Green, Pleasant and Affordable: Achievable?

Today has seen the publication of two more significant contributions to the ongoing and vociferous debate on housing policy

The wide-ranging policy paper

The first is an inaugural policy paper – Green, Pleasant and Affordable – from the newly formed Conservative Think Tank, Onwards. Written by Neil O’Brien MP, a former Special Advisor at both the Treasury and Number 10. It is full of facts and figures setting out the scale of the problems to be overcome if the country is to see more homes actually built, and to make those homes affordable to younger renters and buyers.

To give just three of the more eye-watering statistics:

  • Since 1998, the ratio of average house prices to average incomes has doubled – from 3.5 to 7.7;
  • In the 1980s and until the late 1990s, the average 30-year-old could afford a deposit for a home if they saved for three or four years. Now they would have to save for nearly 20 years;
  • From the 1960s to the early 1980s private renters spent on average around 10% of their income on rent in most of the country, and around 15% in London. Today those figures have increased to over 30% and nearly 40% respectively.

O’Brien goes on to suggest some radical solutions, addressing both supply- and demand-side issues, which are likely to receive a mixed reception from his colleagues on the Government benches in the Commons. Among these is a suggestion to ‘reform property taxation to limit demand for housing and land as speculative assets’ which takes aim, in particular, at those investing in buy-to-let properties. Unsurprisingly this has led the news in many conservative-leaning newspapers today.

Another proposal, ‘tilt[ing] policy towards building more in our cities’, increasing densification and ‘liberalising rules on building upward’ could perhaps be seen, by those of a cynical disposition, as an MP who represents a rural area trying to make sure his own patch doesn’t get swamped with new developments. However, he also supports a new generation of garden cities and proposes merging the Department for Transport with the Ministry of Housing, Communities and Local Government to ensure these would be provided with the required infrastructure. John Prescott would approve!

Against the more progressive proposals stand some designed to appeal to the more traditional elements of O’Brien’s Party and electorate. For example, allowing councils who meet the new ‘Delivery Test’ more freedom to control developments, ‘including making views and landscapes enjoyed by existing residents a legally-allowed planning consideration for the first time.’ Other practical proposals also seem designed to protect the concept of localism, not least exempting local authorities from appeals to the Planning Inspector, providing those authorities have in place a 10-15 year housing plan and they are actually meeting the agreed targets those plans contain.

The laser-like examination on a single issue:

The second polcy contribution is a much more focussed policy review: Sir Oliver Letwin’s draft analysis of the causes for slow residential build out rates by developers in areas of high housing demand. Commissioned as part of the 2017 Budget, Letwin published an interim report back in March of this year and a final report with recommendations is to be published ahead of this year’s Budget.

Like O’Brien’s paper, Letwin’s contains some eye-catching statistics:

  • Of the 15 major sites he examined as part of his review, the median build out period for these sites from the moment when the house builder has an implementable consent is 15.5 years;
  • Or, to put this another way, the median percentage of the site built out each year on average through the build out period in one of these 15 large sites is 6.5%:

In short, he is clear there is a problem and is determined to propose a remedy to ensure the build out rate of large sites improves, which would aid the delivery of a large number of new homes in the short-term.

Letwin discounts several possible causes for delays that have been suggested by some, including: the logistics of managing large sites; the speed or delivery of new transport infrastructure; the availability or methods of raising capital; the number of skilled workers; or delays to the provision of utilities to large scale sites. He also refutes the charge that large-scale developers or financial investors are colluding in ‘land banking’ per se, as ‘their business models depend on generating profits out of sales of housing, rather than out of the increasing value of land holdings.’

Instead, he focusses the issue of ‘absorption rate’. By this is meant the rate at which new properties in a community can be released without seeing a drop in property prices, which would hurt the re-sale value of houses belonging to the community’s existing residents, as well as the profit margins of the developer and their investors, as land costs and future income are calculated on pre-existing property prices in the area around the development site. In short, developers build out rates of large sites is deliberately slowed to ensure the number of new properties added to the local market do not alter the dynamics of the market.

The solution?

Whilst no specific recommendations are contained in this version of his report, Letwin makes clear a diversity of property types and tenures across large development sites is required in future, possibly delivered by splitting large sites into smaller units to be developed by different developers. This would reduce the number of properties of the same ‘type’ coming onto the market at the same time and ‘if the resulting variety matched appropriately the desires of the people wanting to live in each particular part of the country, then the overall absorption rates – and hence the overall build out rates – could be substantially accelerated.’

We will have to wait for the Autumn to see exactly how Letwin thinks this might actually be achieved.

More action less policy-making please!

These two reports today add yet more ideas to an already burgeoning policy field. We’ve had Government Green Paper and White Papers; we’ve had think tank after think tank put forward proposals; we’ve seen more and more autonomy, powers and money devolved to regional government, especially in London; and Housing Minister after Housing Minister has made the case for why we need to deliver an increasing number of new homes as quickly as possible.

To be frank: there are enough good ideas out there. We now need to see decisions and actions to ensure future generations can have access to the affordable housing they need and deserve.

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