04.11.16
Time for housing reform
Source: PSE Oct/Nov 16
Pete Jefferys, senior policy officer at Shelter, outlines how local authorities and smaller housebuilders could play a pivotal role in helping the government deliver more homes.
As the months go by, the government’s target of a million homes by 2020 seems increasingly unlikely. Looking at the past decade, housebuilding peaked in the UK at just under 220,000 in 2006-07, followed by a great dip in construction following the financial crisis.
This seems a far cry from what we built in the past. Between 1919 and 1939 four million new homes were built in England, with over 300,000 a year in the 1930s in London suburbs like Harrow, Brent and Barnet.
Critics will say that such levels are unattainable in today’s climate, but this attitude seems deeply pessimistic. These homes were generally built by many smaller housebuilding companies, building some for the council and some for private buyers. Importantly, there was a mix of supply and small and medium-sized housebuilders played an important role.
Granting smaller housebuilders access to land
Recently, Shelter published the ‘Achieving Ambition’ report setting out the methods by which the government can build more homes. Central to this is the idea that smaller housebuilders must be granted access to land in order to build.
The land market is, although rarely written about, central to all housing development and the cause of our housing shortage – it acts as a crucial preliminary link in the building chain.
Large developers often engage in a hugely competitive bidding process which front loads the system with higher costs and so triggers a race to the bottom in the quality, size and affordability of the homes that can be built. Developers are also under little pressure to build the homes quickly, so instead have the ability to release homes slowly and ensure prices remain high and profits are maximised.
To be clear, this is not exactly the fault of large developers – it all makes business sense. But it still means that we are left with a dysfunctional market where the developer who offers the worst deal for the consumer ends up winning the site and pushing out smaller builders in the process.
Our latest projections with Capital Economics show that housebuilding will fall by nearly 8% over the next year following some uncertainty among risk averse construction firms who would rather mothball sites until the market looks like recovering again – thus compounding the problem. This would follow the post-war trend of market housebuilding ratcheting down after each economic crisis, never recovering to its previous peak.
This systemic failure must be acknowledged and addressed. Housebuilders need to be able to buy land at a steady price, in order to provide better quality, more affordable homes.
Communities must be consulted
Communities need to be able to have a real say in the kinds of developments they want in their areas, thus encouraging development and reducing nimbyism. Local and Neighbourhood Plans should have real weight, and if they are ignored there should be stronger powers of compulsory purchase available to the local authority.
Public sector landowners should also be strongly encouraged to release small sites to SME builders on long-term models to share the development profit. As of July this year, only 8% of the government’s target for public land release was met – so the case for improvement here is pretty strong.
The Neighbourhood and Planning Bill currently making its way through Parliament may be a significant step towards remedying some of these problems. Hopefully it will give more confidence to local people that the plans they create will be delivered, because local authorities will have some ability to influence developments through stronger land purchase powers.
Whilst the facts and figures are obviously central, we should remember that we are talking about an issue at the heart of our society. Generations are having to put their lives on hold and delay starting a family because their housing situation is insecure. At the sharp end, we are looking at the prospect of rising homelessness, increasing levels of poverty and a further growth in inequality. The stakes are clearly very high – now is clearly the time to reform.
FOR MORE INFORMATION
The ‘Achieving Ambition’ report can be accessed at:
W: http://tinyurl.com/PSE-Shelter
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