Chairman's Blog

1 October 2009

Improving housing supply and housing markets - does mortgage finance need to be thoroughly reconsidered?

Recently we would appear to have seen the first signs of a long-awaited revival in the economy. However, the short-term outlook must be viewed with caution. It’s simply too early to say that a sustainable recovery is now underway, but the early signs are encouraging. However, there are uncertainties arising from the country entering a pre-election phase and from unemployment continuing to rise.

When the recovery does get underway it will show even more starkly that there is a significant shortage of housing in Britain. In better times we have not been producing enough new homes to meet the demand, let alone now when production levels are at historic lows. This is widely recognised by many people and government too, and therefore it must be of considerable concern. It’s important therefore that every effort is made to increase the supply of new housing and a broader, more competitive market for home loans would be an important aspect of this.

Reconsidering mortgage finance

Properly functioning housing markets rely very much on the availability of finance for home loans and yet it does not look likely that the supply of funds will increase dramatically for some time yet. This will put a break on house prices recovering. Does the whole issue of finance for house purchase therefore need to be thoroughly reconsidered? Is the reliance on the banks and building societies as the principal suppliers the only answer for the future?

The volatility of finance from these institutions during this recession has had serious consequences for the housing market. Government needs to address how home buyers will be financed in the future. Are there for example other financial institutions likely to be interested in some form of public / private partnership that specialises in finance for home loans? Lord Turner has considered the way that banks operate with a view to more competition and it would be advantageous for the stability of the housing market going forward if something similar would happen to the home loan market.

Planning and localism

As I’ve noted in my blog previously, planning is a significant restriction on housing supply. The system has been criticised by the development industry for years and is generally slow and cumbersome. It is an issue that a future Government is going to have to address.

The Conservative’s localism agenda is laudable in a number of ways as community led initiatives can make a real impact on people's lives and they are rarely dependent on large amounts of grant funding. However, localism without local economic development targets could well mean no development activity whatsoever for the foreseeable future. To ensure a decent level of housing supply in the future surely what we need is localism in response to national housing policy.

Affordable housing

The need for more affordable housing has significantly increased as there are so many more people at present who can’t afford to buy a home or pay market rent. Housing associations and local authorities are their only real option at present. However, new affordable housing has been significantly curtailed due to the reliance on cross subsidy from homes for sale and many regeneration and affordable housing projects have subsequently stalled during this recession.

Government through the HCA has introduced schemes to help stimulate new private and affordable housebuilding but these initiatives, as well intentioned as they are, are of limited scope and therefore impact.

Design quality and sustainability

Whatever initiatives come about to improve the supply of new housing it is very important that high design standards are achieved. CABE’s recent research shows how important this issue is to the public. There has been an improvement in design standards by many developers in recent years, but sadly this has not applied across the board as much as it should have.

There’s also the important issue of sustainability – environmentally, socially and economically and these issues will have to be addressed in any programme designed to increase the supply of new housing. Whatever action is taken we must ensure that we produce better quality homes that are sustainable and improve people’s quality of life.

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10 July 2009

Why we’re in denial over housing supply

I’ve been reading with great interest the National Housing and Planning Advice Unit’s (NHPAU) report and research into the public's attitudes to housing, and the affordability problem in England.  They highlight the imperative of having sufficient homes to meet demand.

The NHPAU states quite rightly that attitudes to new housing development need to change as a matter of urgency. In their research 51 per cent of homeowners would oppose more homes being built in their area, compared with 31 per cent of non-homeowners!  So we’re in denial at a time when 6 million young people will not be able to get on the housing ladder until prices fall to more affordable levels and they have realistic access to a mortgage.

As I‘ve said in recent blog posts recessions do not impact on the number of people wanting a home, but they do cause a sharp drop in the number being built.  All this serves to exacerbate a growing problem of the mismatch between supply and demand.

The NHPAU’s report states that, “the evidence is clear: we need to take some major steps to close the gap between supply and demand or the consequences for individuals and families will become increasingly severe, with wider economic and social impacts.  We need to move the debate on from whether there is a problem… to how we can plan for the homes we clearly need in a way that will benefit existing communities and protect the environment."

What are the consequences of not enough housing being built?  More people will be homeless or live in overcrowded conditions, more young people will be forced to continue living with their parents, and the aspirations of millions to live in the type of homes they want, where they want, will be frustrated.  This lack of people mobility will impact upon the wider economy.

In some respects the whole issue of housing is being buried underneath the recession, but the housing problem will be here long after the recession has passed. Therefore, current and future Governments need to create robust policies that will improve Britain’s housing supply.  This is of course not as simple as it sounds.

What we don’t need however is knee jerk responses that will create mono-tenure estates of affordable and council housing that have no regard for creating sustainable communities and which would, if built, create a legacy of social problems.

As I said in my last blog we have got to address the issue of development finance if we are going to be able to increase housing supply.  Bank loans may not be as readily available in the future as they have been in the past.  So how the development industry is going to be financed in the future has got to be addressed.

I also can’t help but to think of the planning situation.  It is very slow to respond and the process takes an incredible length of time compared with the past.  Government has tried to improve it without much success, but the Conservative’s proposals are going to make the situation worse by delaying the system further.

I welcome the Government’s additional funding for housing that was announced recently and particularly the additional £500m of Kickstart support that will enable more developments to move forward.  However, the funding is still relatively modest when considered against the size of the problem.

Shared equity schemes, such as the HCA’s HomeBuy Direct and the First Time Buyer’s Initiative, are helpful in enabling more people to be able to buy a home they want.  Hundreds of people are now enjoying a new Countryside Properties’ home as a result, but more needs to be done on a grander scale and we need to make these schemes easier to access and understand.

We have recently launched a new video which highlights our unique approach to development.  I hope you enjoy it.

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16 June 2009

Playing politics with housing supply

In the Government’s Housing Green Paper they state “that housing is critical to Britain’s future – the decisions we take today make a crucial difference to the lives of generations to come.  Our first challenge is to provide more homes.” So housing supply should be concerning Government in a major way.  But where is the impetus going to come from? 

In recent years we have seen a succession of Housing Ministers and CLG Secretaries of State.  The latest reshuffle has seen a new team of Ministers at the CLG and as a result it is lacking in direction – at least in the short-term.   John Healey does have experience of planning, but the new Ministers have a steep learning curve and bulging in-trays.  Therefore there is going to be a vacuum whilst they try to pick up the baton. 

CLG’s remit is broad.  They set ‘policy on local government, housing, urban regeneration, planning and fire and rescue’ and have responsibility ‘for all race equality and community cohesion related issues and for building regulations, fire safety and housing issues’.  This is a critical time for housing and regeneration when we are only building one new home for every three households that are being formed.  Indeed, almost 5 million people are likely to be on council waiting lists by the end of this year.  We therefore need to do what we can to help the new Ministers get up to speed. 

A General Election will happen within the next 12 months and therefore all the parties need to be thinking about what they can do to boost housing supply.  The Tories through their Housing Policy Paper are proposing considerable change in scrapping regional planning.  It is simply too revolutionary.  The Tories' plans would wreak havoc at a time when new housing production is at such low levels and when we need to invest in our infrastructure.  It will make the under-supply of housing even worse as planners and everyone else involved in the planning process gets to grips with an entirely new system.  It would be far better to modify what we have and make it work better.

However, no party has yet articulated robust plans to tackle the chronic shortage of new and affordable housing across the UK.  I would urge all the political parties to fully understand the issues before developing their thinking further.  They need to take a more holistic approach to housing reform.

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21 May 2009

Property developers must cope with the present and look to the future

There has been a huge amount of media coverage in recent weeks of MP’s expenses alongside criticisms of bankers.  These issues must not be allowed to overshadow everything else that we must cope with during this recession, including doing everything possible to stabilise the economy and then bring about a recovery.  Indeed, we are planning ahead for the inevitable upturn. 

We are engaging with those providers of goods and services and considering how the development industry’s capacity can be stimulated through the training and re-employment of professionals and craftsmen who have been made redundant.  The question for all stakeholders is how we assist them and offer training to enhance their employment opportunities.  Without a coherent strategy and incentives it will be many years before we return to the necessary levels of delivery of 240,000 new homes per annum.

How is my development company coping with recession?  Like many developers we have deferred starting on some sites, slowed down the speed of construction on other projects and continuously reviewed our overheads and expenditure.  At the same time we’ve been looking at the best ways of selling the new homes that we’ve been building, whether this is via Part Exchange, Shared Equity or other buyer support.  As a result in recent months we have been experiencing encouraging numbers of visitors and reservations on almost all of our new home developments.

Where appropriate we have also sought assistance from the Homes and Communities Agency who have been given £600m of additional Government funding in the Budget to kick start a number of stalled housing schemes, including extra funds for HomeBuy Direct a shared equity scheme that we are currently offering on some of our sites. 

The scale of what is needed to stabilise the housing market and then bring about a recovery is considerable.  Whilst Government assistance is welcome, and will make some difference, it is not enough to get the development industry moving again.  The effective rationing of mortgages and finance for developments are still the critical issues.

Whilst we are coping with present difficulties we must not take our eye off the future.  We must prepare for it.  This is particularly so for developers and many parts of the public and private sectors where forward planning and investment are critical for future success.  Improving our infrastructure is a pre-requisite for many developments to move forward and therefore infrastructure works should get underway now.  Developers should not wait until the market improves to progress their planning applications.  Certainly we have been moving a number of major developments forward so that we will be ready to go ahead with them when the outlook improves.

Please do let me know if we can help you with planning and development issues that you may have.

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