Oral evidence: Housing: State of the Nation, HC 958

Oral evidence, 22 February 2017.

Witnesses

Terrie Alafat, Peter Andrew, Toby Lloyd and Lord Porter.

Chair

Welcome to the Public Accounts Committee. We are here to look at an issue that has been a big concern for the Committee and one in which we have determined to take a close interest in this Parliament: housing in England. We are pleased to have a National Audit Office Report that pulls together a landscape review of what housing policy is out there and how the housing market across all sectors is working, which I know our witnesses on the first panel will have had a chance to look at. We have called it, “Housing—State of the Nation”, which sounds grand. Given the Government’s White Paper, the Report is timely. We know there is a chronic shortage of housing in England. The costs include £28 billion of Government spending in the last year, of which three quarters was on housing benefit. At the same time, there are issues around private sector rents in all parts of the country, with different issues affecting different parts. The Government are promising to build 1 million new homes by 2020. We want to try to get an understanding today of how the various housing policies of the Government interact, what is working and what is not, where the stresses are and whether the ambitions in the White Paper are deliverable. As a Committee, we do not look directly at housing policy, but we are looking at the economy, the efficiency and the effectiveness of the policy. We hope our first and main panels will be able to answer some of those questions. I am pleased to welcome our first panel, consisting of Terrie Alafat, the chief executive of the Chartered Institute of Housing; Lord Gary Porter, the chair of the Local Government Association and the leader of Lincolnshire—

Lord Porter

The best part of Lincolnshire: South Holland District Council.

Mr Bacon

The bit nearest to Norfolk.

Chair

I think I have family living there, so forgive me; I tripped over my words. I also welcome Toby Lloyd, who is the head of housing development at Shelter, and Peter Andrew, deputy chair of the Home Builders Federation. I apologise that we do not have a housing association representative here. That is through a mix-up on our part rather than the sector’s, but we will ensure we get appropriate written evidence about their views on these issues. I remind people if they are following on Twitter that our hashtag today is #housing. I will ask Richard Bacon to kick off.

Mr Bacon

Chair, thank you. May I ask each of the witnesses, starting with Ms Alafat, to say in one minute what they think is wrong? The White Paper is called “Fixing our broken housing market”, so it is Government policy that the housing market is broken. Can you say very briefly why you think it is broken?

Terrie Alafat

First, it is quite clear—Government have acknowledged it—that we have not been building enough homes, and there is a whole range of reasons why that is the case. The White Paper goes quite far in addressing some of those reasons and there is probably more we can do. The second thing that needs to happen is a debate around affordability. The statistics are showing us that it is increasingly difficult for people to access and afford the private rented sector market, and obviously there are issues about access to social housing as well. There is an issue about affordability going forward, and it is a strategic issue that we should be looking at as a country. The other issue is joining up better two particular policy areas: welfare and housing. Another area is housing and health and care, because of the pressures.

Mr Bacon

Thank you. We will probably come back to welfare, because it is a key point in the Report.

Lord Porter

It is quite simple: we have more families than we have housing. We need to build more housing. For the past 45 years, successive Governments have fallen out of love with developing enough homes of the type that people want, in the place where they want to be and at a price that they can afford. The coalition Government failed to do what was necessary, but the previous Labour Government drove councils away from delivering council housing. The only way we have ever built enough homes in this country to keep the country in satisfactory accommodation is when the state plays its part in building enough homes. The private sector generally, with the exception of recessions, does roughly the same number of properties year on year. It is the state sector that has failed to keep up with the demand, which we should have kept up with.

Toby Lloyd

I agree with everything Lord Porter just said. I would go further and say that the fundamental failure of the state here is not just in building homes directly but in intervening in the land market to ensure that enough land is available at a low enough cost to build more homes at prices that people can actually afford. That is not the fault of the speculative house building industry, but that industry, as Lord Porter said, is incapable of building a number of homes at the price that people can afford. As a result, more people are renting and we have a private rented sector that is fundamentally not fit for its purpose. It was designed for footloose yuppies in the ’80s. It is now accommodating huge numbers of working families with small children and is simply not fit for purpose. The final piece of the jigsaw is that the benefits system, which is there to ensure that people who cannot house themselves adequately in the market can at least afford the rent, has now been cut back to the point where those people cannot afford the rent.

Peter Andrew

I tend to agree. The issue goes back about 35 years, when we started under-supplying homes and under-supplying land with planning consent for those homes. Successive Governments since the recession have really moved towards trying to address some of those demand and supply-side needs, but we are still in a place where we are under-supplying the overall market. Some of that is to do with more players on the pitch building homes. That is partly, without a doubt, to do with local authorities, but it is also to do with trying to widen the builder base. Smaller builders need to get into the marketplace. They have suffered by about 80% of their numbers in the past 10 or 12 years. It is about getting more players on the pitch as well as more planning consents.

Mr Bacon

Thank you very much. I would like to pursue each of those points further. Can we start with the land economics point? Since it is entirely relevant can you remind us, Mr Lloyd, of the title of your book that is coming out next week? You haven’t actually told me yet, and I would quite like to know.

Toby Lloyd

It is called “Rethinking the Economics of Land and Housing”.

Mr Bacon

I do not want to diminish your book sales, but can you say what your book says in two sentences?

Toby Lloyd

The fundamental problem of housing is a land problem: because land is inherently scarce, a market-only solution will never deliver sufficient homes in order to bring the price down to a level that everyone can afford. Therefore, we need public sector intervention in land markets in order to provide enough land at a low enough cost, let alone provide it with the infrastructure needed to make genuinely attractive, affordable and sustainable communities.

Mr Bacon

That was very succinct, thank you. Just to be clear, when you say not “a market-only solution”, you are not saying that the market cannot have some role but that a market-only solution will not suffice.

Toby Lloyd

Precisely. As Lord Porter said, the mixed economy in housing and land supply has historically been the only thing that has successfully delivered enough good-quality housing in order to keep prices within reach of ordinary people.

Mr Bacon

Okay. Can I turn to the question of benefits? I would like to ask you, Mr Lloyd, to continue with that; I will also ask Ms Alafat, who mentioned it earlier. One of the most striking things about this Report is that the Government spend £28 billion every year on housing—that is the number on page 4—and some 74% of that goes on housing benefit. In other words, it helps people to pay their rent because, presumably, they cannot pay it otherwise, either because they are out of work and have no income or, in many cases, because they have some income but it is not enough. How do you see the relationship between benefits and housing—this is for you as well, Ms Alafat—evolving in a way that is more effective? Bear in mind that we do not look at policy, but the remit of this Committee does include the effective use of public money.

Toby Lloyd

The first thing to say is that that situation is fundamentally unsustainable. It is one in which we are effectively paying the price of failure. We are paying continually to compensate for the failure to fix the deep structures, which stem back to the land market, as I said, and that mean so many people cannot afford to house themselves adequately in the market. If we want to turn that around, and I suggest that we should, first we have to recognise that it was a policy choice to go down that route. It is not an accident. When public housing was scaled back and land market interventions were scaled back, the deliberate statement by the Minister at the time was that housing benefit was there to take the strain. That was a choice, and it is a choice that can be unmade; however, unfortunately, it is not a choice that you can unmake quickly. If you cut back on that benefit bill now, it will do nothing to fix the fundamental dysfunctions and will just mean more homeless people—we are already seeing that. Unfortunately, this is a long-term proposition of invest now and bring down the benefit in the long-run.

Mr Bacon

Thank you. Ms Alafat?

Terrie Alafat

One of the graphs in the Report that I thought was particularly interesting is the one showing the increase in housing benefit in different sectors against the increase, or lack of increase, in income and wages. One of the things that is striking about that graph is that in 2008—

Chair

Sorry, can you remind us? I know the graph is in there, but I can’t see it. Is it figure 13 on page 31?

Terrie Alafat

Yes, I think it is figure 13. What really strikes me is that you start seeing a great divergence in 2008-09, and of course we all know what happened in 2008-09. When you start to ask the question about the cost and price of housing, which, as Toby said, is surely affected by the lack of housing—mismatched demand and supply obviously has an effect on prices—you also have to ask some questions about wages during that period. There is an interrelationship between what we need to do in terms of building more housing and the number of working people who are going on benefits, which is linked to wages and the nature of jobs that they have in the market. Those things need to be looked at in the round. What has actually happened in Government policy is that the Department for Communities and Local Government is focusing on supply—we all know that if we can build enough houses, it starts to affect affordability theoretically in the longer term—but in the short term we have put in place a number of Department for Work and Pensions policies that are having an effect on some of those people who cannot afford to buy and some of those people at the margins. I think that is worth looking at now, because during an economic downturn is exactly when you will start to see the pressures again. It really needs joined-up thinking in the round, rather than measures to increase supply and to cut benefit. It needs to be looked at in the round and probably looked at in terms of the effects in different parts of the country and for different groups of people. We have done quite a lot of research and we are happy to be part of looking at that big issue.

Chair

So you are saying one size does not fit all.

Terrie Alafat

One size does not fit all. We are finding that it was always going to be the case that the cumulative effect of separate policies over time would begin to affect certain individuals in certain groups. The most recent research we did, which looked at issues to do with the cap on benefits and also the disparity between private sector rents and local housing allowance. There is a gap and it is affecting more and more families—two and three-children families, not just the largest—in more parts of the country. It is an indication that we need to look at that in the round.

Mr Bacon

Thank you. Lord Porter, you said Governments have fallen out of love with building houses. In sum, we have fewer houses built than used to be the case. I have yet to meet the grandmother whose daughter has just had a second baby and who is happy at the idea of her daughter’s family living in a ditch. One would have thought that the idea of having enough houses for everyone to have a dwelling to live in would, among other things, be politically popular. Can you explain why you think that we have fallen out of love with building enough houses?

Lord Porter

If we have not fallen out of love with building enough houses, why do we keep getting in the way of being able to deliver enough houses? It is state intervention in some things and lack of state intervention in others that have created the position that we are in. The Government’s job is to monitor the population, and if people are now choosing to live in separated families as opposed to together, the Government allowed that to be a proposition. We did not scale up house building as a result of that; we scaled back. I don’t know why politicians don’t like houses. I love ‘em.

Caroline Flint

Are you talking about council building as well?

Lord Porter

Councils have been actively discouraged—you know this as a former Housing Minister—from building houses. I cannot recall any previous Labour Housing Ministers while I was leading on housing for the LGA that ever attempted to encourage councils to build houses. In fact, the Labour Government that you were a part of actively tried to make us get rid of the housing through stock transfer. We have now got a Housing Minister who actually is open to housing. I just think his hands are being tied by the Treasury. If Governments really loved housing, somebody would get hold of the Treasury and make them understand that it is all their fault.

Mr Bacon

Mr Brown, what have you got to say?

Lord Porter

It is not the councils’ fault. It is not because we don’t have enough land. It’s because builders cannot get access to money.

Mr Bacon

It is all your fault, Mr Brown.

Richard Brown

That is not directly the case. There are always difficult decisions to be made about the allocation of resources. The Government regard housing as an important priority, but there are things it competes with.

Mr Bacon

Mr Andrew, you said among other things that there had been a systematic and prolonged under-supply of planning consents. I heard the Housing Minister speaking at the CPRE annual conference on Monday. The figure he quoted, which I presume to be an accurate current DCLG figure, was 277,000 planning consents in the last 12 months. We know that in any given year there are significantly more planning consents than there are houses built, so how can there be an under-supply of consents?

Peter Andrew

I meant over a period of about 35 years. In recent years, planning consents have been rising quite rapidly. You are right that there were about 280,000 planning consents last year. If you look at the supply against consents, there is about a three-year lag between consents being granted and getting the pre-commencement conditions satisfied and permits and the like and going through the infrastructure and build process. If we go back three years to 2012-13 for the equivalent number of homes last year, there were about 180,000 or 190,000 planning consents three years ago. Last year there were 164,000 new builds and a total of 189,000 net additions. There is a three-year correlation. So the pro-development policies that have come through from successive Governments over the last five or six years are leading to an increase in planning consents, getting to the level that we need. With that lag, I think that delivery over the next three years will start to match planning consents three years ago.

Mr Bacon

The Home Builders Federation commissioned YouGov to do some research. Can you remind us what percentage of the people you surveyed said that they were unlikely to or would prefer not to buy the products of volume house builders?

Peter Andrew

About 90% of people would be happy to buy a home, and about 85% of new-build people we surveyed would recommend a friend to buy a home.

Mr Bacon

Really? The number I was thinking of was the 67% who said that they would prefer not to. I can find you the survey; I have it on my iPad.

Peter Andrew

If I am incorrect, I apologise, but they are the numbers I remember.

Mr Bacon

My point is about the reason you do not sell more houses more quickly and therefore you do not build out quickly. The industry as a whole, which you are obviously here representing, is often criticised for not building out as quickly as you might and for “land banking”, although it is apparent from talking to people in the industry that there are lots of different views about that. Is it fair to say that that land banking criticism is overstated, and that a better way of stating the issue would be that you can only sell houses at a certain rate, and if you could sell them faster, you would build them faster?

Peter Andrew

It is fair to say there is no evidence of a land banking issue with land that is sat with house builders. The economic model that house builders use does not lead to land banking.

Mr Bacon

Not with house builders, but land that is sat with strategic land promoters.

Peter Andrew

No, in my view, land that has a consent is being built out by house builders where it is in house builders’ hands. In terms of speed of build, I think the house builders are building at a rate that they can manage with regards to the labour that they have, the demand that they have—

Mr Bacon

And the sales. I am not criticising you, but presumably it is fair to say that you are only going to build houses at a rate that you can sell at and still makes you a profit. There is nothing wrong with making a profit, but—

Peter Andrew

There is a rate at which a market can take new homes, and house building tries to match that rate. In other words, we will sell to the demand of that particular area for the product of that particular site.

Mr Bacon

Mr Lloyd, you look like you want to come in.

Toby Lloyd

That is entirely accurate, and a simpler way of saying that is that that model will never build so many homes that the price comes down. We cannot expect that model to solve the affordability crisis; it is absolutely set up to do the opposite.

Mr Bacon

In other words, the house builders will build when and only when it is sufficiently profitable to do so, for perfectly understandable reasons.

Toby Lloyd

And where it does not lower the price of the product.

Chair

I am going to bring in Caroline Flint. Ms Flint, Lord Porter made some particular comments about your tenure as Housing Minister, so I will allow you to respond to those. But we do not want to dwell on having a little ding-dong between Lord Porter and Ms Flint.

Caroline Flint

In the about a year that I was Housing Minister, we tried to get eco-towns off the ground. They then got converted into garden cities, so when the first garden city is built, I will have some claim to have had something to do with that being created. The point I was making to the chair of the LGA was that I understand what you are saying about politicians at national level being able to deal with some difficult questions, but in my experience it is also the case that some of the problem lies at a local level. A lot of local authorities do not actually have a housing plan that is up to date. Also, when it comes to big decisions on private developments, I’m afraid that local councillors, perhaps like local MPs, tend sometimes not to want to take those decisions. I will not mention any names or which party they are from, but a number of housing leads at local authority level said, “We just want you to make the decision at the centre, because it’s a lot easier for us.” On this problem about local needs and making tough decisions, how better could councils actually promote why there is housing need and what the answers to it are?

Lord Porter

May I just dispel one myth about councils without housing plans? I do not have a plan that is NPPF compliant, because I was part of the group, with Peter, that drafted the NPPF, and you don’t actually—

Chair

Just explain NPPF.

Lord Porter

The national planning policy framework. You don’t actually need a plan to be able to build houses; you need a plan to stop building houses. The idea of a local plan is to control development, not to enable development. That is the whole point of the plan. If you really are free and open to building more homes, you need to be compliant with the NPPF; you don’t need a local plan that sits underneath that.

Caroline Flint

So there is nothing stopping—

Lord Porter

I must defend my own council. Strategically, I am not bothered that we do not have a local plan, because we are a pro-growth council. You are right: local politicians, like national politicians, know that sometimes there are votes in things and sometimes there are no votes in things. And I can guarantee there will be no votes in houses. Nobody ever wants to vote to have their view obscured or to have people who are less desirable than they may wish as new neighbours. With the first pairs of council houses I started to build in 2006, when John Prescott did the £60,000 challenge, I got complaints from the neighbours next door, who did not want to live next to social tenants, but the neighbours next door were in a council house. Because we had managed to change council tenants to social tenants in the language change, they did not want those people living next door. There are no votes in houses, but politicians generally are brave, aren’t they? We normally find a way around that. You will find very, very few councils that deliberately set out to thwart development. Something like 87% or 92% of council planning applications are dealt with and granted when the application first comes in. It is only the most controversial that become issues that go to appeal. The vast majority are granted as soon as they turn up. Can I just go back to the point about the Treasury? We do not want Treasury money. You are missing the point. This is not about the Treasury printing new pound notes. The private sector banks, either in this country or in Canada, have enough money to lend to us to build houses. We are sitting on 2 million council houses that do not have sufficiently large mortgages on them. We are prepared to get big mortgages on those, secured by the value of the asset, to build new council houses. You just have to let us. That’s all. We don’t need a cheque; we just need the permission.

Chair

Well, I think Mr Brown will take that back. Mr Brown?

Richard Brown

I rather suspect that if you were to adopt that policy, you would have an impact on the fiscal aggregates, which is something we keep our eyes on very closely.

Lord Porter

The problem is that we put those houses on the public sector debt book. The rest of Europe does not do that.

Chair

That is a long-running issue; it has been going on at least since I have been involved in housing, if not longer.

Caroline Flint

Let me go back to the Government’s White Paper, and we’ll go along the panel from Terrie through to Mr Andrew. I want to ask you about supply. There are lots of interventions in this White Paper, and in some ways they are finessing what has gone before to help people to buy a property or get hold of property, but if the supply is not there, that is not going to work. So what is the best policy on supply in the White Paper, and what is missing that you would like to see there to boost supply?

Terrie Alafat

I think the best thing about it is actually the recognition that it is not just about home ownership and if I can get a second, and it is not just about private house building. There is a shift in what the White Paper says, which is that we need all bits of the sector, including local authorities. I agree entirely with what Lord Porter has said: there is a lot that can be done with the right package of incentives or freedoms, with local authorities playing a bigger role. That is the big shift for me. There are a lot of other things in it. The Minister has been clear that there is not one silver bullet; you need to do a number of things. And a number of those things are beginning to work, but I think the recognition that you cannot do this with just a very single-minded approach to tenure or with only one bit of the sector is the best thing about the White Paper. Going back to what I said earlier, I think for us there is still a big question about affordable housing, and by that I do not mean just social rented housing or whatever, but what do we mean by building for those 20% to 25% of people who cannot afford the market or cannot afford home ownership? What does it mean to have housing that is truly affordable? I think things have shifted quite a lot in terms of policies and it is probably the right time just to say: going forward, let’s ask that question and figure out what makes the most sense in terms of Government investment.

Lord Porter

Again, I would agree. The thing that is most appealing in this White Paper is that it actually recognises the problem is too big to be fixed by one type of tenure alone, and that multi-tenures will be the only way we fix this problem; and the recognition that sometimes major infrastructure projects can unlock housing, and the fact that the Government have actually been prepared to find some money for the major infrastructure that could be necessary to free up some sites: that is a really positive move as well. If I were suggesting that there is something that is not joined up in there, it is that there is a recognition that we have not got enough construction materials and construction professionals to build the homes that we all say we need anyway; even if they were permissioned and paid for, there are still not enough people to do it. Therefore we need to move more to system build, to get up to the level of supply. We won’t get system build at the scale we need based on purely private sector delivery. The state have got to get into there. I am not sure about which sort of tenure you will have around this table, but I can guarantee none of you would have bought a system-build house if you could have bought exactly the same type of property in traditional construction methods next door to it. Private people will not spend money on system-build property at scale.

Mr Bacon

When you say system build, are you including things like Huf Haus?

Lord Porter

Yes, at scale.

Mr Bacon

A Huf Haus can cost £1 million. People choose to buy that rather than a traditionally constructed one.

Lord Porter

Few people. Very few. Most wouldn’t. Most people will have grown up when we had that little kiddies’ story about the three little pigs, and it was only the one built out of bricks and mortar that the wolf did not get in the door; and that is the psyche that we operate on.

Caroline Flint

Which goes to the point about why so much in the social housing sector is more energy efficient than some we find in the private rented sector; because it leads in that area.

Toby Lloyd

I would say the most encouraging thing in the White Paper was actually some of the more obscure bits—so the announcement that local authorities will be given the power to create development corporations. As long as the detail is there, that could be genuinely transformational. What is missing is precisely that detail. Development corporations work precisely because they are able to acquire land compulsorily at existing use value, and unfortunately the land compensation code has been changed by case law since 1969, which means that now when that happens they have to pay all future possible speculative gain to the existing landowner, meaning that there is almost nothing left over for infrastructure, for quality construction, for affordable housing, or any of the things that make house building acceptable to local communities. So what we need to see, to make that provision really work and be transformational, is an amendment to the compensation code.

Chair

Would you care to expand on that?

Toby Lloyd

It is simply that where local authorities are creating development corporations they should be able to capture the value created by that local authority investment and the public grant of planning permission, rather than happening to create an enormous windfall for a lucky landowner. There is plenty of value there to give landowners an extremely healthy return, without them being able to claim all future possible value growth on day one, before a planning permission has even been applied for, before a single brick has been laid. At the moment the law effectively gives them 100% of all future value.

Peter Andrew

We think the White Paper moves the situation further forward. I think there are lots of t’s crossed and i’s dotted around planning, bringing some of the planning matters that have been discussed before and held back to the White Paper. That is positive. I agree that multi-tenure housing has got to be a focus. I said at the start of this that we needed more players on the pitch, and local authorities are, and Government is, part of that. We were very pleased with some of the measures to help small builders. As I said, small builders have been depleted by about 80%, so some of the planning matters about the presumption in favour, and these kinds of things, are very positive towards suppliers as well. Then we were very pleased to see the transparency questions from both the local authority and the developer side. We have been calling for transparency around local plan five-year supplies, and where they are coming from, as well as the industry being more transparent about their supply, and how they were going to manage the five-year supply for the local authorities. All of this is positive. If I may just say, on the demand side we were very keen to see the discussion about Help to Buy—what happens post-2021—coming into the equation as well. House building is about long-term, three-year—

Chair

I am going to stop us here, because a vote is imminent. I think we will adjourn now, briefly. I apologise, because we are nearly at the end of this panel. We will adjourn and come back. As soon as we are quorate, we will start again, if colleagues are happy with that. Sitting suspended for a Division in the House. On resuming—

Caroline Flint

Mr Andrew, you were answering my question and giving me one thing you thought was good about the White Paper and one thing you thought was missing. You gave me lots of things you thought were sort of quite good. What is missing from the White Paper, in terms of delivering supply?

Peter Andrew

I have got to be honest, I think it moves dramatically forwards, in terms of supply. It has helped SMEs and the planning system—we will see whether that works.

Caroline Flint

You have to have the planning officers there in local authorities to do the job, haven’t you? Can you give me a practical suggestion about something that you feel—from your perspective and that of the people you represent—could be there but isn’t? If there isn’t anything, just say so.

Peter Andrew

There is one thing I would like to see that I don’t fully understand yet, but it will come out. There is talk about ring-fencing the increase in planning fees. You mentioned planning officers; the lack of those is definitely an issue. I would like it to go further and ring-fence the whole planning fee, rather than just the increase of 20% in planning fees, so that the whole planning fee goes towards planning departments and the like.

Lord Porter

May I reiterate one of the LGA’s strong messages, which is that ordinary taxpayers are and have been for years subsidising the planning system? If we got to full cost recovery, I would agree with Mr Andrew’s position, but until we get to full cost recovery, the state is already having planning fees subsidised by individual council tax payers.

Chair

While we are on that point, Lord Porter, one of the concerns we have—certainly in high-value areas like London, but perhaps it is not the same in South Holland and The Deepings—is that developers, and large developers particularly, tie planning officers up in knots talking about the viability of schemes. That can go on for many months, at a great cost. Sometimes that planning officer is paid for by the developer. Is there anything you want to add about how that works or whether that is a problem in terms of the supply coming through?

Lord Porter

I am not aware of anybody who has expressed a problem about having their staff tied up in dealing with viability. Planning officers are probably not the best people to deal with viability. We can find out information.

Mr Bacon

Mr Lloyd, you were nodding at the Chair’s question. Can I add a supplementary question before you answer? We hear a lot about viability. Correct me if I am wrong, but my impression is that the word “viability” is played like a violin by developers to get exactly the outcome they either want or are prepared to see happen. Is that fair?

Toby Lloyd

I would say that the viability system as it is currently structured is completely broken. It gets into horrible circularities where if you overpay for a piece of land, you can then say that the affordable housing requirement that was in the local plan already is no longer viable—you overpaid for the land knowing full well what that policy was, and yet the law now says that that is no longer viable, and the local authority is obliged to drop its affordable housing requirements. There are fundamental legal problems with the definition of viability that need to be changed. The idea that a competitive return to a landowner is enshrined by law, in conditions of a competitive land market, is deeply problematic. There are also genuine pragmatic problems to do with skills and capacity.

Mr Bacon

On that point, in Germany the land is, in the first instance, after it stops being owned by the farmer, owned by the local authority. If you want to buy a piece of land in Germany, you go to your local council and say, “I’d like to buy a piece of land please,” and they say, “Would you like a big one or a small one?” It is very easy and very normal. Do you think that the way land is brought forward is also fundamentally flawed?

Toby Lloyd

Absolutely. That is why I spoke earlier about the need for compulsory purchase reform and for development corporations at a local level, in order to acquire land and get it into development at reasonable prices. The existing market supply of land effectively creams off all of the value long before Peter’s colleagues even get their hands on it, because it is the landowners who are effectively able to benefit from all of the future uplift in value that comes from planning permission, development and growth. In that situation, we will never be able to build enough homes, let alone the infrastructure, the affordable homes and the high-quality construction that we all need.

Philip Boswell

This ties in with what Mr Lloyd just said and a comment earlier from Lord Porter in relation to politicians being brave and commending it when they are so. I agree with that, but do they necessarily keep promises? There was an article yesterday in the Huffington Post by Owen Bennett saying that the Government will “miss its own housing target by 12 years.” It says: “In 2015 the Government vowed”—we know all about broken vows in Scotland—“to sell enough public land to build 160,000 homes by 2020.” It goes on to say that yesterday the Government released a report that shows land for just 13,817 homes has been sold off, which is less than 9% of the promised amount. Under that rate of progress, we have the prospect of achieving the target by 2032. Lord Porter, is there any way the Government can keep their pledge if, say, even one third of this promised public land is not sold off in the next few years?

Lord Porter

I don’t think it is my job to speak for the Government and whether or not they will hit their targets. It is a good target to have, and I’m sure local government will play its part in it, but you have to deal with other parts of the state—

Philip Boswell

Well, Lord Porter, you did speak up for the Government earlier on.

Lord Porter

I don’t recall ever speaking up for the Government, even though it happens to wear the same colour rosette as I do once every four years.

Chair

We can put that to Melanie Dawes. For those who might not be following this, the annual report on land disposals was published on Monday—something this Committee has called for. We will touch on that with Melanie Dawes when she is in front of us in a moment. If that is everything, Mr Boswell, then we will go to Dr Pugh.

John Pugh

This is for Mr Andrew specifically. I was sitting here quietly, determined not to say anything very much. You used the word “transparency”. I am aware that some builders now are selling properties that really ought to be freehold as leasehold. I can point you to advertisements where it is clearly not a declared fact. When people get to the purchasing process and are committed they understand that at the end of the day, but at the start they do not. I have tried to find whether there is a growing tendency for people—I am talking about in the north-west, and not in London and places like that where leasehold is more the norm—not to sell property freehold, but with various strings attached. Of course those add to the value for the builder. Is that a trend you pick up?

Peter Andrew

We are still collating information on this, but certainly the practice of selling some leasehold houses has been prevalent in the north-west and the north-east over time. That has gone back many years and is quite often driven by the landowner.

John Pugh

That was in feudal time; feudal landowners in my area used to have 999-year leases. Most new property is sold freehold, until very recently when builders have been trying to, as it were, maximise the value that they get.

Peter Andrew

As I am aware, there are still houses—we are not talking about apartments, but can come back to those—being sold as leasehold in the north-east and the north-west. That has been the practice for quite some time. That is partly because that has been the tradition up there, and is partly because some land is sold to developers on a long leasehold basis. As I understand it, the majority of those are 900-odd year leases but anything above 150 year leases—

Chair

But you do know what Dr Pugh is referring to—

John Pugh

I am talking about a growing trend in the way in which property is marketed.

Chair

It has received quite a lot of publicity, Mr Andrew. Could you just answer the question?

Peter Andrew

Yes. I am also aware that there are some sites other than in the north-east and the north-west that are being sold on that basis, so I guess you could say that it has increased. From our information it is predominant in the north-west and the north-east and that has not changed for a lot of years, but there are some elsewhere in the country that are starting to—

Chair

You are saying it is not a new phenomenon.

Peter Andrew

Selling houses leasehold is definitely not a new phenomenon.

Mr Bacon

It is not a new phenomenon, but it is a growing scandal, isn’t it?

Peter Andrew

There is no doubt that there are some sites elsewhere in the country that are now leasehold from the selling of a house point of view , so I guess it has moved out of the north-east and the north-west.

Caroline Flint

So it is all right for the north-east and north-west to have it, but it becomes a problem where everybody else—

Peter Andrew

I cannot really comment on that. It is the tradition up there and it has been like that for 30, 40, 50 years.

Chair

Does the Home Builders Federation have a view on whether this is an appropriate or desirable practice?

Peter Andrew

I don’t have at this moment in time. We are putting together a lot of information to understand what is exactly happening, and I have not got that view yet.

Mr Bacon

It sounds like a growing rip-off to be honest; it sounds like people doing it because they can. The ordinary punter does not get much choice. There is so little choice; we know that 60% of houses are built by the top 10 housebuilders whom you represent—they are your members. There is not a huge series of alternatives at scale that people can take advantage of like, for example, large numbers of serviced plots. At the moment isn’t it fair to say that the large entities that are increasingly doing this, are doing so because they can—to their own economic benefit and to the long-term economic detriment of the house buyer?

Peter Andrew

I think you need to ask the individual housebuilders that question with regards to their own policies.

Mr Bacon

But you are representing them—you are here representing all of them at the Home Builders Federation.

Peter Andrew

I am representing the industry. I am not representing individual housebuilders and by no means all, as I understand it—

Caroline Flint

Do you think it is healthy?

Mr Bacon

You are representing your members, presumably? Your members are the people who are doing this.

Peter Andrew

Yes. As I said, they are certainly doing it in the north-east and the north-west because they have been doing it for very many years, and there are a number of sites elsewhere in the country that have moved towards leasehold houses.

Chair

I don’t think we want another description of it. I think we may well want to write to the housebuilders and find out what their policies are. Policy is not our area, but there wider issues for the housing market. Mr Boswell has a very brief point, I have a couple of quick points and then we will move to our second panel.

Philip Boswell

I have a brief question for Toby Lloyd. I am looking at the submission to the Public Accounts Committee consultation, “Housing - State of the Nation”, from Shelter. Page 4 says: “The point is made within the report that current owner-occupiers’ housing costs have become more affordable in recent years because of historically low mortgage interest rates…At the same time…rising house prices are increasing the barriers to ownership”. We then come to a table on page 6 which looks at the various regions of England and “% of working renting families who cannot afford”. They are 76%, 86% and in the 90s. Can you explain to me whether this trend is getting better or worse? Are we actually improving things at all in this respect?

Toby Lloyd

It is getting worse pretty fast. Wages have been stagnant for a long time, and house prices and rents have been rising very fast. Do the maths.

Philip Boswell

So the definition of affordable housing should maybe be changed to “houses you can actually afford”, rather than a scheme?

Toby Lloyd

There are, unfortunately, two definitions of affordable housing. One is a planning definition which refers to certain types of tenure and has nothing to do necessarily with an individual household’s income. Then there is a house that people can afford, which obviously depends on the price of the home and that household’s income, and therefore cannot be assigned to an individual home.

Chair

We have pulled together with the help of the NAO the history of the affordable housing policy, something that has been subject to a debate for a long time, and what percentage of income should be spent on it. If only we together in this room could solve that, we would be a long way to solving a lot of these problems.

Toby Lloyd

That is relatively straightforward, actually. There have been an awful lot of studies attempting to solve that problem with very sophisticated polling and modelling and so forth. They always come back to pretty much the same rule of thumb: about a third. When Shelter conducted a very large piece of research last year, we just asked ordinary British people, “What do you consider is required for a decent home?” Right across the piece, from conditions, to size, location and everything, again, it was that for it to be reasonably affordable, you should not be spending more than about a third of your income.

Chair

We hear what you say, and I think there is probably not much disagreement on this. I will ask some quick-fire questions. I am not asking everyone to come in on this. The private rented sector is now growing. In my constituency, more people rent privately than own their own homes. Colleagues in Greater Manchester talk a lot about the poor quality of the private rented sector there. Lord Porter, where there are areas with very poor-quality private rented sector properties, councils have some powers to do things, but not necessarily the resources. The combined authority in Greater Manchester submitted some good evidence on this. What is the view of the LGA about what the role of local government could and should be in helping people living in the private sector live in decent homes?

Lord Porter

I need to declare an interest at this point, because I am a private sector landlord myself.

Chair

Actually, you remind me that I didn’t declare my interest. So am I. Carry on, Lord Porter.

Lord Porter

The LGA will give you the standard line that we are quite happy to get involved in enforcing higher-quality housing to let, but that will require resource, and that is an unmet resource. Central Government would need to resource it, but I think we are missing a trick at that level. I think the best way of doing it is seen in the councils that are starting to set up their own housing companies, where they are keeping some of their stock as buy-to-let stock. Getting councils to become the landlord of choice for the private sector renter is probably a better way of driving quality and ensuring that we build houses and rent out houses that are high quality, so that the private sector has to follow suit. To get a sustainable private sector, you need more than regulation. You need market competitiveness. If they have to compete against good-quality council-owned private sector rental units, that will drive up the sector quality. Then, obviously, when people are found to be mistreating their tenants, the courts need to have serious amounts of teeth to bite people who are serial offenders.

Chair

Have you got the powers now that you need to tackle some of the poorest quality and worst landlords?

Lord Porter

I will get the office to give you a full response on our whole wish list, but our whole wish list will come with a price tag, which is why I am reluctant to say it. I do not want to be sitting here saying, “Just give us more money and we’ll fix it.”

Chair

Terrie Alafat, on the issue of housing association rents and rent levels, a 1% cut was forced on housing associations. We will be getting further evidence from them directly, but from your perspective at the Chartered Institute of Housing, what impact do you think this will have on the supply side?

Terrie Alafat

First, the worst thing that can happen with housing associations is uncertainty, because as we know, the whole model relies on private finance. That was the biggest issue with the decrease in the rent: there was a 10-year rent settlement, and then there was quite a rapid decision which affected their whole model. I am sure the National Housing Federation can give you lots of numbers on the actual direct effect. I think it is quite an important one going forward, particularly when there is a lot of discussion about what the next rent settlement might look like and there is a lot of debate about rent flexibility and various things. I think it does need to be thought through very carefully, because it is that issue of certainty. It is not just about rents; a lot of the debate is now around supported housing, for example, which we have not touched on today. There is the LHA cap on supported housing and the funding of supported housing. We also know that the uncertainty around the future funding of supported housing means that some organisations are holding back. The other thing is that organisations have obviously looked at what they are there to deliver. Different organisations are deciding what their core purpose is and pulling back from some sectors. One has to look really carefully at those kind of policies and bear in mind the environment that they create, which then affects access to funding and building. Having said all that, we know that there are a lot of other things where the housing association sector is responding very positively in terms of diversifying tenure, going into the private rented sector and those sorts of things. They are also becoming more and more reliant on sales to support their housing programmes, and in a downturn that is riskier. Bearing in mind where we might be going—I do not want to speculate—in a downturn, counter-cyclical investment has helped the housing market. It just needs to be looked at in the round in that way. A lot of things have changed around the whole model and system, and it is worth looking at that and thinking about the right model to sustain going into the future.

Chair

I thank you for that, and I thank our panel for giving their time and managing through the interruption of the vote. Our transcript of this hearing will be up on the website in the next couple of days, but we will obviously send you a copy of that. It goes up uncorrected, so get in quick if you think there is something wrong. We will obviously send you a copy of our Report, which we will be hoping to get out in the next few weeks. I cannot be precise on the timing, but we will make sure you get a copy. Thank you for your time. You are very welcome to stay for the next panel if you wish, but if you have to get off, thank you. Examination of witnesses

Witnesses

Melanie Dawes, Helen MacNamara and Peter Schofield.

Chair

Welcome. It is quite warm in here, so feel free to take your jackets off, if you wish. I thank you for your forbearance; the previous panel lasted a little longer than we intended, although we had some interesting evidence and were interrupted by the vote. We are now on to our second panel to look at “Housing—State of the Nation”. We have in front of us Helen MacNamara, the director general for housing and planning at the Department for Communities and Local Government. Welcome, Ms MacNamara. I think it is your first time in front of this Committee. We are a very friendly bunch, as I am sure Ms Dawes will testify. We have Melanie Dawes, the permanent secretary at the Department for Communities and Local Government, and Peter Schofield, who is the director general for housing benefit at the Department for Work and Pensions, but who previously did Helen MacNamara’s job. We thought it was helpful to have you here. Apologies that there was a bit of to-ing and fro-ing about whether we were requiring you today. We are aware that we are asking mostly about housing benefit. We are not going to be asking you about things that you might not have had time to prepare for. You are very much on top of your subject in that respect. Thank you for coming along.

Peter Schofield

Just to say that my job title is director general for finance at DWP. It is a wider role.

Chair

Forgive me. It includes housing benefit, and you did Ms MacNamara’s job, so you are well across the piece. Our hashtag is #housing, if anyone is following on Twitter. Before we get into the main discussion, Ms Dawes, I wanted to mention the annual report on land disposals. First, I thank you for publishing it. Does this mean that you will now be publishing it annually at the same time every year, or will it be at a different time in future years?

Melanie Dawes

Yes, I hope it will be at the same time.

Chair

To recap for those who may be following this, some 92% of the programme commitment has now been identified for land releases over this Parliament. The improvement is that the high-risk sites have dropped from 52% to 42%, although that is still quite high. What are you doing to manage those high-risk sites and ensure that they are able to deliver the homes that this public land disposal is supposed to be delivering?

Melanie Dawes

We are working very intensely with Departments. Over the past few months, we have looked at the 100 biggest sites across the programme as a whole. We have worked with every Department and gone through all of those sites to ensure that we have a realistic date at which the disposal can take place and that we understand the number of homes and all the barriers. As you say, it is encouraging that the number of high-risk sites has come down and keeps coming down as we keep looking at the sites. Equally, the programme is still high risk. There are a lot of big, difficult sites here, where Departments have still got to take them out of operational use and where work then needs to be done to prepare them for sale. We are putting in place more and more programme governance around this is in the Department. It is something that my colleague has put in since she arrived in the Department. All I can say is that we keep a very sustained effort on this and we will be very transparent about our progress.

Chair

You have the overview across Whitehall for delivering housing and, of course, the Government have their infrastructure funding going in. If there is a high-risk site that needs a road or other facilities, is that something that you then try to unlock with the Department that is actually releasing the land? Is that a particular role for you at DCLG?

Melanie Dawes

It might well be the right answer. On the housing policy side, we have got additional funding. In November, we announced our housing infrastructure fund of more than £2 billion, where we can go in and help local areas with money that they might need to unlock development. That might be on a public sector land site or it might be on a private site. It might be about helping the community to be more engaged in those plans or it might be a specific bit of infrastructure such as a road, footbridge or something like that. That gives us more flexibility and we have opened that up for bidding for the next financial year.

Chair

Policy is not our area but this relates to our role. If DCLG says that this land can be unlocked to develop this number of new homes, where does that rank in priorities for the Government in the infrastructure spend? Do you have first call or high-priority call on that or are you waiting in turn with other demands?

Melanie Dawes

I am seeing my opposite number at the Ministry of Defence in the next fortnight to talk about their public sector land contribution. If they have got particular needs, we can talk together about how to ensure that that is prioritised across Government. I would always ask a Department first of all to look to how they are going to achieve their own objectives. They have all been funded in the spending review to sell this land and they did all go through the process of thinking what investment they might need to take to realise those objectives. Equally, sometimes as you go through the process, you discover that there is something extra that is needed, or it might be another Department that needs to make the spend. The way that we set the programme up, the engagement that we have got across Government at ministerial and permanent secretary level, means that I think we have got the conversations that we need. As I said, we have got extra funding now in DCLG, which is primarily just to get housing delivered locally but it might well be relevant in some cases for this programme. However, if we have already got the funding identified in Departments, I would not want to take it from the new funding, if that is not necessary.

Chair

Good, you are watching taxpayers’ money but hopefully delivering.

Melanie Dawes

Absolutely.

Mr Bacon

I wanted to pursue this point about unlocking infrastructure because the Chair asked what priority you put on it and I want to know what weight you put on it, given other methods of funding, given how powerful unlocking can be. I spent a day in Plymouth recently and saw where £5 million spent from this unlocking pot produced £45 million spent by Plymouth University on what is going to be a huge new facility in the air above the railway station. As it happens, that is university facilities, not residential, but it could so easily be residential as well. Therefore, should you be looking first to other Departments to spend their own money or should you be looking first to collaborate to ensure that that kind of leveraging effect happens as often as it possibly can?

Melanie Dawes

As you say, sometimes relatively small sums for a largish development will be what makes that development happen. The sort of story you have just told is exactly the kind of thing that we might be able to help through our new funding. What I think has happened in the past is that Departments have tended to prioritise their budgets in accordance with their own objectives. For example, Network Rail’s or Highways’ programmes of improvement have generally been driven by Highways’ objectives. Although housing often comes into the calculations, as they do their Green Book analysis for example, we are still not necessarily prioritised as much as you would expect, given the overall priority to build homes for the Government as a whole. What has happened is that the Treasury has given us additional funding to help unlock that. The issue we are going to need to watch is the one I have just mentioned around additionality. I don’t want to let those other agencies off the hook if they were already going to fund it. Equally, if we are clear that it was lower for them just on transport grounds or whatever other grounds are in play, we do now have the capacity to put a little bit more money in from the housing side.

Mr Bacon

I’d like to start with Mr Schofield. I should declare two interests. One, when he was doing the DCLG job, Mr Schofield came on our all-party group visit to Berlin, so he is fully aware of the power of community house building and the potential of self-build. The thing that strikes me by far the most in this Report is the fact that the total spend is £28 billion and 74% of it is in your Department, Mr Schofield, for housing benefit. Plainly, that is the policy of the Government. Let’s not shilly-shally around. It is also the policy of the Government that the housing market is broken. That is what it says on the front page of the White Paper, which I regard as a very welcome acknowledgement before the thing can be fixed. Do you see a role in this £21 billion in helping to fix the housing market better and more effectively, which is the remit of this Committee, than is currently being done?

Peter Schofield

I do.

Mr Bacon

May I declare my other interest? I am a member of the right to build taskforce that is referenced in the White Paper.

Peter Schofield

You need to start from the point that you have just made, which is that the primary objective of housing benefit is to enable people on low incomes to access the housing that they need. That is why the regime is in place. But there is something very important in what you have just said about the fact that with housing benefit we have got a flow of Government-backed funding into the sector—£21 billion, as the Report says, in England and £24 billion or so if you look at it Great Britain-wide. The reason why that is important is that it provides the backing that enables housing associations in particular to go into the capital markets and raise finance at cheap rates. If you compare the business models and the cost of capital of housing associations with the business model and the cost of capital of the major private sector house builders, it is dramatic. One is capital markets-funded to a large extent, which is important. You can raise finance cheaply in the capital-intensive industry that house building is. On the other, you have one that, primarily I suppose, is equity-funded and therefore has a much higher cost of capital, and that will constrain its ability to deliver the volumes of house building that we need.

Mr Bacon

How do you get more of the money that in many cases is effectively subsidising poor-quality housing—taxpayers are paying this money—spent more effectively on the creation of more dwellings and more high-quality houses?

Peter Schofield

The limit of DWP is around eligibility to housing benefit, in terms of enabling people who are eligible to receive the money that they are entitled to. That is as far as we go in that respect. What I would say, in my old role, is that there is building on success in the sense of the scale of investment that housing associations have been able to raise since 2011-12—

Chair

Mr Bacon is talking about the private rented sector.

Mr Bacon

No, I wasn’t. If you turn to page 31, the housing benefit spend is set out there. Some of it is private rented sector and some is housing association. If you look on the bottom right of the chart on the housing association line, it says £8.387 billion in 2015-16. Presumably, a lot of that is for the ongoing activities of housing associations and their staff and so on. Do you know how much of that £8.3 billion can be ascribed to new buildings and housing development?

Peter Schofield

I don’t know the number; Melanie might. I have a number in my mind, though. When we went into the 2011-2015 affordable housing programme, there was £4.5 billion of Government grant. That leveraged in £15 billion of funding from particularly the capital markets, but it was private sector borrowing. So it gives you some indication of the scale of funding that was being brought in as a result of this funding model from the capital markets.

Mr Bacon

Very roughly, on this £8 billion, are you saying that we ought to assume that three and a half times that—£30 billion of extra private sector capital market funding—is going in as a result of that £8.3 billion?

Peter Schofield

Sorry, I am in danger of misleading the Committee if I have put it that way. I was comparing the capital grant put in by Government via DCLG and the amount of money that was raised in capital funding from the capital markets to fund new house builders. What I couldn’t tell you the answer to is how much—obviously, that capital funding is then financed by free cash flow from housing associations and their business models. Different housing associations will be in a different position in terms of their overall surpluses. That is something that the housing regulator will look at on a regular basis. The key point from a DWP point of view in terms of our contribution to this is the very fact that we have, according to 2015-16 figures, 4.1 million people who are entitled to housing benefit. So to a degree there is Government backing of the ability to pay rents into the sector.

Mr Bacon

Of course. The question then is—it is rather like this discussion about 109,500 potential homes. Constituents do not live in planning permissions or potential homes. Going back to our remit, how effectively is that money, that potential or that borrowing capability translated into extra dwellings? For example, as you saw in Berlin, people go along to a local authority as a housing co-operative and put forward a scheme and get the support of the local authority in bringing it forward to create new dwellings that they then rent at an affordable rent through a mutual housing co-operative. De novo, a bunch of people who are entitled to housing benefit could do that, potentially, if the soft infrastructure and hard infrastructure were there for them to do that. That is not really there at the moment. Going back to Melanie Dawes, if I may, luckily you do talk to other Departments—I am sure you talk to Mr Schofield, and the Committee fully understands the limits of his current remit in relation to the entitlement to housing benefit—but do you see my point that this could be much more effectively spent and solve what looks like a long-term problem that is just a running sore?

Melanie Dawes

You are right that the primary purpose of housing benefit is to help people put a roof over their heads. That £21 billion is also a very significant revenue stream from which we should be getting maximum economic value. On the housing association element of that, over the past few years the Department has developed stronger ways of getting the best bang for our buck in terms of house building. The question of whether it is right to raise affordable rents creates wider questions about the impact on households, particularly those who are not getting housing benefit, but it has enabled us to gear more housing out of our affordable housing grants. When it comes to local authorities and that element of housing benefit, we do support local authorities to build. There are always questions over housing revenue accounts and the cap, and that is partly a fiscal question for the Treasury to be judging against other priorities. What you have seen in the White Paper is a sense that the Government are open to a bigger role for local authorities, not only necessarily in building their own housing but in buying land for the private sector to develop, as they are doing in some parts of the country. For example, in Bicester, that is happening for new forms of housing, such as custom-build and self-build. The private rented element of this is quite tricky. In the end, the solution is to build more homes. Part of the reason why the figures have gone up in the private rented sector is that rents have been increasing. There is a wider affordability issue there, of course, to which the right longer term solution is to keep building, but there are short-term issues.

Mr Bacon

Presumably the rents have only been increasing because the supply is insufficient.

Melanie Dawes

Yes, exactly.

Mr Bacon

If we can temporarily park the private rented sector and concentrate on local authorities and housing associations, that is still £13.3 billion according to this chart. What I am trying to get a handle on—from either of you—is how we measure the extent to which that is being translated into new dwellings. Do you have metrics that enable you to do that? If not, are you developing them?

Melanie Dawes

That is a very good question. As so often happens, you have asked a question that has genuinely made me think about the question in a slightly different way. I do not have at my fingerprints a sense of the overall building and wider borrowing—

Mr Bacon

If you did, and you had a number, you could do things that would make the number go in the right direction, and then you would be spending the money more effectively—both you and Mr Schofield.

Melanie Dawes

It is a very interesting question. Peter might want to come in again. Housing associations are also getting rents from their tenants. Not all are on housing benefit and some are only part-funded by housing benefit. The overall income into the sector is significantly larger than these figures. I am very happy to have a think about how we can come back to you and answer your question.

Mr Bacon

These are annual numbers, aren’t they?

Melanie Dawes

Yes, they are.

Mr Bacon

So, it is £65 billion over a Parliament, roughly calculated on the back of a cigarette packet. That is not small potatoes. It is serious money.

Peter Schofield

There are two ways into the point you are making. One is the way that the affordable housing grant is allocated, which is a competitive process, with the money going primarily to those who can demonstrate that with the smallest amount of grant they can deliver the largest amount of housing. If that is a process that can work effectively, it is a competitive tension that should be driving a balance sheet efficiency, maximising the amount of borrowing that can be done. The second is the role of the housing regulator, in terms of its ability to identify metrics and produce data that then demonstrate not only balance sheet efficiency but, in this case crucially, operating efficiency. The crucial thing there is, are you driving your costs down, which would then enable you to maximise the free cash flow that you can gain from your rent to a large extent backed by housing benefit? If you have free cash flow, that gives you the opportunity to raise capital against that.

Mr Bacon

When you say the housing regulator, you mean the Homes and Communities Agency.

Peter Schofield

Yes.

Mr Bacon

Good. I am seeing them very soon so I will raise that point.

Chair

While we are on the subject of housing benefit, and before I pass to Caroline Flint, I wanted to pick up on the impact of Government policy changes on housing benefit, and the knock-on effects of that. We have had the bedroom tax, which was an attempt to reduce the housing benefit bill. Mr Schofield, some people, certainly some of my constituents, went into smaller properties that were more expensive, so the housing benefit bill actually went up, for individuals if not in aggregate. There is also the issue of the benefit cap, which again is a policy delivered through DWP. I know I am not the only MP who has people coming to surgery who five years ago would never have darkened the door of surgery looking for a council or housing association property because they were living in the private sector, but they are now prevented from doing so. If they have fallen out of luck and lost their job, or their salary has not kept pace with rent, they just can’t afford it. That is certainly very much a London problem. Melanie Dawes and Peter Schofield, do you advise Ministers about the interaction of these policies, and look at the bottom-line numbers of the cost to the Exchequer, let alone the personal impact on individuals?

Melanie Dawes

The answer is, yes we do. We work very hard to ensure, as we think about housing policies and DWP thinks about welfare policies, that together we do factor in the impact through housing effectively, and housing benefit and other benefits sometimes as well. For example, when we are putting together value for money business cases for the Treasury for our capital spending, we do factor in, as we build new homes, which is where we get the primary economic benefit from those programmes, that we are also reducing the number of people who need to live in the private rented sector, and therefore save some housing benefit and temporary accommodation costs. We do factor that in. Peter might want to expand on this, but likewise, when DWP thinks about welfare policy, and that is most often in a fiscal context, as it thinks about the impacts on house building, it asks us to do the modelling, which we do. That then feeds in through the Office for Budget Responsibility and its economic forecasts. To be the best we can, the revenue forecast for the DWP and our value for money assessments are consistent with the policy agendas of the two Departments. We can’t always get every single i dotted and every t crossed, but we do have a framework, ultimately underpinned by the Green Book, for doing that. Sometimes there are trade-offs between the policies. There is evidence through some of what we will be talking about, I’m sure. We try to ensure that that is factored in, too.

Chair

We are aware that in the end Ministers make policies and you can only advise.

Peter Schofield

I very much support what Melanie has just said. I have the luxury of having seen it on both sides in both Departments. The analysis is done in a very joined-up and effective way, as Melanie says, sharing models and information. From a DWP point of view, of course, I should say up front that housing supply matters as much from a welfare point of view as it does from a housing policy point of view. Those factors need to be taken into account. Then we put the advice up to Ministers who, as you say, make the decisions.

Chair

It is interesting you say that. I am a London MP so my perspective is slightly different from that of many members of the Committee. Rents have gone up so they are really out of reach. A woman came to my surgery who had had a good job but was unemployed temporarily because she was ill. The rent went up and she could not find anywhere as a single woman, even with a good job when she was working, without some reliance on housing benefit, and the housing benefit would not cover because the rents are too high. She is somebody who is now looking for social housing who would not have been before. There is an impossible loop that people like that are in. Do you look at this on a regional basis and look to see whether there are advice and recommendations that you can give? The knock-on effect to the taxpayer—the cost-shunting through the system of somebody who was managing well and funding their own rent in the private rented sector and is now unable to do that—is immense once you put the multiplier in. To take just one example, my own London borough is spending £35 million a year on homelessness. We are going to touch more on that later. You say that you do all this number crunching, yet there is a knock-on effect on the public purse—the taxpayer—of some of these policies. The interactions do not always seem to work.

Melanie Dawes

You are right to challenge us to keep on top of what is, certainly in London, a rising problem of affordability of rents as well as of homes to buy. You touch on the questions of homelessness. We have seen homelessness rising in recent years, particularly in the capital. The ending of private tenancies—you were describing some of the problems that can give rise to those tenancies ending—is the single biggest cause of that. We do need to keep this under review. The DWP has put more money in through discretionary housing payments to help people in particular need. In the end—Helen may want to say more about this—we are doing a lot on homelessness in DCLG as well, particularly on getting the service support that local authorities can give earlier in the process so that people do not lose their home.

Chair

We are going to come back to homelessness. Looking at the interaction, if policies kicking in causes some of these problems, surely some thought has not gone in at an earlier stage of policy making that could have prevented that in the first place. Rent levels in the private sector are not entirely in your control, although you are an influential part of it—but that is a policy issue. At the moment the way it works is that there is a market, but there are knock-on effects of policy decisions. How do you monitor that regionally so that you try to stop these problems before they start? There are so many initiatives in housing and the way they interact sometimes creates these problems.

Peter Schofield

To assure the Committee, we do get into a level of regional and local detail when it comes to assessing what is going on in local housing markets and local rental markets. To give one example, when it comes to the local housing allowance freezing, we have taken 30% of the savings to be reinvested back into targeted affordability funding. That money is targeted on particular places where we think there is a particular problem. We have identified 48 market areas where we are going to be allowing some flexibility around the LHA next year, and our analysis feeds into those sorts of decisions—so we do all that. I have to say that everything we do is also in the context of Government policy and a Government mandate to find £12 billion of welfare savings. Another interesting thing about the graph that we have talked a lot about—figure 13 on page 31—is what has happened in terms of the stabilisation of spend on housing benefit since 2010-11. That is a Government policy—

Chair

You say that, but do you know where that case load has gone? Do you know where those people who are no longer claiming housing benefit have gone? Do you have an analysis of that? Are they living on the sofa in a family member’s property?

Peter Schofield

We have done evaluation, as the Report says, of quite a number of our policies. A quite a lot of evaluation has looked at the way that different claimants have responded. Looking at the bottom line—the case load numbers—in that table below figure 13, it shows that case load numbers are broadly stabilising around just over 4 million. As the Report says, we have looked at a number of these policies, at what has happened to individuals, and in particular at the way that many of our policies are helping to encourage our claimants to look for work, which is a very positive dimension and key objective that we have.

Chair

Not many working households on an average income in London are actually able to rent privately without housing benefit of some sort—I should just throw that in. We might come back to this, but we are going to come back to homelessness later.

Caroline Flint

Before we get on to supply, I want to touch on one other aspect of the amount of money spent on housing benefit, particularly in the private rented sector. In figure 13, the table shows that claims by tenants in private rented housing now make up the largest share of spending. If you look at page 13 of the NAO Report, the final sentence of paragraph 1.7 on housing stock quality says, “In 2014, the private rented sector had the highest proportion of non-decent homes (29%), while the social rented sector had the lowest (14%).” That is presumably because of the decent homes standard that was established in 2001. Both yourself, Ms Dawes, and Mr Schofield made the valid point that we need to remember that the housing benefit being paid into the private sector is providing people with a roof over their heads. Couldn’t we use the amount of money that we are paying to those landlords through housing benefit to ensure that it is a decent roof over those people’s heads? I would suspect a huge proportion of the 29% of non-decent homes in the private rented sector are for people who are having to claim housing benefit to pay their accommodation costs. Have you thought about using that leverage to improve standards in the sector?

Melanie Dawes

Perhaps I can come in on this; I may ask Helen to talk more widely about our approach to decent homes. You always have to balance the costs that you are putting on to the landlord— which will in the end feed their way through into rents, whether they are covered by housing benefit or not—and the need to ensure that the homes are decent. I think that is at the heart of our approach to the private rented sector. It leads us into questions about wanting more secure tenancies but recognising that if we push too far in those kinds of directions we can end up with a response that takes homes off the market, which is not what we want. Our approach has been to drive improvements in decent homes through other means. We have made more progress in the social rented sector. Perhaps Helen might like to say more about that.

Helen MacNamara

Our policy so far is to focus very much on those people who are being exploited the most. So we are concerned about those people in the private rented sector who are the victims of rogue landlords. In the Housing and Planning Act we put a number of things in place to tackle those things. From April this year, local authorities will be able to charge civil penalties on landlords, which we hope will help. There are rent repayment orders to hurt the landlords where we think it will hurt the most.

Caroline Flint

I understand all that. My specific point is that in 2001 the Government of the day set a decent homes standard. That undoubtedly contributed to the upgrading of our social housing stock. It probably impacted on the amount of money that was left over to build more social homes, but I am not going to get into all that. It had a massive effect in terms of improving people’s quality of life. There are lots of things we can do around landlords, about tenure and security, but why can’t we demand of those who want to be landlords that the homes they provide are as decent as the homes we have in our social housing sector, given that your White Paper about the broken market suggests that private rented tenure is here to stay and may grow bigger?

Chair

The bigger point, of course, is that if housing benefit is going to those landlords, that is a direct amount of money—

Caroline Flint

Subsidy—

Chair

From the taxpayer via the Government.

Peter Schofield

As I recall, the 2001 initiatives were accompanied by very large amounts of Government grant going in to the social housing sector to enable those sorts of improvements to be made. I guess the challenge that we are all raising here is how we get additional funding, particularly private sector funding, into both the private rented sector and the social sector. There have been a huge number of initiatives that have been taken forward to get more private capital coming into the private rented sector.

Caroline Flint

Hang on. I understand your point that there was money to support it, but are you saying that for someone who decides today that they want to go out and become a landlord, we shouldn’t say to them, “Actually, if you want to provide a home, it should be of this decent standard”?

Melanie Dawes

There are standards that landlords are required to meet. It is a question of how far we go. In the end, it is a balance about how far you want to put up the cost for landlords, which will in the end be reflected in rents. That is just a balancing act. As Peter says, we put in money in the early 2000s to fund that through the public purse. I am not sure that, just because a landlord is receiving housing benefit, it necessarily means that there is a particular lever that gives us the ability to ask for a higher decent homes standard than if they were simply going out to the private market. I would worry there that you would take homes off the market for tenants in receipt of housing benefit—

Caroline Flint

Are you worried that 29% of homes in the private rented sector are below standard?

Melanie Dawes

I think that is too high, yes. As Helen said, our approach is to focus on the most egregious examples. I am particularly worried about overcrowding, rogue landlords, beds in sheds and so on. We are doing quite a lot there but it is a fair challenge to ask us about the wider decent homes strategy as well.

Caroline Flint

Ms Dawes, the title of the White Paper is “Fixing our broken housing market”. I think everyone has acknowledged that that is a bold statement to make, and maybe it allows us to focus on a long-standing problem. The document sets out what you have described as radical reforms to build more homes. Are you now confident, given that there have been many housing White Papers over a number of years that have tried to address similar problems, that you really understand what the problem is and that you can fix it?

Melanie Dawes

We have set out the challenge in the White Paper. We have got policies that go right through, from the planning system and recognition that at the root of this is the lack of availability of land, as the earlier panel discussed, because it is rationed through the planning system in England, which is already a highly populated area, through to measures to speed up the build-out of planning permissions. As you discussed earlier, we have a building industry that is used to a business model with relatively slow build-out. The third leg of our strategy is to diversify the sector and bring in as many new players as we can, with more flexible business models, whether that is smaller and medium-sized builders or recognising the contribution of housing associations, building on the back of the revenues from the rents that we have just been discussing, and also boosting the private rented sector. In the end, there are also policies to support individuals and families to get the homes they need through affordable housing and other policies. We have set out a pretty broad-ranging set of policies. A lot of those are opening a debate and we are consulting on some new areas. Questions such as the delivery test are quite significant, and a tighter and stronger set of sanctions for councils that do not really want to build the homes that their areas need. Similarly, we are opening up a question about how we define that need and whether we are reflecting the overall challenge to the country as a whole, when local plans are doing their areas. There is still quite a lot here to be played for.

Chair

Could you remind us of the timetable for those consultations? I think they are on a rolling basis. Is that right, Ms MacNamara?

Helen MacNamara

Yes, they are.

Chair

Could you just rattle off dates quickly?

Helen MacNamara

The bulk of the consultations are all designed around producing a new national planning policy framework in July this year.

Chair

So when will the country see the benefits or the outcomes of this White Paper, if they materialise as planned?

Helen MacNamara

Starting with the planning policy changes, provided we make the changes that we want to do and obviously do the consultation, the planning policy happens immediately we have published the new NPPF.

Chair

When will the country see the fruits of your labours?

Helen MacNamara

In planning policy terms, it will take some time. This is quite profound system change.

Chair

Exactly. So, roughly? Months, weeks, years? How many? We are halfway through a Parliament already. There is a lot of impatience, as you have heard from colleagues around the table and elsewhere.

Helen MacNamara

It might be easier if I can frame my answer in a slightly different way. There are things in the White Paper that we hope will get an impact from straightaway: the things we are doing on accelerated construction to try to create a new pipeline of modern methods of construction; the potential housing deals we might do with local authorities where we can try to unlock planning permissions; the housing infrastructure fund that Melanie referred to, where we will be looking for places where we can apply just that little bit of money that will start to make sites viable.

Chair

What about in the long-term, the big stuff?

Helen MacNamara

Planning changes take time. When we have changed the planning policy, that means it will apply from the point at which—

Chair

Do you have a target for outcomes—additional dwellings you want to see as a result of these changes to planning?

Helen MacNamara

Not from the White Paper package in its totality. We have very clear ambition in terms of—

Chair

I know you have the other ambition. I wondered whether there was anything pinned to these issues. You are saying, “No, there is not a specific target pinned to the White Paper.”

Helen MacNamara

There is not an aggregate number where you can add up everything in the White Paper and say it is X rather than Y. What I can say is that we have named in the White Paper the size of the problem as we see it and there is broad consensus around that: between 200,000—

Chair

Okay. I am just going to bring in the Comptroller and Auditor General and then back to Caroline Flint.

Sir Amyas Morse

I have a point on that same theme. Given that you have a composite of different policies and interventions, understandably some are going to work better than others and you are going to need to keep track of that and change tack a bit, I assume. The real question is, have you thought through yet, or are you going to think through, how you keep track of that? Maybe you can also let the Committee know how they will keep track of such a large, composite front of different changes. Any thoughts you have on that would be very interesting.

Helen MacNamara

Of course. Our thinking is more advanced in some areas than others. I fully expect over this Parliament to be back in front of you talking about our delivery of different elements of it. On the areas where were have most worked up the targets we are aiming for, in the White Paper we said that we want to see 200,000 new homeowners by the end of the Parliament. That is made up of a number of different programmes and we have two or three plans for each of them in place. The Housing Minister and I are chairing a programme board where we are going to look across all the things we are supposed to be delivering, take regular soundings about where we are and monitor our progress that way. Some of these things are more straightforward, because they have an obvious input and a clear output. For some of them, especially the planning changes, it will be harder to track the causality of one thing rather than another, but we have ways. Every week, I get a whole set of indicators about what is happening in the housing market, and at both a national and a place-based level we will be looking at what we can do.

Sir Amyas Morse

So you can share your thinking on this with the Committee? That would be very helpful.

Chair

We like annual reports, or some sort of reporting mechanism. I don’t see, Ms MacNamara, why most of those metrics couldn’t be fairly public. Are they in the public domain?

Helen MacNamara

The biggest metric is the national statistic about how many houses we have built each year, so a lot of the main measures—

Chair

Yes, but that is the very end of the process. I think we can have dialogue outside this about exactly what metrics you can provide us with. We will watch them eagerly, even between hearings, if that is all right. Well, whether it is all right or not, that’s what we are asking for.

Melanie Dawes

We will be publishing our departmental plan probably in April, which will set out what the targets are. We will also say more about the kinds of indicator we will be looking at.

Chair

I am going to bring Ms Flint back in, and then at a certain point I am going to bring in Mr Kwarteng.

Caroline Flint

What I find quite interesting is that we have got this very detailed White Paper with a lot of interesting ideas in it, but does the sum of it get us any closer to where we need to be in making sure the pace of house building keeps pace with demand? I think that is confusing. The White Paper tells us, Ms MacNamara, that England needs 275,000 or more new homes a year, but the ambition, as I understand it from the Department, is to deliver 1 million new homes by 2020, which requires only 174,000 new homes a year. That is fewer than what we delivered last year. What number of homes are you aiming to deliver to keep pace with demand?

Helen MacNamara

Our ambition for this Parliament is to deliver 1 million homes at the end of the Parliament.

Caroline Flint

Yes, I just said that.

Helen MacNamara

The White Paper recognises that number and gives a name to the number of houses that will need to be built to start to bring back down the affordability ratios that people are very concerned about and that we are concerned about. If you are asking me whether we believe that we have got all the tools in the White Paper that we think are going to help to change supply, I think we do. I think one of the striking things from listening to the panel earlier and from the response we have had is that nobody is saying that we are not doing the right things across the piece; it is just that we have to act on every lever and at every level.

Caroline Flint

I appreciate that, but this is a White Paper, isn’t it?

Helen MacNamara

Yes.

Caroline Flint

It’s not a Green Paper; it’s a White Paper. My understanding is that a White Paper is meant to be a much more thought-through version of a Green Paper. Therefore, given all the suggestions and initiatives that populate this White Paper, which is entitled “Fixing our broken housing market”, why is it that at this stage you can’t tell us more about how some of the individual propositions in the paper are going to contribute to the number of houses that need to be built, with some targets against that?

Melanie Dawes

I think we can. Can I just clarify that, as Ms MacNamara said, the 1 million homes target is for the end of the Parliament, so that is a slightly faster trajectory than the one we gave the NAO last summer? That is reflected in the Report.

Chair

It is the end of the Parliament. The land disposals have now slipped to December 2020, haven’t they?

Melanie Dawes

No, they are still for the end of the Parliament.

Chair

That is the public land disposals.

Melanie Dawes

Yes.

Chair

And that is to the end of the Parliament.

Melanie Dawes

That is to the end of the Parliament. On the 1 million homes ambition, we shared our trajectory with the NAO last summer, and at the time we were forecasting that a reasonable trajectory was to get there by the end of 2020. Our Ministers are ambitious here, and we now want to get there by the end of the Parliament. That is a slightly faster annual rate than the one that you just mentioned—175,000 a year. It is actually slightly higher.

Caroline Flint

I am just quoting what you said in the paper—that 275,000 or more new homes a year are needed to keep pace with demand. I am just juxtaposing that with what we currently have on the stocks, which is 174,000 new homes a year.

Melanie Dawes

I am saying that the 174,000 will now need to be more than that to get to 1 million homes by the end of the Parliament. We have 189,000 in year 1, so we will need to exceed 200,000 in some of the years to come. That is a change in approach compared with what was in the NAO Report. Our Ministers have brought the date forward.

Caroline Flint

So what number of new homes are you aiming to deliver in 2017-18?

Melanie Dawes

It will be a combination of what we see from the private market and what we deliver through our own programmes.

Chair

So how many?

Melanie Dawes

I do not have a figure for you. I am not expecting we will be publishing a detailed trajectory for that. We will be held to account by the annual number every year, which is a national statistic and comes out in the autumn. What I can say that is that we have within that some very clear targets, particularly where we are using public money, such as on public sector land—where of course we are also using public assets and giving out grant through the affordable homes programme—and on accelerated construction, where we are putting investment in on public sector land. We are very clear about the precise numbers we are delivering in each year.

Caroline Flint

So when you talk about targets in each of those areas, you are talking about the number of new homes built.

Melanie Dawes

Yes.

Caroline Flint

Could you give me the headlines in each of those three areas you just mentioned?

Melanie Dawes

Yes. Public sector land is quite familiar to the Committee. The target is to release land towards 160,000 homes by the end of the Parliament. That is a target for the release of the land; many of those homes will be built out later, but we will be publishing detailed data on the trajectory for that, so that you can see as the homes are built. That is the first target I mentioned. The second is the one that Helen mentioned, which is a new target in the White Paper. The Government previously had a target of 200,000 starter homes in this Parliament—

Caroline Flint

Just give us the headlines for now.

Melanie Dawes

We are now saying that we will support 200,000 homeowners to buy a home through Government programmes—that is people with a key to the door—by the end of the Parliament, which is either a new starter home, a home for shared ownership or support through a Help to Buy mortgage. We then have a target of up to 15,000 homes that we will deliver through the accelerated construction programme. More broadly, we have our affordable housing programme, where we hope to get 400,000 homes by the end of the spending review period, which is 2021. We will set all this out in our single departmental plan.

Chair

Can we be clear? Does the 400,000 include shared ownership—ones at 80% of private rent?

Melanie Dawes

Affordable rent, yes.

Chair

So that is all affordable. We are not talking about affordable social housing rents as they are now, necessarily; we are talking about a mix—just to be absolutely clear for the record.

Melanie Dawes

Yes.

Caroline Flint

It would be interesting to see—perhaps you could write to the Committee—how those different strands and the numbers add up to what the White Paper says about needing to contribute to 275,000 homes or more a year. If I heard you correctly, they may not be realised by the end of this Parliament. The plots may just be released, so it will be less. I have two other quick points; I know other colleagues want to come in. Ms MacNamara, how are you going to ensure that homes are actually built in the places we really need them? We could have more homes but ones that are not in the right place.

Helen MacNamara

We are very focused on what we can do in high-demand areas. There are two things. One of the main proposals in the White Paper is that there could a different way of assessing the real need in a place and changing the way in which objectively assessed need is calculated. People tell us that in some places they produce a lower number and that there are lots of arguments and debates and time wasted by people in planning committees arguing about the level of need. We think that by defining better the number of homes that need to be built in a particular place based on the demand in the area, we would start getting more homes planned for in those areas through the local plan and more planning permissions through. That is one of the strongest things we are doing.

Chair

How would you do that? In my area, we would know very clearly what the need is, because a lot of people are in a homeless hostel and others are doubling up by living on someone’s sofa. You can count them quite easily. What is the Department going to do that local authorities are not already doing?

Helen MacNamara

There are two things. First, are areas planning for the need they have? I appreciate that in London in particular, it is not that the need is hidden or not planned for; it is the land constraints that are an issue. But there are places that are just not planning and recognising. We think that is quite a big thing—perhaps not in very high-demand areas, but in the next places out—which should help in aggregate to bring the numbers up. On your question about what we are doing in London in particular, and areas of extremely high demand, that comes down to us working with places— We are trying to shift our approach now—we have this national policy framework—to a very place-based approach. You will see a lot in the White Paper about the deals we want to do with different places and the way in which we can work with places to understand how we unlock that particular housing need. In lots of urban places it is about brownfield development and what we can do to encourage more density and all of those things. I know that we are working very closely with the Mayor of London as he develops his London plan to work out how we can best combine our efforts to get the supply in London and the surrounding area that we think we need.

Caroline Flint

The role of council planning departments came up in the last session. They have often been the poor relation within local authorities. Ms Dawes, you envisage a beefed-up role for those departments. Could you describe to me how they are going to get the resources they need to be able to provide some of the things and initiatives that you have outlined, and how they will work with developers, whether social or private?

Melanie Dawes

As you say, this is one of the areas that has actually experienced some of the largest cuts as local government finances have been reduced over the last few years. The NAO has shown that in previous Reports and it tallies with the Departments figures. That is why the Government have said that they will allow planning departments to increase their fees, which will help to bring more money into those departments. We also have capacity funding in the Department. We have found that to be quite helpful, particularly in areas that are seriously planning for large increases in homes and have a lot of work that they need to do with developers and so on to get those homes built, as well as the early stages of planning. We have a number of means to get more money into the system and I think we need to keep that under review. The lack of capacity in local authority planning departments is often an area that developers say they think is their number one priority.

Kwasi Kwarteng

Obviously, representing a south-east seat as I do, the future of the green belt is something of grave public concern. How do you envisage the green belt developing with your bid to try to give enough supply to meet the demand?

Helen MacNamara

As I think and I hope is clear in the White Paper, we are not changing Government policy on the green belt. The policy position at the moment, as set out in the national planning policy framework, says that the green belt can be developed on only in exceptional circumstances. That absolutely remains the case. What we have done in the White Paper is describe a bit more about what those exceptional circumstances mean. A local place will really have to have done its homework and will have to have looked at all of the brownfield sites that can be used, looked at density and whether needs can be met through co-operation with local places. Only when all of that has been done, and the inspector thinks that green belt development is justified in that place and it is what a local authority wants, will green belt development go ahead. We have not made any substantial changes to green belt development policy.

Kwasi Kwarteng

You are essentially saying that the policy has not changed, but you have spelled out more of the exceptions?

Helen MacNamara

Yes.

Kwasi Kwarteng

Some people might think that was a change.

Mr Bacon

A quick follow-up on the green belt. There are very large areas of the country that have no green belt. In fact, if you search “green belt” on Google images, you get a map on which, I think, there are 14 big blobs of green. None of those are in East Anglia; I think there might be one around Cambridge, but there is certainly nothing to the east of there. We have vast amounts of land in Norfolk. Government policy is to have market towns and garden cities and garden villages. Do you see not only new garden villages but, potentially, new garden towns being used as a vehicle to take the pressure off the green belt? Looking at large areas of the country, assuming that the economic activity were there—they proved with Canary Wharf that it is possible to create a zone of high-value economic activity out of a sandbank, a tidal mud flat and an estuary—do you think that, if you could create the right conditions and economic value, you could have really quite large settlements elsewhere that would significantly reduce the pressure on the green belt?

Helen MacNamara

Yes, I agree. That is exactly the sort of thing we would like to see, but I do not think it is for central Government to decide where those places are. That is partly why we are so committed to the local planning framework. If places come together and decide, either through different boroughs, districts or countries working together, that a new settlement is the answer, we are doing things to try to make having those settlements easier. As you say, we are very open to garden villages and garden towns, and a very small percentage—13%, I think—of the country is green belt. There is a lot of land that is not developed.

Mr Bacon

Melanie Dawes, I would like to return to the question of the 1 million target. To what extent are you dependent upon private sector housebuilders to help you achieve that?

Melanie Dawes

We are very dependent. They will continue to form the bulk of that house building over this Parliament. It is about all sectors pulling together.

Mr Bacon

Although the Bank of England keeps on revising its economic forecasts upwards and having to apologise for having got it wrong, there could be an economic downturn. There is no sign of it at the moment, but these things do happen. If there were to be an economic downturn, what would be your plan B?

Melanie Dawes

As you say, the 1 million homes target is dependent on wider changes in the economy. We have always said that, and it will continue to be correct. When you look at the range of our policies and at things like the fact that the affordable housing programme has provision for affordable rent, or things like accelerated construction where we are using the Government’s own balance sheets, we do have policies in our armoury now that are more countercyclical and will help us to balance any changes in the economic situation that we might see. Putting public sector land into the system is another example. Clearly we cannot always offset any change in private sector house building—that is subject to market conditions—but I think we have a good range of things to work from.

Mr Bacon

You say “clearly”—an interesting assumption there—but surely the aggregate demand for housing, the long-run aggregate demand of the number of people who want a roof over their head, is intimately and fundamentally related to the number of people. There are other issues—the degree to which access to housing market is financialised and so on—but at the end of the day the most fundamental driver of the demand for a roof over people’s heads is the number of people. We have seen the number of people go up: in 2004 it was 60.0 million; and now it is 65.3 million. It has gone up over 5 million since 2004. Other things being equal, we would expect the aggregate long-run demand for roofs over people’s head to be commensurately higher, and that is before we get into single-person household formation, divorce and all the rest of it. So even if there were an economic downturn, would not the long-run aggregate demand for people to have a roof over their head stay the same?

Melanie Dawes

It would, yes.

Mr Bacon

Why then is it clear—to use your word, because you said “clearly”—that you just have to sit back and let the economic downturn happen and not be able to do anything about it?

Melanie Dawes

I do not think that we would sit back, but we cannot get away from the fact that the private sector house builders operate off a model that is very responsive to the economic cycle. They need—

Mr Bacon

Yes, but the model is broken—that is Government policy, that the model is broken, which is why we are talking about potential new models, isn’t it?

Melanie Dawes

Yes, and our challenge over the longer term is to bring other business models into play so that we are not as dependent on that very cyclical model of the big house builders. They are the only ones left in the market.

Mr Bacon

You mean like larger numbers of service plots, for example.

Melanie Dawes

Precisely. What I am saying when I use “clearly”, what I was meaning, is that in the short term if we have a period of a few years when some of that house building stalls, there will be things we can do. We can use our balance sheet—we are already loaning to private developers to reduce the overall cost to them, to reduce the risk, and that is already helping and making the market more resilient—but there will be a limit to what we can do to stop every site from slowing down. But we will not be sitting back and putting our feet up. We have a very wide range of tools now to be intervening with, working out what is going on and seeing whether it is financing, our housing infrastructure fund or housing associations that can be brought into play. We have a wide range of tools to be able to be quite active, but we will always have to accept that if the market moves we are likely to see some short-term impacts. Our challenge is to change that market over the longer term.

Mr Bacon

I have one more question on your tools, then Mr Kwarteng wants to come in. The expert group in the Netherlands achieved a doubling of self-build and custom house building inside three years. If we were building pro rata the number of units that are being built in the Netherlands now, do you know how many we would be building?

Melanie Dawes

I do not have that figure—

Mr Bacon

It would be about 60,000 units which, I think you will agree, on 174,000 is quite significant additionality—and it would be almost entirely additional. Obviously you did not know the number yourself, but do you think that that is understood inside Government?

Melanie Dawes

We are very enthusiastic about self-build, custom build and generally introducing as many new players and new methods into the market as we can. I disagree, by the way, with what I think Lord Porter said earlier, that he thought people would always choose a traditional method of construction. I do not think we know. We have not tried it before. I would love to be pleased and to see this market grow very rapidly. That I think is a question: how fast can it grow?

Mr Bacon

I do not think that Lord Porter has actually called himself a dinosaur, but I do not think that he would necessarily object to that description. He has very traditional views. Certainly in the Netherlands they build using system houses frequently, and there is not a lack of demand. In fact, because of the thermal properties, you actually get much better value for money.

Melanie Dawes

It depends where you are building. I was in Bicester last week and saw the broad array of homes that people are planning for their self-build sites, which are, as I am sure you know, getting up and running, including homes made from hemp. The variety and ingenuity of the British public is going to brought to bear on some of these sites in the near future, and it is going to be very interesting to see how far we can push it.

Chair

I am aware of the time. We have quite a lot of ground to cover, so I urge colleagues to ask brief questions and the panel to be a little briefer. You do not need to tell us what is in the White Paper or the NAO Report, because we know that bit. If you could answer questions briefly, it would be helpful.

Kwasi Kwarteng

Could you remind the Committee to what extent you do forward modelling in terms of demand?

Melanie Dawes

We have a housing model in the Department. We are able to forecast demand a number of decades ahead. Of course, the further forward you look, the more those are estimates, projections and ranges. We also forecast and project rates of house building in different sectors.

Kwasi Kwarteng

Over decades?

Melanie Dawes

Yes, but that inevitably depends on quite neutral economic assumptions, so as the economy changes, you will see some variation.

Kwasi Kwarteng

Presumably you have flexed models as well, and different scenarios.

Melanie Dawes

Yes, we do.

Chair

I talked earlier about the number of initiatives and programmes you have. You have shared ownership, affordable homes and starter homes just to start with. All these different programmes amount to about £9 billion—well, by just 2012 you were spending about £9 billion of taxpayers’ money on those initiatives. That is just boosting demand for home ownership. Isn’t it a bit counterproductive? It is potentially putting prices up. Wouldn’t it be better to spend that money on boosting supply?

Melanie Dawes

You are talking mainly about Help to Buy.

Chair

Well, support for shared ownership, too. A lot of these are subsidised, or money is going in from the taxpayer to support these schemes for ownership.

Melanie Dawes

On Help to Buy first, we introduced it recognising the problem of affordability of deposits for a number of homeowners, and—

Chair

We know what it was for, but what is interesting is that we suddenly saw in places like my constituency prices come in at just a little bit below the threshold. It actually increased prices in some areas.

Melanie Dawes

We did an evaluation of this, which was published about this time last year, and it showed that 43% of the homes that are sold under Help to Buy are in fact additional housing supply, and there hasn’t yet been any evidence of any impact on house prices. But we need to keep this under review, certainly as we think about the future of the programme into the next Parliament.

Chair

Because once you have them, they are there for a long time. You do not agree, then, with the premise that boosting home ownership is actually just increasing prices and it would have been better to spend that money supplying more homes and reducing prices through the market.

Melanie Dawes

There is a clear value for money case for Help to Buy. We obviously paid significant attention to that a year ago when we extended Help to Buy to 40% in London. That comes from the impact on house building, but of course the Government are also taking an equity stake in the housing. It is not like a grant, which is a one-off payment; we expect that we are actually going to get a return eventually, when that home is sold. We now have an array of these financial instruments, and they have different value for money cases.

Chair

Have you projected that rate of return and what you are going to do with it?

Melanie Dawes

The rate of return depends on prices, ultimately. We have projected, with the Treasury, what our financial flows are, and that depends on the rate of return. We do not get that return until the home is sold.

Chair

Absolutely, but you must have some projections. There are plenty of people out there projecting house price increases.

Melanie Dawes

We do have projections and assumptions, but we do not have targets, in the sense that we are not necessarily trying to make people sell their home at a certain time.

Chair

No, I’m not suggesting targets. When that money comes back, does it go to DCLG or does it go back to the Exchequer?