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The noble Lord said: It sometimes appears that the Bill does not reflect the fact that housing associations are not-for-profit corporations. So if they have a surplus of funds, and many of them do, that money is recycled into additional social housing and provides a useful supplement to any money that they would get, which in future will be through the Homes and Communities Agency. Essentially, this is government funding.
There are circumstances in which there is one type of ownership, but someone else is doing the management. If the housing association is the owner, but someone else is managing, matters could fall between two stools. Both ought to be mentioned in the clause.
On Amendment No. 98, we have to whip through the Bill a long way to reach Clause 71, where we find a somewhat similar situation. That clause defines the categories of low-cost home ownership that require regulation; namely, accommodation for the elderly and so on. We need to pick up this matter and define the low-cost accommodation more fully, because the definition in the Bill is not satisfactory to cover all the appropriate categories.
These are not attacking amendments intended to limit the Bill; they are intended to make it more precise and more understandable, and make sure that both categoriessocial ownership that is tenanted and social ownership that involves part-ownership by the tenantare included in all the relevant parts of the Bill. These are not huge changes, but the Bill would be better if they were written into it. I beg to move.
Lord Best: Until now I have taken a vow of silence to hasten the passage of the Bill, but this is a point on which I wish to express some views and, indeed, some support for these amendments. At the moment, the Bill distinguishes between low-cost rental housing and low-cost home ownership housing. If a non-profit-making organisation is doing either of those it gets regulated but, if a profit-making bodya developer or a housebuilderis doing the low-cost home ownership schemes, a much lighter touch regulation follows from the role of the HCA in this clause.
I am not happy with grants going to private developers and house-builders. They may do a good job but, if the same grants go to non-profit-making housing associations we get a double whammy or benefit, because any profits that are made are recycled to produce more low-cost rental housing or amenities in the neighbourhood. If over time the asset appreciatesthe part that is for rent appreciating as well as the part for personal ownershipthat extra appreciation and the equity gain is locked in for social purposes, so long as a not-for-profit organisation is the owner and provider. That does not happen if the provider is a profit-making company or housebuilder. I have always been unhappy with social housing grants being paid to developers and housebuilders in preference to housing associations. For that reason, I would not like to see a special treatment with a lighter touch regulation and less control by the HCA of the product when the developer is a profit-making company.
I have one other reason to throw into the pot why the distinction between low-cost rental and low-cost home ownership may not be quite as clear-cut or permanent as it appears. The noble Baroness, Lady Dean, chaired an inquiry into the future of low-cost home ownership. One of its chief recommendations
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We call that schemethat opportunity for people to staircase down and become a tenantflexible tenure. The Joseph Rowntree Housing Trust has been doing that for many years, with all its shared owners. If shared owners and their properties get into difficulty and they cannot remain there as owners, it has been possible not to have to evict them but to keep them as tenants. That way, you do not have the problems that mortgage repossessions, of which I fear we will see a lot more, bring for families who have to move their children out of the school and move away to try to create a new life after the collapse that has happened because their home has been repossessed. So this is a prevention of repossession, with the family then able to get housing benefit to help them to pay rent.
The distinction between low-cost home ownership and low-cost rental housing becomes blurred, in that regard; in good practice, you would allow the low-cost home ownership to become low-cost rental property and not think of them as quite distinct, with two regimes and two different ways in which to work with them. It is a very good idea to bring the two together and, if we are to have a light-touch regulation at all, the proposal in these amendments is that that would apply only for schemes in which nobody was elderly or vulnerable in any way. I would not even go that far but simply put the two together and regard low-cost home ownership and rental as products that are best done by bodies properly and fully regulated. In my book, that would be only the housing associations and those who will come under the full weight of regulation. However, if the profit-making bodies needed to be included, they should be subject, if they have received a grant, to just the same regulatory powers as the non-profit-making organisations.
Lord Greaves: My proposal to oppose Clause 34 is included in this group. Some of the comments made just now by the noble Lord, Lord Best, are valuable because there is no doubt that the renting and home ownership markets are closely interrelated, particularly in low-cost property, whether it is designed as low cost or whether it is low cost because of local market conditions. I have two points to make. The first concerns the definition of low-cost rental accommodation in this clause.
What is low-cost rental accommodation as opposed to rental accommodation generally? The housing market is not as buoyant in some parts of the country as in
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For people who need to rent, the real need is not necessarily low-rent accommodation in the local market, but decent accommodation. That means housing associations and local authorities, because the housing market in these areas is simply not going to provide a lot of rented accommodationcertainly not that people can afford. There may be a small amount of more expensive accommodation catering for a different market altogether. Coming from an area where the housing market has been depressed for a long time, I am wary of talking about low-cost accommodation. Decent accommodation is required for renting.
My second point relates to one made by the noble Lord, Lord Best, about the relationship between renting and buying, particularly in the case of individual households and individual houses. In some areas, complex regeneration partnerships or packagescall them what you willare being put together to regenerate the area. They might be regenerating existing properties or clearing properties and building new ones. In many areas, you will be involved in the private sector with development companies. That may be desirable or undesirable but that is the real world we live in and therefore you have to put together partnerships or packages. The houses that they provide will be for sale; whether they are low-cost accommodation for home ownership is a matter of opinion, but some of it will be deliberately low-cost accommodation in relation to the local circumstances. In any case, because of the market it is aimed at, it will have all to be sold at a reasonable price.
My problem with the clause is that public subsidy will in many cases go into those regeneration packages. It will go directly to the developer in return for their selling the houses for less than they would have to if they were funding them themselves. It might be the land or, in some cases, the houses and the land to be regenerated which is provided either for less than market price or for nothing. That is not a grant in the sense that the noble Lord meant it, but it is a direct public subsidy which will come from a public body. That might be English Partnerships and therefore the HCA under the new legislation. In some circumstances, it might be sensible for some of those houses to be provided for rent rather than for ownership. It might be sensible for the development company to be the body which rents them out. The clause might get in the way of that.
It may be a case of the clause being designed for very specialist situations in some parts of the country or of me asking too many what if questions, but I can see some problems here. I know of at least two circumstances in which development companies are coming in on exactly that basis; that is, they are being subsidised so that they can provide the houses at a price which might be saleable in the local market. If one does not provide that subsidy, it will be a case not of their trying to sell the houses for a lot more money but of their not coming in, because they would not be able to sell them at what would be the commercial price if they were doing it just as a spec builder. There may be a problem which the Minister might look at.
Baroness Falkner of Margravine: I broadly agree with almost everything that the noble Lord, Lord Best, said and a lot of what my noble friend Lord Greaves said. The Minister knows of my concerns. I hope that we will have an opportunity to reflect on this matter and that she will come back with her views slightly changed.
Baroness Andrews: The amendments have important implications. I shall break the golden rule that seems to have been adopted today and speak at a little greater length than has been the case to explain the background and implications of the clauses and the amendments.
The amendments are technical and deal with a complex issue. I stress that we share the objectives that they underpin. In response to the question whether Clause 34 should stand part of the Bill, I say that the effect of the clause is to ensure that low-cost rental accommodation provided as a condition of Homes and Communities Agency funding, infrastructure provision, land disposal or direct provision is owned by a relevant providerwhich means a registered provider of social housing, an English local housing authority or a county council in Englandwhen it is made available for rent. The clause ensures also that, where the landlord is not a local authority, the tenants and the stock are protected by the stock being subject to regulation by the regulator of social housing. That is a bald statement of what the clause does.
Perhaps I may define low-cost rental accommodation, because it is important to provide a context to the rest of what I am going to say. The noble Lord, Lord Greaves, asked what the definition was. It is set out in Part 2 of the Bill, in Clause 70, and includes not just rent being below the market rate but refers also to the other defining characteristics of social housing; that is, that it,
He is right that the value of homes and the market rate vary a lot according to which part of the country one is in, but that definition essentially serves the purposes of all forms of low-cost rental housing, irrespective of the relative differences in the market.
The noble Lord raised general issues concerning what is required in decent rented accommodation. He argued that decent rented homes are needed and I take
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Amendment No. 78, together with amendments to Clauses 71 and 191 which address regulations, deals with complex issues. Essentially, our joint objective is that everyone who provides low-cost homes is encouraged to do sonot dissuadedwithin a regulatory framework that is absolutely appropriate. Together, the amendments seek to achieve what has been described as a level playing field for private providers and RSLs in the provision of low-cost home ownership accommodation. They change the definition of social housingthe noble Lord spent some time talking about the significance of the change in definitionso that a different subset of low-cost home ownership accommodation becomes subject to regulation. They do that by requiring the HCA, first, to ensure that, once the Bill is in force, any new low-cost home ownership accommodation intended for elderly or vulnerable purchasers is owned by a registered provider and, secondly, to ensure that other new low-cost home ownership accommodation, provided after commencement of the Bill, is not subject to regulation.
I listened closely to what the noble Lord, Lord Best, said, and it is worth setting out the current position before I respond because, as I said, this is a complex matter. At present, all homes owned by housing associations are subject to regulation by the Housing Corporation. As we know, increasingly many housing associations provide both rented accommodation and LCHO but, in practice, the great majority is rented. Rightly, the corporation has taken a much closer interest in rented homes than in low-cost home ownership schemes. For the latter, it simply oversees the sales process, which sets the terms of the relationship between the purchaser and provider, and ensures that purchasers have access to the Housing Ombudsman scheme.
Therefore, my first point is that there has always been a practical recognition that the two sectors need a different weight of regulation, reflecting different circumstances. In future, the regulator will have explicit powers to set standards, and these will be limited to social housing, as defined in Clause 69. Social housing may be either for low-cost rentsocial rentor for low-cost home ownership. This means that low-cost home ownership accommodation owned by registered providers will also be subject to the regulators standards.
My second point is that the regulator also has powers to set different standards for different types of accommodation and therefore, following the traditional practice, we would expect the regulator to set much lighter standards for LCHO than for low-cost rental. If necessary, this expectation could be reinforced by the Secretary of State through her objective-setting power. Those objectives could, for example, emphasise the importance of the ability of registered providers to provide low-cost home ownership products at competitive prices to meet growing demand. Therefore, although I
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I was asked why we did not take the opportunity to take LCHO away from the full regulation framework. We considered that as a possibility but the vast majority of homes are existing stock. Their regulation can be achieved only through the regulator and we could not retrospectively impose contractual terms. That was obviously a problem, as is recognised in the amendments tabled by noble Lords. But, as several noble Lords have said, low-cost home ownership has already been provided in recent years by the profit-making housebuilding sectormany well known housebuilders, such as Persimmon, Taylor and Wimpey. In the current funding round, Bellway Homes has accepted grants to both build and retain ownership of low-cost home ownership properties on the condition that the company accepts contractual terms that replicate the key features of LCHO regulation.
The Committee knows that we are not requiring the profit-making sector to register with the regulator unless the companies concerned provide rental accommodation. When funding new low-cost rental accommodation, the HCA is logically required to ensure that the landlord is a rental providereither a registered provider of social housing or a local authority. The same, by definition, is not true for low-cost home ownership, which can be provided by an unregistered provider. The reason is logical. Given that there is successful established practice in the field, given that in the area of ownership more people are able to exercise choice and given that we want to expand to help meet national needsbut also to provide mixed communities, so that some people may rent and some people may own and you will not be able to tell the difference in tenurewe believe that there are sensible grounds for continuing with the light-touch regulation that is now required for low-cost home ownership and which could continue to be replicated through contractual arrangements with the HCA. We think that would provide sufficient protection for purchasers in the vast majority of cases. It does not mean lower standards or fewer controls; it simply means that this is an alternativeand, we think, appropriateroute for the delivery of similar standards.
I recognise, however, that there has been a wide debate about this in the sector, and there are concerns in the RSL sector about the implications. We do not want in any sense to disadvantage registered providers. We recognise that by recycling the profits from their low-cost home ownership into social housing, the housing associations make an invaluable contribution to the expansion of social housing. We do not want to jeopardise that and I am satisfied that the Bill does not do so, for the reasons I have set out. I have, however, asked officials to see what might be done to address the concerns that have been expressed by the stakeholders and have been raised by the amendments. I will look hard at this issue and come back to the House on Report, and hopefully we will have something to offer in that context.
Lord Best: I am reassured that the Minister will bring something back on Report. I am sure that on careful inspection there will turn out to be some tweaks and improvements to be made to what we have at the moment, not least bearing in mind my point that sometimes there is a need for flexibility to move from one kind of housing, low-cost home ownership, to another, low-cost rental. Drawing that distinction may prevent that, which would be disastrous for people, particularly if we are moving into an era of a lot of mortgage repossessions.
Lord Dixon-Smith: I will come to those words in a moment. I am grateful to the noble Lord, Lord Greaves, and particularly the noble Lord, Lord Best, an acknowledged expert in this field, for his support in principle for what I was rather inadequately trying to describe. It is important that we optimise every possible avenue to get both flexibility and a broad spectrum of choice in this field. We do not like to hear that awful segregationist term council housing nowadays. One of its problems was that it was seen as a form of tightly defined community within a community that was different and not bound with the wider field. Although one could perhaps regret the reduction in the number of council house sales, it has been a great social opening for the whole of that community and the community at large has benefited as a consequence.
I am grateful for what has been said. On the point made by the noble Lord, Lord Greaves, about low cost as a local definition, it had jolly well better be a local definition. Pendle and Paddington are worlds apart, but both have a need for social housing. Not least of the difficulties for this big national organisation will be that it has to make that kind of differentiation and to make what it does in Paddington relevant to Paddington and not to Pendle, and vice versa. That is one of the big difficulties for the organisation we are creating.
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