Examination of Witnesses (Questions 104-119)
MR JOHN
SLAUGHTER, MR
PAUL PEDLEY
AND MR
ANDREW WHITAKER
28 NOVEMBER 2005
Q104 John Cummings: In your evidence,
you complain about the planning system constraining supply but
would you not agree that it has helped provide a framework which
has prevented house builders from the problems of oversupply and
the dangers of bankruptcy?
Mr Slaughter: House builders have
managed to earn a reasonable living in recent years but their
wish long term is to grow their businesses. The essential ingredient
of their businesses for long term growth is the right supply of
land on which they can build houses and communities. The situation
has not been optimal. We and our members would like to see an
increase in developable land with planning permission and that
is the way the industry can grow.
Mr Pedley: I sincerely hope we
can look forward to a fairly stable and sustainable housing market
in the years to come. If you look at any of our businesses, the
primary driver of our output is the number of sites that we have.
The number of sites is totally dependent upon the number of sites
we have with planning permission. You can directly relate our
future prosperity to the efficiency of the planning system to
deliver those sites through to our businesses, whichever of the
major house builders you are looking at.
Q105 John Cummings: Is it not in the
interests of house builders for house prices to continue to rise?
Mr Pedley: No, I do not think
it is. I think house prices have to be sustainable relative to
the people who can afford to buy our houses. Effectively, as house
prices have risen over the last few years, the number of people
who can buy what we build has diminished. The average selling
price of a new home is somewhere in the region of £175,000.
Therefore, there is a huge number of people in the UK who cannot
buy what we build. First time buyers are the most obvious example
of that. They have effectively been priced out of the market.
I do not think that is in the best interest of us or the country.
Mr Slaughter: The reality is that
although we are not building anywhere near enough houses the industry
has nevertheless increased output from the modern, historic low
point of 2001 by about 20% over the last three years into 2004
figures. The evidence is there that the industry can and does
want to increase supply when it is able to do so.
Q106 Sir Paul Beresford: Do you not feel
some of your members contribute to the planning delay? In the
south-east, many of the applications on sites by some of your
members have been ludicrous. The densities have been extreme and
it is almost a Germaine Greer effect. You know you will not get
it but you will step back a little bit more and you may have moved
the local authority to a greater density.
Mr Slaughter: The industry has
been asked to look at higher density levels under planning policy.
In many ways that is a response to the policy environment. We
realise that there are issues about whether that is always the
right approach. Indeed, one thing that we hope very much that
government is going to talk about in the PPG3 that is due to come
out, I guess, next Monday with other proposals in the pre-Budget
statement will take a step back from where we have been and say
that we probably need to look at a more flexible approach to realising
density. A one size fits all policy is not appropriate. In many
ways, we understand the concern you are raising and the industry
would like to move forward in a more flexible way.
Q107 John Cummings: Kate Barker's review
suggests that more than 100,000 extra private homes are required
each year to stem house price rises. Do you think that is realistic?
Mr Slaughter: To build that many?
Q108 John Cummings: Yes.
Mr Slaughter: Yes, it is realistic.
Clearly no one is expecting that increase in volumes to happen
from one year to another but it is a progressive process. In time
it is certainly realistic. We have conducted skills research,
for example, with the Construction Industry Training Board, which
shows that the industry would be able to respond to that type
of increase in output.
Q109 John Cummings: If house prices grow
more slowly, do you think developers will continue to build?
Mr Slaughter: Can we take a step
back and say that what Kate Barker is talking about is reducing
the long term real increase in house prices. On an annual basis,
the differences may not seem very great but when she is talking
about 2.7% real increase in prices year on year over the last
20 years cumulatively that is a very big effect. What we are looking
at and what Kate Barker is talking about is a long term supply
solution.
Q110 John Cummings: In the short term
though, if prices grow more slowly, will developers continue to
build?
Mr Pedley: Yes, for many reasons,
not least because it is in the best interests of their businesses.
In truth I would much rather operate in a stable housing environment
where house prices rise in line with earnings than necessarily
what we have enjoyed, if that is the right expression, over the
last few years.
Q111 John Cummings: What do you believe
can be done to make housing more affordable in the short term?
Mr Pedley: Affordability is all
about meeting the needs of the people. We have to take a far more
flexible view in terms of what we build. We have to look at the
needs of the individuals in any location and recognise that the
housing market is a series of small, individual markets in each
town and city and each different category of people who are looking
to buy. Therefore, if we are looking to satisfy the demands of
the first time buyer, we have to have that view when we are addressing
that issue. If we are looking for executive homes for chief executives
or whoever of major firms, it is a totally different set of criteria.
We have to have a flexible approach so that we can meet the needs
of the people with what the industry is delivering. If you do
that, then you can deliver affordability.
Mr Slaughter: On the long term
aspect of this, listening to the evidence of the two previous
delegations was quite interesting. When we are talking about the
affordability issue, achieving that on a long term basis, there
is the question of looking at this as an average position and
in terms of what that means in practice on the ground. If you
get the overall supply situation right in the long term by having
a bigger, more sustained supply of housing to meet the evident
demand that is out there, it becomes much more possible to deliver
different solutions within that. The market will provide where
the market demand is, whether that is for expensive, executive
homes at one end of the market or low cost market homes at the
end of the market. Where you have a constrained supply, there
are arguably going to be sub-optimal outcomes for all parties.
Q112 Mr Betts: You asked, as one of your
suggested solutions to this problem of shortage of houses being
built, that we go back to a situation where we had five years'
supply of land available approved by the planning system. That
does not seem the most obvious solution when, as I understand
it, there are seven years' supply of housing with approval or
allocated for housing already existing in the south-east.
Mr Whitaker: The point about the
five year land supply was that it looked on a site by site basis
at the trajectory of when those sites were going to come forward,
how rapidly they were going to be developed and what the constraints
to their development were. That meant that we had a forward looking
monitoring system that could foresee problems and delays and could
do something about them in order to bring the sites forward to
contribute towards that five year land supply. At the moment we
have a backward looking monitoring system where, by the time we
realise we have a problem, we are another year or in some cases
two years down the road. The whole point of looking forward is
that we can see problems developing.
Q113 Mr Betts: The land is there.
Mr Whitaker: Yes, the land is
there. You need to make a big distinction between allocated land
which does not have planning consent, land which has outline planning
consent where the principle of residential development has been
established but the details have not yet been agreed and sites
which have detailed planning consent where a developer can get
on site and start moving bulldozers around and building houses.
You cannot build houses on an allocation until you have detailed
planning consent.
Q114 Mr Betts: Why are not developers
therefore applying for the planning permission?
Mr Pedley: Developers do. It is
the period of time it takes to get from an allocation through
to detailed consent.
Q115 Mr Betts: That is a different issue.
There is no constraint on having five years' allocation. If the
land is allocated and developers get on and apply for the planning
permission, they have the five years' supply of land with planning
permission.
Mr Whitaker: There are lots of
hoops to go through in order to get planning permission on an
allocated site.
Q116 Mr Betts: Can I tell you what used
to happen in my experience when we had the old system, the UDP
with five years? What used to happen was there were always some
sites at the bottom of the pile. They were difficult to build
on, polluted sites, a bit tricky or a bit small. They always remained
at the bottom of the pile. The five year supply just kept getting
topped up with slightly easier sites and they always got built
on and the ones at the bottom never got built on. Trying to regenerate
some of our older areas was just impossible with that system.
That should change.
Mr Whitaker: That should change.
What should happen is that both the local authority and developers
should work together to bring those difficult sites forward. If
you have allocated them and said, "They are not coming forward"
surely looking at the reasons for why they are not coming forward
is a better system rather than just allocating them and saying,
"We think they will come forward."
Q117 Mr Betts: In parts of the country
the PPG3 change might have involved a short term dislocation which
has now been worked through where builders had to start looking
at brown field sites more seriously because in the past they always
knew they would find green field sites. They would build on those
and leave the brown field sites behind.
Mr Pedley: The industry has been
very focused on brown field development for a long period of time.
Q118 Mr Betts: The percentage of houses
being built on brown field sites has gone up substantially since
PPG3, has it not?
Mr Pedley: Yes, but if you look
at the industry there are a number of major developers now who
are building 60, 70, 80% or more on brown field sites. To be perfectly
honest, if you think about the demographics of a brown field site,
the vast majority are sitting in areas surrounded by chimney pots;
whereas a lot of the green field sites are on the edge of built
up areas. Therefore, just thinking about the market, most developers
would rather build, as a generalisation, on the brown field sites
because they were in the middle of the population areas. Therefore,
you have a ready market sitting there for your product. There
is no negativity in terms of developing a brown field site. The
only caveat is that you can satisfy all the conditions necessary
to make the redevelopment a safe development.
Q119 Mr Betts: Experience may mean it
is difficult to believe that is the case. There is a suspicion
around that builders have not been building so many houses in
the 1990s but their profits have been doing very well, have they
not, because they have been sitting on these land banks and the
value has gone up enormously. That is where your profits have
been generated, is it not? You have not done too badly out of
not building too many houses, have you?
Mr Pedley: At the end of the day
a lot of people have benefited from the change in the housing
market over the last five years. We have been talking about prosperity
in the housing market that started in about 1996 and finished
in the summer of 2004. Virtually all the major home builders spent
a lot of time with Kate Barker's team to hopefully dispel the
notion that we were sitting on land banks, because we are not.
I, on behalf of my company, spent a lot of time with her team
literally going through every site that we owned and either explained
to her that we were on site developing or why we could not. A
lot of it is because we may have an outline planning permission
but we do not have a detailed planning permission.
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