Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence


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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