Perhaps the Minister would like to confirm that, with something over 400 local housing authorities and 160 of them making a contribution to the levy, it is inevitable that more than half the money collected by the levy will be spent in areas where the levy is not being paid. There is a geographical redistribution of the money as well as all the other factors that are taking place. That does not make it either better or worse, but it should be transparent that that is happening. Some places will therefore pay into the system and in other places homes will be built and those homes will not be available to the citizens of the paying-in authority. We need to be quite clear that that is the case.
I particularly wanted to pick up the point made by the noble Lord, Lord Kerslake, about making sure that one for one is written in. As a Minister in the coalition Government, I was insistent that that should be the case. Indeed, in another life, the noble Lord and I occasionally crossed swords on my slightly stroppy insistence on the way that that might be incorporated into the then Government’s policy. Seeing it included in the Bill is important.
There might be a word missing in the amendment although it was not missing in the speech of the noble Lord, Lord Kerslake. There should be an “additional” determination for local housing authority finance. A determination is a thing that the Government can say they have done and we do not know whether it has happened or not. That very often happens with new burdens where a new burdens policy says that if a policy imposed by the Government means that local authorities have to spend more money, the Government will recompense local authorities for that. Then, when the next settlement is made, the Government blandly say, “and this includes the money for new burdens” without any price ticket or transparency. I very much support the amendments, but I hope that the spirit of them should be “an additional determination”. It should not be a case of simply saying, “Yes you were going to get £100 million”—they should be so lucky—“and now we have included our new determination and you are going to get £100 million”. That is not providing the finances: it is simply instructing local authorities to reorder their capital expenditure.
I want to say a word or two about subsection (2) of Amendment 66B, which states that it should be,
“housing of the same tenure, as far as is practical”.
This comes to the basis of what the geographical location of “as is practical” will be. If one took a completely national view of the best way of getting the most houses for the least money or the least trouble, all the high-value houses in the City of London and Westminster would be sold and with the money generated a lot of houses would be built in Knowsley and Sunderland, and other places where there is no housing demand but lots of houses can be built for a comparatively small amount of money. Land is very much cheaper in those places than in Westminster or the City of London. I want to see,
“as far as is practical”,
the same kind of housing. I want the houses to be in the same area. I certainly want them to match the needs that are genuinely there and not built simply to stand empty.
The noble Lord, Lord Kerslake, mentioned another related point—these points all join together—about combined authorities. Stockport is in the combined authority of Greater Manchester, which is pooling its housing targets and housing programme as part of the combined authority. As a matter of fact, the leader of Stockport Council, a Liberal Democrat, is the lead member for housing across Greater Manchester. If we are going to have something that is geographically based, particularly in the case of Greater Manchester, it would be sensible for the Government to make it possible for that combined authority area to be treated as one, taking its own decisions.
My penultimate point is this: who is the preferential creditor, so to speak, when a levy is raised? The first thing that has to happen is that the costs of the transaction have to be paid off, and the Minister has pretty much made that point. But then there is the important question of who the second-tier creditor is here. Is the second-tier creditor the Government’s share going to housing authorities, or is it the local authority’s share to build new homes? This top-up, which is the subject of the amendment before us, is a way of making sure that we do not have to worry about it because the total will equal the amount that is needed to do both those things. However, I have it in mind that the determination is in the hands of the Government, so the question of which tier of debt comes first is rather a crucial one in terms of outcomes. Topping up local authorities so that they can pay the levy is one thing, but topping them up so that they can build houses to replace the ones they have just sold is something else. We need to be sure either that we are guaranteed both or that the Government have stated clearly which one is to be the preferential payment.
My final point is that with 150 local housing authorities, each of which could have separate thresholds of determination—we established that in the previous debate; I welcome that and I think it is right—it does mean that the Government are going to take 150-odd separate decisions about what those levels should be. They may struggle to do that within an objective
framework that does not lead to a considerable number of judicial reviews and problems of that sort in the implementation.
These are all points in support of making sure that there is a specific capital set-aside to compensate local authorities so that they can fulfil their obligations under this legislation. Without these amendments, the difficulties I have sketched out will turn from being the kind of thing that Oppositions dream up on a bad day into hard political realities facing the Government. I look forward to the Minister’s response with real interest.
Baroness Gardner of Parkes (Con): My Lords, I seek clarification on this amendment, in particular the phrase “the same tenure”. I thought that tenure meant how a property is occupied, whether it is freehold or leasehold, but the noble Lord, Lord Kerslake, said in his speech that the property should be the same size. I thought that that was rather different from the tenure.
I particularly want to ask about this because I took a little time out of the previous session of our debate on the Bill to go to a meeting of the British Property Federation in the House. A person who spoke at that meeting said that the federation was very much in support of build to rent and that hundreds of millions of pounds were available for that. He seemed to think that this would be a way to deal with the housing problem. These people already have the land, along with hundreds of millions of pounds that they would be putting in. Does the noble Lord think that local authorities could work with a scheme like this? Is it a possibility that should be considered?
Lord Kerslake: My Lords, the noble Baroness has raised two important points. What I am seeking to say in my amendment is actually related to tenure—retaining the same tenure. That goes to the point I made that the position in terms of access to social rented properties is different from access to market rent and market sale. As we have touched on in previous debates, if a social rented property is replaced with, let us say, a starter home, the people who can access those two different types of homes are very different in terms of their incomes and situation. Of course, it would be desirable in my view that wherever possible, a property is replaced in the same neighbourhood and is of the same size, but I recognise, in the spirit of some flexibility, that it would be very hard to specify to that level of detail. In the circumstances, it is reasonable to look at whether it is possible, where practical, to achieve the same tenure.
The noble Baroness also raised the question of build to rent. I am a strong supporter of this as a new mechanism of supply. But the whole point about build to rent is that it is market rent, it is not the same as affordable rent. What we need is more houses of all types and tenures. We need more houses for sale, more houses for market rent, more houses for shared ownership, and we need more affordable rented properties. It is not any single one of the above, it is all of them. Market rent is a very powerful mechanism for driving new supply, but it is for a particular income group which is not the same as social rented.
Lord Carrington of Fulham (Con): My Lords, the noble Lord, Lord Campbell-Savours, gave an extremely eloquent description of the Churchill Estate in Westminster and the various problems it faces, which are very real. It is possible to look at other estates across central London that have quite similar problems and a trajectory that has led to the same type of housing tenure and ownership. However, many of the problems he described come from the overall shortage of housing supply in London and would be not necessarily eliminated but largely cured if many more houses were provided in London.
That is why the provision of two-for-one replacement in London is so welcome. It is not without its problems. The noble Lord, Lord Kerslake, mentioned that the replacement housing should be in the same local authority or general area. There is a tradition that London boroughs build social housing outside their own areas. I return to the City of London Corporation, which owns social housing spread out over quite a wide area across London. It has traditionally always done so. It is important that the replacement housing should be where the people who will occupy it wish to live. That is a critical deciding factor, and one that can be dealt with only by the local authority. It is not one that we can impose in the Bill, nor one that we should even contemplate imposing.
Lord Kerslake: I will make two points. I am not suggesting changing anything in the Bill for London. I support the two-for-one and the collective approach across London. Indeed, I am advocating the same kind of approach for other combined authorities. I entirely agree with the noble Lord’s general point that we should allow choice about the location of housing where there are combined authorities, and, indeed, in London. My point is simply that wherever you locate it, there is an intent in government of one for one, which should be in the Bill.
Lord Carrington of Fulham: There should certainly be an intent to replace housing; quite how prescriptive we should get is a different matter. Frankly, I do not think we should get terribly prescriptive about it at all, except possibly in London, where there is such a particular housing crisis that it has caused us to look to alternative means of solving it. It has been intractable for so many years.
There is one problem with the two-for-one proposal: the need for flexibility as to how that is funded. We have talked about raising borrowing powers for local authorities to enable them to fund any shortfall that comes from the retained receipts from sale of their housing, but we also need the flexibility to be able to fund it from other sources. Many London local authorities have other assets—other land they could sell or buildings they could convert. There are lots of ways of handling this, other than just using the resources that come from selling the high-value properties that they are required to sell under the Bill.
I suggest that we and my noble friend the Minister should contemplate allowing a great deal of flexibility as to how the two-for-one provision will be achieved, because its financing could be done in any number of
ways. We need the creativity of the local authorities to be brought to bear to solve a problem that is in urgent need of resolution.
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Baroness Hollis of Heigham: My Lords, I am still worried about the effect of redistribution, given that the levy will not apply to all local authorities evenly. We established on the last Committee day that we are getting redistribution from poorer council tenants to more prosperous housing association tenants. We are also getting, as we learned today, redistribution from local authorities with retained stock to those local authorities which do not have to pay a levy because they sloughed off their stock to set up housing associations in the past. That also means, in practice, that we are getting redistribution from city authorities to rural councils. Some of those may be in beautiful, high-demand areas. An awful lot of them are not; they are just rural district councils in Norfolk and other parts of the country.
At no point have we had any reference to waiting lists, or the degree of local need, or the anxiety of young people to move, largely to city areas where there are jobs, which is key when, particularly in rural areas, there is no public transport to get you there if you live outside.
So how will the priority order work? Let us say that my city, Norwich, is required to sell one, two or three high-value houses at £300,000—if we have such; I am not sure that we do. Let us say that we come up to about £1 million. Okay. The local housing associations within the city have 10 people wanting, on average, £50,000 discounts. That is £500,000 gone. Then the other local authorities in Norfolk, which are stock-transfer associations, have built-up demand for a further 50 people, for £2.5 million-worth of discounts. So the sale of five or 10 local authority homes in my city will be funding 10 or 12 discounts, in my city, for housing associations and possibly a further 50 outside my city but in the bounds of Norfolk, by virtue of the way this is going to work.
As that means that the money from high-value sales in Norwich has been spent three times over, where exactly is the money going to come from for the local authority to replace its lost stock? Where exactly is the money going to come from for my local authority to tackle the derelict land around British Rail stations, or old gas sites, or old industrial, chemically polluted sites? These may need a lot of investment if, quite rightly, they are to be brought back into use. Will the Minister tell us how this is actually going to work? Because I do not understand it.
I recognise a pattern of redistribution which, as far as I can see, takes no account of housing waiting lists, no account of pent-up housing need and will just circulate money around in different ways. Either the levy will have to be in addition to sales, so that my local authority will be hit twice over, with both the forced sales of high-value properties and a levy in addition, or the local housing associations in my city and beyond, the housing association tenancies in Norfolk as a whole, will just have to queue, or be rationed, or have to wait, in order to buy a housing association home. At the end of the day, none of those houses in Norwich will be replaced.
I cannot even begin to see how these figures are going to add up. It is completely impossible unless the Government come in with funding. The Government want this policy so the Government should fund it.
Lord Lansley: My Lords, in response to the noble Baroness, it seems to me that there is precisely a place where housing need can be taken into account in this process. It is under Clause 72, where Ministers enter an agreement with a local housing authority for a reduction in the payment that would otherwise be payable under the determination. That will specifically include, no doubt, an assessment of housing need and the extent to which that housing need can be met by the provision of replacement housing by the local housing authority under the agreement.
Amendment 66B in particular suffers from objections of both principle and practice—in principle because it seeks to introduce inflexibility when clearly the structure is designed to give local authorities and government the opportunity to arrive at flexible agreements related precisely to issues such as the level of payment that would otherwise be payable and the extent to which that can be reduced, recognising local housing need, and, indeed, the shape of that need in terms of tenure.
A second objection in principle, which I imagine is well understood by the noble Lord, Lord Kerslake, is that the amendment would introduce the idea of local housing authorities being given a statutory right to sufficient borrowing capacity and flexibility to provide replacement housing, which is entirely outwith the process that the Bill otherwise contemplates of establishing a payment to the Secretary of State which can be rebated under the agreement. At no point does this structure contemplate creating a statutory right to a borrowing capacity, which I am sure the Treasury would find difficult to provide.
It seems to me that the proposed new clause in Amendment 66B is wrong because it seeks to create, under the terminology of a determination, something which is not contemplated in a determination at all. A determination is about a payment to the Secretary of State. The issue of replacement housing falls under Clause 72 and is about an agreement between the Government and a local housing authority which is funded by a reduction in the payment.
As it happens, the noble Lord, Lord Kerslake, and others seek, with Amendment 68B—but not with the same detail as in Amendment 66B—to introduce some of the same purposes into Clause 72. If you wish to do that, that is the logical place to do it. I object to it on grounds of inflexibility but if you wish to include it in the Bill, that is where you would do it. However, I say to my noble friend the Minister that there is an amendment in this group which, on the face of it, has merit—Amendment 68C—since it provides that exactly the same principle which is applied to the relationship between the Greater London Authority and local housing authorities in London should be applied in the same way to combined authorities and local housing authorities in other places across the country. It would certainly be sensible to look at that with a view to determining whether it is a suitable amendment.
Lord Kerslake: Perhaps I may come in very briefly. I wish to make three points. First, in any process you need a balance between prescription and flexibility. If the intent is to achieve one for one, that should be the nature of the agreements that are formed with local authorities. When the statutory instruments are published, that provision may well be included. If the Minister says, “I guarantee that one for one will be in the statutory instrument”, we may not need this amendment. But in the absence of such a guarantee, there is no mechanism for knowing with confidence that the Government’s intent is that one for one can be delivered.
Secondly, in relation to capital borrowing, in everything other than housing, local authorities have the ability to borrow prudentially. As was said this morning, they could borrow to build three swimming pools. The one area where they are capped is housing. Therefore, if you do not fully fund the replacement, you have to have an ability to lift the cap to find the necessary capital borrowing. That is the reason why that provision is included in the amendment.
Lord Lansley: I do not dispute that that is the reason it is in the amendment; I just think that it is wrong. We are not in the business of giving additional borrowing powers to local authorities but of releasing value from high-value assets and determining to what extent that is used to fund the discounts for housing association tenants buying their homes—or, on the other hand, to provide for replacement housing. The first point is very straightforward: if one wants to do this, Amendment 66B would include it in the wrong place; it is too inflexible and would introduce too many rigid criteria.
When the Government begin to create agreements with local housing authorities for replacement properties, I think that many of us would share the wish that, in the right places, where agreements are entered into—which will, of course, not be everywhere—those agreements should look for at least one for one; otherwise, why is the local authority being given that reduction in its payment if it is not in recognition that there is a greater need for housing there than for that money to be made available to housing associations through purchase of the properties by their tenants? It seems to me that the theory is: do you take this into Clause 72 and do you make it a minimum requirement of a one-for-one replacement? That is an issue to look at. I certainly do not think you need a new clause to do it.
Baroness Bakewell of Hardington Mandeville (LD): My Lords, there is not much more I can add to the contributions that have already been made. I support those comments and I oppose the Question that Clause 72 stand part of the Bill.
I agree with the comments the noble Lord, Lord Kerslake, made at the beginning of his speech about the danger of raising the expectations of housing association tenants that they have the right to buy, which they will think has been enshrined in law—and it has not. This is a voluntary agreement in which housing associations may have very good reasons for excluding certain properties. Similar legislation was brought in to allow parental choice over school places.
Parents believed that they had choice but they did not. What they had was the right to express a preference about the school they wanted for their child, and that is a very different thing. Great care is needed with the wording on this issue.
Lord Kennedy of Southwark: My Lords, all the amendments in this group and the clause stand part notice are ones that either I or my noble friend Lord Beecham have signed up to on behalf of the Opposition. I do not intend to speak for very long as I think the case for the amendments has been made very forcefully by other noble Lords in the debate.
As I said before, the theme running through the Bill is one of undermining council housing, be that in other sections of the Bill or the parts we are looking at today. I am sure the Minister will not agree with me and will suggest that this is all about people realising the dream of owning their own home. I contend that these amendments actually help the Government in that aim.
In particular, I agree with the point made by the noble Lord, Lord Kerslake, about people not being able to walk into social housing as they were able to many years ago. When I was a councillor in Southwark in the 1980s, we had a hard-to-let list. No such thing exists any more. The noble Lord, Lord Stunell, was right to point out that with 160 authorities contributing to the levy, there is a redistribution of money, and homes will be built in areas that have made no contribution and people from the areas that have made a contribution will not benefit from better housing. The noble Lord, Lord Carrington of Fulham, was right when he spoke about the housing crisis in London. As we heard in earlier debates, the city works because of the mix of people and tenures—wealthy people and people on modest incomes living side by side. That is how the city works and the problem with the Bill is that it could very well undermine that.
I hope that the Minister specifically responds to the point my noble friend Lady Hollis made about where the money is going to come from to replace the house when it has been sold. The sums do not add up. Where is all this going to come from? I accept the point made by the noble Lord, Lord Lansley, about how he thinks we can square the circle but, again, without wanting to reopen the regulations debate, that is part of the problem—we do not have any regulations here.
Amendment 66B empowers to the Secretary of State to require the local authority to replace every property sold with a property of the same type. It is much better for a family to be able to rent a social home; for one, it will have a more reasonable rent. They could then save for a deposit to buy their own home or exercise their right to buy. Amendments 68B and 68C seek to put in the Bill different provisions, which are all very valid, ensuring that homes sold under the right to buy are replaced.
I will leave my remarks there and may come back with further points when the Minister responds.
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Baroness Williams of Trafford: My Lords, I thank all noble Lords who have taken part in the debate. In responding to Amendment 66B, I assure noble Lords
that we are committed to using a portion of receipts from the sale of vacant council housing to fund the delivery of more homes. We have chosen a way that will not require all local authorities to deliver that housing, as we know that in some cases they do not want to be responsible for it. Instead, authorities can choose to enter into an agreement with the Secretary of State to retain part of the payment in order to use it to deliver more homes. This is the same process as currently happens with the sale of properties under right to buy.
Baroness Hollis of Heigham: I want to ask the Minister this as I genuinely do not know what the answer is. If the local authority wishes to retain some share of the proceeds, but the demand for discounts, even within its own city area, surpasses the amount that it wishes to retain to replace its stock, how will the decision be made?
Baroness Williams of Trafford: My Lords, in that sort of situation, I would imagine that the local authority has a number of options available to it, including the use of capital reserves, or indeed borrowing if it wished to. Alternatively, of course, private sector developers could build housing. A number of options are open to councils in bringing forward more houses within the local authority area, including the retention of a portion of the receipts in order to deliver new homes.
Lord Shipley: A moment ago, the Minister talked about vacant homes, and I really would like to be clear whether the Minister is talking about vacant homes or surplus homes. Is there a clear definition that we can have on the record of what a vacant home is and what a surplus home is?
Baroness Williams of Trafford: My Lords, when I talked about vacant as opposed to surplus, we were talking about assets that were surplus in terms of government but vacant in terms of local authority homes. Vacant, in my mind, means empty, but there will be more detail later defining at what point a property becomes empty.
Lord Shipley: If a vacant home is a home which is empty, for how long does it have to be empty and can a local authority say that that empty home is actually required but just happens temporarily to be empty?
Baroness Williams of Trafford: That is precisely the point I am making. We will be defining what empty—that is, vacant—means in due course in the dreaded regulations.
The Government will be able to ensure that under these agreements local authorities will, as I have said, use the receipts efficiently to deliver as many new homes as possible. Where they have an agreement, we want local authorities to have discretion about how the new housing can meet the needs of their local community, rather than being constrained in primary legislation to replacing the housing they sell with homes of the same tenure. Just to help my noble friend Lady Gardner of Parkes, tenure refers to the type of housing, such as shared ownership. I know people use the word differently in different contexts.
I have just received an answer to the vacant homes point. A home is vacant when a tenancy granted by the local authority has come to an end, as defined in Clause 77.
Lord Shipley: So it is clear that a vacant home simply means that a tenancy has been given up and that, as a consequence, there is a vacancy. However, it may never be empty, because a tenant might move out and another tenant might move in the very same day. In that case, of course, it may well be that that vacant home is not a surplus home.
Baroness Williams of Trafford: When I used the term surplus, I meant surplus assets that government might seek to dispose of, and I gave the example of King’s Cross. For local authorities, vacant referred very much to housing.
Lord McKenzie of Luton: Could the Minister help me with a definition? Does succession to a tenancy create a vacancy along the way? On the death of a tenant, if someone succeeds to that tenancy, does that cause a break that would bring these issues into play?
Baroness Williams of Trafford: It would depend on the context of the succession. If the successor was a spouse, there would not be a vacancy because that spouse would be immediately, automatically entitled to take on a future lifetime tenancy. If, for example, a child wanted to take over a tenancy, it would probably be short term. The only automatic right is with a spouse.
Baroness Blackstone: May I also seek clarification? What if a tenancy comes to an end and there is a long waiting list of potential tenants with very urgent housing needs, of the sort described by the noble Lord, Lord Carrington—very large families, homeless people, people living in totally inadequate private rented housing with large numbers of small children? Is the Minister saying those groups are to be ignored, in spite of their acute housing need; that in an authority where there is not enough social housing to go round, the local authority is to be forced to sell that high-value property, which is possibly quite big and therefore suitable for some of these families with acute housing need?
Baroness Williams of Trafford: My Lords, the vacant high-value asset may not necessarily be a big property; it could be a small property, but the point is that it is of high value and vacant. The sale of these high-value vacant properties will add to the number of homes for a variety of reasons for people all over the country.
Baroness Hollis of Heigham: Does that mean that housing need in a particular local authority will be discarded to fund discounts?
Baroness Williams of Trafford: My Lords, no, it does not mean that for housing in a particular local authority because housing need is determined in a number of different ways. We are talking simply about the selling of high-value assets to provide new homes, which are in high demand, in a national context.
Lord McKenzie of Luton: Is this not in danger of running in conflict with another government policy—the bedroom tax? If part of the rationale is to encourage people in larger houses to downsize and give up the tenancy to do so, the local authority is then faced with having to sell the high-value property. How does that work?
Baroness Williams of Trafford: On the spare room subsidy, if someone is in a property that has more bedrooms than they need to occupy, my understanding of the mechanism is that a suitable property would then be found for them. The noble Lord is asking whether the property that has been vacated would then fall into the definition of a high-value asset. The honest answer is that I do not know but the probable answer is not necessarily at all—probably not—because we are talking about high-value assets across a number of bedrooms. So I do not think it would but I will take that away, think about it and get back to the noble Lord.
Lord Best (CB): My Lords, this comes up under Amendment 68A, which we are coming to. If you have moved out, it is a transfer. We will be debating that a little later.
Baroness Williams of Trafford: I thank the noble Lord for that.
Where we have an agreement, we want local authorities to have discretion over how the new housing can meet the needs of their local communities, rather than being constrained in primary legislation to replacing the housing they sell with homes of the same tenure. We come back to the term “flexibility”. We think it is also important that local authorities are innovative and flexible in their approach to delivering more housing, so there are opportunities for them to contribute their land, make use of their HRA headroom or cross-subsidise from the development of market homes, which I mentioned to the noble Baroness.
Baroness Hollis of Heigham: My Lords—
Baroness Williams of Trafford: I am just going to make a bit of progress if that is okay by the noble Baroness. Perhaps she can come back to me at the end. Is it really urgent on the point that I have just made?
Baroness Hollis of Heigham: It is simply that the people on that waiting list want that which is being sold, which is a socially rented house. They do not want to buy—they cannot afford to—they do not necessarily want to go into a different tenure of house and they do not want to work with a developer; they want what the local authority is being forced to sell with no guarantee of a replacement.
Baroness Williams of Trafford: My Lords, I have just been over that. I want to get to the point about the borrowing headroom.
The noble Baroness also asked how a local authority with limited stock that wants to provide more for local residents does so. I mentioned in debate on the previous group that we have made available a significant amount of additional borrowing headroom, and the allocated
extra borrowing will support about 3,000 new affordable homes in 2015-16 and 2016-17. Local authorities’ ability to borrow will continue to be constrained by whether borrowing is prudential, obviously, and within borrowing limits. Consideration of the former will primarily concern the affordability of the borrowing, which should not be affected by this policy.
The Government are committed to making a deduction from payments in respect of the debt supported by those properties that are taken into account in a determination. This should provide some assistance for local authorities to borrow within their existing caps, as well as utilising other options available to them to finance the building of new homes.
Amendment 68B would ensure that any agreement with a local authority outside London would require the delivery of at least one new affordable home for each property taken into account under the authority’s determination. We want the flexibility to enter into agreements that will result in as many new homes nationally as possible, but it would be better to be able to have an agreement that resulted in slightly less than one for one in some cases, rather than have no new homes built at all. Therefore, we would not want to constrain through primary legislation the flexibility to make this choice. The amendment would limit the Secretary of State’s ability to support agreements in cases that would deliver less than one new home for each one sold, removing the chance for some local authorities to have agreements to retain receipts and lead on the delivery of new housing, and devaluing the key flexibility in the legislation that receipts can be used to fund new housing or things that facilitate its provision.
The need for services and infrastructure to support new developments has been raised in your Lordships’ House, the other place and by local authorities themselves. I understand the sentiments with which the noble Lord, Lord Best, tabled Amendment 68C. If we had specified a target for the delivery of additional homes in primary legislation, we would want to consider carefully how combined authorities could help to deliver that target. However, we do not think that a target is the right approach for local authorities outside London. Instead, the provisions enable the Secretary of State to enter into an agreement with local authorities regarding the additional homes. Local authorities will have the flexibility to work collaboratively with each other, with combined authorities—as they already are doing—or with other housing providers to deliver the agreement. The key thing is that delivery should be a local decision and that the Government will be able to hold them accountable for this delivery.
Finally, I address opposition to Clause 72. Building new homes is at the heart of these proposals. We want as much flexibility as possible in what new housing will be provided and where, in order to ensure that as many new homes can be built as possible. We believe that this will be best delivered through agreements rather than putting restrictions and exemptions in the Bill.
Clause 72 enables the Secretary of State to make an agreement with a local authority to reduce the amount that it is required to pay under the determination. The
local authority will use this amount to provide more housing. To avoid accusations of good money being thrown after bad, we would consider councils’ past performance and plans for delivery in deciding whether they should be able to retain some receipt. For example, if a local authority wanted to lead on a programme to build new homes using funds from the sale of vacant high-value housing, it could seek an agreement with the Secretary of State to reduce the amount that it had to pay. If that agreement was signed, the local authority would use that retained amount to fund the provision of new housing, in accordance with any terms and conditions set out in the agreement.
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Although there is a national need for more houses, we also know that there are particular housing pressures in London, as many noble Lords have pointed out. When the Secretary of State has an agreement with a local housing authority in London, it must require the delivery of at least two new affordable homes for each high-value dwelling. It is important to stress that every home built using receipts from the sale of the vacant high-value housing is an additional home. We have been clear that funding of the building of new homes is one of the two key uses for these receipts, along with funding right-to-buy discounts for housing association tenants. The voluntary right to buy will further increase housing supply, as the housing association will use the sales receipt to fund the provision of another home.
Turning to some specific questions, the noble Lord, Lord Kerslake, asked why there was a special provision for the funding of two new homes for every one that was expected to be sold in London. It is because of the specific needs of London. London has such an acute housing need that it is estimated that about 49,000 to 62,000 additional homes are required every year. Net housing completions stand at 23,986 for 2013-14, and these represent 80% of the 29,830 target in the 2011 local plan. The Secretary of State and the Minister for Housing are continuing to engage with the GLA and the local councils on how two new homes will be delivered for each one that is expected to be sold in London.
The noble Lord, Lord Kerslake, also talked about the local authorities’ borrowing capacity and limitations. The 165 HRA authorities in 2014 had an in-year net surplus of £464 million. They accumulated general HRA reserves of almost £2.5 billion and a borrowing headroom approaching £3.4 billion. While we will continue to consider the impact on local authorities, we have no further plans to raise the borrowing caps.
The noble Lord, Lord Stunell, asked again about the geographical level at which high value would be set. The Bill provides some flexibility on the detail of the legislation, which is important as we continue to collect data and engage with local authorities on the best way to set the high-value threshold. Although I said that I believed that local authority level is an option, and that we have collected the data to this level, the decision has not yet been made. I probably made that clear already in my previous comments. Again, this debate will inform how we take this forward.
I hope that I have covered all questions that noble Lords wanted answering and that our clear commitment to using receipts to fund the delivery of more housing provides reassurance to noble Lords. Clearly, noble Lords may ask me any further questions if they wish, but, on that note, I ask the noble Lord to withdraw his amendment.
Lord Kerslake: My Lords, I am grateful to the Minister for her response and to noble Lords in this Chamber for their contribution to this debate.
I will present the position simply. In relation to London, the Government have recognised a housing need and have a stated intent to achieve two for one. That is, therefore, specified in the Bill. In relation to the country as a whole, the Government have also recognised that there is a housing need and stated their intent to have one-for-one replacement. That is not in the Bill, and we have, as we sit here today, no way of knowing the mechanism by which that will be delivered. The amendment here seeks to put this point about the Government’s intent beyond doubt. It puts no more prescription on local authorities outside London than the Government are seeking to put on local authorities inside London, so this is an important aim.
Baroness Williams of Trafford: I apologise for interrupting the noble Lord, but does he agree that the one-for-one replacement is in the voluntary agreements?
Lord Kerslake: There are, of course, two one-for-one policies here. There is one-for-one replacement in housing associations, which is one thing that we will need to focus on, but it is in a voluntary agreement. I am now talking about the one-for-one policy in relation to high-value sales—or higher-value sales, as I like to call them—which is in the Bill and statutory. That is what I have focused on in my amendment, not the housing association part.
The central point is that we see the need in London, and I would be the first to acknowledge the London need. Indeed, that was the subject of the London Housing Commission, whose report I published this week. There is also a big issue of need across the country. Some parts of the country do not match London but have very severe problems. For example, we have heard today that Bristol has huge housing need. The purpose of my amendment is to give the same degree of confidence about the national policy that we are clearly achieving in relation to the London policy. That does not seem an unreasonable thing to seek. It does not give the absolute confidence, which some noble Lords have sought, that you will get the same property in the same neighbourhood at the same time. Indeed, that is part and parcel of the flexibility to which other noble Lords have rightly referred. However, if there is complete flexibility, there is no confidence about the delivery of the policy, and that is where there must be some statement of intent. I do not care where this assurance is given within the Bill. I think I have put it in the right place, but the noble Lord, Lord Lansley, might have a different view. The key point is that we do not have the assurance.
I shall finish on two points. First, there are surplus resources in local authority HRAs to deliver maintenance and investment, but they have plans to use that funding. The question is how we deliver the plans that they already have and secure the delivery of this new policy that will put an additional demand on their borrowing requirements. It is perfectly possible and consistent with other government policies to say that if we are putting in additional demand, we will give the wherewithal to enable the delivery of that demand, hence the proposal in relation to capital. Secondly, in the amendment I very clearly sought to say that, in terms of tenure type, it should be the same where that is practical. We have not dictated that it has to be the same tenure type because clearly practical issues will come up in individual authorities.
This set of amendments addresses a central issue that concerns people about the practical delivery of one for one and puts the Government’s intent beyond doubt within the Bill. That said, in the normal fashion, I beg leave to withdraw the amendment.
Clause 68: Housing to be taken into account
66C: Clause 68, page 30, line 16, after “Account),” insert—
“( ) it is not managed by an existing tenant management organisation, as defined by the Housing (Right to Manage) (England) Regulations 2012, and managing 1,500 or fewer local authority tenancies,”
Lord Beecham: My Lords, the Bill’s provisions in relation to higher-value council properties and pay to stay—I beg your pardon; I think I may have the wrong group. Let me just check.
I am sorry, I got slightly confused after so many hours in the Chamber. I dare say I am not alone in that. I was right to start where I began.
The Bill’s provisions in relation to higher-value council properties and pay to stay, which we are dealing with later, but not today, are predicated on a myth; namely, that council housing is subsidised by the taxpayer. In reality, housing revenue accounts have to balance their books, matching their expenditure to their income, and we have heard that the Government are deliberately reducing that income by their imposed cuts on rent levels for the entire social housing sector—councils and housing associations alike. As I have said, this single action will cost the sector billions over time. In Newcastle’s case alone, it will cost £593 million that otherwise would have gone into maintaining or improving the existing stock and investing in new homes. Similar effects will be felt at different levels by housing associations.
The ostensible reason for selling high-value homes is that this will release money with which to build new ones—but, as we have heard, in reality most of it will go to the Treasury, ostensibly to facilitate right-to-buy housing association properties. This is not likely to
lead to new building, let alone to new building in the locality whence the sales proceeds derive. I refer again by way of example to the situation that this will create in Newcastle. I suppose I ought to remind the Committee, if it needs reminding, of my interests as a councillor in Newcastle and generally in local government. Newcastle has some 26,000 council houses, 1,651 of which would fall under the Government’s definition of “high value”, according to Shelter—I particularly like the “1” in that figure—although I understand that the city council believes that the number could be greater.
On the Shelter figure, some 82 higher-value homes a year could be the subject of forced sales in the event of their becoming vacant, or deemed sales if they do not, which would generate a very substantial payment—on this sort of figure, something like £1.2 billion, if one took a median figure of a two-bed house at around £155,000. There are proposals for different levels of assumed value in London and elsewhere, and the Shelter list indicates a range in Newcastle for two-bedroomed houses of £125,000-£155,000 and, for larger houses, a figure of £250,000. Clearly, very substantial sums could be raised by the sales of these 82 homes—or, as I say, a likely larger number, obviously yielding a larger amount.
This group of amendments identifies a series of house types that will be exempt from this levy. Amendment 66, in my name and that of my noble friend Lord Kennedy, would exempt housing management managed by existing tenant management organisations, to which we have had some reference already in Committee—the very kind of organisation that one might have thought would be attractive to the Government and indeed to the Policy Exchange think tank that spawned the concept.
Amendment 68 would require regulations to provide that housing forming part of a housing regeneration scheme, or consisting of specialist housing or recently improved housing, should be excluded. It defines housing regeneration schemes and describes specialised housing as designed or intended for occupation by the elderly, people needing care or support with mental health problems or learning disabilities, or other features designed to make it suitable for use by disabled people. These are clearly priority areas that should be protected. Equally, the amendments propose that where properties have recently been improved or substantial repairs have been being carried out in the previous two years, where again, clearly, the local housing revenue account will have contributed substantially to the current state of the property, they should also be exempt.
The amendment chimes well with the views of Nottingham City Homes tenants, about whom we have heard from the noble Baroness, Lady Bakewell, who clearly has written to a number of members of the Committee. The chairman is a tenant of 40 years’ standing, who asserts in her letter:
“Our properties have been adapted for tenants with disabilities. If they are sold then other homes will have to be adapted too, at extra cost”.
Clearly that will be a burden on the local authority housing revenue account, and the benefit will accrue to the Government or those who buy the home if it is sold on the market. She makes a telling point:
“There will no longer be any affordable council housing in certain neighbourhoods—council housing will be marked out as something that is only in poorer areas”.
That trend is already under way. The street in which I live, in my non-£5.9 million house, is a nice street in a residential area of Newcastle, at the bottom of which there used to be a block of council flats. All those council flats have long since been given over to other tenures.
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I subscribe to Amendments 67B and 67C, in the name of the noble Lord, Lord Kerslake, and to Amendment 68A, in the names of the noble Lords, Lord Best, Lord Kerslake, Lord Stoneham, and in my name, which respectively refer to the exclusion of properties that have been built since 2008, are tied to a regeneration scheme, used as supported housing, exempt from local authority right to buy, or vacant due to restoration or tenant transfer. Underlying these amendments and many others that we have discussed is a fundamental issue; namely, the centralist approach of the Bill on what ought to be matters for local decision, affecting as they do local communities and the aspirations of local people, whether existing tenants or would-be tenants, as well as those who wish—perfectly properly—to own their own home.
The imposition of a universal prescription for all circumstances of this kind is of a kind that would make Stalin blush. The notion that the Government not only tolerate the activities of Mr Putin, which they seem to do, but are reverting to the practice of one of his less amiable predecessors is quite astonishing. I beg to move.
Lord Shipley: My Lords, I have put my name to Amendment 66E, which relates to the point made a moment ago by the noble Baroness, Lady Blackstone, about demand and whether a local housing authority would be required to sell off a high-value home, which perhaps has a large number of bedrooms, even though that property could be in demand for rent. It also goes back to the discussion we had about the meanings of the words “vacant”, “empty” and “surplus” in the previous group, so I do not seek to go over that ground again.
I will emphasise two points, the first of which is that the noble Lord, Lord Kerslake—again, in a previous group—clarified something which we all know: there is no surplus of council and local authority housing in this country. Maybe there was a few years ago but today there is not. So it is very important that we understand what the impact of selling vacant high-value properties will be on those who are on social housing waiting lists—and, as we know, 1.6 million people are on those lists. This amendment simply says that the local housing authority should deem that there is no demand for that high-value property for rent. That is it, and it is a perfectly legitimate test to apply. If there is a waiting list in that area for that property, there should be no compulsion on a local authority to sell it.
Lord Kerslake: My Lords, I will speak to Amendments 67B and 67C, which are in my name. Both amendments relate to the exclusion of certain types of property
from the forced sale programme, which would therefore be suitably amended with regard to the formula for the so-called levy.
The first category identified in Amendment 67B seeks to exclude properties that any reasonable authority or person would regard as sensible not to be included in a forced sale policy. I will not go through all of them but will give a few examples. The local authority would seek to achieve the maximum flexibility possible in the progression of a regeneration scheme. To be forced to sell off certain properties that are critical to the delivery of the regeneration would be a perverse outcome indeed. The exemption of properties that are themselves exempt from the right-to-buy policy would also seem absolutely logical, and this comes back to the formula that we might see. Again, the regulations may do this—but we have no regulations to fall back on.
A third area is vacancy, which we have spoken about. Under the bald definition of “vacancy” that we have had hitherto, if a property becomes vacant, it will be put up for sale. For the purposes of the Bill, it will be essential that it is regarded as being considered for sale, albeit that it is covered by a formula rather than an individual requirement. If, however, existing tenants wished to move into that property because they had already been identified as being in need, the property would be excluded. That sits alongside the amendment in the name of the noble Lord, Lord Best, which covers much the same point. At the very least, the amendment would cover high-value properties where there is clearly an existing tenant in another property in the authority who might move into it on a transfer basis.
I hope that noble Lords will see that the intention behind Amendment 67B is sensibly to exclude properties that any rational assessment would judge to be not appropriate to form part of a forced sale policy. I hope that the Minister will explain why any of these properties should be in contention for being expected to be sold or for being taken into account in the formula. I would be grateful for the Minister’s response on that point, given the nature of the properties involved.
My second amendment in this group, Amendment 67C, relates to the issue that we discussed this morning. If a local authority is fortunate enough to be in the position of the authority of the noble Lord, Lord True, who spoke earlier, and has transferred its stock, it will not be subject to the levy. If, on the other hand, for very good reason it decides at a subsequent date to transfer its stock, it will continue to be subject to the levy. As we heard from the Minister, this will be a levy in perpetuity and there will be no situation in which the authority can escape it. This will happen despite the fact that the authority transfers the stock to another organisation and therefore has no direct role in relation to the efficiency or otherwise of the management of that stock. That seems perverse, and it will be extremely difficult for the Government to deliver without some form of challenge. One local authority, through a sheer accident of timing, will be subject to a levy when another authority which takes very similar action is not subject to it. That seems perverse.
Lord Stunell: Is this not actually a back-door way of abolishing stock transfers? There will be no more in the future.
Lord Kerslake: The noble Lord makes a very strong point. The stock transfer mechanism has been available to local authorities of all political persuasions as a means of improving the quality of the stock for, and therefore the well-being of, their tenants. It has been a very powerful model for improvement. Indeed, there are plenty of examples of transfers. They are not always appropriate but, where they have gone well, they have resulted in significantly improved stock. The question here is: why would a local authority continue to progress such a transfer when it would carry on paying a substantial levy with no means of financing it? Therefore, the noble Lord makes a very good point.
Local authorities are now in quite challenging circumstances in relation to managing their stock. A number of smaller authorities are asking whether they can sustain the management of their stock, given such things as the rent reductions and the impact those have on the viability of their stock. I know this for certain because I have been in conversation with a number of them. For some local authorities, the logical answer is to deliver a stock transfer. So, not only does it prevent the opportunity of transfer because of the positive benefit to a local authority; it also inhibits the transfer where local authorities have very significant issues that they need to address and that can only really readily be dealt with through a transfer process.
I should emphasise that I am not suggesting local authorities should or must transfer their stock—that must be their decision. What I am saying is that it is a perverse position that those authorities that choose to do that in a year’s time will be subject to a levy that those who chose to do it a year ago will not. I cannot believe that it is fair or reasonable for that to stay in the Bill. Therefore, I move that it be taken out.
Baroness Grender (LD): My Lords, I rise to speak to Amendments 67, 68E and 69 in particular, but am generally supportive of all other amendments in this group. Other noble Lords have talked about how concerned they are that this part of the Bill will reduce the number of low-rent social homes in places where they are needed most. I am a governor of an inner-city school where over 50% of children are on pupil premium, but in an area where market rents are at a premium and house prices have continued to rise, even during the 2008 recession. I want to use that small community as an example of some of the challenges posed by this particular part of the Bill and to raise the questions that I have. I will then go on to explain my amendments.
How will key workers be able to live near a place such as I have described on reasonable rents? How will government objectives on the need for cohesive communities be met? We need a mix of tenure in every block and every street. I was particularly struck by what the noble Lords who spoke about that earlier had to say, especially the noble Lord, Lord Carrington of Fulham. What about children in the most challenged families who need a stable home near a school like the one I have described, in a very expensive part of
inner-city London, so that they can have the stability they need to help them overcome all the other challenges in their lives? The school must stick with them throughout their childhood. For that reason, I support many of the amendments in this group and have extreme concerns about the sale of these high-value asset houses. I make those general comments as this is the first time I have spoken in the debate.
The amendments tabled by me and my noble friend Lady Bakewell of Hardington Mandeville are about newbuilds for local authorities and an exemption of those from sales. Without an amendment of this nature, the threatened forthcoming sell-off puts at risk existing building programmes. I will focus on that because councils are pausing, rather than build an asset, because they believe that they may lose the value of that asset almost as soon as it is built.
Shelter estimates that almost 113,000 council homes are likely to be above the value threshold, of which 78,778 will be lost from the most affected local authorities, of which half are in inner-city London. As other noble Lords have said, we are basing this on Shelter figures because, at the moment, that is our best grasp of figures in this area pending more detail from the Government. The top 20 councils that are most impacted currently have plans to build 20,390 homes. However, even the threat of this legislation means that they are pausing in building these homes. For example, Islington Council has said that the policy could end its newbuild programme. I would be interested to hear how the Minister believes councils can even borrow at the moment to build, given that lenders can have no confidence in future revenue from that property if, as soon as it is built, it is in jeopardy of being sold. Indeed, existing council building programmes are often partly financed from the revenue projected from the sale of a small number of high-value council homes, with one fundamental difference, which has been much debated already: the councils get to keep the money.
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Of those 20 most affected councils—and this is so important to these Benches and other noble Lords who have expressed opposition to this part of the Bill—159,014 people are on the waiting lists, 22,371 of whom are children, who right here, right now and even as we speak are living in temporary accommodation. As we focus on those children, can we please learn from this Government how they will be helped into permanent housing by the sale of these assets? Shelter believes that this sell-off will reduce overall stock. High-value homes sold are likely to become buy-to-let properties—other Members have spoken at length about the danger of that, so I shall not expand on it. Those families in temporary accommodation are not even back to square one; it is even worse, and this is not solely an inner-city or London problem. This comes on top of the 1% rent reduction. The noble Lord, Lord Lansley, talked about South Cambridgeshire council, his own area, but it recently said in evidence that its housebuilding programme of 1,000 homes had ceased overnight because of its concerns about what is coming down the track in terms of sales of high-value assets. It has built four houses from its programme for the next 20 years, but as I understand it, it has now
ceased building entirely. Joseph Rowntree estimates that the recent rent cut has already resulted in 34,000 fewer homes being built. I know that we have been very attached today to commitments in the Conservative manifesto, so I simply remind the Government of that manifesto commitment to 275,000 additional affordable homes by 2020. However, if 34,000 fewer homes are being built because of the rent cut—and some councils, including Conservative councils, are now pausing their housebuilding programmes—even that target, which we would prefer to be larger, is in jeopardy. In Lewes District Council, the Conservative cabinet has mentioned the uncertainty over future plans for council housing as a reason to put on hold its current housebuilding plans. I am concerned that we will look back at this moment and see a drop in the level of council house building while this policy is being debated.
The current trend of reduction in social housing is bad enough, as Joseph Rowntree makes clear, with the figure of one in seven people being so housed today projected to decline to just one in 10 by 2040, but those projections were made before the freezing and pausing of housebuilding that I have described. We would like the sale of those assets to be held back when it comes to new build in order to encourage councils to get on with building social housing.
It is our understanding that, in communication which DCLG has so far had with councils to develop this policy, it has been clear that the department considers new-build homes to be subject to sale under the terms of the Bill as it currently stands. In Committee in the Commons, the Minister ruled out newly built homes that had yet to be occupied as counting as high-value vacancies, but, as far as we are aware, DCLG has not committed to limiting the scope of new-build sales beyond that. Therefore, a new home could potentially be sold off months after it was occupied only for the first time if the tenant moved or died. Although I appreciate that the Minister is working within the constraints of how much material and information have been provided to her through regulations, particularly in this area, it would be great to know what the Government intend. As someone who worked for a year at No.10, I know what will be happening there right now. This place and our complaints about the lack of regulations will feel very remote. Instructions will come through to Ministers, as they always do, “to just get this Bill through and land it, and those pesky Lords are being very annoying in all these questions”. I understand and sympathise with the situation that the Minister is in. Constructive amendments such as this one are meant to be helpful. It gives reassurance to councils that they can carry on with their building programmes and hold on to a valuable asset.
Many of these amendments—we have seen this throughout the day—are like a guessing game. Why are they a guessing game? We all know that it is because we do not know the detail so we cannot debate it. For example, I also have in this group Amendment 68E, which simply says that a property should be allowed to be vacant for six months. That is a complete stab in the dark, because we have nothing else to build on. The Government may say that if a property is vacant for six minutes that means it is a vacant property. I am saying six months. I would love
us to be able to debate the detail of that, but we all know where we are with that. If new-build homes are not excluded, the risk that homes will have to be sold shortly after being occupied will be a major disincentive to new council building, hence the amendments that we have tabled in this group. The same applies to homes that have been brought back into use through significant renovation.
I want to return to the small catchment area I described—a school with a high level of pupil premium, in an area of high market rents. Key workers are priced out of the area. Mixed tenure is gone and the mixed community is gone. Children on pupil premiums are priced out of the area altogether. That is not a community that I ever want to live in or want to see in the future, and I do not think this Government should either.
Lord Best: My Lords, I support all the amendments in this group, not least those in the name of the noble Baroness, Lady Grender. My name is added to Amendment 68A, but I begin by supporting Amendment 66C about tenant management organisations in the names of the noble Lords, Lord Kennedy of Southwark and Lord Beecham. That amendment relates to the council housing that is managed by tenant management organisations. This is in a quite separate context from the earlier discussions about TMOs, which the noble Lord, Lord Young of Cookham, raised an anxiety about. This time, these managed properties are not in danger of losing a right to buy. Instead, this is just about excluding the tenant management organisation properties from the calculation of the vacant high-value local authority housing levy.
That may seem a rather specialist exclusion from the levy, and indeed tenant management organisations do not count for more than a few per cent of council housing, but these organisations, as the noble Lord, Lord Kennedy, said, merit special attention. They were a product of policy from an earlier Conservative Government who wanted to devolve responsibility to tenants on self-help principles. They have attracted significant input from volunteers giving up endless time to make their council estates better places. Of course, housing co-operatives are excluded from the sales under the vacant properties programme because they are registered as housing associations. However, although tenant management organisations are similar to housing co-operatives, the homes that they manage remain classified as council housing and therefore their property gets caught up in the new levy.
I recognise that local authorities must choose for themselves which vacant properties to sell to pay the levy imposed on them, so a council could opt not to sell TMO stock; but for most councils, the very serious money involved on top of the 12% cut in income in rents over the next four years means that whatever housing goes into the calculation of the levy is very likely to have to be sold as vacancies occur to pay that levy. So this amendment seeks to take them out of the equation altogether.
As a case study, I have had a chance to consider the circumstances of a Southwark-based TMO, the Leatherhead JMB. It has been going for 22 years and
over time has turned around an unpopular collection of estates and has created a well-liked and settled community. It has an extraordinarily high level of tenant satisfaction. On a 78% turnout, 92% of tenants expressed their support for the TMO. The London Borough of Southwark, using the Localism Act 2011 introduced by the last Government, has devolved to the TMO financial control of what is in essence a separate housing revenue account. Two government Ministers have visited to celebrate this great example of localism in action. The Leatherhead JMB is currently engaged in building new homes in addition to its very cost-effective management role. It is willing and able to sell a small number of vacant properties selected by them to raise the necessary funds for new build. But, of course, if the properties all went into the calculation of the levy and its parent body, the London Borough of Southwark, then felt compelled to sell all the vacant homes, two-thirds of the funds would go to the Treasury and this would scupper its plans.
What we have here is really a housing co-operative by another name and as such it seems entirely appropriate to treat the TMO as if it were a co-operative and therefore a housing association outside of the levy. Because the tenants themselves have made this a popular place, they have raised its value and therefore its vulnerability when it comes to compulsory sales of high-value council-owned, but not council-managed, properties. This settled community will also be disproportionately affected by the sales of vacant flats, very often to overseas buyers because of its London location close to the river. This particular issue may not have crossed the Minister’s desk, and I would make a special plea for her to call in the papers and have a good look at the special status of tenant management organisations.
Amendment 68A concerns people who want to transfer from one home to another within the social housing stock. My concern is about the calculation of the levy on councils which is gleaned from selling vacant properties. As Shelter points out, “Households need to move within the social stock for a large number of legitimate reasons. They may be under-occupying their current home and want to downsize or be subject to the under-occupancy penalty, the bedroom tax, and need to move. They may be overcrowded in their property and need extra room. They may need to move for work, or to move closer to relatives in their old age”. No one wants to discourage transfers since they ease problems of both under-occupancy and overcrowding.
The question raised by Amendment 68A is this. When working out the amount of the levy that a council must pay, will the DCLG’s calculations exclude those vacancies created by transfers; that is, by people who vacate one council property but move immediately into another council or housing association property? Obviously a mutual exchange between two tenants does not create a vacancy since both of the homes that are vacated are instantly refilled. The process with a transfer is that a property becomes vacant, enabling a transferring tenant to move in and thereby theoretically creating a second vacancy in the home they are leaving. But the person transferring will immediately occupy
the other council property, so it cannot be right to count two properties as empty because of a transfer. We know that the DCLG is already well into the consultation process for determining the levy, and I would be grateful for clarification from the Minister that this point has been taken on board. From what she said earlier, I think that the answer may be in the affirmative.
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Baroness Hollis of Heigham: My Lords, I strongly support Amendment 67B, moved so well by the noble Lord, Lord Kerslake. I want to talk about two aspects of this: proposed new subsection (2)(e), on restoration work, and paragraph (f), on transfers, about which the noble Lord, Lord Best, has just been speaking.
Unlike housing associations, local authorities retain a statutory responsibility for seeking to meet the whole housing need across their authority—whether they do it directly or indirectly, whether they are helping to place homeless people in temporary accommodation in the private rented sector, giving advice, or whatever. That is their responsibility. It belongs to them, and rightly so. Councillors are elected to deliver that legal requirement.
Why am I picking on these two paragraphs? I could have spoken on the others and on supported housing, but that would repeat some of the debates we had earlier on rent reductions for supported housing and how that will affect housing associations. I will just say that if supported housing has to become vacant, we will end up hoping that housing associations can pick up the slack. Many years ago I purpose-built supported housing for people with severe learning disabilities. I think it was probably the first in the country. It was hugely expensive. We had to provide extra sound insulation because of noise, different types of carpeting, insulation, all the fittings and fixtures and so on, smart appliances to reduce the risk of gas leaks, along with all the other things we were advised to provide by the admirable architects from the then DoE, such as John Goldsmith. Those individual units would now fetch quite a lot of money. It was basically a sheltered housing scheme. If they were sold off, no one else would meet the needs of those severely disabled people and their families, for whom they had been purpose built. I certainly do not think that any housing association could have afforded to take that on.
I want to talk about restoration work in particular. My city, like Bristol, Cambridge, Oxford and others, is an historic city. We have a lot of older properties, including some that are medieval, which were due for demolition. The city council moved in. We saved a street of 14th-century weavers’ cottages by one vote. We turned them into homes, which people rented. We maintained the ownership of them to assure proper maintenance. The maintenance on those properties was far too high for any owner-occupier reasonably to afford.
I also remember buying five gothic houses when high Victorian gothic was deeply unfashionable. We could have sold them off. Developers wanted to buy the site, knock them down and build three-storey blocks of flats. Instead, we rehabbed them and worked
with a local housing association—indeed, the housing association I went on subsequently to chair. They became a network of houses in which, again, disabled people and their carers could live, courtesy of the housing association. The housing association could not have bought them; we bought them through DOs and CPOs, as an alternative to seeing them sold in the private sector and demolished. That was partly for their streetscape value, at a time when high gothic was not yet popular—but I thought it was “coming up in the lift”—but also to meet a local need that would otherwise not have been met.
During the last 20 to 30 years, my local authority has bought one-off Victorian houses around the city for Carr Gomm, Nacro, St Mungo’s, Edmund’s and so on. They could not afford to buy the property. We rented to them at very modest rents indeed—virtually token rents. At one stage we had some 40 of these properties going directly to housing associations supporting specialist, unpopular groups in the local population, such as anorexic young women—you name it. In addition, we bought houses that would otherwise have been DOed. I rehabbed them to make them available as temporary housing so that people did not have to go into bed and breakfasts.
All that required restoration and sometimes removal from clearance programmes. Sometimes I had to use CPOs. I voided DOs, but as long as you render a house fit at reasonable expense, you are allowed to acquire on improvement grounds. Under the Bill, unless such properties are exempt, such recycling by the local authority of whatever comes their way would not happen. For example, the county council decided that it was going to widen a road. I remember this well. As a result, it bought a lot of properties along Duke Street. It subsequently decided not to do it. Those properties came to the local authorities and we were able to recycle them, for the most part, for special needs that otherwise would not have been met. Unless we protect the capacity of local authorities to use powers that housing associations have never had—legal powers of acquisition, such as CPOs, road widening and so on—and then recycle them into best use, we will strip out the ability of communities to meet needs that, unfortunately, are not always very popular but which it is absolutely right that we as a community should seek to meet.
My second concern here—I am very grateful that the noble Lords, Lord Kerslake and Lord Best, referred to this—is about transfers and exchanges. The Minister has not had very much to do with the bedroom tax, I think. The bedroom tax affected those who were not pensioners and who had one bedroom spare. Unlike the rather more civilised DCLG definition of underoccupation, which is two spare bedrooms, DWP decided to produce a new definition of underoccupation of its own, which hitherto did not exist in English law, of one spare bedroom. Some cases are now going through the courts as to whether, for example, people with severe disabilities are entitled to a bedroom each, and so on.
DWP sought to tackle something like 500,000 families that had, in its view—though this is being tested by the courts—one spare bedroom. If such a family “wished” to stay, it would expect to see something like £14 a
week removed from its housing benefit. What do those tenants do? Of those who stayed, something like 65% are now in arrears and local authorities are having to decide how best to help them—whether they have to seek eviction notices and all the rest. What mattered here was that local authorities did not have the stock or the capital resources to build the single-bedroom units that DWP thought it was cost-effective for such tenants to occupy. Why? Because local authorities and housing associations had, for the most part, been building two-bedroom flats because they are the most flexible form of accommodation whatever your need—whether for young families, older people with disabilities, or the frail elderly.
Because we have been unable to build, tenants have been faced with a choice. They have not been able to move within council house stock to a local authority new build, because local authorities have not had the resources to do it. They have not been able to downsize into a local authority property. So what have they done? Either they have stayed put, as I have said, and the arrears have mounted—this is now a really serious problem across local authority housing revenue accounts—or they seek to exchange. They cannot move into the private rented sector, because not only are the resources scarce but the housing benefit bill goes up and they then get caught by the local housing allowance. So their only option is to transfer.
DWP will tell the Minister—perhaps she knows these figures already—that nearly all the movement that has come from downsizing as the result of the pressure of the deeply unfair bedroom tax has come from transfers. Without that, the downsizing could not happen and the tenant would be locked into paying the bedroom tax almost in perpetuity and arrears and possible evictions would grow and grow. What the Minister will do, unless she is prepared to accept the substance of the amendment in the name of the noble Lord, Lord Kerslake, is lock those tenants into that situation. They will not be able to exchange, because that property would then immediately be available for forced sale by the local authority, so they will be locked into making good the reduction in their housing benefit, as a result of the bedroom tax, of £14 a week.
What does the Minister suggest that they do? It is not possible to go into the private rented sector and not possible to downsize into an existing housing association or local authority new build, because they do not exist. Good housing authorities rely on trying to encourage transfers and exchanges between their tenants to make best use of their space. If we say that the moment such a transfer or exchange comes into the purview of local authorities, that property is immediately available for forced sale, what the Minister will do is freeze the sensible use of local authority housing stock. I cannot believe that this is what she wants to do. It makes no sense, but as far as I can see, all the flexibility that she is talking about is actually the flexibility of the Secretary of State, not the flexibility of local authorities, which are being stripped of it, left, right and centre.
Will the Minister please understand the decades of social policy behind some of these exclusions that the amendment in the name of the noble Lord, Lord Kerslake, seeks to put into the Bill? If she does not,
and if she does not give those assurances, the ability of local authorities to work with housing associations to provide the homes they need for their special needs, as well as our ability as local authorities to allow our tenants to escape the problems of the bedroom tax, will come to a stop.
Lord Carrington of Fulham: My Lords, this afternoon we have heard many examples of potential housing crises and disasters caused by the way that tenants will be treated under this Bill. Most of the examples, of course, depend on the properties in consideration being high-value properties, and therefore available for sale. So a lot of the problems would be resolved if the Secretary of State determined what a high-value property was in negotiation with representatives of local authorities.
Clearly, there will need to be further negotiations in some cases to decide how you tackle particularly difficult cases. Putting all that in the Bill would indicate that we could produce a solution to these problems covering the whole of the country rather than one which reflects local circumstances, local authority by local authority. That is what we need to do, perhaps by means of the regulations which—as has been said many times, not least by my noble friend the Minister—we have not yet seen. We do not know when we will see them, but a resolution of this issue will be down to the good will between the Secretary of State and the local authority negotiators.
Some problems have not been addressed, one of which applies particularly in London. The noble Baroness, Lady Grender, touched on it slightly but I thought rather overegged the issue, if she will excuse my saying so. If a local authority sells a high-value property and uses the proceeds to build two other properties, the two other properties will probably not be high-value properties. Just the arithmetic, apart from anything else, makes that unlikely. However, London house prices are going up at a very high rate, and have done so historically. They are not going up at a high rate at the moment. In fact, in some places they are positively coming down. I am told by my friends in the property world that that trend may well continue for some years. If that is the case, the point I am about to make will not arise for some time. But I think we can expect that in due course the replacement properties that the central London local authorities build will rise in value.
It is conceivable that in a very strong domestic property market, a local authority will build a housing unit—if I can use that ghastly expression—which is currently below the high value but, because of its land value, is still quite a high-value property but not high enough to trigger the sale. But within a very short period of time, which could be as short as 12 months, or possibly two years—who knows?—it could become vacant, and at that time its value could rise just above the threshold. So there is a problem here. I think it applies particularly to London. I suspect that it will be less of a problem elsewhere. But it depends totally on the definition of high value in each area, as I said earlier. The key to making this policy work is to get the definition of high value right area by area and district by district.
Lord McKenzie of Luton: My Lords, I shall speak briefly to Amendments 67C and 68A. I apologise to the noble Lord, Lord, Lord Kerslake, as I did not mean to pre-empt Amendment 67C with my earlier question. I support the thrust of what the noble Lord said. The measure seems to look through a stock transfer and treat it as though it were still with the local authority. It is pernicious in the extreme.
I can see why the Government may want to do this. It goes back to the point about the possible ending of stock transfer, because one way of thoroughly undermining these provisions is for there to be a series of stock transfers, with the result that the remaining base of those authorities with housing revenue accounts diminishes. But if that is the fear of the Government, there ought to be another way of dealing with it; otherwise, if these provisions pertain in the Bill, it will be necessary to try, presumably by all sorts of contract means should a stock transfer take place, to pass the levy liability on to the RSL and away from the local authority. Whether that is practical or possible in any way, I do not know, but it seems entirely wrong to have this provision and I hope that the Minister will give a very clear explanation as to why it is here and why the Government consider it necessary.
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So far as Amendment 68A is concerned, my noble friend Lady Hollis covered the territory extensively. The most effective way for people to avoid the bedroom tax is to downsize into a smaller property—or, I think the DWP said, they should take in a lodger. I am not sure that many have done that. But if there is a risk that by encouraging a tenant to downsize to help their personal circumstances and their benefit position the local authority is opening itself up to another high-value property which could add to the levy, you can see the dilemma that councils are faced with. So this needs to be clear in the Bill.
These things are not a matter of individual local authorities. They may impact local authorities differently. These two issues—the stock transfer and protection from the bedroom tax—run throughout the country. That is why I support the amendments.
Baroness Williams of Trafford: My Lords, I thank the noble Lords, Lord Kennedy, Lord Beecham, Lord Best, Lord Kerslake, Lord Shipley and Lord Berkeley—in his absence—and the noble Baronesses, Lady Bakewell and Lady Grender, for their amendments. I welcome this opportunity to discuss their suggestions for possible exclusions from the housing that is to be taken into account in calculating the payments required from local authorities.
The legislation already includes the ability for the Secretary of State to exclude categories of housing from the calculation through regulations. Regulations will provide flexibility to ensure that if circumstances change over time or a need for different exclusions is identified in the future, this can be easily addressed by adding to, amending or removing exclusions in the regulations. We will carefully work through the suggestions that have been put forward, considering the points noble Lords and others have raised, while balancing the need for the policy to support the delivery of right to buy to housing association tenants.
Any exclusions of types of housing that have been suggested today would reduce the amount of money that would be available to increase overall housing supply and to extend home ownership, as the Government committed to in their manifesto. Therefore, we will be considering the data that have been submitted by local authorities, which I referred to earlier, covering the 1.6 million council properties, to identify the potential impact that these possible exclusions would have on the funding available to deliver our priorities.
While no decisions have yet been made, I assure noble Lords that we will be carefully considering the views expressed in your Lordships’ House and the other place and through our engagement with local authorities and other stakeholders when making these decisions. With this in mind, I hope that noble Lords will support our ongoing engagement with local authorities in looking at possible exclusions, and will agree to withdraw or to not move their amendments.
Turning to the detail of the amendments, Amendment 66C, tabled by the noble Lords, Lord Kennedy and Lord Beecham, concerns tenant management organisations. We are collecting data and engaging widely to inform the types of housing that will be excluded from the policy, but homes managed by TMOs that are in scope of this legislation must be owned by councils. We think that councils should not keep hold of their vacant housing, the value of which could be released to fund both the building of additional homes and the extension of right to buy to housing association tenants. Excluding housing managed by TMOs would result in less funding being available for these two aims.
Lord Beecham: Does that not effectively spell the end of tenant management organisations, and are they not a form of dealing with housing which is rooted in communities and self-management?
Baroness Williams of Trafford: Would the noble Lord explain why he thinks that this would be the end of TMOs?
Lord Beecham: Because if the properties become high-value ones, on becoming vacant they will be sold. The whole concept of a tenant management group—a sort of co-operative, if you will—managing the property will not last.
Baroness Williams of Trafford: My Lords, if the property were sold, surely the TMO would exist for different types of tenures.
Lord Beecham: I cannot see how that is going to happen. As people move out, the people who move in will be buying the house: they will not be part of a tenant management organisation at all.
Baroness Williams of Trafford: My Lords, that is not the intention at all, but I am very happy to take that away and have a think about it. I would not want to spell the end of tenant management organisations, because they fulfil a vital role.
It is important to say at this stage that under the formula approach, if a local housing authority has discretion not to sell properties and does not want to sell a particular property—for example, one managed by a TMO—it should choose not to do so, provided that it makes the payment to the Secretary of State. I accept that that does not answer the noble Lord’s point. Perhaps he could just let me think about this—although it may be too late, as I cannot think very well at the moment.
Amendments 67, 67B, 68 and 69 seek to exclude various types of housing when calculating the payments required from local authorities, including newly constructed or renovated homes, homes in regeneration areas, recently improved housing and specialised housing. Amendment 68A, in the name of the noble Lord, Lord Best, would exclude dwellings that become vacant as the result of a transfer to alternative social accommodation from being taken into account. I assure noble Lords that we will look carefully at all these suggestions and consider the points that have been made today, while balancing the need for funding from the sale of high-value vacant homes to support the delivery of right to buy to housing associations.
The noble Lord, Lord Best, is concerned about two social tenants being unable to exchange properties. I can reassure him that the two tenancies do not come to an end, so a vacancy is not created. I therefore confirm that, in these circumstances, mutual exchanges will not fall into the scope of the policy. The legislation allows the Secretary of State to specify other cases where housing would not become vacant for the purposes of the chapter.
Lord Best: I am delighted to hear that from the noble Baroness. My amendment was specifically about transfers, where we did not want two vacancies to be scored when clearly there is only one, since the person moving immediately occupies another home. I think that the noble Baroness hinted earlier that transfers would probably be treated in the same way as exchanges.
Baroness Williams of Trafford: I think that the noble Lord is right—he is more alert at this hour than some of us.
I also hear the reasons behind Amendment 68E, in the name of the noble Baroness, Lady Grender. I am afraid that I cannot accept it, because it would radically change the duty for local authorities to consider selling high-value housing by preventing the duty from arising until a property has been vacant for more than six months. She talked about the policy increasing homelessness, temporary accommodation costs and the housing benefit bill. We have, as I have probably said to her on a couple of occasions now, invested more than £500 million to help local authorities prevent almost 1 million people from becoming homeless. The two-for-one replacement in London will mean that more families can be housed in the capital.
I bring us back again to the intentions outlined in the Government’s manifesto. The argument is similar to that which I spoke to last Tuesday. The legislation is framed to provide local authorities with some flexibility
on what housing to sell and how to make payments to the Secretary of State. The duty is an important part of this, to ensure that the payments are focused on high-value housing, both in the calculation by government and the way they are met by local authorities.
I have listened to the noble Lords, Lord Kennedy and Lord Kerslake, and thank them for Amendment 67C, but I cannot accept it. It is right that the Secretary of State should be able to continue to take into account housing stock that has been subject to a transfer when making a determination.
My noble friend Lord Carrington of Fulham asked whether we were trying to stop any stock transfers. Local authorities are still able to transfer their stock to a private registered provider. The legislation does not stop the transfer of stock, but it is important that local authorities do not try to avoid having to sell off their high-value assets by making stock transfers. Where there is a need for more homes, we should be unlocking the value that local authorities hold in vacant high-value housing in order to fund more homes and help people into home ownership. The legislation means that the sale of vacant high-value housing will have to be one area that local authorities consider as part of their negotiation of any transfer, just as it will be one of the considerations of the Secretary of State when deciding whether to grant consent to the transfer.
The noble Lord, Lord Kerslake, and my noble friend Lord Carrington talked about perpetuity and how long the Secretary of State will continue to demand payments. We do not intend to place a restrictive provision on the length of time after a stock transfer when a determination could still be made. This will be considered on a case-by-case basis, recognising that every local area is different.
Lord Kerslake: I want to come back to this issue, although I am conscious of the hour. The Minister said that it is right that the Secretary of State should have this power to take transfers into account, but she did not say why it is right. What about the potential consequences that would flow where some very valuable transfers were prevented as a consequence of this provision? It looks like a small technical provision but it is not. It will adversely influence the future well-being of many tenants. I would be grateful for an explanation of why it should be taken into account when the clear intent is transfer with a view to improving the stock and the tenants’ quality of life.
Baroness Williams of Trafford: It is important for the Secretary of State to make the decision because he can make a judgment on why transfer is taking place.
Lord Kerslake: I accept that in the Bill it is a discretion—it says “may”—but we have no sense of knowing in what circumstances the Secretary of State might allow a transfer to go ahead without a levy and in what circumstances he would not. It is not unreasonable to want to know those circumstances. Perhaps the Minister could write to me on that point.
Baroness Williams of Trafford: I was about to say that, if I may, I will get back to the noble Lord in due course with a bit more detail on circumstances et cetera.
The noble Baroness, Lady Grender, made a very valid point about key workers. The two-for-one replacement goes to the heart of meeting the demand that is so significant in London and will bring into the market a supply of houses that could be used for people on whom we rely every day to get around London and go about our business.
I assure noble Lords that it is not our intention to prevent stock transfers. As I have said, we will consider on a case-by-case basis the implications of this chapter for these transfers.
With that in mind, I ask the noble Lord to withdraw the amendment, but, before I finish, I am looking forward immensely to our debates next week. I just draw your Lordships’ attention to the fact that yesterday, the Government published our response to the consultation on how income thresholds for Chapter 3 of Part 4, the pay-to-stay clauses, should work. The document summarises the consultation responses and sets out the Government’s way forward and, in the spirit of trying to give more information, I hope that it helps noble Lords in our debates next week.
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Lord Beecham: My Lords, I am glad that the noble Baroness recognises that debates will take place next week. I hope that we will have proper time to complete our deliberations on the Bill and will not be asked to sit until the early hours of the morning, as is apparently being currently threatened. That is not in the interests of good legislation or the House. More particularly, if I may say so, it is not in the interests of the noble Baroness, who has once again single-handedly represented the Government today for about six-and-a-half hours. Those responsible for government business should ensure that she has some support at the Dispatch Box—with respect, not just alongside her—in discharging the responsibility of dealing with this very important, complicated and controversial Bill. We are indebted to her for her patience, good temper and, if not for the substance of her replies, at any rate for her genuine attempts to reply to the variety of comments made across the Chamber. I hope that she has a restful weekend, and that those who are responsible for government business wake up to their duty to see that she continues to be able to have restful periods, not just at weekends, after the extremely arduous performances she has been called on to carry out.
Having said that, I will be relatively brief—for me. I congratulate all noble Lords who have contributed to this particular debate: the noble Baroness, Lady Grender, my noble friend Lady Hollis and, in particular, the noble Lord, Lord Carrington. The noble Lord shed relevant light on an aspect of the problem which affects London, but perhaps also other places. I suspect that places such as Oxford and Cambridge may be in a similar position.
I am particularly indebted to the noble Lord, Lord Best, who has once again proved that the best is not the enemy of the good, but is certainly the enemy of
the inadequate, which is the only way that the Bill could be described. I entirely endorse what he and others said about tenant management organisations and the impact of the bedroom tax, which has driven people out of properties which will presumably now go for sale. In my authority and many others, people are waiting to move into such properties. The paradox is that the rationale for the bedroom tax was to facilitate people moving into those properties, but if they go under the right to buy, there will be no requirement for the occupiers to occupy every room. If it is a three-bedroom house, it will no longer be expected to accommodate three people. That makes nonsense of the Government’s whole approach in that respect.
In its briefing, the National Federation of Arm’s-Length Management Organisations reminded me that the Prime Minister, launching his party’s 2015 election manifesto, made it clear that homes bought under right to buy would be replaced on a one-for-one basis in the same area with normal affordable housing. Those were the Prime Minister’s words, which the Bill does not achieve.
Finally, I refer to a particular situation that arose in my own ward and demonstrates the downside of what we have been discussing. In my ward, I was honoured by the naming of a small development of 12 very well-designed bungalows for elderly people; they had walk-in showers and everything fitted for elderly people who might have a disability. They named it Beecham Close, after me. I was very touched on that occasion—some people might think I am fairly touched anyway—and
seeing the pleasure that people got in that splendid accommodation was very heartwarming. The notion that those properties, if they become vacant, might then be sold—and they would be sold at a premium, with all the features that I described—not necessarily thereafter to the people for whom they were designed, strikes me as a really sad commentary on the Bill. With that, this Beecham will close. I beg leave to withdraw the amendment.
Northern Ireland (Stormont Agreement and Implementation Plan) Bill
First Reading
7.06 pm
The Bill was brought from the Commons, read a first time and ordered to be printed.
Enterprise Bill [HL]
Returned from the Commons
The Bill was returned from the Commons with amendments.