Over the past year, the government has launched numerous measures to halt the plunge in housing starts. But will any of them work? Joey Gardiner asks the experts
5 November 2007
The government published guidance for councils on how to set up joint ventures – called local building companies – with developers to build council housing. Could this fill the gap?
Jon Rouse, chief executive, Croydon council
Councils definitely can step in, to a certain extent. We’re getting our local housing company ready to go. This will not fill all the gaps from falling production, but could provide some level of construction work, as well as much needed affordable housing. In fact, we are already on site building council houses right now.
Our local housing company could be up and running in about 10 months, but we need the Housing Corporation to work more quickly to accredit it. At the moment it has given us no timetable for when we can expect to get approved, presumably because we’ve got the Housing Corporation winding down and the Homes and Communities Agency hasn’t officially begun yet. If councils are to be a serious answer to the fall in housing output, then we need more urgency from central government.
29 February 2008
The Greater London Authority responded to calls from commercial developers to expand the professional rented sector with research on the subject. With land values falling and potential yields from private tenants rising, could now be the time for build-to-let to ride to the rescue?
Jacqui Daly, director of residential research, Savills
In theory, build-to-let should be able to help fill the housing gap, but in the current market it just won’t stack up. The model was about linking the income generated from a rental asset to the value of the investment, similar to the development of student housing or commercial property.
However, investors will be able to achieve higher yields from sectors such as commercial property, where returns have been rising fast. Why would an investor build homes for rent at 4.5% yield when it could get 7-8% from commercial schemes? One way to make the model more attractive is to lower s106 contributions on bespoke rental property, but at the moment there is no prospect of this. The market needs a number of innovative solutions including build-to-let, but it seems unlikely it’ll happen any time soon.
14 May 2008
The government allocated £200m to housing associations to buy up unsold private homes as part of a wider effort to fill the development void left by major builders with social landlords. This worked during previous downturns, as there was no drop in demand for cheap rented homes. Could it work again?
David Eastgate, chief executive, Hyde Group
There are a number of reasons why housing associations just aren’t in a position to act in a counter-cyclical way as they have during previous downturns.
The big developing associations have in recent years been building homes for shared ownership and outright sale. These have been subsidising the development of affordable rented homes, which are our core business.
Also, some associations were buying sites at the top of the market – assets which are sitting on their balance sheet and may have to be written off. We’re really in the same position as the developers – we’re slowing down schemes if we can, and ones we have to build we’ll see if we can change to social rent or market rent. If we can mothball things, we will – it’s just common sense.
2 September 2008
As part of the £1bn housing market rescue package prime minister Gordon Brown has set aside £300m for a new shared ownership scheme called HomeBuy Direct. Many builders see shared equity as one of the few ways they can still sell. Could this move save the industry?
Jon Neale, head of development research, Knight Frank
I really can’t see people rushing into shared equity until prices begin rising rapidly again and people are desperate to get on the ladder.
Shared equity emerged at the height of the housing boom, but take-up was low – suggesting that there is little public appetite for the products. More importantly, banks were already wary of lending against equity shares as they perceived the market to be risky.
Mortgage lenders will become more risk-averse as they try to recapitalise, and it is likely they will be even less willing to lend for shared equity purchase. Also, I don’t think it is sensible or fair to encourage often young, transient people into home ownership.
8 October 2008
The UK government published a £500bn package of measures designed to prop up the banking industry. Could this reverse the slump in new-build caused by home buyers’ lack of access to funding?
Kevin Cammack, analyst, Kaupthing Capital Markets
Maybe in the course of the next one to two years, the intervention will make a difference. But in the near future, no, it won’t do anything.
This is for two reasons. The package, which is ultimately good news for the industry, will take a while to filter through in terms of mortgage lending. And then it’ll take longer to get any corresponding increase in supply from the large housebuilders.
The bigger problem is that, while six months ago the lack of mortgage lending was the single most detrimental factor affecting the industry, now it’s less of an issue than the overall lack of confidence from buyers experiencing falling prices. If you look at the drivers for house price falls and low build rates, the lack of demand is now more of an issue than any lack of supply in inhibiting sales.