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Third Standing Committee
on Delegated Legislation
Monday 12 May 2003
[Mr. Derek Conway in the Chair]
Housing (Right to Buy) (Limits on Discount) (Amendment) Order 2003
4.30 pm
Mr. Philip Hammond (Runnymede and Weybridge): I beg to move,
That the Committee has considered the Housing (Right to Buy) (Limits on Discount) (Amendment) Order 2003 (S.I., 2003, No. 498).
The regulations exercise the Secretary of State's responsibility for setting discounts for right-to-buy arrangements. They propose to reduce from £38,000 to £16,000 the maximum discount available in specified areas in London and in the south-east and east of England; the previous figure had already been reduced from the £50,000 maximum discount that applied before 1999.
Mr. Desmond Swayne (New Forest, West): What is £16,000 these days?
Mr. Hammond: As my hon. Friend says, what is that these days? It is a mere trifle when considered in the context of housing prices in such areas. At the same time as the Government reduced discounts in those areas from £50,000 to £16,000, property values throughout the country have soared. That has happened throughout the country, but especially in the hot spots in London and the south-east and east of England. I am sorry to say that the measure will all but snuff out the dream of owning a home of their own for thousands of council tenants and their families. It will halt the progress towards creating mixed tenure estates, something that most people regard as good in its own right. It will do nothing to alleviate the crisis in the provision of social housing.
The simplistic argument that I have heard many times is that slowing sales by reducing the discount will increase the availability of social housing units, and thus help to ease the crisis in social housing which we all recognise exists in such areas—it will not. I accept that, on a first glance, that will be regarded as counter-intuitive, but it is clear that such action will do nothing to alleviate the problem, and I shall explain why.
What matters to potential tenants is emphatically not the size of the stock of social housing units; it is how often the units become available. They are interested only in available new tenancies. In London the annual rate of turnover of social tenancies is now only 3.4 per cent. If my maths serve me correctly, that means that each unit will be available for a new tenancy only once every 30 years.
Under the right-to-buy scheme, many tenants who are unable to purchase in the open market but who have savings available to invest, can use those savings to buy the property that they occupy already as a social tenant. As discounts decrease and the value of property increases, fewer tenants will be in the category of having the right to buy and sufficient
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savings to exercise it. What action can be taken by those who are squeezed out of buying because the opportunities available to them are decreasing? They will have to stay precisely where they are, occupying the same house or flat, and taking advantage of a rent subsidy for life that they might no longer need but are being prevented from giving up.
Transmissibility of tenancy means that it could be more than a subsidy for life; the property might remain occupied by that tenant's family beyond his lifetime. When a right-to-buy tenant buys, the public purse capitalises the stream of rental subsidy that it would give to him if he remained a tenant into a one-off cash discount on the purchase price, and the person continues to live in the same house in which he would have been living had he not bought under right to buy. If matters were to rest there, there would be no change, on the London average, for about 30 years.
There is no basis for arguing that it is wrong or unfair to give a subsidy to a tenant who buys. The subsidy is given at the moment when the tenancy is granted with security of tenure. From that moment, the tenant can enjoy a rental subsidy every week for the remainder of his life, as, in addition, can somebody to whom he can transmit that tenancy. All that we do in offering a right-to-buy discount is give a capitalised incentive—a cash discount on purchase price—to end that subsidised tenancy. There is no practical change.
If, however, the receipt from right to buy is reinvested in new social housing, the exercise of that right not only transfers out of the social sector a tenant who no longer needs the rent subsidy and further the laudable aim of mixing tenures on estates—with the benefit that that brings to all tenants, not just those who are able to exercise the right to buy—but provides a capital contribution to fund new social housing that will be available to let to people in genuine housing need.
I could embark on an argument about the Government's proposal to sequester capital receipts from local authorities and redistribute them. I spoke about that—at length, as the hon. Member for Kingston and Surbiton (Mr. Davey) says—during consideration of the Local Government Bill. For the purposes of today's consideration it is immaterial whether the local authority obtains the capital receipt from right to buy and is required to reinvest it fully in new social housing or whether the Secretary of State appropriates it and reinvests it similarly. The end result is the investment of that money in social housing.
Mr. Edward Davey (Kingston and Surbiton): The hon. Gentleman is making a case with regard to right to buy that many people can agree with in principle. However, behind the order lies the fact that discounts have increasingly been exploited. Will he address that? The discounts have not gone to tenants but have been arbitraged away by private landlords.
Mr. Hammond: I shall address that important point in a moment.
What matters to those waiting on housing lists is that the receipts from right to buy are fully reinvested
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in the provision of new social housing for people in housing need.
Dr. Brian Iddon (Bolton, South-East): I am sure that the hon. Gentleman has received from Shelter the same circular that I have. Its conservative estimate taken across all the authorities that we are dealing with—the hon. Gentleman mentioned only London—is that 5 per cent. of properties would be let. If sales continue at the current rate, 75,000 homes will be sold between 2001–02 and 2005–06, and we shall lose 13,000 lettings—which would cost £1 billion to replace—between this year and 2005–06. In that year, the authorities that we are considering will make 4,000 fewer lettings than they do today. Does the hon. Gentleman accept Shelter's figures?
Mr. Hammond: I have not had the benefit of seeing the figures that the hon. Gentleman is quoting, but his logic strikes me as somewhat suspect. Across the area in question, house prices are relatively high and the discounts are a relatively small fraction of the total value of the average house being sold. The flaw in the argument, and what is missing from his analysis, is the provision that would be achieved during that period by reinvesting all the receipts from the 75,000 sales that he talked about.
You probably would not thank me for going into detail, Mr. Conway, so I propose to send the hon. Gentleman—free of charge—a useful pamphlet, produced by the Conservative policy unit, which goes into the matter in some depth and provides a detailed analysis and figures. I hope that he will find it useful.
Sir Paul Beresford (Mole Valley): Does my hon. Friend agree that the flaw in the argument of the hon. Member for Bolton, South-East (Dr. Iddon) was the word ''lost''? Housing is not lost. Its occupants are the people who would occupy such housing anyway; the average turnover means that people live in the housing for 10 years before it is sold; and when housing is sold, particularly in London, it is at an affordable price.
Mr. Hammond: My hon. Friend is absolutely right, and I look forward to hearing his speech, when he will give us his perspective based on his long-standing knowledge of the way in which the housing market works in a London borough.
Mr. Davey: Does the hon. Gentleman agree with the hon. Member for Mole Valley (Sir Paul Beresford) that homes that have been bought under the right-to-buy scheme are resold at affordable housing prices? Or does he think that the value of those homes often increases?
Mr. Hammond: There will be increases in some cases, but some flats in blocks that are bought under the right-to-buy scheme are notoriously difficult to resell. The hon. Gentleman misses the crucial point. A council tenant, with a secure tenancy on a property in which he has the right to remain in for the rest of his life, has a choice. He can stay there and take the rental subsidy week in, week out for the remainder of his life, or he can exercise his right to buy. If, at some later stage, he sells that property on, he still has to house himself and his family. He does not disappear from the
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face of the earth as a result of exercising the right to buy.
Those are the reasons why the Conservatives oppose the reduction in the maximum discount level and why we would extend the right to buy to housing association tenants. They, too, could then enjoy the benefits of right to buy and the wider benefits created by mixed tenure, and the additional capital receipts could be available for reinvestment in housing. We would specifically require that all receipts from the sale of social housing—both council and housing association—be reinvested 100 per cent. in the provision of new social housing units.
Hugh Bayley (City of York): I was interested in the hon. Gentleman's remark about all receipts being recycled into new housing. Why did the Conservatives not follow that policy when they were in government? I ask because in my local authority roughly a third of the housing stock was sold. Now, about 170 homes are sold each year and about 110 homes are built each year in the social and housing association sector, so there is a net loss. More homeless families are accepted by York city each year than there are new lets available. How would the hon. Gentleman's policy help a city such as mine, let alone an authority in the south-east, where the housing stress is even greater?
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