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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9 March 2009

The broad impact of the recession in housebuilding

Inadequate housing supply creates a number of highly damaging problems – economically and socially.  This year new housing output may be down to a post war low of 80,000 new homes or less. This is just one third of the Government’s annual target.

The obvious implication of the very low levels of housebuilding expected over the next few years is that the supply/demand imbalance, which already existed before the credit crunch, will substantially worsen.  This has significant consequences not just for those people who cannot find a decent home to live in, but for all of us.

The fact that so many developments are not starting means Section 106 planning contributions are not happening either.  A lot of infrastructure will not be delivered including roads and public transport initiatives, schools, libraries and social and community facilities.

EC Harris’ recent report estimates local authorities benefited to the tune of £9billion from Section 106 planning contributions in the financial year to March 2008. This is predicted to fall to £3billion this year and £2billion next year.  This is putting a real strain on council budgets and it is likely that central Government will be asked to fill the funding gap.

Affordable housing contributions have constituted around half the total value of planning obligations secured in England in recent years.  Given that local authority waiting lists rose to 1.77 million households by April 2008, affordable housing is a priority.  However, the call last week by the 2020 Group to spend £6bn on social rented accommodation is a rather short-sighted solution to a much wider problem.

If we are to tackle the current undersupply of housing resulting from the wider economic downturn, a balanced range of initiatives aimed at kick-starting the construction of housing of all types and tenures is required, resulting in long-term solutions. We need a comprehensive approach to the housing crisis rather than a narrow, short-term mono-tenure focus which is likely to create adverse social consequences.

Finally, no blog post would be complete without a plea to improve the planning system.  As the editorial in the FT pointed out on 24 February ‘a significant part of British housing costs comes from the country’s unnecessary labyrinthine and capricious planning process.  Liberalising planning must remain the central objective of British housing policy.’  The recent Killian Pretty Review produced many practical ideas for a more efficient and effective planning regime.  These should be implemented as soon as possible.

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10 November 2008

Why we need an open book approach to planning negotiations

I spoke last week at the East Midlands Property Show on the issue of new housing supply.  In many ways my presentation picked up on the important subjects I’ve been discussing in my recent blogs.  In the first part of my speech I talked about the current downturn and the economic fundamentals faced by housing developers.  I then moved on to look at some of the other very important issues that effect new housing supply including planning, sustainability and regeneration.

One of the key points I made during my presentation was to call for a new realism in the planning negotiations which govern major long-term developments in light of the unprecedented decline in new housing supply. 

I set out a new ‘open book’ approach, with financial disclosure at its heart, to working with the public sector and called for trust from all parties to conclude negotiations.  I asserted that this was fundamental to keep new housing supply from drying up in the current economic conditions.  An open book approach helps to demonstrate what a development can and cannot afford.  This involves negotiating the percentage of affordable housing for the initial phase or phases of large projects before negotiating the obligations for subsequent phases in line with market conditions as they improve. 

It will take trust from both sides to make it work, but work it must to keep our much needed new housing supply from drying up for both private and affordable homes.

Interest & mortgage rates

The cut in interest rates is most welcome and such a large cut is no doubt recognition by the Bank of England that the outlook for the UK economy is of increasing concern.  How this decision impacts on housing markets however remains to be seen.  Much will depend on how many banks and building societies lower their mortgage rates accordingly.  Whether or not lower interest rates will bring about an improvement in the supply of funds for home loans is fundamental to the housing markets. 

It is of course very important to stabilise the housing markets at the earliest possible time as housing is extremely significant to the wider economy.  

On this and many other housing topics Anne Ashworth in The Times is always well worth a read.

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