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Housing Update

Volume 539: debated on Wednesday 1 February 2012

I would like to make a statement to update hon. Members on the coalition Government’s action on housing, following the publication of our housing strategy in November 2011.

We have acted quickly to ensure that the measures set out in the strategy have a rapid impact on delivering the new homes and jobs that the country needs and put power and incentives back into the hands of local communities.

Housing finance reform

My Department is today publishing the final determinations which will deliver a coalition agreement commitment to replace the discredited Housing Revenue Account subsidy system. This will involve a £19 billion deal between central and local government, delivering a new devolved system for financing council housing. Responses to our consultation show overwhelming support for our reforms. These reforms will give councils the resources, incentives and flexibility they need to provide high-quality, efficient housing services for their communities.

Under the current system. Government make a series of complex calculations each year about how much they think each council should be able to raise in rents and how much they should need to spend on their housing services. On the basis of this desk exercise in Whitehall, Government take money from some councils and give money to others.

In recent years, this has produced a national surplus for Government, currently forecast to be around £670 million in 2011-12. This so-called “tenant tax” would continue to grow each year under the current formula. Local authorities do not know from one year to the next how much they will gain or lose from this redistribution, making it hard for them to plan ahead.

Under the new system, councils will keep all their rent income and use it locally to fund their own homes. This will give councils the stability they need to develop long term business plans with the most efficient local mix of maintenance, repairs and replacement works. Instead of waiting to see what turns up in the annual subsidy round, councils will take responsibility for their homes. This will enable and encourage active local asset management to meet the future housing needs of communities.

Alongside this freedom from central control, councils will have more money to spend on their homes. The reforms do not change the rent policy established by the previous Government in 2001. But the new system deals with the chronic under-funding for capital works under the subsidy system which led to the huge backlog in Decent Homes works. The stock valuations on which the new system is based include higher assumed costs for management, maintenance and repairs, based on independent research. This will give councils on average 15% more to spend on services for tenants.

Today we are publishing the final determinations which provide the legal and financial framework for this new system. Copies have been placed in the Library of the House. The determinations and supporting documents are also available at:

The new system will replace the Housing Revenue Account subsidy from April this year.

The NewBuy Guarantee

We are announcing today that the new build mortgage indemnity scheme will be open for all new build houses and flats up to £500,000 and will be available to UK citizens buying their main home. The scheme will support up to 100,000 prospective borrowers to access a 95% loan to value mortgage. This scheme will particularly help first time buyers who currently find the size of a required deposit prohibitive.

We are also announcing today that the scheme will be known as the NewBuy Guarantee. We have already published a guide for those interested in the scheme on our website and house builders are already taking expressions of interest.

Extending the Right to Buy

On 22 December, my Department published a consultation on proposals for reinvigorating the Right to Buy, suggesting that we offer tenants a £50,000 cap on discounts across England, more than tripling the cap that currently exists in most of London and also giving a substantial increase for the rest of England. This proposal sits alongside plans to deliver one-for-one replacement so that for every home sold under the Right to Buy, a new Affordable Rent home is built.

Unlocked stalled sites

On 22 December, my Department also published a prospectus for the £420 million “Get Britain Building” investment fund, which sought expressions of interest from developers by 30 January 2012. This will help unlock progress on stalled sites that have planning permission and are shovel ready, thereby helping to create jobs and economic growth and the delivery of up to 16,000 new homes by December 2014. We halved the paperwork required and the response from industry has been positive with thousands of visits to the web page.

Regenerating surplus public land

The Government have moved rapidly to take forward the next phase of our programme to free up redundant, formerly used public sector land and buildings to support new homes. We are working with smaller landholding Departments and agencies, such as the Ministry of Justice and Home Office, to maximise the release of their surplus land for housing. We are working not just with Government Departments and agencies, but also the BBC, Network Rail and the Royal Mail.

We are putting in place support that Departments can draw on to help unlock release of their land, including through the Homes and Communities Agency, and a small advisory group of experts which will start meeting shortly, and provide practical advice to Departments on disposal of key sites.

Fairness in social housing

We are also pressing ahead rapidly with our plans to make social housing fairer, including consultations on new allocations guidance for local authorities to ensure that social homes go to people who genuinely need and deserve them the most, such as hard working families and ex-servicemen and women; and proposals to tackle fraud in social housing.

Streamlining building regulations

My Department has also launched yesterday a consultation on streamlining building regulations to save businesses money by cutting excessive red-tape while delivering safer and more sustainable buildings. The consultation includes proposals for the next steps to improve the energy efficiency of new homes, to pave the way for the introduction of zero-carbon homes from 2016, and for help with the roll out of the Green Deal this autumn.

Strengthening protection for leaseholders

Last year, my Department consulted on proposals for increasing the value limits that determine the eligibility of residential long leaseholders (those with a lease of more than 21 years) to rights in two specific areas.

These are rights to remain in their properties at the end of their lease terms as an “assured tenant” and to extend the lease or purchase the freehold of their leasehold house on particular terms. Legislative change would be subject to parliamentary approval.

Today I am publishing the summary of responses to the consultation and I can confirm our plans to bring outdated protections for leaseholders back in pace with changing property prices. The Government propose to raise the £25,000 “value limit”—or notional annual rental value—outpaced by house price inflation since it was set in 1990 to £100,000, enabling many leaseholders to stay in their home when their lease comes to an end. A copy of the summary has been placed in the Library of the House.

New Homes Bonus

We are announcing today the final payments for the second round of New Homes Bonus. Commenced in April 2011, the bonus is based on the council tax of additional homes and those brought back into use, with an additional amount for affordable homes, for the following six years.

The bonus will be paid in respect of 159,000 homes from October 2010 to October 2011 including 22,000 long-term empty properties brought back into use. The allocations also include the first affordable homes enhancement, which totals £21 million in respect of 61,000 new affordable homes.

This means we will pay councils £432 million of New Homes Bonus for local authorities in England. This includes the second instalment of £199 million in respect of year 1 and £233 million for housing growth in year 2. We will also address losses of New Homes Bonus in areas affected by last summer's riots through a separate grant from riot recovery funds.

We are confident that the New Homes Bonus will continue to support local authorities in engaging local communities in a debate about the benefits that growth can bring. The Department has written to local authorities confirming their final allocations and I have written to all Members of Parliament in England. A full list of the allocations is being placed in the Library of the House. Further information on the bonus can be found at:

Supporting infrastructure: Growing Places

I am also, together with my right hon. Friends, the Secretary of State for Transport, and the Chief Secretary to the Treasury, confirming individual Growing Places Fund allocations.

This funding will benefit the 39 Local Enterprise Partnerships across the country. It will get housing development moving again, provide additional funding for infrastructure projects already in the pipeline and promote wider economic growth.

Local areas will be in the driving seat, with funding directed to Local Enterprise Partnerships, bringing private sector expertise to help deliver significant infrastructure projects.

Now that funding has been confirmed, Local Enterprise Partnerships and their local authority partners will be able to get to work allocating funds to address the constraints which they consider to be a priority. A number have already identified their priorities, and others are assessing options—we expect funding to be put to work quickly to support local economic growth. Funding will be paid towards the end of February 2012.

In summary, the coalition Government are getting on with the job of delivering the commitments set out in the Housing Strategy—bringing to life proposals to deliver more new homes, built to the highest quality; to get housebuilders building again; and to support tenants and prospective buyers to own their own home.