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Lord Berkeley: I rise to speak to Amendment No. 62, standing in my name on the Marshalled List and, if it is convenient, to Amendment No. 72 standing in my name and also to Amendment No. 65 in the name of my noble friend Lord Williams of Elvel and the noble Baroness, Lady Hamwee.

The purpose of these amendments is to protect housing associations against having to sell their houses at a loss, or perhaps I should say below the cost of

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construction, while at the same time not unduly restricting the rights of tenants to buy, effectively through no fault of their own, because they happen to be in a house which might show a loss.

The William Sutton Trust which, I believe, is the sixth largest housing association in the country, has expressed serious concern to me about this since it affects the ability of the trust to invest in new affordable housing stock. This really gives rise to the macro effect mentioned just now by the noble Baroness, Lady Hamwee.

My amendments begin by trying to define a dwelling. That may seem simple. But that trust, and possibly many others, recognises that there is a need to have what it would like to call a cost floor to protect those cases where, for quite proper reasons, the cost of providing the house is greater than its market value. This is rather difficult. Why should the cost of a new housing association house ever exceed its open market vacant possession value? The open market vacant possession capital values are set by the market for private owner-occupied houses, both new and those for resale. However, housing associations often have to provide houses, or homes, with a higher technical specification than in the private sector in order to achieve low maintenance and running costs. For example, double-glazed or UPVC windows, as I call them, are often installed rather than soft wood windows. They are encouraged to do this by the Government and the Housing Corporation, which expects housing associations to keep their running costs low. That is obviously commendable.

The Government strongly advocate energy efficiency measures in new homes and housing associations tend to go further than the private sector in reducing energy costs for their tenants. There are many occasions when one sees a group of housing association houses next to private sector houses and one can see the difference in the standard of construction and the quality of the housing association houses for those reasons.

In support of other government initiatives to create communities on estates, housing associations often expend money outside the dwelling on local offices, good community landscapes, children's play areas and community halls. All those facilities have a cost which does not add to the value of individual properties but adds to the whole. The amendment which I have tabled tries to create a definition of a dwelling which includes that.

It is true to say that the better housing associations tend to build to the same high standards everywhere and construction costs are very much the same throughout the regions. But of course, in some areas, the market value is significantly lower. How do the housing associations achieve those higher standards? It is usually by putting some of their own reserves into the schemes or taking out higher private sector loans. But if there is house price inflation over time, any difference between capital values and the cost of provision may be eroded and that may sort out the problem. But as we heard earlier, the tenant may buy on the first day of occupation if he already has two years of tenancy with another social landlord. Therefore, there is quite a serious problem.

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I can also see some problems which the Government may well put back to me. For example, how could a cost be included in a definition of a dwelling in relation to a community feature? It could cover anything provided that at the same time that the dwelling was built, the construction was an amenity for or to provide services for a dwelling. That would eliminate any subsequent initiatives or expenditure which came after the initial building.

It could be argued that the trust's proposals will take away people's right to buy, but that can be answered with two suggestions. The Government could provide a larger grant so that the tenant could still exercise his right to buy and the housing association would not then lose out; or, secondly, the tenant could be given priority through a tenants' incentive scheme, which is another grant given by the Housing Corporation to enable a tenant to move out and buy a property in the private owner-occupied sector.

I believe that without these amendments there is a real risk that the quality of new, affordable housing or the quality of the upgrading in existing houses which is necessary, and is still covered, I believe, by the Bill, will be reduced and/or the number of new social houses built to replace those sold will also be reduced.

I am not sure that the drafting of the amendments is correct. I certainly commend Amendment No. 65 in the name of my noble friend Lord Williams and the noble Baroness, Lady Hamwee. However, I hope that the Minister will recognise the concern of some housing associations and will be able to respond positively.

9.45 p.m.

Lord Williams of Elvel: Following the intervention of my noble friend Lord Berkeley, I should like to speak to Amendment No. 65 which stands in my name and that of the noble Baroness, Lady Hamwee.

As I understand it, the Government have accepted that there should be an exemption from the right-to-buy where the private loan debt is greater than the open market vacant possession value of the property. But whether or not the Government accept that, it is not on the face of the Bill, unlike the rural exemption. We believe that it should be. If there is to be an exemption like the rural exemption, it should be on the face of the Bill.

The exemption contained in my amendment will be most relevant for local housing companies and large-scale voluntary transfer initiatives, which the Government, with our support, seek to promote. They have a rising debt profile in the early years of their life. In the amendment, we have added to that exemption a complementary one; namely, that,

    "the cost of provision (but not repair) of the dwelling",
should not exceed the,

    "open market vacant possession value".
The argument here is, first, that that has been accepted in the context of voluntary purchase grant. Therefore, it is hard to see why it should not be accepted equally on the statutory scheme giving right to buy.

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Secondly, although the Government will be contributing social housing grant to the sort of scheme which might be affected by the exemption, the association itself is often contributing its own resources in order to ensure good space standards, high technical energy efficiency, and housing plus environment. That is in order to reduce the cost to both the landlord and tenant over the lifetime of a rented home. If tenants can purchase at a value, further assisted by the Government to meet a discount, which is below the cost of provision, both public funds and the housing association will lose out. Moneys available for the disposal proceeds fund will be less than is needed for replacement, and so there is certain to be a loss of lettings.

For local authority right to buy there is a cost-floor mechanism which is missing from the Bill's provisions as presently drafted. The direct read-across, if I may use that expression, from right to buy is, therefore, broken. It is not easy for us to see how a cost floor could easily operate with the grant and discount system proposed. The mechanism proposed by the amendment is, in our view, simple and straightforward. It would determine very easily, subject to valuation, whether or not a sale could go ahead.

The amendment was debated in another place but without, in our view, a satisfactory answer being obtained. It would exclude homes where the market value was less than the cost of erecting or the cost of acquiring and improving or the amount of outstanding private loan debt available on the dwelling from the effects of Clause 16. In other words, those properties would not carry a right to buy.

Baroness Gardner of Parkes: We have now started to debate a different series of amendments, but, as we are in Committee, I should like to make a few comments on them. I received a brief from the Sutton Trust and I have considerable sympathy with its views. However, there is one part of the brief that I do not understand. It states:

    "Private sector homes tend to be under-occupied, whereas the Government encourages full occupation of social housing to make the best use of the asset".
That is clear enough. But the brief goes on to say:

    "Therefore the better housing association homes have higher space standards than the private sector, which is not necessarily reflected in value".
That sentence worries me because it takes me back to the days when all local authority housing was built to Parker Morris standards which were far in excess of anything that any builder could afford to build if he was building commercially with a view to sell. In fact, it took many years before it was decided not to continue with such standards.

It worries me if housing associations are now building to an unrealistically high standard. I believe that they should be building to a good standard. Indeed, I agree with the point made by the noble Lord, Lord Berkeley, that such constructions should be of a type that will not require additional maintenance. It is often cheaper to have a better standard at the beginning of the process. If housing associations are actually providing people with

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more space than they could possibly afford if it were a private house, that seems to me to be an argument against themselves.

The point that concerns me most and most encourages me to support the Sutton Trust argument is its statement that at the moment it has a rolling programme to upgrade all its old property. We all know that the Sutton Trust has long-established and old properties, many of which need upgrading. Unless it gets back at least what it has paid to construct the new buildings, it will not continue to invest money to keep the old properties up to standard, as it will not be in its interests to do so. I believe that to maintain old buildings is as important as to construct new ones, as so many people have lived in those old buildings for so long. In principle I support the amendments spoken to by the noble Lord, Lord Berkeley.

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