Private Rented Housing

HL Deb 05 February 1987 vol 484 cc354-60

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Skelmersdale)

My Lords, with the leave of the House I shall now repeat a Statement about private rented housing that has been made in another place by my honourable friend the Minister for Housing, Urban Affairs and Construction. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement.

"The Government are very keen to encourage the provision of private housing for letting by a greater variety of agencies than at present and to increase freedom of choice for people wishing to rent their homes. My right honourable friend the Secretary of State for Wales and I propose, therefore, to give local authorities an explicit statutory power to provide financial assistance to the private sector, including housing associations, in order to assist in the provision of rented housing using private sources of finance. We envisage that financial assistance might be particularly appropriate for the support of schemes involving assured tenancies. We propose to include the necessary provisions in the Local Government Bill this Session.

"Local authorities will be able to use these powers to keep the rents of new housing developments by the private sector to levels which prospective tenants can be expected to afford. The purpose is also to give further encouragement to the introduction of private finance into the provision of such housing. I hope that authorities and others concerned will make the maximum use of these powers to encourage the development of schemes by responsible landlords for rented housing, particularly in areas where the needs are greatest.

"It is important, however, that such financial assistance should not be used simply to feather-bed private sector provision by removing all risk from it and converting it into a concealed form of private sector lending to the public sector. The legislation we are proposing will, therefore, require that such financial assistance should be provided only with our consent. The Government expect individual local authorities to contain the cost of financial assistance within their existing programmes. We envisage that assistance would normally take the form of annual grants to bridge the gap between financing the costs of a development and the expected rental income, but other forms of assistance will be covered by our proposals.

"There are four key matters on which we would normally wish to be satisfied before giving consent: first, the commercial risk of the development should rest substantially with the private sector and, in particular, the local authority's commitment should not be an open—ended one to meet any differences that might arise between costs and income; second, the level of financial assistance should not exceed in amount or value 30 per cent. of the overall cost of the scheme; third, the activity of managing and maintaining the houses concerned should be carried out by the private sector participant and not by the authority offering financial assistance; fourth, if local authority land is involved, the land should be sold freehold or on a lease of not less than 99 years.

"Other factors that we might also wish to take into account in deciding to give or withhold consent are the overall costs of a scheme, the proposed tenure mix, whether the tenants would have the right to buy, rights given to the authority to nominate tenants, the likely proportion of tenants receiving housing benefit and the proposed rent levels.

"Some authorities are already planning to assist the provision of housing by private sector landlords using certain existing powers. It is important that such schemes should be developed in accordance with the criteria I have indicated. We are, therefore, proposing that the Local Government Bill should include a provision that, with effect from midnight tonight, local authorities shall not, without our consent, give financial assistance to or for the benefit of other persons, including registered housing associations, or enter into agreements to give such assistance in connection with the acquisition, construction, conversion, rehabilitation, improvement, maintenance or management of accommodation for letting or licensing, including hostels and lodging houses. We do not, however, propose that consent should be required with respect to assistance which is expressly required by an obligation imposed by an agreement made on or before today. Financial assistance given without our consent after today will be declared to be unlawful and transactions relating to financial assistance entered into without our consent after today will be declared void. Financial assistance for these purposes includes grants, loans, guarantees and indemnities, subscribing for share or loan capital, and the provision of benefits through the transfer of land or other property, the provision of goods services or facilities, the carrying out of works, and the making of other payments.

"We propose to initiate consultations immediately on the details of our proposals. I am placing in the Library copies of a document which sets out the proposals fully and which explains certain exemptions we propose to make from the requirements for consent. Copies of the document and of this statement are today being sent to all local authorities and to the local authority associations. Copies are also being sent to the Housing Corporation, the National Federation of Housing Associations and other interested parties. Meanwhile I would advise any local authorities and others who are actively contemplating schemes to seek the guidance of my department or the Welsh Office."

That concludes the Statement, my Lords.

Lord Dean of Beswick

My Lords, we are grateful to the Minister for repeating the Statement made by the Minister in another place. I welcome the fact that the Minister has mentioned in the Statement that there will be full consultation with the people involved before the Bill comes before the other place and your Lordships' House.

May I put one or two pertinent questions to the Minister? Is the scheme designed to encourage local authorities to participate in such activities or is it designed to stop a repeat of the Sheffield United Kingdom housing scheme? Am I to take it from the Statement that the Sheffield City Council, which has by-passed the normal procedures in the scheme I have just mentioned, will still be allowed to go ahead with that scheme? As I understand, it caters for up to 2,000 houses in conjunction with a deal that it has done with one of the national building societies outside the normal remit. Will the Sheffield scheme be allowed to go ahead, bearing in mind the fact that, if I have understood the Minister correctly, the provisions take effect from midnight tonight and nobody can proceed with a scheme without the consent of the Secretary of State?

It appears from the Statement that there will be no new government money to support any such schemes. Does that not mean that there will be very few of these schemes starting? Most of the local authorities in the public housing sector are short of funds to do what is necessary, such as repairs. In the Statement, the Minister also said that local authorities will be expected to give up their management rights and these will be operated by the private participants. In view of that, will a local authority retain the right to nominate tenants for these properties from its own waiting list, bearing in mind that it will be expected to fund up to a maximum of 30 per cent. of the cost of a scheme?

The Minister mentioned the right to buy. If this were imposed as a diktat, as in the rest of the public sector, would it not be a complete discouragement to the public sector, which would be expected to participate, if the Government were to impose on this sector a mandatory right to buy for tenants taking these houses?

Lord Winstanley

My Lords, we, too, on these Benches should like to thank the noble Lord for repeating that important Statement. He will accept that it is very complex, as indeed is the document to which he referred which has been placed in the Library. He will also accept that we shall wish to study that document and the Statement more carefully before we can finalise our views on this whole matter. But in general we welcome the Statement because it appears to signal two things. First, it appears that the Government now accept that the principal need so far as housing is concerned is for houses to rent. Secondly, it appears to signal the fact that the Government recognise that it is no longer acceptable for all their efforts to be restricted to increasing the percentage of owner-occupiers, which hitherto has seemed to be the Government's single and only housing policy.

With regard to the new arrangements, the Statement makes clear, as the noble Lord, Lord Dean, said, that the axe falls tonight. The Statement says, from midnight tonight, local authorities shall not, without our consent, give financial assistance to or for the benefit of other persons, including registered housing associations", etc. I should merely like to ask the noble Lord whether he will confirm that consent will not be unreasonably withheld. I know that more is said about consent in the Statement.

Going on from that, the Statement makes clear that consent will not be required for schemes already in the pipeline. I, like the noble Lord, Lord Dean, should like the Minister to confirm that the exciting and interesting scheme already afoot in Sheffield will not be frustrated by the new arrangements.

With regard to the provision of extra finance, is it not possible that, were the 20 per cent. rule regarding local authority use of funds received from the sale of council houses to be relaxed, it might well be that local authorities would be in a very much better position to fund arrangements of this kind than they perhaps now are?

While this new scheme may very well bring forward more homes—that certainly is to be warmly welcomed and, I am sure, will be warmly welcomed by noble Lords in all parts of the House—it nevertheless remains a fact that many of the people who seek those homes to rent will have difficulty in paying the rent? That is inevitable.

We have an elaborate system of support schemes, housing benefit and so on, which is so bureaucratic and complex that it is not working fully. I should like to ask the Minister again about the possibility of doing away with all those elaborate schemes and focusing help in a single benefit paid as of right, in the same way as child benefit is paid as of right and retirement pension is paid to all as of right, but with the provision that through the tax scheme money can be creamed off by the Government where it is not needed. A system of that kind would, I am quite sure, be immensely valuable.

The Government mention that all these documents will be sent to the various bodies which he named and interested parties but the noble Lord did not mention specifically the building societies in that connection. I think many of us hope that with the new freedom which the building societies now enjoy they will be encouraged to take part in schemes of this kind. I should like the noble Lord, if he can, to confirm that the Government are consulting the building societies individually, or perhaps with the Building Societies Association, on participation in schemes such as this.

5.15 p.m.

Lord Skelmersdale

My Lords, I am very grateful to both noble Lords for their welcome—in one case generous and in the other, from the noble Lord, Lord Dean, slightly more cautious—of the Statement which I have just repeated. This Statement is good news for local authorities, but more importantly it is good news for prospective tenants of rented accommodation. The Housing Corporation already has powers to make grants of up to 30 per cent. of the costs of rental housing schemes. Local authority associations have sought similar powers and we are now proposing to give them to them. The noble Lord, Lord Dean, welcomed the consultation exercise which surrounds this proposal of my right honourable and honourable friends, and I can confirm that the financial institutions are also being sent copies of the consultation paper.

The position in Sheffield is rather curious. There are in fact two schemes going on in Sheffield. I have details of one, which is as the noble Lord, Lord Dean, explained, and I understand that this is signed, sealed and delivered and therefore will not be caught by the Statement. As to the second scheme, it will depend entirely on what the terms and conditions are. But assuming that they follow the criteria that I have outlined in the Statement, there is absolutely no reason why it should not go ahead.

The noble Lord, Lord Dean, noted that the local authorities were not to have management of the schemes. It is quite natural that the risks and rewards, as it were, should go the principal provider of the money. He also asked about nomination rights. The retention of nomination rights is simply one of the factors to be considered and obviously we have no objection in principle. But I have no doubt that this is the sort of comment that will be made in the responses to the consultation paper. I appreciate especially that some of the tortuous, legally framed phrases and clauses that I read out from the Statement need very careful study indeed, and I agree with the noble Lord, Lord Winstanley, on that.

As to the use of capital receipts and the 20 per cent. restriction, many of these schemes are likely to be in those areas that we discussed at length in our debate on the inner cities on Monday, and these are areas where they have very limited capital receipts anyway. But on the general point I do not think it serves the interests of either the noble Lord or the House to repeat my endless arguments on the use of capital receipts.

Lord Elton

My Lords, can my noble friend tell me what will happen to applications for consent between the axe falling and the conclusion of the consulation period and how long is that likely to be?

Lord Skelmersdale

My Lords, I think that the consultation period is two months. The Statement made it quite clear that any contract entered into after midnight tonight would be caught, and of course when the Bill gets onto the statute book it will be the legislative base of that.

The Earl of Onslow

My Lords, how much will this cost?

Lord Skelmersdale

My Lords, as the Statement said, it is intended that this money shall be found from within existing local authority funds. But the whole point about this is rather like the success of the urban development corporations in that it gives the local authorities the opportunity to use enormous leverage and as a result get more houses for less money.

Baroness Denington

My Lords, I found the Minister's Statement very interesting and I shall be reading what he has said. I wish to take up only two points. I believe I am correct in saying that he said that the Government will not give more than 30 per cent. grant. Is that correct? I gather that it is not correct. I am very glad to know it. I am deeply involved in one housing association which is trying very hard to get private money into rented housing. The Government have offered a 30 per cent. grant. However, it is simply not enough. We have done exercises on this matter, and we are not the only housing association to do such exercises.

The role of housing associations is not to provide high-cost rented housing. They may attain perhaps 5 per cent. above fair rent or perhaps a bit more than that. But a 30 per cent. grant, as we have all found from the studies, is not enough to provide housing for the people whom housing associations feel they are in this field to help. I am sure that that applies to local authorities as well.

Therefore, I ask the Minister to look at the actual level at which grants are pitched. We all want to try to make this scheme succeed. Rents may be above fair rent prices, but not far above them; otherwise it will kill the scheme. I think that that is an important point.

My other point is that the Minister says that the management shall be private. I do not know whether that will help the scheme. I should have thought that financial institutions would not be interested in taking on management. That is not their function; they are not skilled in management, while housing associations are. I should have thought that such institutions would very much like to be in partnerships with housing associations which would undertake management for them.

Lord Skelmersdale

My Lords, the Government regard housing associations as part of the private sector. Perhaps that is part of the answer to the last point made by the noble Baroness, Lady Denington. I shook my head when the noble Baroness said that the Government were providing 30 per cent. grant. In fact, in this particular instance it is the local authorities who will be providing the 30 per cent. grant. These sorts of schemes are not yet properly off the ground and I think it is too early to say whether the 30/70 per cent. mix is right or whether it ought to be altered.

I have also heard, out and about in the country, exactly the same thoughts which the noble Baroness has just voiced. Obviously we shall take those considerations on board.

The Earl of Onslow

My Lords, I apologise. I had not quite finished my question to my noble friend, and I gave way to the noble Baroness. The Minister did his best to answer the question but I should like to know the actual amount of money involved and also whether the rents will be subject to rent control or will be free rents. As my noble friend will have seen in several articles in the more market-oriented papers, the way to provide the largest amount of housing is to deregulate the housing market, and not to work on a system which was designed to stop soldiers from the 1914 war being evicted from their houses.

Lord Skelmersdale

My Lords, I do not know about the 1914 war, because the Housing Acts which my noble friends normally complain of were those passed by a more recent Labour Government. Be that as it may, the amount of money involved is impossible to predict because it depends entirely on how much use local authorities actually make of these schemes. However, what I have said is that this is constrained, in a sense, by the normal local authority budgetary arrangements.

So far as freeing rents is concerned, the objective is to increase our very successful policy of assured tenancies, which incidentally was agreed between parties.

Lord Dean of Beswick

My Lords, I am grateful for the way in which the Minister has dealt with the questions. However, I must correct him historically. He referred to the fact that this side of the House is always concerned and annoyed as regards housing Acts passed by the last Labour Government. Perhaps I ought to say that the biggest villain of the piece is in fact the 1957 Housing Act, which I think was passed when Mr. Powell was the Minister.

Lord Skelmersdale

My Lords, I have difficulty enough with the present and, clearly, if I am wrong on my history, I apologise.