Peer review – part 2

Originally posted on January 27 on Inside Edge 2, my blog for Inside Housing

Part 1 of this blog covered the opening skirmishes in the Lords on the Housing Bill. This second part covers all-party criticism of the detail of the Bill where the sums don’t add up or don’t exist yet. What are the prospects for changes?

Starter homes. Peers criticised both their affordability and the fact that the discount disappears into the back pocket of the first buyer. As Labour’s Baroness Andrews put it:

‘We know from all the evidence that starter homes are not even affordable for most low and middle-income families, whether in rural areas or central London. However, it is not even a fair policy for future buyers. The 20% discount will apply only to the first tranche of buyers; they will be free to sell their assets after five years at market value. We will be minting a new generation of property speculators.’

Tory peer Viscount Eccles said the scheme had ‘not been thoroughly thought through’ and called for much more detail.

Right to buy. Doubts on this came from both sides of the house. First, is it a right at all? Former Tory minister Lord Young remembered his failed attempt to extend it to charitable housing associations in 1982. A portable cash discount for tenants followed but was scuppered by the Treasury on cost grounds. He argued:

‘In housing policy terms it has much to commend it, but it would be worrying if those who want to buy who read my party’s manifesto were first told by the housing association that they could not because of the exemption, but were then told that they had to wait indefinitely for a transferable discount scheme because the scheme had become rationed. I urge my noble friend to ensure that the hopes raised by my party’s manifesto are not dashed by the Treasury.’

Labour’s Lord Beecham said he understood why associations had made the voluntary deal but ‘they made a grave mistake’. A government with a slim majority would have struggled to impose the policy on the sector and: ‘I predict that if over time they become dissatisfied with the progress of the new right to buy, it will be made compulsory, as it already is for council housing.’

Rural areas. Peer after peer raised concerns about the impact of the right to buy and starter homes on rural communities. Housing associations would find it impossible to build replacements in the same areas, peers argued, while landowners would be put off releasing land for rural exceptions sites by the prospect that profits will no longer be held by the community in perpetuity but go to the first buyers of starter homes.

I’m not sure how much land the Duke of Somerset (a crossbench peer) owns but was presumably drawing on personal experience when he warned that ‘landowners will hesitate to promote low-value land just to enrich an individual, rather than a community’.

One significant intervention came from crossbench peer Lord Cameron (no relation) of Dillington, who conducted an independent review to ‘rural proof’ government policy last year. On using rural exception sites for starter homes, he was clear that:

‘This must not happen. It is a complete misunderstanding of what exception sites are for: they are put in place for all time. Actually, it will not happen. No farmer is going to donate land to house locals if it can be sold to anyone in five years’ time. No village will agree to an exception site for the same reason, unless the limited planning permission and the discount remain in place for all time. That might help.’

He also called for a blanket exemption from the right to buy for all communities of under 3,000 people

Community land trusts. Several peers argued that the right to buy will undermine the whole point of CLTs, that homes should remain affordable in perpetuity. Tory peer Baroness Rawlings was among those calling for exemptions for rural areas and CLTs to be written into the legislation rather than just the voluntary agreement with the NHF.

Gypsies and Travellers. Peers criticised the removal of the specific duty to provide for their accommodation needs. With no consultation and against the public sector equality duty, it would lead to more illegal encampments and higher costs for local authorities and landlords.

Pay to stay. As the Bishop of Rochester argued, people hitting the income thresholds for market rents would still not be able to get a mortgage on a starter homes, which hardly qualifies them as ‘high income’. The government says higher rents will be tapered in but peers demanded the detail. Labour’s Baroness Lister put it like this: ‘I fear that no amount of tinkering with tapers and multiple thresholds can avoid its disincentive effect, particularly for second earners, who as we have already heard are mainly women.’

Forced council house sales. Peers called for details of the regulations that will on the formula for the levy that will apply to local authorities and more details of potential exemptions.

Lord Kerslake quoted Shelter’s calculation that the extension of the right to buy will cost councils £1.2bn a year and require the sale of 113,000 council homes. Even if they could be replaced one for one, it was very unlikely to be in the same area or with social rented, meaning that the net effect over time would be higher-value areas denuded of social housing. Worse still, he said there was ‘real doubt whether the receipts generated will adequately meet the cost of the proposals’:

‘It is hard to think of any other policy where we start on that policy knowing that the sums do not add up. Something will have to give. I think that the House is entitled, before Committee stage, to a full and detailed analysis of the numbers.’

Criticism also came from a generally supportive Tory peer Baroness Eaton. As vice-president of the Local Government Association, she called for greater local flexibility on both starter homes and forced sales. Lib Dem peer Lord Shipley, another LGA vice-president, asked why local authorities were not being treated in the same way as housing associations and why extra burdens were being proposed for councils with housing stock.

And crossbench peer Baroness Valentine, chief executive of the business group London First, made a crucial point about the replacement homes promised in London:

‘I would be interested to see the audit trail on whether these two-for-one houses end up being net additional. Perhaps this is something the National Audit Office could investigate.’

Labour peer Baroness Blackstone, the chair of Orbit, said two for one was ‘simply not credible’. She called on the minister to say how progress would be monitored and what the alternative mechanism would be for funding the right to buy if the target was not met.

Fixed-term tenancies for new council tenants. Labour’s Baroness Lister contrasted the removal of security of tenure with David Cameron’s Christmas message that ‘if there is one thing people want at Christmas, it’s the security of having their family around them and a home that is safe.

Crossbench peer Lord Adebowale summed up the proposal like this:

‘The threat of limited-term tenancies removes one of the last remaining secure types of housing available to people who cannot afford home ownership. It will leave people at the mercy of the insecurities of spiralling private rents and sky-high housing prices.’

Communities minister Baroness Williams responded to all that in a closing speech that mixed intransigence with a few hints of concessions and detail to come.

Starter homes would be ‘more affordable than some noble Lords fear’. However, even her discounted price of £291,000 rather than £450,000 in London looks out of reach for most.

On social housing, she argued that local authorities would still be need to apply local planning policies on affordable housing: ‘we would also expect them to seek other forms of affordable housing, such as social rent, where it would be viable. She added that the spending review had confirmed £1.6bn for 100,000 affordable homes to rent. Needless to say, she did not add that this is a legacy of the previous spending review and that the 2015 version only included funding for a limited number of ‘specialist’ homes.  .

On starter homes, she rejected calls for the discount to remain in perpetuity, arguing this would make it more difficult for first-time buyers to sell. She added that ‘those tenants who buy a starter home under right to buy [my italics] should have the same freedoms as every other home owner’. Was this a slip of the tongue or perhaps a hint that right to buy replacements (and those available to tenants with a portable discount) will be starter homes?

She rejected calls for tenants to be allowed to spend it on any home rather than just another owned by the association. Local authorities facing the loss of their best stock might want to count to three before reading her justification that: ‘To allow the portable discount to be used on properties in the open market loses that income to the sector, limiting the ability of housing associations to deliver new supply.’

However, she did hint at some concessions on high-value sales. The government was ‘considering a number of types of housing that could be excluded when that it taken into account, and cases where housing will not be considered to have become vacant’. She also pledged more detail on the ‘high-value’ threshold, greater flexibility for councils to choose which properties to sell, and on excluded housing.

The minister said she recognised peers’ concern about the number of proposals left to secondary legislation and ‘I will do my best to provide as much information as possible as the Bill progresses’.

However, with so much at stake on high-value sales, pay to stay, rural housing and starter homes, I didn’t spot a commitment to do that in time for the committee stage or even the third reading. And from here on in the battle is all about the detail.