Against a backdrop of greater commitment by key stakeholders, increased funding availability and improved engagement in delivery partnerships, three acute issues must be tackled to achieve a step change in housing delivery.
In response to the sector’s call for support in meeting the goal of 300,000 new homes per year, the government has lifted the cap on councils’ ability to borrow to fund housing and increased the funding allocated to affordable housing.
At our recent annual housing conference, Sir Edward Lister, Chairman of Homes England said, “Never has central government shown such commitment to Homes England, with the agency having more money, the right people and a focus on increasing its delivery capability at an unprecedented rate.”
From a London perspective there is also unequivocal commitment by the Mayor of London, with the Greater London Authority focused on the delivery of its Affordable Homes programme that will see £4.8 billion invested to build 118,000 homes by 2022.
The public and private sectors are also working ever more closely together, in many instances through commercial partnerships, to ensure the delivery of increased housing. This has seen an increased focus from local authorities on commerciality and value creation. At the same time there is a growing appetite from the private sector to deliver in new ways. Both these approaches increase the potential to deliver housing at pace.
Despite this positive backdrop, however, three acute issues remain that must be addressed for housing delivery ambitions to be met:
1 Skills and talent
Progressing schemes to construction commencement has been a challenge in the past. The market now recognises the skills shortages and the need to build capacity at a local and regional level, as evidenced by public sector bodies increasingly working together. But more still needs to be done.
According to the Royal Institution of Chartered Surveyors, the 'business as usual' model is unlikely to stand with low productivity and the risk of losing around 10% after 29 March 2019. The industry recognises that it needs to attract significantly more talent and increase diversity. However, if this is to be achieved, a national solution is needed given the real risk of falling behind the pace required for such a significant increase in housing delivery.
2 Diversity in the marketplace
Ten years ago, there were 12,000 SMEs building 40% of homes. Today there are 2,500 SMEs delivering 12% of homes. The market is now dominated by a small number of large corporates, but there is room for organisations of all sizes. SMEs need to be encouraged back into house-building - from in-fills to new towns and the schemes in between.
SMEs face barriers such as the planning system, which is weighted towards the larger corporates. A solution would be to simplify the planning system to make it more cost effective and straightforward for SMEs to enter the market.
Additionally, the UK tax system could be reviewed to understand what additional benefits could be offered to SMEs to allow them to engage more actively in the market and reduce the disproportionate time they are required to spend on tax compliance, when compared to larger corporates.
3 The cost burden of infrastructure
If we want high levels of affordable housing alongside infrastructure and the required public realm, then something has to give. A key area of this debate is land value capture. There are several examples where the public sector is investing large sums of money to deliver infrastructure, but land owners and investors are taking the uplift on land value.
Innovative thinking is required to ensure land value is not leaked. Models such as CIL, s106 contributions and roof tax are already used, but further radical thinking through the tax system could recover the benefits and recycle funds that are created from infrastructure investment.
These areas are all necessary for action if these challenging targets are to be realised within the set time frames. Unfortunately, there is no one silver bullet but many of the fundamentals are now in place to help secure increased housing delivery. We now need to focus on unblocking the remaining challenges and catalysing the sector further to increase the pace of delivery from a diverse set of organisations in the market.
To discuss this further, please contact Ian Tasker.