Lord Kerslake
Main Page: Lord Kerslake (Crossbench - Life peer)Housing and Planning Bill
Lord Kerslake Excerpts
Lord Kerslake (CB)
My Lords, I support Amendment 41A, spoken to so ably by the noble Lord, Lord Best. I declare my interest as chair of Peabody, president of the Local Government Association and chair of the London Housing Commission.
The focus in our debate on Tuesday was on the impact of proposals on social rented housing. As the noble Lord, Lord Best, has said, there is a price to be paid in the current model for that sort of housing. We also spent considerable time debating the one-size-fits-all approach to planning that is envisaged to support starter homes. Today we have focused on starter homes as a product in itself; indeed, we might say that we have spent most of this morning on what might be described as product design, and the Committee might agree that this has been a rather unsatisfactory process. The reason why this is the case is quite clear: with starter homes we are going from a prototype to full production by missing out the stages in between, so it is hardly surprising that we are struggling to make sense of something that, in truth, has not been fully designed.
If we ourselves are confused, struggling with this, frustrated or indeed concerned, it may be some consolation to the Committee that such confusion, concern and frustration are shared equally by the house builders and lenders. Before we come to the amendment, it is important to explain the context for why this issue is so difficult for them and for us. There have been products to help first-time buyers to access home ownership for 30 years now. It is not a new concept; it has been around under both Governments as something that they aspired to achieve. The aims have been twofold. The first has been to help people with the deposit. People often have the income to enable them to pay the mortgage but not essentially the wherewithal to pay the deposit on the property. That was one key element of helping people into home ownership. The second reason why we went down the road of promoting home ownership products was to sustain demand, particularly following the financial crash in 2007. So there were two reasons why, as I say, Labour Governments as much as Conservative ones have gone down this route.
Up to 2013, the cost of these products came essentially from departmental budgets—in this case CLG and, before that, the ODPM. Because budgets were tight, accessibility to these products was constrained and in fact linked to income, as was talked about earlier. That was our basic model prior to 2013. In 2013, though, it was established by the Treasury, and there was some very clever thinking on this, that in fact these forms of support, in the shape of equity loans, could be regarded essentially as financial instruments and held against a third-party asset. As a financial instrument, they scored as debt but not as deficit. The Chancellor therefore thought that he could expand them in a pretty unconstrained way, so income requirements came off and the size and value of the property that you could buy went up substantially.
That was a crucial shift to making these schemes much more widely available. In fact, in 2013 a large sum was assigned—it was expanded to £10 billion later on—to take this through to 2020. In addition to that, there was £12 billion to support an additional product, Mortgage Guarantee, which underpinned mortgages. So there were two products that effectively helped people to get over the deposit problem, Help to Buy and Mortgage Guarantee. Since 2013 there have been something like 126,000 purchases using one or other of those products, and £3.8 billion of government money has been put alongside that. I cannot say how many of those people who bought are under 40 because I do not think those data are held, but I am willing to bet that a large number were in that age category.
Lord Horam (Con)
My Lords, I will comment very briefly on the remarks made by the noble Lord, Lord Kerslake, who made a significant point about the existing instruments we have to help people in this situation—the Help to Buy method and so forth. He made the point that this is a financial instrument and therefore the debt/deficit equation, which is so important to the Government, is resolved by using these sorts of methods. As he pointed out, no fewer than 126,000 people, with total costs of £3.8 billion, have been helped by these methods.
The simple point is that it has not been enough. As the noble Lord also pointed out, you have to have an income of no less than £83,000 to be able to afford a house in London, and 90% of people cannot do that. So the plain fact is that we need to do more—which is what the Government are trying to address with starter homes. We dealt two days ago with the question of whether we are helping the right people when we addressed the question of whether you can help people who are in a different category but who are even more disadvantaged than people who might benefit from starter homes. We dealt with that issue—or at least we tried to. Now we are dealing with whether this is the right kind of instrument in the circumstances to deal with the fact that we have a crisis, particularly in London, and the present instruments do not help enough. That is the fundamental point.
Lord Kerslake
I am grateful for the opportunity to come back on this point. The noble Lord is entirely right to say that we need to do more—there is no question about that. I strongly hold the view that we need to put a lot more into the building of new housing. If there is an issue about the existing products, as there was in London with Help to Buy, we should look to revise and amend the products themselves rather than introduce a new product which essentially competes in the same market and, instead of giving people a loan to help them with their deposit, gives them a very substantial gift. I am most concerned about that issue. I said that we had to make choices about priorities and doing more. As my noble friend Lord Best said, we have this cash, so I would put it into affordable rented accommodation. Nothing you will do in relation to these products will make housing accessible for people on middle or low incomes. We have to build an awful lot of houses for an awfully long time before they will benefit.
Lord Horam
I entirely agree with that. My way would be to recognise that the sort of lift in the cap on borrowing for local authorities, for example, is perfectly acceptable in the context of the Government’s overall economic strategy. If you look at what is now being said worldwide by the International Monetary Fund and the OECD, at the moment they are calling for more capital investment of this kind, and there is no better capital investment than housing. It is interesting that insurance companies, for example, are now going into the build-to-rent market in a fairly big way in London, because the sort of regular, sensible rents you get from that sort of market precisely match the sort of income streams they need to service insurance bonds. That is a very interesting development, which I am sure the Government will welcome and which shows how the market, if left to itself, can itself resolve some of these questions.
To digress for a moment, the reason that insurance companies are going into this area is not only that it is a very interesting way of solving their problems but that the price is high enough for them to be able to produce buildings at a cost which enables them to rent them out to young people at a price they cannot afford. So the very high price is producing a supply consequence which is very favourable. None the less, the noble Lord is right that what is proposed here is a new product, and there is always a danger with a new product that it will lead to distortions of the market. If you try to interfere in a market situation with a product that has not been thoroughly thought-through, you risk unintended consequences—and that is what we are worrying about in this situation.
If that is the case, Amendments 38 and 39, put forward by the noble Lords, Lord Kennedy and Lord Beecham, are frankly impractical. They are not the way to deal with this problem. They are putting into the system the local authority having to decide what the level of affordability is in a particular area, when the market already decides what affordability is in a particular area. Frankly, therefore, I do not trust local authorities to second-guess the market as to what the right level of affordability is.
Secondly, on the idea of having a discount in perpetuity, as the noble Lord, Lord Campbell-Savours, rightly pointed out, how on earth do you value it in the future? Indeed, how on earth do you value it now? There is no way you can value something which has been separated from the rest of the market, which is determined by market forces, and which has a value discount attached to it. You cannot do that—there is no way an accountant could work that out over a period of time and make any kind of sense of it. Inevitably, if you try to put in something in perpetuity, it will disappear into the general market in due course, probably in some way you do not expect.
So the right answer is the amendment put down by the noble Lords, Lord Best, Lord Kerslake and Lord Beecham—two minuses and one plus, from his point of view—whereby you pull back some of the discount over a period of time from the people who benefited from this government largesse. You are achieving what you want to do, which is to get them into a new house and to start a home and so forth, but you are pulling back some of the advantages you gave to them to achieve that.
However, I point out that even that has its impracticalities, because you will be asking them to pay back rather a large amount of money at some stage unknown—they do not know when and you do not know when—in the future. That could be a very considerable amount of money. I do not know how you would do this over a period of time and whether you would do this in one lump sum or whatever it may be, and you and they do not know what their circumstances will be. So there are impracticalities even with this. None the less, we have to have some measure by which you can pull back some of the advantages you are giving to people under this new model, and the Government have to think very carefully about how they handle this.
Baroness Williams of Trafford
My Lords, the noble Baroness asks who will benefit. Young people will benefit, and history shows us that it is young people for whom home ownership has been out of reach.
Lord Kerslake
There is a critical point here, which has perhaps been missed. When a couple or an individual seek to buy, they will make choices about what they can afford and, accordingly, where they can buy. In some situations, they will choose somewhere, as was said earlier, of lower value, because that is what they can access by way of mortgage; in other places they will go for somewhere of higher value but with a discount offered. They will make a choice about their purchase at that point. What they are essentially doing, when you put a second charge on a property, is making a trade-off between the discount—and the length of the discount—and the price they have to pay. That is what they are doing.
If you make it five years, anybody will go for that, whether or not they need it, as that will be the only way they can access the property. If you make it 20 years, it is much more likely to be the people who genuinely cannot access full market value who go for the property. This is a crucial point. If you really want to avoid deadweight squeezing out the people who might be able to purchase only with the discount, you have to have a longer taper than five years.
Baroness Williams of Trafford
My Lords, I think we are going to have to disagree on this. The noble Lord, Lord Campbell-Savours, made the point that owners would get the uplift from house price inflation. However, that could be the other way round, as after five years, a house could be worth less. The housing market is cyclical—prices go down as well as up—so there will not necessarily be an increase in the house price after five years.
Baroness Williams of Trafford
My Lords, I turn to Amendment 39A, which would enable Rent to Buy products to be considered as starter homes. We know that there is an appetite among housing providers and developers to deliver more home ownership in new and innovative ways. We know that we need a wider range of products to assist young first-time buyers to access home ownership when a generation is increasingly being priced out. The Government are supporting people who cannot afford a discounted purchase outright through the separate schemes that I have mentioned, such as Rent to Buy, Help to Buy and shared ownership.
Our commitments through this spending review will provide households that cannot yet afford a home on the market but aspire to home ownership in the medium term the opportunity to save for a deposit. It is a good product and, like other valuable products that support access to home ownership, affordable Rent to Buy can be considered by councils as part of their wider affordable housing requirements for their area. The clause will not prevent those developments from coming forward.
This is a new product. Our manifesto was clear that we would build 200,000 starter homes and this is central to our housing ambitions. The electorate will expect us to deliver on our commitment. The starter homes policy is a product for outright purchase that gives people the benefit of home ownership and, importantly, helps them to achieve a step up the ladder. I have tried to answer all noble Lords’ questions.
Lord Kerslake
Before the Minister sits down, I understand that Shelter will publish its data very shortly. I was keen to have the latest data for this debate. It would be helpful if the Government could also publish not just their data but the underlying assumptions behind them so that we could have a true like-for-like comparison.
Baroness Williams of Trafford
I can say to the noble Lord that we will certainly request that—he has been teasing us all afternoon. I am looking forward to seeing that report and I am sure that we will debate it in full, comparing those data and the Government’s data. I ask noble Lords not to press their amendments.
Lord Kerslake
My Lords, I add my support to what I think is an excellent amendment from the noble Baroness, Lady Doocey. It absolutely goes to the heart of the practical challenge of estate-based regeneration. Typically, in those situations, you are dealing with stock that is either time-expired or very badly designed, and the only solution there is to redevelop and re-provide on the site. Anybody who has been involved in such schemes will know that the viability of doing this is extremely hard. It is compounded, as the noble Baroness said, by the proper requirement—I emphasise the word “proper”—to ensure that those who live on the estate at the time of the redevelopment can stay on the estate when the development is completed. It typically involves a phased process of redevelopment, decant and then development of the properties that have been freed up.
Yesterday, I was at the unveiling of public art for a scheme in St John’s Hill, where the leader of the council, Councillor Govindia, was in attendance as well. That is the first phase of a scheme there. What we have secured on that site is an increase in supply from 351 homes to 528. Of those homes, 249 are for sale and 279 are affordable. The point I make is that that scheme took over five years to get to a point of viability. We had to provide for those who were already living on the estate and we had to cross-subsidise the whole initiative through the market-sale properties on the site. We have there a scheme that we at Peabody can feel genuinely proud of. However, I can tell the Minister that if another requirement was superimposed on that scheme that itself involved the loss of value in the form of starter homes, I do not think that we could have delivered both a viable scheme and met the needs of the tenants. These issues will be replicated up and down the country. We have had a long debate about the pros and cons of this, but it is crucial that in the introduction of starter homes we do not inadvertently create a problem for the practical regeneration of estates that so desperately need it.
Lord Horam
My Lords, I add my voice to the support for Amendment 42 in the name of the noble Baroness, Lady Doocey, and the noble Lord, Lord Kerslake. I am aware, as they have said, that there are many chief executives, of big London boroughs in particular, who are very anxious to regenerate their existing—very often large and troublesome, I must say—estates in an interesting and innovative way. But the first thing they have to do is get the support of the people on the estates. They have votes, and it is no good not giving them the sort of right of return that this amendment involves—you simply would not get the support that you need to go ahead with the kind of development that is necessary.
Although it encapsulates a very important idea, this particular amendment is not right, and perhaps I can anticipate the Minister’s response in this respect. I do not think that you can exclude any starter home-type development. It would be wrong to do that, as the amendment appears to, because some sort of mix is needed. None the less, I think that the right of return for existing tenants should be guaranteed. Indeed, that is essential if you are going to get these schemes off the ground.
Baroness Williams of Trafford
My Lords, I thank the noble Lords, Lord Kennedy, Lord Beecham and Lord Kerslake, and the noble Baroness, Lady Doocey, for their amendments. They give me an opportunity to explain our key parameters for the delivery of starter homes, particularly in relation to unviable and underused brownfield land and housing regeneration schemes.
Perhaps I may start by addressing Amendment 41, which seeks to restrict starter homes to underused and unviable brownfield land in line with our original starter homes exception site policy, as the noble Lord, Lord Kennedy, has said. Let me be clear that we still expect exception sites to make a significant contribution to starter home delivery, and the first planning applications have been submitted under the exception site policy which has been in place since March 2015. We expect these to deliver a substantial number of starter homes, boosting the overall housing supply, and we have consulted on planning policy changes to extend and strengthen this policy, as well as bringing forward more land for starter homes, building on the exception site policy. We want to ensure that sufficient appropriate land is brought forward to meet housing need.
This planning reform will be further strengthened by the £1.2 billion starter home land fund which was announced by the Prime Minister in January. The fund forms a significant part of the £2.3 billion allocated to deliver more starter homes in the spending review and will support further brownfield site preparation, delivering at least 30,000 starter homes. It builds upon £36 million made available this year to secure and prepare more land for a first wave of starter homes, and it includes £8 million offered to councils to support starter homes on 27 underused or vacant brownfield sites across England. The HCA is using the remaining funding to acquire further suitable brownfield sites to drive up housing delivery.
But we also need to deliver starter homes on more conventional housing sites so that first-time buyers across the country can benefit from discounted home ownership. Limiting this would limit the opportunity for home ownership. It will also bring the benefit of a new mix of housing types on site: discounted properties for first-time buyers alongside wider market housing and any shared ownership or rented housing secured on the site. It is our view that the opportunities for first-time buyers have too often been neglected. Starter homes provide for a new model which should be delivered alongside other housing types. My department will be consulting on proposals for starter homes requirement on conventional sites in a technical consultation to be launched in the near future, and we want to look carefully at the proportion of starter homes required.
Lord Kerslake
I apologise for intervening again, but there is a critical point to be made here. When you consider the viability of a regeneration scheme, you can juggle the mix between market, sale, affordable rent and shared ownership, but in the case of the proposals for starter homes, we will have a number dictated by central government that in effect will be required to be delivered. That will have an impact, whether we like it or not, on the viability of a scheme. The issue is the ability to deliver a scheme and the flexibility required to make it viable. That will be significantly impacted by an absolute requirement to deliver starter homes regardless of the other requirements.
Baroness Williams of Trafford
I take the noble Lord’s point that the requirement to deliver starter homes might affect the viability of a site. That would be absolutely counterproductive, but it will often be the case that not only will the starter homes requirement be able to be met, but the council, in consultation with the developer, may well be able to provide other types of housing. I particular refer to houses for affordable rent, because they are quite often the grant-funded houses that effectively act as a pump-prime for the construction of homes.
Turning to my noble friend Lord Deben’s point on the green belt, we are very committed to protecting the green belt, despite what noble Lords might read in the newspapers, and we are maintaining the strong safeguards that are set out in national planning policy, which allow for development only where special circumstances exist. I agree with my noble friend that once it is gone it can never be got back.