Memorandum by Barton Willmore (CRED 56)
EXECUTIVE SUMMARY
— Regional Spatial Strategies were
beginning to move towards providing sufficient houses to meet
Government targets.
— The effect of the credit crunch is
to reduce completion levels significantly. However, the fundamentals
of demographic change and increasing prosperity mean that the
need for housing remains unchanged.
— Two key problems have to be addressed:
1. The availability of sufficient finance
to purchase housing.
2. The availability of sufficient land with
planning permission for houses.
— A step change in the level of housebuilding
requires a step change in mortgage availability.
— The regulatory burden on housebuilders
combined with the credit crunch is threatening to depress land
values to a level at which landowners will not sell.
— The provision of affordable housing
is a key element of this. We propose that there is a cap on the
level of affordable housing funded by developers through Section
106 Agreements to address this.
— It takes a very long time to bring
forward land for housing. It is therefore important that targets
in Regional Spatial Strategies are not reduced as the land will
be needed.
— Private housebuilders are key agents
in the delivery of the additional houses needed. They will need
a favourable set of circumstances to deliver. At present the circumstances
are particularly unfavourable.
— Government has a key role in freeing
up the mortgage market and providing more public money for affordable
housing.
1. INTRODUCTION
1.1 The Committee has asked for evidence
on three questions. In this submission we address the first of
these:
— Achievement of the Government's housebuilding
targets for both market and for social housing.
1.2 Our expertise is as planning consultants.
Barton Willmore is the largest independent planning and design
practice with nine offices across the UK. Many of our leading
clients are housebuilders and we have an established track record
in providing evidence for and appearing at Examinations in Public
into Regional Spatial Strategies.
2. HOW MANY
HOUSES ARE
NEEDED IN
ENGLAND?
2.1 The Government's key policy goal is
to ensure that everyone has the opportunity of living in a decent
home, which they can afford, in a community where they want to
live (PPS3 paragraph 9). This must be the starting point.
2.2 The question then is how we establish
how many houses are required to achieve this goal. The only objective
method is based on demographic projections and, as the Housing
Green Paper makes clear, this is the basis for the Government's
target of achieving a build rate of 240,000 homes a year by 2016
and to have built a total of 2 million new homes by 2016. A further
ambition is that three million new homes should be built by 2020.
2.3 There is also evidence coming out of
more recent projections and work being carried out by the Government's
advisory body on affordability, the National Housing and Planning
Advisory Unit (NHPAU), that suggests that building rates should
increase still further to around 270,000 houses a year. We attach
a copy of Table 12 of the NHPAU publication "Meeting the
Housing Requirements of an Aspiring and Growing Nation" (June
2008) (Appendix A).[92]
This shows the implications of a housing supply range designed
not only to meet housing needs but to address affordability by
increasing supply. The key outputs from their recommended supply
range for England for the period 2008 to 2026 are:
| Bottom | Top
|
| Average annual net additions to housing stock
| 231,500 | 276,900 |
| Minimum delivery point by 2016 | 240,100
| 297,700 |
| Total net additions by 2016 | 1,996,900
| 2,285,200 |
| Total net additions by 2020 | 2,957,000
| 3,475,900 |
2.6 It can be seen that the bottom of the range figures
coincide almost exactly with the Government's targets. The upper
end of the range addresses the issues of backlog in demand and
allowing for growth in second homes and vacancies (NHPAU, June
2008 paragraph 113).
2.7 This in our view represents a good indication of
the measure of need for new housebuilding in this country.
2.8 To put the target of 240,000 or 270,000 dwellings
a year in perspective, an average of 148,085 houses has been built
every year for the last ten years (CLG Live Tables On Housebuilding,
Table 209, attached) at Appendix B. According to information we
have compiled Regional Spatial Strategies are beginning to address
the issue of the step change required to meet the need for housebuilding.
Current RSSs including the Plan for London plan for around 213,000
houses, still short of that required but moving in the right direction.
Appendix C.
2.9 If the national target is to be met, attention needs
to be given to both the demand for new homes and the supply of
new homes. Our observation about the "Billion pound package
of housing" described in the CLG statement is that it seems
to address only the demand side of the equation. We develop this
point below.
3. EFFECT OF
THE CREDIT
CRUNCH
3.1 So before the Credit Crunch we were as a nation were
building far too few houses but were beginning to move in the
right direction to achieve what is required. The Credit Crunch
has set this process back considerably. There are predictions
that less than 100,000 houses may be built this year and that
a low level of completions will continue at least into next year.
This is taken by some as an indication that the Government's targets
will not be met and that the drop in house prices will correct
issues of affordability without increasing the building rate dramatically.
3.2 This is to ignore the fundamentals of demographic
change and the long term trend towards greater prosperity. A further
publication by NHPAU, "Affordability Still Matters"
(July 2008) shows that any drop in house prices will have disappeared
in the next 10 years if there is no increase in housebuilding
(Figure 6 and paragraph 1.22) Appendix D. Others say that prices
will be back at their 2007-08 levels in five years (Centre for
Economics and Business Research, Press Release, 27 October 2008)
Appendix E. While that is good news for those in negative equity
it is not helping those who have yet to get a foot on the housing
ladder.
3.3 The message has to be that every effort must be made
to get house building up to the levels the evidence shows are
required. This is a formidable challenge and in our view there
are two key problems that have to be addressed:
1. the availability for members of the public of sufficient
finance to purchase housing; and
2. the availability of sufficient land with planning permission
for housing.
4. MORTGAGE AVAILABILITY
4.1 We are not financial experts but we can say that
houses will not be built if they cannot be sold. A step change
in house building needs to be accompanied by a step change in
both mortgage provision and a step change in finance for affordable
housing. Whilst the Government's efforts to recapitalise the banks
should be effective in securing greater availability of funding
it will take market confidence to recover and for sufficient people
to save the necessary deposits in order to take up the available
finance. With regard to affordable housing finance, that is within
the Government's control, subject to overall spending targets
and limits.
5. THE SUPPLY
OF AVAILABLE
LAND
5.1 It is self evident that developers will only bring
forward their land and sell houses where they secure a profit
from doing so (ie income exceeds costs). The planning system dictates
to a large extent the cost of land and the overall cost of development.
With reduced house prices, the expected income obviously falls.
If the costs associated with the planning system remain the same,
it becomes increasingly unviable to develop sites. The government
should renew, in the short term how the "cost of planning
permission" can be reduced. This should include limiting
Section 106 costs and reducing the administrative requirements
associated with preparing an application. This would also help
expedite major investment projects.
6. AFFORDABLE HOUSING
6.1 This is probably the right point to comment on social
housing provision. Regional Spatial Strategies are identifying
requirements for affordable housing. The RSS for the South West,
with which the writer is most familiar, is seeking that 35% of
new housebuilding should be affordable housing and this is not
untypical.
6.2 The main ways of achieving affordable housing are
from housebuilders through Section 106 Agreements and direct funding
from Government of Registered Social Landlords. The levels of
affordable housing being sought from housebuilders is getting
to the point where they cannot afford anymore. The Government
is seeking ever higher standards in housebuilding such as Lifetime
Homes and progress towards higher levels of the Code for Sustainable
Homes. The effect of the Community Infrastructure Levy is not
known. This is coming at precisely the time that land values are
falling and it is becoming very difficult to match the price that
a housebuilder can afford to pay with the price at which a landowner
is prepared to sell.
6.3 The recent report by the Office of Fair Trading "Homebuilding
in the UK", published in September 2008, commented at
paragraph 4.31 (Appendix F)
"Nevertheless it is clear that land values are sufficiently
sensitive to the costs of regulation that it is entirely conceivable
that, if not managed carefully, the regulatory burden on the homebuilding
industry could depress land values to a level where landowners
will not sell land for residential development".
6.4 Affordable housing, along with progress towards higher
levels of the Code for Sustainable Homes, is the key issue that
needs to be addressed to stop this happening. Our view is that
there are a number of initiatives that need to be considered.
1. A cap is placed on the percentage of affordable housing
required from housing developments funded from Section 106 contributions.
This percentage should be well below 35%. At the present time
levels of perhaps 20% should be considered.
2. A corresponding increase in Government funding for affordable
housing will be required.
3. A recognition that higher levels of housebuilding will
both improve affordability and deliver higher levels of affordable
housing even at lower percentages.
7. SUPPLY OF
LAND FOR
HOUSING
7.1 Supply of land with planning permission for housing
is the other key issue we have referred to.
7.2 The OFT Report examined the time taken to bring land
forward for development (see paragraphs 5.58-5.66) (Appendix G).
This indicated that around two years was quite a normal period
between first pre-application meeting through the grant of planning
permission to a start to construction. This takes no account of
the possible need to promote the site through the local development
framework in order to secure an allocation first.
7.3 We have considerable experience as a practice of
promoting very large urban extensions (of several thousand homes
each) and we are also involved in several eco-towns. Schemes of
this scale will play a key role in delivering the houses required.
They require very significant lead times, typically of five to
10 years. We append an extract from the web-site of the Wichelstowe
development of about 4,000 houses on the southern edge of Swindon
(Appendix H). It is not one which we have been involved with directly
but it happens to have a chronology for the promotion of the development
on the web-site which illustrates the issue. This shows a period
of 15 years from first proposals for the site to first completions.
7.4 What this shows is first, because it takes so long
to bring these large sites forward it is essential that long term
plans ie Regional Spatial Strategies and Local Development Frameworks
continue to make sufficient land available to meet identified
needs. This means no reduction in Government targets on which
the RSSs and in turn the LDFs are based. This land will be needed.
7.5 Second, the system for bringing forward this land
needs to be speeded up considerably.
8. CONCLUSION
8.1 In conclusion, we see a need to maintain pressure
for a step change in housebuilding. Just because people cannot
buy houses at present does not mean that the need has disappeared.
There should therefore be no reduction in housebuilding targets
and they may even need to be increased.
8.2 Private housebuilders are key agents in the delivery
of these houses but they will need to be given a favourable set
of circumstances to deliver. At present the circumstances are
particularly unfavourable for reasons which we have outlined.
8.3 Government has a key role in ensuring that the right
financial conditions are in place to allow this to happen. There
are two particular issues which we have identified as requiring
attention.
1. Freeing up the mortgage market.
2. More public money for affordable housing.
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