Leading industry figures tell us how they would end the housing crisis
Last week’s publication of the Montague review on how to stimulate the construction of homes for rent was just the latest intervention in a long-running debate: how to increase the woeful rate of housebuilding in the UK.
Not only were fewer than 115,000 homes built last year - which is less than half of the best estimates of the number of homes required - the number of homes being started is dropping sharply, largely because of falls in the construction of affordable housing. The total number started in the first half of this year is more than a fifth down on the same period in 2011.
There are two powerful arguments for reversing this situation: growth would not just help the thousands of people in this country who are in housing need, it would give a serious boost to an ailing construction economy.
Although the problem is becoming more severe, it is nothing new - politicians have long tried to solve it but to no avail, highlighting how hard it is to find a new approach. In a bid to make more sites economically viable, the coalition is set to launch a housing strategy in the autumn that, it has been reported, will free private developers from the burden of having to provide affordable housing. At the same time the government is also due to underwrite loans to social landlords to encourage investment, and therefore development, in that sector. Meanwhile Sir Adrian Montague’s report called for the government to kick start homes for private rent by taking a share in development schemes, and again relaxing affordable housing requirements.
These policies are certainly new but on their own many doubt they will make a major impact on the number of homes built. So, if asked for one big idea to solve the housing crisis, what would you come up with? That was the question we put to some of the most senior figures from across the housing, development, policy and social housing sector.
THE LONDON HOUSEBUILDER
Tony Pidgley, chairman, Berkeley Group
The key thing is to establish what sustainable development means and drive through the National Planning Policy Framework changes. Then give clear direction to planning inspectors to drive that through real planning decisions.
The government has introduced this presumption in favour of sustainable development, but I have no idea what the sustainability part of that actually means.
Until we have that clear definition and we let industry know, then we’ve actually got a government that promised to cut bureaucracy putting in more bureaucracy. The way it’s currently happening is allowing local politics to trump the national interest - and we all know how local politics goes.
We have just had a scheme the inspector admitted was “finely balanced” turned down on the basis of design quality, and that the parish council might be minded to form a neighbourhood plan. Our QC has told us the inspector is selectively picking out parts of the NPPF to turn the application down, rather than taking the thing as a whole.
We could challenge but that means another 18 months management time and £200,000, so we won’t. The point is, it’s the government’s flagship policy that’s being used inappropriately.
Nick Jopling, executive director Grainger
Having spent much of the last six months on Sir Adrian Montague’s review panel, it will not come as a surprise that my game changer for UK housebuilding would be his recommendation that planning authorities and local government consider the development of large-scale private residential schemes with less or no associated affordable housing.
This is not a charter to build less affordable housing as some critics have shouted - the need for this too is well made and understood - but a charter to house those who do not qualify for social housing or can’t afford to buy a new home. The price for this leniency would be a commitment that these private rented sector blocks could not be broken up for sale for 10 to 20 years. This means they will not compete with the normal absorption rate of new homes built for sale in the area or even the same development.
There are two conundrums to solve - first, building more homes for the private rented sector and second to attract institutional income.
The UK housing market is complex and there is no “one wish fix” but Sir Adrian just may have found a route map for one tenure class and if you haven’t read the report’s five recommendations, I strongly recommend you do.
Graeme Cooke, associate director Institute for Public Policy Research (IPPR)
In the short term, the best way for the government to get housebuilding going would be for ministers to enable local councils with strong balance sheets to make the most of their housing assets by allowing them to borrow against their value to finance the building of new affordable homes. This would produce a rental income.
This would be better than them selling off their best social housing properties - which would be just a one-off cash windfall. But in the medium term, given the severe pressures on the public finances, we need to find ways to shift the balance of government expenditure from subsidising rents to building homes.
During this spending review we will spend £95bn on housing benefit and just £4.5bn on capital grants for new affordable housing. Making such a switch would be a hugely complex and controversial reform - but housing policy is in dire need of strategy rather than a diet of initiatives.
IPPR has proposed that the distribution of spending could be reversed, over time, if local authorities were put in charge of all housing expenditure in their area and given the scope to strike the balance that is right, locally.
THE AFFORDABLE HOUSING PROVIDER
Brendan Sarsfield, chief executive, Family Mosaic
Land is our biggest problem. All the ideas around credit easing and supporting housing associations financially are one thing, but for us they’re somewhat academic unless you can get hold of the land.
To increase volume we need more of it. At the moment you have a lot of companies chasing very little land and it’s very inflationary.
I’m buying land at the moment, but there isn’t enough land in the market for my basic affordable rent programme and homes for sale.
Local authorities should have a target of bringing a certain numbers of units of residential land to the market each year. This should be both bringing their own land forward for development and targets for approvals through the planning system.
Local authorities have to be positive about development. I don’t think the [coalition’s pro-development reforms to the] National Planning Policy Framework make local authorities positive about development. What we need is a cultural change.
Clive Betts, MP (Labour), chair of House of Commons Communities and Local Government select committee
To deal with our housing crisis we need to build over 100,000 more homes each year. There is no single fix for increasing numbers as the House of Commons Communities and Local Government select Committee found in its recent report on the Financing of New Housing Supply.
However, one idea we did support very strongly is the development of a significant self-build sector as is now happening in the Netherlands. This will not happen with individuals identifying a small piece of land and doing it themselves at weekends.
It needs local authorities to designate large areas, divide them into plots, and then promote and sell them to individuals who will then contract with an architect and a small builder, or buy a system-built property online.
This process will be a challenge: for councils to organise; for planners to set guidelines rather than overly rigid rules; for the building industry (building costs in the Netherlands average £40,000 less than the same volume-built home here); and particularly for lenders who will not have the bricks and mortar for security from the start.
THE NATIONAL HOUSEBUILDER
Stephen Stone, chief executive, Crest Nicholson
There are three arms to housebuilding - homes for private sale, affordable homes for rent, and the private rental market.
If you accept that the mortgage market is flat and government funding cuts mean that affordable housing is not going to increase in volume, then you must focus on the private rental side.
The Montague review goes some way to address this, but I think we can go further with a specific tax incentive for homes for private rent. In the early eighties the government introduced a policy, called the Business Enterprise Scheme, for investors to get full corporation tax relief on investment in buying and building homes for rent.
In addition, the policy saw capital gains tax written off on any gains in value on the investment, meaning there was a double relief. So far pension funds haven’t stepped up to the mark on private rented housing, but this policy saw large funds set up very quickly and could be a very good stimulus.
It’s a tax incentive and it’s one we know works. It may not solve everything in the longer term, but we haven’t got the time to wait for two years while an institutional private rental sector is slowly formed. We need to create jobs and employment now.
Ben de Waal, head of residential, Davis Langdon, an Aecom Company
While there would be undoubted merit in reviewing the cost of housing, the main intervention should be finance with a particular focus on the rental sector.
As the Investment Property Databank has demonstrated, underlying rents are generally predictable and do not suffer the same fluctuations as house prices. This makes rental products attractive to institutional investors especially if the rents are guaranteed under headlease arrangements by landlords who have a good covenant and a strong existing management infrastructure.
Local authorities and registered providers are ideal candidates for such arrangements and can be the catalyst for growth in high quality, service-focused mixed tenure rental developments. This would leverage much-needed finance into a sector starved of readily available and affordable finance.
However, the ability of local authorities to participate in this market is restricted by the debt caps imposed on them as part of the housing revenue account reforms. Therefore an immediate rise in that debt cap is needed so they can underwrite rent payments to institutional investors.