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Lord Selsdon: My Lords, the noble Lord has a point but, unfortunately, the market economy has an impact on the situation. I am fully aware that often housing associations have a simple formula. They know how much per square foot they can afford to spend on building, they know how many square feet they have for a flat or a house and they know roughly the market price. Often it is a combination of yields and interest rates. It can be the combination of a sudden rise in the cost of building materials due to a sudden demand and of contractors, if they have sufficient work, quoting higher prices in more difficult areas.

One of the objectives of associations is to build houses in the lower cost areas. However, I do not see how one can arrive at a particular floor as regards building costs because without heavy subsidy they would be influenced by the outside market.

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Earl Ferrers: My Lords, I am sorry that the noble Lord, Lord Berkeley, is still worried about this. I certainly do not think that the Bill should result in houses being built to a lesser standard than they are at the moment; nor do I see that it will stop flats being built. Of course, if you have any change there is always anxiety, and I understand that. Those who are involved are naturally apprehensive and wonder what is going to happen. I shall do my best to try to assuage the noble Lord's anxiety.

The statutory purchase grant scheme has been introduced so that, in future, certain tenants of registered social landlords will have the right to buy their home. On the whole, we believe that is a good thing. Something similar to the amendment of the noble Lord, Lord Berkeley, was discussed in Committee.

Let me tell the noble Lord what the position is. Landlords will receive the full market value of any properties which they sell. Where a property has certain amenities, such as a playground or something like that, the market value would be expected to increase accordingly. I do not think it would be appropriate to enshrine in legislation the requirement that the value of a property must reflect the fact that it enjoys access to communal facilities. We should rely on the market to determine the value of any particular property. If the noble Lord is selling his house it has a certain value attached to it. If the house has a garden three-quarters of an acre in size which goes with the house, then the chances are that the house will have a greater value.

That is why we think we ought to rely on the market to determine the value of the property. If a tenant purchases his home, which shares facilities or amenities with other properties, such as a communal garden, he will normally have to pay service charges for his contribution to the maintenance of those facilities. Of course, if a tenant buys, that does not deprive the other tenants of the full use of those facilities.

Amendment No. 214, in the name of the noble Lord, Lord Berkeley, would exclude properties where the sale price to the tenant was less than the original cost to the landlord. I would like to assuage the noble Lord's worries. Under the purchase grant scheme landlords will always receive the full market value of any property which they sell.

The noble Lord was concerned whether the property might have gone up or fallen in value since it was built. Mortgage rates and interest rates also go up and down. The point is that if the landlord receives the full market value of any property which he sells then of course he will be able to recycle that money, and if he wishes to purchase another property then the replacement property should reflect the same market value, whether it has gone up or down.

Even if the landlord were to make a financial loss he would at least be cushioned by the grant which he had received earlier, and he should have the option of buying a similar property on the open market. Perhaps I can explain that a little further. When the flat or the house was built it attracted a certain grant which, of course, lowered the net cost to the builder. When the landlord sells that property, of course the total price might have

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gone down, but that will be reflected in the fact that he will be able to use that lesser price to buy a house also of a lesser price because of the position of the market.

The traditional right to buy a council house does not allow a local authority to refuse to sell a property where its market value is below what it actually cost the local authority. The local authority may have spent a lot of money doing up the property just before it was decided that it should be sold. In this case, because the tenant would, in effect, be getting a considerable benefit, and a benefit of almost total renovation of his house or flat, the discount which he normally would have received may be waived or reduced.

I hope I have been able to persuade the noble Lord, Lord Berkeley, that the position is not quite as frightening as he thought it was and that it is based on the market value. If the market value goes up then the landlord is relatively advantaged, but he will have to spend more when he purchases a replacement property, and if it goes down he will be relatively disadvantaged but he will pay less for a replacement.

6.45 p.m.

Lord Berkeley: My Lords, I am grateful to the noble Earl, Lord Ferrers, for that explanation. My concern has always been to see a continuing stock of social housing. I believe he has explained the position very clearly. We have debated the matter at length, both now and at Committee stage, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hamwee moved Amendment Nos. 211:

Page 11, line 21, at end insert--
("(5) The right granted by subsection (1) of this section shall not apply where the tenant is a tenant of a dwelling subject either to a planning obligation as defined by section 106 of the Town and Country Planning Act 1990 or to a planning condition in the planning permission authorising the existing use of the dwelling, which obligation or condition has the substantive effect however expressed of restricting the use of the dwelling to occupation by persons who cannot afford to occupy houses generally available on the open market.").

The noble Baroness said: My Lords, my name has been added to this amendment. The Marshalled List was a little eccentric today, but my name appears on the supplement. I spoke on this matter at the previous stage. The amendment argues for so-called Section 106 properties to be excluded from the right to buy. In moving this amendment I speak also to Amendments Nos. 216, 221A and 221B.

The amendment has been revised since the last stage to take account of concerns raised by the Government about defining such an exclusion in law. The Government said at Committee stage that Section 106 agreements can involve a wide range of planning conditions which have nothing to do with affordable housing, and that has been taken into account in that the amendment excludes only homes covered by a Section 106 agreement concerned with that provision.

Secondly, it was said that the issue of tenure was not a part of the planning process, and this amendment does not refer to tenure. Instead it adopts the Department of

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the Environment's own definition of affordable housing, as used in its draft circular of last February. The Government's policy of increasing affordable housing outlined in the draft circular would be undermined, I believe, unless an exclusion, similar to the one which I am proposing, were provided. A home built specifically for people who could not afford to buy on the open market would be resold and taken out of that provision.

That is why I was keen to see the matter reconsidered. In particular, the Government's draft circular provides that there should not be commuted payments, in other words, payments in lieu of actual housing. At the last stage the Minister said that he believed that the Government's endorsement of this use of Section 106 agreements was fully consistent with extending home ownership through the new right to buy, and with landlords recycling the sale proceeds for the continued benefit of the local community. That was at col. 1475 of Hansard of 6th June.

If Section 106 homes are sold, or are available for sale, the local housing authority, or the local planning authority wearing that hat, might just as well take commuted payments, payments in lieu of an actual building, but that is what the Government now frown upon and outlaw in their recent circular. It does seem to be inconsistent. With a view to ensuring that this particular provision relating to affordable housing should not fall between two stools as a result of the changes to the planning guidance, and because of the Bill, I beg to move.

Earl Ferrers: My Lords, I was looking round because I thought that my noble friend Lord Kinnoull might wish to speak to his Amendments Nos. 221A and 221B. However, as he seems to have vaporised, I assume that he does not wish to do so.

This group of amendments seeks to impose a series of further exemptions to the new tenant's right to acquire in Clause 16. In the early stages of the Bill's progress through Parliament, the right to acquire was welcomed generally. But at each stage we find that amendments are tabled which seek to limit that right. We have provided a series of reasonable exclusions which are based on rural areas of particular special needs. However, I do not believe that it would be sensible to keep chipping away further at the right to acquire, not least because each new item introduces further complexity. We have introduced legislation to give housing association tenants the right to buy their homes and we want as many of them as possible to do so.

Amendment No. 211 seeks to exclude from the right to acquire any properties which are subject to a planning obligation or condition which has the effect of restricting the use and occupancy to people who cannot afford to occupy houses which are generally available on the open market.

Planning obligations and conditions may cover a very wide range of requirements, not just related to affordable housing. I believe that that could cause particular problems of definition for any exclusion from

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the right to acquire. The noble Baroness's amendment acknowledges that difficulty in its very broad wording. In fact, that may cause considerable uncertainty and argument about just what are the "substantive" effects of obligations and conditions. I wondered what that meant because I am not quite certain what "substantive" means when describing an effect. I do not know whether it means a substantial effect or whether the qualification of the word "effect" means something more sinister. That would be a point of argument. I do not make great play on that; it is just that personally, I do not understand it.

Planning obligations may be either agreements between the local planning authority and relevant landowners or offered voluntarily by a landowner. Planning authorities have wide discretion in the use of planning obligations and conditions. The exemption suggested by this amendment could apply widely, to the detriment of the many tenants who would be at risk of being deprived of their right to acquire.

Affordable housing may be for rent, for purchase on shared ownership terms or for outright ownership. Paragraph 40 of our Policy Planning Guidance Note 3 indicates that planning obligations cannot be used normally to control which of those three options should be used. They commonly limit occupancy to people with a local connection. But a family which occupies a property as tenants is likely to be equally qualified to continue to occupy it as an owner.

For those reasons, I hope that the noble Baroness will not seek to press the amendment because I believe that it would cause further complications.

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