Let me begin by drawing attention to my interest as declared in the Register of Members’ Financial Interests. Let me also congratulate the Chairman of the Select Committee, my hon. Friend the Member for Sheffield
South East (Mr Betts), on his excellent introduction to the debate, in which he highlighted a number of issues on which I think there is a large measure of consensus.
It is a pleasure to follow the hon. Member for Meon Valley (George Hollingbery). I did not agree with everything he said, but there was also a large measure of consensus between the views that he expressed and those that I shall express in my own speech. It is curiously frustrating that, at a time when there is such a large measure of consensus between those who have looked seriously at the issue of housing and what needs to be done, the housing position in the country is so lamentable.
Our output level is falling. According to the DCLG’s own statistics, in 2012 we started only 98,000 homes. That is not just massively below the 230,000 level that is generally recognised to be necessary, but 11% down on the inadequate levels achieved in 2011. An already bad situation is getting worse, not better. According to the latest figures from the National House Building Council—I received my copy only yesterday:
“NHBC data show private sector housing starts down 13% in the three months to the end of January, compared with the same period a year earlier.”
We must ask why that is happening. A number of contributory factors have already been identified, but I think that four are fundamentally important. The first, on which the hon. Member for Meon Valley focused, is a lack of confidence in the market. People are very cautious about investing at the moment, which is hardly surprising given the state of the economy and their nervousness about whether they will have a job, and also their nervousness about whether the house that they are thinking of buying will be worth as much in a year or two. Prices in many parts of the country—I do not include inner London, where the circumstances are probably rather exceptional—prices have been iffy. In some places they have declined and in others they have shown modest growth, but there is little ground for real confidence. I am not advocating a return to the hyper-inflation in house prices that we encountered during the booms of the 1970s, 1980s and the noughties, because they were unsustainable, but at a time when there is no confidence at all, it will be difficult to get the market going because people simply will not invest.
Secondly, when people are prepared to take the risk, they face real difficulties in obtaining mortgage finance. It is a classic instance of our reacting to over-generous lending during the boom years by allowing the pendulum to swing too far in the opposite direction, and to get stuck in a position where it becomes a serious obstacle. Anyone who has looked closely at the figures will have noted that many people who are currently struggling with high rents in the private sector could probably support the cost of a mortgage easily if they were able to get one, but the demands in terms of deposit requirements or the interest rates charged in the case of high loan-to-value mortgages make that impossible.
Yesterday the hon. Member for Rugby (Mark Pawsey) and I attended the launch of that much-respected document “UK Housing Review”. Looking through the rather voluminous set of useful housing data, I spotted the latest figures relating to the current mortgage cost-to-income ratios for first-time buyers. They are at a very low level: 17.6%, one of the lowest levels in the last 30 years. The
figure was 24.6% in 2007, at the end of a boom, and 26.9% in 1990, at the end of another boom. It is not that house buyers need a disproportionate level of income to pay a mortgage, if they can get one—as I have said, some are paying rather more in rent than it would cost them to service a mortgage—but that we have to find a means of helping people to obtain a mortgage if they are prevented from getting one.
Thirdly, there has been a drastic fall in public investment. The Chair of the Select Committee highlighted the Government’s decision, as part of the spending review announcement early in their lifetime, to cut spending on social and affordable housing by 60%. Output has, inevitably, plummeted, with housing association starts in the latest 12 months totalling just 19,500, which is 23% down on the equivalent period for 2010-11. Affordable housing is doing worse than the housing market overall, which is obviously a particular concern for all those people who depend on obtaining accommodation at a reasonable rate.
The fourth element in this overall package is the very uncertain planning environment, which is entirely of the Government’s creation. They decided to tear up the previous planning framework and to create a new planning system. Many of us warned before the last election that not only was that likely to cause uncertainty, which would be damaging to development and to confidence, but it would open the door to an awful lot of nimby instincts among people who have, for a variety of reasons, been opposed to new housing development. I am afraid that the evidence clearly shows that that is what has happened. Councils are planning 272,000 fewer homes than would previously have been expected, according to Tetlow King Planning, and the level of new planning consents going through remains massively below the level required to meet the country’s needs. So there is a problem with planning as well as with the other factors that I have identified.