The regional assembly is proposing a large housebuilding programme to respond to economic growth in the North-east. With widespread low demand, many people think this is a mad idea. Who’s right?

The windows are boarded up, the doors have been kicked in and the skeletal brick facades have grafitti scrawled across them. This street is in a once thriving town in Tees Valley, but it could be on any number of run-down estates across the North-east – an area that includes not just the Newcastle and Gateshead market renewal pathfinder but County Durham, Middlesbrough and Hartlepool. It’s hardly an image likely to attract hopeful young housebuyers – and sure enough, towns such as these stand empty and unwanted across the region.

The regional housing strategy requires 6900 homes in the region to be cleared each year for market renewal to be successful and that’s just the tip of the iceberg – the pathfinder actually includes only a quarter of the homes at risk of low demand.

So the news that the North-east Regional Assembly’s regional spatial strategy envisioned the construction of 155,000 homes by 2021 was a surprise to many. Headlines in the region’s biggest daily, The Journal, in June reflected local concerns by asking: “Why do we need all these homes?”

Yet doubling the rate of housebuilding is not as out of tune with what’s happening in the region as it might sound. After years of economic stagnation, the North-east of England is experiencing something of a boom and, for the first time, planners are using predictions of economic growth as well as demographic changes to inform housing numbers. The region’s economy has grown and a population that has been in decline since the collapse of its traditional industries now looks set to rise. According to the last census, fewer than 10,000 people left the region in the year to April 2001 and the regional assembly estimates that the population is now rising.

But the plans for growth have genuinely surprised those in the region who are still dealing with years of collapsing housing markets and economic decline, many of whom believe projections of economic growth are more wishful thinking than realistic assessment.

It’s not difficult to see where these fears come from. The North-east’s economy may be improving but at 1.8% a year it still has the lowest growth rate in the country. It’s two percentage points behind the national average and has the worst figures for new business creation and entrepreneurship.

Just three years ago the M62 report by the Centre for Urban and Regional Studies identified 209,000 homes that were at risk of never selling – one in five of all homes in the region. House prices, despite recent rises, are the lowest in the country and the average of £114,000, according to the Land Registry, is less than half the London average. And in some wards in the Tees Valley, prices are still falling despite the biggest property boom in 50 years.

Experts fear too much development will make these problems worse, by drawing demand into new developments, away from problem areas. “The regional spatial strategy seems to have quite optimistic targets, which could just exacerbate low demand,” says Greg Stone, the cabinet member for regeneration at the new Liberal Democrat administration in Newcastle.

Peter Stott, managing director of social landlord Home Housing, agrees. “I’m not seeing the evidence that the region is really bridging the gap with the rest of the country,” he says. “The temptation, because everyone wants the region to do well, is to paint an over-optimistic picture. However if we’re too optimistic the problem of low demand will spread.”

These concerns are likely to be multiplied by the soon-to-be-published Northern Way growth strategy, which was set up to encourage an ambitious economic growth agenda for the North. The North-east has had to delay the preparation of its regional spatial strategy so the Northern Way’s findings can be included. According to documents seen by Housing Today (HT 13 August, page 7), the Northern Way is likely to recommend more demolition and even more building.

But John Lowther, chair of the regional spatial strategy group, says the assembly’s decisions are informed by detailed knowledge. He says the assessments of future demand for housing are modest and wholly justifiable, citing house price rises of 26% in the past 12 months and net influxes of people. In the past three years 56,000 new jobs have been created in the region, with the urban renaissance agenda well and truly catching hold in Newcastle. There is also anecdotal evidence of business relocation to take advantage of perceived quality of life benefits, and 40,000 jobs have been created since 1999.

The housebuilding strategy is due to go out for public consultation in November and the regional assembly stresses that the 170,000 homes figure quoted by The Journal is very provisional. Current estimates indicate a need for 40,000-55,000 demolitions alongside 155,000 new homes, two-thirds of them on brownfield land.

The regional assembly is not the only source of positive expectations. John Moralee, chief executive of the Northern Housing Consortium, says: “There is a renaissance in the North-east, there is no question about it.

“Of course there are areas of low demand, but that’s because that housing is obsolete, not because of real lack of interest. The region has to be willing to take a risk on economic growth to get a payback.”

Others supporting the building argue that thriving economies are driven by successful people who need decent housing. The North-east currently has a preponderance of small homes, and few larger homes that would be desirable to economically successful people. Only 12% of homes are detached, compared with a national average of 20%. In addition, 28% of homes are in the affordable rented sector, compared with just 20% nationally.

“A much bigger risk to the North-east [than continued low demand] is the chance  that the region may end up with an undersupply of the kind of housing that supports economic growth,” warns Pat Ritchie, director of strategy at regional development agency One North East.

But even casting aside suspicions that the current economic growth is fragile and fuelled in part by a speculative house price bubble, there remains a very real problem that large demolition and building programmes may be politically impossible to deliver on the ground. Labour’s shock loss of Newcastle at the council elections on 10 June was in part due to the controversial “Going for Growth” programme, which had led to the demolition of hundreds of homes in the city’s West End.

Local people’s resentment was fuelled by the perception that unpopular homes were being cleared to make way for “yuppie” flats and the fact that those living in the worst areas were least likely to benefit from economic growth was being ignored.

“In Newcastle it’s been seen as social cleansing, moving the problem people from a particular area. People feel like they’re being rubbed out,” says Newcastle’s Greg Stone.

Charlie Hughes, chief executive of Endeavour Housing Association, says: “People are suspicious of regeneration because they don’t think it’s for them. We try to do regeneration for the people living in the bad areas, but it’s not always possible.”

This is what made The Journal’s sensational headlines ring so true with so many people. If the regional assembly and the Northern Way steering group want increased housing growth to support economic growth, they have to face the fact that people living in run-down estates aren’t suddenly going to be able to afford riverside flats just because the region’s per capita gross domestic product has risen.

These issues must be tackled head-on, by putting together realistic resettlement packages to help people start afresh after being moved out of their homes. The challenge is to make the regional strategy sensitive enough to take people with it, so it can achieve its laudable ambitions.

No men at work

Perhaps the highest priority for everyone involved in housing in the North-east is the shortage of skilled construction workers.

Three quarters of housebuilders say labour shortages are affecting their business. The Construction Industry Training Board estimates that 17,700 extra skilled people are needed in the profession within the next four years. However, the facilities to train them don’t exist.

According to Peter Mole, a Gateshead councillor and chair of the regional housing forum, there is not a single spare place on a plumbing or electronics course in the
North-east for the next two years. “Also, the people we do train are leaving the region and not coming back – they’re going down to build houses in London or work on Heathrow Terminal 5 for £1000 a week,” he says.

But the North-east has huge construction projects of its own. There’s the flagship Sage music centre on the Gateshead riverside, large-scale residential developments such as the Great Park, and massive investment in council housing over the next five years.

Newcastle and Gateshead are set for large decent homes programmes funded by arm’s-length management organisations and the market renewal pathfinder will generate a further £342m investment in the twin cities. Meanwhile, transfer RSL Sunderland Housing Group is spending £600m refurbishing all its 35,000 homes, and building 4000 houses.

Skills shortages in the region could threaten the ability of councils and associations to meet the decency standard. Peter Stott, managing director of Home Housing, says: “It’s not just a matter of making building work much more expensive. There may be a point where there are simply not the people there to do the work – it’s very possible that it could affect the decent homes target.”

Tees valley and County Durham: the forgotten areas

Almost three-quarters of the North-east’s low demand problems lie outside of the region’s only market renewal pathfinder, which is in Newcastle and Gateshead.

The Tees Valley area, which includes Stockton, Hartlepool, Middlesbrough, Darlington and Cleveland, seems to be finally gaining the recognition it needs. After being denied the place many believed it deserved on the list of pathfinders, support for a fully funded Tees Valley renewal initiative is expected in the Northern Way strategy document in September.

However, less well-known are the problems of the ex-coalfield towns in County Durham.

Three Rivers Housing Group has been at the forefront of efforts to regenerate the area.

Operations director Pete Ottowell says the problems are widespread: “The pit closures of the past 30 years sent many villages into significant decline.

“The problems are very different from those on Tyneside and Teesside but no less acute.”

Up to 20,000 homes are at risk, in 35 villages including Easington Colliery, Merton, Bowburn and Ferryhill.

The response has been to set up the Durham Coalfields Partnership, chaired by regeneration quango English Partnerships and comprising Three Rivers, development agency One North East and the affected local authorities.

Initial research by the partnership has found that 2815 properties will need to be cleared across both the private and housing association sectors, with an investment of £25m required from the government.

The partnership is working up a full economic analysis, which will be submitted to the Treasury after a project director is appointed this autumn.

Sunderland: a soaring success

Sunderland Housing Group is turning heads throughout the region, and increasingly the country, with its ambitious and innovative £250m construction programme.

It has already started to deliver on its 2002 pledge
to “change the skyline of Sunderland” by clearing obsolete stock and completing the first of its new affordable homes in April.

And it has almost finished bringing its homes up to the government’s decency standard – three years ahead of its self-imposed schedule.

Sunderland has called its new stock “pathway” homes, the first 20 of which have been built in a mixed-use development in South Hylton Green.

The Housing Corporation was so impressed with the scheme it gave the stock transfer association special dispensation to build private homes for sale.

Ultimately the site will provide 82 homes, of which 19 will be for private sale and the rest rented to RSL tenants. Housing Corporation funding for the £7.5m scheme is just £700,000 – less than a tenth of the scheme cost; the sale of the private homes will fund the rest of the scheme.

However the main reason for Sunderland’s pride is that the homes for rent are constructed to exactly the same specs as those for sale, with space standards a fifth bigger than corporation requirements and features such as ensuite bathrooms and garages.

The association claims that four-bedroom homes of this type are available at just £80 rent a week, about half their market rental value.

In addition, it is also keeping the price of its saleable units down, to avoid fuelling the property market.

Ian Grant, managing director of development at Sunderland, wants to extend the concept by introducing a variety of shared homeownership packages and market rents to the “pathway” homes idea.

He says: “We want everyone to think they can access a ‘pathway’ home, whatever the tenure – that can be done to suit them.”

Sunderland has been able to make such an impact because of the huge, concentrated stock it has in the city.

It is England’s largest successful transfer, which gives the organisation a huge amount of power in the local market.

Peter Stott, managing director of Home Housing, says: “It’s very exciting what Sunderland are doing.

“They’re setting the standards for the social housing sector generally.”

Going for broke: a new political strategy

Until the local council elections on 10 June, Newcastle had been a solidly Labour council for 30 years.

Housing played a central part in the Liberal Democrats’ victory; they promised to scrap Labour’s controversial Going for Growth house clearance strategy.

In January 2000, Going for Growth was hailed as
a landmark in urban regeneration in some quarters but reviled by many locals.

Over a 20-year period, it planned to revitalise the whole city by clearing 1500 derelict houses and replacing them with 20,000 new homes.

But controversy over a perceived lack of consultation, plus lengthy planning wrangles, ensured that by 2004 only 603 homes had been demolished and no new ones built.

So, what is likely to replace Going for Growth?

The council’s new executive member for regeneration and development, Greg Stone, wants less stress on demolitions. He says: “We can’t go back to year zero – areas have been cleared and we can’t get that back.

“But from now on, there will be much more work with residents and much more neighbourhood management.”

He is also likely to unveil plans for a housing “expo” in the area in the near future, showcasing good design.

Going for Growth aside, the Labour council did succeed in regeneration. It spearheaded the revitalisation of the waterfront, culminating in an oh-so-close European capital of culture bid and a rapprochement with long-time rival Gateshead. The new partners won £67m in ODPM funding for a joint pathfinder in February 2004.

The city’s regeneration faces an uncertain future under the new council and so too does the relationship with Gateshead’s Labour council.

Within a week of Newcastle changing hands, the Newcastle Evening Chronicle reported a spat between the councillors in the two cities over a perceived snub in a council meeting.

Stone says the affair was a storm in a teacup, but doesn’t provide much comfort for supporters of the pathfinder: “We need to have a long hard look at the strategy. The scale of intervention concerns me.

“We are being strongly encouraged to be radical with the pathfinder. I’m wary of these kinds of solutions.”

North-east: the stats

  • Population: 2.51 million, projected to rise to 2.55 million by 2006
  • Unemployment: 6.5% (national average 5%)
  • 1.08 million homes, of which 71% are owner occupied, 11% rented from council, 10% privately rented and 8% rented through RSLs
  • Average price of a home in last quarter 2002: £81,387, up 19.8% on previous year
  • Households receiving benefits: 78% (national average 69%)
  • Vandalism, burglary, and vehicle thefts in 2002/3: 3125 per 10,000 households (national average 3428 per 10,000 households)

Source: Office for National Statistics, compiled by Pinnacle-PSG

Who's who in the north-east

Malcolm Bowes
Bowes is to be principal author of the regional spatial strategy. He trained as a town planner and is now assistant director of regional development at the North-east assembly and chair of the English Regions Network Regional Planning Body Group.

Malcolm Levi
Chief executive of Home Group, Levi has been involved in council and RSL housing for more than 25 years, and is one of the most respected figures in the industry. He is a qualified accountant and has been in charge of Home, which has 50,000 units, since 1998.

Peter Walls
Chief executive of the largest transfer association in the country, Sunderland Housing Group, which has started a £600m regeneration programme in Wearside. A larger-than-life figure who was director of housing at the council for 15 years, Walls has faced sniping about his £140,000 salary and controversy over demolition plans.

Alison Thain
Thain is chief executive of Tees Valley Housing Group, one of the region’s largest RSLs. But she is also chair of market renewal group Tees Valley Living and widely respected across the region. She is married to CIH chief executive David Butler.

John Carleton
Director of investment and regeneration, North, for the Housing Corporation, Carleton has called for RSLs to consider more mergers for efficiency’s sake. But the job is itself to be merged with the northern regulatory role held by Tansy Hepton; it is unclear who’ll survive the change.

Alan Clarke
The chief executive of regional development agency One North East, Clarke is heading the production of the Northern Way. A Scouser, he’s lived in the North-east for 30 years and worked at Sunderland and Newcastle councils.

Jonathan Blackie
Director of the Government Office for the North-east and chair of the regional housing board. He trained as a planner and oversaw the creation of the country’s only dedicated unit for the provision of statistical and evidential support to the work of the board.

Source

Housing Today