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Lord Best moved Amendment No. 53:

(a) that tenants of homes built under subsection
(2)(d) are afforded the same protection as tenants of registered social landlords in respect of—
(i) legal rights;
(ii) terms and conditions of occupancy;
(iii) rent levels;
(iv) bankruptcy of landlord or managing agent;
(v) recourse to the Independent Housing Ombudsman;
(b) that all recipients of grant under subsection (2) are subject to the same regulation in respect of—
(i) disposal of land or property which has been the subject of grant;
(ii) accountability for the use of grant;
(iii) requirements to repay or recycle grant."

The noble Lord said: My Lords, I apologise for detaining the House for one more important amendment to the Bill. Amendment No. 53 seeks to improve Clause 213, the clause which would end the requirement that has prevailed for 30 years that social housing grant—previously housing association grant—can be paid only to not-for-profit, registered, regulated housing associations.

The Government's worthy intention is to produce more and cheaper affordable housing for the same amount of public money. To achieve this, the Housing Corporation would be empowered to pay grants directly to house builders and developers. At present, house builders will obtain planning consent for any significant development only if they incorporate 25 per cent or more affordable housing. That usually means having a housing association as a partner because only the housing association has access to grant. This partnership approach is going well and has provided many thousands of affordable homes.

But because the housing associations will own, manage and maintain those properties in perpetuity, they negotiate fiercely with the house builders and developers about the standards, the quality of the fixtures and the integration of the rented homes among the housing for sale. Some noble Lords heard yesterday from a number of housing associations how intense and hard-nosed the negotiations for Section 106 deals with house builders have to be.

But, freed from the constraints of having a housing association partner, undoubtedly the house builders will be able to bid for lower levels of grant. Naturally they will want to maximise profits and possibly cut
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corners; they may want to cherry pick the easiest opportunities—for example, putting the social housing on the worst part of a site in a ghetto that can lead to well known social problems later on.

I am grateful to the Minister for Housing and Planning, the right honourable Keith Hill, for his helpful notes on how the Government hope to resolve the obvious conflicts of interest which will arise from switching grant from not-for-profit bodies dedicated to social housing provision to house builders who have so far often resisted and opposed social housing provision in their developments.

The Government hope that a contract between the Housing Corporation and the house builder will do the trick and will hold good for decades to come, even if the house builder merges, is taken over or goes bankrupt. But how can the Housing Corporation substitute for a partner housing association's intensive negotiations and on-site contract supervision? Where will all the new corporation staff come from to handle these local negotiations in place of housing associations? In terms of the powers of inspection, regulation and intervention, the Housing Corporation would be operating with one hand tied behind its back when dealing with house builders, despite the much higher risks involved. Gone would be the powers currently held over housing associations, which even include the power to dismiss and replace board members.

In terms of ongoing housing management, the Government hope that the house builders will use registered social landlords to do the managing, even though they will not own the property. But this has serious flaws. The housing association will be picking up the pieces after the homes are built, with whatever deficiencies the development contains. The housing association will be working with less grant aid for these homes than for their own and will have to levy 17.5 per cent VAT, reducing the amount from rents available for good services.

Moreover, and most significantly, if the housing association does not own the homes it will get no part of the long-term increase in property values. Tragically, the plan is that capital gains, which have to date been recycled 100 per cent for social purposes, will be split between the Exchequer and the house builder. The expectation of those future gains for house builders will also allow them to bid for less grant at the beginning, artificially undercutting the housing association's bids on day one.

What does the Treasury gain from Clause 213? A 10 per cent or 15 per cent cut, perhaps, in the level of social housing grant. But the Audit Commission has pointed out that the initial cost of a property for rent, when viewed over its life-cycle—with the constant spending on repairs, management, maintenance and improvements—represents only about 20 per cent of the total cost of provision. So savings of 10 per cent
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on the initial grant will save only, perhaps, 2 per cent over the longer term—and even that 2 per cent is only a saving at all if the standards are as high as under the present arrangements. Yet, in return for that small saving, there will be the losses to tenants and taxpayers of half or two-thirds of the growth in property values.

It is these capital gains that have fuelled the excellent work on community, environmental, social and welfare activities of housing associations in recent years, as exemplified by the report, Social Capital, published last week by London's 15 largest housing associations. If, in the Housing Act 1974, the Government had chosen house-builders, not housing associations, to receive the grants and to provide the social housing, all this good work would not be possible now. Thank God the housing Ministers of the past locked in all those future benefits for today's communities and residents.

If this radical and risky change is to proceed, I believe that exactly the same protections and constraints that have applied to date for housing associations, as Amendment No. 53 requires, should be demanded of the house-builders and developers. Otherwise I fear the short-term savings from some cheaper social housing today will prove illusory and, as with the efforts to accelerate the building of social housing back in the 1960s and 1970s, will end in tears. I beg to move.

Baroness Hanham: My Lords, I support the amendment moved by the noble Lord, Lord Best. We have had the most profound anxieties about this part of the Bill ever since we first saw it. As the noble Lord said, it is inexplicable why the Government would want to create another mechanism to ensure that social housing is provided and goes to the right people at all the standards to which the noble Lord referred. We have not even touched on the management of such accommodation.

I can only assume that this is tied up with the Deputy Prime Minister's wish to see hundreds of thousands of houses plonked all over the place, containing affordable housing, and a concern that the Housing Corporation and housing associations may not be able to cope. However, the housing associations have demonstrated that they can manage this and perfectly proper partnerships have been developed between private developers and housing associations for some time. That is a perfectly sensible way forward.

I simply do not understand the Government's insistence and requirement for this provision. I therefore support very heartily the noble Lord's amendment.

Baroness Miller of Chilthorne Domer: My Lords, I believe that this is one of the most important amendments that has been tabled to the Bill. Without it, as the noble Lord, Lord Best, said, developers will be able to cherry pick and the Government can wave goodbye to any affordable housing in smaller rural settlements which, at a previous stage, the noble Lord, Lord Bassam, defended so staunchly, because
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economies of scale simply will not encourage them. Any savings the Government think they might make will melt away as local councils have to pick up vast amounts of management costs from developments which developers have built and then walked away from.

The amendment proposes very modest safeguards to an otherwise very dangerous path.

Baroness Maddock: My Lords, I have supported the noble Lord, Lord Best, in his concerns in this area. He has put the case extremely well at every stage.

There are one or two things about which I have real concerns. The noble Lord talked about capturing equity. The reason that housing associations have managed to do so well in the past is because they recycle their money. Quite frankly, the note that we received from Keith Hill gives me no confidence at all. The Housing Corporation is therefore looking at ways of recovering a proper share of equity growth. Clearly, it has not worked out how to do it.

We have had no proof from the Government about whether this will actually provide better value for money. Yesterday, people in the housing association sector told us of a pilot experiment some years ago by a developer who was involved in the Housing Corporation and thought that this was the answer. After he did it and looked back, it was found not to have worked, and he was extremely disappointed. I think that the Government should consider that.

I do not understand how the rent regime will work. The Government control the rents of registered social landlords and local authorities. Are they really saying that they will control the rents of these private developers? How will that work? I really cannot see it. The Government have not thought this out, and we will be in the same sort of mess as when we were desperately trying to build houses in the 1960s and 1970s. I beg the Government not to fall into that trap again.

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