My Lords, we are all familiar with the concept of the starter homes project, which the Government launched with a great fanfare. It will, as we are now very familiar with, provide 200,000 affordable homes—I think that is the Government’s target—for first-time buyers aged under 40 who will benefit from a discount of 20%, which will not be repayable on a subsequent sale after five years. That is the basic concept.
Of course, the only criterion for obtaining the assistance and the discount to buy these starter homes will be age, not income. In London, for example, this could lead effectively to a handout on resale of more than £100,000 to the buyers of starter homes bought for the capped price of £450,000 after the discount—an untaxed £100,000 gain for the fortunate under-40s who secure a starter home. The Government fund all this with £2.3 billion, which represents just a part, as I mentioned before, of the housing benefit savings from the imposition of the 1% increase on social housing rents. The damage that that does to the social housing stock is, of course, studiously ignored.
Section 106 currently delivers half of all new affordable homes. Shelter describes it as being,
“especially vital to the delivery of new social rented homes, as grant funding for these homes was removed in the last Parliament”—
by, I remind your Lordships, a coalition Government—
“and funding for Affordable Rent ends in 2018”.
Of course, in the mean time we will have cuts to social rents, limiting housing associations’ ability to build new homes. Shelter research found, as we have heard, that starter homes are unaffordable to people on low incomes in 98% of the country and unaffordable to those on middle incomes in 58% of the country.
The claim is that affordable homes will thereby become available for purchase but clearly affordability is an elastic concept. The coalition Government drove up council rents, deeming an affordable rent in that context to be 80% of private sector rent levels. But given the chronic housing shortage and the boom in buy to let, which dramatically drove up prices and rents in the private sector, that definition of affordability is fundamentally flawed. Affordability must surely relate to what the would-be owner-occupier or tenant can reasonably be expected to pay, having regard to his or her income, not an artificial comparison to the market rate.
Prices, as we know, will be capped at £450,000 in London and £250,000 elsewhere after the 20% discount, representing, in effect, full market prices for these new properties of £562,500 in London and £312,500 elsewhere. However, the Government claim that the average price of starter homes for first-time buyers would, after the discount, be £291,000 in London and £169,000 elsewhere. Even at those levels—which are highly questionable, especially for London—starter homes will not be affordable for a huge number of people. In fact, the Government’s figures appear to be based on the average cost of houses bought by first-time buyers, not the average price of new houses, which would be higher.
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I am indebted to Savills for helping me ascertain the figures. Savills explained that the average new home values for the 12 months to November 2015 were £560,000 in London—with the 20% discount, that would give the £450,000 figure—and £260,000 in the rest of England, which, with a discount, would give £210,000. However, these are of course irrelevant, as it looks as though the Government have used the average first-time buyer house prices from the same source. A price of £364,000 in London for the average first-time buyer—not of a new house—with a 20% discount would give £291,000; in the rest of the country, £211,000 for first-time buyers, of all types of houses, would be £169,000 with a 20% discount. In other words the Minister—obviously unwittingly, I suspect—has been quoting figures which do not relate to what we are talking about, which is the cost of newly built houses, which will, as Savills put it, be higher. In fact, the email I received from Savills said:
“This seems an odd choice”—
the choice of the average first-time buyer’s purchase—
“as clearly new homes sell for more than second hand homes”.
I trust that the Minister will henceforth acknowledge that the figures she has given are not quite accurate.
I am not accusing her of anything except perhaps being supplied by her civil servants with figures based on the wrong comparison.
What is affordable? I hope your Lordships will forgive me for referring to the council that I know best, but in Newcastle, for example, the 5,900 applicants on the council’s housing list have average earnings of £20,000, which would be enough to support a mortgage of £70,000, leaving an effectively unbridgeable gap between that and the discounted purchase price of a starter home. Even the national average income of £26,000 would fall short of the amount required to obtain, and sustain, the required mortgage. We must also bear in mind that we have a historically very low level of mortgage interest rates at the moment, which is ultimately bound to go up. Ironically, in passing, we should note that a household income of £30,000 outside London—which could be a couple on the national minimum wage—would invoke the pay-to-stay provision for council housing, were they to be in such houses.
The LGA quotes a report by Savills that starter homes would be out of reach for all people in need of affordable housing in 220 council areas, as we have heard this evening. The definition of starter homes as affordable, which councils will have to promote together with Help to Buy, will, in Savills’s view,
“leave a gap in housing provision for those on lower incomes”,
while benefiting those in London with incomes of between £45,000 and £90,000 a year.
The Town and Country Planning Association reports that 80% of councils surveyed say that starter homes would not be affordable, while only 7% say the policy would address the need for affordability in their area. It conducted a survey of authorities, 54% of which were Conservative, 27% Labour, 17% no overall control and 2% Liberal Democrat. We have a little over 2% of Liberal Democrats in this Chamber, for reasons which I will not elaborate. The results of the survey were strikingly similar. Of the councils surveyed, 61% thought that the need for affordable homes in their area was “severe”. The survey asked whether the Government’s proposal to reduce social rents by 1% a year for the next four years had an impact on their plans; 68% said that it did. Councils were asked whether the starter homes policy would address the need for affordable housing in their areas; 85% said no. They were asked whether starter homes should be classified as affordable housing; the answer, from 75% of those councils, was no. Councils were asked whether the proposed extension of right to buy would have an impact on housing available for social rent in their areas; 80% of them said that it would.
There will also be an impact on what councils can achieve under Section 106 planning agreements. The Government’s own figures suggest that for every 100 starter homes built, between 56 and 71 affordable council and social rented homes will not be built, as we heard earlier. Over the four-year period of the starter homes scheme this represents a reduction of around 50% compared to the last four years. Savills confirms that the policy will result in fewer homes being built for affordable rent. Savills also questions the impact on shared equity
schemes and warns of the risks of reducing the number of new homes built. Savills is an independent commercial organisation with no political interests at all.
Amendment 37, as we have heard, seeks to broaden the objective of the Bill to include the provision of new homes across all tenures, including, but not restricted to, starter homes. The concept of building starter homes as self-contained areas—islands—is rather disturbing. We need balanced communities, with housing of all tenures for different kinds of people. The Minister and I have exchanged views about development in the ward that I represent, which has a mix of new housing for sale and some for rent. That retains the notion of a mixed community. I fear that significant developments of, almost exclusively, starter homes will militate against that kind of community.
Amendment 48 would allow councils not to provide starter homes if it would prevent other types of affordable housing being built on particular sites. Newcastle, and, I suspect, other authorities, has a policy of providing 15% of houses in new developments for affordable rent.
Amendment 49 requires the Secretary of State’s restriction of planning permission for residential developments of a specified description to those where the starter homes requirement is met, to be subject to a full assessment of the need for starter homes in that area. We should start from what is actually required before overruling local aspirations and imposing starter homes exclusively. In passing, the continued displacement of local decision-making by regulation and central government fiat is extraordinary, especially when one recalls Conservative opposition to regional housing strategy.
Amendment 50D allows regulations to permit exemption from starter homes provision in build-for-rent schemes, in the important areas of supported housing, schemes with homeless hostels, refugee accommodation and specialist housing. These, I submit, are perfectly reasonable suggestions.
The noble Lord, Lord Young, referred to institutional investors as newcomers to the market, and I welcome their involvement in the private rented sector. However, one is left wondering what the future is for council housing, in the first place, and perhaps also other forms of social housing. There seems to be a view in government that council housing is to be ultimately wound down completely. The market will be left essentially to the private sector, possibly with housing associations—although I fear for their future, too, because I suspect that the voluntary nature of right to buy will be replaced over time by compulsion. We will then be left with an essentially private sector-dominated rented sector.
We need a mixed economy of housing provision. We need good local authority housing, good social housing, good private rented housing and as much affordable owner-occupied housing as can be provided. We are moving away from that mixed economy, and I very much hope that your Lordships’ House will encourage the Government to get back on track.