Boosting housing supply

[Originally posted on Liberal Democrat Voice, 05/10/11]

The Conservatives’ proposal to resuscitate the Right to Buy through increasing discounts appears to be an attempt to bask in some of Mrs Thatcher’s reflected glory. Unlike the 1980s version, though, Mr Cameron and Mr Shapps are emphasizing that each property sold will be matched with a newly built property at “affordable” rent. This is an attempt to head off criticisms that the Right to Buy reduces the supply of “social” housing. So, it would appear, this initiative could lead to a net increase in the housing stock.

Of course, things are never as they first appear.

It is not yet clear how the Government will be able to deliver on this pledge of one-for-one. Bigger discounts mean lower revenues. The broader reform of the Housing Revenue Account includes requirements to pay 75% of receipts to the Treasury. The Q+A released by DCLG on Sunday indicates that using RTB receipts to repay debt will still be part of the picture. So there appears, on the face of it, to be a gap between the money raised from sales and the money that would be available for new build. No doubt that gap will be filled by the expectation that landlords will borrow against their current asset base – a strategy that will relatively rapidly come up against serious constraints. The new Right to Buy policy will also, if it takes off, most likely accelerate the change in the profile of social housing tenants towards the poorest.

As you can tell, I’m sceptical about the impacts of this policy. But it has the positive effect of focusing the housing discussion. Everyone involved in housing agrees we face problems. Almost everyone agrees that there are long standing problems of under-supply. Layered upon this are problems of access and affordability. The question is how to address these problems.

The Government has brought forward a number of new or revised initiatives. FirstBuy is intended to assist first time buyers with the costs of accessing the housing market. The first household purchasing a house through the scheme – in Bridgwater in Somerset -completed last week. The New Homes Bonus is intended to incentivise local authorities and local communities to support development in their area. The Housing Minister is keen on “mates mortgages” which allow groups of friends to buy together. The new “affordable” rent regime allows registered providers such as housing associations to construct new housing, but at higher rents and not in the same volumes as were being built by Labour.

The problem with most of these initiatives is that – however desirable they may be individually – they are too small to make much of a dent in the problem.

The real boost to housing supply – from the Government’s perspective – will come from the reform of the planning system and the early release of land in public ownership for development.

The reforms of planning are massively controversial, and the debate has been polarised into some very simplistic positions between the pro-development and the conservation lobbies. At the core of the debate is the presumption in favour of sustainable development. But there is also the developing recognition that the Government is proposing to get rid of many of the mechanisms local authorities have relied on to deliver social and affordable housing. Anyone who has read the draft National Planning Policy Framework will know that its authors don’t provide a clear definition of sustainable development and have no real appreciation of what it means. It is a document that prioritizes growth and new development except where “the adverse impacts of doing so would significantly and demonstrably outweigh the benefits”. That apparently simple “common sense” requirement will no doubt launch a raft of legal challenges.

This is not perhaps surprising. It is relatively well-known that the development industry has had a large influence over the drafting of the NPPF, as it does over the ministers concerned. Indeed, Mike Slade, chairman of the Conservative Property Federation, was recently reported in the Telegraph as saying:

They [ministers] know nothing, they’ve never been in the real world, and they need to be told what the facts are and the British Property Federation, the Property Forum and lots of other people they engage with do that.

This emphasis upon “facts” – rather than perspective – finds an echo in the draft NPPF which pointed insists that local authorities have an obligation to meet “objectively assessed development needs”. We don’t have the space here to explore how facts and objective assessments are hard to come by in something as politically contested as development planning.

The Government’s approach is problematic because it is so partial. Few who are familiar with the housing system would deny that the planning system contributes to the problems of housing supply. It has been under scrutiny for the last decade. But the problem is more complex than that. For example, top down targets did not, all on their own, cause low rates of house building, as the Housing Minister is wont to argue.

To understand housing supply we need to go beyond the planning system. We need to understand cultural attitudes to development; intergenerational relations; the impact of advocating local development on political support; the peculiar structure of the UK construction industry, which relies upon subcontracting and has limited incentive to provide high quality accommodation; and the role of local spatial monopolies in sustaining house prices through controlled release of land. We also need to recognise that severe economic cycles and shortages of mortgage finance make it difficult to forecast demand. The system is pervaded with volatility and uncertainty. And that impacts upon developers’ willingness to build.

An accessible, balanced summary of the issues entitled More Homes and Better Places has recently been produced by the Building and Social Housing Foundation.

Until policy is willing to recognise and grapple with these more wide-ranging issues then progress is going to be limited. And for policy to do that it is going to need to look beyond the world as seen from the developers’ perspective.

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