Housing: Affordable Housing

Lord Shipley Excerpts

Monday 22nd February 2016 Grand Committee

Asked by

[Lord Shipley]

To ask Her Majesty’s Government what assessment they have made of the affordability of homes under their proposed extension to the right-to-buy scheme and their starter homes proposals.

[Lord Shipley (LD)]

My Lords, I am grateful for this opportunity to speak to this Question for Short Debate. I should at the outset declare my vice-presidency of the Local Government Association. This QSD was tabled three months ago, and it is fortuitous that it has come up for debate at this point because the Housing and Planning Bill is in Committee.

This QSD asks what assessment the Government have made of the affordability of homes under their proposed extension to the right-to-buy scheme and their starter homes proposals. By affordability, I mean what dictionaries tell us affordability means: people having the resources to pay for a product or service.

Of all the factors that enable people to enjoy a fulfilling life, a decent and secure home is central. Too many people do not have that and too many cannot even aspire to it. I have come to the conclusion that the Government do not actually understand that. If they did, they would be building more homes for rent. Clause 143 of the Housing and Planning Bill defines affordable housing as,

“a new dwelling in England … to be made available for people whose needs are not adequately served by the commercial housing market or … a starter home”,

within the meaning of the Bill. However, so much of the evidence we have tells us that the Government’s proposals in the Housing and Planning Bill will not help us to solve the problems of affordability or access to decent rented housing for the many people who do not earn enough to buy their own home. That is because house prices are so high and not enough new homes are going to be built over the next few years. The Government have admitted on several occasions that their plan to build 200,000 homes a year to 2021 will meet only the projected increase in the number of households over that period. In other words, the current housing crisis will remain unaddressed.

Average house prices are now £288,000 outside London and £540,000 in London, which is several times average incomes. This is not just a London problem; it is a problem right across the country and impacts on all parts of England where for so many home ownership remains a dream. House prices are predicted to rise by up to 20% in the next few years, so in no sense can these houses be deemed affordable even at the lower end of the market for the vast majority of people who are currently renting or who are living in a family home. The consequence of this policy is that there are 1.6 million people on housing waiting lists in the UK, with 9 million people living in private rented accommodation, including 1.3 million families with children.

The lack of social housing for rent and affordable houses for purchase has driven more people into the private rented sector. There are now more people living in the private rented sector than in social housing for the first time. Thirty per cent of private rented households contain children, and people in this sector pay higher rents and have much less security than other tenures.

The truth is that we are building too few homes and, with the Government depending too much on owner-occupation to the detriment of expanding the social rented sector, the aim of giving every family the stability and dignity of a decent home cannot be achieved. To stand a chance of doing so would require 300,000 extra homes to be built annually rather than the 200,000 which the Government plan. What is worse is that the Government, in producing a target figure of 1 million new homes by 2021, have not published any longer-term projections about how many houses they plan to ensure are built, nor do they tell us the net figure of new homes taking into account demolitions.

Housing is too important to rely on short-term planning. We need 300,000 new homes a year, and I wonder whether the Government have grasped that. Might they look again at creating a housing investment bank to provide long-term capital for projects? Might they look again at creating more garden cities in areas where there is local support?

Current government policy is driven by two new policies: starter homes and the right to buy housing association properties, with funding being made available by the sale of higher-value council homes. The housing announcements in the 2015 spending review included a doubling of the housing budget, which is welcome. It is not enough, but the sense of direction is right in terms of spending. The review also established that there would be 400,000 new affordable homes to buy by 2020—half would be starter homes and 135,000 Help to Buy shared ownership. I welcome that support for Help to Buy shared ownership schemes. However, the trouble is that this simply does not represent enough new homes, and there is no sign of any understanding of the need to build new homes in England for rent. In fact, we will see a reduction in the number of new homes for rent, as starter homes to buy will be built instead of them. First, councils will be required first to sell off their higher-value properties to help to fund the right to buy of housing association properties and, secondly, councils will lose rights under Section 106 agreements and the community infrastructure levy to build more homes for rent.

As we know, starter homes are new properties for first-time buyers under the age of 40, who are entitled to a 20% discount off the market price. The Government have set a target of 200,000 starter homes during this Parliament, which is expected to deliver most of their affordable housing goal. Shelter has calculated that on average in England a deposit of £40,000 and a salary of £50,000 will be necessary to afford a starter home. In London, buyers would need a deposit of £98,000 and a salary of £77,000. These are very large sums of money. Shelter has also suggested that, based on the purchase price caps of £450,000 in Greater London and £250,000 outside Greater London, starter homes will be unaffordable in 58% of local authorities to households on average income and in 98% of local authorities to households on the national living wage. What assessment have the Government done of this compelling evidence provided by Shelter?

I have concluded that, in practice, starter homes are for renters who are higher earners or who have access to private capital and that those starter homes will replace homes with affordable rent levels for those who are less well off. For those who buy a starter home, there could well be a substantial profit if, as forecast, house prices continue to rise. That is because they will be able to sell it at market value just five years after buying it. There is a very strong case for starter homes to maintain a 20% sub-market rate for much longer than five years, so the benefit of a cheaper home can be passed on to others. There is a very serious risk that starter homes will be built at the expense of traditional affordable housing for sub-market rent and shared ownership. This would worsen the availability of low-cost housing, particularly in rural areas. Starter homes should be delivered in addition to affordable housing, not in place of it.

This brings me to the right to buy for housing association tenants, which will reduce the number of affordable homes for rent, given the way in which the Government are effecting the sale. It will then make things more difficult for those on the social housing waiting list and those for whom home ownership is not within reach. The Government have made no commitment to exempt housing association properties in rural communities, but they should. As I have said, the Government’s plan would require this right to buy to be funded by councils via an annual tax, which the Government expect them to finance by selling off high-value council homes. The current right-to-buy discounts are £104,000 in London and £78,000 outside London. I understand that the National Housing Federation has calculated that the extension could cost £11.6 billion. I wonder what the Government’s assessment of that figure is as well.

The forced sale of high-value council homes will reduce the number of low-rent social homes in the places they are needed most and will make things worse for the 1.6 million people on social housing waiting lists. It will also jeopardise new housebuilding because it will reduce councils’ capacity to borrow. It will also put any new council homes that are built at immediate risk of being forcibly sold if they are deemed to be high value. Crucially, there will be even fewer homes available for larger families.

In conclusion, all of this could see homelessness return to 1980s levels. It is already increasing and the Government’s failure to build for rent and to support adequately that category of housing is likely to see homelessness rise. I wonder what assessment the Government have done of the likely increase in the number of homeless people.

Everyone deserves a decent, affordable home to live in. I regret that many people are going to be priced out of the communities in which they grew up, due to rising house prices and rents. I am deeply concerned by the present Government’s housing reforms, which will lead to fewer new affordable homes for rent and a potential breakdown in community resilience by the selling off of affordable homes with no guarantee of replacement in the same place.

--- Later in debate ---

[Lord Shipley]

Before the Minister sits down, can I thank her for her reply? I hope that two things will be explained in writing. The first relates to the figures quoted from the National Housing Federation, the noble Lord, Lord Beecham, Savills and Shelter. I believe those figures to be true. If the Government have had discussions with any of those organisations, or feel that other figures are correct, it would really help the Committee to know exactly the Government’s view of them. At the moment, I think all those figures are correct. If they have had discussions, could we know about them?

Secondly, will the Minister respond specifically on the issue of high-value council properties? I understand that there will be, either through regulation or perhaps in the Bill, some clarification about what “high value” actually means. I draw it to her attention that, by their very nature, larger homes tend to have a higher value and that larger homes are appropriate for larger families. Of course we understand that they will be sold only when not occupied, but if we end up with four-bedroom —or even more—properties being sold, it will help nobody.

[Baroness Williams of Trafford]

The noble Lord makes a good point. We would not want to get rid of all the four and five-bedroom high-value assets in an authority—meaning there would be no houses of that kind—so we have definitely thought about that. As for our discussions with Savills and others, I am certainly happy to write to all noble Lords who have taken part in the debate and place a copy of the letter in the Library.