How we can build the new homes that are needed

The fact that Theresa May is taking a direct interest in building new homes is a welcome step. Government departments and their ministers will often roll their eyes at yet another initiative from Downing Street, catching the daily headlines but without the follow through that makes any real impact.  But they also know that if the full weight of Number Ten is behind an agreed policy then it stands a good chance of success among competing demands for parliamentary time for legislation and also Treasury money.  Over the next year (as over the last one) Brexit preparations will crowd out most of the routine business of government.  If a drive to build houses is going to gain any traction then the active support of the Prime Minister is essential.

There is a big hill to climb if the country is going to build enough homes to meet the increasing demand of a growing population. Even without population growth (and it’s possible that new household formation will dip post Brexit if immigration falls) we need new homes to match the pent up demand already in the system.  In property hot spots, with high private sector rents and large deposits needed to buy your first home, it is now common to find “young” people in their late twenties or early thirties still living with their parents, while they save up the money needed for independent living.

Estimates have been bandied about but it is fair to say that we need to build at least an extra quarter of a million homes every year.  The Liberal Democrats went into the 2015 and 2017 elections saying that we needed to reach 300,000 pa over a ten year period.  Both of these figures are a huge leap from our current position.  The latest housing completion figures for 2016/17 show that there were 217,350 net additions to the housing stock in England.  Only 183,570 of these were completely new builds. Much of the balance was from various other initiatives, including office to residential conversions and the sub division of houses into flats. Some empty homes would have been brought back into use as well.

The country has only just got back to the level of house building prior to the crash in 2009. The last time the nation built at the levels needed now was in the 1950s. But the extraordinary levels of house and flat building under Harold MacMillan was largely to make up for war damage and there was also a huge programme of slum clearance.  So much of the building programme was replacing existing housing stock.  It is also true to say that much of the building, particularly council tower blocks, was well below the standard that would be acceptable and legal now.

So how do we increase the rate of new home building by say 100,000 every year? It won’t be easy. The Prime Minister resorted to attacking the private sector volume builders, an odd position for a Conservative politician. It’s true that companies could build out their sites at a faster rate. But that’s not always going to be the most profitable option and like it or not, companies are not social enterprises so their shareholder interests are paramount. The bonuses paid to their directors, obscene as they might appear, are a consequence of this economic reality.

Theresa May also announced yet another review of the local authority planning system.  I was a minister at the Department of Communities and Local Government from 2013-15.  I believe that the Coalition Government wrung the most that was possible (or desirable) from reforms of the planning system.  There will be much diminished returns from further reforms, though some could work.  I also think that the Treasury led initiatives to help people onto the housing ladder have little scope for expanding the rate of house building. “Help to Buy” and its various funding cousins have certainly helped individuals finance their first house purchase and when the housing market was flat it would have stimulated new build. But now that house building has picked up there is a danger that the major result of finance schemes is to blow price inflation into the market.

So here are some reforms and initiatives that I believe will drive up the rate of housebuilding:

1              Planning reforms – I would tighten up two existing rules.  Housebuilder companies have been much criticised for “land banking” whereby they sit on sites without building homes once planning permission is obtained.  This stops anyone else taking on the permission in place for the site for three years. It should be straightforward to reduce the maximum time allowed between permission being granted and work starting on site.  There should also be tougher anti-avoidance rules to make sure that the clock isn’t stopped by minor works that are not a serious intention to build out the site. If the limit was reduced to two years then further pressure could also be applied after 18 months, opening up bids for someone else to acquire the site.

The second planning reform I would advocate is a tightening up of site viability assessments. Local councils enter into negotiations with developers for local improvements (highways works, etc.) and also for a proportion of the development to be affordable housing. Developers will, naturally, try to get away with as little as possible.  They will claim that the development is economically unviable if councils demand too much.  During the recession developers often wriggled out of prior commitments.  This may have been a pragmatic approach by councils at the time, some new homes (plus construction jobs) being better than no activity at all. There is no excuse for it now.  It would be better for all if the process was more transparent and assessed by an independent examiner. If a developer wishes to revise an agreement then they would have to pay for a report, with the consultants appointed by the council.

2              Restructuring local government – successive Conservative ministers have criticised local councils for their tardiness in driving extra house building.  Yet they’ve shied away from any meaningful structural reform. Local government in England is a mess, with some areas little changed from the last nationwide reforms in 1888 (county councils) and 1894 when district councils were created. Edward Heath’s government started to put in a more rational structure in the early 1970s. Then Margaret Thatcher and John Major scrapped the strategic authorities created by their Tory predecessor.  New Labour carved lots of city and large towns out of their historic counties, creating all-purpose unitary councils on tight boundaries. These are usually surrounded by small district councils, which hold the planning powers that are key to increasing the number of new homes.

The Conservative-Liberal Democrat coalition government made a start on re-ordering the map by creating a network of Local Enterprise Partnerships and providing finance to competitive local growth deals.  I appraised many of these and it was often clear that the lack of affordable housing was a drag on economic growth.  This was particularly true around Oxford, Bristol, Cambridge and other centres of the high-tech knowledge economy.

All too often the economic needs of a city are not the direct concern of the surrounding authorities, where protecting the character of small towns and villages will be seen as more important. There was little incentive for districts to expedite planning consents for new housing.  My Conservative coalition colleagues came up with the New Homes Bonus, a central government grant for each extra unit in the council tax base. This sounds fine at first but I found it objectionable as the extra money was funded from top-slicing the whole local government budget. Once data became available for a couple of years it was clear that much of the “bonus” was going to prosperous districts that had plenty of scope for expansion, at the expense of depressed areas that had little need for new housing.  At a time of a huge squeeze on council budgets this policy has become socially unjust and should be phased out.

The creation in May 2017 of new Regional Mayors and Combined Authorities in several conurbations (West of England, West Midlands, Greater Manchester, Merseyside and Teesside and Cambridgeshire) may bring people together for a more holistic approach to planning.  But the underlying structure of local government remains and it is unlikely that the May government will go for a big bang reform. During the coalition Eric Pickles told me that he kept a pearl handled revolver ready to shoot any (Tory) minister who talked about reorganisation.  The preponderance of Tory councillors in the shire districts makes Tory MPs nervous about upsetting their activist base.

But Dorset is about to restructure, abolishing all its districts, merging Bournemouth and Poole into a single unitary with the rest of the county’s towns and villages coming under a Dorset county authority.  The two new councils will undoubtedly save money and will hopefully also be a model for strategic planning in the rest of England.

I have long favoured a Dorset model for the rest of the country.  England should be divided between city region and county authorities.  The new structure would be more efficient, would have the potential to rejuvenate local council chambers and crucially, would be able to plan in a strategic way to meet local needs, including new housing. A duty to cooperate would ensure that structure plans were coherent across a county or sub-region.

3              State intervention in house building.  Even with a fit for purpose planning system it is inconceivable that we would get anywhere close to 300,000 units a year by relying on the private sector. The huge volumes reached over 50 years ago were achieved only with a large amount of state investment, with much of the delivery by local government. The state needs to get back into the business of building homes. That means enabling local authorities to build but also making sure that housing associations have the resources to expand their portfolios.

There should not be a return to the state building monolithic estates of council houses and flats. The state should finance the building of balanced communities of homes of different sizes for rent and sale. The Treasury should relax local authority housing borrowing constraints, making permanent an initiative I helped launch in 2014.  Local authorities, housing associations and other state bodies (the NHS and MoD own lots of land) could pool resources into a social enterprise to build homes for sale and social rent.  All profits would be reinvested in social homes.  To safeguard the asset base and to maintain social balance the ‘right to buy’ should not apply to new homes.

4              Diversify the housing mix.  While our housing stock has not grown to accommodate a larger population it has also not changed to reflect the changing demographic mix. There are more single households and people are living at home well into their eighties and nineties. More smaller units of accommodation are needed in the social sector, to free up houses for families.  The same principle applies in the private sector.  Many elderly people are living in houses that are larger than they need and are also expensive to adapt for reduced mobility.  People are reluctant to give up the autonomy they enjoy in their own home if the alternative is council sheltered accommodation often presided over by a jobs-worth warden telling them they can’t have flower pots outside their front door. We build far fewer units of high quality owner occupied flats and bungalows than other countries. Perhaps a tax incentive would get pension funds and other institutional investors more interested in this sort of long term investment.  At the other end of the age spectrum students occupy large swathes of neighbourhoods near to their university.  The huge expansion in student numbers in the last two decades has not been matched by new halls of residence or purpose built student flats. Local families have been crowded out of many streets by buy to let landlords. Universities or private investors should be incentivised to provide student rooms and flats and local authority plans should identify suitable sites.

5              Learn from others. My comments so far have referred to England, where I have been a politician as a councillor, MP and minister.  Local government and housing policy are devolved to Wales and Scotland. It’s possible that their governments have had more success in raising the levels of housebuilding and have invested more in social housing, though I’ve not seen any evidence that this is so.  Housing pressures are concentrated mainly around Cardiff and Edinburgh so it’s possible that the national need is not as urgent as it is in large areas of England. But there are undoubtedly lessons to be learned from many of our European neighbours.  There is a much larger private rental sector in prosperous countries such as Germany and Switzerland.  But the flats and houses are purpose built, owned and managed by institutional investors rather than the small private landlord model we have in Britain.  Modular build is also more common, enabling sites to be built out much faster than our traditional bricks and mortar method.

6              Address the skills gap.  Building more homes will require more resources other than land and money.  A big expansion cannot happen without the skilled workforce needed to bring sites to completion.  It is likely that Brexit will make this much harder, as freedom of movement ends and the pool of labour from Eastern Europe diminishes. A concerted drive is needed to attract more young people into the construction industry, with particular focus on the gender gap.

7              Quality and sustainability.  Finally, this is not just a matter of numbers of units. The mass building of the 1950s to the 1970s was often of very poor quality, especially in flats.  Today’s building regulations are much tighter. All homes, whether private or social sector, need to be built to high standards of sustainability and with generous dimensions.  As a minister I put in place a national standard for room space and also the legislation for “zero carbon homes.” The Conservatives governing on their own have scrapped the higher sustainable standards and the ‘allowable solutions’ that would have compelled housebuilders to invest in other environmental schemes such as retrofitting older homes.  This policy should be reinstated so that new homes are built to last and older homes (the vast majority of our stock is a century old) refurbished for more sustainable and affordable living.

 

 

Further information

DCLG latest housing statistics for 2016/17 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/659529/Housing_Supply_England_2016-17.pdf