Property Market

Mark Pawsey Excerpts

Tuesday 25th January 2011 Westminster Hall

[Mark Pawsey (Rugby) (Con)]

It is a pleasure to serve under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for Watford (Richard Harrington) on securing this debate. Although I recognise that the debate so far has been exclusively about housing, its title is “Property Market” and I hope to raise a point about commercial property, when my declaration in the Register of Members’ Financial Interests will become relevant.

[Hywel Williams in the Chair]

My hon. Friend and other Members are quite right to draw attention to the failure to build new homes at a time when our country needs additional housing. I want to talk about the factors involved, particularly those that relate to the planning system, and to raise the issue of price. My hon. Friend has rightly drawn attention to the link between the planning system and the supply of land for development. We know from a report that came out earlier this month that less land is being approved for development than before. As elected representatives, we all know about the fundamental contradictions that exist within planning. We know that individuals are generally conservative with a small c. They like the environment they live in and they do not want to see change; indeed, they fear change, so we often find communities that are inherently anti-development and which oppose proposals for development at the first opportunity. At the same time, those very people are often looking for places for their children, so that their children can remain within their community, and they are often looking for smaller residential units, too, where they might retire, and which they know in turn will free up family homes for their children in future. Part of the planning system is about the challenge to reconcile those competing influences.

The abolition of the regional spatial strategy was one of the very first acts of the new Government and it is one of the reasons why my hon. Friend the Member for Watford has concerns about whether enough land will be made available for development. However, I think that local authorities have thrown off those shackles as a completely natural reaction, as they were imposed on them by those at the top. If somebody demands or insists that a local authority do something and the local authority then does it with great reluctance, as soon as that demand ends there is an incentive for the local authority to say, “Well, we’re not going to have anything more to do with that, we are going to control our own destiny and take things forward in the way that suits us best”.

However, I believe that there are two measures in particular that will allay my hon. Friend’s anxieties. The first measure, to which my hon. Friend the Member for Peterborough (Mr Jackson) has referred, is the new homes bonus, whereby councils will retain the council tax for six years. It is not a simple concept. It has taken local authorities a great deal of time to work out how they will benefit financially from taking that action. I am delighted that my local authority in Rugby has made the calculations and recognised the benefits that will accrue to it from taking a progressive and positive attitude to the new homes bonus. I think that, as people look in detail at the proposals, more and more communities will say that this idea for dealing with development will mean that the community will benefit and the new homes bonus will start to make a great deal of sense.

The second measure is in the Localism Bill. Like many of my hon. Friends who are in Westminster Hall today, I would have loved to have discussed that Bill last week but I did not have the opportunity to do so. I want to discuss the effective consultation proposals in that Bill, which demand that developers undertake consultation with local communities before introducing development proposals. We know that good, sensible developers, who want to achieve what is best for the communities they want to work with, are doing that anyway. It is in their interests to do so; it is in the interests of a good developer to get the community working on the same side as them.

An example of a developer taking a proactive approach before the Localism Bill becomes law is the developer who is introducing proposals for 6,200 new homes in my constituency on the radio mast site in the west of my constituency. Many Members will be familiar with that site, because anybody travelling up and down the M1 will see the radio mast, with lights on it, which tells them that they are about an hour from London if they are driving south. The site is a sustainable urban extension, and the local authority continues to introduce plans that, in general, are supported locally. There is some immediate local opposition to the site, but I think that one reason why the ideas are making progress is the very effective consultation that the developers undertook in 2009. They held a detailed design inquiry lasting five days. Stakeholders were there for two days, but the weekend was allocated exclusively to the general public. People in the town and communities most likely to be affected by the development were able to talk to the developers about their vision for the site—what they wanted to see on the site and how they saw its future development.

A big part of the consultation was about learning lessons from recent developments in the town. One reason why people have a negative attitude towards development is that they can identify poor development that has taken place, which is often development that has been rushed through without effective consultation. Poorly designed road structures and poorly thought-out houses are built, leading to people being negative about development.

Another feature included in the design inquiry was respect for the site’s heritage. Signals were sent from the site to the British Navy in times of war, so its heritage is important and links into Rugby’s industrial heritage. That will be respected through the retention of existing buildings on the site. A significant issue for local people was the infrastructure and the ability of people in the add-on development, at the extremity of the urban centre, to find their way into the town centre. That was important if the development was to be seen in positive terms as contributing to the development of the town. Businesses will be attracted to our town because of the additional spend from people living in the new homes.

Local people have had their say. I might add that the time taken up in working on the proposals has been beneficial. In fact, the delay in bringing things forward caused partly by the state of the housing market means that we will get better planning. My hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile) argued for speedier planning decisions. I think that we want better planning decisions, not necessarily faster planning decisions.

The price of land is a key factor in providing housing—in the rate at which housing is made available—because it is a very significant proportion of the eventual selling price of housing. An anxiety that may prevent land from being made available forward and about which my hon. Friend the Member for Watford may be concerned about is that, in many cases, developers have built up land banks at times when prices were rather higher than they are now. That acts as a disincentive to use the land for development now, because if prices are expected to rise in the future, the land value will be a smaller proportion of each house price than if development were undertaken now. It is a perfectly natural reaction for developers to hold on to their land bank in the hope that things will get better.

In respect of demand, reference was made to the uniquely or characteristically British view of home ownership. Homes are seen as an investment, as something to put one’s money into to add to one’s pension, rather than as somewhere to live. We have seen a massive growth in home ownership, to a peak of 71% of UK homes being privately owned by 2003.

[Mr Stewart Jackson]

Does my hon. Friend agree that one problem with registered social landlords not developing more schemes for shared ownership is that the existing business model is one with a constant stream of housing benefit income—and that has been the case for a number of years—while the Government’s reform of housing benefit will use the market mechanism to develop more innovative ways of getting people into shared equity?

[Mark Pawsey]

My hon. Friend makes a very sensible point. Shared equity offers a real opportunity. I like to see variable rates of shared equity, so that people may start with a 25% equity stake and increase that as their circumstances change. That is not happening as often as it should.

Points were made about the availability of finance. People’s ability to buy homes is very much driven by their ability to borrow, and there are real uncertainties in the market because of the current FSA proposals, which have been described as draconian. The harder we make it for people to get the level of finance they require, the less demand there will be for housing, and that will provide a disincentive for people to bid at a higher price, which in turn will lead to a further reduction in supply.

I wish to make a quick point on the supply of commercial property, because there is a specific measure that the Government could introduce to provide an additional supply of commercial property which, as we move out of recession, will be increasingly important, at it applies to the non-domestic rates for commercial property that have been in effect since April 2008. For decades before that date, Governments helped struggling businesses through the application of empty property rates relief as an incentive to bring empty commercial property into use; my hon. Friend the Member for Carlisle (John Stevenson) raised the issue of bringing empty housing into use.

If there is insufficient activity in the economy, it does not matter what the rent is, because very often the commercial property will not have a use. That leads to two things: the demolition of commercial buildings, and the fact that there is no speculative building of new commercial premises, because if someone constructs a building they end up with an immediate liability for non-domestic rates on an empty building; they have an outflow before there is any inflow. As the economy recovers, it will be important to ensure that premises are available for our businesses to use. I again congratulate the hon. Member for Watford on introducing the debate, and I look forward to the Minister’s response.