Debate contribution: Rent and Housing Initiatives: Financial Transactions Capital

Debate contribution by Mr Gordon Lyons on 14 May 2024.

MLA

Mr Gordon Lyons

Party at the time

Democratic Unionist Party

Date

14 May 2024

Type

Debate contribution (made as a minister)

Business

Ministerial Statements

Heading

Rent and Housing Initiatives: Financial Transactions Capital

Assembly identifier

Official Report component 4489838

Read the official Assembly record

Text

Thank you, Mr Deputy Speaker. At the most recent election, my colleagues and I on these Benches stood on a platform to help working families. One of the most pressing issues facing those families right across Northern Ireland right now is the affordability and availability of quality housing. This is not an issue that will be solved quickly or by any one Department or by any one intervention, but it will require consistent and collaborative action on multiple fronts. Make no mistake about it: if we do not use all the levers available to us, we risk doing what we have always done and will end up getting the same results. Without change, we will continue to struggle to match the high levels of housing need with proper supply. I am therefore determined to do more with what is available. Otherwise, thousands of households will continue to struggle to find a safe, secure and affordable home. To that end, I have come to the Assembly today to announce my intention to launch a competition to make available a substantial sum of money that will support the delivery of a new supply of affordable intermediate-rent homes via financial transactions capital (FTC). It is a new form of affordable housing product, and it is being introduced in Northern Ireland for the first time. It is a first step for Northern Ireland's housing sector in moving beyond the established tenures of social rental, private rental and homeownership. Intermediate rent sits between social rentals and private rentals in cost. It offers high-quality homes, with better security and access to support services. Tenants will receive a discount of at least 20% on their rent compared with local open-market rents, and they can remain in their intermediate-rent home for longer than is the norm in the private sector. They will also receive more proactive support from their landlord when they need it, and their home must meet a high-quality standard. Typically, those who can benefit most from an intermediate-rent home are those lower-income households that are spending more than 30% of their income on housing costs. Research has indicated that, with over 28,000 households here spending more than 30% of their income on rental costs, there is certainly space in the market for a product that can offer a more affordable solution for lower-income households. The Northern Ireland intermediate-rent policy and the dwelling design standards documents were published just over a year ago. My officials have been working since then to develop a funding scheme that can help breathe life into the policy. I therefore announce that, from tomorrow, 15 May 2024, a competition for funding will launch that will see a significant award of FTC loan funding to an intermediate-rent operator. The operator will initially develop 300 homes where they are needed and manage the process of renting them to eligible lower- to moderate-income people and families. That will help increase the supply of housing generally and the supply of affordable housing for rent specifically. People need housing solutions that they know that they can rely on over time, so we are asking the intermediate-rent operator to offer the homes for at least 25 years. That long-term commitment will help intermediate-rent tenants to establish themselves in communities where they work or learn and where their children attend school. Schemes such as intermediate rent allow us to deliver even more affordable housing by leveraging private finance and using novel government funding sources. Intermediate rent will complement existing affordable housing options, including social housing. We all recognise what we need to do now. Housing demand has, for too long, outpaced housing supply. We need to focus our capital spending on delivering those much-needed social homes right across Northern Ireland, but we also need to do something for those hard-pressed people and families who cannot get or do not want a social home, and we are doing that by offering them safe, secure and affordable alternatives. The approach also serves to protect my Department's capital budget, avoiding competition with the social housing development programme. That ensures that we can deliver the social homes that we need while offering alternative affordable housing options. Homeownership is an aspiration that is shared by many people here, but rising house prices and mortgage costs, as well as, given the high rents in the private sector, the difficulty of saving for a deposit, mean that, for a growing number, it is becoming more and more difficult. I am committed to helping those who need a bit of extra support in order to afford their own home to do so. Intermediate rent could be a real game changer for hard-working families whose needs are simply not met by what is currently on offer. My officials will continue to look for new ways in which novel funding sources, like FTC, can be used to expand housing delivery meaningfully. The competition to award funding to the operator will launch tomorrow and close to applications on 23 August 2024. I expect that, once the intermediate-rent operator is in place, we could see the first intermediate-rent homes being available to rent as early as 2026. I look forward to announcing the outcome of the competition for funding before the end of the year. The issue of housing will not fix itself, and, in light of an extremely tight budget environment, we must be prepared to do things differently and be radical in our approach. The pilot has the potential to pave the way for a new and sustainable supply of quality housing that is so desperately required for our citizens in Northern Ireland. I commend the statement to the House.

I fully accept that it is a very difficult and complex issue for people. As I said in my statement, intermediate rent homes are one tool that we can use, but we have to address the issue on multiple fronts. This is a pilot programme. It is right and responsible that we test the initiative and see how it goes so that we make sure it works for people in Northern Ireland. It is, however, novel to here. I want to try it, and I believe that it will be successful, which will allow us to go further. It not only addresses the lack of affordable homes for people in Northern Ireland but takes the pressure off the system more widely for social housing and the private rented sector. It will help us utilise FTC, which we often hear is underutilised. All in all, this is a good announcement.

I said that, in Northern Ireland, we are looking at not 10 years but 25 years. That is much longer than the Member thought. The initiative is to help solve a problem for some people, particularly those who may be trying to get on the housing ladder but are unable to save for a deposit because of rent. In some cases, the reduction in rent, compared with that in private rented market, will hopefully give them the opportunity — those who want to — to get a deposit and purchase their own home.

I am always happy to agree with Mr Brett. It is absolutely right for us to seek to ensure the best use of the properties that we currently have. Part of that will be addressed in the housing supply strategy that I intend to bring forward. The Member is also right to highlight the importance of the Housing Executive being in a position to build homes again. We need more social housing in Northern Ireland and for housing associations to continue the work that they are doing. We also need the Housing Executive to be in a position in which it can borrow against its assets and build more homes and, importantly, refurbish its existing stock. I do not want to see more Housing Executive homes getting to such a state of disrepair that people cannot live in them. That is why it is important that the rules are changed. Work is going on with Executive colleagues and the Treasury to get us to that point.

This is different from allocation of social homes and fills a different gap in the market. It will help, however, by taking additional pressure off people who might otherwise be trying to get homes. Social homes will be taken away from that list, so it will relieve pressure, and, of course, there will be different criteria. That will be put in place so that it can go to those who need it most. The operator will look at the areas of highest rent, the areas where the need is greatest and the areas with the people who can benefit most. Over 28,000 households are paying out over 30% of their income for rent. Those are the families that we are trying to help.

To the Member's last question, no, this will not be subject to the right-to-buy scheme, because a private operator will be coming in and using FTC. Once the 25-year period is over, it will be up to the operator to decide what it is doing with its properties, but that will not be in the time period within which the arrangement has been made. Intermediate-rent homes can be delivered in any location across Northern Ireland, but I believe that they will be particularly effective in areas of high rental cost and high demand. The operator will agree the delivery locations with my officials. They will be based on identified need, prevailing market conditions and viability. The competition will also mandate provision in at least two local government districts, in the first phase.

The households that can benefit from an intermediate-rent tenancy include those that are not yet ready for or are struggling to save towards home ownership; those who are living in the private rented sector but are struggling to pay their rent; and those with lower points who are waiting to rent a social home and who may benefit from a more affordable alternative to private renting while they wait for an allocation. As I said, those who spend more than 30% of their income on housing costs will be prioritised. Those are the parameters within which we intend to operate, but they will be subject to discussions as we move forward.

One of the key points about the intermediate-rent model is that the homes are not just at but above minimum standards. It is important that that is the case. We know what a difference a good home can make to people as they start out in life. For children and young people, having a good quality home — not just the fact that they have a home, but that they have a good quality home — makes all the difference to their education and health outcomes. It will be a requirement that the homes meet the minimum standards, but we want them to go beyond those standards.

Yes, this model has been tested elsewhere. It has been utilised in GB for over a decade. It has worked and has been successful, and that is why we are bringing it in here. I believe that we will have similar success, but it will still be prudent to take the pilot approach in order to make sure that it works in our market and for our needs and demands here. I look forward to its being as successful as it has been elsewhere so that we can expand and grow and, hopefully, contribute to dealing with the housing crisis that we find ourselves in. I emphasise again to Members that this is one tool, and we have to fight this battle on all fronts.

Absolutely. Those are all important tools for dealing with the housing crisis that we find ourselves in. FTC will be used here, and it is used in the co-ownership model, and I am pleased that I have been able to increase the co-ownership limit since I came into office. It is absolutely the case that we will need to fight this battle on all fronts and not just in one Department. It will require a genuinely cross-departmental, collaborative approach. I need to work with colleagues in the Department of Finance to make sure that I have the funding for the social development housing programme. I need to work with the Department for Infrastructure, and it needs to deliver to make sure that we have the waste water capacity and the right planning laws in place so that we can build homes in Northern Ireland more easily than we have done in the past. We need to make sure that planning law matches up to where it needs to be. We need to have collaboration with councils on development plans and to make sure that we have enough land. We need to make sure that we can build more social housing, more for the private rented sector and more for homeowners to buy. This is another tool in our toolbox, and I am delighted to bring it forward today.

The Member is right to raise the importance of the issue. It is absolutely the case that I want to be in a position to be able to go further forward than the 300 intermediate-rent homes that I outlined today. It will be prudent to test the concept beforehand, but we will have an evaluation of the scheme, which will determine whether it can go forward in future — I believe that it can — and, importantly, the best way for it to go forward, with learning from what has taken place before.

I am grateful to the Member for her question. She frequently raises with me the need to deal with social housing in rural areas. In fact, only yesterday, she was speaking to me about it. As we all know, Fermanagh and South Tyrone is a very rural constituency and is the most westerly constituency, I believe, in the United Kingdom, as the Member likes to tell me. That means that it should not be left out. Rural areas are facing housing need. All too often, the perception can wrongly be that housing is an urban problem. It is not, and there are huge demands in rural areas as well. I am committed to maintaining the viability of those rural areas through the social housing programme. We have set up a rural housing steering group, which has been established to explore the barriers to rural housing development and to develop a plan to address those barriers. Research has been commissioned, which is expected to report in the coming months, and I will be happy to share that with the Member in due course.

The Member is right to highlight the lack of social homes in Northern Ireland. I support people's right to buy their own home. Those homes are not wasted; they go to people who need somewhere to live. Getting rid of the right-to-buy scheme will not deal with the issue. We need to make sure that we build more social homes in Northern Ireland. We need to continue with the social housing development programme. I will continue to lobby for more funds for that, but I will also look at innovative ways for us to increase the supply of social homes and other tenures in Northern Ireland.

I am grateful to the Member for raising that question. It is important that people not only have homes but have the homes that are right and appropriate for them. We know that that is a struggle. I look forward to announcing some changes on making sure that people have appropriate homes, but I want the House to be clear: progressing this policy does not mean that I am stepping back whatsoever from my desire to make sure that we have more social homes in Northern Ireland. The intermediate-rent programme is one tool that will help us to deal with the crisis that we face, but we have built too few social homes over the past number of years. We need to continue to build more of them in order to give people more security. The Member will be aware of the length of time that some families in our constituency have to wait to get into a home. That is not good enough. We want to do better, and I will do all that I can to make sure that the programme moves forward in collaboration with the Housing Executive and housing associations. The real game changer for us will be the Housing Executive's ability to borrow against its assets so that we can refurbish and renovate homes and, most importantly, build new homes. I am committed to getting that done.

As I said in my answer to Mrs Erskine, housing stress and housing affordability issues are not unique to urban areas. We find them in rural constituencies as well. The process that will be set out will not be limited to particular areas based on the need there. We will look at Northern Ireland as a whole. The programme will be spread out around at least two local government districts. I have set out those parameters today, but more detail on it will need to be worked out in consultation with others.

As I have always said, we need to explore a number of models, especially with FTC, which has so often been underutilised in the past. Co-ownership is another way in which we can use FTC to achieve that. I am sure that the Member will not mind if I do not go into the detail of how much FTC we intend to spend, because the programme will open to competition tomorrow, and it would not be wise for me to go into exact numbers. I can, however, confirm that the amount is substantial. I look forward to the competition opening and closing and to our moving forward on the issue.

2,991 words. Text as published by the Northern Ireland Assembly.

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