Affordable Housing

HC Deb 14 July 2004 vol 423 cc458-78WH

2 pm

Andrew George (St. Ives) (LD)

I was delighted to secure the debate this afternoon. In fact, I could not believe my luck. The hon. Member for South Holland and The Deepings (Mr. Hayes) and the Minister may have a sense of déjà vu, because we debated the same subject on 9 December 2003. The hon. Member for Stroud (Mr. Drew) also took part in that debate. One of the reasons that we are here today is that it is a massive issue and affects most of this country. We in the House cannot explore enough the need to find solutions to this most pressing and urgent of problems.

I said that I felt extremely lucky to secure the debate this afternoon, but that was before I realised that the minor matter of the Butler report would be discussed in the main Chamber at the same time, which may have diverted a large number of hon. Members who would otherwise be interested in taking part in this debate. There are important issues to debate and I am delighted that the Minister is here. I told his office about the issues that I intend to cover. They are similar in some ways but different in many others, and develop our debate of eight months ago.

The situation is now so urgent that we need a constraint on the building of new private market homes in the countryside. That may sound perverse, but it is needed to deal with the lack of affordable housing, particularly in the countryside. There is a crying need for the development of an intermediate market between social rented housing and the first rung on the ladder of the private owner-occupying sector. That gulf has been consistently large in many parts of the country, particularly in rural areas, although it oscillates over time. Sadly, it has affected my part of the world for the last generation. We must recognise the need to build a bridge by developing an intermediate market between social rented housing and the first rung of the housing ladder.

I argue strongly that the Government should explore new constraints on the still growing demand for second homes in many areas with severe housing problems. I am not opposed to people who own holiday homes. There are many of them in my area, and despite what others in the Chamber may believe, I am on very good terms with them. Owning second homes and using unused or underused properties for recreational purposes is fine in areas with an excess of housing, but we need seriously to consider ways of constraining the use of such houses purely for recreation and investment in areas with massive local housing demand. Those are the areas about which I am most concerned.

I want to talk about the development of the intermediate market. I also want to engage constructively in the debate, and I hope that that spirit came across the previous time we debated the issue. It is perhaps important to tell the Minister that I shall not be encouraging the many thousands of people in housing need to get involved in a gladiatorial argument about statistics, past records and what the Government have or have not done. I say that because the answers are staring us, as legislators, and the Government, as the controller of the resources, in the face.

In my contribution, I want to look at the intermediate market, changes to the planning exceptions policy under planning policy guidance note 3, and section 106 obligations under the Town and Country Planning Act 1990. I also want to look at measures to control second home ownership and ask about the Housing Corporation's targets for rural areas and market towns. I then want to ask about the predicted outcome of the investment in social housing that was announced in Monday's spending review and that the Deputy Prime Minister elaborated on further on the Floor of the House yesterday.

I have covered the background to the issue in previous debates, so I shall not go into great detail about the situation in my constituency, which covers Kerrier, Penwith and the Isles of Scilly. As has been well documented, however, it is experiencing severe need because it is at the bottom of the earnings league table but has extremely high house prices. As Members of Parliament, we tend to wear our hearts on our sleeves, drawing attention to the severe problems in our constituencies in an almost macho comparison of scars. Although we may all say that the problem is far worse in our areas than in those of other hon. Members, that will not help to solve the problem. None the less, I assure the Minister that he will find severe housing problems if he looks at areas such as mine. Indeed, the numbers on the local authority waiting list have increased by more than 50 per cent. in the past five years alone.

The problem is illustrated not only by the statistics, but by the human tragedies and the human suffering that those statistics quite properly highlight. It is clear from my constituency work over the past three or four years that the lack of affordable housing is the most significant issue for the majority of people, and I am sure that other hon. Members will have found the same in their casework surgeries, correspondence and public meetings.

Many young couples come to me in severe circumstances. They may be living in winter lets, overcrowded accommodation or one-bedroom flats with two or three children. The local authority is doing its best, and social housing providers and housing associations are trying to manage their resources as best they can, but the fact that many hundreds of families are in such situations brings home to us all just how severe the problem is.

Some people perceive those who live in bedsits, bed-and-breakfast accommodation, overcrowded housing or, as happens in constituencies such as mine, in winter lets such as holiday chalets, as incompetent, dysfunctional, or as belonging to the undeserving poor. I assure hon. Members, however, that those living in such circumstances in my constituency come from hard-working families and were born and brought up there. They do not have criminal records and show no signs of being dysfunctional. They are doing their best, but the facts of life that they face are against them. Despite every effort to improve their situation, they find that it is getting worse, if anything.

Mr. Adrian Sanders (Torbay) (ID)

Does my hon. Friend have the same problem in his constituency as I have in mine—a growing gap between wages and average house prices, and a new group of people who need affordable housing because they cannot afford to borrow, and whose wages in the same occupations 20 or 30 years ago would have meant that they could afford to buy? The affordability gap has increased homelessness among working people.

Andrew George

That is true. I am grateful to my hon. Friend for mentioning that. I notice from the Joseph Rowntree Foundation findings on affordability differences for working households wanting to buy homes that Torbay comes 20th on the list of authorities with the highest house price to income ratios. Many areas in my part of the world are high on the list, too.

In the families that I am talking about, the main or second income earner—it is not unusual for there to be two—may be a nurse, a member of the fire service or, as in one recent case, a teacher. One would normally expect those professions to provide for their members a settled existence in the community and a sound foundation from which to go to work with some security.

Mr. John Hayes (South Holland and The Deepings) (Con)

I shall speak later, so I do not want to take up too much of the hon. Gentleman's time. Does not the intervention by the hon. Member for Torbay (Mr. Sanders) highlight the fact that affordability is about people, not buildings? Houses become more or less affordable according to market change, so it is necessary to focus on helping people to afford the available housing stock—not merely to assume that it is possible to build "affordable houses", because they may quickly become unaffordable.

Andrew George

I am grateful for that intervention. I entirely agree. As I said earlier, we cannot simply build ourselves out of the present housing crisis. However, I did not sufficiently explain one point. The affordability gap has been significant for the past 25 years in areas such as my constituency, which has consistently been at the bottom of the earnings league table, but where house prices have always been buoyed by people equity stripping from the south-east, buying second homes and so on. It is just that a gap sometimes becomes a gulf, which is what it is at the moment.

Of course, there are oscillations in the market. Even when there is negative equity, the affordability gap remains for many families. It is not something that goes in cycles and will vanish in a few years when the market rights itself. My prediction is that in areas such as mine the market will never come right. There will always be a significant affordability gap. Therefore, we need to find constructive, creative ways to resolve the problem.

The Countryside Agency's report entitled, "The state of the countryside 2004", published at the end of June, identified a 30 per cent. increase in homelessness in remote rural areas in the past two years. I am sure that the Government have taken that on board.

Hywel Williams (Caernarfon) (PC)

I apologise for not being able to stay for the debate, much as I want to participate, as I have a Committee meeting.

Does the hon. Gentleman agree that there is a great deal of market failure in many respects? In my constituency, for example, there are communities where more than 50 per cent. of the homes are second homes. Anyone on an average wage locally will be pushed out of the market. There is nothing whatever that those people can do. On his point about homelessness, is not a large amount of rural homelessness masked by out-migration?

Andrew George

I entirely agree. In certain circumstances, even where there are jobs locally for a local young person or family, housing pressures become so great that those people are forced to leave—they do so because of lack of housing, not lack of jobs. In the far west of Cornwall and the Isles of Scilly, which are particularly remote, it is difficult to make that decision, whereas in areas that are closer to urban centres, that decision can be made relatively easily because the family or person can still keep in touch with the local community from which they come. However, I accept the hon. Gentleman's point.

I want to mention the development of the intermediate market. I use that expression, as do some others, and I hope that it will gain common currency and that the Government recognise that there is a policy area that is presently largely filled with a vacuum. I am talking about the gap between rented—mainly social rented—housing and the first rung on the housing ladder in the private sector. Primarily, when people think of filling that gap, they think of shared equity developments, which is fine as an approach. I agree that, primarily, an intermediate market means shared equity properties or long-term leasehold properties.

A problem emerges when people are encouraged to create demand in that market, but there is a lack of available properties for them. Another problem, if people are able to get a shared equity property, is what to do after they have purchased that property if they want to move on. Often, people find themselves locked into a shared equity situation. They are unable to make the further step on to the first rung of the housing ladder because there has been no significant increase in their income, and they have not had the benefit of money from a legacy, or won the lottery. Where do those people go? There are so few options for them.

The development of sufficient property in the shared equity sector—the intermediate market—is required, so that it will have a life of its own. That will need a positive policy initiative from the Government. I appreciate the need to avoid, in any shared equity development, the situation in which an occupier can staircase ownership up to 100 per cent., so that the property cannot be used for local need. It is also important that such schemes ultimately have a housing association or other similar manager to provide long-term management. Investment and a concerted effort on the part of the Government are needed.

On 10 May, I had a debate with the Economic Secretary to the Treasury in the main Chamber on self-invested personal pensions. The hon. Member for Ceredigion (Mr. Thomas), who knows a great deal about the issue, and I had a meeting with the Financial Secretary to the Treasury last week to discuss the potential negative impacts of the misuse of self-invested personal pensions, which we fear may allow those who use the scheme to purchase second homes. There is potential for a virtuous circle to be achieved here. There may be a problem with the many people who have spare income to invest in private pension arrangements, and who use a self-invested personal pension, because from 2006 they will be eligible to invest their pension in residential property. If that were clearly restricted to portfolios of shared equity accommodation with housing associations or the public or private rented sector, the pension investor would get the benefit of investing in the relatively stable and growing value of the property market over time, there would be a beneficial social outcome and the available housing stock would increase for people who need affordable housing.

I urge the Minister to talk to his Treasury colleagues about ensuring that self-invested personal pensions are not misused to buy second holiday homes, but are used for good and virtuous purposes. That will take a concerted effort and a little joined-up government, with which I am sure the Minister would want to associate himself.

Another area that is currently being developed, which was mentioned to me by the co-operative movement, is the possibility of establishing mutual home ownership. I am told that mutual home ownership is a model based on two core structural elements: a community land trust to hold the land outside the market, and a shared equity housing co-operative to reduce the management costs and to ensure accountability. It is argued that the main advantages of that model are that, unlike shared ownership, any public subsidy is locked in and preserved for future generations.

The proposed structure gives residents access to lower mortgage rates as an individual owner-occupier, because it is part of a wider investment plan. The monthly payments are flexible and based on an affordable percentage of a key worker's income. There are a number of advantages to the scheme. I say to the Minister that the mutual home ownership approach is worth looking at along with other approaches such as the shared equity system.

I want to consider the planning exceptions policy. Before I was elected in 1997, I was involved in the charitable sector, working with parish councils and local authorities, to establish local housing need working parties to identify land and housing associations, and to work with the local authority to stitch together developments of 10—possibly more, possibly fewer—houses using the exceptions policy, after PPG3 was introduced in the early 1990s. At that stage, there was a lot of enthusiasm about recognising the distinction regarding market housing on the edge of villages and, I argue, towns as well, and recognising the problems of sticking strictly to planning policies and not demonstrating flexibility, which rolls over into hope values on land. Landowners were prepared to countenance the idea of making land available at significantly lower than market rates in order to meet a need that is held in perpetuity. I urge the Minister to look carefully at the way in which the policy is being rolled out.

The Minister for Housing and Planning made a written statement on 17 June this year regarding that policy, but he did not make it clear whether the Government will ensure that exception sites will be allocated, or allow them to be identified through a development process. I urge the Minister to consider the issue carefully because as soon as one starts allocating exception sites one, first, increases their value and, secondly, restricts other options.

When I was involved in the working parties, there were occasions when the landowner said, "I want to hold out for more money." Because the working party held the mechanism to deliver housing to meet local need, we were able to say, "If you're not prepared to negotiate on the price, we'll look at another site". That usually brought the landowner back to the negotiating table.

It is important that we ensure that the exceptions approach is expanded still further. As I have said, we cannot resolve the crisis simply by building so many thousands of houses that it brings market prices down. That is unrealistic. In fact the private sector has enough land in planning permission to build 250,000 houses tomorrow. The problem is the phasing and development.

Last week, a local newspaper the Helston Packet had as its front-page headline—it is a big issue—"Priced-out". Its report states that estate agents were confirming the findings of an official report by the National Housing Federation that said that homes in the south-west were unaffordable. One branch manager, Stephan Kent of Miller Countrywide estate agents, is quoted as saying:

The only way, really, you could solve the situation is having councils saying houses can only be sold to local people. There really is no other solution unless the market comes down. That recognises that something needs to be done. Something dramatic needs to happen to ensure that exception sites can be brought forward.

That involves much more robust planning policies. In my view, those need to be more draconian to stop general unfettered planning permissions in the countryside and to provide a fertile ground on which exceptions developments can go forward. For example, in Penwith district, only one exception site has been brought forward in the past five years and that was on council land. We need the support of Government to create the fertile ground on which such development can take place.

I do not want to go on much longer but I emphasise to the Minister the issue of second home ownership, which I have raised before. I understand that the Welsh Assembly has considered the issue of altering the Town and Country Planning (Use Classes) Order 1987, so that planning permission would be required to change a property from a permanent residency to a recreational, holiday or non-permanent residency. It consulted a large number of academics, who said that that would be unworkable because it is difficult to define what is a second home and what it is not.

I urge the Minister to consider the issue more carefully. It was possible to define what a second home was when it was in the interests of second home owners to receive a 50 per cent. discount in council tax. As it was possible in those circumstances, I urge the Minister to consider the issue closely to see whether there are ways in which such constraints could be brought forward. In the past, the Housing Corporation set targets to meet needs in more remote and smaller rural communities.

There is concern about the matter. In its annual report to Government last week, the Countryside Agency warned that the Office of the Deputy Prime Minister's plans to scrap national targets for the provision of low-cost housing for local people in settlements of fewer than 3,000 people—and to hand responsibility to the regional housing boards—will result in fewer social housing units being developed in rural areas.

When it comes to meeting future targets, the impact of the spending review and the annual 4.1 per cent. increase in investment in social housing, I am concerned that, in respect of registered social landlord and council developments of social housing since 1996, the number of completions has almost halved—from 38,000 in 1995–96 to 19,000 in 2002–03. The investment available from the Government is one thing, but completions appear to be quite another.

I know that I have taken up quite a bit of time but, as not many hon. Members are present, I have perhaps taken more liberties than I should. I apologise to you, Mr. Olner, and to other hon. Members for doing so. I wanted to set out the importance of the issue clearly, as well as establishing a constructive cross-party consensus to try to find new ways to bridge the affordability gap.

2.31 pm

Mr. David Drew (Stroud) (Lab/Co-op)

I am delighted to reprise a debate that we seem to have every six months, but I hope that we can move it forward today, as there have been some important developments since we last had the opportunity for debate, either in this forum or in others. I know that some of us are regular offenders when it comes to taking part in such debates, but either we are a bit slow in getting our message across, or we feel that it is such an important message that we must keep reiterating it. I hope the latter is the case.

I welcome what the hon. Member for St. Ives (Andrew George) has said. I disagree with no detail of his explanation of the rural context. I make no apology for speaking largely about rural Britain, because the urban dimension is regularly raised in other quarters.

Three developments since we last had a similar debate are worthy of note. The first happened yesterday. It would be churlish not to recognise that the OPDM has done well out of the comprehensive spending review—assuming that the review will turn into real money at some point. It was a good announcement, and housing was obviously the major beneficiary: £1.3 billion by 2008 is a significant investment. However, we all know that we have to go further and lock in private sector funds.

The second development is the changes in the planning system. Like so many developments trailed by any Government, the impact of the changes is more immediate in theory than it is in reality. I hope that the changes will be implemented sensitively in rural areas—no one wants untrammelled development. I retain my membership of the Campaign to Protect Rural England, but sometimes argue with the organisation about the way in which some of its messages are—at best—misconstrued. The CPRE must avoid being perceived as a taking a no-development-in-any-circumstances approach. The focus should be on having the right development, carried out in the right way, with appropriate housing numbers.

The third development, which is not to be underestimated, is the Miles report, which considered some of the macro-underpinning of the housing market. Although we are considering only part of that market, it is an important part. If people are starved out of the market, it is not effective—there is market failure. The inbuilt pressure of excess demand inevitably increases prices, which prevents more people from entering the housing market.

The hon. Gentleman did not blind us with a lot of statistics, as has happened in previous debates, and I do not intend to examine the figures for what has happened over the past few years, either. Anyone who has a rural or semi-rural constituency will know one clear piece of anecdotal evidence: development has not taken place in recent years, especially in villages; and many developments in market towns have not been able to bridge the affordability gap. We have a specific problem with our ability to deliver social housing. My right hon. Friend the Deputy Prime Minister talked yesterday about gap funding, and on a very different level we may need to consider that in a rural dimension. I take it that the Department will be working on it, and no doubt my hon. Friend the Minister will say a few words on the subject when he responds.

I shall concentrate on three rural housing issues, coming in directly where the hon. Gentleman left off with exceptions policy, although I will be even more blunt than him. Baroness Dean of Thornton-le-Fylde asked some of us whether it was suitable or appropriate to try to change exceptions policy. The overwhelming message from rural Labour MPs was to leave it alone. The figure should not be raised beyond 3,000, because, if it were, the emphasis would immediately be put more on market towns than on small communities. There was even an argument for reducing the threshold, but we did not get into that. I hope that the Government are not wobbling and getting the idea that the figure is irrelevant or that a different approach is possible. The only other approach is to use section 106 agreements, and anyone who has had dealings with local authorities—love them though we do—will know that they are often seriously underpowered in that respect. Developers are too often able to twist and turn and exploit the lack of expertise, so that what is supposed to be delivered ends up not being delivered. That is no way to give any community confidence in that way of proceeding.

Andrew George

I do not disagree with the hon. Gentleman, but were he and his fellow Labour MPs confusing the Housing Corporation targets, which over the years have included developments of social housing for communities with fewer than 3,000 people, with exceptions policies, which are about developments on the edges of settlements that could involve a range of communities of various sizes? Is he talking about the allocation of public funds or the imposition of planning policy?

Mr. Drew

They work together. That is the whole point. My old friend Moira Constable from the Rural Housing Trust has told me on more occasions than I care to remember that, in reality, there are three sides to the problem. There is the problem of land, but people are adamant that they can find altruistic landowners to provide land. Planning permission is more of a problem, but that is why exceptions policy is so important. An interested parish council or organisation working off a parish council—usually the main drivers—will almost certainly find a way of using the policy. Because the development almost certainly falls outside the village envelope, they usually find a way to persuade people that the development falls within the exceptions policy criteria, and it is moved forward. The third problem is money. One can have the land and the permission, but one needs the money from the Housing Corporation. The biggest single problem with that is the fact that the sites involved are small, perhaps consisting of only three or four houses; they go into the pot against larger developments and sometimes lose out because they cannot offer economies of scale.

Let us leave things as they are, but improve the process. Let us give parish councils and local communities the wherewithal to feel confident. The biggest problem is the time involved. In the case of one village in my constituency, Nympsfield, it took a decade of attrition to get from wanting a small number of affordable houses, some of which would be social housing, to completion. It took so long despite helpful support from Gloucestershire rural community council, which takes an active interest in the area. The process takes a long time and we need to cut that down.

There is another problem that needs to be solved. I am usually a great believer in regional strategy and identity, but regional housing boards must recognise that, as well as establishing the strategic overview, they must work at a much lower level—dare I say, the first level—of communities: villages. Regional housing boards must include rural housing people who really understand what needs to be done in terms of the process of attrition, the cleverness that always has to be brought into any system, and the sheer guts that are needed to stand up to the developers, who often come back with something that is not necessarily what the community wants.

I hope that the Minister will consider the matter. I am sure that he will net give us an instant reply, because I know that the discussions are ongoing, but there is a clear understanding among rural MPs in general, and Labour ones in particular, that we do not want the policy monkeyed with. It is working. It could work better, but the alternatives are far worse.

The next issue is what I call the structure of rural housing—who is there and who is not. We know who is coming into the rural housing market: increasingly, it is people with money. When I met Shelter recently, it described the drift that is taking place, largely from the south-east to the south-west—I make no apology for concentrating on the south-west. That drift puts enormous pressure on house prices, particularly for the sort of house that a first-time buyer wants to move into, but that someone else might regard as an ideal second house—they might ultimately want to move to the south-west, but initially they regard the property as an investment and something that they can use at weekends. In the meantime, they might rent it out, which keeps the unit of accommodation accessible to someone of lesser means for a time, but at some point it will be lost. We must understand the structural implications.

Labour does not sell off housing association properties—there is a marked difference between the main Opposition and us in that respect. Going along the route that they propose would be the death of any form of social housing in rural economies. However, I feel strongly that we have made a huge mistake in terms of the number of council properties that have been lost. I know that I disagree with Ministers on that—I shall not reiterate the arguments about keeping the fourth option open—but social housing in rural areas is even more important than in large urban council estates, because even now there are still some units of accommodation left and it is important to keep them in a price bracket that makes them available to families who are never going to be able to buy at the current rate. That is important whether one calls it social engineering or social justice.

We can look at the issue in different ways—I will come on to my proposal in a minute—but we must not confuse affordable housing with social housing. Some people concentrate wholly on social housing, and we must fight that corner, whether we are talking about housing for agricultural labourers or housing that is tied to a particular job, or housing in some parts of the south-east and the south-west for people who would not be able to do social care work, or even work in the public sector, if they did not have access to that type of housing.

That takes me on to my final point, which was well rehearsed by the hon. Member for St. Ives—I said "hear, hear" plenty of times. My solution to many of the problems, which is still in its infancy, involves community land trusts as a way to control the land. If we lose control of the land, a whole section of the population is shut out. Retaining ownership of the land while giving people an equity stake—that is where the mutual prospects come in—would be music to my ears and those of my hon. Friend the Minister, who is a fellow co-operator. That is not just a theory or a wonderful idea that might be tried in a couple of decades. In many parts of the world, community land trusts and mutual house ownership give people an equity stake that increases so that, ultimately, they can buy for themselves—they are not prevented from taking advantage of the opportunity to do so—but the important thing is that they cannot take the unit with them. I hope that the Government will give the idea serious consideration.

If my hon. Friend the Minister has been briefed properly, he will know that I have already got my greedy little fingers all over one of the sites that has moved from the Department of Health to the Office of the Deputy Prime Minister and said that it would be a wonderful location for a pilot. Although I have a vested interest in my hon. Friend examining what can be done in the Strouds of this world as well as in the Londons, he does not have to say anything today and do not mind where it is done. This is a real opportunity that should be grasped now, given the fact that there is good will behind it and additional investment.

We had an excellent meeting in my constituency last Thursday with David Rodgers of CDS Co-operatives, who is well known to my hon. Friend the Minister. Mr. Rodgers was well received by 100 people, to whom he sold the idea that the proposal that I have outlined could begin to break the back of the affordable housing problem. A report commissioned by CDS from the New Economics Foundation goes into considerable detail about how it could work. We just need to take it up and get pilot projects under way to discover how it could be introduced across the country.

Community land trusts are not the only answer, but there are solutions to the problem, and we must consider them. What is happening now is not in any way acceptable, let alone sustainable. We talk about sustainable communities, but it will not help if urban centres become more sustainable while rural communities become even less sustainable—if they become commuting settlements or areas in which only those with means are able to live.

I hope that my hon. Friend the Minister has heard my plea. He will get nothing but support from me, because I believe that we must all pull together—I hope that the issue does not divide the parties. There were many Conservatives in the audience last week, and they were keen to hear about the proposal. We must begin to break the back of this problem. Many people think that politicians have let them down and that the issue has slid past us. It seems so difficult, and we ask, "What can we do?" Well, there are things that can be done, and I hope that with support from all quarters my hon. Friend will be there to make sure that they are done.

2.48 pm

Mr. Adrian Sanders (Torbay) (LD)

I congratulate my hon. Friend the Member for St. Ives (Andrew George) on securing this debate and on dealing with issues that are pertinent to most constituencies in south-west England and beyond.

The intermediate housing market requires attention. It is clear that we have suffered from a two-dimensional housing market in which one either rents or buys. However, in an intermediate market, one can go from renting to part-purchase to purchase. That gap in the market is short. My hon. Friend mentioned the affordability gap—not a new phenomenon but one that has certainly become worse in the past 15 to 20 years. As I said in my intervention, a new group of people are looking for affordable accommodation—people whose incomes would in the past have enabled them to borrow and get on the first step of the property ladder.

My hon. Friend also mentioned the problem of second homes. People with equity who move in from outside not only inflate house prices with their bids, but are often in a position to move faster to secure a sale than people in the local area. My hon. Friend also mentioned self-invested personal pension schemes and the impact that they might have in future, which is certainly a concern.

On PPG 3 and local housing need strategies, if a local authority was tasked with developing a local housing needs strategy and left to conduct an authoritative study of what was needed in the area, it would probably come up with a very different picture than simply an outline showing the total number of units required, which is how things are done now. A local approach is more likely to produce appropriate housing. That point is important in bringing quality to the planning system and in developing communities.

My hon. Friend called for tougher planning rules to assist the provision of affordable housing. The hon. Member for Stroud (Mr. Drew) echoed that call and made a good point about section 106 agreements. There is expertise within local authorities to negotiate such agreements, but that expertise is not the same in every local authority. There is no doubt that some developers can get a better deal out of one local authority than another. Perhaps some work should be done to ensure that the skills and powers in local government are equal, so that no authority can be picked off.

The hon. Gentleman also mentioned migration from the south-east to the south-west, which is quite well documented. Surveys of people's expectations suggest that there will be no downturn in the number of people desiring to move to the south-west from the south-east. He also mentioned community land trusts—an idea whose time has come, particularly in small rural communities, but in urban areas and cities as well. He was right to say that no one has the answer to the problem of affordable housing, but there are solutions. I should like to talk about some solutions that the Liberal Democrats advocate, and add to those that have already been mentioned.

On the scale of the problem, about 175,000 houses were built in the United Kingdom in 2001—the lowest level since the second world war—and 12.5 per cent. fewer new houses were built in the last 10 years than in the preceding decade. Over the past 30 years, UK house prices have increased by 2.4 per cent. a year in real terms, compared with the EU average of 1.1 per cent.—the figures were 0 per cent. in Germany and 0.8 per cent. in France. The latest evidence suggests that the trend rate of house price growth in the UK has increased to 2.7 per cent. in the last 20 years.

Following the spending review and the Barker review, the Office of the Deputy Prime Minister's housing budget will be £1.3 billion higher in 2007–08 than in 2004–05, which is equivalent to an annual average growth rate of 4.1 per cent. in real terms. That is marvellous news—I do not think that anyone has said, "We're against this"—but, according to the Government's figures, the increase will provide funding for only 10,000 new social housing units a year by 2007„08. The Barker review says that we in fact need between £1.2 billion and £1.6 billion for social housing alone, and 17,000 to 23,000 more houses each year.

My local authority conducted a housing needs survey and brought in outside consultants, who concluded that my authority alone needed 2,000 units of affordable accommodation. I often look at national statistics and try to work out what they mean for my area, so I did a quick calculation based on that figure. The population of my area is 0.2 per cent. of the UK population, so the 2,000 properties needed in my constituency is equivalent to close on 1 million properties across the UK, yet the Barker review says that only 23,000 are needed. Either the Barker review has massively underestimated the likely need for housing, or the situation in my constituency is worse than a crisis. Perhaps it is a bit of both. The Barker review states that additional investment building up to £1.2 to £1.6 billion per annum will be required to deliver additional social housing to meet projected future needs. The spending review is therefore a start, not an end, to meeting the need for more affordable housing.

The Liberal Democrat view is that we can do better, that empty homes should be brought back into use and creative planning should be used to build more affordable homes. Between 1991 and 2001, growth in housing demand outstripped supply by more than 400,000 households Based on current trends, a housing shortfall of 1.5 million within 20 years is predicted. In human terms, that means overcrowding at best, and more homelessness at worst. Britain now has the highest ever number of households in temporary accommodation, and Shelter reckons that 1 million households are already inadequately housed. House prices and rents are so high in some areas that employers in schools, hospitals and across the economy simply cannot afford to recruit staff locally. That will not get any easier when graduates come out of university with big debts: areas with high house prices will have difficulty in attracting graduates, because they will want to go where the highest salaries are so that they can pay back their debts with minimum outlay on housing costs. That will have a profound effect across the board in the far south-west, where the affordability gap between what the local economy can offer in salaries and how much it costs to house oneself is greatest. That will affect not only the private sector, but local government and other public services.

There is a rather obvious reason for the problem: for the past 30 years, we have been building fewer homes. Annual house building has plummeted to levels not seen since the 1920s. The Government have acted, but, sadly, they also cut the social housing grant, which meant that affordable housing schemes across the country had to be curtailed and projects that had been several years in the making had the rug pulled from under them. The Liberal Democrats want to know why the tens of thousands of empty properties across the country are not being reused. There have been some pilot schemes, but nationwide action is needed. There should be some consideration of homes that are left empty because their owners lack the cash to repair them, or because the absentee landlord cannot be bothered with them, or because their ageing owners have not been offered help and advice about renting them out. Empty homes present an opportunity, and we need to do more to bring them back into the market. If we want to boost the number of affordable homes quickly, it makes more sense to use existing homes than to build new ones, as it must be cheaper and faster to repair empty housing stock.

To do that, we need to trust and empower housing authorities more than we currently do, which means providing best-practice cash and legal powers to act. The Liberal Democrats believe that the first steps should be voluntary changes such as the use of grants and advice to try to persuade owners to let their property; brokering relations between owners and letting agents; proposing appropriate tenants; and delivering faster on housing benefits, which can often act as a disincentive to people to rent out. However, all that needs back-stop powers. There should be a power to act where owners leave homes empty for no good reason, which is why we have long advocated empty property management orders giving councils the power to take over the management of the property for a limited period, and compelling them to lease it. I am pleased that the Government are taking that up. The use of empty homes should have been part of the sustainable communities plan. That aimed to be environmentally friendly, and in many ways it is, but there is a glaring error in relation to empty homes.

We all know that it is difficult to find extra housing resources, so one of our proposals is for a right to invest, which has been referred to by other hon. Members. That would make the old notion of shared equity far more flexible, by allowing council and housing association tenants the right to build up stakes in their homes. We think of it as a development of right to buy in which the home does not leave the social housing sector. Under right to invest, tenants share in the rising value of the social landlord's property, so rocketing house prices do not prevent them from moving out of social homes if they want to do so. The concept is not new; it just involves tweaking the planning rules so that planning consents place limited restrictions on future sales of new affordable homes.

We are also keen for the Government to investigate the idea of land value taxation, which would bring land that is banked by landlords into use. The evidence of greater Government effort is there, but the report of the Select Committee on the Office of the Deputy Prime Minister on the Housing Corporation concluded that housing policy has become a quagmire of quangos. That needs to be addressed. We must make it simpler to invest in housing. Finally, the message from the ventures is that we need more affordable homes because the scale of the problem is so great. We want more local decision making, a review of the planning system and policies that match the problems that are experienced in our communities.

3.2 pm

Mr. John Hayes (South Holland and The Deepings) (Con)

I refer hon. Members and others to my entry in the Register of Members' Interests.

I congratulate the hon. Member for St. Ives (Andrew George), who always speaks with charm and expertise about his locality, expertise that wavers a little when he moves outside it, but he is certainly well informed and passionate in his advocacy of local interests. It is entirely appropriate that the tone of the debate has been largely non-partisan. As several hon. Members have said, many of these issues extend well beyond the normal party divide or knockabout.

We have a major problem with housing affordability in the south-west and elsewhere; there are few areas in which it is not a problem. Although there are pockets where this does not apply, most places experience an affordability problem of some kind. In my part of the country—a rural constituency in a rural county—young people, first-time buyers and other local people who want to get on the housing ladder all experience difficulties because house prices have risen sharply.

There is a great deal of empirical evidence to support that assertion. The Halifax price index shows that the price index ratio increased from 3.19 in 1997 to 4.78 in 2003, and the Halifax annual first-time buyer review suggests that eight out of 10 towns in the UK were unaffordable for the majority of those buying their first home during 2003.

The hon. Gentleman referred to the Joseph Rowntree Foundation report, which found that the ratio of house price to household income for working households aged between 20 and 39 exceeded five to one in 33 local authority areas in England, and that in 19 local authority areas fewer than one in five such households could afford even the lowest quartile of house prices.

The results of the affordability problem have been manifold. One of the most notable and socially significant is that people are buying houses later in life; they are finding other ways to accommodate themselves. More young people, including young married couples with children, are unable to get on the housing ladder and are therefore obliged to live with their parents. It happens in my constituency, and I am sure that it happens also in the Minister's constituency and those of other hon. Members. Couples are having to live with parents, or other members of the family because they cannot get on the housing ladder.

However, this is not principally a problem of housing supply, although that is a problem in some parts of the country. We certainly need to build houses—we always have and we always will. Houses of the right kind, built in the right places, will add to the quality of the built environment, be in sympathy with the landscape and deliver high-quality residences for those who buy them, but, although supply is important, the question of affordability is principally about people. I justify that conclusion on three grounds.

We have already spent a little time debating the first; it is clear that as house prices change so does affordability. Affordability is about people's ability to afford what is available. With volatility of the sort that we have seen in the housing market over recent years, houses that were affordable one year become unaffordable the next—for the same group of people doing the same kind of job and with the same social status and the same income. That is exactly the point made by the hon. Member for St. Ives when he introduced the debate.

Secondly, the result of the massive growth in second home ownership and the buy-to-let market is that available houses have been bought not by first-time buyers, key workers or those who in the past would have been able to buy them, but by people who consider them principally either as an investment or as places to be used for recreational purposes. That does not suggest a supply problem. The houses are there, but they are not being bought by the people who once would have purchased them—people who are rooted in the local community. Often, for the reasons I mentioned, they are bought by people from outside the community.

Thirdly, there seems to be an imprecise relationship between house prices, and therefore affordability, and supply. Only 10 per cent. of housing transactions involve new housing stock, and only 1 per cent. of total housing stock is new. Due to the typical delays involved when supply is increased, a massive number of houses would need to be built to affect price through supply-side means. Most factors that affect house prices, and therefore affordability, are demand-side factors. They include the level of interest rates, the attractiveness or relative unattractiveness of alternative investment vehicles, the level of borrowing secured by housing equity and the disproportionate allure of home ownership in English culture.

To assume that one can counteract those factors by changing the volume of supply is at best naive and at worst a hopelessly misplaced adventure. None the less, the Government may embark on that adventure if they follow the recommendations of the Barker report. Despite the fact that Kate Barker is a distinguished and much respected economist, she seems to have disregarded the macro-economic arguments that I have listed. She seems to assume that one can significantly affect house price inflation and volatility by making a massive change in supply.

I hope that the Government will be much more imaginative than that. We have to consider a range of means by which people can be helped to afford available housing. Before that, however, I want to deal briefly with two or three points made by others.

The hon. Member for Stroud (Mr. Drew) spoke with great passion and knowledge about the exception site policy. It is an important means, in rural areas such as those represented by me and the hon. Member for St. Ives, of adding to the housing stock incrementally—with sensitivity to local wishes and in keeping with the local built environment and landscape—to provide housing for local people. But the exception site policy should not be used as a means to ride roughshod over the proper planning process. That policy is not about building 100 houses in a settlement irrespective of who will buy them, what they look and feel like, and their impact on local infrastructure. It is an incremental means to add to a settlement and to provide low-cost and social housing for local people. That has my full support, as I have said in the House previously.

The hon. Member for Stroud is right in that we need to look at ways that we can provide extra support. I hope the Minister deals with that. There are strong arguments for examining how we can build on the exception site policy, because there is hardly a village in Britain that could not accommodate a small number of extra houses to provide opportunities for local young people and first-time buyers, and this policy provides a good means of doing that.

The hon. Member for Torbay (Mr. Sanders) referred to social housing and was right to say that, notwithstanding the Deputy Prime Minister's announcement yesterday, social house building has virtually petered out. There were between 35,000 and 40,000 social housing completions in most years under the last Conservative Government, but that figure has fallen to fewer than 20,000 under Labour. Even with the extra 10,000 a year mentioned by the Deputy Prime Minister yesterday, we are 10,000 a year behind the record of the last Tory Government.

There are key issues involving social house building and whether we are getting, in the words of the Minister for Housing and Planning, sufficient bang for our bucks. Are the current means for providing social housing and the mechanisms for delivering a return on investment the most effective? We did not hear much about that from the Deputy Prime Minister yesterday. There may be an issue as to how effectively the Housing Corporation is delivering bang for bucks—those words are not mine, but those of the Minister for Housing and Planning—and there may be issues about how we can help housing associations to work more effectively with the private sector to deliver more social housing where it is needed.

Andrew George

rose—

Mr. Hayes

I shall give way briefly, because I am anxious to give the Minister maximum time to reply.

Andrew George

I agree that the hon. Gentleman should give the Minister the maximum, so I shall be brief. I accept that the Labour Government seem to be putting more money in, but they seem to be getting less housing out. The crucial factor is the price of available land, which requires the Government to establish robust policies to distinguish between unfettered permission for market housing and social and affordable housing.

Mr. Hayes

The hon. Gentleman makes a good point; it may also involve how land availability can be re-examined. I refer him, in particular, to the designation of brownfield land. I recently completed a study on that and found that the proportion of brownfield land designated for commercial and industrial development is greater than that designated for residential growth. In terms of take-up, the Government have had some success; they have met their target for brownfield land, although whether it was high enough may be debatable. That is a cheap and easy point, which I should not make because I am neither.

There is an argument that some redesignation of brownfield land in urban and rural areas would have a significant effect on the available land for development. While one would need to consider the cost of development in those cases—there are associated fiscal and regulation issues—it would provide an opportunity for the development of land that is lying idle. There is hardly a town in this country that does not have a derelict former industrial or commercial site that has remained so for a considerable period and that could be used more productively for residential development.

We are not saying that we do not want to build anything anywhere, but that we want to build the right houses in the right places—houses appropriate to local needs and in line with local wishes. We also want to make available housing that suits local demand, so we are indeed talking about social and affordable housing.

My final point is about changing our view of affordability. We need to change from a building-centred view to a people-centred view. We need an equity revolution—to give serious consideration to shared equity, as several hon. Members have said. We need a multiplicity of schemes that will allow people to get on to the housing ladder at different levels and to staircase up their acquisition of equity over time. Most people can afford more as they become more prosperous. Ironically, however, mortgages do not work like that. They are very hard to pay right at the beginning, but as one becomes older and richer—well, some do; I live in hope—the mortgage becomes easier to pay and so we need to consider ways to adjust that kind of arrangement. In essence, shared equity can provide a means to bring into the housing market people who are excluded from it.

In conclusion, I draw the Minister's attention to the study by Glen Bramley of Heriot-Watt university, who estimates that if shared ownership was widely available, it would help an additional 12 to 15 per cent. of householders in the south of England, including the south-west, to buy.

We have a problem that requires imagination and lateral thinking. It is not a party political problem, but the Government are the ones with the power to do something about it. If we fail, we fail aspirant home owners; we fail the future.

3.16 pm

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope)

I congratulate the hon. Member for St. Ives (Andrew George) on securing the debate and on bringing this important issue to the attention of the Chamber again. If we do this every six months, we can call it a biannual review and develop policy in that way. We have had a high-quality debate, although there may have been few people in the Chamber, for reasons to which he alluded. The quality of hon. Members' contributions has been excellent. We will take away many of the comments in the spirit in which they were made, which is how we solve the problems that we face.

I make it clear, and I am sure that there is no doubt, that the Government are committed to increasing the overall supply of housing in areas with significant housing shortages. I shall return to the core point made by the hon. Member for South Holland and The Deepings (Mr. Hayes) about being people-centred rather than building-centred. Whatever that argument may be, there is no doubt that we must increase the supply of housing in areas with significant housing shortages. The provision of sufficiently good-quality housing is an essential requirement if we are to have thriving and sustainable communities.

Tackling housing shortages, homelessness and the problems associated with housing in poor condition, which we have not touched on today, as well as low demand and abandonment, which are totally different problems that affect certain parts of the north, is a key part of our strategy to tackle social exclusion and to make real changes to the quality of life in our most deprived communities. Cramped housing and housing in poor condition have an impact on people's well-being, their general health and their children's educational attainment. There is a raft of problems, with which we are trying to deal. Problems with the supply of housing affect the economy as well as people, a point that was made earlier.

Several hon. Members, including my hon. Friend the Member for Stroud (Mr. Drew), mentioned the strategic spending review announcement yesterday. I shall place on record what was announced, so that we have a context. There will be an extra 10,000 social rented homes a year by 2007–08—an increase of 50 per cent. on previous figures—delivered as a result of a 22 per cent. increase in investment, coupled with significant efficiencies, to which the hon. Member for South Holland and The Deepings referred We intend that real investment to turn around the growth in homelessness by 2008.

We are acting to increase the housing supply and to help to improve affordability in high-demand regions through the communities plan, which will deliver some 200,000 additional homes in the growth areas of London and the south-east. We are also responding to new proposals for sustainable growth where there is demand locally. Yesterday, we announced a new £200 million community infrastructure fund, responding in particular to the Barker report recommendations on providing transport infrastructure to support the development of new sustainable communities. Often, transport can be the key to unlocking sites and regeneration.

Although this has not been a focus of the debate, we are also improving the economic development of the north of England to deal with the issue of the growth gap between the regions. We are dealing with low housing demand by trebling the pathfinder programme to £450 million, with a new scheme to deal with low demand—the opposite of the affordability issue that we have been debating this afternoon. We are also reducing the number of non-decent social rented homes by 1.6 million between 1997 and 2008, giving sustained progress to our target of having 2.1 million decent homes by 2010.

In these debates, the time available to tackle the raft of issues and concerns raised is never enough. There is no quick and easy way of tackling the complexity of the problems and issues raised this afternoon. However, we are now putting in place all the building blocks—if I may use that phrase—to get this matter right. First and foremost is the question of resources. Although public funding is inevitably limited and difficult choices have to be made, it is clear from yesterday's announcement that we attach huge importance to the need to improve our work on housing. Some £4.5 billion has been allocated for mainstream housing investment in 2007–08, which is about three times the amount made available in 1997–98.

I do not want to get into point scoring here, and we have done pretty well in that regard so far, but I have to say that the previous Conservative Government halved funding for housing investment in the five years up to 1997–98. When the hon. Member for South Holland and The Deepings was speaking about how he wanted to be person-centred, not building-centred, I wondered whether that meant that he could not say today whether his party would match the investment that we announced yesterday for housing. I am happy to take interventions from the hon. Gentleman or from the hon. Member for St. Ives on whether they would commit themselves at this stage to matching the investment in new house and home building over the period of the strategic spending review. It seems that no one is going to intervene, so I shall take that as a no.

I make that point because the hon. Member for St. Ives made an impassioned speech, but did not give the statistics. He talked about the personal impact on individuals, families and people growing up in rural areas of not being able to afford to buy a house. He was absolutely right to describe that in those personal terms, but the Government have to match personal experiences with effective spend. and put the resources in place. That is why I put down that small challenge as to whether we could rely on a Liberal Democrat Government—God forbid—to match our spending on housing, which the individuals whom he described so desperately need.

Andrew George

It would be quite improper for me, speaking from the Back Benches, to tie the hands of my Front-Bench colleagues by making commitments. We certainly strongly support the investment that the Government are proposing to put in. We are undertaking our own spending review, and we will be looking at the Government's commitments, but the Minister knows very well that the Liberal Democrats are very committed to increasing investment in social housing.

Rather than getting involved in such a silly spat, I want the Minister to answer the constructive issues that I raised about exception sites, section 106 agreements and the intermediate market.

Phil Hope

I will certainly do that, but it is important in these debates that we have not only analysis and discussion but the action that goes with that, which requires commitment to deliver from those who take part in the debates.

I move on to deal in some detail with some points that have been raised, turning first to second homes. The hon. Gentleman described the impact of people buying second homes in his constituency, and how that takes away from the market affordable housing for the people who live in his area. He will know that we changed the council tax rules to allow local authorities significantly to reduce the 50 per cent. discount for second homes. That was done to provide additional funds to address the significant impact that second and holiday homes have on local housing markets.

Of course, it is up to local authorities to decide how to use any additional income. I am pleased that local authorities in Cornwall have taken the opportunity afforded by the Government to increase council tax on second homes. It is estimated that that will provide more than £4 million of additional funding for affordable homes in 2004–05. That is a significant amount, given that the Housing Corporation's investment programme in Cornwall will provide about £20 million over the next two years. So that is one successful line that has been taken.

The hon. Gentleman has raised concerns with my Treasury colleagues about the impact of self-invested personal pensions. I have been given assurances, as I think he has in his meetings with those ministerial colleagues, that the relevant policies will not give individuals an incentive to buy properties for personal use, because a tax charge based on the rent imputed on the capital value of the property will be levied on any non-commercial use that is made of it. Therefore, most homes that are bought by a pension fund will need to be sold before the pension can be drawn to provide a secured income in retirement.

It is true that those policies will increase the number of pension funds that can invest in property, but individual property investment is unlikely to be attractive in many cases. The restriction on borrowing to 50 per cent. of the value of the scheme's assets, together with the requirement to put all rental income into the pension fund, is likely to be unsuitable for most buy-to-let landlords, who will need to access income returns to fund mortgage repayments. I hope that that reassures the hon. Gentleman.

Unfortunately, I cannot give the hon. Gentleman a similar answer on changing the use classification of second homes. We debated the idea of a separate use class for second homes six months ago, and there were lots of arguments either way. For example, concerns were expressed about the fact that, even if the use class were changed, there would be nothing to prevent someone from claiming that their second home was another family member's main residence, even if it were being used primarily as a second or holiday home. We have had lots of debate about that in the House. Following research into the issue, and feedback on the consultation document that we issued in 2002 on options for changing the use classes order, we have decided not to change the C class, and we shall not be allocating a different use class to second homes. All the research has shown that such a measure would not have the impact that the hon. Gentleman and others would like.

Let me move on to some of the planning issues. PPG3 is all about having a sufficient number of better-designed homes to meet housing need. We want a better mix of housing to reflect everyone's needs, and there has been some development on the issue. We are updating PPG3 to secure more affordable housing and a better match between the housing plan and the needs of the community. Some of our proposals for updating PPG3 will make it clear that affordable housing—this reflects the point made by the hon. Member for South Holland and The Deepings—should be defined in terms of the relationship between local income levels and house prices or rents for different types and sizes of housing, as well as in terms of housing for identified groups, such as key workers. That brings together the points about the affordability of property and people's ability to pay.

The issue of exceptions is still under consideration, but I can say that we are taking all the responses into account in working up our proposals, which we hope to publish in the autumn. We understand the point that is being made.

I realise that I am about to run out of time. I have answered all the questions that have been asked in the Chamber. Rural housing issues, such as affordability and the provision of more housing in the areas that need it most, are at the top of the Government's agenda, and we are responding positively through our strategies. I have also answered one or two of the more detailed points raised by the hon. Member for St. Ives. I hope that he knows that our review and our plans are putting money in place, changing planning procedures and introducing measures to deal with how people behave and how we provide more resources for building. They will address many of the concerns that hon. Members have raised in the debate.