That this House has considered the availability of affordable housing in Devon and Cornwall.
It is a pleasure to serve under your chairmanship, Mr Hosie. I hate the word “crisis”, but there is no doubt in my mind that we have a housing crisis across Devon and Cornwall, which is particularly acute in my constituency of North Devon. It means that there is virtually no housing available for local people, affordable or otherwise. This weekend, the Chamber engagement team secured over 200 responses, the strength of feeling is so high. It is my constituents’ experience of this issue that drove me to apply for today’s debate.
Carol, one of my constituents, says:
“For me personally I am a single woman two years off retirement, I will not be able to retire completely because private rents are too high for one person on a pension. I am at risk of being homeless because of this. I’m not eligible for help if I lose my house because I cannot afford to live here anymore.”
Rachel says:
“We’ve been given notice to move out after 10 years so our landlord can use the house for family holidays. But we cannot find another family home in Braunton—there’s simply nothing available, likely due to the increased number of holiday lets.”
Kathryn says:
“We were saving to buy a house 3 years ago, unfortunately having reached our savings target 18 months ago, we have been unable to buy due to the huge increase in house prices in North Devon during the last 2 years. We now require more than double our original savings target for a deposit so are stuck renting until something changes.”
Stephanie says:
“Despite working, two of our children who live in Devon with children of their own are now suffering poverty due to high and increasing rent and no possible chance of either social housing or owning a home. They are likely to need deposits of approximately £150,000 as their wages would only cover a mortgage to approximately £90,000. It’s no good claiming there are schemes where only 5% deposit is needed when house prices far exceed earnings.”
So what exactly is going on? Figures from the Land Registry show that house prices in North Devon have risen by 22.5% against a UK average of 8%, the second highest increase in England, with neighbouring Torridge coming in fifth at 19.9%. At the same time, we have seen a complete collapse of the private rental sector as landlords take advantage of the surge in domestic tourism during the pandemic. Currently, Barnstaple, with a population of over 35,000, has just three private rentals available on Rightmove and 234 holiday lets on Airbnb.
Does my hon. Friend agree that the situation at the moment allows landlords to buy up good residences in towns such as Barnstaple and Bideford, register themselves as businesses, apply for small business interest rate relief, pay nothing to the community, either in council tax or business rates, and provide very little by way of employment, and that that racket has to be stopped?
As always, my right hon. and learned Friend and neighbour makes an excellent point. There is so much that needs to be done in Devon and Cornwall.
Building on the point I was making about the availability of property, today Ilfracombe has just one private rental and over 300 holiday lets. Apparently there has been a 67% reduction in rented housing between 2019 and August 2021, making North Devon the worst affected area in the south-west and the fourth worst nationally. Despite an improvement in the management of the list, the council reports a 32% increase in applications, with local affordable housing providers advising that there has been an increase of four to five times in the number of applicants for each new affordable rental property. From the data available, our district council reports that we have lost 467 houses from the permanent occupied market to second homes and short-term holiday lets, at a time when the rate of new developments has dropped right off due to the pandemic.
Simon Jupp (East Devon) (Con)
Does my hon. Friend agree that the Government need to consider a bold policy intervention to tackle the impact of second home ownership? One such policy could be to allow councils to reserve a percentage of new builds for people with a local family or economic connection to an area.
I agree with my hon. Friend. In my constituency many of these homes are reserved for local people, and I will explain some of the further issues later in my speech. I know that the Secretary of State has conceded that we have not built enough affordable homes, and he is right.
Neil Parish (Tiverton and Honiton) (Con)
I thank my hon. Friend for securing the debate. In Cullompton in Mid Devon, we are putting up Zed Pods, which are very good modular homes that are zero carbon and equipped with triple glazing. They are also going on to garage sites and the like, and can be put up quite quickly. If we want to push to get more housing done, that is one way in which we could produce affordable, good-quality housing that is good for the environment and help reduce waiting list numbers.
That highlights another important point, which is that a large number of small district councils in Devon are all tackling the same issue and coming up with different solutions. In fairness, building rates in North Devon have been good historically. However, we are currently averaging only 18% affordables on each development. As the Affordable Housing Commission concluded in 2020, many of these products are
“clearly unaffordable to those on mid to lower incomes.”
With some of the lowest productivity figures in the country and an abundance of part-time and seasonal work, we clearly have a lot of residents in that category.
My hon. Friend makes a good point about affordability. Does she agree that it is important to ensure that our county council statistics on average earnings are reflective of what in-county people earn? All across Devon, average earnings per year do not relate to the people who want to be able to afford houses and who work in the same area.
My hon. Friend makes a good point. That is particularly the case in the south of our enormous county, where people can go out to other places, whereas we up in the north are very much—unless we work in London—in North Devon. Many new builds there are being snapped up as holiday lets or second homes. Many never even make it to market; they are purchased off plan before local residents see the light of day.
Building right down the Devon and Cornwall peninsula is difficult. We have higher land prices, particularly on the north coast, and fewer resources to build and materials to build with, making viability so challenging that the percentage of affordables drops right off. Many of the issues impacting on the housing market at present are particularly extreme on the coast, and we have an abundance of beautiful coast in Devon and Cornwall.
North Devon has an abundance of tiny communities looking to community land trusts, but products that should work well there repeatedly find that the high-unit grant rates required on often challenging sites with high abnormals still have a funding gap of £30,000 per unit, and that is despite the generous registered providers and grant rates from Homes England’s affordable homes programme.
I hope that I have detailed the magnitude and complexity of the problem. I have been walking this road for over 18 months and am grateful to the ministerial team for hearing from me quite so often on this topic. However, what I am struggling to convey is the urgency of the need for a solution.
With summer approaching, we are expecting and, indeed, seeing another surge in section 21 notices, as landlords find ways to evict tenants to enable them to convert these homes into holiday lets. With no registration scheme in place, there is no formal record of how many people are renting properties out on a short-term basis. We desperately need the consultation on the registration of short-term holiday lets to conclude, but it has not even started, despite having been announced last June. The Department for Digital, Culture, Media and Sport assures me that it is imminent, and even Airbnb is calling for one.
The hon. Member for North Devon (Selaine Saxby) has admirably outlined the problems that many of our constituencies face. Mine are slightly different from hers, but they carry a lot of similarities. If anything, house prices in Exeter are further inflated by the presence of a very successful university that has grown considerably in recent years due to the fact that the city is an attractive place to live. It is two hours from London on the train, and it is possible to cycle or walk to schools, so Exeter has all sorts of quality-of-life benefits.
My local authority has a very good record at doing what it can to ensure the good provision of local social housing and affordable housing to rent, but it really is working against Government policy all the time, and I have to give the Minister a number of practical proposals from my local authority that would make people’s lives much easier. For example, we are one of the few local authorities in the region that always insists on the maximum legal requirement for social housing in private developments in Exeter. That has made a huge difference, but it is like pushing a boulder up a hill repeatedly—not least given the impact of the covid pandemic. In recent weeks I have been knocking on doors for the local elections—as I am sure we all have—and have been completely dumbstruck by how many people have arrived in Exeter in the last year or so. They have moved out of London and the south-east for a better quality of life and cheaper housing, as far as they are concerned—they can now all work from home—and that is making the problem more acute.
There is a useful thing that the Government could do, according to my local authority. Through the right-to-buy scheme we are losing 40 council homes a year in Exeter. We are building 100 a year, but obviously we would provide a lot more local council houses if the local council was allowed to keep some of its receipts a bit longer. I know that the Government extended the number of years that local councils could keep those receipts to invest in local housing provision. However, because of the current shortage of construction workers and labour, and the difficulty in getting stuff built—I am experiencing that myself as I am currently renovating a house—it would be really helpful for local authorities if the Government had another look and considered extending to 10 years the period in which local authorities can reinvest that money. I do not see what the argument against that would be, as it would make the lives of local authorities a lot easier.
I can only echo all that has been said so far about the challenging situation in Devon and Cornwall. This acute problem particularly affects Devon and Cornwall, and I commend my hon. Friend the Member for North Devon (Selaine Saxby) for securing an extremely timely debate.
The lack of good-quality, affordable housing for local people is not new, but it is not helped by significant population growth. In the past couple of years, Cornwall has had the highest net internal migration of any local authority area in England and Wales. I do not want to say this, but I know it is a fact as I do a lot of work on empty homes in my constituency: the problem is not helped by the fact that the Church of England, the Methodist Church, Cornwall Housing, an arm’s length company of Cornwall Council, and LiveWest, which we all know in Devon and Cornwall, have a lot of empty homes across Cornwall. The Methodist and Anglican Churches have empty homes in my constituency, and I am trying to get them used to address the significant need that hon. Members have set out clearly. Nor is it helped by the fact that long-let homes are being flipped to holiday lets at an alarming rate.
I refer the House to my entry in the Register of Members’ Financial Interests, and to my housing debate in December, when I had more time to set out the difficulties and potential solutions. During the debate, I called—more ambitiously than has been done so far—for devolved powers to local authorities such as Cornwall Council through the levelling up and regeneration Bill. I believe I have the support of Cornish colleagues in suggesting that all new homes be restricted for permanent residents only in perpetuity, and for a licence requirement if someone wants to use a home that is lived in as a holiday let, a bolthole or for any other business purpose.
Since December, the Government have not done a great deal to resolve the problem, although I appreciate that legislation is to be announced in the Queen’s Speech, but they have sought to address the exemption of second homes from business rates and council tax. From next year, as a consequence of lots of work that many have done—I have raised the issue twice in the Chamber over the years, and the Government ran two consultations—people will have to prove to the local authority that they have rented their house for 70 days before they qualify for the exemption. I still think council tax should be paid on all homes built to live in. That would be very good for our police and our town and parish councils, which at the moment are losing that income.
And stop the opportunities for fraud. At the end of the day, it is fraud for someone to say they have a business that they do not have. I would happily welcome that.
Today, I want to explain why the pressure on housing has intensified in recent months and years. Regrettably, that is in part an unintended consequence of Government policies. I want to pick on two of them. Government policy is effectively driving landlords out of the market. We hear landlords saying—I could use some French, but I am not going to—“We’re not going to do this anymore. We are going to flip our homes into holiday let or do something else with our property,” and they are partly supported by Government policy, such as changes to long-let allowable tax benefits. Since April 2020 —not that long ago—landlords have no longer been able to deduct any of their mortgage expenses from their rental income to reduce their tax bill. The new system means higher or additional-rate taxpayers can no longer claim tax back on their mortgage repayments. Less obviously, the new rules could force some landlords’ total income into the higher or additional-rate tax bracket, depending on their pension or other income. I do not particularly object to that if it is fair across the board, but at the moment it favours holiday lets and does not help private landlords.
Neil Parish
I very much welcome what my hon. Friend is saying. We need to set up a rental system that encourages people to have private, long-let properties. We have made a mistake by targeting them too much, taking away the interest rate and the ability to claim that back against the property. We want private landlords who let good quality properties on long-term rentals, so the Government should reverse some of that policy and look at ways to encourage the private sector to put up good properties for long-term lets.
I completely welcome and agree with that intervention. I do not believe the Treasury deliberately intended to force private landlords out of the market, but that is certainly what is happening.
Energy performance certificates are a pet subject of mine and a debate on their own. Rental properties now require an E rating, which does not sound particularly ambitious until we try it on a property that was built in the 1800s. Since April 2020, landlords can no longer let or continue to let properties covered by the MEES regulations if they have an EPC rating below E, unless they have an exemption, which is not easy to get and costs over £3,000. The landlord has to spend money on the house before they even apply for the exemption. If they are planning to let a property with an EPC rating of F or G, they need to improve the rating to stay within the law. Again, every landlord has to get an EPC rating of E.
The Government’s plan to make rented homes greener is not in itself a bad thing, although we can have a wider debate about whether an EPC is the right tool to deliver the desired outcome. It is a computer system that invariably says no, without the ability to understand or appreciate the diverse nature of the built environment. I do not object to improving homes, making them warmer and their upkeep cheaper, with less of an impact on the environment, but my concern is that landlords seem to be subject to the EPC requirements in a way that holiday lets are not, and the situation is expected to get much worse because the Government have consulted on a compulsory energy performance certificate rating of C on new tenancies by December 2025—three years from now if they pursue it—and on all rented properties by December 2028. If we think the problem is bad today, it will be disastrous for somewhere such as Cornwall, where buildings were constructed in a very different era compared with today, and I would not even say that our buildings today are that modern. We will not get properties up to EPC rating C, so they will be lost to the rental market.
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Having spent much time with housing providers, I know that they believe that the only solution is to devise another class of planning for short-term rentals, so that councils can differentiate between C3 housing and what would be, in essence, a commercial venture in short-term holiday lets. Local councils could then require licences to run that type of business in a property that was initially built for full-time residency, and limits could be placed in a community if there is deemed to be an imbalance.
We have always welcomed holidaymakers and second-home owners to our beautiful coast, but we have got out of balance, leaving the fabulous pubs, restaurants and hotels that people come to visit—and even our surf schools—unable to recruit enough staff. The situation has extended to our public services, with transferring personnel, however senior, struggling to find housing. With vast distances between so many communities, the increase in the cost of fuel and the absence of public transport, if there are not enough people living close to jobs that are paid a living wage, it is simply not worth travelling to get there in North Devon. We have already seen teaching assistants move out of jobs they love, simply so they can work closer to home. If there are no homes near someone’s job, it leads to jobs being returned, as people simply cannot move into the area.
I believe that we also need to go beyond just tackling business rates on short-term holiday lets; we need to tackle the inequalities between mortgage relief on long-term and short-term rentals, which are viewed as capital assets. Their profits are taxed differently, as returns on capital. Both types of property were built as homes, and they should be taxed comparably. Without a register of short-term holiday lets, I imagine that many are paying no tax at all, which is another opportunity for the Treasury. This is a step that could be taken rapidly to make the private rental sector more appealing to landlords, which is ultimately a step that we need to take quickly in order to begin to provide more housing in the south-west.
Other steps that could be taken rapidly include recognising that Devon has a large number of small planning authorities that all tackle the same challenges, with most having under-resourced planning departments, as detailed in previous recruitment challenges. Will my right hon. Friend the Minister commit to assist our planning departments to reverse building where appropriate, to stop building properties solely for holiday lets or second homes, and to have a clause that exempts people from living there full time? It is one thing for holiday parks, which are designed that way, but actual housing is being built with this restriction in place along the North Devon coast. Clearly that is needed on occasion, but as we have such a shortage of long-term housing, can we not focus on this, given that we are short of the other necessary resources—land, builders and materials?
Will my right hon. Friend the Minister also commit to work with the Treasury to look at taxation reforms and how to tackle the issue of empty properties? We have an abundance of them in North Devon, but it is simply not viable for the council to spend its time and resource on tackling this issue. If we could breathe life into empty buildings, we could take steps to regenerate additional housing, without building all over the beautiful fields of North Devon. I keep being told that the councils have it in their remit to convert space above empty shops into homes. Will someone please come to Barnstaple and make that happen? We have so many empty units with huge storage areas, rather than flats, above them, and tackling this issue could transform our town centre as well as provide vital accommodation.
Finally, please can steps be taken to tackle the issue of viability and barriers to councils being able to build developments with more than an 18% social housing component? I know that we English believe that our home is our castle, but far too many of the residents of North Devon worry about not having a home at all. That causes mental health issues, which are exacerbated further by having so many shortages in mental health services, as we cannot recruit to fill the vacancies.
We get really big storms in North Devon, and we are stuck in a really big housing storm right now. Without urgent intervention, we will have literal ghost towns and villages along our coast next winter, as locals have their homes and opportunities to live and work in their community ripped away from them by something like the Kansas twister. I hope that we can say goodbye to the yellow brick road and that some affordable housing wizardry will be expedited this afternoon.
I know that this is a controversial suggestion, but given the seriousness of the situation outlined by the hon. Member for North Devon—this is a serious crisis—will the Government consider suspending the right-to-buy scheme for a limited period? That would protect our stock and enable local authorities to add to it in net terms. Even if private sector rental accommodation is available, in many cases the rents are simply out of the reach of many people, given the incomes they can command in the south-west.
The Minister could also change the way in which “affordable” is calculated. At present, the term “affordable” is applied to a calculation of 80% of the local market value. In Exeter, as in most places in the south-west, that 20% reduction of already hugely inflated prices makes absolutely no difference to the majority of potential homebuyers. The cost price is still way out of the reach of most local people. A resetting of the calculation of “affordable”, using, for example, a percentage of the value above building costs, could really make a difference. It would go a long way towards making “affordable” actually affordable in reality—for most people, that is currently not the case.
The hon. Member for North Devon has touched on the issue of second homes and Airbnbs. That is also really serious and has got much worse in the last year or so. It is unlikely to get better given the continuing demand from people across the UK for domestic holidays. We need an area-based cap, based on the local housing need. A cap on the percentage of housing used for short-term holiday lets needs to be put in place, even if it is a temporary measure for a couple of years in order to redress the imbalance of permanent versus temporary housing.
Planning regulations and houses in multiple occupation regulations need to be changed. Local authorities need greater powers—this is a massive issue in Exeter—so that they can determine the percentage of housing that is permitted for short-term HMO lets based on the housing need in their area. Local authorities need to have the ability to refuse planning permission for flipping family homes into HMOs once that cap is reached. That would make a significant difference in Exeter and, I am sure, in some of the constituencies my colleagues represent.
The final thing that my local authority said would really help to address this crisis in the short term is a two-year freeze on private sector rents, and a fair rent endorsement backed by Government incentives, such as a deposit underwriting scheme, so that local people can afford private sector housing. Many of them cannot at the moment. Those are just five or six practical suggestions that I hope the Minister will take away. I am sure that colleagues present will make other suggestions.
This is the most serious housing crisis I have experienced in my 25 years as a Member of Parliament. The combination of the cost of living crisis, inflation and the extraordinary inflation in house prices, which is more acute in beautiful regions such as the south-west, is creating an unprecedentedly difficult situation for families. I worry that we will see a big increase in homelessness in the months to come unless the Government do something about it very quickly.
Those are examples of legislation that applies to long lets, as my hon. Friend the Member for Tiverton and Honiton (Neil Parish) has clearly demonstrated. We are losing valuable homes that people enjoy—we have heard about tenants of 10 years—because the legislation that applies to private landlords does not necessarily apply to people who own holiday lets. I largely agree with the requirements, but I do not believe there is a level playing field. Irrespective of Government policy, we must avoid a situation where we drive private landlords out of the market. There are people who do not wish to own their own home, and there are lots of people who, because of how we manage the term “affordable”, find it difficult to get on the ladder.
I hope the Minister understands the severity of the problem for Cornwall and the Isles of Scilly. It is urgent. I have many constituents in a desperate situation, and we need rapid and effective intervention that provides a secure home for life, whether it is owned or rented.