Delivering the housing we need: some observations from industry


Our team: Nick Wood


Background – The Housing Crisis

Whether you work in the property industry or not, undoubtedly you will have heard that we are in the midst of a “housing crisis”.

When people talk about this in the United Kingdom, they are by and large talking about the fact that average prices for residential dwellings rose from £70,000 to £224,000 in the 20 years between 1998 and 2018.

This 320% increase has, of course, not been matched by a corresponding increase in people’s ability to save for a deposit or to pay for a mortgage.

This, coupled with the fact that on average a greater share of one’s income is spent on rent than on a mortgage, is deepening the inequality that exists between those that own their homes, and those who do not.

Supply

It is against this background that the Government has worked hard to increase the supply of housing. Earlier this month in a speech to the Policy Exchange, James Brokenshire MP (the Secretary of State for Housing, Communities and Local Government) defended the government’s efforts to resolve the housing crisis.  As evidence for success, he pointed to the fact that more new dwellings were delivered last year than in any year but one of the last 31.

Indeed, fresh projections recently published by the Office for National Statistics imply that at current house building levels enough homes are being built to satisfy demand.   However, many commentators have been keen to point out that increasing supply will not solve the housing crisis in isolation.

We have considered devolution and planning below, but would suggest that these are just two features of what should be a multifaceted solution to a complex problem.  Other factors, including finance and better quality control, would always have to be considered.

Devolution

The “Northern Powerhouse”, the “City Deals” and the “Midlands Engine” are all flashily described efforts to localise decision making.

Local and regional bodies taking a practical lead in progressing new housing projects will lie at the heart of any path to resolving the housing crisis described above.

A one size fits all approach is likely to fail because the challenges are not uniform; they are manifold.

This fact is perhaps best supported by the convergence of many commentators around the idea that in some parts of the country, particularly parts outside of London and the South East, there is no lack of housing supply, but there is a lack of housing demand.  The challenge in these parts of the country then, is inverted.

Stimulating demand for existing housing stock outside of London and the South East and where possible repairing or replacing this where it is currently uninhabitable must be an economic solution for these regions.  It would also have the consequential benefit of (in part) reducing the demand for oversubscribed housing stock in London and the South East.

Recent think tank output suggesting that these programmes are being undermined by austerity is, therefore, concerning.

Planning

A 2014 study carried out by the LSE and the Dutch Bureau for Economic Policy Analysis found that house prices in England at that time would have been 35% cheaper without regulatory constraints.  This is surprising for its significance.  If the aim is to reduce the price of housing stock coming to the market, reducing costs here must have a role to play.

However, at a time of tight public sector budgets, the resources available for planning departments are under great pressure.  As well as understanding this, the private sector may need to provide practical help (perhaps paying for additional consultancy resources) in order to make schemes happen, although they will clearly only do so if it would help them deliver profitable and viable schemes.

One would think that simplification of the planning process would appeal to public and private bodies alike.  Even following the grant of planning consent, requests for relatively minor amendments may trigger a full planning committee review on projects viewed to be contentious.  Sometimes the role of the planning professional seems to be weighed alongside that of elected members. There appears to be something of a “game of pass the parcel” with planning authorities unwilling to be bold.  How best can we instil in those charged with making planning decisions the necessary confidence to deliver innovative housing?

We believe finding an answer to this question will be important, a sense that has been underlined by a survey Fladgate recently carried out of clients and contacts in the context of our brownfield campaign, which identified planning as a top concern for developers and funders when it comes to brownfield development.   For more on our brownfield campaign please see here.

Conclusion – who delivers housing?

The housing crisis challenge is considerable.

To the extent increased supply needs to be maintained (and of course it does in some guise), it is obvious that developers will only pursue profitable housing projects.  Within those confines, I am sure that the private sector would welcome opportunities to work with the public sector, realising that there are resource and skills shortages.  The private sector may have a role in seconding staff to the public sector or paying for additional consultancy support, for example.

However, working with a number of different public agencies can be testing for the private sector.  This risks delaying completions of housing projects and could make a project uneconomic.  The length of the timetable increases where projects are advertised and procured as significant housing schemes subject to EU legislation on public procurement.  In addition, wasted costs for unsuccessful tenderers raise barriers to participation.  The Government may wish to reconsider this regime when the United Kingdom leaves the European Union (and even if it doesn’t).

As a final thought, another way of driving costs down may be innovative construction techniques for delivering housing.  Despite reservations, the quality of pre-assembled housing (or specific elements) is constantly improving, and must be an option as we seek to make the most impact in the shortest time on the supply of housing.

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