My Lords, I am very pleased that I chose to give way to the right reverend prelate the Bishop of Leeds, because he has done a superb job in introducing the amendment in my name, and I thank him very much for that. Perhaps I can just step back and look at the group that we are debating as a whole. There are five different approaches from the different amendments, which are all tackling the same problem. They approach it in different ways, but they are all aiming at a common destination. I will say to the Minister that it would be a mistake for her to simply play off the five different amendments and assume that there is no consensus and that this can simply be dismissed. They are all aimed at correcting the same fundamental policy mistake, which is to assume that the current formulation of the words “affordable homes” actually means affordable homes. It does not. It does not mean that, either in the private rented sector or the private ownership sector.
The highly desirable provision of affordable homes is supposed to be delivered through the planning obligations placed on developers when planning permission is granted. The calculation of that affordability is currently based on 80% of the market sale price of that property on that site or, alternatively, 80% of the market rent which is applicable in that general locality.
Now the reality is that in many parts of England, especially but not only in London, taking 20% off either the market price or the rental price, while it does make it cheaper, does not make it affordable to those in the most local housing need.
My noble friend Lord Foster provided me with a typical case that illustrates this rather dramatically. It relates to Southwold in east Suffolk, where there are significant housing problems—for instance, last month, 31 homeless families applied to occupy one vacant rental property. So, there is absolutely no shortage of demand; it is a rural area 100 miles away from London. There is a terrible shortage of supply, despite the availability of so-called “affordable homes” achieved as a result of a planning agreement. One such so-called affordable shared ownership property in Southwold has been on the market for two years, during which time there have been no eligible local people able to afford to take it on. Local incomes are simply not high enough. That unaffordable home is on a redeveloped former hospital site where more than £1 million of public money has been contributed to “prioritise housing for local people”. Now, because there has been no eligible buyer, that home is going on the open market. That is a tragic lost opportunity to provide a home to meet local need; and, of course, it is a pitiful waste of public money.
In most London boroughs, affordable homes are not in reach unless you have two professional incomes at the household’s disposal. If Ministers doubt that, I suggest that they might like to ask the civil servants sitting in the Box behind them about their housing circumstances. Young professionals in London are squeezed out of the purchasing market and in grave difficulty even in the renting market. Those two London professionals who put their incomes together will perhaps be able to buy a house at a discounted price. That is good, but it is not a solution to London’s housing crisis. In Southwold and many other areas of the country, neither professional employment nor the bank of mum and dad can bridge the gap between real life and the policy intentions of “affordable homes”.
The five amendments in this group on this topic all start from the premise that affordability has real meaning only if it is based on income levels and not on the market or capital value of the home. Amendment 242 in my name and that of my noble friend Lady Thornhill was the first to appear on the Order Paper, but I concede that it is not necessarily the best option for the Minister, because it sets out a simple way of calculating affordability and might perhaps be best described as a statutory instrument rather than an approach to go in a Bill. But what we have is a formula that is based on existing databases for homes for sale, rent and shared ownership. That calculation is focused on local housing allowance figures for renters and for purchasers of median household income. We do not need a royal commission to consider these matters, nor indeed does the ONS need to devise a new way of measuring things. Everything is there, so the Minister could just get on with it.
I very much welcome the support of the right reverend Prelate the Bishop of Chelmsford, with whom I had discussions beforehand, and now of the right reverend Prelate the Bishop of Leeds, for my
Amendment 242, but I recognise that such a specific amendment might in itself be controversial. Therefore, my noble friend Lady Pinnock and I also tabled Amendment 242ZA, which puts the same proposition in the court of the Minister or the Secretary of State to write the regulations rather than us doing it for him. I do not need to spend too much time advocating for either of these or commenting on the other options in the group. All are aimed at a complete reset of the affordability policy as it stands in the NPPF, so that homes set aside under that policy in future are affordable for those in housing need.
However, I need to spend a short time underlining that there are at least two parallel affordability bottlenecks. The first, which my Southwold example highlights, is the bottleneck—almost the deceit—caused by the assumption that a home sold at 80% of its market price is likely to be affordable to those in most housing need. It is true that such homes bring a new slice of first-time buyers into the market, but in many places they will be people with substantial incomes, a long way above those referred to by the right reverend Prelate and so eloquently by the noble Baroness, Lady Taylor of Stevenage.
Providing them through the planning system as affordable homes misleadingly implies—sometimes it is explicitly said—that it is a significant move towards tackling and reducing housing need for those in most hardship. That is simply not true. The recalibration we seek in my two amendments is to put that right and bring all such homes within reach of any household at or above the median income for that area. My noble friend Lord Foster tells me that, in Southwold, the affordability ratio is currently 17:1. That is outrageous. What happens to the affordability ratio if you take 20% off the price? It becomes 13:1. That does not make it affordable. Affordability defined like that is simply a poor joke.
The second bottleneck is the provision of an affordable home for households whose income is below the median and for whom a house purchase is completely out of sight. Such a household will by default be in the formal or, increasingly, the informal rented sector, as the noble Baroness, Lady Taylor, powerfully illustrated. There is sloppy talk about affordable homes being provided for rent within schemes of development which are far removed from the reality of people’s lives and their ability to pay. As a side note, half of the council homes sold are now back in the private rented sector—it is officially known that half of all the sold social homes have been transferred to the private rented sector, where the average rent is approximately double what it would be. You have terraces with a mixture of former council homes and those that remain social homes where the rent paid can be different by a factor of two, depending on whether it is a sold home or not.
My two amendments offer a solution by setting out clearly what is to be regarded as affordable rent when evaluating developments that purport to provide such accommodation. If adopted, the claims by some developers about their provision of “affordable” units would be weeded out and more genuinely affordable homes for rent would enter the market. For the third
category of shared ownership, we recognise that a hybrid calculation of affordability will be required, and we have outlined how it might be done.
However, this is not about the minutiae of particular schemes; it is about recognising and then doing something about turning the hollow words of affordability calculated on house prices into a meaningful policy based on households’ ability to pay. If Ministers accept that basic principle and reshape the existing schemes to make affordable homes affordable, based on income, I am sure that all noble Lords with amendments down would be only too ready to work with them to get the small print right and dot the “i”s and cross the “t”s. Pending that important step, I will keep my Amendment 242.
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