REVIEW OF 2017, Richard Hyde - Editorial Panel Chair
(links to each report in pink)
The seminal work produced in 2004 by Kate Barker defined the number of houses that needed to be built each year to support macroeconomic stability, labour market flexibility and provide more affordable housing at between 195,000-245,000. This was referenced in many of this year’s publications, including the Government’s own housing needs analysis in the February White Paper “Fixing our broken housing market” which set a figure of 225-275,000 homes per year. Since the 1970s there have been on average 160,000 new homes built each year. In 2016-17 we built 183,570. This increases to 217,000 if change of use is included.
There was no shortage of solutions offered to resolve the lack of supply in total and across particular forms of tenure, including social housing – some of which may have helped influence the Governments renewed interest. Housing our ageing population and the implications of not doing this was the focus of a number of papers.
Before I dive into an examination of the best of these reports I want to look at the implications of not building enough homes; the ‘so what’ question. Perhaps a pertinent starting point given that some voices have questioned whether we actually have a housing crisis.
Two reports on how homelessness and rough sleeping are linked to the shortage of affordable homes stand out. The NAO report for DCLG in September produced some stark data. It stated that the ending of private sector shorthold tenancies is main cause of homelessness which has risen from 11% to 32% in last seven years. Local Authorities spent £1.15bn in 2015-2016 on homelessness. There are 77,000 households in temporary accommodation, a 60% rise since 2011. Homelessness is more likely in areas with the least affordable housing; ie there are wide regional variations. Private rent accommodation costs have increased three times faster than earnings and in London this is x8. In March the CSJ looked at housing led solutions to rough sleeping and homelessness . There are 4,000 rough sleepers out on any given night and this is up 130% since 2010.
The impact of housing supply not meeting demand was looked at by the Resolution Foundation in its Homes Affront report which said that the millennials, who are financially locked out of house ownership are four times more likely to rent than they were two generations ago.
Solutions offered to help resolve the housing shortage
Land availability and the scope it has to impact on the ability to deliver housing was looked at in a number of papers. The IPPR and Michael Lyons edited collection of think pieces offered a variety of imaginative and thoughtful analyses. This report covers a wide variety of areas and the Editorial Panel praised the strength of its analysis. The section on land reform challenges the boundaries and quality of the current greenbelt provision where no real changes have occurred since 1955. It questions why, if we can reform the NHS, the greenbelt is sacrosanct. It has an insightful chapter on the German success at land assembly – something that Nick Boles, MP picks up in his housing thinkpiece published in the autumn. Civitas develops this further in its Building Homes Faster Report and its very recent update which proposes amending the Land Compensation Act to remove “hope value” which they believe is increasing the cost and slowing the pace of construction. The Financial Times series on UK infrastructure looked at how high land values work against the public sector’s capacity to provide affordable homes. Whilst the private sector can benefit from land value capture (values rise once permission is given) to finance the construction of affordable homes the public sector has to pay prices that take into account potential planning permissions and infrastructure, rather than just the current use value. It proposes that the law needs to change to allow councils to benefit from the uplift in land prices.
Planning and its liberalisation was a common theme with many proposing this as an important way to get more house built but we were reminded in "Lyons2" of the evidence from the Spanish and Irish property crunches that planning freedoms were contributory causes .
Local Authorities and their potential to increase the supply of housing was reported on by many. Toward the end of 2017 the Association of Retain Council Housing and the Nat. Fed. of ALMOs published an analysis that concluded that lifting the housing revenue account (HRA) borrowing caps would allow local authorities to deliver at least 15,000 new homes. This would be achieved by allowing councils to manage the HRA in line with the existing Prudential Code for public borrowing. Localis also looked in detail at the benefits to housebuilding by lifting the HRA cap. The rise of local housing companies (LHC) was reviewed in October by the Smith Institute . They suggested that LHCs offer councils a “triple dividend” in the form of much needed extra housing, a greater stewardship role in place-shaping and a financial return to the council. There are now probably as many as 150 LHCs in England, most formed in the past few years. On the current trend, this could increase to 200 by 2020.
One of the more imaginative ideas was on funding and Respublica’s proposal for a National Housing Fund. This would boost housing supply by utilising the government’s ability to borrow money at historically low rates. It calls for £100bn of investment over ten years which would build up to 40,000 more rental homes per annum. The money is invested in homes for rent, managed by housing associations (who also own a share of the fund). Rents are used to repay interest costs and management costs. It is noteworthy that this report seems to be underpinning some of the current Government ‘chatter’ on the way to radically boost supply. The Editorial Panel questioned whether all the new houses would really be additional.
Structural constraints caused by the decline of small building companies and over-centralisation were well covered. Two reports on devolution stand out. The Smith Institute suggests ways that the new metro mayors can use their powers to the best advantage and what other powers could be devolved. At times this does become a bit of list of government asks but the analysis picks up on some of the more creative and innovative proposals. An example is the Cambridge-Peterborough combined authorities’ approach that should demonstrate that real flexibilities are not just confined to London. There is also the £1bn Tees Valley equity based investment vehicle. The Joseph Rowntree Foundation looked at how the new city regions can tackle poverty though their housing and planning policies. JRF have identified that at present only a small number of small city and town local authorities are addressing inclusive growth through direct intervention. JRF conclude this is a key missed opportunity, and that the small number of proactive interventions being pursued at the moment could be easily scaled-up and pursed at the metropolitan level.
The need for the house building sector to modernise its methods of construction was picked up in the government’s white paper which followed the comprehensive analysis produced last October by Mark Farmer This 80 page review had a 'by the sector, for the sector' feel to it. As a result there are sections that focus on the minutiae of what trade bodies need to be doing to respond to a stark picture of low productivity, poor skills and old fashioned procurement. If the built environment sector wants to see a change in behaviour a detailed prescription is probably needed and here it is!
Rent controls/regulation have reappeared on the political horizon and Thinkhouse selected three reports that shed light on the subject. Alex Hilton’s ‘How to repair the housing market’ for the CWU , IPPR looked at the German rental market and the Joseph Rowntree Foundation’s review of the Irish regulation system for their rental market .
.. and finally housing our ageing population
2017 saw a steady flow of reports that assessed the consequences and costs of not housing our ageing population in appropriate housing. Many analysed the impact on care support services. In September KPMG in their Reimagine Housing report took a look at sharing the value of an elderly persons existing property between the costs of buying a new smaller flat in a modern care complex, their relatives, future living costs and future care costs. It also considered multi-generational living ie students offered cheap accommodation in exchange for acting as a ‘buddy’. The LGA along with Housing LIN produced Housing our Ageing Population which offered some useful statistics and best practice case studies. The number of people aged over 65 is forecast to rise over the next decade, from the current 11.7 million people, to 14.3 million , a 22 per cent rise. This means that one in five of the total population will be over 65 in 10 years’ time, which will become one in four by 2050. In the UK, the vast majority of over 65s currently live in the mainstream housing market. Only 0.6 per cent of over 65s live in housing with care, which is 10 times less than in more mature retirement housing markets such as the USA and Australia, where over 5 per cent of over 65s live in housing with care. The suitability of the housing stock is of critical importance to the health of individuals and also impacts on the demand for public spending, particularly social care and the NHS.