When all the housing markets are broken

By Eric Bohl | 18 June 2019

When former communities secretary Sajid Javid said in 2017 the housing market was broken, which one did he mean, exactly? The land, development, construction or residential end-markets? Or the markets in each region (and sub-region)?

His 2017 white paper was promising and touched on all these markets, but their web of problems remains the same. We’re not building enough; too much housing is unaffordable; renting is precarious; design, quality and sustainability are poor; the wrong type is being built in the wrong places; the cladding scandal is still not resolved; and the new scandal of permitted development is emerging blinking into the limelight.

It does not have to be like this. There are advanced European economies that do not have broken housing markets. In a series of policy debates this year, the Society of Local Authority Chief Executives (Solace) is examining how local government can best consume from, participate in and shape the markets in which it operates.

The housing market is probably the most complex. How can we regulate and intervene better? What should we be lobbying for next, after the lifting of the Housing Revenue Account (HRA) cap? What capacity do we need?

‘There’s a deficit of skills in this space and we’re competing with blue chip businesses. This is high stakes,’ says Niall Bolger, chief executive of Hounslow LBC and Solace spokesperson for innovation and commissioning.

The starting point is to make sense of the scale of the challenge and its interlocking dimensions.

‘You need to think systemically. There are regional and local differences that affect the private sector’s propensity to build and you have to incentivise it differently,’ argues Tom Stannard, corporate director for regeneration and growth at Wakefield City Council.

This means challenging misplaced truisms about the solutions and avoiding Whitehall’s London-centric prism. We need to articulate better the scale and complexity of the problem and help Government resist knee-jerk policy disasters such as Help to Buy, which fed super-profits for developers.

In each sector of the market, local and combined authorities are intervening to deliver on local priorities, despite perverse laws and regulations on land, development, construction and end-residential markets.

The Letwin Inquiry concluded that developers were not land-banking, but developing at a pace that maintains their prices and profits. Some may struggle to spot the difference.

Letwin did recommend a more strategic role for authorities, assembling land and ensuring developers build what’s needed rather than what they want. However, this alone would not tackle inflated land prices, which can increase a hundredfold with planning permission.

‘Action is needed on land value capture. The Government needs to reform compensation for compulsory purchase,’ says David Rudlin, director at URBED, the urban design practice.

The local plan is the key mechanism that enables authorities to set a strategic framework for housing. But a sizeable minority of authorities still do not have one.

‘We have to be proactive about this to have credibility with central government,’ argues Mr Bolger.

While authorities are keen to drive up homebuilding, we face the catch-22 of being set housing targets and then punished because developers fail to build out the permissions we give them.

More units are being delivered, but they often remain unaffordable and, in some parts of the country, authorities need better targeted subsidies to regenerate town centres where the costs of land remediation and assembly stop the market delivering.

Many authorities are tackling the problems of affordability by entering the market with their own housing companies. Many are starting small, but Croydon chief executive Jo Negrini says: ‘You have to intervene at scale if you want to make a seismic change in affordability.’

Where authorities do not have the capacity in-house, they are entering into public/private and public/public joint ventures and regional collaborations, often as part of combined authorities.

While public/private joint ventures may be controversial, they can allow authorities greater influence over the mix and quality of new housing. But to hold our own, we need the culture and nous to understand developers’ financial models and argue assertively.

This means protecting and enhancing regeneration and planning teams; sharing capacity; and working together.

Nick Walkley, chief executive of Homes England, says the chief executive has to think beyond their local place to the strategy for the wider market and communities across a region. He adds: ‘It is their job to broker the partnerships needed and ensure the capacity and capabilities are there to manage the balance of risks.’

Local government needs to campaign assertively, whether on abolishing right to buy; removing punitive planning rules; greater flexibility in plan-making; better targeting of regional investment; or reforming land compensation legislation.

Our experience of tackling the challenges and the promise of what more we can do are the best gifts we can offer to any government determined to fix all the broken housing markets.

Eric Bohl is director of public services at Activist Group

For the latest in housing news, including a look at the councils embarking on large-scale housing projects, see The MJ Housing Supplement June 2019

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