Government's Housing White Paper Disappoints Developers
England’s residential market is broken, communities secretary Sajid Javid told the House of Commons as he unveiled a white paper on the state of housing on Tuesday.
Homeownership is a “distant dream” for young families, Javid said, noting that average home prices had jumped to 7.5 times average incomes, and renters often paid over half their take-home pay.
A fresh wave of homebuilding is needed, but Javid warned that the density of development in England’s urban areas will have to increase and home sizes may shrink.
The white paper, entitled “Fixing our broken housing market,” laid out several new initiatives designed to boost homebuilding, such as: developers will be forced to use or lose planning permission within two years once granted (developers currently have three years to use it); older people will be given incentives to move out of large, under-used homes; and tenants will be given more protections.
Reaction to the white paper was mixed. Jonathan Manns, Colliers International head of regeneration and planning, said instead of a climactic end to the housing crisis, these were merely odd tweaks to the status quo: supporting a “quicker, more efficient and reliable approach” to planning applications; asking councils to review targets in their Local Plans, and calling for reviews of standardizing housing needs assessments. Manns said there is weakness where it really matters, noting the government ruled out any consideration of using the Green Belt to build more homes. He also noted a lack of big, groundbreaking initiatives.
"Far from watching HMS Britain launch a buccaneering pre-Brexit assault on housing injustice and inequality, we find ourselves on the deck of RMS Titanic whilst Sajid Javid and his band seek to provide a reassuring distraction. Affluent Baby Boomers, who clambered into the lifeboats of homeownership decades ago, drift quietly off,” Manns said.
Trussel CEO Ishaan Malhi also said it was a shame the white paper didn’t go further. “The current generation face an almost impossible task getting onto the property ladder and this is almost entirely down to a lack of supply, leading to unaffordable homes. This isn't the first time that the government has put housing at the top of its agenda, but so far we’re yet to see any real improvement in homeownership accessibility.”
Malhi said we need fresh thinking, and instead of relying exclusively on the big housebuilders, smaller and more innovative companies should have a voice.
That was a sentiment shared by several small builders. Inspired Asset Management CEO Martin Skinner, whose firm builds micro-apartments, said that many other small developers need to reach 50% off-plan sales before lenders will release development finance — and that means companies rely on buy-to-let investors to get projects off the ground. “We hope that some of the £3B Home Building Fund will filter through to developers like us. SME developers are key to unlocking smaller sites and delivering new homes as quickly as possible,” Skinner said.
LendInvest chief investment officer Ian Thomas (shown) agreed, saying the success of small scale housebuilders is of critical importance to the increase in housing supply. “Government must put SMEs at the fore, providing them with access to finance, land and skills to put homes on British streets,” Thomas said. "We want to see these small builders and property investors at the front of the queue to purchase public land and we look forward to opportunities to work with government to get public finance into the hands of these developers."
Close Brothers property division managing director Frank Pennal believes the government's plan will aid small housebuilders. These groups regularly cite land, planning and finance as the major barriers to expansion, and the white paper provides a meaningful way forward to address these issues, particularly the government’s pledge to release more small and medium land plots. With estimates that 60% of new homes are built by just 10 big building firms, the new housing strategy will encourage smaller construction firms to complement large housebuilders that have been dominating the sector.
DWF housing partner Richard Birks took issue with the government speeding up the building timeline, saying the government is punishing large builders, and that the private sector is in the crosshairs. Major housebuilders with substantial land holdings are a prime target and these measures will force them to speed up the pace of delivery, he said. He summed up the government’s position as “build out or sell up, and don’t think a material start on-site will preserve your planning position."
Birks said the government’s threat to use Compulsory Purchase Orders or send sites to auction is a radical solution, and stalled developments are now at risk and the days of constructing at a pace to suit the developer could be coming to an end. How this plays with the costs of materials, subcontractors and labour market pressures is anyone's guess, Birks said.
That was a sentiment shared by Toby Greville, Colliers International director of residential development. He said everyone wants to increase housing supply, but many hold a deep-rooted suspicion toward developers and seek to tax private developers through social housing contributions and community infrastructure. Their demands can render proposed projects too risky and unprofitable.
“Developers are used to lodging planning applications with the knowledge that their application will be refused on political grounds, only to win their case after a costly and timely appeal,” Greville said. “It’s rarely in the developers’ interests to land bank, and the consequence is too many decent projects are left unbuilt. Sadly, the Housing White Paper’s answer to this is to seek to deter ‘unnecessary appeals’ by imposing an appeal levy. Many more applications are passed on appeal than are refused; clear evidence that the fault lies with the local authority’s planning committee. The White Paper offers no solutions to this.”
Audley Retirement CEO Nick Sanderson wanted to see more incentives to free up housing occupied by older people.
“We had hoped that the government would use today’s White Paper to finally introduce incentives to downsize, but we have been left disappointed once again,” he said. The paper lacked any commitment to action, Sanderson said. “Delaying putting in place any actual initiatives lacks drive, and misses the point. The point that our population is getting older. And fast. A commitment to ‘all types of housing’ must include the swift provision of high-quality retirement housing, which, alongside financial incentives to downsize in the form of long-overdue reforms to Stamp Duty, will address the lack of movement at the top end of the market. If the view is that the housing model is broken, a continued laser-focus generating supply at the bottom end is not the answer."