Housing Minister, we have someone who is listening. I know he spends his time going around the country talking to local authorities. The key thing here is that this is not a singular problem. It varies from region to region: in some parts of the country, it is perfectly affordable for people to buy homes, but in other parts of the country it is not.

Now we come to the bit that I found ideologically challenging. The great thing about this House is that we operate—certainly our committees do—on the basis of the evidence put before us. The evidence was absolutely overwhelming: we cannot rely on the private sector to provide all the housing that we need and the different categories of housing that we need, but it was also reassuring to find that the old kind of statist ideas were also not going to deliver. We need a rented sector, but this term “affordable housing” is like something out of double-think. Affordable housing turns out to be something that you have to be very well-off indeed to be able to afford. There is little in the way of supply for those people who are on very low incomes and do not have very much money. The conclusion that we came to is that we must find a way of enabling local authorities to provide low-cost housing for people who need those facilities.

Where I was cheered, in recognising that there needed to be more reliance on public sector housing, was that this would also enable us to save a great deal of taxpayers’ money. The noble Lord, Lord Hollick, pointed out that we were spending £27 billion on housing benefit. If we had more housing at lower rents provided by local authorities or housing associations, or local authorities in partnership with the private sector, we would not have to provide the housing benefit on such a level. It does not seem a very effective use of taxpayers’ money to simply use housing benefit in a market where the rents are going up and up and neither the taxpayer’s situation nor the availability of housing is improved.

I should, perhaps, declare an interest as chairman of Secure Trust Bank, because one aspect of the Government’s policy is clearly to encourage the building of more houses. They have set a target—I think it is a target—of a million houses, which, as the report points out, will be insufficient. The clear conclusion of our report, described by the noble Lord, Lord Hollick, is that the big housebuilders are something of an oligopoly. Actually, if you look at the business models of the big housebuilders, they are entirely rational in taking up the land, getting planning permission, creating a land bank, and then restricting the supply of housing that is coming on to the market to maintain the price, get best value and plan for the economic cycle. They are being entirely rational and you would not expect them to do anything else, but that is not consistent with what the Government need to do to meet their policy objectives.

Encouraging the small and medium-sized builders, which the Housing Minister says is a priority, means that they need availability of finance and labour. That has implications for our immigration policy when we finally get control of our own borders, but it also has implications for finance; so what on earth is going on when the Bank of England, in setting the capital requirements of the banks for lending, is actually making it cheaper for them to provide mortgages to people who have a low loan-to-value requirement and more expensive for the banks to provide money to developers to build housing? In the last few months, it has increased the capital weighting required for smaller banks, which are the main sources of revenue for small and medium-sized builders, from a 100% risk weighting to 150%. That means that it is 50% more expensive for the banks to provide loans, and it also means that there is less capital available and less ability for the banks to provide that.

On Friday, a report was published by the PRA with a statement from the Treasury Minister, saying that it wanted to increase competition and that it was going to address these issues. However, when you look at the detail, it is making the situation—certainly on my cursory glance—not better, but marginally worse.

I appreciate that we have lost a bit of time this morning, so I will bring my remarks to a close. On housing for rent, we need—as I have already indicated—rental properties available for people on lower incomes. We also have to recognise, however, that we need to have some means of securing rental tenures that are longer and more secure for people with families. We cannot go back to having a regulated housing market—we are certainly not recommending that—because we know where that will end: it will end with even less supply. We can, however, encourage the development and funding of building for rent in the private sector, where the terms of tenure are longer, to meet an obvious demand as we move forward.

Finally, I should like to say what a pleasure it has been to serve on this committee, and how much I appreciate that the White Paper has picked up on some of the ideas. The Housing Minister told us that everyone wanted a silver bullet. The White Paper is not a silver bullet; there is no silver bullet. We will solve this problem with a combination of policies on the capital and other rules that apply to the banks, on housing benefit, on welfare and on immigration. We need government as a whole to put their shoulder to the wheel on this. In our report, we said that there should be a senior Cabinet Minister who is in charge of driving this policy; my recommendation is to make Mr Barwell a senior Cabinet Minister.