Council Flat Owners: Financial Assistance (Hansard, 5 December 1996)

The Minister of State, Department of the Environment (Earl Ferrers)
My Lords, Her Majesty's Government intend shortly to issue directions to social landlords which will enable them—and in certain cases require them—to reduce charges in some cases to those who are in particular difficulties with high service charges.

§ Lord Dean of Beswick
My Lords, I am grateful to the Minister for that Answer. Is he aware that I am talking about people who in good faith bought the council properties in which they were living? Is he further aware that the numbers are growing so much that we are talking in terms of thousands of elderly people who, in the main, purchased flats and are living in them. In some places a block of flats has been bought in that manner. The owners now find themselves faced with bills of between £10,000 and £15,000 for remedial treatment and repairs, and there is no possibility of selling those flats. They are trapped in them. Could not the Government think up some scheme to provide some financial help for the owners of those properties? If they do not, those properties may well be lost to this country's housing stock.

Earl Ferrers
My Lords, I am sorry the noble Lord did not find my Answer as helpful as I thought he would think it was. Some people who have bought council houses, or flats in particular, find considerable difficulty with high service charges. I agree with him that there are certain people who are old and who find themselves in trouble. The local authorities can buy back those houses or flats, particularly if people are old and may become homeless. It may be cost-effective for them to do so. There is also an exchange sale scheme under which the Government give local authorities 778 concessions to encourage them to buy back houses or flats at the original right- to-buy price, provided that they offer the people another property.

§ Lord Clark of Kempston
My Lords, does my noble friend agree that the generous discounts given to former council tenants who bought their own houses or flats mean that comparatively few of them are suffering from negative equity? Does he further agree that it would be wrong to single out one class of owner-occupier on whom to use taxpayers' money? Finally, does he agree that the Government's policy of selling council houses has been extremely successful in view of the fact that nearly 70 per cent. of the population are owner-occupiers?

Earl Ferrers
My Lords, I am grateful to my noble friend for drawing your Lordships' attention to that matter. He is right that few people are caught by this. Of some 200,000 flat owners—those who have purchased their council flats—only 2 per cent. could not sell because the purchaser could not obtain a mortgage. We produce a booklet on the right to buy. That booklet warns tenants of the costs of buying, service charge costs and the possible difficulty in selling the flats. We warn that expert independent advice should be taken, and tenants should think carefully before they buy. With regard to my noble friend's remarks about people being house owners, he is again of course right. In fact, 2.1 million council tenants have bought their properties since 1979 and become house owners. That is a creditable figure.

§ Lord Williams of Elvel
My Lords, I welcome some of the measures that the Minister has announced. Does he agree, however, that the proper way to approach this problem, which is a serious one, would be to introduce a scheme for mortgages to rents generally across the board rather than the scheme of rents for mortgages that the Government had in place?

Earl Ferrers
My Lords, I shall need to work out exactly what the noble Lord is saying. Some people have their mental processes work rather slower than the noble Lord's. I shall consider what he is saying about mortgages to rents and rents to mortgages. People who decide to purchase their house take a risk—of course they do. It happens with everyone. In the council sector they are given substantial concessions. The negative equity problem to which my noble friend referred does not affect them nearly so much, particularly now, because house prices are increasing. Negative equity at the moment is about one-fifth of what it was in 1992.

§ Lord Dean of Beswick
My Lords, is the Minister aware that some of the facts in the noble Lord's question were wrong? Is he further aware that just after the right to buy was established several years ago, a substantial number of tenants bought industrially built houses which showed serious defects after a short time and that 779 the Government introduced substantial grants for them to be repaired? Will the Minister consider extending that scheme to these people?

Earl Ferrers
My Lords, I have explained to your Lordships that the exchange sales scheme enables local authorities to buy back houses where there is a difficulty. The fact is that anyone who purchases a house takes a risk and has to have professional advice. I realise that some people fall into difficulties not necessarily of their own making and we have taken steps to help.

§ Lord Monkswell
My Lords, we are grateful that the Government are recognising the problems experienced by some people who have bought their houses or flats, and that they are prepared to make financial provision to help them. However, there is a difference between the situation of those people who have bought their houses or flats and who then experience unforeseen problems and the situation in Westminster where the Conservative council mis-sold its flats with the result that the owners have faced enormous bills. Presumably the government scheme will apply to them, too. However, have the Government any intention of surcharging the councillors responsible for mis-selling their council's property?

Earl Ferrers
My Lords, that question is wide of the Question on the Order Paper and does not require an answer, other than the fact that I am not aware that it is so.
I say to the noble Lords, Lord Monkswell and Lord Dean of Beswick, that a survey carried out in 1994 of the people who had bought council houses showed that 97 per cent. of those who purchased under the right-to-buy scheme considered that they had good value for money; 86 per cent. of council flat owners considered that they had good value for money; only 8 per cent. of flat owners were more than one year in arrears with their service charges; and only 12 per cent. of all sales under the right-to-buy scheme are flats. Therefore, a considerable number of people who have purchased flats or houses are satisfied with what they have done.

§ Lord Avebury
My Lords, is there any incentive for local authorities to buy houses or flats at less than their market value and to relet them to the tenants at rents which do not cover the interest or management charges? Will the Minister say how many local authorities have taken advantage of the powers that he says they possess in this regard?

Earl Ferrers
My Lords, not many councils have taken advantage of the exchange sales scheme, although it is there for their benefit. With regard to buying back houses which are owned by people who have got into difficulties, if people are old and may 780 become homeless it may well be cost effective for the local authority to do so; otherwise, it would have to find alternative accommodation for such people.

§ Lord Williams of Elvel
My Lords, the Minister said that not many local authorities have taken advantage of the scheme. Can he give a figure indicating how many is not many?

Earl Ferrers
My Lords, I shall have to scratch around in the books to find the answer. I do not have it at the moment, but I shall see what it is and tell the noble Lord.