Braced for the cuts
First Published 26 October 2016
Forget doing ‘more with less’. For housebuilders, it’ll be all about doing ‘anything with nothing’
Just about the only certainty in politics right now is that public money will get scarcer. So far, housing investment has held up, as the government pulled forward Homes and Community Agency budgets and pumped extra cash into propping up house building.
It’s debatable how well spent that money has been -some argue that it was essential to prevent a collapse of output and loss of capacity in the industry. Others say it has done little apart from rescuing a few housebuilders (and some housing associations) from bankruptcy and preventing the land market from finding a realistic price floor on which a reformed house building industry could start new projects.
Either way, it’s striking how quickly we have moved from the position 18 months ago when the HCA was being created. Then the buzz phrase was ‘doing more with less’. Today it is about doing less with more, as grant rates have risen far above pre-credit crunch levels.
Regardless of who wins the election, the pressure to reduce the ballooning national debt is bound to impact on housing. But all parties agree that we need homes, and particularly affordable housing -so the question will be ‘how can we do anything with nothing?’
Clearly, there are no magic solutions and everything comes at a price. But there are smarter ways public agencies could use the resources and powers available to them to get houses built without breaking the bank.
Even if we ignore the bits that are not great for building homes, like much of the Ministry of Defence estate, there’s a lot of public sector land that could be developed, most of it owned by local authorities. Councils have a duty to get ‘best consideration’ for assets, which many interpret as meaning ‘top market price’, and many rely on sales to support other programmes.
Of course, much of the land is not all that valuable, especially now. So instead of selling property assets for quick cash, public bodies should retain freeholds while releasing control of sites under licence. Developers could then access land for no upfront cost, with the proceeds of development shared between public and private sectors over the long term.
By breaking up large sites into small parcels, authorities could enable a much more mixed house building economy to flourish. Developers and housing associations could be joined by new market entrants, community groups, and self-builders -a much neglected source of housing supply that manages to produce around 20,000 homes a year, and without requiring any subsidy.
According to the National Self Build Association, self-builders invest around £3 billion in housing construction each year and could double or even triple that figure if they had access to sufficient land -and their homes tend to be better quality and greener than your average volume housebuilder’s ‘unit’.
The other big government levers are its regulatory and planning powers, which could be used smarter. We need regulation, but there is some truth behind complaints about the ‘burden of red tape’. Regulation works best when it is simple, clear, predictable -and unavoidable. That way the costs of compliance are known and can be factored into scheme costs, and there’s no distortion of competition if everyone has to obey the same rules. Our system is nothing like that.
Regulation in this country is both too restrictive and too weak. Our liberal history makes us reluctant to dictate outcomes through zoning, but poor outcomes and different policy pressures lead us to introduce more and more incremental regulation, creating our complex web of local, regional, and national planning policies, building regulations, environmental standards and design guides.
And the regime is constantly changing -a sure sign that it isn’t working properly. To simplify these overlapping systems and reduce transactions costs we need to be clear about what we want built -and to be bold about demanding it. Then we can let designers come up with ways to achieve those outcomes.
Combine these two approaches -greater public control of land and smarter regulation -and you get something like the Dutch model. Public land owners don’t sell land to any old developer at the highest price. They assemble the land, provide appropriate infrastructure, zone it and masterplan it properly, and pass on these serviced plots to partners proposing the highest quality schemes. Value for money comes in only at that stage.
The result is not only faster build out, better standards of development and a better range of providers, but less need for intrusive and petty regulation. If you control the land and write the masterplan you don’t need regulation to dictate doorknobs or daylight angles.
Toby Lloyd is a consultant at Navigant.