My Lords, before I respond to the amendments, I will make, as I did last week, some introductory remarks which will set today’s discussion in context and, I hope, reassure noble Lords about our proposed approach to this important issue.
For many years there has been underinvestment in housing, as my noble friend Lord Carrington and many other noble Lords have said. Recognising that the supply of housing needs to increase, as the noble Baroness, Lady Hollis, said, the Government have set a target of a million new homes by 2020-21 and are determined to do all that they can to boost housing supply. That is a key government priority. There are also many people living in housing association properties who do not have the opportunity to realise their dream of getting on to the property ladder because they do not have the right to buy. That is another key government priority. The provisions we are discussing today will support the delivery of both those priorities. I will explain how.
We know from published statements of accounts that the market value of local authorities’ housing stock in April 2014 was more than £200 billion. By
requiring councils to sell their high-value housing as it falls vacant, we can realise that locked-up value to support the building of additional homes, increase housing supply and extend home ownership by funding the right-to-buy discount for housing association tenants.
Let me also be clear: this is a flagship manifesto commitment. I am not going to get into arguments today about manifesto fundamentalism. I shall leave that to other noble Lords. It took centre stage when the Prime Minister launched the manifesto because he and this Government believe passionately in the importance of building more homes, which this country needs, and helping more people achieve their dream of owning their own home.
I also want to update your Lordships’ House on the commitment I made at Second Reading when I said I would keep noble Lords informed as we made progress with the collection of data on the 1.6 million homes owned by local authorities. I understand the frustrations that have been expressed that we have not yet provided noble Lords with more details of the policy. I hope that noble Lords will understand the importance of ensuring that we have all the data and that they are correct before we make policy decisions that will inform how much individual authorities have to pay.
The majority of local authorities had provided data by the end of January 2016 but there were some outstanding issues, such as a lack of vacancy information for some areas. We have now obtained almost all the data required, and we are processing and validating them. I hope that noble Lords will understand that doing this for more than 16 million pieces of data takes time.
That is why this legislation has been designed as a clear framework for the policy, to enable us to take into account the housing that is owned by local authorities, in line with the manifesto commitment and without restrictions that are inappropriate or unnecessary. We have also been conducting an intensive engagement exercise with local authorities to understand their views about the policy, and we will reflect on those as we develop the regulations. I reiterate my commitment to your Lordships’ House that I will bring forward the detail that noble Lords want as soon as we can.
I close my introductory remarks by thanking noble Lords for their scrutiny of the Bill and by emphasising what I said on Tuesday—that this will help shape the development of this policy. I also assure noble Lords that the Government will take into account all the points that have been raised as they take forward the legislation.
I now turn to the amendments, for which I thank the noble Lords, Lord Kennedy, Lord Beecham and Lord Kerslake, and the noble Baroness, Lady Bakewell. Parts of Amendments 61 and 62A relate to components in the calculation of payments. Clause 67 already allows for costs and deductions to be set out in the determination. These will be detailed in the determination, on which we will consult local authorities, their representatives and their relevant professional bodies. I assure noble Lords that in calculating the payment, we are committed to making a deduction in respect of the transaction costs for local authorities to sell housing,
and in respect of the debt supported by those properties that are taken into account in a determination. We will continue to work closely with local authorities to establish how these figures should be calculated.
Parts of Amendments 61, 62 and 62A seek to deduct the cost of replacing properties from the payments required. Clause 72—and this may go some way to addressing the point made by the noble Baroness, Lady Hollis—already provides for the Secretary of State to enter into an agreement with a local authority to retain a portion of its receipts to fund new homes. The amendments would merely make deductions from payments and would not be able to require the delivery of the additional homes that the country needs in the same way that the agreements will. The amendments would simply allow local authorities to retain the funding. So the agreement process will ensure that local authorities will deliver the houses and will achieve value for money in doing so.
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The agreement process will also give local authorities a lot more freedom to build the houses that meet their communities’ needs—this has been mentioned several times today—rather than placing expectations for the new homes in the Bill. Local authorities will be able to decide on the tenure of the homes and where to build them. If, for example, an authority wanted to work with a neighbouring authority to build homes across borders, the agreement process would allow for that. I can think of an example somewhere near me where that might happen.
Amendment 62 seeks to use the definition of affordable homes from the National Planning Policy Framework up until May 2015. This would not be consistent with the definition of affordable housing in Clause 72 and elsewhere in the Bill.
Amendment 66A seeks to require another statutory instrument under this chapter. However, we think that the determination is the correct place for any formula used to be set out. The key variables that feed into the formula, including the definition of “high value”—of which more later—the definition of “vacancy” and any exclusions, are either set out in the Bill or will be set out in secondary legislation made under the Bill. This means that there will be parliamentary scrutiny of these key definitions.
In addition, the legislation sets out the overarching way that payments will be calculated. It must represent an estimate of the market value of the authority’s interest in any high-value housing that is likely to become vacant during the year, less costs and deductions that would also be set out in the determination, including transaction costs and the debt supported by the housing that is expected to be sold. Moreover, Clause 69(2) requires us to consult with local housing authorities, the LGA and relevant professional bodies before making a determination under Clause 67. Local housing authorities will therefore have an opportunity to comment on the proposed approach to the formula before the determination is made. The amendment appears to create an unnecessary hurdle that could delay the opportunity both for housing association tenants to
buy their homes and for councils and housing associations to build the additional homes that the country so desperately needs.
Turning to specific questions that noble Lords have asked, the noble Lord, Lord Shipley, the noble Baroness, Lady Bakewell, and the noble Earl, Lord Lytton, all expressed concern in different ways about how the number of bedrooms might be used to define high value and how it will impact on the disposal of larger family homes. The noble Lord, Lord Shipley, and I have had discussions on this on previous occasions, but I am pleased to place some of those on the record, and to reassure him and the noble Baroness, Lady Bakewell.
As part of the data-collection exercise, we have asked local authorities to tell us not only the market value of each house but the number of bedrooms. We are intending that the formula for high value will estimate the number of homes of one, two, three and four bedrooms that fall above the threshold. Specifically, we will set out the different monetary thresholds for what constitutes high value for homes of different bedroom numbers. For example, the threshold that applies to a one-bedroom property will be completely different from that which applies to four-bedroom homes. The result of this is that in general the threshold for larger properties will be set higher than if we had set one threshold that would apply to all properties regardless of the number of bedrooms. It also means that we are not just looking at vacant larger homes, which would by their very nature be the most expensive, but are determining high value separately from the number of bedrooms.