Westminster Hall debate on Affordable Housing in London
June 15, 2016
Mark made the following interventions in a Westminster Hall debate on Affordable Housing in London on 14 June 2016:
Ruth Cadbury (Brentford and Isleworth) (Lab)
I beg to move,
That this House has considered affordable housing in London.
It is an honour to serve under your chairmanship, Sir David.
First, I should draw attention to my entry in the Register of Members’ Financial Interests as the owner of a rental property and a member of the Residential Landlords Association.
To say there is a housing crisis in London has become a cliché, but it is more than that for our constituents who want to be able to stay in London and to afford a roof over their heads. Affordability is defined by what is affordable to people who live in London, or want to live in London. Living in London should not be seen as some sort of privilege. Not only should our constituents have the right to live in London among their community and family support networks, but London needs people to keep our great city’s economy and public services going. I will show just how difficult that can be when teachers, nurses, daycare assistants, chefs, cleaners, baggage handlers and so on cannot afford to live in London.
Mark Field (Cities of London and Westminster) (Con)
First of all, I apologise, as I will not be able to be here for the whole of this timely debate. There is a particular problem in the housing market in the centre of London that has a knock-on effect in suburban areas. The hon. Lady refers to various jobs and how people feel squeezed out of the London market, but that also applies—dare I say it—even to those who would be regarded as incredibly well-paid city professionals. I hear from senior partners in law firms who say that junior lawyers on almost £100,000 a year simply cannot get on to the housing ladder without having a hell of a long commute, and often they work very long and untimely hours as well. As she rightly says, the problem affects all of us here in London. All of us MPs, of whatever political colour, feel strongly that we hopefully can make a contribution to ensure that the Government are aware of the particular problems we have in the capital city.
I thank the right hon. Gentleman for his intervention. Of course, in his constituency he has many people working at very high salaries. We know there is a crisis when people on almost £100,000 a year cannot afford a home in London.
The problem goes to the heart of London’s ability to function and to serve the rest of the UK. Let us look at the problem from the perspective of a few people who want to live and work in London and see what their choices are. In the teaching and social work professions, there is a chronic shortage and a recruitment and retention crisis, as all of us who have recently met headteachers or directors of social services know. Inner London salaries range between £27,000 and £37,000. If we take a mid-point of £32,000, someone could get a 25-year mortgage with a 5% interest rate and they would be able to afford between £87,000 and £131,000, but in my constituency a teacher could not get anything. The cheapest home for sale in my constituency, apart from a boat, is £190,000, and that is for a one-bedroom flat in a house that is in a shocking condition.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
Is my hon. Friend aware that in the W4 postcode, which is in her constituency and mine, just to have a chance at having a one-bedroom flat—a so-called starter home under the new scheme designed to alleviate the crisis—someone would need a salary of £90,500? Starter homes have been misnamed. They are not starting anything, but ending dreams for a generation.
My hon. Friend is absolutely right; I will move on to that subject shortly. Certainly a salary of more than £90,000 is not the average mid-point for a teacher or social worker.
Time and again when I talk to employers, housing is the issue. For some nurses there has been some key worker housing, which was introduced to deal with market failure and to provide cheap housing, but that is all but disappearing. Those entering nursing will also face a mountain of student debt now that the Government have announced the scrapping of the NHS bursaries. The Royal College of Nursing survey recently showed that many nurses will leave London if they cannot afford anywhere to live, which will add to the problems in the NHS.
At the lower end of the pay scales are people who are essential for London to work. A daycare assistant is paid £6.70 an hour to work in a nursery here in London; that is about £1,000 a month. No one with a family can do such work when the average rent is around £1,500 a month. Even renting a room takes well over half the daycare assistant’s take-home pay. I have a specific example of a hard-working man and his family in my constituency. Since coming to London he has worked full time in two jobs. He has rented privately for years, taking multiple loans to cover deposits and rent up front, and is now in considerable debt as a result. His landlord has now raised the rent as it is the end of the tenancy, so he now cannot stay there with his family. Letting agents and private landlords will not accept claimants of housing benefit, which he needs to top up his rent, and he cannot borrow any more money for a deposit. Despite never missing a rent payment and despite two previous letting agents confirming that with good references, he cannot rent privately. He has had to apply to the council as homeless in order to get housing.
But my constituent will not get a council home. The current series of “How to Get a Council House” is filmed in my borough of Hounslow. None of the families in that series have ended up getting a council home. If they have been lucky and got through the hoops, and if they have been accepted under the council’s duty to house, they are placed in temporary accommodation, as my constituent and his family will be. Temporary accommodation is private rented housing where housing benefit may contribute to housing costs, but even then my constituent is not out of the cycle of escalating rents. He may dream of owning a home—a Government objective—but what he needs is a home at a rent he can afford on his low wages.
He is not alone. The ending of a private tenancy now accounts for 39% of homelessness acceptances in London. According to the Department for Communities and Local Government statistics, 32,000 people in London made an application to their council as homeless in 2014-15, which represents an increase of 38% over five years. DCLG statistics reveal that right-to-buy sales between October and December 2015 accounted for 26% of sales. Right to buy is for people who are already fortunate to be council tenants, but, with a Government discount of up to £100,000, it is taking valuable stock away from local authorities, hence their dependence on temporary accommodation.
In the council housing sector, like-for-like replacement is not happening for the council homes bought under right to buy. The new replacement homes that the Government announced could be shared ownership or low cost sale rather than rent. At least 36% of all homes sold by councils across London are now let by private landlords, many of them subsidised by housing benefit because the rents are so high. The sale of high value vacant council homes will have the overall effect of restricting the number of affordable houses for rent. London Councils is concerned that the objective to replace two homes for every one sold may not be sufficient to cover construction costs and land purchases in the right mix of housing. So already we have examples of the failure of the housing market in London that is causing the affordability crisis.
I have not yet mentioned employees in the private sector on middle incomes. Fuller’s Brewery in my constituency is a thriving business with an international reputation. Having spoken to the directors, it has become evident that the housing crisis is affecting their business and their ability to recruit and retain staff. So who can truly afford to buy a home in the area they want to live in, grew up in or want to work in?
John Cryer (Leyton and Wanstead) (Lab)
Leyton, which forms the bulk of my constituency, has traditionally been a relatively cheap place to buy, compared with the rest of London, but in recent years all the surveys—for example, by the Evening Standard and other newspapers—point to Leyton as one of the city’s property hotspots, which has meant that property prices and rents have gone through the roof. Does not that point to the fundamental problem: a lack of supply? The imbalance between demand and supply has reached the point where so many people, such as those whom my hon. Friend is discussing, can no longer afford to rent or buy in London.
My hon. Friend is absolutely right. So many people are moving away. Many are moving abroad to countries where their skills are valued and they have a much higher standard of living. Even a childcare assistant can earn £40,000 in the United Arab Emirates. It is, though, investors from middle east countries who are propping up London’s housing crisis. Many people are moving elsewhere in the UK as well, thus adding to London’s brain drain and skills drain.
Yesterday’s Evening Standard reported that young Londoners spend almost 60% of their salaries on rent. The first year group to leave university with more than £50,000 of debt, because they were the first group of students to have to pay £9,000 a year in tuition fees—my son among them—are now hitting the jobs market. How can someone save, pay off their student debt and afford to eat and keep warm with rents at current levels?
The hon. Lady is highlighting the personal misery of housing in London; would she also reflect on the fact that the housing shortage—there is no doubt that we have a major problem here in the capital—is beginning to put London’s international competitiveness as a business centre at risk? This side of a further referendum in Scotland even the Scottish National party would recognise that as a problem, because if London’s competitiveness suffers the whole United Kingdom will suffer. A recent London First survey said that some 73% of the London businesses surveyed said that housing supply and costs were a significant risk to the capital’s economy.
The right hon. Gentleman is absolutely right. Many business organisations are raising housing as an issue. Two years ago, the London Chamber of Commerce and Industry wrote a significant, ground- breaking report on housing costs and the housing shortage. That does not appear to have been taken into account when the Housing and Planning Bill was drafted. I understand that the LCCI will be launching another report in a couple of weeks to highlight the problems again.
A shortage of the total number of homes in all sectors—council, social rented, intermediate and market rented—has driven up open market sale and rental values. Several organisations, particularly the London Housing Commission, have estimated that London needs at least 50,000 new homes a year just to begin to deal with the shortage, and stated that a significant proportion must be affordable, particularly when wages have not kept up with prices. The average Londoner’s salary is £33,000, but the average home now costs 16 times that. As more people are priced out of home ownership, they are putting more pressure on the rental market, in which rents are continuing to rise. In my borough, Hounslow, the rent-to-salary ratio is 58%, and rent levels are out of reach for average earners, let alone those on low wages.
Until around five years ago, councils relied on Government support to add to the stock of council and housing association homes so that they could provide decent-quality, affordable homes to those in acknowledged housing need who were unable to rent or buy in the private sector. In 2011-12, some 12,000 new social rent homes were delivered, thanks to the Labour Government policies that supported housing associations, and later councils, to build, but that figure has been declining, and only around 2,000 new social rent homes will be built this year. That shows how the pipeline supply is declining. The number of council homes and housing association social rented homes built this year will be lower than the number of council homes lost through the right to buy. The total stock of homes for social rent is going ever downwards.
There was always the intermediate market of shared ownership—part rent, part buy—but less of that stock is now coming on stream as the Government focus on starter homes and Help to Buy. Relying on the private sector to deliver affordable homes has meant that in new developments across London, only 13% of homes given planning consent last year were considered “affordable” under the official definition. We are losing social rented homes faster through council house sales than section 106 agreements with developers are delivering new homes.
What are the Government doing about affordable housing? Let us look at their flagship policy: starter homes. When the policy comes on stream, it will apply only to brand new properties, which, at current prices, are unaffordable to most working Londoners, as the right hon. Member for Cities of London and Westminster (Mark Field) said. Someone needs to be earning £97,000 to buy an average-priced starter home. Starter homes will also cut the delivery of all other homes. A third of councils that responded to an Inside Housing survey revealed that their entire affordable housing requirement could be consumed by starter homes if the threshold is set at 20%.
Charities such as Crisis are concerned that the policy will require councils to prioritise starter homes for higher earners and so reduce councils’ scope to meet the full range of housing requirements identified through their local planning processes. London Councils agrees that starter homes should be in addition to other forms of housing, so that councils can still secure the necessary tenure and price mix in accordance with the needs in their area, and can discharge their homelessness responsibilities by providing truly affordable housing.
My hon. Friend is being very generous in taking interventions. She mentioned her own experience as a parent; has she seen the Aviva research that shows that 1 million more people aged between 20 and 30 are going to be living at home with their parents in the next 10 years? We have all heard of the bank of mum and dad, but does she agree that the Government have not only messed up the housing market but seem to be stunting young people’s growth?
Young people whose parents live in a house in London big enough for them to have their own room, or even to share a room, at least have the advantage that they can ask us to carry on housing them—for I do not know how long—but what about mobility? How can young people from other parts of the UK or other parts of the world come to London? They do not have the landlord of mum and dad to turn to.
Let me return to the implications of Government policy and the Housing and Planning Act 2016. Many London councils, particularly those in inner London, believe that in future there could be areas where there are no affordable rented homes, because the Government expect 20% of all new developments to include starter homes on sale at 80% of market value. Couple that with the right to buy, the decline of housing association stock and the forced sale of vacant council homes, and there will be yet more of a crisis.
I counsel that we should not despair entirely. One of my local authorities, the City of London, owns property not only in the square mile but in places such as Southwark, Lewisham, Lambeth and Camden, and is looking to start its biggest house building programme for four decades, since the building of the Barbican centre. That will require being pragmatic about the mix—with some social housing and some at an intermediary level—but it is looking to build 3,700 properties over the next 10 years, which is quite a lot for such a small local authority. If we can work with local authorities to recognise not only the problems but that, because of the cost of land, we have to be a little more relaxed about density than we might have been in the past, there is potentially a route forward, with all local authorities working with the London Mayor and, of course, the Department.
I will move on to the London Mayor at the end of my speech. The City of London is in a slightly unusual situation: it has capital and other sources of income, and it can use its wealth to deliver affordable housing across London, as it used to do historically.
My council still has several hundred of the last council homes in the pipeline. Labour authorities generally, with the exception of the City of London, had a much higher propensity to deliver council housing until now, but the current Government policies make that more difficult. There is no specific Government-led initiative aimed at key workers, and the right to buy for housing association tenants is paid for by the sale of vacant council homes, which causes the social rented housing stock to decline further. Other Government policies, such as reducing the benefit cap, extending the right to buy with discounts of £100,000 and freezing local housing allowance rates, exacerbate London’s affordability challenge.
At the end of May, the Chancellor, who was standing in at Prime Minister’s Question Time, acknowledged to me that there is a problem. That is a start, but it is a shame the Government did not acknowledge the scale of the problem before drafting the Housing and Planning Bill. The Chancellor told me that he has met the new Mayor of London—our former colleague, Sadiq Khan—and that housing was top of the agenda. The new Mayor is committed to ensuring that 50% of all new housing in London is genuinely affordable. He has announced that he will introduce a new London living rent, which will be based on one third of average local wages, to tackle the skyrocketing private rental prices, but to do that he needs the Government’s active support.
The Government must acknowledge that there is a problem in London that the current initiatives will not address, and that merely increasing the supply of housing will not in itself provide the housing we need to attract teachers, nurses, social workers, cleaners and childcare workers. The London Mayor, local authorities and the Government will have to work together on new solutions. The Mayor is offering the use of non-operational Transport for London land, but we also need the land of other public bodies, such as the NHS, for key worker housing. We need to return to providing proper support for social rented housing that is truly affordable to working people at all stages of the salary range.
By acknowledging the scale of the problem and accepting their role in addressing it, the Government will make a start. They must accept that their policies are depleting the supply of affordable housing and that they are subsidising market distortions in flats to buy. They must allow local authorities to have the power to invest in new social rented housing, cut the discount on right to buy and release funding for key worker housing. That would be a start.