Mr. Mark Field (Cities of London and Westminster) (Con): Talk of the economic downturn has gone hand in hand with some very gloomy predictions about the health of the housing market. Each week seems to bring forth ever more catastrophic forecasts about the likely fall in house prices, leaving the spectre of negative equity to torment an increasing number of home owners. However, in the midst of the panic about private housing, a less reported story has also emerged: social housing projects have stalled dramatically. It is quite conceivable that, this year, there will be a collapse in the completion of affordable housing developments and no programme in the 2010-11 tax year, unless credit begins to flow once more.
Grant rates for new development have decreased to about 40 per cent., leaving housing associations, which are the main providers of affordable housing in the capital, with a choice either to build social housing at a financial loss or to cross-subsidise through sales of shared ownership and private borrowing. In these tumultuous economic times, associations’ ability to take the latter option has, as for many other private businesses, been brought to a standstill. The Government’s target to build 3 million new homes by 2020 looks like it will never be fulfilled.
Notwithstanding the difficult economic climate, the housing associations to which I have spoken believe that there is a path forward. I want to address that in my comments today. I appreciate that these are very difficult problems, and I hope that in the Front-Bench contributions from the hon. Member for Brent, East (Sarah Teather), my hon. Friend the Member for Welwyn Hatfield (Grant Shapps) and the Minister will be a sense of trying to work together on this matter. It is not, and should not be, an issue for an over-partisan approach. Inevitably, there will be differences in the approaches that each political party takes, but I think that we all appreciate that some major problems are affecting all our constituents, especially given the reliance on social housing, and that there are particular pinch points—dare I say it?—within London and its outskirts. I consider the number of central London MPs; I am well aware, having contested a seat in Enfield, North well over a decade ago, that the same issues apply to constituencies such as my hon. Friend’s, which lies just the other side of the M25. I recall that such problems were at the forefront.
Planned Government investment could be brought forward in a new national housing programme, and a fresh financial model could encourage genuinely mixed communities in our cities, thus opening a flexible social housing option to a far greater number of people on a wider range of incomes. However, if the Government fail to take steps quickly enough, associations believe that the ambitious social housing targets will remain woefully unachievable.
Of the many misconceptions about my constituency—Cities of London and Westminster—the most common must surely be that I represent only a lucky club of people rich enough to live in central London: the mansion dwellers of Belgravia and Mayfair, the City’s movers and shakers and wealthy international folk who snap up river and park-side penthouses at ease. In reality, constituency-wide, there are significant pockets of social housing, and the area has important historical connections to some of this nation’s oldest housing associations. Some estates in my patch have even attracted plaudits for their design, such as the Pimlico’s post-war Churchill Gardens, which has been praised as an imaginative example of high-density, inner-city housing—at least it was high-density when it was built in the 1950s, although it does not seem so now. It now seems to be a very well-planned estate. Other estates provide wonderful examples of Victorian philanthropic architecture, such as the Peabody estate in Brown Hart Gardens in Mayfair and the Abbey Orchard estate off Victoria street, which is almost a stone’s throw from this debating chamber. Such developments have helped to transform one of Westminster’s and inner London’s worst 19th century slums and stand as a testament to the generosity of renowned philanthropist, George Peabody and the eye of the English architect, Henry Darbishire. Sadly, such well-built, attractive estates have been eclipsed in the nation’s perception of social housing by so much undistinguished post-war development.
Along with other London Members’ constituencies, Cities of London and Westminster has witnessed a colossal boom in the housing market in the past decade. Property prices in my constituency rose by some 220 per cent. in the decade to 2007, while the average wage rose by only 44 per cent. In the meantime, the number of people on social housing waiting lists continues to increase. Last year, 333,857 households were on social housing waiting lists in the capital—a 47 per cent. increase over the past five years alone.
With the neediest households receiving priority for housing, my constituency is now exclusively home to the super-rich and the very poor. That is not a healthy state of affairs, although it has probably applied in places such as central London since time immemorial—it has always been home to the very wealthiest, as well as to much poverty. One can read books going back many centuries to see that. However, that phenomenon increasingly applies almost throughout the capital. People face great disadvantages. I am sure that all Members have constituents earning multiples of the average national wage who cannot get on to the property ladder and who find themselves lost, because they are regarded as being far too wealthy to qualify for social housing. That probably applies to suburban areas such as Eltham as well—I see the hon. Member for Eltham (Clive Efford) in his place, although silently so, I expect. We need to draw back from such polarisation. In the immediate term, one can see that an economic downturn might help at the margins of that polarisation, but we need a much more systematic and fundamental approach.
With the enormous pressure on stock, housing problems, along with immigration difficulties, continue to account for the largest element of casework that I receive in my daily postbag. I expect that the same could be said of all other inner-London Members. Those two issues are likely to go hand in hand, as many people migrating to Britain arrive in, or make their way to, the centre of London, which can place enormous pressure on emergency and temporary housing. Given the disparity between stock and demand, I am frequently sent letters from residents who find it difficult to secure a permanent council or housing association property or to get awarded a transfer to a more suitable home. In the meantime, those constituents often find themselves waiting in desperately overcrowded conditions or in properties quite ill-suited to their basic needs.
Last November, I met representatives of the G15, which is the group representing London’s 15 largest housing associations. They wished to express their deep concern about the impact of the current economic crisis on London’s social housing stock. The G15 associations house about one in 10 Londoners—approximately 700,000 people—and manage some 410,000 homes. Crucially, they are also relied upon to develop most of London’s new affordable housing each year, in view of the targets for the next decade or so. However, they told me that it is becoming increasingly harder to continue with affordable housing projects.
As I mentioned earlier, grant rates for new developments have decreased to about 40 per cent., making it impossible to build social housing at anything but a financial loss, unless an association can cross-subsidise. However, cross-subsidy is no longer an option, because it can be generated only through sales of shared-ownership properties and private borrowing—routes that have been cut off owing to the collapse of the property and credit markets.
Furthermore, a significant proportion of new social housing in London is produced by private developers through planning gain agreements. Again, however, as private development dries up, commensurately less planning gain for the social sector will follow. As I am sure that the Minister is aware, the result is likely to be longer delays for the thousands lingering on social housing waiting lists and an increase in the 750,000 Londoners currently living in overcrowded conditions.
Ms Karen Buck (Regent’s Park and Kensington, North) (Lab): I have disagreed with nearly none of what the hon. Gentleman has said. However, does he accept that, even before the impact of the credit crunch was felt, in some local authorities, including his and my borough of Westminster, the proportion of affordable homes from planning gain was only 11 per cent, over the past two years? Only one in 10 of all homes built in the borough before the present economic crunch was affordable, and that cannot be blamed on the present economic situation.
Mr. Field: The hon. Lady makes a fair point. In the eight years that I have been in the House, we have had a number of battles—friendly, I hope—on issues related to housing. As she is aware, one of my concerns is that the targets that were set by the erstwhile Mayor of London were so unrealistic that too many developers in places such as Westminster were happy to sit on their hands and watch the value of their stock of land going up and up, rather than going down the path of taking on social housing. I accept the point that the hon. Lady makes. I am not suggesting that the short-term credit crunch is the only issue, but given that it will impact on the housing market—particularly the social housing market—for some years to come, it gives us an opportunity to take stock and collectively to work out the best pathway forward.
Faced with the situation in which lenders will not lend, buyers will not buy and builders cannot build, the G15 contend that we need to rethink our national housing policy. The previous housing crisis was dealt with by encouraging the emergence of a third sector of independent housing associations and a third way that combined the best of public and private to get the market moving. Similarly, the G15 now want to see—as I do—a fourth way in which planned Government investment is brought forward to allow for a new national housing programme led by the third sector, to which I have referred. Such ideas could turn the current financial crisis into something of an opportunity.
I should like the sales-based cross-subsidy to be replaced with a new type of subsidy that will fill the gap that is left. That will require support from the Government through increased grant funding and through equity investment given by the Homes and Communities Agency. In addition, more accessible and less expensive land will have to be made available.
I should also like a re-examination of the nature of Government investment that separates future investment into two elements: grant subsidy, which is used to develop and deliver affordable rents, and equity, which is needed to fund the product. Although equity cannot be returned, it can be reviewed and adapted to suit changing individual circumstances.
In addition, I support the introduction of a new housing model that discourages home ownership for those who cannot afford it, but leaves open an option—not an obligation—to buy in the future. By that I mean getting on a stepladder to buy a bit of shared equity. Currently, too many models regard home ownership as the be-all and end-all. In many cases, people do not have suitable lifestyles for home ownership. For example, they may not have a particularly firm employment record. Getting on to the housing ladder may seem an attractive proposition, but it is an unrealistic one for many people. The new model would help to generate very mixed communities, which is a positive way forward in social housing development. It would offer a wide range of rents and refocus on providing homes that are currently in short supply, such as family accommodation.
As for supply, I should like new partnerships to be established between housing associations, local authorities, house builders and the Homes and Communities Agency. By working together, the inherent economic risk can be reduced, investment can be increased and a firmer eye can be kept on long-term sustainability by ensuring that the quality of housing is high. Calls for housing associations to buy unsold private stock should be resisted as far as possible. The majority of such properties are not suitable for social housing. Only 2 per cent. of new private development homes have been awarded the status of “very good”, or level 3, of the sustainable homes code. Level 3 is the minimum standard that housing associations require to use a property for social rent purposes.
With regard to the sale of current shared-ownership stock and the financial health of individual housing associations, a number of housing association chief executives have identified banks’ lending behaviour as a major risk to their business and a significant stumbling block in the completion of property sales.
Although low-cost home-ownership sales have decreased substantially in recent months, demand has risen. Housing associations are receiving more and more inquiries about different kinds of home ownership, but the rate of completion remains minute. Admittedly, in some circumstances, that is because potential buyers are waiting for the market to bottom out. They are making their inquiries and then sitting on their hands for a few months, perhaps for a year, assuming that the asset value will get lower, which is probably a fair assumption to make.
In most cases, housing associations report that transactions fail because of a lack of mortgage finance. Lenders are looking for opportunities to reprice their loan book, which has had a detrimental effect on housing associations as well as on local small businesses, many of which have been in touch with me in recent weeks. Let me provide an example. A housing association that had a group structure with three different organisations decided that it wanted to collapse that governance structure to become a single organisation with residents’ panels. That is perfectly desirable. The association consulted its residents, who mightily approved of the scheme, and such a change would save the association around £300,000 a year. However, its core lender said that if it went ahead with that restructuring, it would regard it as a significant event and be compelled to reprice the entire loan book at a cost of £1.9 million to the housing association. Naturally, in the current climate, the move did not go ahead, and efficiency savings along those lines were not made.
We must encourage Government to put further pressure on lenders, especially those in which they hold a significant stake, to provide affordable finance in this field. I appreciate that this is fast-moving situation, and I do not expect the Minister, even in conversations with his friend the erstwhile Member for Hartlepool, to give us commitments at this juncture. None the less, I hope that he will make the case for social housing, given the amount of money that is going into various loans for small businesses.
Problems with social housing policy extend well beyond supply difficulties. The cost of renting in London remains a significant issue, due to the gap between social and market rents and the inflexibility of the social rent structure. That is a problem about which I am particularly passionate, given the impact of economic polarisation in my own constituency. As I have said, wealth disparity has been a London issue for time immemorial. In the eight years in which I have been in the House, I have watched the extent of demographic change and seen that those on middle-to-low incomes in London—by that, I mean at least double the average national wage—are increasingly being pushed out of the area. All too often, families who have been here for generations and who want to contribute to the local community are in that category and are forced to move away.
As for the limits of the current structure, I shall use the example of the housing arrangements of one of my constituents who passed away last year. She had lived as a secure tenant in her home on the Peabody Wild Street estate since 1986 for a rate of £75.50 a week, which included services. The estate is moments away from Covent Garden piazza, and the market rent for the flat would be around £320 a week. The flat is now being re-let at £116 per week, including services to a tenant with support needs. The difference between the social and market rent is £200 a week, or £10,000 a year. What happens to those who fall between the two extremes—those who do not qualify for social housing, but who cannot realistically afford the cost of market rents in central London? That is the sort of gap that we are looking at—effectively two thirds of the cost. One third applies to someone who qualifies for social housing, and the full rate to individuals who would love to live close to their place of work but who simply cannot get on to the housing ladder.
The current economic climate provides us with a once-in-a-lifetime opportunity to create a much more flexible rental market. I support the provision of a wider range of housing options for people who are too rich to qualify to rent social housing but too poor to buy in the market. Housing associations are often frustrated that the income they receive from renting a property barely covers maintenance costs and that the rental income from a four-bedroom house is only slightly more than that from a two-bedroom flat. The same applies when we look at the differences in rent for a zero-carbon home and for an old, inefficient property. None of this makes sense. I appreciate that it is easy for me to make proposals. We are on the verge of unravelling almost a century of rental arrangements going back to the first world war. There are many inconsistencies in place, and it is difficult to establish a definitive template, but I am trying to put a few things on the record that will form part and parcel of the thinking of this Government and of all parties going forward.
Much better use could be made of rental portfolios, to the immense benefit of people on low and middle incomes, who would like a wider range of renting options, and would view intermediate rent of 80 per cent. or less than the market rent as an important new mechanism to bridge the gap between the social and market rent. Importantly, it could also ensure that we have a greater mix in communities. A relaxation in rent policy will increase incentives to build to higher standards and reflect the relative value of a social tenancy. Rent differentiation would also provide an incentive for a couple to downsize when they no longer need to stay in a large property when their children are grown up. That would free up valuable family-sized accommodation to address the acute problems of overcrowding.
I frequently receive letters from constituents telling me of the desperate pressure imposed on family life by overcrowding. I received a letter this week from the City of London citizens advice bureau that brought to my attention the plight of a family of eight who live in a three-bedroom flat with one small bathroom in the square mile. They have been trying to get a transfer either to a larger property or to one with better bathroom facilities, but the lack of social housing in London has resulted in their having to remain in that flat. That is one example, but London Members will receive letters like that day in, day out, all year round.
I appreciate that this is an unintended consequence, but I fear that the Government’s target of reducing temporary accommodation by 50 per cent. is hampering efforts to reduce overcrowding, because local authorities are forced to transfer households who live in suitable private-sector accommodation to any new flat that they gain. That means that when councils ask developers to build new accommodation under a section 106 agreement, they build for single occupancy to reflect the type of households in temporary accommodation, and ignore the need for family accommodation, which is in many ways the more pressing need. As I said, that has an important impact on the social glue of a community, because we want to ensure that people can live in central London for the long term, and we do not want them to think that living here is something they do when they are single, before moving away.
One of my local authorities, the much-loved Westminster city council, fears that overcrowding will increase as the economic downturn deepens. The council has long recognised that overcrowding is one of the biggest housing challenges it faces and is launching a campaign to tackle the issue. It intends to say which of the Government’s targets are particularly contradictory and unhelpful in preventing local authorities from dealing with overcrowding, and it will highlight the need for reform on three key issues: more efficient use of supply, managing demand, and tenure reform.
Westminster council would like the Government to allow local authorities greater flexibility, to give them the power to transfer a household to a more suitable home when housing needs change, and to allow them to discharge the homelessness duty when a client has been assisted into suitable private accommodation, which would quickly help to reduce the overbearing waiting lists. The council contends that Government targets to reduce the use of bed and breakfast and temporary accommodation have resulted in fewer transfer opportunities for existing tenants, because new people on the register are given preference for available properties. It also intends to recommend that an applicant’s connection to the local area and community is given greater weight when deciding a person’s priority for housing—as the Minister will be aware, I feel particularly strongly about that.
Jeremy Corbyn (Islington, North) (Lab): How does the hon. Gentleman define local connections when it comes to the allocation of properties? I ask that with some feeling, because the proposal could end up being discriminatory against people who are in a poor housing situation. They could be in a worse position because they could be blocked out of the transfer system.
Mr. Field: Clearly, I am not going to define that off the top of my head. As the hon. Gentleman knows, we have waves of migration, and some people have families who have lived here for several generations. Let us be honest: if we were talking about local connections in the context of housing in London 30 or 40 years ago, the unspoken issue would have been race. To my mind—this is the reality—local connection now means every bit as much to the large numbers of Bangladeshi or Chinese communities as to anyone else, and I would assume that the same applies to a place such as Islington, North. Promoting local connections means as much to people whose families have lived here for a couple of generations and who want to stay, who have work and social networks, including friends, nearby.
Arriving at a firm definition is quite difficult—it is an inherent difficulty. By the same token, too much discretion in the hands of local authorities would present difficulties. We all know that there is a sensible medium ground but, unfortunately, the strict and mandatory rules of central Government pre-1997—this is not a narrow party-political point—make things more difficult, as it is frustrating for councils, whether a Labour or Liberal-run Islington council, or Conservative-run Westminster council, to try to build a stable population in which people are willing to play an ongoing part in the community.
I appreciate that other hon. Members wish to speak, so I shall conclude. I recognise that the Government alone do not hold sway over the provision of social housing in Westminster or other local authority areas. With a budget of more than £5 billion, the Homes and Communities Agency, which is chaired by the Mayor of London, has an important role to play in addressing the capital’s housing needs. However, in his recently announced housing strategy, the Mayor has already shown a commitment to many of the aims that I have addressed in this speech, such as encouraging mixed communities, promoting a range of tenures, expanding the intermediate rental sector, boosting the number of family-sized homes, and nurturing partnerships between local authorities, housing associations and developers. It is now crucial that the Government show their true commitment—I am sure that they have one—to the provision of social housing in our capital, not simply by restating targets, but by giving serious and immediate thought to the proposals that I have set out.
Unless a fresh housing model is introduced swiftly to recognise the need for a new subsidy, the Government’s stated aims on social housing will, sadly, remain unachievable. Although the crisis facing the social housing sector is daunting, it should be seen as an opportunity to address some of the long-term problems that have plagued housing provision in the capital, such as the polarisation of communities, overcrowding, and the unaffordability of property. By working with housing associations rather than putting a break on their aspirations, the Government can use social housing to steer London’s home owners and tenants out of the darkness.