Housing, Communities and Local Government Committee

Select Committee statement

We begin with the Select Committee statement. Will Forster will speak on the publication of the second report of the Housing, Communities and Local Government Committee, “Affordability of Home Ownership”, for up to 10 minutes, during which no interventions may be taken. At the conclusion of his statement, I will call Members to put questions on the subject of the statement and call Will Forster to respond to those in turn. Questions should be brief and Members may ask only one question. I remind Members that they should bob if they wish to be called. I call Will Forster on behalf of the Housing, Communities and Local Government Committee.

It is a pleasure to serve under your chairship this afternoon, Sir Alec. I am grateful to the Backbench Business Committee for allocating time for this statement on the second report of the Housing, Communities and Local Government Committee. I am pleased to speak on behalf of the Committee in place of my colleague, the hon. Member for Vauxhall and Camberwell Green (Florence Eshalomi). Our report is on the affordability of home ownership in England, a topic that affects so many people across the country. Some have suggested that in the current market, affordability of home ownership is a contradiction in terms. Everyone who has tried to buy a home recently, or knows someone who has, knows how difficult and expensive it has become. Housing affordability has been getting worse for decades. The majority of British people still want to own their own home, but fewer of them can do so. Over 20 years, the rate of home ownership has dropped from 71% to 63%. It is even worse for young adults: the rate of home ownership for 27-year-olds fell from 43% to 25% over not 20 years, but 10. It is deeply unfair that someone’s chance of owning a home is more dependent on whether their parents own a home than their own earnings. That is unacceptable and needs to change. Of course, affordability is exceptionally complicated. House prices have risen while incomes have stagnated. Mortgages have been hard to obtain and there are systemic barriers that slow down the whole home buying process. Successive Governments have tried to tackle the problem, but have failed to measurably improve the situation. The current Government must not fail as well. What, then, are the Government to do? First, as we know, more homes are needed. The Government are right to address the historical undersupply of homes, and we support their target to provide 1.5 million new homes by the end of the Parliament. At the same time, we are concerned that they might not meet that target and, even if they do, that 1.5 million new homes may not be enough. The last time homes in this country were built at the pace required to hit that Government target was over 50 years ago. Back then, 40% of homes were built by councils, but those days are long gone. Now, 75% of home building is done by private developers, which are facing their own challenges. The costs of building are rising, and if private developers cannot make a profit, they will not build the homes in the first place. We are seeing that happen across the country, with developers such as the Berkeley Group scaling back operations because of the volatility caused by the conflict in the middle east. In my constituency of Woking, over 2,000 homes in and around the town centre alone have got permission, but none is even under construction. The Government are right to encourage councils to build again, including through their social and affordable homes programme, but private developers are vital to building the homes we need. We have asked the Ministry to write to us twice a year about its actions and progress on increasing home building rates by developers. The Government could do more, however, including using the hundreds of thousands of homes around the country that are lying empty. Those homes are an unused stockpile, representing a significant chunk of the 1.5 million new homes the Government want to build. Councils already have some powers to take control of vacant homes, but those powers carry risks and are rarely used. We concluded that the Government need to make existing powers easier to understand and use, and to provide new powers where necessary. The evidence we saw during our inquiry shows that high loan-to-value ratio mortgages are important for first-time buyers, so it is good news that such mortgages are becoming more available because of the prudential and financial regulations affecting the property market. But there is more to be done, and we need to encourage lenders to change their affordability assessments so they are fair and mortgages are accessible to those who need them most. For example, it should never be the case that a renter is turned down for a mortgage because they cannot afford the repayments, when those repayments are less than what they are already paying in rent. Other financial products besides mortgages can also be put towards the cost of a new home. Some products are even backed by the Government, such as the lifetime ISA. I will not go over all the problems with lifetime ISAs now; as part of our inquiry, we sat jointly with the Treasury Committee, which has published a separate report. Suffice it to say, the Government have promised to replace the lifetime ISA with a new product that is specifically designed for first-time buyers, and we support them in doing so. The new first-time buyer ISA will be introduced in 2028. The Government launched a consultation on its design just two days ago. We are glad that, in line with our recommendations, the design is geared specifically towards first-time buyers and does not have a withdrawal charge that could cost people their initial investment. However, we also recommended that the Government should avoid a static property price cap that could make the product useless in some parts of the country. The Government have not yet set out the details of their property price cap for the new ISA, so we are still waiting to see how they will ensure that the product remains useful over time and in every region of the country. As well as publishing our inquiry report, we also wrote to the Minister on 29 April to set out our concerns relating to the home buying and selling process. We found that it is a painful experience that reduces people’s motivation to move and slows down the housing market. Barriers and unnecessary costs should be eliminated to encourage more people to move, to increase the day-to-day supply of homes on the market and to reduce the number of transactions that fall through. In particular, we recommend that the Ministry should mandate that necessary property information is provided earlier in the process, that conditional contracts should be used to make transaction agreements binding at an earlier stage and that there should be stronger regulation of property agents. The Government promised to address the first two of these in their reform road map, which was published last week. Although the Government have stopped short of regulating property agents, they have promised to publish a code of practice for them by the end of the year. I hope that, with the political instability, that is not lost. Lastly, I turn to the stamp duty land tax. Stamp duty directly reduces the affordability of home ownership by increasing how much people need to pay to buy a home. More than that, it slows the property market, stops people relocating for work or downsizing, and ultimately damages the economy. I wish I could say that stamp duty was an isolated problem, but all property taxes in this country, including business rates and council tax, are a mess. Similarly to a previous report, which recommended that the Government should make changes to council tax, we recommend that stamp duty should be overhauled and replaced. It is fundamentally unfair and damages our economy. Those two taxes need to be changed, and I hope the new Government take that opportunity. Stamp duty provides £14 billion of Government revenue each year, so the Government cannot just get rid of it outright, but we have called on them to consult by the end of the year on alternative to the current form of stamp duty, including replacing it with a revenue-neutral alternative, such as an annual property tax; reducing rates to stimulate more transactions; tying tax bands more closely to local house prices; and updating reliefs to better meet Government goals. I know the new Prime Minister is keen on a land value tax, and I hope this is a priority for his new Government. It was on this day three years ago that I moved into the first home I have owned by myself, but for so many people, home ownership is beyond reach. In my constituency of Woking, more people are having to leave their home town to buy their first home, and some cannot buy a home at all. That is not acceptable. To address housing affordability and to ensure that our young constituents can get a foot on the housing ladder, we need the Government to go much further and much faster. We need them to use a range of approaches to improve the supply of homes and the effective demand for those homes. We welcome the steps that they are taking in some areas, but in others they must be bolder to enact the policies that we have set out in our report, which can lead to real and long-lasting improvement in the affordability of home ownership for first-time buyers in this country.

It is a pleasure to follow my hon. Friend. I declare an interest as the former chief executive of a registered provider, the Cornwall Community Land Trust. I am now a volunteer on its board. I have therefore worked in the sector for some time. First, I congratulate my hon. Friend and his Committee on an excellent report, and I hope the Government will take heed of it. Secondly, I was very fortunate, as you were, Sir Alec, to come high in the private Members’ Bill stakes, and I have opted to advance an affordable housing Bill on Friday 13 November. There is an opportunity over the next five months to draw together a range of options and clauses, which I hope will help the Government to deliver the laudable objectives that they have established to address housing need. I think they need further tools to do so. In relation to that, there is a concern that the planning system is still weak. The provision for affordable homes is often used as a Trojan horse by wily private developers, whose intention is to provide not affordable but unaffordable homes. That Trojan horse is often exploited. There is also a need for stronger ingredients to ensure that we can genuinely deliver affordable homes, particularly for the in-perpetuity community benefit, and a range of measures could be taken to advance that aim. I repeat that the Second Reading of the Bill will be on 13 November. It is in gestation at the moment. I hope that the Committee, and indeed the Minister, will be prepared to work constructively with me in the coming months to look at ways in which we can strengthen and advance the cause, because it is quite clear that the Government are going to struggle to deliver what we all agree needs to be delivered to address the desperate need for more affordable homes in this country.

My hon. Friend thanks me for the Committee’s work. In return, I thank him for choosing housing as the topic of his private Member’s Bill. It will really improve things on the housing front, and I am thankful that he is putting the topic high on the agenda. The Committee and I will look to speak as much as we can in favour of his Bill, and I hope that the Minister will work constructively with him on its passing. Even if it does not pass, the Government may take its provisions into other legislation. In answer to my hon. Friend’s point about how the viability of developments can reduce the amount of affordable housing, I am concerned that we are seeing that across the country. In my Woking constituency, brownfield developments do not include any affordable housing contributions at all because they are classed as unviable—and they are still not being built. We need to ensure that developers make contributions on affordable housing, which is why the Government’s social and affordable homes programme is essential to cover that lack of viability. The Committee has also raised concerns with the Government about changing the requirements of the Public Works Loan Board. That would ensure that councils, via their housing revenue accounts, could invest in not only maintaining properties, but building new homes, which is exactly what we need.

I declare an interest as chair of the all-party parliamentary group on council and social housing. The affordability of home ownership is one of the biggest issues in our country. I welcome many of the recommendations in this report around tackling empty homes, reforming stamp duty and ensuring that we are tying the definition of affordability to local incomes. I also want to take the opportunity to congratulate the Minister for Housing and Planning on his role in securing the highest number of social rent homes since 2010, as announced today. That is a major achievement. However, part of the affordability question, which perhaps could not come into the scope of the Committee’s report, still lies unanswered and unaddressed. Since the 1970s, the number of homes per capita in this country has risen, despite house prices massively outstripping ordinary people’s incomes in that very period. That seems in a large part down to private banks effectively being able to print money, which then flows into house prices. I wonder whether, in its future work, the Committee will consider the interaction between monetary policy and house prices in this country.

I agree with the hon. Gentleman’s concerns. I want to thank him for his work on the APPG. In the report, we highlighted that the Government should review and update the definition of affordable housing. We are particularly concerned about those cross-cutting issues, and we have worked with the Treasury Committee, as mentioned in the report. This is not just an MHCLG issue, but a Treasury issue. The hon. Gentleman said nice words about the Minister, who I know will be appearing before the Committee soon. The Minister knows his subject and explains it in a plain-spoken way. It is important that we do not have another change of Housing Minister; we need that certainty. I am looking forward to holding the Minister to account while he—we—delivers the draft Commonhold and Leasehold Reform Bill and deliver the homes we need.

I thank the Committee for its deliberations, thoughts and recommendations. As the hon. Member for North East Hertfordshire (Chris Hinchliff) said, one thing that I am particularly pleased to see is that the Committee is trying to address the issue of stamp duty. I can remember building my first house on the farm at home in 1987, and it cost £27,000. My son built his house on the farm some 25 years later, and it cost him £125,000. My youngest son now wants to build a house on the farm—the same house that my other son built—but it will cost £275,000. That is the same house, but it will cost £150,000 more than it did. This is a big issue for my constituents and for my family personally. We also have a cottage on the farm, so to help my son, we will let him have that and renovate it. That will probably make it a wee bit easier for him, but not everyone has that opportunity. What consideration did the Committee give to co-ownership—in other words, owning half a house now and perhaps buying the other part later? What consideration did it give to smaller deposits? Smaller deposits and a lower bank mortgage rate might enable more people to buy houses—perhaps with some assistance from Government.

My final answer is to thank the hon. Gentleman for attending a Westminster Hall debate; it is lovely to see him here. He highlighted that there is a slight age difference between us—the hon. Gentleman built a home and moved in 27 years ago; I moved into the first home that I have owned three years ago.

It was 37 years ago.

It was 37 years ago—sorry, I lost 10 years for the hon. Gentleman. Our report focused on the affordability of home ownership where people genuinely own the full home. We have previously done inquiries on shared ownership, which I am happy to send to the hon. Gentleman. The key thing we want the Government to do is look at how they can lower the cost of building a home. Inflation has had a notable impact on the cost of home ownership. The costs of owning a home and building a new home are too unreasonable, and I hope that the Government look at this issue and tackles it. Backbench Business