Despite a desperate need for new ideas, the complexity of products and innovations can too often stifle entrepreneurship and creativity in the housing sector. It’s time we stopped being so risk averse, says Richard McCarthy
There is some dispute over whether George Bush actually said, “the problem with the French is they have no word for entrepreneur”. However, it is clear that the problem with the British is that too often we hold back our would-be entrepreneurs. It’s time to set them free!
It is a given that we need to build many more homes. We know the conditions are challenging - economic uncertainties and the continuing credit squeeze remain fundamental blocks. Both the previous and present governments have sought to stimulate activity, and without their initiatives the position would be much worse. However, I can’t help feeling that too often good ideas - whether from politicians, officials or private sector organisations - have a diminished impact once the inevitable complexity sets in.
This is not a tirade against regulation or planners. It is a plea for simplicity and a cry for decision-makers to focus on impact. Even when introducing products and initiatives, the removal of barriers - rather than the over-complex design of inputs and risk-averse solutions - needs to be a central driver of activity and judge of performance.
This is where the entrepreneurs come in. With the right barriers removed and incentives in place, they need space and encouragement to design their own solutions. This means they won’t always produce exactly what the policy and product designers had anticipated. However, as long as they operate within clearly defined rules, don’t break the law and pay their taxes, isn’t this something to be celebrated? It will almost certainly mean we get more homes quicker.
Entrepreneurs only engage if the arrangements are simple and make it possible to generate a decent return
Consequently, I worry about the NewBuy product and some of the complexity that delayed its implementation and take-up. I wonder whether there is space to back off on some of the rules and regulation. Equally, and perhaps more importantly, I fear the scale of complexity around the £7.5bn of debt guarantees for the provision of new-build homes for private rent. I urge ministers and former colleagues to check whether, in an attempt to remove risk, they are in danger of making the operational arrangements over-engineered and underwhelming.
The private rented sector is dominated by small and individual entrepreneurs. However, entrepreneurs only engage if the arrangements are simple and make it possible to generate a decent return.
My concerns also apply to affordable housing providers and private sector players. Private rented housing is a relatively simple concept. As you enter the field, keep it clean and simple. Don’t confuse the punters - this will only make it more difficult to manage. Use your entrepreneurial instincts to achieve maximum impact. Beware the advisers and consultants who don’t understand the private rented sector and want to sell complex products you can barely understand. Clever structures can work, but complexity isn’t a guarantee they will: just ask a banker!
Finally, governments don’t just create complexity; they can also remove it. Local authorities are starting to get their housing mojo back as the reform of the housing revenue account takes effect. It is a powerful example of simplicity. The previous national account, with its centrally driven complexity and significant redistribution of resources, stifled creativity and supply. Replacing this with a self-financing regime has brought new freedom and will result in more homes.
But with prudential borrowing providing an overarching framework, the government could go further. There are no signs of recklessness. So, go on! Remove the borrowing caps and taxing of Right to Buy receipts and make it easier for local authorities to exercise responsibleentrepreneurship.
Clarity of thought and simplicity of design can lead to large-scale impact. So, come on Building - let’s put a “simplicity with purpose” category in your annual awards.
Richard McCarthy is executive director at Capita Symonds and former director general of neighbourhoods at the communities department