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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