Climax City

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Resetting the UK Housing Market?

First published as a column in BD 31st Oct 2019

A few years ago I asked a volume house builder client of ours why it took them so long to build-out their large sites. This was prompted by a news report at the time suggesting that, at current build rates, Ebbsfleet Garden Village would take more than 70 years to deliver (it has since speeded up). I put to him the widely-made accusation that the big house builders were restricting supply in order to keep prices high. His response was that on a big site they could be out of pocket by tens of millions before selling the first house. In no way was it in their interest to slow down sales given their borrowing costs. If anyone could tell them how to sell more that the one or two units a week from each sales office then they would love to hear from them.

Well Sir Oliver Letwin has just delivered a report to the UK Chancellor doing just that. Commissioned at the time of the 2017 budget he was asked to explore the gap between the number of new homes consented and the numbers delivered and how we might increase the latter. The report largely endorses the view of my housebuilder client and while it doesn’t make particularly comfortable reading for the industry, the first two thirds will not worry them unduly. However it ends with a radical twist that is very much in line with our thinking in our 2014 Wolfson Economics Prize essay and which could change everything.

The amount of new housing is affected by two broad factors – ‘delivery rates’ and ‘absorption rates’. The former is the speed at which we can build new homes and the latter is the speed at which they can be sold. Letwin identifies a number of delivery issues such as lack of transport infrastructure and site remediation but dismissed their impact on delivery. The only delivery issue that really worries him is a lack of skilled labour although he manages to duck the Brexit issue, arguing instead for ‘a five year flash programme of on-the-job training’.

The real problem according to the report is the absorption rate, and while he doesn’t say this out loud, the message is that you will never sell more homes if you keep building the same old stuff. There are only so many people in each housing market who want to buy a mass housebuilder three bed semi. The answer is to increase the diversity of housing on large sites in areas of high demand and much of the report is devoted to the policy levers that could make this happen.

Large sites are defined as those over 1,500 units and no breaking up your large site into chunks that are smaller than the threshold – planning authorities will be able to designate these large sites in their plans. Areas of high demand are not defined and, as someone who works across the country, I’m not sure why these proposals shouldn’t be applied across the board.

For private sites the proposal is to make the housing mix on site a reserved matter so that reserved matters applications will need to show how they are going to provide a mix of unit sizes, tenures and types, including custom-build and self-build. The idea of diversity is  widened to include more distinctive settings, landscapes and streetscapes and emphasises the importance of masterplanning which is of course very welcome. This can all be provided by the same developer, since Letwin has retreated from his initial idea that sites should be broken, up but he does encourage the house builders to work with smaller specialist developers. Up to this point the report leaves you with the feeling that none of this will do any harm but that there is plenty of scope for the army of planning consultants and lawyers who buzz around housing sites to water it down, to argue viability and to carry on broadly as they are with some token changes.

However at this point the report gets all radical and sets out a range of proposals that are very much in line with what myself and my colleague Nicholas Falk have been promoting. It suggests that local authorities should be able to designate large sites in future plans along with strong masterplanning, design codes, infrastructure and housing mix requirements that could reduce the value of the land to as little as 5% of what it would be worth with an unencumbered planning consent. In theory this would reset the UK housing land market to values of around £100,000 per acre, which would be comparable to Holland and Germany and would allow much more to be spent on the quality of what is built. However we would agree with Letwin’s analysis that there is a huge gap between theory and practice in British planning and this can’t be relied upon.

So he goes on to propose a change in primary legislation to allow local authorities to acquire large sites that they are designating in their local plan at the ‘value which such land would have in the absence of the development scheme’ which I think means existing use value. They would then be able to set up some form of development corporation (various models are suggested) to act as ‘master developer’ for the site. This master developer would be responsible for the masterplan and design coding, the strategic infrastructure and for parcelling up development sites for onward disposal (probably via long leases) to developers. Exactly! That is what we have been saying all along. That is how it is done across most of Europe and, until we grasp the nettle, we continue to produce the same old stuff.


Place Alliance – Big Meet 4

On 27th October the Place Alliance held the fourth of its Big Meets in London. The packed meeting was addressed by Brandon Lewis, Minister of State for Housing and Planning. I was one of a number of people asked to make a response, although of course the minister wasn’t able to stay to hear these responses. I therefore promised to post what I said…

Dear Minister

It is good to have the opportunity to thank you today. When I won the Wolfson Prize last year I was in such trouble with many of my friends and colleagues. Then the  minister released a statement saying that our essay was rubbish, and certainly wasn’t, nor would it ever be government policy and my reputation was rescued! I can however sympathise with your position, a number of the things that we suggested are politically impossible, not just for a conservative minister like yourself but, as I have found in my subsequent discussions, to politicians of all persuasions. This is the tragedy of current housing policy, there is a broad consensus that the current system isn’t working as it should and that something should be done but a unanimous view that it is all but impossible to change.

I have spent the last twelve months talking at conferences like this to a wide range of people and we have been looking particularly at the situation in Oxford and Sheffield. From these discussions I would suggest the following four impossible things that we need to find a way of doing:

  • Large scale change: let us start with the easiest – a mechanism to allow us to act on a a large scale, as we did when we cleared our slums, built our new towns or indeed staged the Olympics. The current mechanism for doing this is a Mayoral Development Corporation as has just been designated at Old Oak Common. Manchester and Sheffield may go down this route once, once they have mayors but not everywhere will have a mayor. Whatever we call them we need a way to designate bodies that can act across borders, acquire land, assume planning powers, borrow money etc…
  • Cross boundary planning: In many places administrative boundaries are now drawn along the back garden fence of the last house in the town. If we are to plan properly we need a mechanism to allow us to plan for housing growth across housing market areas which means across administrative boundaries. Virtually no one I have spoken to believes that the duty to cooperate is working and, while I realise we are not allowed to talk about regional planning, there are some things that can only be planned locally once a policy context has been set over a wider area, housing is one of them.
  • Land value capture: The planning system in the UK is based on the nationalisation of development land rights. The value of land is therefore a national asset and the ‘unearned increment’ as Ebenezer Howard called it, is being redistributed to land owners every time land is allocated or planning consent granted. Because of this land in The UK is far more expensive than elsewhere in Europe and a disproportion amount of money, time and effort is spent unlocking its value rather than building good homes. This it seems to me is the main reason why the quality of housing in countries like Holland and Germany is so much greater than in the UK.
  • The green belt: Finally the most difficult one of all! Green belts perform a very useful function in preventing sprawl (note the present tense). However in any successful place there will come a point when the demand/need for new homes exceeds the capacity to build within the settlement. At this point current policy means that either housebuilding grinds to a halt, as in Oxford, or land is allocated in surrounding districts beyond the green belt. In the latter case people are forced to commute back across the greenbelt, often with no alternative but to use their car. It would be much more sustainable to build in a planned, managed way within the green belt. We estimated that you could double the size of Oxford using just 7% of its green belt. I know it’s difficult but we need to create a plan-led way of doing this.

How does the saying go – the difficult we can do straight away, the impossible takes a little longer. Now that the government is in a reasonably secure position I would hope that now is the time to address some of these impossible tasks. I accept that the politics is difficult but I do think the case can be made, and that there is a cross-party acceptance of the need for change.