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Mr. Rooker : The otherwise silent hon. Member for Dover (Mr. Shaw) will vote for anything that is put on his plate, not for reality. The Secretary of State announced a formula for capital value rents tied to the value at which houses and flats can be sold in the market. No matter how it is described, rent--as the Secretary of State freely admitted, and as I would be the first to admit--is money down the drain. Rates or poll tax, however the Government care to describe it, form a community kitty to pay for local services. Nobody denies that, but we are opposed to the way in which it is collected. We have to have local taxation. It cannot be abolished, because it has to provide for our community.
We cannot all have a swimming pool in our back garden, our own fire brigade and a library in our house. We have to pay for them from the community. I will argue until the cows come home-- [Interruption.] If you, Mr. Deputy Speaker, are prepared to accept a debate on the amendment and alternatives to the poll tax, I will stay all night and all day tomorrow to continue that debate. However, I will not go halfway and then be pulled up by you, Mr. Deputy Speaker, and be unable to complete the rest of my arguments. I want to debate what the Secretary of State has brought to the House tonight : capital value rents.
As I was about to say before the Secretary of State interrupted me again, it is not as though this hike in the rent and the extra money that we will get from it will be used for a certain purpose. We all know what will happen : the money will be creamed off the housing revenue account to subsidise the poll tax. That is the reality. Rents will be tied to capital value. That is an interesting proposition from the Government because they have always said that they do not want market rents to be fixed by the market of supply and demand and the link between the scarcity of properties and rental values. However, they have found another way of doing the same thing, and the end result of the formula is exactly the same.
It would be interesting if the Government were to do the same for private rents and landlords and, as they moved towards ending the control on private rents, proposed that rents in the private sector should be tied to the capital and market value, at vacant property values. That is what the Secretary of State was talking about, not tenanted values.
Later, I suspect that we shall argue about how the averages are worked out, particularly for local authorities which sell an excess of houses with front and back gardens but in which the majority of properties are tower block flats or deck access flats. That may well be the case in London, in the Lambeth and Vauxhall authority. It is wrong for authorities to fix the rent by applying the average value of the properties they sell to those which they cannot sell, but which people could, if they wished, buy under the right-to-buy scheme.
I understand it when the Secretary of State says that neither he nor the Government will fix the rent. I tell my constituents that and explain that, by manipulating the money that they have taken from local authorities, the Government fix the rent. They use the local authority as their proxy to fix the rent. The Government, not the local authority, will bring in a rental system which is based on the capital value of the property. The House and the Labour party have not asked for that.
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My hon. Friend the Member for Norwood (Mr. Fraser) was right to remind us of the housing tenure mix in the Vauxhall constituency. The long-term consequence of the Secretary of State's statement will be that council house, flat and maisonette rents in Vauxhall will be £45 a week at today's values, and a lot higher in the future. If we also face the prospect of the ring fencing of the housing revenue accounts in respect of rent rebates, that will be appalling. In three or four years, nobody in his right mind will be paying £45 a week rent plus the extra to subsidise the rent rebates for everyone else. They will not do that but will instead buy the deck access and tower block flats. That is what the Government's policy is designed to do. The Secretary of State deserves our congratulations on having the courage to say, "This is important to the Government. We have a fantastic new rent system I am determined to rush down to the House of Commons on Wednesday 14 June. I don't care what is happening on Thursday 15 June because this is so important that the House of Commons should get it hot off the press. My message is that capital value rents in Vauxhall will hit £45 a week, at 1989 values, at some time in the future".
Mr. Soley : My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) has got it exactly right and my hon. Friend the Member for Norwood (Mr. Fraser) hit the nail on the head : it is incredible.
I have made many allegations about the Ministers being confused about what they want as regards rents, but the Secretary of State is not at all confused. He knows exactly what he wants. I am astounded at his audacity. He emphasised that he did not want market rents, but then described a system which, over a period, would lead to market rents. The system is based on market rent assumptions.
The Secretary of State said that his policy would achieve three goals. First, it would encourage rents increasingly to reflect the pattern of house prices around the country, thus, to some extent, reflecting supply and demand. The important part of that statement was the first part because, as I said earlier, market rents are largely determined by house prices. Therefore, if a system is devised which will, as my hon. Friend the Member for Perry Barr said, have a capital value rent system, inevitably, over a period, prices will move towards those which properties would fetch in the market. That is the other side of the coin that I use as a rule of thumb guide to what a market rent would be--which is the money one would receive if one sold a house, invested the money and drew the interest on it. That is why the private sector continues to decline.
We all know that it pays to buy and sell houses in this country, but it does not pay to rent them. That has nothing to do with the Rent Acts, which are only marginal, but everything to do with the way we subsidise finance for purchasing houses. The Minister has created a system which links that to market values over a period. My hon. Friend the Member for Norwood, who is astute and quick in such matters, has picked up the figure. My hon. Friend the Member for Perry Barr was exactly right when he said we should thank the Secretary of State for coming here today and telling the electorate that anyone who is in council property can expect to have his rents moving towards market rents over the next few years, because that is what will happen.
Column 971Will capitalisation, such as repairs, be included in this system? If it is, the system will be even more incredible and will put up prices even further. My hon. Friend the Member for Perry Barr is right. A great attempt has been made to push people out of the council sector into home ownership or the property of other landlords. However, the reason that the system will not push people into home ownership is that people with the right to buy are increasingly those who cannot exercise it because they cannot afford to do so.
People are trapped in paying rents when, with a little more money, they would be able to buy, but because they cannot afford to pay their rents, even with the assistance of housing benefit, they will not be able to buy. Therefore, their only option is to transfer to another landlord. There is a problem with that as well, because the Secretary of State is also pushing up housing association rents by cutting grant. Some of the examples that I have given recently show how housing association rents have risen and are continuing to rise. If tenants made the worst choice of all and went to a private landlord, their rents would rise even more rapidly--for we know that private rents rise more rapidly than others. Whatever they do, they are trapped : they will be financially clobbered.
Sooner or later--this has not yet been said today, but the whole tragic situation focuses on it--the Government must take a view on what is an affordable rent. Many people in the housing movement are saying that it should be a maximum of 20 per cent. of net disposable income. That is a common-sense guideline, for we know that those on average or even above- average incomes who spend more than 20 per cent. of their net disposable incomes on housing will get into serious economic difficulties sooner or later--usually sooner. They will find themselves in debt ; they will be unable to pay gas or electricity bills.
Under the present Government, more and more people are spending up to 40 per cent. of their net disposable incomes on rent--and, in some cases, mortgages, although I should like to concentrate on rent. As far as I am aware, that has not been the case under any previous Government, Tory or Labour. Those people cannot survive : the facts are as bald as that.
The Government must understand that the crisis is becoming desperate. People are in trouble, whether they are renting or buying. They are trapped at both ends : because of the interest rate policy they cannot buy, or, if they bought recently, they are in trouble because of the dramatic increase in their mortgage rates. If they try to rent, they find that rents are being driven up in the housing association, private and council sectors. This is an extraordinary proposal for the Government to advance now.
Mr. John McAllion (Dundee, East) : I am concerned to hear of the massive rent increases that the Tories are imposing on people living in Vauxhall and elsewhere in London. Does my hon. Friend believe that the same will apply in Glasgow--particularly in Glasgow, Central, where voters are also going to the polls?
Column 972European elections. People need to understand that, almost uniquely among western European countries, we are reducing the housing subsidy as a proportion of gross domestic product. Most other countries are increasing it. My hon. Friend the Member for Perry Barr put the electoral message very clearly.
Having spoken twice, I do not wish to delay the House. We cannot vote on the proposal ; it is something that the Government intend to do. Let me say this, however : the Minister talks of amending clause 71, and he will probably need to, even with the wide-ranging power that he has given himself with a variety of local government Bills. I assume that that will be done in the House of Lords ; but, either there or when the Bill returns to the Commons, we shall want to return to the issue again and again, because the message to those who are renting is desperately serious.
What I announced today was a new mechanism for local authority rents, in place of an existing mechanism which has been used by the Government for the past 10 years and which is proving more and more defective. As a result --as I have already pointed out--we have not increased council house rents, on average, by more than about the level of the increase in earnings over that period. Nothing that I have said today suggests that we will increase them by more than that, or by less, or by any particular amount. All that I have announced is a mechanism : that is my first point.
Mr. Fraser rose--
Mr. Ridley : I am coming to the hon. Gentleman's point. He got it completely wrong on two counts. First, he assumed that this was not a mechanism, but a major rent increase, and that rents in Lambeth would in due course rise to £45 a week. He has no right to make such an assumption. When, each year, the annual subsidy is determined, he can come back and say whether he thinks that we have done too much or too little--as he could have done in each of the past 10 years. Secondly, the hon. Gentleman missed the point that I made earlier--that the adjustments will be from where council rents now lie on the scale to where they would lie under the formula. He assumes that the present base is correct, although I went to some lengths to tell him that I did not consider it fair, equitable or even. If we were to name a percentage of right-to-buy values over a number of years, it might be 50, 40 or 30 per cent. ; it might be any percentage. That is not what we are talking about--we are talking about a mechanism--but some authorities are closer to that "x per cent." now than others, and it is right to take into account that inequality within the base.
Mr. Fraser : Surely the Secretary of State understands that-- although there will be a revision of base levels--because the average price of a house in Lambeth for a first-time buyer is about £80,000, the base level will if anything go up as a result of market conditions. As for rents, in a borough such as Lambeth they are barely enough to pay maintenance and management charges. Ring-fencing the housing revenue account will inevitably lead to rents being driven up. In future there will be no other source from which to obtain the cost. It cannot be obtained from rate funds.
Mr. Ridley : The hon. Gentleman is entirely wrong. Clearly he has not followed the debates on the new housing subsidy in which we have engaged all afternoon as well as in Committee. The housing subsidy is there to fill that very gap.
I must say that I expect trouble in Lambeth, because the efficiency of its maintenance and management does not give a great deal of satisfaction : I could talk about that at some length. It is, however, within Lambeth's ability to put the matter right, and to adjust that slightly higher rent. In answer to the hon. Member for Truro (Mr. Taylor), who asked what was a reasonable increase, the figure will be determined every year just as it always has been, just as a Labour Government have had to do it before and just as his party would have to do it if it came to office.
I concede--if "concede" is the right word--that the proposals that I have announced bear some relation to right-to-buy values. As hon. Members have rightly pointed out, the best houses tend to be sold under the right to buy, and the inequality that the hon. Member for Norwood (Mr. Fraser) tried to find is present in all authorities, so it will probably work itself out. We feel that the right to buy is a reasonable yardstick, but we are happy to discuss possible modifications with local authorities. We propose only a proportional relationship.
I marvel at the hypocrisy of Opposition Members who are trying to create fuss and indignation just because there are a couple of by-elections tomorrow. They themselves have been going around the country trying to conceal the fact that their system of local taxation is based on capital value rates, not just related to them or a proportion of them. That applies to full capital value rates in Lambeth, Norwood and every other constituency that they have been bleating on about. The hon. Member for Walsall, North (Mr. Winnick) advocates capital value rates for council tenants in Walsall and then he comes here and bleats. He ought to be ashamed of himself for his rank hypocrisy.
The hon. Member for Newham, North-West (Mr. Banks) is the worst of the lot. The Government have been pressed to make a statement about their rent policy. I made a statement. I told the hon. Member for Hammersmith (Mr. Soley) that I intended to do so. What did the hon. Member for Newham, North -West do? He accused me of a conspiracy. I never realised that to say something on the Floor of the House could form part of a conspiracy. The hon. Gentleman is determined to misinterpret. However, I shall tell his constituents that he bases their contribution to local authority services on capital values, whereas we shall only take them into account in determining fair rents.
(4) In making a determination under paragraph (3) above, the Secretary of State shall determine a standard rate of residual debt subsidy applicable to all disposals falling under paragraph (1) above.'.
(5) Where a disposal to which this section applies is made under sections 74 or 104 of the Housing Act 1988 or section 32 or 43 and section 106a and Schedule 3A of the Housing Act 1985, and where the terms of such a disposal include a disposal cost or other payment by the local authority, the Secretary of State shall, in respect of each year to which the cost or payment relates, issue a Supplementary Credit Approval under section 46 above equal to not less than 75 per cent. of the cost or payment in that year.'.
Mr. O'Brien : We have been considering tenant extortion. Now we are considering dowries to people who take over council house estates. Amendment No. 189 continues the debate on dowries. A dowry is a capital payment from a local authority to another landlord when council houses are transferred to a housing action trust, or are dealt with under the change of landlord provisions in the Housing Act 1988, or are the subject of large -scale voluntary transfer. Payment would arise when the transfer took place at negative value. Where such a dowry is payable, the amendment provides that the capital cost should not come from a council's housing investment programme allocation or basic credit approval. The Government would have to issue a supplementary credit approval to a value of not less than 75 per cent. of the dowry.
The Government have been vacillating on the issue for nearly a year. We want to know when a decision is to be taken. The Government are in a terrible mess. The only formal application for a tenant's choice transfer is in Westminster--a Tory-controlled authority. It seems that that Tory council will have to pay the tenants £30 million, which it does not have. It has embarrassed the Government. In Committee, we were given a completely unsatisfactory answer by the Under-Secretary of State for the Environment, the hon. Member for Surrey, South-West (Mrs. Bottomley). She said that supplementary credit approvals would be issued in the case of housing action trusts but that a decision had not yet been reached on tenant's choice transfers. She said nothing at all about voluntary transfers. That substantiates my claim that the Government are in difficulties with Westminster city council about the subsidies that will have to be paid under the dowry allocation.
Amendment No. 188 would amend clause 73, which provides for residual debt subsidy to be paid to local authorities for the costs relating to the disposal of houses and other properties. A consultation paper was issued by the Department of the Environment and the Welsh Office in January 1989. It proposes that the rate of residual debt subsidy will vary according to the type of proposal. The consultation paper refers to
"Tenants' Choice and Right to Buy -- 75 per cent.
Voluntary Transfers to Other Landlords -- 90 per cent.
Housing Action Trusts -- 100 per cent."
No clear or logical reason was given by the Under-Secretary of State for the Environment in Committee as to why the rate for tenant's choice disposals should be less than for voluntary transfers, or disposals to housing action trusts.
What is the relevance of the different arrangements? Does the Minister not agree that in disposals to a housing action trust and in disposals under tenant's choice a local
Column 975authority is being forced by the Government to dispose of part of its stock? What possible argument is there for the rates of subsidy to be different?
The Government seem to have accepted the principle that forced disposals should attract a higher rate of subsidy. I refer to the Under-Secretary of State's comments about the Secretary of State's initiative on housing action trusts. Why, therefore, do voluntary transfers attract a higher rate of subsidy--90 per cent. in this case--when another type of forced disposal, tenant's choice, attracts only 75 per cent? In what way are the problems and uncertainties in Wales different from the problems and uncertainties in England? Does the Minister not accept that the cost of a disposal is exactly that, whether it occurs in Wales or in England? What is the outcome of the further considerations?
I ask the Minister to explain why different subsidies are being paid. Would it not be fairer and more just to apply the same subsidy to all houses disposed of?
Mr. Fraser : I am grateful to my hon. Friend the Member for Normanton (Mr. O'Brien) for reminding the House that if houses are transferred under the housing action scheme, the residual debt subsidy will be 100 per cent. under what he described as the dowry--and, I hope, 100 per cent. of the debt, apart from the dowry, under the original loan charges. The Minister knows how important that is in my constituency. Under the housing action trust scheme, the Government propose to do more than was done in the 18th century when the Highlands were cleared--they intend to take out of local authority stock 2,144 homes in two housing action areas.
When I asked the Under-Secretary of State about this, I was told that the maximum cost of the two housing action schemes would be £132 million. That gives some idea of the scale of the meanness of the housing investment programme. Lambeth's housing investment programme amounts to about £20 million per year. That has to cover the massive housing needs of the homeless and those on the waiting list and the improvement of about 48,000 homes. The Minister's own expert's assessment of the cost of improving two estates alone was £132 million. What that expert believes ought to be spent on two estates is about six times more than the annual allocation for the whole of Lambeth's housing requirements.
The cost of essential improvements to a house or flat in a housing action trust area is about £60,000. The maximum that could be obtained under the right-to-buy arrangements would, because of the discount, be about £30,000, but it would probably be much less than that. There would need to be a huge dowry of about £30,000 per house--about £60 million in total--if one took that as the measure of the dowry which would be paid if a housing action trust took over. There is another even more pessimistic way of looking at it. The rents of about £20 per week on that estate would support capital debt of about £10 million, taking a modest 10 per cent. interest rate. The amount to be spent on the estate is £132 million, so the amount needed to service that debt would be much higher. The dowry would be enormous--possibly about £100 million.
I am trying to give an idea of the scale of the dowries. They would be enormous if the housing action trust scheme went ahead. If a dowry adversely affected the
Column 976minimal housing investment programme in Lambeth, we could forget about doing anything about housing, despite the 20,000 people on the waiting lists and the 1,200 homeless families, about 500 of whom live in expensive bed-and-breakfast accommodation. I ask the Minister to confirm what my hon. Friend the Member for Normanton said by saying that the residual debt subsidy for housing action trust schemes in my constituency will be 100 per cent. I want the hon. Gentleman to give a solemn undertaking that there will be no further diminution in Lambeth's housing investment programme because of any dowry to be paid under the HAT scheme.
I apologise because in a sense this may be a highly theoretical debate as there is no way that my tenants will vote for these measures anyway.
Mr. Trippier : I listened carefully to the hon. Member for Norwood (Mr. Fraser) and I suspect that his last sentence devalued the currency of the rest of his speech. He must realise that his comments are in direct conflict with the statements of his hon. Friend the Member for Normanton (Mr. O'Brien). The hon. Member for Norwood is talking about forced disposals, but he and I know better than that. We know that one of the concessions which was given was that there should be two votes for housing action trust tenants. They can choose, first, whether they should have a housing action trust. They will have a second chance to vote with their feet to opt for various alternatives, for example, a tenants' co-operative, housing association, private landlord or return to local authority control. Let us have no more nonsense about forced disposal. It is equally mad to suggest that tenants' choice is a forced disposal. The choice is placed in the tenants' hands. That is not a forced disposal. The points raised by the hon. Member for Norwood were rather technical, and I shall deal with them briefly. Another concession that we made with regard to housing action trusts was to say that there would be no further financial penalty on a local authority if it wished to reacquire the houses that had temporarily been in the ownership of the HAT while they were improved. I stand by that statement, as does my right hon. Friend the Secretary of State. We are anxious to get that point across to tenants.
It is a matter for tenants because each tenant will have the opportunity to vote. The consultants are still talking to various tenants on the estates. Because the money about which we are talking is more than that which the local authority would receive in the form of the HIP allocation--which the hon. Member for Norwood said was an enormous sum--I should have thought that it was sensible for that money to be accepted. I have made it clear that, if they wish, many of those tenants can go back to the local authority and it would not be penalised financially. This is an opportunity of a lifetime, and I hope that tenants will be sensible about it.
This money is specifically allocated in a budget within the Department of the Environment for HATs. I have made it clear that if tenants do not want it, that sum of money will be available elsewhere, and I am glad to say that some interest has been sparked in other authorities, not all of which are Conservative-controlled. I do not want that to happen. The money should be targeted in the area that the hon. Member for Norwood represents. I think that deep down he believes that. He knows that that work
Column 977needs to be done. The local authority can certainly repurchase the properties, and I am delighted to have played a part in discussions on that matter. The hon. Gentleman should help us and make it clear to tenants that this is a good deal.
I turn to the points made by the hon. Member for Normanton. Recent developments in our policies for new capital and revenue regimes in local government mean that a residual debt subsidy is neither needed nor appropriate from 1 April 1990. From that date, loan charges will be taken 100 per cent. into the subsidy calculation. Sales receipts must be set aside partly for the reduction of debt. Any debt left after that will automatically be taken into account for subsidy. There is still, however, a case for residual debt subsidy to be paid in this financial year while the housing subsidy arrangements are, I admit, much less generous. We now propose to limit it to those authorities that are not eligible for main housing subsidy. We would limit it also to multiple sales only--the sales of individual properties normally cover the outstanding debt. RDS would therefore be available for tenants' choice and HATs and also for voluntary large-scale transfer. Our new proposals for RDS will not have any permanent effect on main housing subsidy.
I apologise to the hon. Member for Norwood, who asked me a specific question--whether the proposals will in any way affect the HIP allocation that is available for Lambeth. The answer is no. That is another undertaking that I can give him.
There have been persuasive arguments for 100 per cent. RDS. Taking those into account, we have concluded that, for 1989-90, a single rate of subsidy set at 100 per cent. of the loan charges on any residual outstanding debt would be more appropriate and would, moreover, fall into line with the rate of HRA subsidy payable under the new financial regime from April 1990. Suitable amendments reflecting this and the other changes will be made to the Bill in another place. In view of that, I maintain that amendment No. 188 is not necessary and therefore should be withdrawn.
Amendment No. 189 proposes that supplementary credit approvals under the new capital finance system should be issued to cover 75 per cent. of any disposal costs or other payments made in transfers of local authority stock to a HAT, or under the tenants' choice procedures or in respect of voluntary disposal of stock. I am sorry that I cannot give the hon. Member for Normanton all the comfort that he seeks. We are considering how best to deal with problems in funding the disposal costs that may arise because of transfer of local authority stock to the various recipients which I have recently catalogued. We issued a consultation paper earlier this week, so it is obviously premature for me to say more before further comments are received.
In the case of a voluntary transfer, the local authority has full control over the timing of a disposal and can arrange the timing to suit its financial position. Indeed, it is for the local authority to decide whether the disposal takes place at all. As the local authority is in control of timing, there should normally be no reason for it to incur a disposal cost that it had not expected the year before.
In those circumstances, I hope that the hon. Member for Normanton will see fit to withdraw his amendment.
We are witnessing legislation on the hoof. We have heard about a change in legislation which has never before been presented to the House. What is behind that change in policy on this special issue of housing? The Minister has given an assurance that the HIP allocation will not be affected by residual debt subsidy. We shall carefully watch what happens.
I cannot accept that there would be no compulsory disposal. What the Secretary of State said earlier will, to a large degree, influence compulsory disposal. We shall carefully monitor what happens when we have had time to consider all that has been said by the Secretary of State and the Minister.
Because the Minister has assured us that suitable amendments will be introduced in another place, and because a consultative document is to be released, I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn.
Amendments made : No. 47, in page 78, line 16, leave out applying' and insert relating'.
No. 48, in page 78, line 17, at end insert--
(3) As soon as practicable after making a determination under this Part, the Secretary of State shall send a copy of the determination to the local housing authority or authorities to which it relates.'.-- [Mr. Trippier.]
(1) In the interests of maintaining stable communities and obtaining value for money in renewal areas designated under Part VII of this Act the Secretary of State shall within one year of the passing of this Act make regulations for the introduction of rebuilding grants.
(2) In Regulations made under the above subsection rebuilding grants will be available to owner occupiers where the local housing authority has made an assessment that it is uneconomic to offer improvement or repair grants.
(3) The Secretary of State after consulting local housing authorities and other appropriate bodies may make regulations as to the numbers of properties, age of properties, payments of rebuilding grant and recovery of such grants as may seem appropriate to meet the needs of the local communities and the Exchequer.'.-- [Mr. Rooker.] Brought up, and read the First time.
Mr. Rooker : I beg to move, That the clause be read a Second time. The new clause is a probing mechanism to test the water, and I shall not attempt to divide the House. No one could deny that some improvement grants have been wasted. Some properties are improved at quite drastic cost, but end up not being worth very much. Indeed, I could name properties in my constituency that have been improved again, again and again. After five years, the owner-occupier obtains the full benefit of any improvement should he wish to put his house on the market. In many ways that has a ratchet effect on house prices.
I am not knocking improvement grant schemes--far from it. They have provided improved housing for thousands of our fellow citizens. However, not all
Column 979improvement grants are economic. Some properties are identified as uneconomic or unsuitable for grant. The cost of improving those properties is so great that it is sometimes argued that instead the owner-occupiers should accept clearance. I shall leave on one side the problems of compulsory purchase orders, compensation and rehousing, and concentrate on the one certain consequence of clearance, which is the destruction of stable communities. Most hon. Members who represent older areas know that to be the case. Only yesterday my hon. Friend the Member for Leicester, South (Mr. Marshall) said that he wanted to speak on the new clause because of the problems in the Spinney Hill area of his constituency. We thought that we would be discussing this matter yesterday, and unfortunately my hon. Friend has to be in Leicester today.
The experts in these matters believe that there is scope for an alternative to traditional improvement grants or clearance compensation. It is important to make far better use of financial and human resources. The cost of the loss of stable communities is incalculable because people are distributed around the four corners of our cities. It affects the quality of life for all concerned. I take 100 per cent. responsibility for the inadequate drafting of the new clause, which I tabled only because of a telephone conversation about the problems. My aim is to emphasise the importance of making better use of financial resources, helping to maintain stable communities and obtaining value for money. Mechanisms other than clearance should be available for uneconomic properties. Since I tabled the new clause I have had the benefit of written briefings from the Birmingham environmental services department, the Nationwide Anglia building society and the Rochdale housing department. I wish to draw upon all three briefings as I feel that that would set out matters rather better than the phrasing of my new clause. The basic principle of a rebuilding grant is that it is given to owners of a block of unfit properties, calculated to leave them with the same absolute equity in new equivalent property as they enjoyed in their unfit property. I am referring to new property built on the existing site. I emphasise the phrase "same absolute equity". Any calculation would take account of the existing value, the new build value and the cost of development, together with any outstanding loans on the property. It would also take account of disturbance and temporary rehousing during the development period. The Minister has probably seen some detailed calculations based on three examples put together by the Nationwide Anglia building society which considered the financing of such an operation. I shall cite just one example provided by the Birmingham environmental services department. The figures are based on a property in a particular part of Birmingham, using a local estate agent's valuation. The current market value of the unfit property would be £35,000 ; its market value when improved would be £37,000 ; the cost of improvement would be £20,000 ; the market value of new build on the same site would be £60,000 ; and the cost of rebuild on a new site would be £30,000. Under the current policy Birmingham would have compulsorily to purchase the property at a cost of £37,000, which would count against its capital allocation. It would end up owning land worth about £3, 000--of which, if it were to sell the land under the proposed rules,
Column 980it could use only 25 per cent. for future capital spending. The person whose property was being purchased either would have to buy another property--probably a poorer quality house--or have housing supplied by the city.
The proposal is that the rebuilding grant would be based on the principle that the owner should retain the land throughout and own the same absolute equity in the new house as he did in the old--in this case £35,000. The council would arrange and pay for temporary rehousing and the demolition of the property. It would also arrange for private sector finance--in most cases a building society or a housing association--and build new dwellings on the site at an average cost of £30,000. The new property would then be handed over to the original owner of the site, but with the £30,000 debt attached to it--that is, the cost of rebuild. The owner would have a brand new property worth £60,000, but with a debt of £30,000. The owner's original equity was £35,000--the value of the property in an unfit condition. The council would provide a rebuilding grant of only £5, 000 leaving an outstanding debt of £25,000.
It would be a brand new house that allowed the original family to live on the same site in the same street. Obviously, the £25,000 debt would have to be financed. An additional mortgage could be arranged in advance with the building society that adopted the scheme, the owner could find his own money or, most likely, the building society or housing association attached to the scheme could take an equity share in the property. It would retain a 42 per cent. share which either could be funded by charging rent or it could retain its share and reclaim it if and when the property is sold or the owner could afford to buy out the share.
The scheme would depend on the building plot being of sufficient size to allow rebuilding. That would not necessarily be the case in some clearance areas because of the size of properties and the design of dwellings. However, it would still be possible to apply the scheme to the same locality, if not exactly the same site. It would be important to obtain a new-build valuation, and I used the example of £30,000. The example that I gave earlier from Birmingham envisages a scheme for about 50 dwellings. That is not a massive scheme, but it would offer economies of scale for the builder.
I am told that the current housing market is especially favourable for such schemes, with a relatively high premium on new build property compared with the cost of building.
The example that I have given of a property costing £30,000 to build-- I appreciate on land already owned by the owner--subsequently becoming worth £60,000 is incredible. Those figures were provided by local estate agents, not dreamt up by the local council.
The cost of rebuilding compared with rehabilitation is important. In most cases, rehabilitation will clearly be the most economic option. I am putting forward the scheme not as an alternative but as an option where rehabilitation is uneconomic, and as an alternative to clearance and the destruction of a stable community. It is crucial that the social side of the equation is entered on the financial balance sheet. If a cost is not placed on destroying stable communities, a case for rebuilding grants probably cannot be made.
Column 981The scheme would enable local rebuilding and would result in a considerable saving for the city of Birmingham on the work that it has done so far. Owners would get a new property at no cost to them and would have a mortgage. Although they would own only a proportion of the property, it would still be their home, they would have the same neighbours and live in the same community from choice, as opposed to being sent elsewhere such as a tower block miles away, having to move their children from school, make new friends and all the other difficulties of breaking up a community. A worse possibility is having their property improved and living through what can be a nightmare for many people, yet in three or four years having to have the property improved yet again, which is a gross waste of money. I am sure that in his tours around the country the Minister will have seen many such examples of waste. I could certainly give him addresses in my constituency where that has happened. I understand that Rochdale housing department has pursued schemes such as the one that I am proposing but has fallen foul of the Department's financial rigidity. With the best will in the world, it was trying not to waste money on improvement but to maintain stable communities, give owner-occupiers a choice, and ultimately save money. However, it fell foul of the Department's present legal arrangements.
I was quite taken by a couple of paragraphs of the briefing provided to me by Rochdale housing department. It listed some safeguards and said :
"With all aspects of urban renewal, it is important to remember that however attractive a scheme, it is ultimately carried out on the basis that The Community is the Client'. Any scheme must be for the benefit of the community and not for the personal satisfaction of officers or councillors."
I pay tribute to whoever drafted that briefing in the Rochdale housing department. I would not lend my name, voice or vote to anything that was dreamt up for the aggrandisement of officers or councillors. The client counts, and in this instance the client is the community. We are debating, by and large, owner-occupiers in run-down inner-city dwellings. The briefing continues :
"Consequently various safeguards must be built into the scheme 1. Properties must be built and sold at the market value for that area. If this requires an additional subsidy it must be applied for from whatever grants are available."
In other words, no new magical money would be dreamt up to make the scheme work. The briefing continues :
2. The scheme should be applied as an option to residents affected by clearance It would be wrong for it to be considered as an alternative to traditional house renovations."
The scheme must be an option for people faced with clearance, otherwise one would not be able to justify the social cost of keeping communities together because, by definition, they would not be sent to various parts of the city.
I tabled the new clause following discussions with my local authority, and I believe that it has some merit. I may not have explained it satisfactorily, but I hope that the Department and the Minister will consider it and do some more work on it. If the scheme saves money, that is important ; if it keeps communities together, that is important ; and if it prevents us spending improvement grant uneconomically, that is important. I am in favour of money being recycled from where it is spent to the benefit