Building More Homes (Economic Affairs Committee Report)

Lord Young of Cookham Excerpts

Thursday 2nd March 2017 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, the whole House understands why the noble Lord, Lord Kennedy, was unable to wind up the debate. We extend our sympathy to him and to his wife, the noble Baroness, Lady Kennedy, on the recent loss of her father, although no one would know that the noble Lord, Lord Beecham, had not been working on that wind-up speech for several weeks.

If political students wanted a textbook example of how a committee in your Lordship’s House could influence and reshape government policy, I would direct them to the report we have been debating this afternoon. As the noble Lords, Lord Horam and Lord Best, explained, its context was the Housing and Planning Bill, introduced by the newly-elected Government in 2015, which contained a number of measures to increase housing supply, particularly for first-time buyers, but was not free from political controversy. It provided the back-drop to this report, which was published a few weeks after Royal Assent.

A few days after publication, there was, in effect, a change of Government. All DCLG Ministers but one were moved and a new team arrived, with the political space to revisit policy and with your Lordships’ report in their in-tray to assist that process. I have been genuinely impressed by the fresh approach adopted by Gavin Barwell, as I know have many others, who have admired the way he has shown his commitment to tackling the challenges of his portfolio and engaged with all the stakeholders. As a former Chief Whip I would caution against praising him too highly, just in case he is headhunted by the Prime Minister and his skills are applied to other challenges that may confront the Government in Whitehall. But it was perhaps a tacit acknowledgement of the influence of your Lordships’ report that the title of the subsequent White Paper, Fixing Our Broken Housing Market, was lifted from the introduction to this report: “Housing, A Broken Market?”.

I cannot think of any Select Committee report in either House that has had so many of its recommendations adopted so quickly, sometimes at the expense of Government reordering earlier priorities, as my noble friend Lord Horam said, and as also mentioned by the noble Lords, Lord Turnbull and Lord Kerslake. Perhaps the right reverend Prelate the Bishop of St Albans would describe it as repentance. We are taking forward measures that fit with over half of the committee’s 13 final recommendations as well as a host of other points raised in the report. So I commend the committee on the timing and the targeting of its report, its chairman for his perceptive introduction and all noble Lords who have taken part in this debate. The White Paper was, of course, a consultation document, so everything that has been said in this debate will be taken into account in that process.

I have discovered in my short time in your Lordships’ House that Whips are often invited to respond to debates on subjects in which they had, until shortly before, displayed but a fleeting interest. I hope that that is not the case today; like other noble Lords, I have chaired a housing association. Unlike other noble Lords, I was a housing Minister at various levels of seniority from 1981 to 1994, with a discontinuity from 1986 to 1990 when I fell out with Margaret Thatcher over the poll tax. Indeed, as Under-Secretary of State at the Department of the Environment, I first spoke in a housing debate in October 1981 about making the best use of government land to support the housebuilding programme—a subject still topical today, as the committee highlighted in its report.

Let me say how the Government have acted on the committee’s recommendations, and try to address the points raised in today’s debate, recognising that I may not have time to address all of them, in which case I will of course write to noble Lords.

The report rightly acknowledges that housing has become too unaffordable, whether to rent or to buy—a point strongly made by the noble Lord, Lord Hollick, when he introduced the report; and many others, including the noble Baroness, Lady Blackstone, and the noble Lord, Lord Sharkey have explained the impact this has on the lives of those who are affected. They reminded us that the average house costs almost eight times average earnings—an all-time record. This means it is too difficult for too many people to get on the housing ladder, and the proportion of people living in the private rented sector has doubled since 2000. For the average couple in the private rented sector, rent now takes up roughly half of their gross income, a point mentioned by the noble Lord, Lord Turnbull, who also mentioned the anxiety that many of those in the private rented sector feel because of the absence of security. That figure, of roughly half of their gross income, is even higher in London. Noble Lords may ask themselves, as indeed do many others, how their children and grandchildren will be housed when they grow up and leave the family home. The Government are determined to reform the housing market so that housing is more affordable and people have the security they need to plan for the future. That is the background to the White Paper.

The starting point, as the committee has recognised, is to build many more homes. Since the 1970s we have delivered, on average, 160,000 new homes each year in England, far below what the committee and numerous independent assessments have said we need. The White Paper sets out a comprehensive plan to deliver the step change in housebuilding—as the noble Lord, Lord Kerslake, described it—which capitalises on the substantial additional funding secured in the Autumn Statement. The figure of £1.4 billion was referred to by a number of noble Lords as extra money available for affordable housing. In deciding how that money should be spent, the right reverend Prelates the Bishop of Newcastle and the Bishop of St Albans stressed the importance of stable communities where young people can buy a home and have a stake in the area in which they live. We were invited by the right reverend Prelate the Bishop of St Albans not to overlook the needs of rural housing. That is, indeed, a priority and there is a new community fund to provide £60 million per year to support housing in rural areas. It is interesting that in the Neighbourhood Planning Bill a number of neighbourhood plans came forward with more homes in their village or community than were actually required by the district plan. That addresses the point so well made by the noble Lord, Lord Best, that nimbyism is moving on, although it may not have totally disappeared.

To achieve this goal, the White Paper sets out a four-pronged approach. First, release more land for homes where people want to live. The noble Lord, Lord Forsyth, reminded us that there are regional variations in the equation between supply and demand. Secondly, ensure homes are built more quickly, once they have planning permission; thirdly, open up the housing market to a wider range of providers and methods of provision; and fourthly, help people in the meantime while our reforms take effect. We think that that is a comprehensive and realistic plan to deliver the homes we need, and others agree. David Orr, chief executive of the National Housing Federation, said that the White Paper contained,

“extremely positive steps towards ending the housing crisis”.

How have we addressed the committee’s recommendations? It raised the importance of ensuring that local authority planning departments are properly resourced—an issue raised by my noble friend Lady Eaton and others. As noble Lords have mentioned, the Government are boosting local authority capacity by raising planning fees, by 20% where local authorities commit to spending the additional income on planning services. The Federation of Master Builders has said that this is,

“one of the biggest game changers”,

in the White Paper. I hope that those extra resources might enable planning authorities to recruit the ecologists referred to by the noble Baroness, Lady Young of Old Scone, where they are needed and also to deal with some of the sharp practices that we heard about from the noble Earl, Lord Lytton. An additional 20% is available in areas that are delivering on their housing plans.

The Government agree with the committee that we need to act to ensure that homes are built more quickly once planning permission has been granted, which was an issue raised by the noble Baroness, Lady Blackstone. The White Paper includes a package of measures to address slow build-out. The committee highlighted the suggestion that planning consents should be limited to two years. We encourage local authorities to consider shortening the timescales for developers to implement a permission from three to two years, as set out in the White Paper.

The committee recommended that the community infrastructure levy needed to be simpler, more transparent and responsive to the concerns of builders and we are looking at that carefully. That includes the workings of Section 106, which was raised by the noble Viscount, Lord Chandos. We will make an announcement at the conclusion of those considerations in the Autumn Budget this year.

More broadly, we are tackling the barriers that can hold back development on-site, including through the £2.3 billion housing infrastructure fund, by helping to put the right infrastructure in the right places—an initiative welcomed by the noble Lord, Lord Hollick—and by streamlining the licensing system for managing the great crested newt. Too often, lack of infrastructure prevents development, and that substantial sum should unlock up to 100,000 new homes. We will hold the feet of local authorities and developers to the fire to account for the delivery of new homes, including through a new housing delivery test, to ensure that local authorities are on track with their plans.

The committee made several recommendations about making better use of public land to deliver new homes. The Government aim to dispose of surplus government land in England with capacity for at least 160,000 homes by the end of March 2020. This follows our successful programme in the last Parliament, in which land was released for 109,000 homes against a target of 100,000.

Progress with the current programme is good. The programme’s annual report, published on 20 February, shows that by the end of September 2016 departments had already sold or identified land with capacity for 145,492 homes—91% of the programme’s ambition. I hope that publication of that report, which of course came after the publication of the committee’s report, has addressed concerns about when information on monitoring the new programme would be available. We will publish a further report in July, with data about the number of homes built on land released under the programme—an issue raised by the noble Baroness, Lady Blackstone.

Alongside this, the Government’s new accelerated construction programme will deliver up to 15,000 housing starts in this Parliament on surplus public sector land and encourage new developers with different models of construction to build new homes at up to double the rate of traditional housebuilders.

We agree with the committee that we need to diversify the market to increase supply. That includes supporting housing associations and local authorities to build more—an ambition recommended by the committee in Chapter 5—alongside supporting smaller developers and new investors.

We want to support housing associations with ambitious plans for growth—for example, L&Q, which has recently merged with East Thames housing association and acquired the strategic land firm Gallagher. I was interested to hear from the noble Lord, Lord Kerslake, about the merger between Peabody and Family Mosaic with the specific aim of enabling the combined association to build more homes. We welcome new investors into different types of housing, such as the joint venture in supported housing between Universities Superannuation Scheme Ltd and Morgan Sindall Investments Ltd—a subject raised by a number of speakers, including the right reverend Prelate. Although we have taken initiatives to sustain supported housing with some ring-fenced funding, I understand that there are residual anxieties, which I will certainly pass on to ministerial colleagues.

We want to see local authorities deliver new council houses, as stressed by the right reverend Prelate the Bishop of Newcastle. Numbers of new council homes have been increasing year on year, and they are an important source of new supply, particularly in areas where there is acute housing need.

We will work with local authorities and key partners to consider the options for increasing housebuilding further. This may include innovative approaches—such as the one in Ashford mentioned by my noble friend Lady Eaton—and the use of local housing companies to deliver new affordable and market housing. In response to the question from the noble Lord, Lord Hollick, I understand that there is no fixed budget for this. The department responds to requests on a case-by-case basis, focusing on areas of high demand.

My noble friend Lady Wheatcroft raised points about diversifying the market and the potential for the greater use of modern methods of construction, such as off-site construction. We will stimulate the growth of the sector through government programmes—for example, partnering with off-site manufacturers through the accelerated construction programme—and we will work with lenders to ensure that homes built off-site can access finance on the same basis as traditionally built homes. Therefore, in direct response to the question from my noble friend, we recognise the imperative of government leadership in this area in getting the initiative off the ground.

The committee called for more homes for rent alongside those for sale. The White Paper includes a package of measures to boost new privately financed build-to-rent developments, as well as additional investment and flexibility for more affordable homes, including those for rent. That was a subject raised by the noble Lord, Lord Best, and perhaps I can focus on it for a moment. I have always been amazed that pension funds and insurance companies in this country have invested in almost every conceivable asset apart from residential accommodation for rent. They have invested in gilts, equities, commercial property, commodities, gold and silver, but, had they invested in homes for rent, they would have achieved both capital appreciation and income buoyancy unparalleled by almost any other investment. I have nothing against buy-to-let investors, but there would be more stability and professionalism in this sector if there were this long-term institutional investment, as suggested by the noble Lord.

A number of major investors have already invested and are already building schemes—Legal & General, M&G, Grainger, Moorfield, Lone Star, Hermes, Realstar, Essential Living and Delancey, to name but a few. I noted that the property consultancy Knight Frank estimates that investment appetite could grow to £50 billion, representing 250,000 homes.

The committee highlighted barriers to entry for smaller builders. The White Paper includes a package of measures to help smaller firms—an issue raised by the noble Lord, Lord Layard—from making more small sites available through the planning system, to loan funding of £1 billion as part of the home building fund to support small and custom builders. Many noble Lords spoke about those on the waiting list and those threatened by homelessness, which I hope will be assisted by the Bill being taken through your Lordships’ House by the noble Lord, Lord Best.

Increasing the supply of social housing for rent will of course help those looking to the sector for a solution to their housing problem. I have always favoured schemes that help social tenants move on to home ownership, such as HomeBuy. Some of these, where tenants move into a new property such as Help to Buy, can help to secure a re-let at a fraction of the cost and time of a new build. That can promote mobility through the sector helping both tenants and those in housing need.

The committee and noble Lords raised a number of questions about the Government’s housing target. Our ambition is to deliver 1 million new homes by this Parliament, by March 2020. We have made good progress so far with 189,650 new homes delivered in 2015-16. However, there is clearly more to do, as the noble Lords, Lord Sharkey and Lord Kerslake, reminded us. No one who has listened to this debate could draw any conclusion other than that we need to go a lot further to meet that ambition.

I turn now to some of the points raised in the debate. A recurring theme was the need to raise the borrowing limit for local authorities. In addition to doing a spell as a Housing Minister, I also did a spell in the Treasury so I can see both sides of the argument. On the one hand, the Housing Minister wants the maximum borrowing capacity for local authorities and on the other hand the Treasury sees an imperative to manage public debt. Clearly, there is tension between the two. I would like to write to noble Lords because there is a real danger of getting bogged down in fiscal theology as to what scores and what does not score as a public expenditure. I will set out more clearly what we are doing and what the constraints might be. But in the Autumn Statement 2013, £300 million of additional borrowing was made available to councils in England and £127.2 million was taken up. In 2015-16, local authority borrowing headroom is set to be £3.4 billion on top of almost £2.5 billion of general housing revenue account—the reserves accumulated by local authorities.

The noble Lord, Lord Sharkey, asked what the housing delivery test was. It is about assessing progress in housebuilding against local planning authorities’ targets. It compares the number of homes that local planning authorities set out to deliver in their local plans against the net additions in housing supply. It is not just about planning but about how many actual houses are built.

My noble friend Lord Forsyth raised the issue of the PRA. I will raise again with the Treasury and the PRA the issue of the capital weighting of loans to small builders. I have many other answers, but my time is drawing to a close so I will sum up. The Government are committed to fixing the problems with our housing market, many of which the Committee highlighted in its excellent report. By building the homes that Britain needs and giving those renting a fairer deal, we will give those growing up in society today a greater chance of enjoying the same opportunities as their parents and grandparents, as part of our wider ambition to make this a country that works for everyone. I welcome the committee’s interest in this area and, in light of the impact of its report, hope that it will consider looking at the issue of housing again, possibly later in this Parliament.