Prescott's paradox

You might think that private sector housebuilders would be rubbing their hands with glee. John Prescott, deputy prime minister and ultimate arbiter of housing and regeneration policy, has given his blessing to the construction of 200,000 extra homes in South-east England.

To a certain extent, they are. But their delight is being diluted by a concern that the government is becoming too interventionist for the housebuilding industry's good.

Prescott's policy towards building in South-east England is contained a report called Sustainable Communities: Building for the Future, known more familiarly as the communities plan. This sets out where the 200,000 new homes are to be built: the Thames Gateway to the east of London, the Milton Keynes–south Midlands area, Ashford in Kent and in the triangle formed by London, Stansted and Cambridge. It outlines the kind of sustainable, mixed-use, mixed-tenure communities the government wants to see developed there, and talks of the possibility of setting up bodies resembling urban development corporations to deliver what it wants. The report even offers guidance on what kind of product housebuilders should build, saying that there have been too many large luxury homes and not enough affordable ones.

Prescott's plan has led to accusations of Stalinism by the sector. "The private sector is being exhorted, beaten round the head, and told it builds the wrong sorts of houses," says housing consultant Roger Humber. "The government intends to make housebuilders into its contractors. Housebuilders could be entering into a Faustian pact, where the government is tempting them with the promise of land, but housebuilders are having to give up the fundamental objective of being a developer rather than a contractor, which will cut their profit. Shareholders are not going to be thrilled."

Of the four growth areas highlighted for development, the one with most government hopes riding on it is the Thames Gateway. The other three growth areas have £164m each; by contrast, the plan has committed £446m to assemble the Thames Gateway, decontaminate it, contribute towards infrastructure and pay for affordable housing. "That's enabling money. There is clearly going to be a need for major investment from the private sector," says Robin Hoyles, managing director of the strategic projects division of Countryside Properties. "We're waiting to see the detail of how they intend to make the Thames Gateway work."

Others are worried about whether the private money will be forthcoming. "In the Thames Gateway the question is not whether it is physically possible to regenerate the areas fully, but whether it is financially viable to do so," says a House Builders Federation spokesperson. "The success of urban regeneration depends on the amount the country is prepared to invest in making sure that sites are viable; whether that is cleaning up contaminated land, putting in infrastructure or other measures."

The overriding concern for many is transport (see, for example Building's recent columns by Ken Livingstone and Steve Norris), and Prescott has indicated that could be something for the PPP to handle. "Not enough priority is being given to investment in infrastructure – especially CrossRail and the Thames Gateway River Crossings," says Jo Valentine, chief operating officer of business membership body London First. "Without this, the amount of housing that can actually be delivered will be significantly limited."

One of the measures announced in the plan is the formation of a cabinet committee, led by the prime minister. Among other things, it will look at how developers in the Thames Gateway might contribute to its infrastructure costs.

However, the housebuilding industry would like to see more of a partnership approach adopted for Thames Gateway, and for the implementation of its communities plan in general. "The private sector builds most of Britain's housing, and the government needs to work with it to produce a solution," says Williams. Martin Leyland, strategic land director with Wilson Connolly, agrees: "Dialogue between the government and those who will deliver the end result could be better. We want to have a dialogue. We want to deliver."

Despite its sceptical response, the housebuilding industry was hardly surprised by most of what it read in Sustainable Communities and its nine accompanying regional reports. Much of the content had been revealed at the urban summit last October, and the £22bn spending package was largely allocated in the Comprehensive Spending Review. Housing market renewal is already being addressed under the PFI, and other items, such as planning reform, are under way.

The government intends to make housebuilders into its contractors. They could be entering into a Faustian pact

Roger Humber, housing consultant

What the communities programme does achieve is to put the policies and the funding into one package – the latest example of Labour's commendable concern for joined-up government. "We're wanting design-led communities, rather than estates of housing," said Prescott at the action programme's launch.

David Birkbeck, chief executive of Design For Homes, thinks it will work. "For the past 30 years, it has all been down to housebuilders building out the local plan," he says. "Now it will be part of a development process that brings everything together, not just housing, but also employment, services and infrastructure." Tim Hough, managing director of Miller Homes, is also heartened: "I'm encouraged by the realisation that there's a housing shortage, and that housing can't be built in isolation."

Much of this new thinking will be carried out by regional housing boards, which will be created to prepare regional housing strategies for ministers. "They will decide where money goes so that land and housing work together, along with employment," said Prescott. Among those sitting on the boards will be the government's regional director and representatives of its regional cross-departmental offices, the Housing Corporation, the local RDA and English Partnerships.

The move, like much of the rest of the report, has been applauded by the affordable housing sector. "Local authority strategies are not good enough any more – we need a more broad-ranging view," says Dave Power, head of strategy and policy at national affordable housing provider Places for People. With the Housing Corporation being given an extra £200m to allocate to housing associations, the affordable sector has cause to celebrate, but, Power points out: "This shouldn't be a building bonanza. The challenge is for us to create quality communities".

Other moves in the action programme that have won favour with the affordable sector include the government's determination to free up the transfer of council homes to housing associations. Some barriers have been removed and the government has promised that more action will follow if necessary. "The good news is that the government is undertaking further consultation on this," says Nigel Minto, projects manager with the National Housing Federation.