- [Wera Hobhouse in the Chair]
- 2:30 pm
- I beg to move,That this House has considered reform of the standard method for assessing local housing need.It is a pleasure to serve under your chairship, Mrs Hobhouse.Everyone agrees that across much of the country, homes have become far too expensive either to rent or to buy. There is less consensus on the best way to get things back under control. I will argue that throughout the history of the standard method for assessing local housing need, that method has been part of the problem, not the solution.For a long time, the free market ideology we followed was to build houses randomly until the price came down. Ever since the days of Margaret Thatcher, who single-handedly killed off the public sector contribution, we have never got anywhere near to keeping up with demand. In recent years, the strategy has been to set stiff compulsory building targets and, to that end, the Government introduced the standard method.We were told that the method would produce clear, objectively determined house building targets for every local authority. We were assured that they would be equally and fairly distributed in line with genuine local need. We can now confidently say that that failed. Many authorities got nowhere near their number. Sometimes that was through dragging their heels, but often it was because their individual targets were outright bizarre and unachievable.Meanwhile, the system has kicked up terrific public anger and opposition, which in itself gets in the way of success. At times, the Government have resorted to wielding a bigger stick or they have backed off in the face of Back-Bench pressure. Under the present Government, we are heading back towards the big-stick approach. There is almost no attempt to win consent.I will argue not only that the standard method failed to do what it says on the tin, but that the failure was inherent from the first. It never stood a chance. Far from solving the affordability crisis, the method has significantly contributed to making that crisis worse, and it will continue to do so even under the remodelled version announced before Christmas, because it is based on a false premise.To be absolutely clear, this is not about national targets. Whether we aim nationally for 200,000, 300,000 or 400,000 homes a year is a separate debate, and I hope we will not get sidetracked by that today. It is easy to tweak the standard method to meet whatever national target we want it to meet, but in practice, national targets have been not much better than slogans, such as Boris Johnson’s 40 new hospitals, which never existed in reality. Instead, it is the local target as applied to individual planning authorities that matters.Broadly speaking, the standard method compares local house prices to local wages to estimate an affordability ratio, and it adjusts targets upwards if that shows prices to be unaffordable. The sums have been fiddled with many times since the method was introduced, and I do not doubt that such a process will continue. That is where the first big failure comes in: the standard method is supposed to provide an objective assessment of local housing need but, if we were honest, we would acknowledge that it is actually designed to reflect national need.For example, in my constituency, the growth target based on existing households should now be 527 a year, but our poor affordability ratio takes us all the way up to 1,329 a year, and that is before we add on more for our neighbours. That is a whopping uplift by any stretch of the imagination. The face of Horsham district is changing at breakneck pace. Villages such as Billingshurst and Southwater are on the way to doubling in size in less than a decade. That is not because Horsham is experiencing some kind of spectacularly large birth rate; it is just an arbitrary calculation.Once again, to be clear, I wholly accept that this is a national problem and that we need national solutions. Every area, including Horsham, has its role to play, but it is insulting people’s intelligence to describe that as a local need, when we plainly have nowhere near enough locals to go around, and they mostly cannot afford the new homes anyway. If we keep telling obvious lies to people, how will we ever win public consent? This brings me to the next big failure of the standard method, which is that there is no meaningful public scrutiny. Most local councillors do not understand how it works, sadly, let alone the general public. The standard method is never an election issue, yet it has a massive impact on our communities. In this case, ignorance is not bliss. It is a big reason why Conservative councillors have, election after election, proclaimed their commitment to allocating brownfield sites over greenfield yet somehow ended up doing the exact opposite. They cannot do anything to stop the logic of their own inflexible system. The standard method is a kind of mathematical bulldozer, sweeping aside our open spaces.The single worst failing of the standard method is that it fails in the very purpose that it was supposed to be designed for. In Horsham, as in many areas, the average price of a new house is higher than that of our existing stock. Ironically, the more houses we build, the worse our affordability ratio gets, and the higher our target will be next time around. The standard method does the exact opposite of what it is supposed to do. The more housing that is built, the more the method asks to be built, with no obvious mathematical limit.I stress again that I completely agree that building many more houses than we have over the last 40 years is an essential step on the path to affordability. However an obsession with one arbitrary number, without thinking what goes into it, does not work. It is actually getting in the way of success. We have to focus attention on the type of housing we are permitting, not simply the raw total. The standard method is based on a false premise, because many things affect prices besides the house building rate.
- I am very grateful to my hon. Friend for giving way and sorry I missed the first minute of his speech. I warmly congratulate him on the point that he is making. I agree that what he describing is a false premise, in the same way that the targets themselves are based on a delusion. The delusion is that private developers would be prepared to collude with Government to drive down the price of their final products in order to deliver affordable homes. That clearly is not the case. The combination of these two things is working against what the Government are trying to achieve, which is to meet housing need.
- I thank my hon. Friend, who makes a very good point. The system is working almost to the reverse of what was intended.In my constituency of Horsham many people either work for London businesses or perhaps have traded down from a more expensive London property. From their point of view, Horsham represents excellent value. The official affordability ratio does not reflect real working conditions in Horsham for locals, and therefore overstates local targets.Local councillors all strive to get the best for their communities, but the way we receive targets under the standard method destroys our negotiating position with developers. Developers are not stupid. They can work out as well as anyone else how many sites are needed to meet our targets. They have no need to concede on civil amenities or on affordable housing because they know that, at the end of the day, they have got the council over a barrel.I have no issue with a private developer seeking to make a profit—what else do we expect them to do?—but do not rely on them to do social planning. In areas like Horsham, years of free market ideology have turned councils into mere editors of private developer proposals. We build on greenfield sites because they are the only ones that get presented. There is literally nothing else to choose from in Horsham. The free market approach to affordability does not work for the housing market. Competition has driven prices up, not down. In Horsham we would arguably be better off if we granted a monopoly to one single developer and let them push down local land prices.To add insult to injury, we also have the standard method’s bullying friend, the housing delivery test. I am not sure whether there ever was a carrot in this process, but the HDT is definitely the stick. Failure to meet targets can ultimately result in losing local control over planning altogether. It is a Catch-22 situation: the developer controls the rate of delivery, but the council pays the price if targets slip. Heads they win, tails we lose.
- I congratulate the hon. Gentleman on securing this very important debate. He mentioned some of the incentives for first-time buyers. Through the stamp duty discounts, we saved the typical first-time buyer around £6,000 on their purchase, which helped about 640,000 young people get on to the housing market. Is he saying that he is not interested in that and that it was the wrong thing to do to help those first-time buyers on to the housing ladder?
- For the individuals who benefit, no one can argue with it. It is the same with the sale of a council house—if you are the family that gets it, it has clearly given you a massive uplift. What I am saying is that we have a national societal problem to solve in the housing market in general. We have a certain amount of money to put towards it. That was a subsidy. There are far better things to do with that subsidy that do not inflate prices further, as that simply eats up the subsidy.As I was saying, putting all that together, it is clear that the standard method is getting its social sums wrong. The affordability ratio is actually a lousy proxy for actual housing need. What we need to do is factor a proper analysis of local housing conditions back into the system. That should include an assessment of local homelessness rates, the need for social housing, pensioner poverty and all the other factors that make communities tick. We also need to find a clear role for neighbourhood plans. Neighbourhood plans started as a great way to bring local consent and local knowledge into housing, but from the day the standard method was introduced, they have been effectively overruled. In the latest planning reforms, they were completely marginalised and were not even mentioned.How can we change the standard method to do the job it is supposed to do? I suggest at least two inputs: a local needs calculation, which focuses on helping local people into the homes they need, and a national needs top-up. Having a separate national needs figure will help us to focus on the delivery of new towns. When our housing needs are as great as they are, new towns are essential. In contrast, the standard method spreads targets indiscriminately across every area. It leads to endless incremental add-ons to existing settlements until they begin to lose their identity altogether. In rural areas such as mine, the standard method has an inherent tendency to create low-density suburbs. Not only do they tend to be more expensive houses, but they use two or three times as much land as they strictly need to.
- I thank my hon. Friend for securing this valuable debate. Does he agree that, as well as causing the issues he described, incremental building contributes to problems with the sewerage systems? If a developer builds 50 houses here, 50 houses there and 50 houses elsewhere, and each one is considered on its own merit, it does not warrant an upgrade to the sewerage systems, so the water companies do not upgrade, systems become overloaded and we start getting sewage in the water.
- Yes, it makes strategic planning very difficult. Provision of infrastructure, particularly in rural areas, is a major problem and not sufficiently built into the planning system to compensate for it. It is easier in urban centres where the infrastructure is already in place.This is the reason we have contrived to have perhaps as many as 1.5 million unbuilt permissions nationally, at the same time as a national housing shortage. That is because too many of them are permissions for unaffordable and, therefore, unbuildable homes. There is a degree of land banking but, for the most part, developers build as fast as they can sell. If they are serving only the top end of the market, that will be slowly. As Oliver Letwin described in his excellent 2018 report, sadly unacted on by the Government of the day, we need far greater variety in housing type.As much as 80% of housebuilding is aimed at the top 20% of the market. The fastest way to fix that is to build a guaranteed quota of social housing. My party is asking for 150,000 a year. I guarantee they would be snapped up like hot cakes, as fast as they could be built. There is a fundamental difference between permissions and actual, physical houses. If all we ever think about is permissions and alleged impediments to permissions, we will never get to grips with the problem. Wrong permissions do not increase supply, they suppress it. Wrong permissions bake high land prices into the system. Handing out more permissions like confetti simply chokes the system with unbuildable sites that will hang over the market for a generation. There are lots of ways the standard method could be reinvented, but any future form must empower local authorities to deliver social housing in significant numbers from day one. How we do that is up for grabs, but somehow it must be done.
- I intend to give the lead Member two minutes at the end of the debate at 3.58 pm. I will call the spokesperson for the Liberal Democrats at 3.28 pm. I will not impose a formal speech limit for the time being. I hope there is time for everybody to come in.
- 2:47 pm
- It is a pleasure to serve under your chairmanship, Mrs Hobhouse. I thank the hon. Member for Horsham (John Milne) for bringing this timely debate for all of us to consider. Before I come to the main thrust of my speech, I should say that it is universally accepted that, irrespective of the Government in power, over the past 20-odd years hardly any housebuilding has happened. The last time there was a proper housebuilding programme in place was in the ’70s, ’60s and ’50s. I am going back in time, but it has not happened in a number of years. It does not matter which political party has been in charge.
- I appreciate the hon. Lady’s giving way. By way of correction, during the period of our last 10 years in office, there was an average of 207,000 net new home additions every year, which was higher than in the 1970s.
- I know, but that is still not a sufficient amount. Some of those houses did not come through. There was an amount of housing that needed to be done and was not done. It was done in the ’50s, ’60s and ’70s, which cannot be denied. We need to build more homes, including more affordable and social homes. This is an important debate because it asks Government and builders to look at how to assess local housing need.In Bolton, more than 20,000 individuals are on the social housing waiting list. Families face an 18-month wait for a three-bedroom house, with 800 to 900 applicants for each available home. Many are referred to the private sector, where of course the rents are very high, increasing the financial strain on already struggling households.The current methodology for assessing local housing need fails to capture the realities on the ground. It overlooks income disparities across our country, the availability of affordable housing and the specific needs of our communities. That disconnect results in inadequate housing provision, leaving many without suitable options. There are homes out there that could be used to reduce housing waiting lists, but they need substantial work to bring them up to standard.In my constituency recently, I hosted a roundtable with housing providers as well as homelessness charities, and one of the things that they asked for was a ringfenced fund to help social housing providers to make their stock fit for purpose, release more housing and give more people the homes that they desperately need. In the private rented sector, what is called affordable housing is often not affordable, because many of my constituents are on the minimum wage or living wage and they are not able to afford homes that people in the south or in other parts of the country might think are reasonably affordable. They are not affordable for those living in Bolton and the surrounding areas, because “affordability” is based on market prices, not what people are earning locally. It is all about the central, national figure, whereas we should be looking at local wages and what is affordable to people there, as opposed to somebody in a more prosperous part of the country. Of course, the current system also allows landlords to charge higher rents and make profits because they are taking advantage of the fact that the need for homes is greater than the availability.
- 2:53 pm
- Mrs Hobhouse, it is a great pleasure to see you in the Chair—I think, in my case, for the first time. I congratulate the hon. Member for Horsham (John Milne) on securing the debate and bringing us together to discuss this important matter.It is very good to see this Minister in his place. I thank him and his Ministry of Housing, Communities and Local Government colleagues for their engagement on these issues. I have been in this place on more than one occasion to talk about related issues, including about how national parks work relative to local authority planning areas. I am grateful to his colleague the Minister for Housing and Planning for also meeting me separately as well as corresponding. Today, I am going to talk not about those issues, but about the algorithm overall and how it works and, in particular, about the affordability ratio and how it works—or, more correctly, does not work.We know that the Government are looking for a big uplift—a 50% increase—in the number of housing completions, but in areas such as mine in Horsham, the increase is much greater than that. In my local planning area the target is up from 575—already a pretty punchy annual target—to more than 1,100, which is effectively a doubling. It is not a north/south thing, it is a rural/urban thing. Rural areas throughout the country have some of the biggest increases, such as in the rural far north-west and far north-east. There have been really big increases in the target, and at the same time major conurbations are seeing much lower increases in their numbers—typically 16% or 17%. Some places, including parts of London and Birmingham, are actually seeing the numbers go down at a time when we are trying to build many more homes. Sometimes it is thought that this is correcting a historical imbalance—that homes have not been built in the countryside for all these years—but that is not the case. Proportionately over the last couple of decades, in the rate of additions of homes per 1,000 existing dwellings, the predominantly rural areas have seen a greater build-out rate than predominantly urban areas.
- 3:00 pm
- Thank you for your chairship, Mrs Hobhouse. I thank the hon. Member for Horsham (John Milne) for securing the debate. I intend to keep my remarks relatively short. I want to make it clear from the outset that I am speaking not to score political points or to point a finger, but to share my experience, which I hope will be useful.I recognise the immense challenges that local authorities, such as mine in Harlow, face. Only yesterday, housing officers, led by the wonderful Cara Stephens, supported a number of families forced to leave their homes because of fire safety concerns. The challenge is partly caused by a lack of social housing.Before I came to this place, as well as being a local councillor, I spent two years working for a homeless charity in Harlow called Streets2Homes, so I saw the challenge from both sides. Like the hon. Member for Horsham, I saw the reliance on the private rented sector. I have raised this issue a number of times, not because I think the previous Government had any malicious intent—absolutely not—but because when they raised the housing allowance of universal credit, it led to the private sector in Harlow raising rents, which ultimately meant that the state spent more money on benefits and it just went into landlords’ pockets. I ask the Minister to consider that point.Streets2Homes had the resource to do what local authorities often cannot: sit down with those making homeless applications and really get to the root of the problem. Clients often said to me that during the process of applying for council housing, they felt dehumanised. The lack of council housing meant that it often became a tick-box exercise for housing officers. I recognise why that is the case, but for the person applying for housing—if they face homelessness, they may be suffering a huge amount of anxiety and mental health issues—it was not suitable.On the substantive point that the hon. Member for Horsham made about housing need and local allocation, there is cross-party agreement about the need to build council and social housing in Harlow, although there is a limit to the amount of housing we can provide. I often say that Harlow is a very small district, and it is very much built up to its borders, so would the Minister comment on how local government reorganisation will potentially impact that? I have regular conversations with the Conservative leader of Harlow council, and we both agree that we need to build housing, but Harlow is limited in where it can be.