My Lords, I have sat on my hands for a considerable while since we started in Committee this morning. I speak to an intriguing amendment, Amendment 41A. Before doing that, I will try to peel back some of the skins of the increasingly complex onion that we appear to be dealing with.
The first thing to realise is that the housing market is potentially a very volatile animal, and has an enormous number of different subset markets—as we have heard, different parts of the country operate in very different situations. I know that your Lordships’ Select Committee on National Policy for the Built Environment heard evidence that, in certain parts of the country—not the north-east or the north-west— the market simply has not returned to anywhere near pre-peak levels of value. However, I leave that to one side.
Earlier, the Minister cited a gap in the market. I question which market we are referring to. Apart from believing that the gap is vanishingly small—we have heard some reasons why other products would effectively fill it anyway; and apart from the means being adopted to plug it in the Bill being vanishingly transient; and, furthermore that the limited category of people whom this type of starter home would actually benefit is, to my way of thinking, irrelevantly small in the overall scale of things, I have to wonder where we are trying to get to.
We need to be clear about whether society will provide lasting sectoral benefit to that proportion of the population that any social society is bound to try to assist. In that, I include people who may have been property owners at some stage, have fallen on hard times and, for whatever reason, have to depend on the state. When you are dealing with free markets, that sort of thing happens. There will always be a proportion of people—I do not pass judgment on how significant or insignificant—who cannot afford to buy and almost certainly cannot afford to pay a market rent. Are we going to assist those people, or to provide an increasing focus on a windfall gain for the few, without reference to the needs or actual means of the few who will benefit? I question what we are doing here.
In introducing Amendment 41A, the noble Lord, Lord Best, identified that the discount and loan assistance taken together is a huge transfer of asset. It is much bigger than the headline 20% figure that we are led to believe applies under starter homes. As the noble Lord, Lord Young, observed on Tuesday, developers are keen on this. Yes, indeed— they would be. Who would not be as an alternative to the affordable housing regime under Section 106, with the uncertain outcomes and unpredictability that that involves? I am not in the least surprised about that. Purchasers of starter homes would also be keen. Who would not be, offered a windfall gain for the asking? I wonder whether we should be devoting quite so much time and effort to this ephemeral social benefit.
When dealing with the question of housing and the impecunious, I am reminded of a gentleman who once said to me, in connection with council house sales, “If I had that sort of cash, I would put it to a better use than buying this place”. I hope that we do not build the sort of place that he was referring to, but I wonder whether, in circumstances of strapped resources in the public domain, we should be funding the ephemeral and assisting those who have access to a deposit that enables them to gain this discount in the first place. There is certainly no gain to the social budget on the sale of a starter home. The mortgage gets paid off, presumably, and the balance of it goes off down the road with someone to their next home. Or, if they have succeeded in being parted from their money, it goes to someone else—some financier who may have come in on the back of this scheme. It was mentioned earlier today that there is absolutely no end to the ingenuity of financiers of all sorts, regular and irregular, who would jump on this bandwagon and might usefully talk people round into doing business with them on the basis that they would share in some of the largesse being provided by society at large.
I believe that doing more here includes retaining a significant element of social benefit of some sort, and it is a matter for debate how much that should be, for society at large—unless of course you believe that the market will do everything, which of course it will not and cannot. History shows us that it does not.
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I turn to the point made by the noble Lord, Lord Horam, who questioned the means of assessing the value of some of these discounted and other types of what might be called interim ownership of one sort or another. My profession is full of guidance on this. There are many mechanisms for dealing with various social assets of one sort or another. Whether it be an opportunity cost or a replacement value, there are mechanisms for getting at it. They may not be perfect and they may not be precisely what you would look at in terms of market value, but they are not insignificant ways of dealing with assets, whether they be on a balance sheet or the assets of private individuals. That is something we need to consider.
The noble Lord, Lord Shipley, referred to the fact that a number of people cannot participate in the purchase of a property. I made the point earlier that there will always be that sector, so I very much agree with that sentiment. But fundamentally, the need to
build more houses altogether and to have a suite of tenures is what we must concentrate on. But there are dangers in that too. If it is inferred, as I rather suspected the Minister did earlier, that while building a lot more houses under the Government’s policies would serve over time to ameliorate the huge year-on-year increases in house prices in some areas, which they might or might not, building houses is not the only factor. It is also about jobs, communications, infrastructure and removing the blocks both locational and structural. Much of that has to be provided by public sources such as local authorities and government departments. That is one of the reasons why we should not allow all of the social benefit to just disappear into some sort of market transaction. There is a proper function in devoting this through public means where, in particular, market influences fail.
There are, as I have observed elsewhere, including with one of my children, few votes in the amelioration of house price increase. I ask your Lordships to think about this. Who would vote for a static or slow-growing house price market? Certainly not the Treasury or mortgage lenders, business lenders and insurance companies; absolutely not existing homeowners—oh no—and not property marketers and pension funds either. Developers and housebuilders would say no. They along with landowners like consistently rising values. Be careful what you wish for in balancing out supply and demand to get a form of equilibrium. If we ever did reach that situation, I question what kind of economic world we would be looking at and what would happen when one of the most significant economic drivers in our country actually started to falter. There is a very fine line between a market that is moving forward rapidly and apparently successfully and one that suddenly grinds to a halt. We have seen that in other sectors as well as in the housing sector in the past.
There is a lot of overconcentration on starter homes, which gives the appearance, if it does not reflect the reality, that we are abandoning other things. The Minister has tried to make out that there is no such abandonment; why, then, the particular obligation on local authorities to foster starter homes? Is that not skewing the balance? If we proceed as the Government suggest I can see a starter home market forming its own little market sector bubble in which the purchaser may well find that the benefits—the cream to which the noble Lord, Lord Best, referred—may have actually evaporated when it comes to reality.
The market is so complex and full of price differentials—in terms of finish, the style of house, whether there are white goods or none, or carpets or none, and so on—that the only bit of the Amendment 41A where I think that the noble Lord, Lord Horam, has a point is that as we get down to the smaller percentage equity that remains, as it is written off, we get to the point, at about 10% or a bit less, where we cannot distinguish it from any other factor in the marketplace. In other words, it becomes impossible to value that sort of consideration among a basket of maybe 50 different price-sensitive elements that make up a house price.
I am superficially attracted to Amendment 41A. I am very attracted to the idea of retaining a significant element of social benefit in the public sector, because I
think the public sector needs it. There is a very good economic reason. It is not a sort of exit strategy; I have no remit to say, “Public sector good, private sector bad”—I do not take sides on that—but I can see, as vice-president of the LGA, as a former president of the National Association of Local Councils, and as a practising chartered surveyor, that this is something where the role of the state and the role of local government, as part of the community, is a very strong element in favour of strengthening and bolstering that and having a better focus. It is not going to do it if there is a progressive siphoning away of what is, in fact, the chief milch cow behind this, which is the housing market.
At the moment, the housing market finances many things. It is, as I have said, a main driver of our economy, and we will not get affordability unless we have good and consistent market-level sales at significant profit. So I think that there are real issues that the Minister needs to consider carefully, with her colleagues, how we square this particular circle, because we have gone into a lot of detail here and I think we are losing sight of the bigger picture.