Westminster Hall
Wednesday 12 November 2008
[Mrs. Janet Dean in the Chair]
Housing
Motion made, and Question proposed, That the sitting be now adjourned.—[Barbara Keeley.]
9.30 am
Mr. Clive Betts (Sheffield, Attercliffe) (Lab): Although it is a pleasure to have an Adjournment debate, it is not a pleasure to talk about problems such as those that we are going to talk about this morning. I support the Government’s targets on building 3 million new homes by 2020, but we must try to do something to address the great shortage of houses for social renting, which is all too obvious to any hon. Member who listens, in their surgery, to the tales of woe and despair that are told all too regularly by people desperate for accommodation when there are no houses to rent. Looking at the current situation gives no one any pleasure at all; prices and sales are falling and the number of new homes being built is falling as well.
Because I appreciate that other hon. Members want to speak I shall try to concentrate on three issues: the state of buying and selling in the housing market and what it may be possible to do—if anything—to help that situation; how we can better help people to keep the homes that they have; and what we might be able to do to stimulate the production of more homes for rent.
First, the situation in the housing market is pretty much one of doom and despair. Prices have fallen by 15 per cent. over the past year. Although there are slight variations and different estimates, that is a reasonably accurate average of the various figures produced by different organisations. It is not necessarily enormously bad in terms of the correction in prices over time, although there are some problems for people in negative equity. These things are still limited, but the market is pretty dead. With regard to estate agents, Royal Institution of Chartered Surveyors figures show that there is about one sale per month. The knock-on consequence on the new build industry is clear, and there is talk of perhaps only 100,000 new homes being built next year, which is a long way short of the figure required. The average growth of households is some 240,000 a year, so there is an awful, big gap that will create problems in the longer term. In addition, mortgage funding this year is at about 40 per cent. of what it was last year.
Everyone can see that there is no quick fix to the problems with buying and selling homes. It will, perhaps, be some time before the market stabilises, and until it does, it is likely that buyers will hold on to see whether prices stop falling. Sellers will probably have to be more realistic about the prices that they ask for. There is clearly a problem in respect of mortgages for first-time buyers, which is holding up many buying-and-selling chains, because people are now being asked to find 25 per cent. deposits, rather than 10 per cent. deposits. Until prices have fallen a bit further and lenders can be
sure that properties will not get into serious negative equity, we will not see a return to 90 per cent. mortgages at least. People having to find a 10 per cent. deposit is much more realistic. I hope that there will be no return to lending above-value amounts on houses.
There are many initiatives, including the first-time home buyers’ initiative, MyChoiceHomeBuy and HomeBuy Direct, and there is a lot of confusion about precisely what people can access and how. There is an issue about people getting comprehensive advice on the market. Will Ministers look at the shared ownership models that are around and look at how easy, or how difficult, it is for people to access them? Shared ownership is an option for people who cannot get anything more than a 75 per cent. mortgage and who do not have the deposit. There is a lot of evidence that mortgage lenders are not recognising that the Government are effectively underwriting part of the buying process in respect of shared ownership and are still asking for too much money from people trying to go down the shared ownership route.
I have to mention one really bad case, which I have passed to officials in the Department for Communities and Local Government for their consideration, and I hope that Ministers will look at it. One of my constituents, Margaret Wilson, came to me with the story of her daughter, who has been trying since July to go down the shared ownership purchase route. It all started okay; she was told that she was eligible for the scheme, so she found a property and arranged a mortgage, but she was then told that the money had run out at Government level. She started again and found another property and was told a second time that the money had run out. Having complained about the arrangements, she was finally told by officials that a little bit of money was left and that, if she proceeded quickly, perhaps the sale could proceed; however, she was also told that she would have to find a little bit more money from the mortgage company than she had initially thought necessary. So she went back to the mortgage company, which then decided to send the matter to its underwriters, because £4,000 extra was required on the mortgage. The underwriters said, “We’re sorry, but we can’t approve this extra £4,000.” She renegotiated a new price with the sellers of the home, in a falling market, got a reduction and returned to the building society, which said, “We’re very sorry, but that mortgage product is now off the market and no mortgage is available.” She had been trying for four months, having previously been accepted as eligible for a shared ownership purchase, and she is back to square one, with no mortgage and no house to buy. Those sorts of complication need to be addressed if shared ownership is going to be a reality.
Bob Spink (Castle Point) (UKIP): The hon. Gentleman is starting to look for solutions, which I welcome. He has brought an important issue to House, and I congratulate him on doing so. However, he will be aware, as all hon. Members are, that some of our constituents who joined schemes that released small amounts of equity—perhaps £30,000 or £40,000—to them 10 years ago are now having to pay back £120,000, £160,000 or £180,000 to major banks; these are not scams. We have to look carefully at the detail of shared ownership and rent-and-buy schemes to ensure that our constituents are protected, so that they are not given massive repayment costs later on and are not exposed to other such scams.
Mr. Betts: That is a fair point. The regulation needs to be looked at in respect of some of these schemes, particularly equity release schemes. Ministers also need to look at the benefits complications of people in shared ownership: dealing with the rental element and the element of purchase can get complicated when getting into pension credits and housing benefits, for example. That is something else that we need to review to try to ease people down the shared ownership path.
Ministers have taken action in terms of the abolition of stamp duty on less expensive homes. I am sceptical about whether that will really kick-start the market, whether that is a beneficial expenditure of money and even whether the £600 million that has been allocated will be spent. If it is not, will Ministers consider transferring it into something more real, such as building new homes for rent?
Julia Goldsworthy (Falmouth and Camborne) (LD): Specifically on stamp duty, does the hon. Gentleman agree that the Government’s prevarication over the summer on whether to make any announcement on changes to stamp duty made matters worse and froze up the market even more?
Mr. Betts: Almost inevitably, people may wait to see what happens when there is any talk about a possible change of policy. That is not particularly a medium or long-term problem. I am just not sure whether the stamp duty holiday has any significant effect, particularly in this depressed market. The money might be better spent on something else.
Although the package of measures to help with building more homes and buying up empty homes was welcome—I will talk about that a bit more in a minute—it came at the expense of taking some money off future budgets for regional development agencies. However, that money will need to be spent helping small businesses in future, so Ministers ought to revise that issue, too.
There is a dilemma. I am not sure whether there is any easy solution to kick-starting the buying and selling of homes. We ought certainly to consider giving people advice about the various alternative home-buying schemes and should try to look at shared ownership. We should also recognise that some people are expressing grave concerns that, when the market bottoms out and starts to recover and demand comes back, after two or three years of low house building, we could see a sharp upward spike in house prices and a return to the old problems that we have had. That is a real issue, and the Government must think about it. They must also think about a problem in two or three years’ time. If the industry will be laying people off and not training them, how can it recover to meet the extra demand that will come at some stage in two or three years?
Bob Spink: The hon. Gentleman is talking about homes not being sold. One class of homes that people in my constituency are having difficulty selling is flats where houses have been knocked down and 30 or 40 flats have been built on the site. In some of those blocks, such as those in Long road, Canvey Island, the flats cannot be sold. Does he think the Government should consider how to bring such units into social housing schemes, so that members of the public can buy them? That would help the market and people who need social housing.
Mr. Betts: Yes, I agree, and I shall come to that when I make my third point. There are no quick fixes for the housing market, but there are some big and different problems in the medium and longer term.
My second point is about keeping people in their homes. The Government propose that, from next April, people who are out of work—unfortunately, there will be many more of them in the next few months—will become eligible to have their mortgage payments included in any income support arrangements after three months instead of nine months of unemployment. That is very welcome, and it should help to deal with the flood of repossessions that might otherwise arise.
Another issue is giving better advice and signalling where people can go for advice when they get into difficulties. Clearly, the message must be that they should talk to their lenders and that lenders should consider every solution short of repossession—for example, extending the mortgage period and interest-only mortgages or percentage-of-interest-only mortgages for a short period—to help people through the crisis. Lots of advice is available, particularly from citizens advice bureaux, and from other organisations and advice centres. Local authorities should co-ordinate that and have an access line that people can ring to ask where to obtain advice in these difficult circumstances. The Government could encourage that.
I hope that the Government will take urgent steps to reverse last week’s court decision that lenders may secure eviction of home owners after two missed payments without going to court. That judgment is worrying. I am sure that many lenders will not take that route and be responsible and try to work with people to keep them in their homes, going to the courts for a possession order only as a last resort. Last week’s decision that people may bypass the courts—there are unscrupulous lenders around who, unfortunately, often lend to the poorest and most vulnerable people—must be reversed to give people greater security. The Government’s scheme for keeping people in their homes allows mortgages to be transferred to shared ownership—people may not welcome that immediately, but it would be better than losing their home—and tries to ensure that such arrangements are simple and easy to understand.
My third point concerns social housing. Clearly, a lot of attention has been given to the fall in house prices and the collapse in mortgage lending and to the reduction in the number of new homes being built for sale, but the real pressure, which existed in my constituency even before the problems in the housing market during the past year, is on people who need to rent a home when there are no homes to rent. I shall repeat the figures that I gave during a debate last week. In my constituency last year, Sheffield Homes, which is the arm’s length management organisation for social rented housing that covers most of my constituency, let only 12 three-bedroomed houses in the whole constituency to people who were not homeless or demolition priority. That is the scale of the crisis. Every month, I see that number of people in desperate housing need, but only 12 homes a year are available. That is the tip of the iceberg of people who come to see me.
The problem already existed, and the Government had a target of building 50,000 new homes in the next spending review period and 45,000 immediately. The reality is that that target will not be delivered in the
current circumstances. The package of measures that they introduced a few weeks ago included bringing forward the building of 5,000 new homes and the necessary finance. That is welcome and necessary, but it is totally inadequate in current circumstances. Shelter welcomed that package but said that it did not go far enough. We need a significant injection of funds for housing associations and local authorities to build new homes for rent. That would also boost the economy in these difficult times and kick-start it, as well as helping to maintain jobs in the construction industry and providing badly needed new homes.
Housing associations deliver the vast majority of homes for social renting. The National Housing Federation said that the current housing association model will not work in the current broken market. That is a damning statement, but it is true. More than half of new homes were being built under section 106 agreements, but they are not being built now: builders are not building new homes for sale, so they are not building section 106 houses for rent either.
Some housing associations are involved in development, and because the amount of social housing grant is only 40 to 50 per cent. of the cost of a scheme, they often build homes for sale as part of their package of building to cross-subsidise the homes that they are building for rent. As they cannot obtain the finance to build homes for sale, given that the wholesale market has dried up and people are not lending to them because they are worried about their ability to sell on those homes, they cannot build houses to rent either. Private developers are slowing down the building of section 106 homes, and housing associations are also having to slow down. That is a real problem for the provision of social housing to rent.
Andrew George (St. Ives) (LD): At the start of his speech, the hon. Gentleman announced that he supported the Government’s target of 3 million homes by 2020. Does he agree that there is a worry that they may be confusing means with ends and that simply building 3 million homes in the belief that that will solve the problem is the means to the end? Surely, the end is to meet housing need, and in the current climate, it would be better to ensure that the houses that are needed are built, especially if the private sector cannot deliver housing in the present climate.
Mr. Betts: I agree. The Government’s estimates were widely recognised as being a step forward in thinking. They had analysed the growth in the number of households and matched that with the number of houses that needed to be built. Most people welcomed their commitment of 3 million new homes by 2020, and 50,000 homes a year to rent. One may argue whether that should be higher, but at least we are on the right track. The reality is that the figures have been blown considerably off course by the current problems. Demand for social rented housing is as high as it was, and the 50,000 target, at least, must be reached, but it looks as though we are going backwards because of the problems that I have identified. In addition, many people who would have tried to buy their homes but cannot do so, because of the problems in the mortgage market, are also having to rent, and demand for rented housing is probably higher than expected. There is increased demand for rented housing and the possibility of supply being reduced. That is a challenge for the Government.
I am looking for a step change in thinking. It may not come today, because the Minister may not have his brief to announce it, but I hope that when he considers his package of economic stimuli during the next week he will agree that the house-building industry, and particularly building houses for rent, is an essential element of that package. I want to press for that, and I hope that other hon. Members will do so.
Andrew George: In Cornwall, where I come from, housing supply doubled in 40 years, but housing problems for local people became worse. It is one of the fastest-growing places in the UK. Simply building houses, which is what the Government intend to do with 3 million homes by 2020, may meet a target, but it will not necessarily address the need. Cornwall is a classic example of where an obsession with numbers does not address the issue.
Mr. Betts: I may have a slight difference of opinion, because I think numbers are important, although I accept—we had this discussion in the Select Committee on Communities and Local Government—that lots of flats are being built in city centres, as in my constituency. I am against that, because we are desperately short of family homes, particularly homes to rent, and that is what we should concentrate on here and now. The Local Government Association says that one in 10 people are on housing waiting lists in some areas. I accept that not everyone on a waiting list is in immediate need of housing, but many are, and we must try to deal with the problem.
The hon. Member for Castle Point (Bob Spink) referred to local authorities and housing associations being able to buy houses, and the Government made finance available in their package in September. That was welcome, but it is probably not sufficient. Schemes in my constituency have come to a standstill, and the next phase is not going ahead. Lots of houses have already been built and are standing empty, and many people who want homes are on a waiting list. With more finance, the Government could put the two together and quickly deal with the urgent housing need.
The Government ought to tell local authorities that they have a responsibility to co-ordinate this action and to look at the building of new homes, that they need to consider purchasing homes that are lying empty in the private market and that they must work with their housing associations and consider, with the advice centres and citizens advice bureaux, what advice should be given to people who are having housing difficulties in relation to paying their mortgage. Local government has a responsibility to pull together packages locally. I hope that the Government will take the initiative and ask local authorities to step up to the mark and introduce plans on how they will address local housing issues in their areas.
Mr. Stewart Jackson (Peterborough) (Con): Given the Government’s current review of the housing revenue account, what advice would the hon. Gentleman give the Minister and others on the use of capital receipts in respect of the sale of properties?
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