PRIVATE HOUSING INDUSTRY

HL Deb 27 November 1974 vol 354 cc1462-86

5.29 p.m.

THE EARL OF KINNOULL rose to ask Her Majesty's Government how they view the current state of progress of the private housing industry, and what steps if any they intend to take to encourage a reasonable level of new private housing in the housing programme. The noble Earl said: My Lords, in putting down this Question to-day, I must say at the outset that it was not designed to test the political spurs of the noble Baroness, Lady Birk. I have managed to attend sufficiently in the House to know that the noble Baroness has already won her spurs following her recent appointment, for which I would congratulate her.

My Lords, the purpose of my Question is simply to draw attention—if, indeed, attention needs to be drawn—to the increasingly disturbing level to which the private housing industry has shrunk over the last six months, and to ask the noble Baroness what remedies the Government intend to introduce to restore some of the vigour, health and, indeed, much-needed confidence to one of the essential arms of any succesful housing programme. Perhaps I could say at this stage how grateful I am to those who have indicated that they intend to take part and so make this short debate the more valuable, particularly my noble friend Lady Young who had, of course, the responsibility of grappling with the housing problem not so long ago, and did so, if I may say so, with such distinction. I am sorry that through reasons of technicality my noble friend Lord Bathurst is unable to take part.

My Lords, in order to describe the serious decline of the private housing industry I have not come armed to-night with a vast folder of housing statistics. Even a probationary student of the subject quickly learns just how flexible some of these figures can be, and indeed how valuable in consequence they are to any housing Minister deploying his or her arguments on a sticky wicket. My information is derived from more humble sources. It is derived from talking to builders, talking to building societies, and indeed talking to private landlords. On the building side, I think it is accepted that the current rate of production in the private sector now stands at something like 55 per cent. of what it was last year. This in itself is a disturbing figure, for it takes little imagination to foresee the effects this may have in a year or two's time; a shortage of new housing leading to a sharp increase in prices and with the many first-time purchasers again seeing their plans to acquire a home of their own disappearing from their grasp.

The second figure, which I have been unable to confirm but I believe is roughly correct, is the number of new houses which stand three-quarters finished, which, of course, do not necessarily qualify under the statistics for either starts or completions. Because of the sluggish state of the house market, and indeed the parlous economic state of many of the private builders, this figure has swollen to what I am told is estimated at over 200,000 houses. Many builders have simply shut up shop until conditions improve. If this figure is correct, what a waste of resources, and what can be done to unlock the situation? The assistance that any Government can give to private builders who have uncompleted houses on their books can, I would assume, be channelled in a number of different ways. I should like to suggest four ways, some not original but all, I hope, mostly practical.

First, there is the role of the Housing Corporation. We know that under the vigorous chairmanship of the noble Lord, Lord Goodman, the Housing Corporation is fulfilling a very active role in the rented sector of housing. I believe that the target for this year is some 30,000 houses. But what I would ask is whether the Housing Corporation, through the housing associations, could be persuaded to purchase some of these unfinished houses. Indeed, they already have an allocation of funds sufficient to meet these purposes. This would at least ease the hump and allow some builders to get under way again.

The second suggestion I should like to put to the Minister is, I am afraid, not new. This has, of course, been discussed for a number of years, and particularly by the last Administration. It is a method of helping first-time purchasers. They represent, I believe, a vital 30 per cent. of the sluggish housing market. I know that the present Government have discussed how best they can help the first-time purchasers, but I think it would be helpful if the noble Baroness could say how soon they intend to announce some policy and, indeed, whether they are consulting the building societies on this matter.

The third suggestion is again an obvious one; to encourage building societies—and here I must declare an interest—to reduce their mortgage rates. One positive way of doing this would be to adjust their composite rates, thus giving them a reasonable margin with which to reduce their mortgage rates. The fourth suggestion would be possibly to set up special building finance on a reduced interest rate basis to house builders. Again, this could be worked through to the benefit of the house purchasers. These arc some of the possible ways in which I believe the Government could act now to assist builders with existing houses under construction.

What of the immediate future? What of the difficulties facing builders planning their future house-building programmes? The cumulative problems and uncertainties are, I believe, unparalleled in their complexity. In addition to the usual—and now more acute—worries that face builders in judging building costs in the house market when the house has been built, the builder to-day is faced with the twin uncertainties of the new development tax and its side effects on land banks, and the planned municipalisation of development land. These cumulative problems lead one to feel that unless the Government are able and willing to take some early remedial steps the creeping paralysis will fast spread over the private building sector, and the decline of the industry will turn rapidly into a collapse.

Turning to the private rented accommodation of both furnished and unfurnished properties, the House will recall the comments of my noble friend Lady Young on the effects of the 1974 Rent Act on the private sector; the gradual unswerving strangulation of the system was basically the burden of my noble friend's advice. We now see yet another nail in the coffin of the private sector in furnished and unfurnished accommodation in the guise of the Housing Rents and Subsidies Bill. The House will recall that the Bill as drafted would end the automatic conversion of controlled tenancies into regulated tenancies. A minority of landlords who remain with controlled tenancies would be left with a controlled rent, possibly between 50p and 60p a week, which would be clearly insufficient to cover even the maintenance of the property. It is always a tragic situation as a property declines to the detriment of the tenant. I hope that the noble Baroness will explain to the House this evening what is the purpose behind this measure.

With the gradual strangulation of some 3 million properties in the private sector, the question that comes to one's mind is, who will fill the gap? Do the Ministry monitor the number of private accommodations which are available or which are lost year by year from the private sector? Are they to be filled by the public sector? Do they monitor the actual demand for rented accommodation? Is it increasing? Who will fill the furnished accommodation role? Will it be the local authorities or perhaps the Housing Corporation? I hope the noble Baroness will address her mind to these questions this evening when she replies. Will the Government reconsider, for instance, giving ail tenants of houses and flats— including local authorities and housing societies or housing associations—an equal security of tenure? Why is it, for instance, that local authority tenants and, indeed, housing association tenants, for reasons as simple as an untidy garden or keeping a pet canary, are able to be served with a notice to quit and have to vacate. There are cases that arise; they may be few, but there are cases, and the question is, why should it happen?

On furnished lettings, there is one point which I should like to draw to the noble Baroness's attention, and I have in fact already given her notice of it. It affects building societies in particular, and arises again from the Rent Act 1974. If an owner of a property purchases his property with the aid of a building society mortgage, and, in time, requests to let that property furnished while he or she goes abroad for a period, a building society will normally have no hesitation in agreeing to this. But because of the 1974 Act, if that borrower should then default, perhaps while abroad, the society is left with a security of which it cannot get possession. This could develop into a very real problem with building societies, and in order to protect them- selves they may well refuse in future to allow any lettings of this nature. This would obviously be unhelpful to all parties, and I should be grateful if the noble Baroness could give us some clarification on this point.

If I were asked to summarise the general fears that lie behind questions about the future of private rented accommodation and its sharp decline, I would suggest that they were based on three simple premises. The first is a strong social need for an adequate supply of rented accommodation. The second is that the public sector cannot, practically or adequately, fill immediately a void that might be left by the private sector. The third is that until the pendulum between the landlord and the tenant finds a more equitable balance, the role of the private landlord is economically finished, leaving a gap—and, indeed, a widening gap over the years—which concerns all those interested in the social requirements of a balanced housing programme.

My purpose to-night, as I have said, is to draw attention to the lack of confidence, the noticeable decline and the fear of collapse of the private housing industry. My purpose will be fulfilled if the noble Baroness can give some encouragement in her reply, and reaffirm that Her Majesty's Government's policy is to retain within the housing programme an active and vigorous private sector. I hope that my purpose will be fulfilled.

5.43 p.m.

BARONESS ROBSON OF KIDDING-TON

My Lords, I rise as the second speaker by agreement with the noble Baroness. Lady Young. It was agreed before the debate started that the order of debate should be somewhat changed. May I first say how much we on these Benches welcome the raising of this Question by the noble Earl, Lord Kinnoull. It is something that worries the whole of society at the moment.

In his introduction the noble Earl said that he would not use a large number of statistics, and neither will I, but I think that I am entitled to use perhaps one or two. First of all, I should like to make a general statement. I do not think anybody disagrees with the fact that, to create a healthy social society, it is necessary and desirable for as many citizens as possible to own their own homes. In the past this country has had a very good record in comparison with other countries in Europe, and that is why the present trends in the private housing sector are so disturbing. If one looks at the Department of the Environment's figures for the first quarter of 1974, one will see that it is stated that for England and Wales completed private houses were 37,674, and starts for the equivalent period for England and Wales were 26,092, and if one uses those figures to see the disparity between completions and starts, and extends this over a longer period of a year, one gets some idea of the reduction in private house building that will inevitably hit the market and the purchaser within a year, or even six months.

Equally, in The Times of this morning there is an article by Mr. Thomas of the Royal Institution of Chartered Surveyors claiming—and I think he is correct—that the private house market is still a buyers' market at the moment for housing in the low and medium price range. Of course all of us welcome a reduction, if it is possible, in the price of housing to the buyer. However, if the reduction is an artificial one caused by economic circumstances other than desirable ones, then it is not good for society. I have a feeling that this reduction is because the private builder and developer are suffering (like a large section of other industries in this country) from a pressure on cash flow due to the high interest rates paid on any loans. I think that this is the reason for the reduction in prices, and the unloading of houses that has taken place on the part of the building and developing industry. Up to a point this has, without a doubt, benefited certain purchasers at the moment. If one felt that the building and construction industry were in a position to reinvest and take up options on new development land, so that one could see a continuation of the private sector, then one would not be quite so disturbed. But I do not believe that this has taken place.

Obviously, we are all concerned with what is happening to the private building industry, and here I should like to divert a little more towards the cost of the land on which the houses are built, because this has a tremendous bearing on what we shall have to do in order to solve the problems that face us. We have had in this country for a long time past Town and Country Planning Acts (conceived with the best intentions) which have, to a large extent, prevented the kind of destruction of the environment through ribbon development that took place before the war prior to these Acts. But in some ways these Acts have been counter-productive. The constraints on planning have given rise to high premium values on land for which planning permission is granted, and the main beneficiaries of these planning permissions and increases in the price of land thereby caused have been the owners of land. Until recently it was only the owners of land, but, since the introduction of the capital gains tax, the Treasury as well. This has meant that housing costs have leapt beyond the capability of young married couples to buy a house.

In recent years, planning consent has meant an increase of about 30 times in the value of the land once that consent has been obtained. If you envisage a housing density of about eight houses pet acre, and a house costing £8,000 to build, it means that it has increased the price of that house by up to 50 per cent. when you include the cost of the land. We are all concerned with this problem, and some solution has to be found. Thirty years ago it took a young married couple about two to two and a half times their annual income to buy a house; to-day it takes five and a half times their annual income to buy a house.

I hope that the noble Baroness, Lady Birk, will excuse me if at this point I refer to the Government's White Paper on land. We on these Benches are deeply concerned about the price of land and realise that something has to be done in order to give the community the benefit of any development. But we have great reservations and fears about the legislation that seems likely to follow the White Paper. First of all, I am very worried about where the local authorities under the proposed legislation are going to find all the valuers necessary if they are to take development land into communal ownership. This is a profession in which there is an enormous shortage in this country. There are not enough to go round for present purposes, and it will be a long time before enough people are found who can support this duty of the local authority. I believe that this will slow down progress.

Having acquired the land, it is to be let out on licence to developers for private housebuilding purposes; and obviously, for the local authorities' own building purposes it is not difficult to transfer the land. But I should like to ask Her Majesty's Government how those developers are to be chosen. It is not the same as letting out a contract on tender. How do you choose a developer, and how do you make certain that something is not open to certain malpractices? Is there not a danger that the developer, having once taken up the licence, will have to make the whole of his profit from the building of the houses, whereas in the past one could assume that part of the increase in the value of the land on which he was building the house would be taken into account?

I have a tremendous fear that as a result the house prices will automatically increase. The developer having built the houses, a private purchaser comes along and buys one of them. I understand he then has to go to the local authority for the purchase of the freehold of the land on which the house stands. I have been given to understand that the price of that land can be adjusted according to the financial position of the purchaser or the new owner of the house. This, again, will set up an enormous bureacratic structure as well as a large conveyancing department in the local authority. These are problems which are very great and they will not help us to advance quickly towards a greater relief of the house building sector.

In any legislation of this kind there is a great danger of a reduction of land on the market for housebuilding purposes, and compulsory purchase may have to be used very much more often. But there is one overriding problem. In this country, like everywhere else, land is a commodity which is finite and it seems that before we embark on this type of legislation we need to work out proper plans with a view to the development of a natural and viable growth point, to make certain that we avoid urban sprawl which creates enormously expensive social problems. I am well aware that we have not even begun to work this out, and I recommend that this should be done on a regional basis. After that I believe that local authorities can be given free- dom to work within such a plan, but my fear is that under the present suggestions the local authorities will, on the whole, be too autonomous in regard to the development of their own surroundings.

On the question of how to help the young married couple, I presume that under the proposed legislation this could be done by an adjustment in the price of the freehold land. But I understand that if that is done there is a constraint put on the owner, and should he sell within a certain period he has to compensate the local authority. In my view this does not give him a proper freehold. I should like to recommend for study the low-start mortgage principle. Most young married couples are looking forward to achieving greater affluence as they grow older and establish themselves in society. If a low-start mortgage, to which I understand the building societies are not averse, could be introduced to help the young married couple, it would not be in any way subsidising them because as they advance in society so they will take up the burden of their own commitment to own their own house. Those are some of the points which I think we should consider in the context of what is happening to the private sector of housing in this country.

5.57 p.m.

BARONESS YOUNG

My Lords, I am sure we are all grateful to my noble friend Lord Kinnoul] for introducing this short debate this afternoon. I intervene to support most warmly what he had to say about the question of the private housebuilding industry to-day. This, my Lords, is an important matter, for in many ways the housebuilding industry is like agriculture. Both are basic to the well-being of us all, agriculture because ft provides us with food, and our requirement for housing comes next. Both industries need a steady pace of development and it takes about a year to build a house even after all the complexities of land purchase and planning permission have been completed. In a situation such as we have to-day, when I believe that new housing starts in the private sector are down to 7,000 a month (my noble friend Lord Kinnoull has said there are some 200,000 incomplete and unsold houses), the matter is one of great seriousness, not only for the industry but for the country as a whole. Indeed, unless there is some consistency in policy towards this we shall build up difficulties for the industry to be carried into the future.

At the moment there will be many skilled men leaving the building industry to go into other industries and then, of course, as soon as things become better again there will be a shortage of skilled labour, frequently coupled with a shortage of building materials. All this arises at the moment when the houses are needed and the further delay in building, of course, forces prices up. Then we have the difficulty that people cannot afford to buy the houses. This emphasises the basic necessity for the housebuilding industry to have a steady flow of houses to buy and buyers able to purchase them.

I am sure that when the noble Baroness, Lady Birk, comes to reply, she will tell us what the Government have already done to help people to purchase houses. She will give us the figures for the amount with which the Government have been able to help the building societies over the past months. I am glad that the Government have been able to do this and we are grateful for their help. But clearly it is not enough, particularly in the depressed state that the building industry finds itself in to-day. I will accept that some of the trouble in the past has undoubtedly been due to the volatility of mortgage funds. There were sudden increases and then sudden decreases, and no one who is seriously interested in housing can blink at this fact. But I believe a new uncertainty has now been added to the whole of the private house building industry with the proposed development land tax, the proposed capital transfer tax and, above all, by the proposed nationalisation of development land. I listened with great interest to what the noble Baroness, Lady Robson of Kiddington, had to say about this matter.

I do not myself propose to pursue the issue further because obviously there will be many other opportunities to debate these proposals in detail. None the less, none of these proposals helps the private house building industry; they only weaken its confidence in the future. Nor, so far as I can see, is there any help in the Budget for the first-time house pur- chaser. There is no doubt that the best way to help the private house building industry is by encouraging and enabling people to own their own homes. There is no doubt at all that the majority of people in this country wish to own their own homes. I accept, of course, that there is a need for council houses and that there will be a continuing need for them, but nevertheless we ought not to forget those who wish to buy their own houses.

It was to meet this need that we on this side of the House very much welcomed the proposals by my right honourable friend Mrs. Thatcher for the 9½ per cent. mortgage interest rates, proposals which were designed to meet this need and which undoubtedly would have been implemented had we been successful in the Election last October. But this is not the only solution. There are many other variations on mortgage interest proposals which could be considered, and although it will be argued that this would immediately force up the price of houses and make for difficulties, the figures I have already quoted on the numbers of unsold and uncompleted houses should, I think, dispel that argument.

I would suggest to the Government that they would do well to consider more help to people wishing to own their own homes, not only because they would be doing something which people would like but because it would be helpful in the light of our economic difficulties at the present time. I do not believe that anyone who listened to yesterday's debate in this House can be in any doubt about our economic difficulties. It is a much better use of public funds to help someone to own his own home than to subsidise a council tenant.

In their publication Home Ownership for the Lower Income Families the Housing Research Foundation has concluded that the subsidy on a council house built in the last year is about £900 a year in rates and taxes, and it compares this with approximately £230 a year in tax relief on a mortgage. So encouraging home ownership not only provides people with what they want but it makes economic sense as well. But it is not just a question of mortgages. There is the very real difficulty young couples have in finding the deposit, and in this connection I was most interested to read a report this month from the House Builders Federation giving some interesting statistics about the proportion of a person's income required both for a mortgage and a deposit. The figures are that the average price of a new house has more than doubled from £4,736 in 1969 to £10,872 in 1974. The recorded income of the borrower has increased by only 89 per cent. in the same period, from £1,617 on average for the first-time purchaser to £3,062. The average loan as a percentage of income is much the same; that is, it is just over twice the annual salary. But as a result of these sums the deposit required to-day by the first-time buyer is £4,190 compared with £1,248 in 1969.

The difference is that to-day the sum is 136 per cent. of income compared with 77 per cent. in 1969. So I think that as well as looking at mortgage rates one does need to look carefully at proposals to help first-time buyers with the deposit. Not only do I think this needs to be examined, but I think the house building industry itself might look to see whether it can produce suitable low-cost housing for first-time buyers. I am aware that this is often a controversial proposal, because it is suggested at once that a great deal of substandard housing will be erected and this in itself is undesirable. Neverthless, looking through some of the professional journals—as I have done in preparation for this debate this afternoon—there is no doubt that there are architects who are interested in this matter. I think there arc many possibilities of dividing small semi-detached houses to make them into suitably sized flats, while a great many different methods of building, which may well bring down the cost, ought to be examined. This is something that the industry should take most seriously because it might well be able to find ways in which a young couple can acquire a foothold in the property market to start them off.

The other point that I think that the industry could well study is the type of accommodation which it builds. I have suggested accommodation for the first-time purchaser that could be low cost, but I believe that the Census figures show that the greatest demand in the future will be accommodation for the single-person household. It may well be that there is a much greater demand for some- thing like this than has yet been considered. Many people who are concerned with the housing of the elderly, for example, give statistics showing the very high proportion of old people that there are already in the population—a proportion which is increasing—and we may well find ourselves with an enormous number of three-bedroomed houses in the country which are already becoming under-occupied and which will become increasingly so in the future.

Clearly what is needed is a kind of general shift of the population so that the couples can go into houses and purpose-built smaller accommodation is designed for the elderly. This needs a great deal of consideration and I put these suggestions only in the most general terms to-day, but I think they are ones which the industry and the Government ought to consider. In this serious situation it seems to me that one needs to have—I was about to say constructive suggestions, but the pun was not intended—a positive policy. I think that the Government would agree that we all want to sec everybody housed as well as is possible in the kind of accommodation that people would like. It is for this reason that we hope the Government will look seriously at the difficult problems of the private house building industry at this moment. I hope that the industry itself will be looking always to what it can do to meet the changing needs of the population. I conclude by thanking again my noble friend for introducing this debate this afternoon.

6.10 p.m.

LORD HAWKE

My Lords, may I intervene for a brief moment to reinforce what the noble Baroness has just been saying, and to apologise for the fact that I may not be able to hear the Minister's reply? Before the war you could buy a bungalow on its own plot of land for £500, and a better quality one for £600 or £700. To-day, bungalows of a similar sort, perhaps with more amenities such as central heating, are selling in my part of the world for £12,000 and £13,000; that is, 25 or 26 times as much. The people for whom they were intended were probably the artisans and the clerk types who, before the war, were earning £3 or £4 a week. To-day, those same people would be earning £40 or £45 a week; that is, ten times as much. The houses may have more amenities than are really necessary; they have central heating, which they did not have before the war. But the net result is that, at any rate in the South-East of England, nobody earning under £3,000 a year can possibly afford the cheapest possible new house; and I cannot help feeling that the building industry, if it really got down to and appreciated these facts, could do something about it, instead of continuing to build houses of a type which are a drug on the market because nobody can afford to buy them.

LORD WOLVERTON

My Lords, before Her Majesty's Government reply, may I ask one question? I apologise for not putting my name down on the list of speakers. My information is that houses up to about £8,000 are selling fairly well—not too well, but fairly well—but any houses above £8,000 or £9,000 are not selling. There are a good number of houses being built at £8,000 or £9,000 in the area in which I live, and it is possible to sell those houses to young people provided they are earning something like £56 a week, because the mortgage repayments amount to something like £20. Could Her Majesty's Government tell me whether my information is right? If it is, I think that it reinforces what my noble friend Lord Hawke has said, that we do not want to build very expensive houses. I should like to know whether these 200,000 houses which are partly completed are the more expensive type which a large number of people just cannot afford to-day in the economic conditions of the country. Perhaps Her Majesty's Government could tell me something about that.

6.13 p.m.

BARONESS BIRK

My Lords, I was about to say, and I still will say, how indebted we are to the noble Earl, Lord Kinnoull, for raising this topic; and I should like to thank him very much for the very nice remarks he made to me. It was extremely interesting listening to him, and he obviously raised some very important points. When, however, the noble Baronesses came in we then extended the field very widely, particularly in the Liberal direction. But the noble Earl has such a long familiarity with matters connected with owner-occupation and house-building that we are all aware of his expert knowledge, and I face answering him and the other expert speakers who have spoken with considerable trepidation. But before I turn to the specific question of the present difficulties for private house-building—and, if I may say so, I think we have roamed fairly widely from that—I feel that I should put it in the context, especially in view, again, of the wider scope that has now been covered, of the gravity of the whole housing problem which confronted the Government when they took office last spring; because it seems to me impossible, although we are trying, I hope, to narrow it to this particular aspect, not to see it in the context (and I think in fact all speakers have mentioned housing problems generally) of the housing of people in this country.

During the 1960s there had been a justifiable air of cautious optimism about the provision of new housing. Over 400,000 houses were completed in the private and public sectors in 1967 and 1968. But during 1973, and into the spring of 1974, there was a disastrous slump in the level of house-building. Improvement grants at this time were all too often going to speculative landlords who were concerned (let us face it) with evicting their tenants and selling the improved houses at a vast profit, or letting at exorbitant rents. Private accommodation was becoming desperately hard to find, and homelessness was increasing. People on the borderline of buying their own homes were being priced out by rising house prices and mortgage rates, and council re-let rates were falling and council waiting lists lengthening. The situation at this time cried out for a rise in the rate of public sector building in response to this deteriorating situation: and I am glad that the noble Baroness, Lady Young, appreciates the two sides, and the needs of people who are homeless or want a different type of housing provision. But the astonishing fact is that there was at this time no movement, and it is only fair to say that this Government inherited the worst public sector housing figures since the war, and that when they took office last February house-building was at what I can only call a grim low ebb.

The state of affairs on owner-occupation was also deplorable. The Conservative Administration had dangled the hope and expectation of home-ownership in front of young couples. But what in fact happened? Rising market rates of interest forced building societies to raise their investment rates to attract funds. This, in turn, compelled them to raise the general level of mortgage rates from 8.5 per cent. to the unprecedented level of 11 per cent. Yet, despite this, an acute mortgage famine had developed. Some building societies thought that a further mortgage rate increase above 11 per cent., perhaps significantly above 11 per cent., was unavoidable. The facts are that we inherited an appalling situation. The country needed more homes, and it needed them quickly. Here, I would say to the noble Baroness, Lady Robson, that while I agree that so many people, and quite rightly, want to own their own home, I think the first priority of any Government in the housing situation we have to-day is to try to do their best to see that people are housed, which means the whole range of housing—rented housing, housing for ownership, housing associations; in fact, I think the whole spectrum which was mentioned by the noble Earl, Lord Kinnoull. The country needed more homes, and it needed them quickly. Therefore, the Government took immediate action to halt the slump in house-building in both the public and private sectors. Local authorities were strongly urged to expand their housebuilding programmes and to buy any suitable unsold houses from private builders. The Housing Rents and Subsidies Bill provides generous subsidies for public sector building for rent.

Perhaps I may refer here to a point raised by the noble Earl, although it goes rather wide of the Question. I think I should point out that the Government have made it clear since the Election in February that they intend to take the privately-rented sector into social ownership either by local authorities or by housing associations, and the details of the Housing Rents and Subsidies Bill are designed to restrict rent increases for the protection of tenants. In due course we shall of course be debating that Bill, so I do not think it right to linger on it any further now. We also anticipate a much enlarged contribution from the voluntary housing unit. This is being expanded and strengthened through the Housing Corporation, and the extra powers and financial assistance provided by the Housing Act 1974. The noble Earl raised the question of the function of the Housing Corporation in relation to owner-occupation. It has indeed been given new powers to lend for owner-occupation but, as I hope he will appreciate, with the limitations on public resources the Corporation's first priority must be to concentrate on those in the greatest housing need, and it is therefore at this time concentrating on rented accommodation.

Nor did the Government in fact neglect the private sector. It is, I find, a habit of many members and supporters of the Opposition to accuse the Government of indifference, or even hostility, to the interests of potential owner-occupiers in the private house-building industry. This is demonstrable nonsense. During their period of office, the last Conservative Administration—which I would have imagined to be the custodian of private building interests—did nothing effective to alleviate the disastrous effects of rising prices and mortgage rates. Confronted with these inherited and deeply grave difficulties, at least the Labour Government took action.

The noble Baroness, Lady Young, referred to the mortgage help, and it is true that we arranged for a short-term loan of £500 million to the building societies as a means of ending the mortgage famine and avoiding a further rise in the general level of mortgage rates. The building societies co-operated, and all the £500 million loan was taken up. Then despite pressures on public expenditure, we continued the arrangements under which local authorities are, in general, free to lend without overall money limits to a wide range of priority categories of borrower; and we also extended the priority categories to include all first-time purchasers of new houses in 1974. In a moment, I shall say something further about first-time purchasers, as this is a point which has been raised by many speakers to-day. The £500 million loan scheme gave the building societies the confidence to begin increasing the level of their lending at once, even though their net new receipts at that time were so low.

Since the spring, the level of new receipts has risen greatly and building societies are now entering into new mortgage commitments at a monthly rate well over twice the level of that of last spring. The seasonally adjusted figure for October was £383 million, which is the highest on record. The number of their monthly net new commitments on new dwellings on an unadjusted basis reached over 10,000, as compared with 6,000 last spring. The total commitments on new houses financed from all sources are now estimated to be running at around 15,000 a month. This means a higher level of sales of new houses, a reduction in the stock of unsold houses and improved liquidity for many house builders.

A continuously improving level of sales should give builders the cash and the confidence to increase the rate of new house starts, but even though the rapid fall in new house starts seems to have been hailed, the average figure of only 8,009 a month in the last quarter is, I entirely agree, extremely worrying. Therefore, the question is: what further action is needed in the short-term? My right honourable friend the Secretary of State is seeking the opinion of representatives of house builders and building societies on the nature of the current difficulties in the private housing market and remedies in the shorter term. Before I turn to that, however, may I take up some of the points made in the debate which bear on this and other points made by speakers which I feel deserve a reply.

The noble Earl, Lord Kinnoull, referred to the Joint Advisory Committee on Building Society Mortgage Finance. This Committee was set up under a memorandum of agreement entered into by the Government of the day—the Conservative Government in 1973—and the Council of the Building Societies' Association. The basic function of the Committee is to provide technical information to assist the Council of the BSA in formulating its recommendations to its member societies. Since these recommendations are essentially a matter for the Council and its members, it would not seem appropriate for the discussions of the Joint Advisory Committee to be made public. I am afraid that in giving that answer I find myself replying on exactly the same lines as the spokesman of the previous Government gave the noble Earl on a similar occasion about a year ago. The noble Earl also inquired about the Government's comprehensive review of housing finance. This is intended to be completed in approximately a year, and I think that the noble Earl will understand that at this moment there is nothing very much more that I can say about the matter.

My Lords, I turn now to the question of first-time purchasers, to whom the noble Earl, Lord Kinnoull, the noble Baroness, Lady Robson, and the noble Baroness, Lady Young, all referred. The Government are of course concerned about the difficulties posed by high house prices and the interest rates faced by those on the threshold of buying their first home. We shall be considering this question as a critical part of our wider examination of housing finance. Some speakers made suggestions as to means of helping young couples to acquire their first home. Again, in order not to keep your Lordships here too long, I will not go into specific detail, but all these things—index rating, deferred payments and so on—are under consideration and will be part of the review. The noble Earl touched on the question of the problem of mortgagees' consent to letting by owner-occupiers in view of certain provisions in the 1974 Rent Act. I hope that he will be mollified with the knowledge that the Government are aware of the views of the building societies on this matter and are in consultation with the BSA about it.

On the question of credit for house builders, a matter raised by the noble Baroness, Lady Robson, I understand from the monetary authorities that there is no intention of restricting the financing of house building for the owner-occupier. Lending for house building in the private sector remains a priority category in the provision of credit. Contingent to that point, the noble Baroness raised the question of the comparison between assistance to the public and to the private sectors. It is very difficult to make valid comparisons between the subsidies for owner-occupied housing and public rented housing, and there have been, as I am certain she is aware, a number of tendentious comparisons by selective use of first year cost comparisons, particularly from a report—Inflation and Housing— published by the Housing Research Foundation, but these comparisons can be very misleading. In order to achieve a reasonable comparison, one must look at the costs over the whole life of a new house, which requires a complex series of inter-related assumptions about such matters as the level of interest rates, rents and house prices. I hope the noble Baroness will forgive me for not going further, but this is an extremely complex matter which we could spend a great deal of time discussing to the exclusion of everything else.

My Lords, so far as the operating margins of building societies and tax liability are concerned—this was raised by the noble Earl—again I have to say that the Government are well aware, through the formal consultative machinery and otherwise, of the views of the Council of the BSA on the problem of margins and we believe that the Council will behave as responsibly as it always has on questions which touch on mortgage rates.

It would be quite wrong to deny that the problems of private house building are complex or to suggest that the answers are obvious. They are not. These are complex matters and the answers are far from obvious. As my right honourable friend the Secretary of State said in a speech last Friday at the annual luncheon of the National House-builders Council, it is true that there are as many different diagnoses as there are doctors. In a quest for a solution, the question as to what the Government can do to help must be balanced by the question, what can the private house building industry do for itself? I think that the noble Lord, Lord Hawke, drew attention to this point. First, I believe that the house building industry is inclined to over-react to boom and slump. In the second half of 1972 and the first half of 1973, the industry started about 235,000 private houses. In the second and third quarters of this year, the industry was starting houses at the rate of only about 100,000 a year. I think it is fair to argue that an annual rate of 100,000 is a serious underestimate of potential demand: it is certainly a very grave underestimate of need.

Of course one understands—and we need not go into it in very great detail at this moment—why builders should feel uncertainty at the present time. But I would suggest that what is needed is a cooler and, perhaps I might even dare to say, a more level-headed approach to assessment of market demand by builders. This could even produce the embryo of a revival of confidence—a point which was referred to by the noble Lord, Lord Wolverton—though I do not by any means underestimate the present selling difficulties faced by some builders.

Another way forward for the industry could be a much more tightly-knit relationship between builders and building societies. There is some evidence, as was pointed out just now, that the industry has been over-investing in large and expensive houses for which there is not a strong and continuing demand, as might have been expected. There is surely a case for saying that builders should work much more closely with building societies in monitoring changes in market demand, especially changes in demand for different types of houses.

I have been all through the field and I have the feeling that perhaps there is one point on which all those who have taken part in this debate would agree; that is, that a far greater degree of flexibility of thought and action is required throughout the industry. At the same time, I believe that builders could develop closer financial relationships with the building societies. It is true that some societies already provide short-term finance to house builders and guarantee a supply of mortgage finance for the houses when completed. If it were possible to extend this, it could provide builders with an important incentive to provide houses for first-time purchasers, which is a matter of concern to all of us here.

This brings me to the important question of lower-priced houses. This, again, is something which is a matter of great concern to all those who are interested in the subject of house building or who are participating in it, particularly the building industry itself. It is something to which we should give the most serious attention. None of us must close our minds to any reasonable solution, whether conventional or unconventional. I was so pleased to hear the noble Baroness, Lady Young, stress this approach—I felt that we had both been reading the same journals this afternoon.

For goodness sake! my Lords, do not let us equate the unconventional or unorthodox with the old "prefab" concept of the early postwar period. What is urgently needed is the focusing of public debate on the use of unorthodox methods; for instance, conventional homes with small floor areas which would be suitable for young couples with no children, and who are both out at work. Then there are extendable homes and basic or "shell" homes that can be finished by the home owner—indeed, any method which could give people a home of their own cheaply and quickly would be useful.

I believe that I have the agreement of noble Lords when I say that where people need houses we should not only encourage people, but should give them more scope to become involved in the provision of houses. This would bring down the cost both for the house-owner and for the builder who built the house originally, and it would make the whole enterprise more economically viable. My personal view is that we should overlook nothing. No ingenious, novel, or even eccentric idea should be ignored if it will help to provide more housing, for the sheer weight of human misery caused by overcrowding and homelessness means that our minds must be flexible and our imaginations lively.

I am very conscious that I have taken a considerable time in trying to deal with the points that have been raised, and also with the question of the short-term. The long term is also extremely important, but we are now getting rather too late into the evening to go into very great detail about that. However, since this has been raised in some detail, particularly those aspects concerning land and the land development tax, which were mentioned by the noble Baroness, Lady Robson, I feel I must say something about it. However, I should say right away that this is not a debate on the proposed Land Development Bill, nor indeed is it concerned with the land development tax. These are such enormous subjects in their own right that it would be quite impossible to do them justice. It would not be fair to the Government, to the people who have raised points and to myself to gloss over them, but there are one or two comments I must make.

First of all, we do not yet have the publication of the Bill. We have had the White Paper, and consultations in my Department are going on all the time and they will continue up to the time the Bill sees the light of day. Many of the points raised by the noble Baroness are those of which the Government are acutely aware and are looking into at the moment. The scheme generally is aimed at strengthening the power to shape development in accordance with social priorities. It is also intended that the community should be enabled to enjoy the benefits of the realisation of development values. Initially, an authority will be encouraged to acquire as much development land as the staff position permits, up to a maximum of ten years' need. I hope the noble Baroness will realise that the point she raised about plans going ahead of staff has already been taken into account. Ultimately, all development land will pass through the hands of the staff.

So far as the new land development tax is concerned, Treasury Ministers announced recently that the Inland Revenue will be publishing details of this as soon as possible. But unlike the previous Government's development gains tax, the new charge will not be applied retrospectively to gains made before the Royal Assent. So far as the effects of the operative scheme on house building are concerned, the Government believe that the whole of the land proposals—and I hope your Lordships will forgive me if I skim over them in a superficial manner—will be of considerable benefit to builders. One of the problems builders have found is that it has not been very easy in the past for them to maintain an extensive "land bank", and when local authorities have the power and the duty to bring land into development, the builders themselves will be relieved of that burden.

The scheme is not intended to produce more land or to reduce house prices—these are dependent on other facets as well—but it is intended to enable better planning to be done. Home ownership is bound to benefit from the curtailment of speculative activities, and we hope that the scheme will ultimately transform the whole development land market. I would ask noble Lords to be patient about this scheme and not to dismiss something out of hand before we even have the legislation before us.

I really must draw to a conclusion now, because otherwise it is possible that I shall be going on until we bring in the Bill and I will not even have time to read it myself. But I should like to say, finally, that I am aware I have not answered all the points that have been raised. I shall certainly go through Hansard later and make sure that I write to all those of your Lordships whose points have, I am afraid, been overlooked—because so many were raised and they were of such interest.

The Government do not seek to conceal their deep concern over the inadequate level of private house building, and although one noble Lord did not feel that my right honourable friend the Chancellor of the Exchequer had been of any help, it was made clear in the Budget Statement of November 12 that the Government have committed themselves to a mixed economy in which the private sector is vigorous, alert and profitable. This must include the private house building industry. Without a thriving and profitable house building industry, we cannot possibly produce all the new houses needed, nor will so many people be able to realise their dreams and legitimate aspirations of home ownership. My right honourable friend the Secretary of State has made it clear that he is very ready to consider suggestions for initiatives designed to restore confidence, but the problems cannot be solved by Government alone. The challenge before us must be taken up by the industry as well as the Government. In this highly difficult situation, conflict can never be the answer. The problems—and they are very grave ones—cannot be miraculously removed. Continuous dialogue can at least keep the important lines of communication constructively open.