Peer review

If the opening salvoes are anything to go by, we are in for a long battle in the House of Lords over the right to buy.

The Conservatives do not have a majority in the Lords. By convention peers do not vote against legislation that was in the government’s manifesto but that still leaves plenty of room for amendments. It’s also hard to see how the government could claim financial privilege to reverse Lords amendments, as it did with the Welfare Reform Act.

Tuesday’s debate was only a short one on that bit of the Queen’s Speech but it was also a preview of the key themes that will be debated over the next few months and some of the key peers who will be making the arguments.

The government position set out by communities minister Baroness Williams was telling in its summary of the priorities of the Housing Bill: ‘to support home ownership and give more people the chance to own their own home’. She also made the dubious claim that:

‘To date, more than 33,000 new homeowners have been created since the right-to-buy scheme was reinvigorated in 2012, and every additional home sold is being replaced with a new affordable home for a social tenant. This has ensured that more council housing has been built since 2010 than in the previous 13 years.’

The right to buy extension came under attack from crossbench peers as well as Labour and the Lib Dems. Shadow leader of the Lords Baroness Smith said the Bill ‘does nothing to address the greatest housing shortage for a generation’ is ‘a rehash of 1980s policy ‘when times and circumstances were very different’.

And Lib Dem peer Baroness Hamwee hinted at problems to come for the government:

‘Of course I recognise the convention about the manifesto on which the Government were elected, and indeed that the Government are no longer “encumbered”—the home secretary’s term—by the coalition. Time will tell whether in addressing the detail of legislation, where the devil may reside, this House will be concerned with its workability or something more subversive.’

However, the most telling attacks came from two veterans of the Welfare Reform Act debates and one newly ennobled Lord. All three have close housing association connections.

Labour’s Baroness Hollis, the chair of Broadland Housing Association, made this telling point about the level of the discount:

‘The Queen’s Speech proposes right to buy for housing association tenants who, after three years of perhaps £5,000 a year rent—£15,000 in all—qualify for a discount of £40,000 to £50,000, rising to 70% of the house value. I repeat: 70%. As housing associations cannot fund these discounts and remain solvent, they will instead be financed by the forced sale of the best council houses….Councils, council tenants and the desperate on waiting lists will be asset-stripped to fund huge discounts for those who are already better off and better housed than they are, simply to change their tenure, adding not one extra home. On the contrary, two social homes to rent will be forcibly sold to fund the discount on the purchase of just one of them.’

She made the key point that saw the Thatcher government defeated on housing association right to buy in the 1980s:

‘Housing associations are charities, not public authorities. Their £60 billion mortgage debt is not on the public accounts any more than landlords’ mortgages are. They are independent charities, many of which are a century old, financed often by gifts from local benefactors. Would we accept the Government asset- stripping Eton or Winchester to fund academies? Perhaps the NHS would like the endowments of medical charities to pay for the drugs bill. Or perhaps we would accept National Trust assets being used to restore this Palace of Westminster. Consult your lawyers—that is my advice.’

She finished by posing 10 questions of detail for the minister that I suspect will dominate the debate in the months to come. I’ll come back to them in another post to follow.

The second of my three key peers is a cross-bencher but much more than that. Lord (Sir Bob) Kerslake is former head of the civil service and permanent secretary at the DCLG and is now chair of Peabody. His comments that the policy is ‘wrong in principle and wrong in practice’made the front page lead of the Observer on Sunday and he spelt them out in more detail in the Lords as he urged the government to reconsider: ‘They should meet urgently with the sector to discuss how the policy can be amended and its deficiencies addressed. Ultimately, the route to more home ownership, which I support passionately, is to build more homes. There is a real risk that this policy will distract from that vital, urgent task.’

Here’s the key section of his speech:

‘It is with great regret, therefore, that I find myself so completely opposed to the Government’s proposals to extend right to buy to housing associations and to force local authorities to sell off their highest-value properties as they become vacant. In its current form, this policy seems to me to be both wrong in principle and wrong in practice. It is wrong in principle because these are not the Government’s assets to sell. Housing associations are private, mostly charitable, bodies. They have built up their housing stock over long periods of time to provide for those who are most in need. Peabody, for example, has been in existence for 153 years, only 40 of which have involved any public subsidy.

‘To fund the cost of the discounts, local authorities will be compelled to sell their highest-value properties as they become vacant. There is a good case for local authorities being able selectively to sell off some of their high-value properties to reinvest. However, a top-down, one-size-fits-all approach is contrary to the spirit of greater devolution and will bring with it unintended consequences. In London, for example, the top third by value of properties will be concentrated in the central London boroughs of Wandsworth, Westminster and Kensington and Chelsea, which stand to lose nearly two-thirds of their stock over time.

‘The plans are wrong in practice because they will not advance the Government’s stated aims; indeed, I fear that they will move them backwards….The proposed RTB policy, combined with changes in benefits, will make housing associations much more cautious about investing in new-build programmes and, crucially, lenders much more cautious about lending. The knock-on consequences of this on new-build and regeneration schemes could be very serious.

‘There are also real doubts in my mind as to whether the receipts from the sale of high-value local authority properties can simultaneously cover the cost of the discount, the re-provision of new affordable homes and a contribution to the brownfield regeneration fund. At the very least this should be subject to a full independent financial review. What is clear, though, is that there would be a substantial flow of funds out of London, potentially of the order of £5 billion, to other parts of the country to make the numbers balance. The level of sales in London could reach 5,000 a year, which would be almost impossible for the London boroughs to match with new-build affordable homes—a fact borne out by the current experience of the one-for-one policy. This loss of affordable homes and redistribution of funds out of London at a time when its housing needs are so acute seems to be completely counterproductive.’

You have to wonder what Boris Johnson will make of this. The Tory MP and Mayor of London says it would be ‘the height of insanity’ if the policy led to housing resources leaving London. Here is the former top civil servant at the department responsible for it predicting £5 billion worth of insanity.

My third peer is a more familiar champion for housing in the upper house, Lord Best. Here are his three main objections plus the best new description of the policy I’ve yet found:

‘First, in relation to housing policy, there are hundreds of thousands of households that are unable to buy but are crippled by the cost of open market renting. For all these, the target of 275,000 extra affordable homes by 2020 is essential and, with government backing, definitely achievable. However, the National Housing Federation estimates that about 221,000 households, out of 1.5 million identified by the Government as eligible, are in a position to buy—and why should they not take advantage of this sudden lucky windfall? If these tenants purchase over the next five years, and if councils over that period are required to sell thousands of their best properties to raise the funds to pay for the housing association discounts, then the social housing providers will have tried to fill the bath with the plug out. At the end of this Parliament, instead of increasing the stock of affordable homes that the country needs so badly, all these efforts will have been in vain and, at best, we will be back where we started.

‘Moreover, the whole process of selling some social housing and building elsewhere will have grave consequences. With councils having to sell in the best areas and having to build in cheaper places, a divisive segregation results, separating the better-off and the less affluent, in contradiction to the universally preferred alternative of mixed communities. As the London mayor has pointed out, replacing the homes sold in London with homes built outside will deny London the key workers on which this city depends, while affordable homes sold off in rural communities will often be quite impossible to replace. ‘

‘Secondly, the financial considerations of this double measure are alarming. The National Housing Federation estimates that the cost could be around £11.5 billion. Do these payments to a relatively small number of people represent the very best use of several billion pounds? A windfall grant to those already in decent affordable housing seems strange indeed when the money could help thousands of others in severe housing need. According to the National Housing Federation, this level of funds would, for example, secure no less than 660,000 shared ownership homes, helping three times as many aspiring owner-occupiers.

‘Moreover, what happens if selling good council housing as it falls vacant fails to raise all the funds to cover the cost of the new discounts, let alone pay for the councils to replace the homes they sell off? Can the Minister confirm that whatever the cost, housing associations will be guaranteed reimbursement for the loss of their assets? Will the taxpayer pick up the bill, regardless of the impact on the public finances?

‘Thirdly, and finally, there are some serious legal and practical objections to this policy. In the 1980s this House very firmly rejected the extension of the right to buy to charitable housing associations, principally on the grounds that government should not be ordering independent charitable bodies to dispose of their assets to the benefit of some tenants of today but at the cost of diminishing the charity’s capacity to help others in need in the future.’

‘On the practical side, there are worries about the response of lenders to the new uncertainties that this measure creates. There are also concerns about planning agreements, which have required a proportion of rented homes in private developments to be retained in perpetuity for those on lower incomes, never to be sold. Are these planning agreements now to be torn up, and will the housing associations be forced to renege on promises to landowners who have given land or sold cheaply, on rural exception sites, for the benefit of their local communities? If so, this is surely an end to such concessions in the future.’

This blog is already way too long but I thought it was worth giving a flavour of the arguments. Judging from the contributions of other peers, the government can also expect real trouble about what one saw as a ‘cataclysmic effect if it is allowed to run rampant in rural areas’.

Responding for the government, Home Office minister Lord Bates said the policy was all about ‘introducing equality of treatment’ for housing association tenants. ‘In putting this forward, we recognise and believe that there is something quite fundamental in people having the ability to take a stake in society through owning a home.’

Even he must have known he was convincing few of their lord and ladyships. It’s going to be a long battle.

Originally posted on Inside Edge 2, my blog for Inside Housing

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