The noble Lord, Lord Lansley, referred to the need to build more homes. There is a way of building more homes that is much easier than all these provisions in the Bill, and that is simply to reduce the price of land. Certainly outside London, it is the cost of land that is driving up the cost of housing and causing the problems we are having to deal with today. Only a few weeks ago I read some statistics about land prices in the Home Counties. An acre of agricultural land can be bought for around £12,000, but with the stroke of a pen—if I may simplify the process—it can be worth between £2 million and £4 million. That is why people cannot afford to buy houses in the United Kingdom but they can afford them abroad. We are simply paying too much for the land that we use.
I wish to support the thrust of these amendments, in particular Amendment 65, tabled by my two noble friends on the Front Bench. As I understand it, they would restrict the amount of property treated as high value, which may have the effect of reducing the levy and thereby the pressure on a local authority to sell stock to fund housing association right-to-buy discount purchases. My case is simple: councils need to defend their public sector housing stock and I shall argue why that stock should be defended against speculative buying.
Just to clarify the position, the Bill states:
“The Secretary of State must by regulations define ‘high value’ for the purposes of this Chapter”,
to which Amendment 65 would add,
“and this definition may not apply to more than 10% of the total authority properties in the local housing authority area”.
These debates have been dominated by some very experienced people, and I do not profess to be one of them. Many leaders of local authorities have taken part, as well as leaders in the housing association movement, so the quality of the debate has been very high. Unfortunately, my experience of dealing with a local authority ended 40 years ago, so obviously I have a layman’s and observer’s knowledge of these matters. My comments are based on some anecdotes and conversations I have had with local authority councillors and leaders who are directly involved in this area. Many of the questions I will put are being asked by the public, particularly where they harbour great concerns about the Bill’s provisions.
3.45 pm
The day before yesterday I had an interesting conversation with a local authority leader. His case was simple. The sale of council property in London is
out of control, with no official monitoring, and it is determined by the Government’s desire to raise revenue from the housing stock so as to avoid public expenditure. It is, in effect, a tax on local authorities. He went on to say that the sale of high-value property would be primarily in the London area, funding countrywide, and that outside of the London area the majority of high-value stock would be confined initially to the national parks, the more well-heeled towns of the Home Counties and a few areas in Yorkshire and Cheshire. But ultimately the Government will lower the high-value threshold so as to maximise the levy and fund their estimated target yield of £4.5 billion a year. He further argues that a high proportion of the council property being purchased in London is by overseas investors using UK residents as the vehicles for buying into the London property market for the purpose of investment. UK residents—tenants—are not the principal purchasers as they require high-value mortgages that they can ill afford and indeed cannot get.
What is the evidence for that? I examined council property prices in Westminster—that is to say, subsequent sales after the right to buy has been exercised. I chose Churchill Gardens in Pimlico because it reflects prices right across London, in an area from Dulwich to Hendon and from Ealing to Hackney. I went on Zoopla, which Members will be aware of, for valuation information. Churchill Gardens—Members will know that it is the series of blocks of flats on the other side of Dolphin Square on the Embankment—was built between 1946 and 1962. There are 1,600 homes there in 32 blocks. It is a development of blocks of flats interspersed with maisonettes. It has the benefit of a district heat and power plant. Much of it is classic deck- access property. It is classic London local authority property. Much of it has been in the conservation area since 1990. It is managed by CityWest Homes on behalf of Westminster City Council. Two-bedroom flats on Zoopla, as of the other day, now cost between £560,000 and £580,000. One-bedroom flats are not much less. These are flats that were sold in 1997-98—I traced them back—for between £24,750 and £25,000. This is a huge increase in the price of local authority property.
Some 50% of the 1,600 properties in Churchill Gardens have been sold off, depriving London of precious housing stock. Where have they gone and who bought them? Those who bought them originally are pocketing the capital gain and selling at the prices I referred to a week ago—it seems like a month ago. They are now joined by Westminster City Council, which, under the current right to buy and after the £103,900 discount, can value the same property at £450,000. Indeed, yesterday I found a three-bedroom property on the Churchill Gardens Estate on Rightmove, being sold by Hamptons International at just more than £600,000. A mortgage in the region of £400,000 to £450,000 requires a buyer to take out a very substantial mortgage of more than £2,000 a month, or more than £24,000 to £26,000 a year, at just more than 3% interest. That is after tax—hardly the income of a council tenant.
So who is buying? It is far too often overseas money. I quote an article from the Daily Mail online, which is not normally a source of information, but it is an interesting one on this particular occasion. It reads:
“One in five people who bought their council house in upmarket Westminster were living on housing benefit … One in five people who bought their council home in one of Britain’s wealthiest areas was receiving housing benefit when they applied, it has emerged”.
These are people who are supposed to be buying property for £450,000. It continues:
“The revelation centres on the London borough of Westminster, and comes after a Government watchdog warned fraudulent purchases under the Right to Buy scheme have increased 400 per cent in two years”.
This is a public scandal. It continues:
“One fear is that hard-up tenants are being ‘gifted’ cash by private firms to buy their homes at a cut-price rate. After buying a property, the company can then sell them on to private landlords for a profit, who will let them”,
at a market rate. It continues:
“In Westminster, 22 per cent of Right to Buy sales were to people in receipt of housing benefit when they applied, dropping to 11 per cent upon completion”.
That is a very interesting statistic. The article continues:
“It begs the question of how council tenants who qualify for housing benefit could suddenly afford to buy properties outright in one of the most expensive parts of the country”.
I hope that it is dawning on Members of the House exactly what I am driving at. Where is the money coming from for these housing association discounts? It is coming not from the people that it is supposed to, but from investors.
The article continues:
“A report also found that 31 per cent of former council homes are now owned by private landlords and can be let for more than £800 a week”—
I do not know about that figure—
“in the capital’s second-most expensive borough.
Councillors have warned of a ‘property bonanza’—and said many tenants claim the money was a gift from overseas, making it near impossible to trace”.
This is a racket. It continues:
“Last summer, it emerged that a property company had leafleted 60,000 council house tenants offering six-figure rewards for working with them to buy and then sell their home.
Nicholas Carlino, a director of London Investment Property Group, told an undercover Sunday Times reporter that he was making so much money snapping up homes that had been undervalued by the council and selling them on that he would ‘never have to work again’. The scheme was entirely legal.
Councillor Lindsey Hall, anti-fraud tsar for Tory-run Westminster, told BBC London’s Inside Out programme: ‘I passionately believe Right to Buy needs to stay, but it needs to be very tightly managed and not fuelling a property bonanza for individuals swanning around estates in grand Mercedes and BMWs’”.
There is something wrong with the Bill if this is what is going to happen in the marketplace.
I shall quote from the journal West End Extra, talking about Churchill Gardens:
“Residential properties are being let out as holiday homes on a near industrial scale changing the historic make-up of central London neighbourhoods, City Hall has been warned. Councillors have been asked to investigate the growing trend for landlords to give up long-stay tenants in favour of taking bookings from tourists through websites such as Airbnb, which can prove more financially lucrative. Residents in Pimlico this week spoke out about how the increasing number of lets to holidaymakers was changing their area, with people on the Churchill Gardens Estate
complaining that a settled community was being replaced by an endless stream of people with suitcases coming and going. Some say they no longer know who their neighbours are.
Labour councillor Murad Gassanly raised the issue at last week’s full council meeting after residents complained to him about ‘noisy parties’ being held at properties and said former council flats were now being set up as rooms ‘numbered like a hotel’. He added: ‘One woman told me she knocked on someone’s door and noticed all the rooms were numbered and there was tourist advertising in there. I looked on Airbnb and there are more than 30 properties on there on the Churchill Gardens Estate at any one time. Long-term residents of the estate say it does undermine the sense of community and does create a transient atmosphere on the estate’.
Conservative Cllr Heather Acton said: ‘We were very disappointed with the government decision to deregulate and enable short letting for a 90-day period of a calendar year’”.
I understand that Westminster City Council is advising people about the dangers of all this. Its website says:
“Sometimes companies or individuals offer tenants money if the tenant agrees to a deal where the company ends up owning the property. If you enter into this type of agreement: Before you buy your property, you will have to repay the discount as soon as you buy it”.
Of course, there are ways around this. It goes on:
“Please think very carefully before using one of these companies or individuals. Ask yourself ‘what is in it for them?’. They may be suggesting that you do something which benefits them, not you. Do not sign anything”.
I do not really know how we can now block what is happening in the Bill. I think the position is desperate. We are going to find huge swathes of London property being sold to people overseas—that is where it will end up—being rented out as tourist accommodation or at very high rentals. London will lose its housing stock and meanwhile the money that is gathered in will be used, not just in London, to fund housing association discounts in various parts of the United Kingdom.
I shall end up by quoting Councillor Acton, who will be known to Members on the Government Benches, talking about Airbub, the site for tourists. I understand that she is a prominent councillor in Westminster.
“On Airbnb there are 3,000 properties across Westminster and 2,000 of those are whole properties, not just a room. And 80 per cent of those are let 100 per cent of the time. They are not people going on holiday, they are people investing in a flat to short let it all the time, and the rent they get is four times the normal annual rent, if not more. It has become a business. There was a one-bedroom flat in Covent Garden which is advertised on Airbnb as sleeping seven”.
We have to find a way of preserving the housing stock in London. I say to Ministers, my noble friend has tabled an amendment which may not exactly meet the objective I have set in this debate, but we have to find something. I believe that the whole Bill is based on a huge error of judgment, certainly as far as London is concerned. As I said the other day, I have great sympathy with the right to buy and I believe that it has worked in parts of the country, but in London it is a disaster and something needs to be done to bring it to an end.