A fight on his hands

Gordon Brown’s arrival in 10 Downing Street has catapulted housing to the top of the political agenda. Within a month Yvette Cooper published a green paper full of ambitious targets for increasing supply, raising design and environmental standards, and tackling affordability. All this is very welcome, but the real challenge facing the government will be to translate its admirable objectives into practical outcomes. We should not underestimate the obstacles.

First will be the political opposition to an expanded housebuilding programme – mainly from predominantly Conservative councils in the South-east. This will not help to secure the planning consents essential to meet the new housing targets. Despite the government’s parallel moves to streamline the planning system, it could well still prove a major barrier to delivery. The recent skirmish with the South East Regional Assembly over housing numbers, which resulted in the inspector setting a compromise target that falls short of the output required by the green paper, is a foretaste of battles to come.

Second is the ability of the housebuilding industry to increase output. The evidence of the past 30 years suggests an industry comfortable operating on high margins and relatively low volumes. There has been no Tesco-style competitor seeking to make money through increased volumes on lower margins. Without such players entering the market there may be no drive to raise numbers. Much therefore depends on how the industry responds to the green paper aspirations, the Callcutt review and the parallel Office of Fair Trading study, and indeed whether these do point the way towards a new business model with stronger incentives to increase output.

The third obstacle is the capacity to achieve the projected expansion of social and affordable housing. Resources should not be the main problem, as the government has committed to substantially increased funding and the release of more publicly-owned land. The difficulties lie in the ability of the delivery agencies to rise to the challenge. Unfortunately, the two key national agencies – the Housing Corporation and English Partnerships – are in the throes of a protracted merger. Concern is heightened by

a recent suggestion from the communities department that the agency’s chief executive, when appointed, may have to report for their first two years through the Civil Service. It is difficult to see high-calibre candidates coming forward on this basis. Even if they do, the prospect of a transition period of up to two years before the agency becomes fully operational in its own right looks like a serious risk to the programme’s delivery.

The evidence of the past 30 years suggests an industry comfortable operating on high margins and relatively low volumes

Several of the delivery vehicles – including partnership companies bringing together councils, housing associations and the private sector, and the eco-town development corporations – may work well in time, but are unlikely to be immune from initial teething troubles. And there is continuing uncertainty over the mechanisms necessary to capture a proportion of development profits to fund infrastructure and social investment. The planning gain supplement looks dead in the water but what will replace it is still unclear.

Fourth is the potential conflict between quantity and quality. When previous governments have asked for rapid expansion of housing, quality suffered. Ministers today are emphatic they will not repeat the mistakes of the past. But what is less clear is whether their high ambitions for design and environmental standards can be met without a cost consequence that may in turn threaten the numerical targets.

Finally, there is the affordability challenge. Large numbers of prospective buyers simply cannot afford the entry price of owner-occupation. While in theory intermediate housing market products, like shared ownership, should help bridge this gap, this has not worked on the scale needed to have an impact. Products such as DIYSO (Do it Yourself Shared Ownership) required too much public subsidy to be sustainable. More recent models, such as open market Homebuy, have not proved attractive to either buyers or lenders. One of the least reported initiatives launched by the green paper is a study into the scope for expanding private sector shared ownership options. Its conclusion will, I suspect, prove crucial to the delivery of the government’s agenda.

So while applauding the government’s ambitions and commitment, I cannot be alone in feeling apprehensive about the scale of the obstacles to be overcome. Ministers are beginning an epic voyage that will require the tenacity and wiliness of Odysseus to ensure success. I wish them well.