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Brighton rocked

by: By Rachel Blackmore, external affairs manager at the Building Societies Association
  • 06/10/2003
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Buoyant Liberal Democrats set out controversial plans for affordable homes as part of their long-term strategy to become the official party of opposition

The Liberal Democrats met for their annual conference in Brighton last month and the mood was buoyant after a surprise a win in the Brent East by-election the week before.

And while there is still debate as to whether it can become the official party of opposition, it is clear is that its recent electoral success means that the other parties will start scrutinising its policies with a lot more interest.

It is estimated that the next general election will be called in 2005 and so the policy areas each party chooses to concentrate on this year are likely to feature as part of their manifestos. And we can be sure that whoever wins the election, those manifesto commitments will then turn into legislation and probably more FSA consultation papers.

Lively debates

One of the key themes at the Liberal conference was affordable housing. The fringe meetings, which take place away from the floor of the conference, were alive with debates such as Building communities – will the plan work? and Is the housing market built to last? or even High demand, low demand: what next for housing? Even the BSA’s own fringe event, which was on levels of trust in financial services, turned into a debate about how mutuals can get involved in helping key workers and local communities in providing affordable housing.

Much of the talk on the fringe centred on the Lib Dems’ new affordable homes policy, unveiled for the first time at conference. Explaining why this is a key issue, Edward Davey MP, Lib Dem shadow to the deputy Prime Minister said: “Between 1991 and 2001, growth in housing demand outstripped supply by over four hundred thousand households. On current trends, a housing shortfall of 1.5 million is predicted within 20 years.”

House prices are now so high in some areas that employers in public services and across the economy simply cannot afford to recruit staff locally, meaning that people face longer journeys to work. House building has also fallen. The Government has launched a Sustainable Communities Plan, but the motion presented at conference describes a much more radical solution to using empty properties.

Described by Davey as a “carrot and stick” approach, the plan is to empower housing authorities not only with cash, but also legal powers to act.

Cash provides the carrot – the plan is to provide grants and advice to the property owner and broker relations between owner and letting agent. There are also plans to reduce VAT on energy saving materials to 5% and equalising VAT on new building and repair work. At the moment new builds are not hit by VAT. Under the new proposals, the reduction on VAT on repairing existing houses would come from increasing from 0% VAT on new-builds.

What is not clear from the proposals is what would stop an owner from taking a grant to repair the property and then selling the house on?

The stick comes in the form of ’empty property management orders’. These orders would give councils the power to take over the management of the property for a limited period, and lease it through compulsion. Such properties will include homes empty due to lack of cash to repair them, due to absentee landlords or due to an ageing owner who has moved out. The rationale is that it is “cheaper and … faster to repair empty housing stock.”

Anticipating the inevitable comment that this does not seem like a very liberal policy for the Lib Dems to be putting forward, Davey went onto to explain: “I recognise this is controversial. As Liberals, we know any measure infringing property rights must be carefully thought through – and have appropriate safeguards. Yet as a society we have accepted compulsory purchase powers for decades. Compulsory leasing would still leave the underlying property in the hands of the owner, who stands to benefit anyway from rent and an improved home.”

Commenting on the proposals, John Goodfellow, chairman of the BSA, said: “It is all very well and good, but the problem is going to be how to define an empty home. What about second homes, or holiday homes for instance?”

Investment rights

The motion also proposed a radical development on the notion of right to buy. Called ‘right to invest’, the tenant is allowed to buy up a stake in their home, but with the home staying within the social housing sector. The idea is that tenants share in the rising value of the social landlords property. Another idea, already being piloted in South Shropshire, is to develop an intermediate market of affordable homes. Under this scheme planning consents place restrictions on the future sale of affordable homes. The consent operates through ‘golden shares’, providing the authority with clout’, so when the homes are sold on, they remain affordable.

These ideas are going to be discussed in more detail over the coming months. However, I am sure they will also provide a context for the debate on affordable housing at the next two party conferences, which will be covered in future editions of Mortgage Solutions.

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