In the context of contruction and urban regeneration, a lot goes a little way.
The spending review settlement promised an additional £1bn for housing in 2005/06 as compared to 2002/03 and deputy prime minister John Prescott welcomed this as generous. Sure, on the face of it, it does look like a great deal of additional funding: it represents an average growth of 4.2% in real terms even though it is a smaller increase than achieved in the last spending round.
But when one begins to match it up with existing commitments and the new promises made in the announcement, let alone reasonable estimates of developing needs over the next few years, it starts to look rather small. Certainly it is not enough to enable the step change the chancellor promised.
The money has to cover three main housing priorities:
- additional affordable housing, especially in the South, to meet increasing demands, including those from key workers
- new funding to turn around areas of low housing demand and abandonment
- the commitment to ensure that the social housing stock provides decent homes for all tenants by 2010.
None of these commitments were anything like fully funded within existing resources, which makes a 4.2%-a-year increase look pretty inadequate.
Cambridge University researcher Alan Holmans and myself did a submission to the comprehensive spending review for Shelter. We estimated that a 100% increase in funding would have been closer to the mark. Our estimate took account of the projected requirement for additional affordable housing, which runs at around 85,000 dwellings a year – 60% of which needs to be in the South (see table, page 30). We also factored in the cost of alleviating existing unmet need, housing regeneration and major repairs, and we took an optimistic view of what might be provided by the private sector either through transfers or through section 106 planning gain contributions.
So far there are very few details of how priorities within the budget will be determined. With respect to new housing, the deputy prime minister's statement makes it clear that the system is not delivering enough new homes, especially in the South. In particular he suggests that regional planning guidance targets in London and the rest of the South-east are at least 10,000 a year below the level they need to be.
The Joseph Rowntree Foundation's study Land for Housing, published earlier this year, made it clear that the majority of this shortfall was concentrated in affordable housing – in other words, housing which requires additional subsidy to make it accessible to those on lower incomes. At even £35,000 subsidy per unit – the absolute minimum for housing in the South-east, allowing for a mix of key-worker accommodation and traditional rented housing – 10,000 additional affordable homes will use up a lot more than a third of the total available. A more reasonable £50,000 average will eat up half the increase just to obtain the numbers already agreed. This leaves nothing for additional provision elsewhere in the South and only half the available cash pile for regeneration and repair.
The flaws in the plan
The government's answer to how to meet regional planning guidance requirements and provide the affordable housing included in that requirement is probably that a higher contribution can come from section 106 planning gain agreements.
But evidence shows that in the expensive South, especially on brownfield sites, much of the developer contribution is going to bring costs down to total cost indicator levels in order to enable the schemes to go ahead, rather than to provide additional units.
This money is certainly not enough to enable the step change promised in the chancellor’s report
In the main, more affordable housing can only be achieved if more market housing schemes are permitted to go ahead.
This presents a major stumbling block. Prescott says only that he will insist that all local authorities deliver their regional planning guidance numbers. But what sticks and carrots does he have to make this happen, except the inadequate grant levels?
More importantly, many local authorities in the South are actually delivering their RPG numbers. They are simply far below projected demand.
Take London, for instance. Mayor Ken Livingstone estimated in his draft London plan, using very conservative assumptions, that the need over the next decade will be for 32,000 additional dwellings every year. The regional planning guidance only requires 23,000, of which 4000 are to come from existing stock, including increased sharing.
Completions had actually been falling until 1999/2000 when they reached a low of 12,500, with less than 3000 of that total in the social sector. Completions are now rising as the impact of the last spending review and the buoyant housing market feed through – but there is clearly not enough available even to meet these minimal requirements.
Prescott is looking to five identified regions to provide 200,000 homes in the South-east over the next decade. These areas are quite large (the one in East Anglia, for instance, includes Stansted airport but also Cambridge and its environs) and a lot of new building is concentrated there anyway, so it is not clear how many additional dwellings are proposed or can be funded.
Neither is it clear whether there will be any special powers, such as those for new towns, made available to ensure that the output is achieved even in the envisaged time horizon.
Equally, funding has to be made available not just for the housing but for related services: in particular health, education and transport. This will test the government's capacity for joined-up action.
Even if successful, this expansion will only provide the equivalent of one year of the national requirement for additional homes.
Nice idea, but …
On the positive side, though, it is good to see the government showing a commitment to development for the first time for many years. It has accepted that much of this should be in the southern part of the country – although it must not undermine the regeneration or environmental agendas. It accepts that the planning system is inadequate. And it has accepted some responsibility for both additional land allocation and for funding.
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New Building and Conversion Required, 1996-2016 (1 of 2)
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Source
Housing Today
Postscript
Professor Christine Whitehead is professor of housing economics at the London School of Economics
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