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16 July 2009 : Column 157WH—continued
The classic case is something that happens regularly. People come to my surgery and say, "Mr. Betts, a house has come up down the road, and our children would like to move into it, so we can look after the grandchildren.
They currently live five miles away, so it's all a bit difficult. We're really upset because someone has just moved in as homeless, and we understand from talking to them that they have only been on the housing list for two weeks. Our children have been on it for 12 years. Why"-this is just the way that people think-"couldn't they have had the home that my children want to leave, so that they could move near us? As things stand, they're just going to tread water on that housing list and never move anywhere near the top of it."
I thoroughly understand that if people are homeless, with children, in priority need and not intentionally homeless, they must be found a home, but there must be a better way to allocate properties than by saying that, because they are in immediate need, they get whatever house is available in any area, at the expense of people who have been waiting for that area for good personal reasons and for a long time. The Government have got that right, and it will be interesting to see the guidance and local authorities' response.
I welcome the housing revenue account decision. We had a good sitting of the Select Committee, with the Housing Minister, the other day. I pressed for a long time for the decision, which will give local authorities-particularly those with arm's length management organisations-greater certainty. The other day, I chaired a meeting of the all-party group on arm's length management organisations, and the message that came across clearly was that we need stability for ALMOs; they are an excellent development that brings tenants more into the management of homes, but many tenants are concerned about their instability, because of the complications of the housing revenue account and their inability to plan financially for the longer term.
Tenants have got the message, and the officers who came from ALMOs all over the country said that the quicker that the reform could be achieved the better, because it would provide enough financial certainty for things to move on. The Minister told the Committee the other day that he might have to get the agreement of all councils, because of the need to transfer debt between them; however, he said he might look at allowing those councils that wanted to become involved in the arrangements, after the two-month consultation period, to opt for the new scheme even if all authorities had not come in and primary legislation was needed to bring them in. I hope that the Minister will consider that, because speed is of the essence and we do not want ALMOs to start to unravel because of financial problems and the inherent instability of the current system.
I agree that the decent homes programme is a major step forward, but ALMOs want to move on now and ensure that they have the resources to maintain their stock to those high standards-even to improve them, particularly by energy-saving measures. They also want to build new homes. The Minister spoke to us about the need for equity in financial arrangements between those authorities that have not carried out stock transfers and those that have and about the ability that he hopes to develop for authorities to borrow prudentially against the rental streams from their homes, which would enable the new building to happen. That is an interesting development, which can put more money into social rented housing in the future and take us on from our current position.
The Government have acted well on repossessions. The Committee was concerned, in the initial report, about whether the protocol would work. However, because of the fall in the number of repossessions forecast by the Council of Mortgage Lenders, there is probably more confidence now that the protocol may be ameliorating some of the worst effects. Ways are being found, with the deferment of interest payments, to help people who are in difficulties whose homes might have been repossessed in past recessions. The bringing forward of help through the support for mortgage interest scheme-it now starts at three months, rather than nine months-has undoubtedly saved many people from getting into even worse debt, and that is welcome, too. I have already commented on the mortgage rescue scheme.
I hope that the Government will come forward soon, having previously announced an intention to act, with measures to deal with the problem of private tenants who unwittingly find that they are in a property that is going to be repossessed, where the lender did not know that a tenancy had been created. The tenants are there in all good faith but have virtually no standing in law at present. That is an important issue on which we need to act.
Finally, I want to emphasise three issues that emerged from the report. First, in our second report, we came back to the asset-backed securities guarantee scheme. Everyone thought that the Government acted with commendable speed to the Crosby review, but unfortunately did not get the answer quite right, because the scheme is not working. John Heron of the Intermediary Mortgage Lenders Association told the Select Committee that although the association was
"impressed with the Asset-backed Guarantee Scheme that was announced and subsequently introduced, it is a great shame that it falls short of its objectives."
"There is only so much risk that a government-sponsored scheme can reasonably take, and that is the position they are in, but the problem with that is that it is rather like half a leap across a chasm: very impressive but doomed to failure."
The Government are halfway there, but currently the scheme is not working.
I accept that it is a Treasury responsibility to deal with the matter, but I hope that the Minister has been listening and will go straight to knock on the Treasury door to see whether improvement to the scheme can be made quicker. It is crucial that, as well as dealing with the issues of social rented housing on which I have concentrated, we should get some money back into the mortgage market. It is not just a matter of using the retail savings; we need to get the wholesale market moving, and clearly, at present, that is not happening. The concern is not only that the money is not available, but that the rates of interest being charged are starting to rise. Five-year fixed rates have gone up by about two percentage points in the past month, and those were the most attractive rates. In the current circumstances, a high cost on fixed or variable rates is probably a bit worrying for many people, particularly if they fear losing their job or have already lost it, or are on short-time working. Getting that money back into the mortgage market is crucial.
Skills and capacity in the construction industry are relevant. The last thing that we want, after the present collapse in house building, is not to be able to bring it back. That happened in the recession at the end of the 1980s and 1990s. The industry took an awfully long time to come back, because the skills had gone. We may eventually get some skills recycled from the Olympic sites in the south. We probably will not get the same number of people from eastern Europe as we have had, because those economies are starting to improve in the longer term and real wages are growing in the countries in question. We may not be able to rely on Poles and Czechs to come and build, as they were doing before the credit crunch.
We must think about how to retain skills and bring more skills into the industry, as a matter of urgency. It is a question of encouraging young people to go into the schemes in colleges and start training, even though there may not be a job immediately at the end of the line. The Government must think about that. Some young people who went into apprenticeship schemes through the colleges a few months ago are starting to say, "What's the point? There won't be a job when we've finished our time in college." That is a challenge for the Government.
Another challenge for the Government is to consider the future for private rented housing. It has a bad image; there is some pretty awful, squalid stuff out there. The all-party group on urban development did a report that included the issue a few months ago, with the support of the British Property Federation. It recognised in the past that some property developers might like the commercial property model to come into play in housing. In that model, the developers develop the housing, retain ownership and manage it to a high standard, rather than just selling it on to some landlord who would probably not be as interested. The developer would become very concerned about the standard of the property it was building, because it would be managing it in the future.
The ideas are interesting, and the Government must get the financing right to help with them. Currently, the commercial property world is probably as lacking in confidence as the house building world, because it has suffered a major collapse in its values in the past few months. However, I think that it would be an interesting way to provide additional high-quality rented housing for the future-perhaps for different groups of people, who are younger and more socially mobile. That would add badly needed housing to the stock.
I have covered some of the key items in the report, which was well timed, with good suggestions. I welcome what the Government have done so far, but some things that still need to be done have been identified.
3.29 pm
Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): I draw attention to the interest declared in the Register of Members' Interests.
I congratulate my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) and her Committee on an admirably thorough, thoughtful and constructive report on a complex subject. I also congratulate my hon. Friend the Minister on his new appointment. He comes into an important post at a challenging time, and I wish him every success.
There is no question but that the state of the housing market and the consequent challenges that it presents is hugely important for all of us. It is the biggest economic challenge that the country has faced for decades, and the downturn, as we all know, has impacted particularly sharply on the housing market. There are implications not just for people who aspire to own their home. Throughout the housing market, people's ability to secure affordable housing, whether to own or to rent, is challenged by the current economic circumstances. Against that background, the Government's response to the challenge has been energetic, comprehensive and imaginative. I contrast that with the experience during the recession of the early 1990s when the then Government took a long time to recognise the scale of the problem affecting the housing market. Their responses, when they came, were fragmented, and some were not very effective.
Grant Shapps (Welwyn Hatfield) (Con): The right hon. Gentleman's knowledge of housing matters is supreme, except in one regard. Does he recall the number of affordable homes that were built in 1992? I seem to remember that the figure was 70,000.
Mr. Raynsford: I am grateful to the hon. Gentleman for raising that, because it is a classic illustration of the then Government's response being fragmented and not entirely effective. After spending a long time wondering how to deal with the problem, they devised something known as the housing market package, which was additional funding for the Housing Corporation to enable housing associations to go out and buy properties on the open market. They did, but the problem was that they bought a lot of poor-quality property, and were subsequently faced with serious problems of managing properties that were not of a sufficient standard, or size in many cases, for social housing needs.
That is exactly one of the lessons from the past that I and others have been pointing out to the Government for the past year and a half. It is helpful during a recession for Government agencies to use resources to acquire empty properties, which should not be left empty when there are housing needs, but the acquisitions must be carefully chosen to ensure that they are of a sufficient size and quality to provide decent homes for the people who will be renting them.
When people buy a home, it may be a loose fit. They may buy a house that is larger than they need. They can choose to have extra space, and if they find that they are a bit cramped, they can move on if they have the resources to do so. When people are allocated a social housing tenancy, they are usually allocated a home with a tight fit that is sufficient for their needs at that time, but not with spare bedrooms. The opportunities to move are often limited. It is important to maintain the quality and attractiveness of the social housing stock and not to make ill-advised acquisitions. That is one reason why I am partly, although not wholly, critical of the then Government's response to the recession in the early 1990s.
Not all the present Government's measures have been wholly successful either, but they have been wide-ranging, and have included measures affecting the mortgage market, people's ability to acquire shared equity products and other means of bridging the gap between the cost of a property and their ability to raise mortgage finance,
helping to avoid unnecessary repossessions, assisting in the acquisition and construction of additional homes, and intervention to facilitate the continuation of regeneration schemes that otherwise might not have been viable and would have stalled. I have not mentioned the whole range of measures, but they have been an heroic response to a very serious challenge. I compliment the Government on recognising the scale of the problem and the degree to which they have responded.
The cumulative impact of the range of measures has been important in limiting the scale of the damage, which could have been greater than it has been. During an intervention on my hon. Friend the Member for Milton Keynes, I referred to the Council of Mortgage Lenders' latest forecast of repossessions. Some 60,000 homes are expected to be repossessed this year, and that is not comfortable, but it is still better than the 75,000 that was forecast a few months ago. That is an example of limiting the damage.
Sarah Teather: I am listening to the right hon. Gentleman's speech with interest. Will he acknowledge that the CML said that it downgraded its forecast partly because of the Government's intervention, but also because interest rates are very low, which has prevented some of the repossessions that might otherwise have happened?
Mr. Raynsford: I accept that entirely. Interest rates are down, but the hon. Lady will recall that the CML's previous forecast was issued after interest rates reached the current level, so we are dealing with a static position. Its latest revision downwards is against a background of a similar interest rate position as that which it took into account when making its previous forecast.
Grant Shapps: With the exception of last year, will the right hon. Gentleman remind us of when the CML did not, in the year in question, revise its estimate down?
Mr. Raynsford: I cannot give a detailed response, but I will look at the figures and will happily respond to the hon. Gentleman in writing.
It is important that there has been a downward revision, because many people might have expected the figure to go in the opposite direction. I certainly recall that in those difficult days of the early 1990s the repossession figures escalated upwards, and the trend was extremely worrying and in the wrong direction. What we are seeing now is a serious rise in repossessions-that is a cause for real concern-but the latest projections are slightly lower than previously forecast.
Sarah Teather: Does the right hon. Gentleman recognise that many economists have been saying that although the figures may have come down in the short term, there is a worry that the long fuse of unemployment may result in repossessions later? The former chief economist of HSBC has said that there may be 100,000 repossessions come 2011 or 2012. I am afraid that the story is not over, and it would be unacceptable for us to be complacent.
Mr. Raynsford:
The hon. Lady will see from Hansard that my remarks showed no complacency whatever. They indicated concern about the problem, but noted
that the latest CML forecast showed a slightly less worrying pattern than previously expected. I believe that that is the result of Government intervention, as well as the impact of relatively favourable interest rates. I accept entirely that that may not continue if interest rates begin to rise, and particularly if a continued rise in unemployment causes people to have difficulty in maintaining their mortgage.
I am not for a moment minimising the problem, but we need a serious, thorough and thoughtful response, rather than simply trying to pick up figures that may make national headlines. To illustrate that, the Nationwide building society recently and sensibly accepted the need to provide mortgage advances of more than 100 per cent. to people in negative equity. If people with negative equity need to move home, they are trapped unless such mortgage facilities are available.
The hon. Lady will recall the torrent of abuse on the Nationwide from various media, implying that it was reverting to the pattern of generous loan-to-value ratios among lenders before the credit crunch. We now want lenders to be more cautious, but we do not want them to be unthinkingly cautious and to swing the pendulum from one extreme to another without recognising the need to be attentive to the requirements of individual households. If those households can afford to meet the repayments, a loan of more than 100 per cent. may be justified. That illustrates my concern that we should have a serious debate about the issues, rather than one that is driven all too often in the media by headline figures and scare stories that do not prompt a full understanding of the complexity of some of the issues.
I want now to talk predominantly about two issues: the availability of credit, and the types of intervention that are most appropriate to help to ease our way through these very difficult times. I have said that banks and mortgage lenders have swung like a pendulum from one extreme to the other in the past two years. From a position in which they were lending money in a way that many people believed was very imprudent, they have now switched off the tap so that many people who could service a mortgage on a new property are finding it impossible to acquire a loan. We have gone from feast to famine very rapidly.
The problem with that is that in too many cases lenders are using the credit crunch as an excuse for restricting the availability of mortgage lending, rather than doing what they should do, which is to examine closely the individual circumstances of the applicant and to judge, on a proper assessment of the applicant and the property, whether the loan is a prudent one to make and, if so, what percentage of the value it is reasonable to offer as a mortgage advance.
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