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Housing (Plymouth)

1.30 pm

Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): It is a pleasure, Mr. Key, to serve under your chairmanship, as you are familiar with Plymouth.

Plymouth is the largest city on the south coast of England, with a population of about 250,000. On 1 April 2008 there were nearly 116,000 dwellings in Plymouth, with 77,000 in owner-occupation. That is 5 per cent. below the United Kingdom average. There are some 15,000 homes in the private rented sector, and 22,000 in the social rented sector, of which about 15,000 are owned by registered social landlords.

Plymouth is one of 29 new growth points that are working with the Government to create large-scale sustainable growth in order to take our population up to 300,000 or more. I, of course, welcome the support that comes with that designation. There is a buy-in to the growth agenda across all the key public and private-sector players that, if not unique—I heard the regional spatial strategy debate earlier today while finalising this speech—is certainly unusual.

Plymouth has some award-winning regeneration going on across the waterfront—from Gun Wharf to the Devonport urban village, and from the Mount Wise estate to Millbay and the East End renewal project. Those projects now in progress seem on the whole to be reporting that their plans are set to weather the current global storms in the financial markets, but there is no doubt that plans over the next few years to build on those programmes are already being affected by the current very uncertain and difficult circumstances.

Unemployment in the city has reduced greatly, but it remains the second highest in the region. Average annual earnings are £17,688 and the average house price is £157,000. House prices are more than eight times the average income. Fifty-two per cent. of the working population earn less than £20,000. The income needed for the average priced property is nearly £40,000, and for the cheapest an entry income of £32,000 is needed. With home buying that expensive, it is little wonder that home ownership in the city is 5 per cent. below the national average.

Those circumstances already existed before the profound shocks in the financial system had such a devastating knock-on effect across the world. We are learning how important trust and co-operation are within our systems, and what happens when those values seize up. First-time buyers will, of course, find the drop in house prices welcome; but the truth is that as long as the demand for homes runs ahead of supply, which it will continue to do, the need to build many more homes remains if we are not to return to the huge increases seen particularly in the last few years.

That is very different from the United States, where the housing market is failing for different reasons—a housing surplus, horrendously bad lending practices and the knock-on effects for its financial systems and those of the rest of the world. House prices are falling in the UK because of the global financial crisis, but predictions from the national affordable housing planning unit are that affordability still matters and that the ratio
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of house price to income in Plymouth will climb to 12 times the average income by 2026—unless, of course, we do something substantial about the problem.

The ambition of the local strategic partnership, Plymouth 2020, is to be recognised as

Housing choice, in the rented sector as well as in the property purchase sector, will play an important part in achieving that ambition.

Three pillars support the overarching strategy. There is the vision for the built environment developed by world renowned town planner David Mackay; there is the local development framework of our award-winning planning team; and there is the plan of the City Development Company, led by chief executive Paul Carrol. The development company was launched recently to deliver the growth in jobs—42,000 of them—to match the growth in population from 250,000 to at least 300,000, identified by David Mackay as being the critical mass at which our community would function better in all sorts of ways. The company was confident at the launch that, despite prevailing circumstances, we could ride the storm.

I flag up some concerns about the regional spatial strategy. The city was pleased with the panel’s consideration of the original version, which would have added 8,000 houses and which would have seen the cities of Plymouth, Bristol and Swindon acting as the engine houses for the region. That was very much in line with the Government’s stated policy. Somehow or other—I hope inadvertently—the Secretary of State seems to have removed that hierarchical approach and restored 21 communities across the region to a position of equal consideration.

We want to help the Government address their agenda of tackling regional disparities and creating sustainable communities and a big enough supply of homes. However, confidence that the necessary levels of support will be focused on growth points such as Plymouth has been undermined. We want to help the Government, but we need clarity to be restored to the spatial strategy if we are to have the self-confidence and the investor confidence to go forward with our ambitious plans, especially in the present economic climate.

Formal submissions on this stage of the strategy are due in later this month, and I will certainly be putting in a formal representation—as, no doubt, will others. However, I take this opportunity to flag up the issue in the hope that it will be reviewed at the earliest possible stage. Nowhere in the country is as positively engaged with the Government’s agenda as Plymouth, but we need consistency in the Government’s support for our growth point status. Nor should our growth in population and housing be just about numbers; it must also be about getting the right mix of tenure.

My hon. Friend the Minister knows that, last October, I started an inquiry to consider what was happening in the housing market in Plymouth and what could be done about the circumstances that I have outlined. Today, I want to build on the discussions that I have already had with the Minister and his colleagues on the key issue in the report—how to get some important rungs put back on the bottom of the house buyer’s ladder. As I say in my report, “Homes for the future:
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21st century solutions for Plymouth”, those rungs can be restored by improving the supply of houses in the intermediate market.

Whenever shared equity and affordable housing products come on the market, there is great demand for them. However, the part-buy and shared-equity market is small, and in the sort of market that I have described in Plymouth, it plays a limited role in connection with the affordability issue. For example, two executive civil servants aiming to share a home would still be hard-pressed to afford the joint mortgage or rent and service charge on a typical shared-equity property.

That is not to say that those options do not have an important role to play alongside the new initiative that my right hon. Friend the Secretary of State for Communities and Local Government launched with the Prime Minister, of rent with an option to buy as part of the welcome £l billion package to support the housing market that was announced on 2 September 2008. As they stand, however, they will not tackle the widening affordability gap, ensuring that the rungs on the bottom of the house-buyers’ ladder are within reach of people who would be able to afford to buy in those parts of the country where the ratio of house prices to average earnings is more in kilter.

Difficulties often bring opportunities. Among the dark clouds that presently beset the international financial system, I believe that there is such a window of opportunity—a golden one—to address the issue in Plymouth, much of southern England and perhaps elsewhere. In my report, I sought to bring together the concept of the local housing company and the community land trust. I am grateful to my hon. Friend the Minister for responding to representations from me and from my hon. Friend the Member for Stroud (Mr. Drew) to include a definition of a CLT in the Housing and Regeneration Act 2008.

For such a model to work, the land would need to be gifted—or, in DCLG speak, made into an asset transfer to the community. It would be held in trust and, through mutual co-operative ownership, people would own a share in the bricks and mortar. The homes built on it would become the asset in which the individual invests. It is the value of the land that drives up the cost of home ownership, so such a model would provide for sustainable affordable housing; it would put those important rungs back on the bottom of the ladder and back within reach of those with modest incomes. Other models attempt to create sustainable affordable housing, but none that I know of performs the role of keeping those important bottom rungs permanently within the reach of first-time buyers, who would otherwise be blocked from buying and unwillingly trapped in renting—and which would add to pressures on the rented sector.

The Housing and Regeneration Act 2008 has given legal definition to the community land trust. I therefore hope that Plymouth will give serious consideration to combining the concept of the CLT with the development of the local housing company to make best use of the precious little land that we have for building. A CLT would mean that the land never left the ownership of the community—and now is the time to make that happen.

Although I have put forward the case for CLTs in relation to my inquiry and the specific circumstances in Plymouth, I believe that the question of developing a
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permanently affordable intermediate market in housing should take centre stage nationally, becoming a relevant part of our response to the profound shocks that we are witnessing daily in the international financial markets. In the present circumstances, mortgage loans for standard shared-ownership products could become increasingly difficult if not impossible to obtain. Because of the lack of liquidity in the credit markets, mortgage lenders are likely to seek to lend scarce mortgage funds to prime borrowers on the open market who can afford a deposit of at least 20 per cent. At the same time, pension funds and assurance companies will be looking for debt investment secured on good-quality residential property assets, rather than high-risk, asset-backed securities. Mutual home ownership on land owned by CLTs offers the opportunity of a unique and attractive debt investment, secured through corporate loans on occupied residential property assets, which would generate a guaranteed and attractive yield for pension funds and life assurance companies that are seeking to match yields to liabilities on a low-risk basis. Mutual models of home ownership are attractive partly because they have a good track record of payment compliance, and therefore low default rates.

In the new realities of the financial markets in the UK, restoring trust and co-operation are premium considerations, so I hope that the Government will prioritise an examination of the opportunities offered by the model. As well as restoring those important bottom rungs to the house-buying ladder, it can help the economy in the face of the logjams that the financial crisis has created, draw investor funds back into the market and deliver affordable new homes, because of its low-risk nature. The mortgage and financial mechanisms have been tried and tested in Canada.

I hope that Ministers will be prepared to listen to the few people in this country who have experience of the model and that they will prioritise time to understand the detailed financial analysis, which shows its relevance as part of the response to the challenges that we face. We have lost many checks and balances in the whirlwind of globalisation, and the model is one check that can be put back—the situation is crying out for action now. I hope that the Minister will urge the new Minister for Housing to give her urgent and serious consideration to the matter, and to meet me, my hon. Friend the Member for Stroud and the chief executive of CDS Co-operatives, David Rodgers, to explore it more fully.

Plymouth has an enviable track record of making things work. My report mentions the work of the award-winning East End Development Trust and the Pembroke Estate Management Board. Both have been supported by Government funding, which has ensured that the housing developments are more than simply bricks and mortar.

I was unable to attend the regional Homes and Communities Agency meeting in Exeter, but I sent representatives, and was impressed by the new organisation’s plans. It was set up under the 2008 Act, which is another good innovation by this Government. Its idea of setting up a single conversation via the local authority, involving all those who are interested in developing housing, including agencies such as health, is good. I was pleased to find in my inquiry that the private sector’s role in providing housing to rent, and the way in
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which the Government have introduced standards—2004 housing regulations are only now being implemented—are driving up quality.

Alison Seabeck (Plymouth, Devonport) (Lab): I congratulate my hon. Friend on securing this important debate. Will the Minister reaffirm the Government’s commitment to social rented housing? In the current financial climate, it is essential to my constituents. I should like to place on the record my belief that a vote in support of the stock transfer proposal, which is going ahead at the moment in Plymouth, is vital if tenants’ homes are to be improved further and if they are to have a greater say in how their estates are managed. That change, with those outlined by my hon. Friend, are vital for the quality of the housing offer across all tenures in Plymouth.

Linda Gilroy: I agree with my hon. Friend. That is the only way in which to bring quality into that sector of housing in Plymouth, and I support it.

There are some excellent private landlords in the city, and the city council has worked well alongside them to transform the landscape of the traditional private rented sector. Plymouth’s award-winning empty homes team has a variety of projects, including the HouseLet programme, and since 2003 they have secured private sector houses for 505 families through a highly successful leasing scheme. That is a model of exceptionally good practice and merits support for growth in the present climate.

I was prompted to look into housing in Plymouth by, among other things, a Saturday morning roving surgery that brought me face to face with a woman who had moved, with her children, five times in five years in the private rented sector. Shorthold tenancies can run counter to the good work that is being done to support families, so I hope that the Government are serious about reviewing them.

Support for voluntary downsizing could also release a lot of family-sized homes. I do not want the forced removal of tenants to smaller homes, and would fight against any such move, but some home owners and tenants who want to live in smaller, lower-cost, better-maintained homes are often prevented from doing so by bureaucracy, petty rules, petty sums of finance, or simply the lack of someone to offer advice and practical help. There are better ways to manage such demand to the benefit of both the tenant who moves and the tenant who is waiting for a larger home. It would be a big help if support services could free up even a third of what I believe to be around 1,000 two to three-bedroomed houses in Plymouth.

The turbulence in the world markets and the credit crunch do not take away the need for more homes in the UK. It is vital that the Government face up to the challenge of maintaining their programme of house building in such difficult circumstances. More than anything, my report brought home to those involved in its drafting that if we do not get things right now, we will condemn a generation to a housing market with limited, and sometimes no, choice. By restoring the rungs on the bottom of the house ownership ladder, we would facilitate both things. By enabling house purchase and shared equity, especially of the CLT variety, the pressure on renting, particularly in the social sector, is relieved.

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I know that the Minister will continue to engage with and champion these issues. There is a need for a step change in the pace and urgency with which some things that I have mentioned happen, particularly ensuring that the potential of CLTs is released. I am pleased that the Government stepped up and defined CLTs legally, and now is the time to ensure that they happen, which requires further work and commitment from all of us.

1.46 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (Mr. Iain Wright): It is a pleasure to serve under your chairmanship, Mr. Key, so soon after the bruising debate earlier this morning. I too congratulate my hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) on securing this debate. I recall with affection our debate on growth in Plymouth in April. Its scope was ambitious, and showed the huge growth potential in her constituency. That ambition has not changed over the summer—indeed, if anything, the appetite for ambition and growth seems to be stronger than ever. I congratulate her on her excellent report “Homes for the Future: 21st Century Solutions for Plymouth”. She is right to focus on the fundamentals and beyond the short-term turbulence to the medium and long-term future, and on what should be done to meet future needs.

As she is aware, the Government’s objective is to ensure that everyone has the opportunity to live in a decent home that they can afford, in a community where they want to live. To achieve that, we need first and foremost to increase the supply of all types of housing, including, in response to my hon. Friend the Member for Plymouth, Devonport (Alison Seabeck), social, market-led or intermediate housing. The National Housing and Planning Advice Unit says that we need to build something like 250,000 additional homes each year to meet the imbalance between the demand and supply of housing, which is caused by social change, longer living and the fact that people move around and live differently.

Although the credit crunch has reduced activity in the housing market to a low level—I shall go on to say how it directly affects Plymouth—the Government are determined to mitigate short-term difficulties and to prepare to ensure that housing delivery resumes as quickly as possible, when the inevitable upturn happens, when conditions allow. That includes ensuring sufficient headroom within the planning system to allow for a rapid recovery of housing supply to meet long-term demand. Major, cross-Government packages of measures to meet the current challenges in the housing market have been announced on 16 July and, more recently, on 2 September. They will do three things: first, they will help first-time buyers; secondly, they seek to minimise the risk of repossessions; and thirdly, they offer greater resources and more flexibility for councils and housing associations to build or purchase properties, which will help to reignite and kick-start the construction industry. The measures will also provide confidence and address the long-term challenges of affordable housing.

Largely thanks to the fantastic leadership of my hon. Friends the Members for Plymouth, Sutton and for Plymouth, Devonport, Plymouth has a very strong
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record of housing delivery and planning for growth in recent years. I am confident that it will be in a position to respond quickly and effectively to an upturn in housing. For example, house building in the city has trebled from about 400 units a year in 2003 to about 1,200 units a year between 2004 and 2007. The local area agreement set a target of 1,000 net additional houses, under national indicator 154, for the next three years. That reflects the submitted regional spatial strategy before the proposed changes were published in July.

Last year, Plymouth was the first large urban authority to adopt a new-style core strategy, which provided for at least 17,250 extra homes by 2021. It subsequently adopted five action plans focusing on key regeneration areas and, as my hon. Friend the Member for Plymouth, Sutton mentioned, it is in partnership with the Government as a new growth point. The partnership, which includes South Hams, was allocated £3.4 million for infrastructure projects in 2008-09 and a further £6.3 million for the period 2009 to 2011.

As I have mentioned, the credit crunch, which is uppermost in our minds at the moment, has had a major impact on construction contracts in both Devonport and Millbay. Sales have come to a halt, as first-time buyers are unable to access mortgages and developers are therefore reluctant to build. In response, the Housing Corporation and English Partnerships are working with registered social landlords, the city council and developers to restore developers’ confidence and ensure that such important developments are delivered. To do so, they are considering making use of the £1 billion housing package to which I have referred, particularly to support the renewed emphasis on investment and flexibility and to bring forward resources for up-front infrastructure.

My hon. Friend mentioned the concern that any support arrangements should not undermine mixed and balanced community objectives, and I agree with her. When I read her report, I was struck by recommendation 17, which states:

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