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Housing and the Credit Crunch

I begin where the Chairman of the Committee, my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) left off—with the Homes and Communities Agency. Obviously, the agency was not created to deal with the present crisis, but thank goodness that it was created. Along with the Tenant Services Authority, it has been proactive in at least ameliorating the damage that has been done in the current difficult situation. The reality is there for all to see: some people cannot get mortgages; others are worried about the future of their jobs, so they are concerned about moving home or buying their first home. The fall in demand for housing has led to a dramatic decline in house building, but we argue in our reports that the need for housing is just as great as it was one or two years ago, even though there is lack of immediate demand because people cannot afford homes that they could have bought a year ago or because they are concerned about their future. There has also been a switch in the nature of immediate demand. For a long time, most people would look to buy, and that is what the Government focused on. There has been great excess demand for a long time, and as we were reminded by my hon. Friend the Member for Islington, South and Finsbury (Emily Thornberry), there has been a chronic shortage of social housing to rent in many parts of the country. That is also true of my constituency. The position in Sheffield has been variable. At one stage a few years ago, the Liberal Democrat council was actually knocking council houses down, which seems rather a mistake in hindsight, and it is now looking to build houses on the same sites. That happened in the north of the city, but the south, where my constituency is located, has always had a greater shortage of social housing. We have not traditionally had as many large council estates, and many of the estates are very attractive, so large numbers of people have exercised the right to buy. Even before the credit crunch, therefore, housing need was very real and was often unmet. People are now waiting longer and longer to gain access to a home that meets their needs. With the credit crunch, people who might have bought a couple of years ago cannot buy or choose not to do so, so demand for social housing has gone up even further. At CLG questions the other day, I mentioned the case of Katie Wilson, who is one of my constituents. She tried all the Government schemes to get part-ownership of a house, and she failed at every hurdle. Eventually, she had to fall back on her position on the waiting list, which she has been on for about 17 years. She simply wants a home to rent in the part of the city where she grew up and where her family lives. That is not a big thing to ask for. She now informs me that she is renting privately for £500 a month, which is quite a lot for people on low incomes and quite a high rent for Sheffield. The problem is repeated elsewhere. I probably will not have as many absolutely disastrous cases as my hon. Friend the Member for Islington, South and Finsbury—however bad the position is in the south of Sheffield, it is even worse in the south of Islington—but I have an awful lot of very bad cases. My heart sinks, just as my hon. Friend's does, when somebody walks into my surgery and says, "Mr. Betts, we've got this really serious housing case. Can you sort it out for us?" They will go through all the facts, and I will sit there listening. I will say "I absolutely agree with you. We should be able to house you. I see your circumstances." They may want to live near a parent with real caring needs, or their bus route may have changed, so they have to move to keep their job. They may also want to move near a grandparent who can look after the kids, so that they and their partner can work—that has become increasingly common over the years. However, I sit there thinking, "They've got a very strong case, but so had the last three people I saw, and none of them is probably going to get re-housed in the foreseeable future." The need for social rented housing is there and it has become greater. Our latest report therefore welcomes the Government's extra £1.5 billion, which comes on top of the money that was previously made available. That extra money has been offered to local authorities to build homes for rent, and it is great even in principle that we are building council houses again. Some of us remember the days when we had major house building programmes, and they were not all disasters. People often say, "Look at the high-rises that were built," but they probably forget that councils tended to build to Government direction in those days, and it was a national policy that sent us down that route. However, councils also built many attractive houses, and I hope that we can get into that business again. There will be a bit of a learning curve for many authorities, and it will take a bit of time to get the process going. However, councils must be prepared to put their land in for free. If the Government are putting in social housing grant, councils must make a financial contribution, too. I have certainly encouraged Sheffield city council to do that. It is Liberal Democrat controlled, but all five Labour MPs in the city put a letter in our local paper, The Star, the other day saying that social housing is an absolute priority. We said that we could work on the issue across the political divide and that we were prepared to offer the council any support and assistance that we could when it bids for Government money, because housing is crucial for the people who we represent. In our report, we raise another question, which the Minister probably cannot answer today. A new programme of council house building cannot just be a quick fix for our current economic crisis and housing problems. There is a long-term problem with providing more social housing, and councils must play a real role in tackling it in the long term. We would like a commitment from the Government on that. We know that there are uncertainties about future public finances, and we always hear that health and education are a priority—the Leader of the Opposition certainly makes that clear, although the Opposition then talk about reductions in public expenditure, so we get the horrible feeling that housing might be one of the areas where they are talking about making reductions. We must make it clear not only that social and rented housing is a priority for us now, but that it will continue to be so in the future. Allocations are a difficult issue, but I was pleased with the Government's announcement the other day. I accept that there are differences in different parts of the country, and I have explained my understanding of the even greater pressures in parts of London, but I have had concerns for a long time—the new Housing Minister and the Secretary of State recognise them—about people being on the waiting list for years and never getting the priority that would enable them to secure the homes that become available. The classic case is something that happens regularly. People come to my surgery and say, "Mr. Betts, a house has come up down the road, and our children would like to move into it, so we can look after the grandchildren. They currently live five miles away, so it's all a bit difficult. We're really upset because someone has just moved in as homeless, and we understand from talking to them that they have only been on the housing list for two weeks. Our children have been on it for 12 years. Why"—this is just the way that people think—"couldn't they have had the home that my children want to leave, so that they could move near us? As things stand, they're just going to tread water on that housing list and never move anywhere near the top of it." I thoroughly understand that if people are homeless, with children, in priority need and not intentionally homeless, they must be found a home, but there must be a better way to allocate properties than by saying that, because they are in immediate need, they get whatever house is available in any area, at the expense of people who have been waiting for that area for good personal reasons and for a long time. The Government have got that right, and it will be interesting to see the guidance and local authorities' response. I welcome the housing revenue account decision. We had a good sitting of the Select Committee, with the Housing Minister, the other day. I pressed for a long time for the decision, which will give local authorities—particularly those with arm's length management organisations—greater certainty. The other day, I chaired a meeting of the all-party group on arm's length management organisations, and the message that came across clearly was that we need stability for ALMOs; they are an excellent development that brings tenants more into the management of homes, but many tenants are concerned about their instability, because of the complications of the housing revenue account and their inability to plan financially for the longer term. Tenants have got the message, and the officers who came from ALMOs all over the country said that the quicker that the reform could be achieved the better, because it would provide enough financial certainty for things to move on. The Minister told the Committee the other day that he might have to get the agreement of all councils, because of the need to transfer debt between them; however, he said he might look at allowing those councils that wanted to become involved in the arrangements, after the two-month consultation period, to opt for the new scheme even if all authorities had not come in and primary legislation was needed to bring them in. I hope that the Minister will consider that, because speed is of the essence and we do not want ALMOs to start to unravel because of financial problems and the inherent instability of the current system. I agree that the decent homes programme is a major step forward, but ALMOs want to move on now and ensure that they have the resources to maintain their stock to those high standards—even to improve them, particularly by energy-saving measures. They also want to build new homes. The Minister spoke to us about the need for equity in financial arrangements between those authorities that have not carried out stock transfers and those that have and about the ability that he hopes to develop for authorities to borrow prudentially against the rental streams from their homes, which would enable the new building to happen. That is an interesting development, which can put more money into social rented housing in the future and take us on from our current position. The Government have acted well on repossessions. The Committee was concerned, in the initial report, about whether the protocol would work. However, because of the fall in the number of repossessions forecast by the Council of Mortgage Lenders, there is probably more confidence now that the protocol may be ameliorating some of the worst effects. Ways are being found, with the deferment of interest payments, to help people who are in difficulties whose homes might have been repossessed in past recessions. The bringing forward of help through the support for mortgage interest scheme—it now starts at three months, rather than nine months—has undoubtedly saved many people from getting into even worse debt, and that is welcome, too. I have already commented on the mortgage rescue scheme. I hope that the Government will come forward soon, having previously announced an intention to act, with measures to deal with the problem of private tenants who unwittingly find that they are in a property that is going to be repossessed, where the lender did not know that a tenancy had been created. The tenants are there in all good faith but have virtually no standing in law at present. That is an important issue on which we need to act. Finally, I want to emphasise three issues that emerged from the report. First, in our second report, we came back to the asset-backed securities guarantee scheme. Everyone thought that the Government acted with commendable speed to the Crosby review, but unfortunately did not get the answer quite right, because the scheme is not working. John Heron of the Intermediary Mortgage Lenders Association told the Select Committee that although the association was""impressed with the Asset-backed Guarantee Scheme that was announced and subsequently introduced, it is a great shame that it falls short of its objectives."" He said:""There is only so much risk that a government-sponsored scheme can reasonably take, and that is the position they are in, but the problem with that is that it is rather like half a leap across a chasm: very impressive but doomed to failure."" The Government are halfway there, but currently the scheme is not working. I accept that it is a Treasury responsibility to deal with the matter, but I hope that the Minister has been listening and will go straight to knock on the Treasury door to see whether improvement to the scheme can be made quicker. It is crucial that, as well as dealing with the issues of social rented housing on which I have concentrated, we should get some money back into the mortgage market. It is not just a matter of using the retail savings; we need to get the wholesale market moving, and clearly, at present, that is not happening. The concern is not only that the money is not available, but that the rates of interest being charged are starting to rise. Five-year fixed rates have gone up by about two percentage points in the past month, and those were the most attractive rates. In the current circumstances, a high cost on fixed or variable rates is probably a bit worrying for many people, particularly if they fear losing their job or have already lost it, or are on short-time working. Getting that money back into the mortgage market is crucial. Skills and capacity in the construction industry are relevant. The last thing that we want, after the present collapse in house building, is not to be able to bring it back. That happened in the recession at the end of the 1980s and 1990s. The industry took an awfully long time to come back, because the skills had gone. We may eventually get some skills recycled from the Olympic sites in the south. We probably will not get the same number of people from eastern Europe as we have had, because those economies are starting to improve in the longer term and real wages are growing in the countries in question. We may not be able to rely on Poles and Czechs to come and build, as they were doing before the credit crunch. We must think about how to retain skills and bring more skills into the industry, as a matter of urgency. It is a question of encouraging young people to go into the schemes in colleges and start training, even though there may not be a job immediately at the end of the line. The Government must think about that. Some young people who went into apprenticeship schemes through the colleges a few months ago are starting to say, "What's the point? There won't be a job when we've finished our time in college." That is a challenge for the Government. Another challenge for the Government is to consider the future for private rented housing. It has a bad image; there is some pretty awful, squalid stuff out there. The all-party group on urban development did a report that included the issue a few months ago, with the support of the British Property Federation. It recognised in the past that some property developers might like the commercial property model to come into play in housing. In that model, the developers develop the housing, retain ownership and manage it to a high standard, rather than just selling it on to some landlord who would probably not be as interested. The developer would become very concerned about the standard of the property it was building, because it would be managing it in the future. The ideas are interesting, and the Government must get the financing right to help with them. Currently, the commercial property world is probably as lacking in confidence as the house building world, because it has suffered a major collapse in its values in the past few months. However, I think that it would be an interesting way to provide additional high-quality rented housing for the future—perhaps for different groups of people, who are younger and more socially mobile. That would add badly needed housing to the stock. I have covered some of the key items in the report, which was well timed, with good suggestions. I welcome what the Government have done so far, but some things that still need to be done have been identified.