13 Dec 2017

Is Government hindering or helping housing, asks Chris Brown

Is Government hindering or helping housing, asks Chris Brown

From the point of view of what we might call the Right to Build sector – Custom Build, self-build and community-led development – the run up to the budget and the budget itself could be seen as quite depressing for housing.

Despite the Government’s apparent wish to deliver large numbers of homes, its intention that these should be in high demand areas and its apparent understanding that the speculative housebuilders weren’t going to deliver them, the actions taken seemed to suggest the opposite.

And this is with a possible 300,000 new homes target, although I didn’t hear the Chancellor actually pledge this number, despite newspaper reports.

Help To Buy bias

Government started by throwing a huge slug of money – £10 billion – at Help to Buy. The lucky recipients of this include the senior management bonuses at a small number of major housebuilders. And it delivers homes anywhere, not necessarily where they are needed.

While politicians are currently very vocal about the salaries of the leaders of our universities they seem strangely quiet about the flow of vastly larger sums of public money into the pockets of the housebuilders. And of course none of this money touches the Right to Build sector as it isn’t eligible.

Then they pushed a much much smaller amount – £2 billion – into affordable housing. Again the Right to Build sector isn’t eligible as you have to be a Registered Provider to receive this cash.

Missed opportunity for Custom Homes

Then came the Budget itself. With housing at its centre piece we might have expected some mention of Right to Build or Custom Build, but there was none.

Those looking for hope will have seen mention of £630 million for infrastructure and remediation of stalled small sites and £1.5 billion for loans to SMEs. However we know that the workings of the State Aid matrix mean that these loans have double figure interest rates for community-led housing groups, and so are unaffordable.

More encouragingly, there was no mention of scrapping the CIL exemption for Custom Build that was recommended by the CIL Review Group but we await the consultation to see if this holds.

For those looking for greater levels of hope, these housing announcements have further to run.

Community-led financial boost

At the inspirational Community-led housing conference on the Monday after the Budget, the housing minister announced the resumption of the Community Housing Fund of £60 million a year, for the next four years.

This followed a brilliant grass-roots campaign coordinated by the community-led housing networks, that culminated in our Custom Build champion, Richard Bacon MP, asking a question at Prime Minister’s Questions that she couldn’t answer.

This £60 million is not much but it could make a massive difference. It was hugely welcomed at the conference with one major caveat. The money must be flexible to meet the needs of the community-led housing groups and not the other way round.

There is a huge concern among the community-led groups that they might be forced to become Government-regulated housing associations or be forced to work with Registered Providers who would own the homes, thus also raising the spectre of Right To Buy.

A major pilot of the Right To Buy was also announced in the budget, and this would defeat the object of supporting community-led building almost entirely. We should expect an announcement before Christmas on the arrangements for the Community Housing Fund.

Homes England

Before that, and central in the process, the Homes and Communities Agency will soon be rebranded Homes England and move out of the Department of Communities and Local Government’s offices.

This is symbolic of the Agency becoming rather more self reliant. We should expect new financial arrangements which might prove to be more important than the Budget measures.

The Budget mentioned an intention to explore the possibility of £8 billion of guarantees and it is likely that, in addition to their ability to make loans, HCA will also be thinking about investing equity.

With all these tools in the box (and CPO powers, also mentioned in the Budget) the newly refreshed agency will have a lot of delivery clout.

Currently, there is a major lack of understanding of Custom Build and community-led housing among the senior management of the Agency.

But despite this, it is far more likely that a delivery-orientated body with substantial financial resources and flexibilities will be able to build the sector once it learns what is needed. And they do have some good front line people who do get it.

Of course they don’t have their hands on the planning system or the tax system or public land disposal rules, all of which need tweaking to get these alternative supply sectors growing to their full potential.

That potential, based on a reasonable evidence base from international experience, suggests that the Right to Build sector could deliver between 50,000 and 100,000 homes a year.

Who’s sitting on land?

It will be interesting to see what comes of Oliver Letwin’s review of land banking. The gossip is that the Chancellor doesn’t believe landbanking happens, which suggests that the speculative housebuilders are whispering effectively in his ear.

As the excellent Who Owns England blog points out, no-one actually knows, because the data simply isn’t available. Government claims to be on a mission to digitise property data. I wonder if it will start here?

You would think this would be a priority, as so much turns on whether the land with planning permission, or capable of being developed, is in the right hands and being delivered as fast as possible.

Its arguable that much of what the Government is doing about solving the housing crisis is actually counterproductive and making a broken market even more broken.

Help to Buy and the SDLT reductions will further push up prices, make a housing crash increasingly likely and help the speculative housebuilders the most, while failing to diversify supply.

But there is definitely hope with the HCA who may have longer time horizons, be less beholden to political funding and be more analytical, and flexible, about how to diversify and thereby increase supply.

There are more announcements to come, including around planning, so more opportunities for Government to put things back on course.

Chris Brown is Executive Chairman of Igloo Regeneration

Click here for further opportunities for Custom Build in the Autumn Budget.

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