Housing and Regeneration Bill

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Clause 273

Financial assistance for certain services about commonhold
Amendments made: No. 119, in clause 273, page 115, line 25, leave out ‘Section 62’ and insert ‘In section 62(1)’.
No. 120, in clause 273, page 115, line 27, leave out from ‘matters)’ to end of line 28.
No. 121, in clause 273, page 115, line 29, leave out ‘and’.
No. 122, in clause 273, page 115, line 31, leave out from ‘with’ to end of line 36 and insert ‘—
(a) any”, and
(c) after “matters” insert “, or
(b) any other matter relating to commonhold land and residential matters”.
( ) In the heading of section 62 of that Act after “advice” insert “etc.”.’.—[Mr. Wright.]
Clause 273, as amended, ordered to stand part of the Bill.

New Clause 23

Right to acquire freehold: abolition of low rent test
‘(1) In section 1(1) of the Leasehold Reform Act 1967 (c. 88) (right to enfranchisement or extension of long leaseholds)—
(a) in paragraph (a) omit “at a low rent”,
(b) before “and” at the end of paragraph (a) insert—
“(aa) in the case of a right to acquire an extended lease, his long tenancy is a tenancy at a low rent;”, and
(c) in paragraph (b) after “he has” insert “—
(i) in the case of a right to acquire the freehold, been tenant of the house under a long tenancy for the last two years; and
(ii) in the case of a right to acquire an extended lease,”.
(2) In that Act—
(a) in section 1(1A) (excluded tenancies)—
(i) for “subsection (1)(a) and (b)” substitute “subsection (1)”, and
(ii) omit “at a low rent”, and
(b) omit—
(i) section 1A(2) (certain deemed low rent tenancies),
(ii) section 1AA (additional right to enfranchisement where tenancy not low rent tenancy), and
(iii) section 4A (alternative rent limits for purposes of section 1A(2)).’.—[Mr. Wright.]
Brought up, and read the First time.
Mr. Wright: I beg to move, That the clause be read a Second time.
The Chairman: With this it will be convenient to discuss the following Government amendments: Nos. 123, 125 to 128 and 131.
Mr. Wright: I am very conscious that I could be a mumbling Member and Minister, so I shall do my best to ensure that Members can hear me.
New clause 23 removes the low-rent test as a means of deciding whether the right to enfranchise—the right to buy the freehold—arises. The test will remain for some purposes, such as determining the basis for valuing the freehold and cases in which the claim is for a lease extension as opposed to acquiring the freehold. The test will also continue to apply to existing leases. Under the Leasehold Reform Act 1967, long leaseholders have a right to enfranchise subject to meeting certain criteria, which include having a long lease at a low rent. A complex formula sets out the criteria for determining what precisely low rent is.
A series of amendments to the 1967 Act mean that the low-rent test has progressively been removed from determining eligibility for enfranchisement. However, the low-rent test has been retained for leases granted by registered social landlords, because other provisions, intended to allow such landlords enfranchisement—I am going to have problems saying that with my new teeth—in particular circumstances were not felt to be as effective as was intended. That issue has been addressed through other proposed amendments to this Bill. We are now proposing the removal of the low-rent test, which is no longer necessary as a consequence of those other changes.
Government amendments Nos. 123 and Nos. 125 to 128 are technical amendments consequent on new clauses 23 to 25. Government amendment No. 131 provides for new clauses 23 to 25 to come into force on a date to be appointed by the Secretary of State. I hope that I have clarified matters, despite the fact that I cannot say “enfranchisement” properly.
Andrew George: I would be grateful if the Minister were to clarify what exemptions there are. As I understand it, exemptions are available under the current leaseholder format. Certainly, some were negotiated for my constituents on the Isles of Scilly, who are also tenants of the Duchy of Cornwall. I believe that those exemptions have been extended to other privileged landlords. I would be grateful if he could inform the Committee whether the proposed alterations to the 1967 Act will change those exemptions. Tenants subject to those exemptions are not entitled to purchase or to take a pecuniary interest in the freehold of a particular property. Will those exemptions effectively be annulled as a result of the amendments and, in particular, new clause 23?
Mr. Wright: I am grateful—I think—to the hon. Gentleman for raising that point. I am not aware of anything in particular, although there are concerns about possible effects on leaseholders in cathedral precincts, for example. However, I shall consider his specific concerns about the Isles of Scilly and write to him later, if that is okay.
Question put and agree d to.
Clause read a Second time, and added to the Bill.

New Clause 24

Shared ownership leases: protection for certain limited equity leases
‘In paragraph 3(2)(f) of Schedule 4A to the Leasehold Reform Act 1967 (c. 88) (exclusion from enfranchisement for certain shared ownership leases granted by housing associations: condition that lease provides for the tenant to acquire the landlord’s interest)—
(a) after “acquire” insert “all of”, and
(b) after “prescribed” insert “or provides for the tenant to acquire some of the landlord’s interest on terms specified in the lease and complying with such requirements as may be prescribed”.’.—[Mr. Wright.]
Brought up, and read the First time.
Mr. Wright: I beg to move, That the clause be read a Second time.
The Chairman: With this it will be convenient to discuss Government new clause 25—Shared ownership leases: protection for hard to replace houses.
Mr. Wright: The amendments will help to ensure that shared ownership properties are retained for future purchases, where replacement would be difficult. It will give first-time buyers a chance to get on the housing ladder in those areas, while, at the same time, keeping properties as affordable housing for future purchasers.
The amendments have been tabled in response to concerns expressed to the Government by rural stakeholders, including the Campaign to Protect Rural England, the Affordable Rural Housing Commission and the Commission for Rural Communities. The proposed changes received widespread support in the responses to our consultation paper, “Shared Ownership and Leasehold Enfranchisement”—it is that word again—published in July 2007 by my Department.
Shared ownership, including properties offered under the Government’s new build homebuy scheme, provides a means of helping households to get on the housing ladder by initially buying a share in a property—on shared equity schemes, we have helped about 95,000 households to get on to that ladder since 1997. Purchasers pay rent to a provider, usually a housing association, on the remainder of that property. In general, the Government want shared owners to have the option to increase the size of their equity share over time and to move to full ownership, when they can afford to do so and where it is financially sustainable. That process is known as staircasing.
I am aware that in some areas—for example, small rural settlements—affordable housing is difficult to replace after a purchaser has bought it outright. In some circumstances, particularly in rural areas, land may not come forward for development if its owner cannot be assured that the housing built on it will remain affordable for future purchasers. Currently, a number of measures can be used to keep shared ownership housing affordable for future purchasers, including providers buying back properties, but, frankly, such schemes are inconsistent between landlords and are sometimes difficult to use or apply.
I therefore want to provide the flexibility to respond to specific, local housing need and, where necessary, to keep some shared-ownership housing affordable for future purchasers. That is in line with the wishes of landowners, providers and other rural interests. The changes that I am proposing will enable some areas to be designated as protected areas, where shared ownership housing cannot be lost to the open market but will remain affordable for future purchasers.
Mr. Raynsford: I warmly welcome this new clause, and the commitment to ensure a provision for retaining shared ownership in areas of need. Yet this all depends, crucially, on the definition of the area. Will my hon. Friend say a little more about how widely he intends to set the parameters defining the protected areas? Will they cover all rural areas and other areas of intense housing need, where the loss of shared ownership housing through staircasing would reduce the availability of housing for people in need?
Mr. Wright: My right hon. Friend has raised an extremely important point. My intention is that the areas will be small and will respond to specific local housing needs. Because of that, new clause 25 will do a range of things. It will amend existing legislation to enable the Secretary of State to make an order designating an area as one where limited land is available for the replacement of affordable housing; it will enable local authorities to designate specific sites within the area; and it will require all providers of affordable housing in those sites to keep that housing affordable in perpetuity. In response to my right hon. Friend’s specific point, those areas will be designated quite tightly.
Mr. Raynsford: My hon. Friend has not entirely satisfied my concerns, because a tight definition would obviously mean that relatively limited numbers of areas would benefit. In many rural areas—and, indeed, in some urban areas—there is a real worry, where it is extremely difficult to meet housing needs because of high land values, that social housing provided through the shared ownership route will be lost through staircasing without appropriate safeguards.
I support strongly the general principle of staircasing, but in those areas of need, there is a strong case for protection. Is the Minister willing to encourage local authorities that believe that their areas are experiencing such need to make representations for their areas to be designated under this provision?
Mr. Wright: My right hon. Friend has raised an interesting point with which I have a lot of sympathy. I think that the areas will be relatively small and will respond to specific acute housing demand. I intend to publish criteria with regard to designating protected areas and to consult stakeholders shortly. I think that this issue will be debated during that process, but I take on board my right hon. Friend’s important point.
12.45 pm
Providers will be able to maintain affordability through either or both of the following mechanisms, which must be clearly stated in the lease. The first is restricting staircasing under the terms of the shared-ownership lease. Leases will need to state that the purchaser cannot enfranchise and state a maximum share that a purchaser could acquire. As I have suggested, this is an and/or situation. The second mechanism is ensuring that providers have the right to buy back properties and sell them on as affordable housing or nominate new buyers from waiting lists when they are sold. The shared ownership lease must detail that obligation. If the provider does not restrict staircasing, they will be required to exercise the right to buy back.
In response to the consultation that I referred to earlier, the National Housing Federation welcomed the move to clarify the position of leasehold enfranchisement rules in relation to shared ownership. The federation also believes that staircasing restrictions will encourage landowners in rural areas to discuss more openly the potential for affordable housing, if they can be reassured that the housing will remain affordable for future owners. The Commission for Rural Communities considers that restricting staircasing is a usable mechanism for retaining shared-ownership properties, and many local authorities have welcomed the changes, which will increase their ability to deliver and retain affordable housing in their areas.
New clause 24 will allow housing associations to grant shared-ownership leases that do not allow the purchaser to acquire 100 per cent. of the freehold. That will provide an additional mechanism in order to retain houses on a shared-ownership basis for future purchasers in a protected area, as proposed under new clause 25. That is an important rule that will help to maintain affordability.
Andrew George: Like the right hon. Member for Greenwich and Woolwich, I have some concerns. I welcome the general drift of the new clauses, but I am concerned whether the definition of landlords to whom the new clauses apply is sufficiently tightly or clearly drawn, so that the landlords who may be subject to a process of ownership of a property through staircasing rather than outright purchase are clear. It is clear in new clause 24 that that applies to housing associations. I just want to be clear that the drafting of the new clause does not open up other tenants of properties equally to staircasing and, through the back door, obtaining properties that we all hope will be recycled within the local community to meet a local need in perpetuity.
When the right hon. Member for Greenwich and Woolwich intervened on the definition of the areas, the Minister responded that the Secretary of State will define those areas tightly by order, which concerns me on two fronts. We have been told that the Secretary of State will take the decision. I seek reassurance that local authorities will have a mechanism by which they can draw the boundaries, rather than it being left to local authorities to apply to the Secretary of State for the definition of where the boundaries of the protected areas lie.
I hope that the Minister recognises that there is great advantage, particularly for housing associations in areas where there is a particular need for affordable housing, to apply a mechanism known in the trade as the golden share. In other words, the housing association will always retain the golden share, which would enable it to ensure that when a property is given up by the occupant, that property can be directed to meet the needs of someone who seeks local, affordable housing, rather than being lost and sold on the private market.
Where that cannot be restricted, I seek the reassurance of the belt-and-braces approach. If we cannot simply apply the golden share, we could have staircasing of shared ownership up to a certain agreed level—for instance the housing association could retain a 10 per cent. or 25 per cent. share that the occupant cannot purchase. Even where the golden share applies, I hope that the Minister will allow those housing associations to apply a legal covenant on the property, which would ensure that it would meet the need for local affordable housing in perpetuity. In circumstances where the property is subject to a section 106 agreement under a planning permission, I seek reassurance that the new clauses will not undermine the intent of those planning permissions, which themselves could be drafted in such a way, as happens in many circumstances, as to direct those properties towards specific social groups. Such properties are intended to meet a defined local need for affordable housing.
I seek reassurance, prompted in part by the intervention by the right hon. Member for Greenwich and Woolwich, that we are not slackening control over the scarce provision of affordable housing for local people. That is particularly true in rural areas, as the right hon. Gentleman has identified, but there are many other parts of the country where the need within the local community is particularly intense and where the provision of affordable local housing is scarce. I hope that the Minister will take those concerns on board.
Mr. Raynsford: I want to echo some of the concerns voiced by the hon. Member for St. Ives and to repeat the points that I put to my hon. Friend in my interventions, as his responses gave me the impression that the Government are taking too minimalist a view of the application of powers. As I understand it, one of the two provisions relates specifically to housing association shared-ownership schemes, and the other relates to leasehold schemes for the elderly.
The first issue raised by the hon. Member for St. Ives is whether other shared-ownership schemes would benefit from being defined within the remit of the powers at a future date. That clearly cannot be done under the definition in the new clauses, but there may be a case, in the context of the Bill, for a more flexible framework to embrace private sector providers as well as registered social landlords. If private sector providers are providing shared ownership in areas of high value and high housing stress, it may be that the restrictions on staircasing should apply.
The second issue concerns the definition of areas. The current definition of rural areas embraces areas with fewer than 3,000 homes. That has generally been used as the criterion for defining rural areas. If the Minister had indicated that it would be used as the basic criterion for defining those areas where the restriction on staircasing will apply, I think that many of the anxieties that the hon. Member for St. Ives and I have voiced would have been satisfied as far as rural areas are concerned.
As the Minister knows, however, I have also voiced concerns about some urban areas. There are parts of central London—it is not only central London but inner London as well—where land values are incredibly high. If social housing is lost, it is virtually impossible to reprovision it. The high capital cost of investment makes that very difficult, if not impossible, and there may well be a case for applying the restriction in such circumstances.
The third issue that I want to highlight is encouragement for landowners to release land at less than market value to facilitate housing development. We have discussed this in Committee on previous occasions, and, as the Minister acknowledged in his introductory remarks, it is relevant to making land available in some rural communities, where landowners are reluctant to make provision if they think that the land will not be held in perpetuity for social housing needs.
If landowners are to be encouraged to make land available, it is essential that they should not have any grounds for fearing that land that they offer at less than market value could subsequently bring a windfall gain to the person who occupies the home that has been built on that land. The staircasing process could enable them to staircase up to outright ownership and then to sell on the open market. There is a serious need to encourage landowners to make land available at less than market value in areas of high stress, if that is crucial to the provision of affordable housing, but, unless we have a good, broad and generous interpretation of the areas where such restrictions will apply, the benefits that can be achieved will be less extensive and more limited than the Government would like, and certainly than I would like.
I urge the Minister in his response to accept that there should be a full consultation with interested parties before the areas covered by new clauses 24 and 25 are defined, and that the Secretary of State, when defining the areas, should be mindful to listen to the views of local authorities, housing associations and other housing providers, which are aware of the needs of those areas and of the importance of retaining an element of affordable and social housing.
Mr. Wright: Several important points have been raised by the hon. Member for St. Ives and by my right hon. Friend the Member for Greenwich and Woolwich. I hope that I can address their concerns and reassure both of them.
If I interpreted correctly the concerns of the hon. Member for St. Ives—he can always intervene on me, if I have this wrong—I got the impression that he was concerned that there would be some sort of staircasing, or avoidance of staircasing, through the back door by non-social providers. I hope that I understood him correctly.
Andrew George: I am sorry if I did not make myself clear. I am concerned about how widely the new clause may be drawn or interpreted at present, and the extent to which it may be amendable in future and applied more widely. Certainly there is a concern that affordable properties that are intended to meet a local housing need may be lost because of the provision in the new clause. Is that unintentional?
Mr. Wright: That is exactly what we want to avoid, and it is the point of the new clause. New clause 25 will apply to all providers in a protected area. I hope that that addresses the hon. Gentleman’s point about back-door staircasing and 100 per cent. ownership. I understand his concerns about a top-down approach from the Secretary of State providing an order. I hope that I can reassure—
It being One o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.
Adjourned till this day at Four o’clock.
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