HC Deb 01 March 1976 vol 906 cc1051-61

10.11 p.m.

The Under-Secretary of State for the Environment (Mr. Ernest Armstrong)

I beg to move, That the Housing Corporation Advances (Increase of Limit) Order 1976, a draft of which was laid before this House on 6th February, be approved. The Order is to be made by my right hon. Friend the Secretary of State with the approval of the Treasury, but before it can be made it requires an affirmative resolution of this House. The Order is to be made under Section 7(5) of the Housing Act 1974 and provides for an increase in the overall borrowing limit of the Housing Corporation from £400 million to £600 million.

The Corporation is empowered by this section of the Act to borrow from various sources, principally the Secretary of State—and thus, in effect, the National Loans Fund—in order to fulfil its statutory duties, mainly lending to registered housing associations, within an overall ceiling of £400 million. This may be increased by Order to not more than £750 million.

The Corporation's overall indebtedness today is £385 million, and the Corporation will probably reach the present statutory borrowing limit of £400 million by about April. The debt is, of course, secured by mortgages on the housing provided. The authorised programme of support for housing associations undertaken by the Corporation involves the approval of about 33,000 new and improved houses and flats a year in England, Scotland and Wales, at an estimated cost during the next financial year of nearly £400 million. Of this, about £300 million is covered by Government grants, the remaining £100 million being loans. The proposed new limit of £600 million will probably be reached by the end of 1978.

As hon. Members will know, the Housing Corporation was originally established by the Housing Act 1964 to channel Government support to co-ownership and cost-rent societies. In the 1974 Housing Act we gave the Corporation wide new powers to regulate the housing association movement by registering those associations which are to be eligible for financial assistance from public sources. Before registering a housing association, the Corporation has to be satisfied about its probity and managerial capability, and also about the need for a further housing association in the area.

By the housing association grant provisions of the Act, the Government gave housing associations thus registered a tremendous incentive to provide housing for rent both by new building and improvement and conversion. This grant consists of an initial capital payment, on completion of the project, designed to meet the full deficit and to enable the housing association to reduce its outstanding loan to a level which can be serviced from the estimated fair rent income, not of an allowance for management and maintenance costs. Housing association grant is normally expected to account for about 75 per cent. of the capital cost of a project and there is no burden on the rates.

In the Government's view, the Corporation has been meeting the statutory responsibilities placed upon it very effectively. Most housing associations who have applied for registration have now had their applications dealt with and 1,422 have so far been registered. Sixty-eight have been refused registration after very thorough and intensive inquiries. Others have been asked to make changes in their organisation or proposed area of operations to bring them within the criteria.

The housing association movement is now carrying out a programme of about 45,000 approvals a year, of which three-quarters are financed through the Housing Corporation and the remainder through local authorities. In fact the movement could achieve an even higher level of output but we have to keep approvals within the public expenditure provision.

The Housing Corporation is now concentrating on the task of ensuring that the available funds for housing associations are channelled into the areas of greatest housing need, especially stress area rehabilitation in London, Glasgow, Birmingham, Liverpool and the other major cities, and into providing housing for the special needs of people like the elderly and the disabled. This is an important role which supplements that of local authorities, many of which have come increasingly to recognise the help that housing associations can provide.

In order to allow this work to continue I ask the House to approve this Order.

10.17 p.m.

Mr. Hugh Rossi (Hornsey)

The Opposition welcome the Order, which increases the borrowing power of the Housing Corporation from £300 million to £600 million. As I indicated when we discussed the last Order of this nature on 3rd April 1974, the Opposition take some pride in the achievements of the Housing Corporation. After all, it was created by a Conservative Administration and our Housing and Planning Bill, subsequently enacted by this Government as the Housing Act 1974, was intended to widen and strengthen the Housing Corporation's powers and in particular to extend its borrowing limit to £750 million towards which the Order now approaches.

On the figures available to me, the progress of the Housing Corporation and the housing association movement has been quite remarkable. By 31st March 1973 there were in existence about three fair rent schemes with 56 dwellings. In the succeeding 12 months, contrary to all other housing trends, this had expanded rapidly to 227 schemes with 9,792 dwellings. Prior to that year—1973–74—the Housing Corporation had concentrated on co-ownership schemes rather than fair rent schemes. It was that policy which had produced only three fair rent schemes as against 40,000 co-ownership schemes in the eight to nine years up to March 1973.

However, increased costs and interest rates have priced co-ownership out of the market. The subsidies available for co-ownership schemes are only those available for the individual owner-occupier—namely, tax relief against mortgage interests. Hence, co-ownership schemes are at a tremendous disadvantage compared with fair rents schemes. The fair rent schemes, as the Minister has mentioned, qualify for a 75 per cent. grant Moreover, the occupier's outgoings are limited to fair rents which in turn attract rent allowances. This is far different from the picture in connection with the occupier under a co-ownership scheme.

Clearly, the time has therefore come to review the system of co-ownership and to develop new forms of tenure, especially on the equity-sharing principle. Such schemes could easily be developed by housing associations and would require less financial support from Government than rented schemes. They would be of particular help to those who prefer to buy their own homes but who cannot immediately afford the full cost. At present such people have no alternative but to join the queue for subsidised housing. The development of equity shared housing would not only reduce the subsidy for housing these people but would also reduce the pressure on heavily subsidised rented housing and also ensure that this went only to those most in need.

During our discussions in Committee on the Housing Bill 1974 I drew attention to the difficulties being experienced by co-ownership schemes which were then becoming apparent. I was assured by the Ministers in charge of the Bill that these problems would be examined. It is a matter of some disappointment that the Government have taken no further action in this sphere. I hope that the present economic constraints on housing subsidies will cause the Government to re-examine the matter and to look at it more closely and urgently. I can assure them of the wholehearted support of this side of the House were they to do that.

In the rented sphere one would like to see housing associations concentrate increasingly on special schemes for particular groups of people in need. I have in mind, as the Minister himself apparently has in mind, especially elderly single people, single-parent families and the disabled. With the Rent Act hitting the supply of furnished lettings it is particularly important that special provision be made for these groups. This is the more so because local authorities continue to concentrate on two- and three-bedroomed accommodation for families, leaving the groups I have mentioned in great deprivation.

The Government have recognised this problem and in Circular 64/75 exhorted local authorities to produce a greater supply of smaller accommodation, but with the lessening of housing subsidies, 85 per cent. of which are taken up to expenditure on projects already approved, the provision for the special groups remains pitiably low. I am certain that the gap is one which the Housing Corporation is ready to close, given the right encouragement and assistance from the Government.

In this connection, I am certain that a relaxation of the Parker Morris standards, especially in the provision of accommodation for single people, would be of tremendous help to the Housing Corporation in making this money go further. The existing cost yardsticks also make it difficult to get smaller units approved. Indeed, the delays attendant on cost yardstick procedures increase the estimated cost of scheme in a time of rapid inflation.

I therefore press the Government to re-examine the cost yardstick procedures and to consider whether they are really necessary. Provided a total ceiling is put upon the funds available, there is no real reason why the housing associations should not be given greater freedom to work in co-operation with the Housing Corporation and local authorities. By reducing central interference in this way I believe that far more homes will be produced far more cheaply and far more quickly than can be done at present.

As it is, housing associations have a distinct edge on local authorities, as they take on average 26 months from approval to buy land to the letting of complete homes—immeasurably quicker than the local authority. However, this time can be further reduced by elimination of what are essentially unnecessary administrative requirements.

Another matter inhibiting the work of housing associations is the drop in improvement grants, which have fallen from more than 450,000 in 1973 to 159,000 in 1975. The published figures do not reveal how many of the allocations to private owners go to housing associations, but the housing associations obviously have suffered considerably from the total drop in improvement grants that have been approved.

This is particularly serious when one considers that until recently housing associations were foremost in urban renewal in co-operation with local authorities. The Minister in his opening remarks seemed to recognise that the salvaging and rescuing of obsolescent housing in our inner cities—the areas of greatest housing stress—is probably the greatest single priority we have.

It is therefore a matter of extreme disappointment that the Government have failed to respond to this challenge and are denying the supply of money to this vital area whilst diverting the limited resources available to areas which many of us consider less important, namely, the fulfilment of their dogma on public ownership through municipalisation or the Community Land Act. Thus, while we do not quarrel with the Government over the Order—indeed, we congratulate them on bringing it forward—our welcome is tinged with deep regret that it is not backed by parallel policies which would ensure the most effective use of money, the raising of which we are tonight being asked to approve.

10.26 p.m.

Mr. Arthur Jones (Daventry)

I was interested in what the Minister said in support of the Order. I wish to declare an interest as a member of a housing association which is engaged in a considerable variety of work—the restoration of cottage properties, providing special accommodation for single persons, and the construction of traditional semidetached three-bedroomed properties. We do that across a variety of locations in England and Wales. In that way we follow the great traditions that have been built up by housing associations and societies in recent years, fulfilling a very useful and valuable role in addition to the other two main providers of accommodation—the local authorities and the developers of private owner-occupied houses.

I have been interested in this movement for many years. I was appointed by the men Secretary of State to the committee headed by Sir Karl Cohen that conducted a wide inquiry into housing associations and societies. Although that committee arrived at no conclusions and made no recommendations, much of what has followed since flowed from that inquiry.

I was very interested to have the Minister's assurance on urban renewal. Housing associations have a very important rôle to play here. There are city centres in many locations which should at present be in the process of restoration. The associations could be active, too, in terms of the rehabilitation of old properties, and in the construction of new residential accommodation in city centres that have often been cleared under slum clearance arrangements. I hope that the Minister will be prepared to give an assurance, so far as he is able, that housing corporations will be more involved in schemes of urban renewal than hitherto. It is difficult to see how city centres can be restored as quickly as they should be unless they get the added support of central Government resources flowing through the housing corporations.

I wish to pay tribute to the tremendous amount of voluntary work that goes into this third sector of housing activity. I was interested in the figures the Minister gave concerning the societies that have been registered. I understood him to say that this number totalled 1,422 with six refusals. It would be interesting to know on what grounds the refusals were made. I am not sure about the criteria for registration. I understood the Minister to say that a number had been deferred.

The Under-Secretary of State was good enough to reply to an inquiry that I made about the resources made available to the Housing Corporation. In a letter dated 20th February, he said: At 1975 public expenditure survey prices we have made £198 million available to the Housing Corporation for the financial year 1975–76. This will enable them to approve 21,000 new dwellings and 9,000 improved dwellings involving the payment of approximately £150 million in housing association grant. When using the phrase "housing association grant", was the hon. Gentleman referring to a capital grant, or was that the grant that was made available in the current financial year to balance the deficits that arose from the operation of the Housing Corporation's funding arrangements?

My concern about the housing association movement is that, as I understand it, on the grant of regulated rents for accomodation that housing associations provide, the Government, through the Housing Corporation, underwrite the deficits on their management accounts. Regarding the standard of building which they are allowed to undertake and the estimated regulated rents that will be forthcoming from the accommodation which they provide, to what extent is the annual deficit on housing association management accounts monitored?

I understand that the subsidies run for a 60-year term. Is it possible to predict the total subsidies available to housing associations and societies for that full 60-year period? My concern is in respect not only of the capital made available through the Housing Corporation, but of the level of the subsidies that have to be made good for all housing associations and societies over a 60-year term by means of public resources. Unless it is carefully administered and considered from the outset, the impression is that the commitment is open-ended. In the context of the high cost of renovation of properties and the construction of new dwellings, can the hon. Gentleman give an assurance that we are able to determine the level of subsidies and that the monitoring of that level will be effective?

This matter is of concern not only to those who are interested in the level of housing subsidies but, significantly, to the whole housing association movement. If the level of subsidies becomes too great, the whole movement will be put at risk, because Governments cannot undertake an open-ended commitment of that character over a long period of 60 years. They need to measure the anticipated outgoings in terms of capital and current expenditure against the level of rents and other income which will be forthcoming. This is an important aspect of the whole question of the funding of the Housing Corporation and the resources provided through that institution to the housing associations, in both capital and current commitment terms.

I entirely support the Order, but I think that we need an assurance about the monitoring of the vast expenditure of public money and the long-term commitments that are entered into. I shall be interested to hear what the Under-Secretary of State has to say in this respect.

10.35 p.m.

Mr. Armstrong

I hope that I may have the leave of the House to reply to the debate.

I am glad that the hon. Member for Hornsey (Mr. Rossi) agrees with me for once about something that we are trying to do, although in some of his remarks I detected a bit of harking back to the old controversies. I shall not rehearse the arguments. I also suspected—I hope I was wrong—that in some way the hon. Gentleman was comparing the contribution made by the Housing Corporation with that made by local authorities. We see one as being complementary to the other, and we consider that the Housing Corporation is doing a valuable job indeed.

Mr. Rossi

I assure the hon. Gentleman that that is our view, too.

Mr. Armstrong

I am glad to hear that. I detected an anxiety to indulge in controversy.

I am grateful to the hon. Member for Daventry (Mr. Jones) for his contribution to the debate. I shall try to reply to the points that have been raised, and I assure both hon. Gentlemen that if I omit anything I shall read what has been said and supplement anything that I say tonight by writing to them.

The Working Party on Housing Cooperatives, which the Minister set up in 1974 and whose report was published in January of this year, recommended that higher levels of subsidy should be made available. As the hon. Gentleman said, at present co-ownerships are entitled only to the option mortgage subsidy, and this proposal must await the outcome of the current review of housing finance.

My reply to the hon. Gentleman's point about Housing Corporation schemes is that one-third of them are to meet special categories. There is no division of opinion between the two sides of the House on that. New standards have been laid down, and yardsticks have recently been issued for single person housing. The whole yardstick system is under review. I cannot say more than that now.

The drop in improvement grant, about which the hon. Gentleman keeps reminding us, does not apply to housing associations. The housing association grant is for all schemes—improvements as well as new building—and I have here some figures that are rather interesting. In 1975–76, 18,000 housing association grants were approved, compared with 10,000 in 1974–75.

The Housing Corporation is diverting an increasing proportion of resources to urban rehabilitation. We hope that it is taking particular care to deal with areas of housing stress. I am assured that the Corporation considers all applications very carefully, and I understand that most refusals have been in areas that are already well served by existing housing associations. That is one of the main reasons why certain applications have been rejected.

Mr. Arthur Jones

Am I to understand that the Corporation is looking at the geographical spread of housing associations, and that none of the refusals has been for malpractice or inadequacy, but only on the ground of the over-provision of housing associations or societies in an area? It would be difficult to make an adjudication between the work of one institution against the performance of another on a geographical basis.

Mr. Armstrong

I stress that despite pressure from hon. Members on both sides of the House, it is a decision of the Housing Corporation, not of my Department. Our information is that the majority of applications that have been turned down have been rejected for that reason, but if the hon. Gentleman wants to delve further into the criteria there is no reason why we should not correspond on the issue.

The housing association grant is an initial, once-for-all capital grant based on the first year's estimate of fair rent income. In practice it is a single payment, although there is provision for payment on account and instalments on completion of the project. It is calculated to reduce loans advanced by the lending authority, which may be a local authority or the Housing Corporation, in respect of acquisition costs, works costs, fees, internal administration expenses, home loss and disturbance payments and capitalised interest to a level that can be serviced out of the estimate of fair rent income, minus an allowance for future management and maintenance. The grant is expected to average between 75 per cent. and 80 per cent. of costs, but in high-cost areas it could be more.

It is never easy to find the right balance in the allocation of resources. The Housing Corporation is making a valuable contribution towards solving our severe housing problems. The Order will enable it to continue with that worthwhile job. I hope that the House will give the Order its approval.

Question put and agreed to.

Resolved,

That the Housing Corporation Advances (Increase of Limit) Order 1976, a draft of which was laid before this House on 6th February, be approved.

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