My Lords, I am sorry to move ahead of my noble friend. The amendments in this group go to the heart of an issue that has been of much concern among providers of social housing: will the Levelling-up and Regeneration Bill lead to more affordable housing—in particular, more social rented housing—or will the replacement of Section 106 agreements with the new infrastructure levy mean fewer new affordable homes? As the Minister has noted, the Government hope and expect the new infrastructure levy regime to result in
“at least as much, if not more”—[Official Report, 17/11/22; col. 1076.]
social housing. Most of the amendments in this group are trying to make sure that this aspiration becomes a reality.
The big picture is that the Government have maintained their overall target of 300,000 homes per annum, and repeated studies maintain that about a third of this total should be social housing—that is, housing affordable to the half of the population on average incomes and below. At a time of widespread concern that poverty and health disparities have worsened, housing policies can cause wider inequalities in society or be a means of reducing them.
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The Levelling-up and Regeneration Bill has profound implications for housing, because it directly affects the amount of social housing required by the planning system from private sector housebuilders. Currently, half of all affordable housing—with its range including higher-cost rentals, shared ownership and so on—comes from the obligations on housebuilders. Within the total for all kinds of affordable housing, the requirements on housebuilders have achieved over half of all the new social rented—in other words, genuinely affordable—housing in recent years.
Following the helpful opening speech by the noble Baroness, Lady Taylor of Stevenage, in our previous session, we come to the first amendment in this group, Amendment 326, which addresses how the infrastructure levy can bolster, not diminish, the production of affordable homes. This amendment was eloquently introduced by the noble Baroness, Lady Warwick of Undercliffe, and is supported by the noble Baronesses, Lady Watkins and Lady Thornhill, and the right reverend Prelate the Bishop of Chelmsford. It would give local authorities the right to require a specific proportion of the infrastructure levy to be delivered on site, in kind, not in cash.
This is an important amendment. It would ensure that new affordable homes are built, whereas a cash payment could end up being used for some other purpose elsewhere. It would mean that new developments will comprise a mix of homes for those on different incomes, rather than the social housing being segregated on a separate, less attractive site and therefore stigmatised. It would achieve a bigger bang for the infrastructure levy buck, because it is cheaper for the developer to build affordable homes themselves than to provide cash for others to build elsewhere. It would represent a speedier route to getting affordable housing built out: it avoids the delays of a payment being made by the housebuilder at the end of the project, with the levy receipts being accumulated and a new development being planned and finally built elsewhere some years later. It would meet local affordable housing needs in places where land for development is particularly hard to acquire and where no other sites may come available for the foreseeable future. It can also help with cash flow for SME builders, who then get guaranteed sales to a social landlord up front for a proportion of their development, easing their borrowing pressures. So, in strongly supporting this amendment, I would hope that councils would mostly use this power to specify that developers must normally fulfil their obligations entirely through on-site provision of social housing.
Amendment 327, from the same team, would exempt schemes of 100% affordable housing from having to pay the levy. Amendment 328 from the noble Baroness, Lady Hayman of Ullock, proposes the same exemption but where 75% or more of the homes are for affordable housing. Exemptions for affordable homes, whatever their proportion of the total built, must be right; otherwise, local authorities will be collecting infrastructure levy from a social housing provider and then refunding the same body to enable it to provide the affordable housing.
Amendment 344, from the noble Lords, Lord Young of Cookham and Lord Shipley, and the right reverend Prelate the Bishop of Chelmsford, alongside me, seeks to get the infrastructure levy set at the level needed to fulfil the demand set out in the local plan. This is very similar to Amendments 332 and 333 in the names of noble Lords, Lord Etherton and Lord Thurlow, which seek to make sure that the infrastructure levy is set at levels which will satisfy the requirements established by the strategic housing and market assessments. Their amendment proposes that these assessments should become compulsory. This is echoed in Amendment 334A from the noble Baroness, Lady Taylor of Stevenage, which would achieve the level of affordable housing set out in the local plan, and her Amendment 349, which follows this up with a requirement for the infrastructure levy to then be spent on achieving this. Amendment 334 from the earlier team spells out that the infrastructure levy must be sufficient to maintain or exceed current levels of affordable housing. So, we are all singing from very similar hymn sheets.
This brings me to my final two amendments in this group. Amendment 350, with the noble Lord, Lord Young, and the right reverend Prelate the Bishop of Chelmsford, stipulates that 75% of the infrastructure levy raised should be spent on affordable housing. That is a smaller percentage than the proportion of Section 106 funding currently spent on affordable homes. Research by the University of Liverpool for the Department for Levelling Up, Housing and Communities has shown that 78.5% of Section 106 support goes to affordable housing.
Of course, the infrastructure levy will replace not only Section 106 contributions but the community infrastructure levy. However, this is not charged by more than half of local authorities and, where it is, it has a far smaller value than the Section 106 funding. Even when adding together the community infrastructure levy and Section 106 contributions as the comparator with the new levy, two-thirds of the total value of these two development contributions still goes to affordable housing. Bearing in mind the importance of upping the numbers of affordable homes, 75% of infrastructure levy is surely justified.
Amendment 359 would require 50% of the affordable housing to be for the truly affordable social rent housing. Social rents are the rents that currently apply to most council and housing association properties, as clarified in Amendment 323 from the noble Baroness, Lady Hayman. Social rents invariably pass the test of genuine affordability and are controlled by the Regulator of Social Housing. But, at present, only 12.5% of new affordable housing is available for letting at these rents, which means that less than 4% of homes built by
the housebuilders are affordable to those on below-average incomes. Of course, more social rented homes require more subsidy up front than shared ownership or other forms of affordable housing. However, in the longer term, the extra cost will be recouped in lower housing benefit payments. Moreover, the Government’s expectation is that the new infrastructure levy will raise more than its predecessor obligations. More social rented housing is the very best way to spend that extra funding.
In conclusion, I must thank Shelter, the National Housing Federation, Homes for the North and Homes for the South West, among others, for their invaluable input to these amendments. The proposals from so many noble Lords are going in the same direction, addressing the core question of how the Bill can help efforts to increase the amount of social housebuilding. For Report, we clearly need to bring together these variations to produce a consolidated set of amendments.
It may be difficult to feel a great sense of urgency when we hear that the Government are planning to introduce the infrastructure levy gradually over the next decade, and when so much detail will not be known until the National Planning Policy Framework’s new guidance is revealed. But the Levelling-up and Regeneration Bill’s introduction of the levy will deeply affect affordable housing production and definitely deserves legislative attention.
I hope that the Minister agrees that this is an opportunity to ensure that the new IL regime has a strong, positive impact in securing more, and definitely not less, urgently needed social housing. I commend these important amendments.