Housebuilders will welcome the government’s return to directly commissioning homes if it genuinely increases supply
The announcements concerning housing and infrastructure in the days running up to the Autumn Statement and the change to the SDLT regime announced within the Statement itself all serve to reinforce the growing importance of housing within the political agenda. The pressing need for more housing and the directly related benefits to growth in UK GDP makes further increases in housing delivery imperative.
Several themes emerged within the statement including;
- An ongoing desire to simplify and speed up planning
- A recognition that key regeneration and major projects can require gap funding and significant assistance with early cash flow for initial infrastructure
- A growing frustration with the perceived limitations of the private sector housing delivery model
- The re-badging of large developments which have been around for many years as Garden Cities and major urban extensions worthy of further special funding.
The changes to the stamp duty land tax (SDLT) regime grabbed most of the headlines. Removing the slab nature of the old regime will be welcomed by all. The previous system distorted house pricing and created artificial price bands.
A model where the public sector directly commissions open market as well as affordable housing would offer a direct contrast to the private housebuilder model
The new banding structure and SDLT rates are by their nature highly political and were undoubtedly designed in part to counteract the Labour party’s desire to introduce a mansion tax. The overwhelming majority of house buyers (98%) will benefit and this should further stimulate demand. It may even induce short term house price inflation in lower priced properties. The impact of the increased rates for properties over £937k could be significant however, particularly on properties over £1.5m where the extra tax becomes significant. This will largely impact London and the prime South East and could slow these markets, albeit that the fact properties between £1m and £1.125m will incur less SDLT has gone largely unnoticed.
There was very little detail on how to simplify and speed up the planning system and make it more transparent. However this will be a pre-requisite to increasing delivery, particularly for SMEs, and really does need more detailed attention, along with more investment in local authority planning skills and capacity.
It was the implied criticism of the private sector housebuilding model which was perhaps the most interesting element, raising the prospect of the re-emergence of public sector direct commissioning and delivery of housing. This also potentially heralds a broadening of the role of the HCA back towards the role enjoyed by English Partnerships in years gone by.
Housebuilders are often criticised by those with little direct experience of an economic downturn for only building to an anticipated sales rate. Given the experiences of 2008 and 2009 this economic model is hardly surprising. Developers caught with significant stock quickly got into serious cash flow difficulties and rapidly became forced sellers. So, whilst Help to Buy has undoubtedly increased sales rates, and the delivery rates of the major housebuilders have risen in proportion, it is not realistic, given the uncertain economic head winds still coming over from Europe, for developers to throw caution to the wind and to build at rates which could be unsupportable. It is simply not our business to put our lender’s and shareholder’s funds at undue risk.
So, a model where the public sector directly commissions open market as well as affordable housing would offer a direct contrast to the private house builder model. It will be very interesting to see how the skills and experience are gathered into the public sector to enable this to be achieved and whether it can be done cost effectively in marginal areas. The initiative should be welcomed as we need as many delivery models as possible if we are to meet housing need. It may also offer the public sector the opportunity to pilot other ways to encourage SMEs back into the market and to accelerate the emergence of the Build to Rent sector. In this regard I wish the initiative success but only hope that it doesn’t take too many years to start delivering.
Chris Tinker is executive board director and regeneration chairman at Crest Nicholson