George Osborne’s National Infrastructure Commission announcement was good for the long-term health of the industry but voter-friendly policies on starter homes risk deepening the housing crisis
Rarely has the construction industry enjoyed the limelight as much as it did at the Conservative Party conference. Nothing communicates a commitment to investment like a busy construction site, and the government increasingly uses infrastructure projects like Crossrail as totems of action - even if total level of investment are down from their peak. Only if Boris Johnson had announced the London Assembly’s purchase of an emergency fleet of concrete mixers could construction’s agenda have been more central to conference proceedings.
The positioning of construction at the conference was not coincidental - Britain needs to be building after all. Accordingly, the agenda was bookended by two policy announcements that could reverberate for years - firstly, by taking politics out of infrastructure planning and secondly, by fumbling an overly narrow planning intervention in response to the housing crisis.
George Osborne’s establishment of the National Infrastructure Commission (NIC) is a good move - exemplifying non-partisan politics by borrowing one of Labour’s best policies from the 2015 election. Slow delivery of the so-called National Infrastructure Plan has drawn a lot of criticism, but arguably it is the lack of rigour in the selection and prioritisation of future investment that risks sub-par delivery in the future. The Treasury’s example of the options available to close the UK’s power gap - energy storage, demand management and inter-connects with Europe, all in addition to new generation capacity - illustrates the range of options that could be considered by the NIC through a strategic, needs-based approach to planning. Given the complexity of the issues involved, the reduction of the political temperature associated with planning decisions should help commissioners to focus on the key issues rather than on short-term expediency.
It will be interesting to see if NIC develops a role in holding delivery to account as well as the actions of the government sponsor
But before we get carried away, it is worth reflecting on the commission’s priorities, and what the impact of a rational assessment of UK infrastructure need might be. The job of the NIC is primarily to identify long-term infrastructure priorities and to hold government to account for delivery. The planning perspective stretches over 30 years, updated on a five-year cycle. The commission’s initial priorities are all long-term problems - transport in the North and in London, and energy generation and supply. Quite rightly, the focus of the commission should be prioritising and assuring delivery of the best solutions to capacity challenges. If these require less building work - then that could be a successful outcome. Construction’s job will be to deliver to the NIC priorities as effectively as possible. It will be interesting to see if NIC develops a role in holding delivery to account as well as the actions of the government sponsor.
The contrast between the NIC and Conservative Party Housing Policy could not be greater. Clearly popular and highly political, the Starter Homes plan is focused on a single aspect of a complex housing problem. The need to enable Generation Rent to become Generation Own is as much an indication of the weakness of a housing model based on a single, dominant tenure as a vote of confidence in the value of bricks and mortar. Build for sale has dominated new housing delivery for the past 35 years and has very rarely delivered 200,000 homes per annum - even when finance was plentiful and the economy was at its peak. Providing further incentives to support the build for sale model - in this case substituting section 106 requirements for affordable rent with for-sale starter homes, risks further reducing the diversity of the housing sector at a time when it needs to grow quickly.
Early suggestions from the housebuilders that the policy will enable more projects to be brought forward more quickly is a clear indication that starter homes improve scheme viability and increase land values - even if prices are discounted by 20%. The risk is that land will become even more expensive, crowding out other sectors including RSLs and the emerging build-to-rent sector, which has always faced viability challenges in UK markets.
As well as encouraging Generation Own, policy needs to enable investment in capacity to build, recognising that the creation of diverse housing demand that spans the inevitable boom-bust cycles of for-sale housing will encourage the kind of investment in skills and capacity needed to deliver 200,000 homes or more.
The contrast between these two initiatives could not be greater - the NIC’s long-term remit must straddle the political divide to be successful while the short-term pragmatism of the Starter Homes initiative is targeted on a key electoral niche. Both are politically astute and both have potential for long-term impact on construction. However, while the NIC proposal addresses a fundamental problem for UK investment in infrastructure, the starter home policy’s voter-friendly perspective has ignored the long-term challenges that exist at the heart of the housing crisis.
Simon Rawlinson is head of strategic research and insight at Arcadis UK