Memorandum by John Acres Msc DipTp MRTPI
(AH 72)
INTRODUCTION
It is encouraging that the Government feels
the need to explore the relationship between housing supply and
affordability. For years the two have been handled completely
separately with the assumption that supply has no influence on
price—clearly, as any GSCE economy student knows, the two
are inextricably linked. The trick is to manage the planning process
so that there is a broad equilibrium between demand and supply
through incentives, investment, intervention and above all through
the private housing market. It is often said that we cannot build
our way out of a housing crisis implying that the solution is
not in investment in private housebuilding but subsidy in the
public housing sector. We certainly cannot spend our way out of
a housing shortage. This would be self defeating, hugely expensive
and ultimately economically unsustainable.
THE POTENTIAL
BENEFITS OF
AND SCOPE
TO PROMOTE
GREATER HOME
OWNERSHIP
Britain's "property owning democracy"
provides the lifeblood of a healthy and thriving economy as well
as a secure and settled society. Most people are keen to establish
a roof over their heads and are prepared to borrow and save to
do so. Once they have a foot on the ladder, they are normally
content to protect and preserve their homes so that they are self
supporting whilst at the same time spending money on repairs and
improvements to generate further growth in the economy. This is
a virtuous circle which any Government is wise to cultivate.
Whilst there will always be people who would
prefer to rent their homes (or who cannot afford to buy) the potential
benefits in terms of well being (both of the individual and of
society) are immense. The Government is therefore right to continue
to promote home ownership.
The recently published National House Condition
Survey, issued by ONS, indicates that, for the first time in 2004,
the were fewer young people buying their homes with a mortgage.
Households are setting up home later. Quite simply, young people
are being priced out of the housing market. Redrow Homes (my own
employer) has addressed this issue by launching a new range of
houses called the "Debut" Range. These are high density
apartments grouped in clusters without individual gardens but
enjoying communal open space, where prices start from £50,000
for a single bedroomed flat and rise to £120,000 for a two
bedroomed duplex apartment with a study. These have proved extremely
popular, indeed all the properties (apart from a few of the larger
units) were sold on the very first day of sale on the first site
in Rugby. They are eco-excellent in terms of energy efficiency.
This represents a major step forward in opening up home ownership
to a broader range of younger buyers.
Sadly however, local authorities tend to press
developers for ever higher proportions of social rented housing,
spurred on by Housing Needs Surveys which invariably argue that
shared ownership or low cost housing cannot meet affordable housing
needs. The West Midlands Regional Assembly has attempted to impose
arbitrary "ring fenced" targets for affordable housing
so that market housing is restrained unless affordable housing
is delivered. This is a deliberate bias against market housing
which is seen as "undesirable". Some authorities in
the West Midlands are now even withholding planning consents on
market housing because they claim that affordable housing must
be delivered instead. This practice must be urgently addressed
by Government, otherwise the delivery of housing, including affordable
housing, will fall seriously short of strategic targets.
THE EXTENT
TO WHICH
HOME PURCHASE
TACKLES SOCIAL
AND ECONOMIC
INEQUALITIES AND
REDUCES POVERTY
Housing (or to put it simply shelter) is an
essential human requirement. Most surveys of peoples' aspirations
indicate that between 80% and 90% of people aspire to home ownership.
The actual proportion of owner occupation is about 71%—the
balance consists of either those who fail to achieve their aspirations,
or those (mainly young people) who are still striving to achieve
them.
Once secured, home ownership provides a measure
of security for a family. Its provides a "nest egg"
against which the household can borrow, to improve the home and
more important it also provides a "stake in society"
so that people can feel confident to invest in the community and
to protect their asset. The ability to borrow over the longer
term helps to smooth out the peaks and troughs in costs and property
prices giving the home owner the likelihood that they will secure
an asset for their children. This in turn helps to provide a hedge
against poverty - provided of course they do not over-stretch
their resources.
THE ECONOMIC
AND SOCIAL
IMPACT OF
CURRENT HOUSE
PRICES
Over the last eight years, house prices have
experienced a period of sustained growth, well above the general
level of inflation. This has been as a result of prolonged low
interest rates, sustained economic growth and shortage of housing
supply, largely as a result of the failure of the planning system
to release sufficient land. The economic impact of this pattern
of continued house price inflation is well documented in the Barker
Review which comments both on the impact in terms of lack of housing
to support business and the waste of resources spent bolstering
an inflated housing market. She estimates a loss of some £4.2
billion.
In addition, paragraph 13 of the recent Government
Consultation Paper, "Planning for Housing" highlights
the social implications of the lack of affordability, for example:
— A bigger wealth gap between home
owners and non-home owners.
— Aspirant first time buyers unable
to enter the housing market.
— Overcrowding due to suppressed household
formation.
— Rising numbers of people forced to
live in temporary accommodation of becoming homeless.
Essentially, although home ownership is often
seen by local authority planners as "elitist" and as
unnecessary compared to the provision of "social housing",
in fact the growing housing shortage actually fuels elitism in
the sense that it pushes up house prices for those already on
the market, but restricts entry to those who are struggling to
get their foot on the ladder and relegates them to social rented
housing - which for them is usually "the wrong ladder".
More recently, house prices have moderated.
This has a similar damaging effect in that people on the margins
of home ownership, or who have bought too late in the house price
cycle, find themselves suffering from "negative equity"—a
form of housing trap whereby they cannot move without disappearing
into debt. A stable housing market, with an adequate supply of
housing is the only solution to this succession of peaks and troughs
which has become a characteristic of the British housing market
over the last 20 years.
OTHER FACTORS
AFFECTING AFFORDABILITY
INCLUDING CONSTRUCTION
METHODS AND
FISCAL MEASURES
Redrow Homes has recently launched its new "Debut
range" which embraces the new "modern methods of construction"
agenda. Homes are built of light steel frame construction, which
although more expensive in terms of material costs, result in
cheaper construction costs due to quicker building techniques
and faster sales. This is helping to have a major impact on affordability
with smaller units on sale for less than £60,000.
THE SCALE
OF THE
GOVERNMENT'S
PLANS TO
BOOST SUPPLY
The apparent acceptance by Government that housing
supply desperately needs to be increased for sound social and
economic reasons, is very encouraging. Ministers are now prepared
to stress that housing delivery must be improved and that we cannot
continue building fewer homes, whilst the level of household formation
rises. The most recent Government "Planning for Housing"
Consultation document (paragraph 13) outlines the many and varied
problems which have arisen as a result of the growing housing
shortfall;
— the increased polarisation between
those who can afford to get on the housing ladder and those who
can't;
— the delay in youngsters being able
to obtain their first home an the resultant social consequences
amongst families. Recent statistics issued by ODPM in the Survey
of English Housing (Provisional Results No25 2005) indicate that
for the first time the number of owner occupiers buying with a
mortgage in the younger age groups has actually fallen;
— the problem of overcrowding and homelessness;
and
— the impact on the economy generally
and businesses in particular. These are aspects highlighted in
particular within Kate Barker's report.
There are clear signs that in the identified
growth areas (Thames Gateway, Milton Keynes/South Midlands, Stansted/Cambridge/Peterborough
and Ashford) the Government is committed to introducing a "step
change" in housing. This a very welcome and despite attempts
by local politicians and the environmental pressure groups to
blow the Government off course the strategy is succeeding. The
MKSM strategy for example was pursued swiftly and efficiently
through a Public Inquiry and arrangements are now being put in
place to deliver the new development. But most of these will require
relatively long lead-in times and significant levels of infrastructure.
Furthermore, there has been a tendency, perhaps understandably,
to use the initiatives to attempt to stimulate poorer market areas,
such as South Essex in the Thames Gateway and Corby in Northamptonshire.
Moving against the market will mean that delivery takes longer.
Perhaps more important will be the need to increase
new housing delivery across the board in most, if not all Britain's
provincial towns and cities, whether large or small. All settlements
need organic growth to thrive and prosper. Despite the fact that
most villages, towns and cities have steadily grown over the years,
there has become an established norm within the last decade that
growth (particularly on greenfield land) is unsustainable and
that replacement growth on brownfield land is the only acceptable
form of development. This needs to change.
THE RELATIVE
IMPORTANCE OF
INCREASING PRIVATE
HOUSING AS
OPPOSED TO
SUBSIDISED HOUSING
There is myth, circulated by some environmental
pressure groups, housing consultants acting for the public sector
and local authorities keen to boost their municipal housing stock,
that the only way to improve affordability in the housing market
is to restrain private housing provision and build more subsidised
social housing. This is not the solution.
Many County Structure Plans, such as Warwickshire
(WASP) have imposed "ring fenced" limits on market housing
so that private development is restricted unless and until social
housing is built. But the very low levels of development and the
high percentages of affordable housing being sought make it impossible
to deliver new housing. Many District Authorities, estimate a
higher need for affordable housing (measured by Housing Need Surveys,)
than the strategic housing targets through Structure Plans. Some
simple commonsense needs to return to the planning process so
that some form of equilibrium is restored and developers can once
again provide a balanced range of housing provision.
Affordable housing is simply part of a broad
and continuous spectrum of housing provision ranging from the
larger owner occupied dwelling to the smallest rented flat or
tied cottage. Changes in the market influences supply and demand
at all levels and shortfalls at one end ultimately have an impact
on price and provision at the other. Consequently, any attempt
to impose an overall shortfall simply increases the price level
for everyone and makes affordability more difficult. "Filtering"
is a fact of life—as any estate agent will tell you. Chains
of house buyers (and renters) consist of people moving up through
the market (as their needs are greater or their income grows)
and people, for example the elderly or those suffering family
break-ups, moving down through the market (as their needs reduce).
For the most part these days, affordable housing
is delivered through cross subsidy by way of S106 agreements with
landowners/developers, supported by Local Plan policies and Government
Circular 5/05. Consequently, the greater the scale of allocations
(and windfall) the greater the delivery of affordable housing.
Since affordable housing can take a variety of different forms
- social rented, shared ownership, low cost owner occupation etc—any
shortfall in land release simply worsens the affordability position.
Moreover, since Registered Social Landlords
are effectively competing in the same land market as private developers,
housing restraint through restrictions in land supply, whether
deliberately or simply through delay, will simply increase the
cost of affordable housing.
HOW THE
PLANNING SYSTEM
SHOULD RESPOND
TO THE
DEMAND FOR
HOUSING FOR
SALE
Planners in Government offices, Regional Assemblies
and Local authorities sometimes seem to have difficulty accepting
that housing should be built to meet market demand rather than
simply meeting basic "needs". (Yet those same individuals
are content to buy and sell their homes for the best price in
the same housing market). Planning strategies, whether at regional,
county or local level are increasingly designed to "buck"
the market, by distorting the level of provision to match supply
rather than demand. This is not helped by paragraph 6 of PPG3
which directs local authorities to take the supply of brownfield
land into account when determining regional housing numbers—hence
the lower demand areas and urban centres are given higher numbers
to achieve, whilst the higher demand areas in the suburban and
rural areas are given lower numbers. This then further distorts
the price mechanism, resulting in disparities both regionally
and locally.
The sequential approach within paragraphs 30-32
of PPG3 adds to this disparity by focusing more housing land supply
on brownfield sites within urban areas and leaving little or no
allocations for rural towns and villages. This issue urgently
needs to be addressed, otherwise the distortions in the market
will continue to worsen.
There is a clear need for the planning system
to return to a closer relationship between demand and supply so
that price equilibrium can be re-established and precious public
resources are not wasted supporting ever higher levels of affordable
housing in high demand rural areas, whilst housing stands empty
in lower demand areas.
Sadly however, the planning system far from
becoming simpler, as promised, is becoming ever more unwieldy,
with prolonged processes of consultation and endless strategies,
audits, and assessments all designed to achieve "perfect
knowledge" and "complete integration". The planning
system appears no longer geared to delivering results, but to
creating a system which exists to generate delay. Local authorities
defer decisions for reasons of prematurity, inconsistency or unsustainability.
But they rarely consider such basic issues such as need, demand
and well-being. Process is being put before people. And it is
society which is the loser.
THE SCALE
OF DEVELOPMENT
REQUIRED TO
INFLUENCE HOUSE
PRICES AND
THE IMPACT
OF PROMOTING
SUCH A
PROGRAMME ON
THE NATURAL
AND HISTORICAL
ENVIRONMENT AND
INFRASTRUCTURE PROVISION
Kate Barker's report (Recommendation 1) suggests
a "market affordability goal". To achieve this she suggests
a 20-40% flexibility allowance over and above local authority
housing targets. To help reduce long term house price inflation
she estimates that some 80% increase is needed in housiing land
supply to limit the real house price growth to 1.1%. To bring
it down to 0% growth in inflation would require 200,000 extra
homes per annum, more than double the number built at present.
These are very crude calculations and it is
difficult to fully explain or justify the numbers. What is important
is that many more homes are needed to re-establish an equilibrium
between demand and supply. For the last 20 years, the Government
has conceded to local authorities and pressure groups who have
exaggerated the potential impact of new housing provision and
ignored the social and economic impacts of housing provision.
Neither the Government, the pressure groups,
the public nor the house building industry would benefit from
an over-provision of housing. House prices would fall, homes would
stand empty and brownfield sites would be neglected. My own preference
would be to return to a more logical "predict, plan and provide"
system of provision, whereby the empirical factors which guide
household formation are properly analysed, the level of demolitions,
vacancy rates, sharing, overcrowding, second home-ownership etc
are all assessed, and the number of new homes is calculated accordingly—together
with a suitable allowance for flexibility to compensate for those
sites which, for one reason or another, fail to come forward.
The "Plan, Monitor and Manage" system has clearly failed,
simply because local authorities have not had the initiative or
the courage to plan positively. Government and Regional Authorities
have allowed authorities to delay and to defer allocating land
and hence the supply of homes has gradually dried up.
The question is: How many more homes are needed
to return the demand/supply equilibrium and what is likely to
be the impact of that change? The difference can only be determined
once the new household projections (shortly to emerge from Government)
are properly analysed. But it is already clear that the new figures
are bound to be substantially higher. It is possible that the
national figure may be some 50,000-60,000 dwellings higher than
are currently being provided. However, I consider that they are
unlikely to be as high as the figures suggested in Kate Barker's
high scenario. Furthermore, as housing provision returns to some
form of equilibrium and house price rises are stemmed, there will
be a lesser tendency to use housing as an investment rather than
as shelter.
What would be the impact of an additional 50,000
homes per year? Since most houses are now built at higher densities
and focused on towns and cities, I believe the impact would be
limited and would not cause major concerns in terms of infrastructure
provision, or damage to the historical or natural environment.
The debate so far as focused too much on emotive claims about
"concreting over the countryside" when a much smaller
proportion of dwellings are now built on greenfield land and most
settlements are seeing fewer rather than more homes. Indeed, there
is now an urgent crisis in many of our rural settlements where
regional policy coupled with the "sequential approach"
has effectively starved rural communities of much needed "organic"
growth to help them thrive (or even survive).
In my view, there needs to be a much more probing
examination of the alleged damage to environmental assets and
more thorough testing of claims about environmental thresholds.
Similarly, Governments cannot be held to ransom by local authorities
and Regional Assemblies determined to use the "infrastructure
card" to prevent housing growth which is necessary to achieve
social and economic objectives.
REGIONAL DISPARITIES
IN SUPPLY
AND DEMAND
FOR HOUSING
AND HOW
THEY MIGHT
BE TACKLED
The south-east region is the engine of the British
economy. Government has highlighted the shortfalls in housing
provision in the south east region in their "Sustainable
Communities" programme and identified four specific growth
areas to focus housing supply. This is welcome and will be helpful
in taking pressure both off London and also the home counties,
which is encompassed within tight green belt and is environmentally
as well as politically sensitive.
Currently, the south east local authorities
are attempting to resist the increases in housing "imposed"
by Government and the Regional Assembly and the same scenario,
which was experienced five years ago during the debate about SERPLAN
is simply being repeated.
Notwithstanding the outcome to this dilemma,
the Government appear to be missing the opportunity to achieve
a more economically sustainable as well as a more politically
achievable outcome by exploring the balance of housing demand
and supply in the surrounding regions—indeed there would
appear to be no attempt to address the nation's housing problems
in a co-ordinated way.
The East of England Regional Strategy, for example,
where the RSS is currently being examined at an EIP, provides
substantially less housing than is needed, and could be accommodated
in the eastern counties of England, including towns in Essex,
Cambridgeshire & Peterborough and Suffolk, as well as the
many well established small towns elsewhere.
In the West Midlands too, there is a vast opportunity
to increase housing provision in the shire counties. Indeed, many
of the local authorities in the region have had to impose moratoria
because, despite facing sever demands and needs, they have already
reached their targets. Some towns, for example Rugby, Warwick
and Burton on Trent are having to refuse consent on brownfield
land because their numbers have been pitched so low. Yet the Regional
Assembly has campaigned to reduce the level of provision elsewhere
in the Growth Area covering South Midlands/Milton Keynes, because
they allege it is undermining regeneration in the Black Country—some
50 miles away! (Milton Keynes is in fact much further away from
the Black Country than it is from London). Local authorities in
the rural parts of the West Midlands are currently in despair
because they simply have not got sufficient housing provision
to meet their basic local housing needs. Indeed, there is an outflow
of people from the West Midlands region as a result.
The East Midlands also has potential for much
greater levels of housing provision. Supply and therefore allocations
have been focused in the three main cities of Leicester, Nottingham
and Derby. However, whilst the regeneration of those centres is
important, other sizeable towns have been starved of housing.
Authorities in Nottinghamshire and Lincolnshire where Structure
Plan reviews have just taken place, are finding that they have
already met their targets even before the Plans are adopted. This
is a direct consequence of inexplicably low housing targets in
the previous East Midlands RSS now coming through the system.
Much more housing can therefore be provided
in the regions surrounding London and the South east, both to
redress the economic problems in those regions and to achieve
a better balance in the economy across the whole country—currently
an opportunity is being lost.
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