With new building nowhere near reaching the politicians’ ambitions, the housing crisis is worsening. RIBA’s Future Homes Commission’s report just might be the tool to inject some money and will into the building programme, says Lee Mallett
Widespread press coverage for the RIBA’s Future Homes Commission shows how hot a political potato the housing shortage is. RIBA can take credit for an astute choice of topic. The Commission, chaired by business leader Sir John Banham, has called for a ‘revolution’ in home building, its scale and quality, and recommends five big changes. A tripling of new homes to more than 300,000 a year including a big increase in rentals, a new £10bn Local Housing Development Fund using pooled council pension funds, a more user-friendly market with better information and valuation focused on design attributes, a lead role in all this for local councils and, of course, better design.
Even before 2007, Britain was investing only 3.5% of GDP in new houses, compared with 6% in Germany and France. The result is 2 million families on council waiting lists and an annual benefits bill of £20 billion – £800 for every household. Given increasing household creation, we somehow have to triple production. Average production in the 15 years to 2007 was 150,000. Now it is below 100,000.
Perhaps the report’s boldest idea is not the suggestion that £10 billion of council employee pension contributions should be steered into housing, but that delivery of affordable and market housing should be ‘decoupled’.
The Commission says councils are ‘blocking housing developments... by imposing excessive Section 106 conditions... that require developers to include a percentage of affordable homes.’ The idea of de-coupling market homes from affordable housing is another startling attack on current consensus.
Sir John Banham, former head of the CBI and the Audit Commission, is unrepentant: ‘The brutal fact is affordable housing policy has failed. And in the countryside you end up with houses that are not affordable being built in the wrong place, or not at all.’
‘The big problem is that a village might need 25 affordable homes, but the developer has to provide 100 to pay for them. Then nothing gets built. That’s what my fellow commissioner Mavis McDonald says has happened at Land Securities’ Ebbsfleet development for the last 10 years. It is the coupling of things that ought to be completely separate,’ says Banham.
‘The attempt to tax developers by tacking on affordable homes has not provided them where they are needed. How come we have 2m people on the waiting lists and spend £20bn on housing benefit every year? We’re not saying they should be totally decoupled – just that since the Localism Act local authorities can be more flexible about the way policy is applied.’
Affordable housing contributions have become a political shibboleth since Ken Livingstone introduced them in the early Noughties. Taken up by councils across the land as a handy vote winner, they have been whinged about loudly by the property industry. Yet trade bodies seemed to think it futile to oppose such policies. Tax the development industry and create more mixed communities. What could possibly be wrong with that?
Nor have either of London’s mayors been able to explain whether the policies are effective or not. But it is clear Ken and Boris have failed to provide enough housing. This summer’s 2011 Census figures showed London’s population has ballooned to 8.3m, making a nonsense of the statistical base for the London Plan and its housing policies. It may be ideologically desirable, but affordable housing policy nearly everywhere is having the opposite effect of that intended.
‘Councils have encouraged housing associations while pretty much ignoring the potential of their own £180 billion’s worth of property portfolios’
Yet councils remain addicted to providing housing for voters. They have encouraged housing associations while pretty much ignoring the potential of their own £180 billion’s worth of property portfolios. There is an unhealthy symbiosis between councils and housing provision. From Dame Shirley Porter’s adventures in Westminster in the 1980s, to Tower Hamlets’ and Camden’s perpetual embrace of poverty, each in their own way are evidence of how the Welfare State’s ‘homes for all’ has mutated into what looks suspiciously like gerrymandering in the absence of social and economic improvement. A cynical interpretation is that some councils like keeping poor people in council property, maintaining a permafrost of deprivation while ignoring the huge undeclared value locked up in their properties and handing out benefits subsidised by a wealthy elite who live in neighbouring ‘conservation area’ ghettoes.
The report’s acknowledgement of some of the demagogic unreality behind affordable housing policies, their brake on development and its recommendation that ‘a long term solution is needed if the problem is not to recur’ (a reference to the proposal to let the Planning Inspectorate conclude stalled S106 negotiations) suggests a new realism is dawning.
Yet the old enemy, bafflingly, remains new development. The Commission argues that good design could change this, but is eroded by ‘excessive S106 conditions’. Roger Graef, another of Sir John’s four non-architect commissioners, is one of the UK’s most respected criminologists and film-makers. He is passionate about the need for better design.
Graef says he was ‘fascinated and horrified’ by what he saw researching the report – quite a statement from someone who has made the films he has. Tiny second bedrooms, no storage, a lack of information in sales details about the benefits of good design, and a consequent lack of value attached to that good design, are his chief targets.
‘Most people think Edwardian houses supply the light, storage, and flexible space we all want but that new homes do not. That’s shocking,’ says Graef. Only 25% of people questioned said they would prefer a new home to an old one.
‘We’re not valuing good design. There is so little information about what is good design – the savings on fuel bills, the storage, the flexible space – we want value to be made apparent so it can be appreciated by purchasers and valuers,’ argues Graef.
‘Also people don’t want new homes built in their community even though they know they need them. Making new homes an attractive proposition is clearly vital. Opposition is rooted in perceived poor quality... and the fear that a shoddy new estate will hit the value of existing homes,’ says Graef.
‘If we build developments where the amenities are present from the start, there will be less opposition. We want authorities to use the Localism Act to take a lead in enabling better development. The best authorities do understand good design – we saw some great schemes in York, Nottingham and Newport. They need to share their knowledge. We think this report cracks something fundamental and we want to see some action.’
The commission’s big idea is for 300,000 new homes a year to be partly financed using £10bn of pooled local authority pension funds, managed by a new independent housing fund that local authorities and developers would pitch schemes to. Under 1% of the UK institutions’ property portfolios are invested in residential.
Banham points to the Ontario Public Service Employees Union pension fund which has pooled smaller funds and generated higher returns. His investment expertise stems from his directorship at Invesco, one of the world’s largest investment funds. He believes the build-to-rent market might help plug the scary hole in local authority pension funds, which is calculated at £2,000 per UK adult at the moment. This poses the threat of councils having to raise council tax to plug it in the near future. He suggests the Local Housing Fund (administered by the fund’s trustees, not the councils), might offer a way into higher returns that would also re-ignite the British economy.
‘The potential is there to add 3% growth a year to Britain’s GDP. It is very rare in my experience that such a substantial economic and social prize is within reach,’ says Banham. ‘This idea is transformational. The last time I saw such a chance in was as a partner at McKinsey and we suggested we stop supporting car maker Chrysler in the UK and invite the Japanese in. That had a similar order of impact on UK GDP, with Nissan, Toyota and Honda subsequently helping grow the economy.’ Let’s hope Eric Pickles’ proposal to double the amount council pension funds can legally invest in infrastructure, announced immediately after the commission’s report hasn’t shot good Sir John’s fox.
Even if you could build 300,000 houses a year, however, housebuilders would not want to develop more than they could sell. Savills highlighted this effect in London earlier this year. Some 2,250 sites across the capital are capable of producing 725,000 homes. But only 46,000 homes on just 600 of these sites are expected to be built over the next five years because development finance is limited, as are mortgages. It’s like trying to run a Rolls Royce on the petrol and air mix for a moped.
‘The greatest British shibboleth, that we all aspire to be homeowners, ensures rented residential still struggles to achieve competitive financial returns over owner-occupied homes’
All parties, including this commission, suggest the answer is more build-to-rent – a new bulk-buy institutional marketplace to replace individual investors, who had kept the market afloat until 2007. There is an unholy alliance between institutions and supporters of social housing to provide much more rented accommodation that will, they argue, make us more like Europe. The campaign has born fruit in the Athletes Village where deep-pocketed Qatari Diar has invested. Aviva Insurance is also a fan. There will be more, but all will be competing with the greatest British shibboleth, that we all aspire to be homeowners (and create our own pensions, as we no longer trust the City to do that).
This deeply rooted, tax-free, individual desire has been the real driver of values and ensures rented residential still struggles to achieve competitive overall financial returns over owner-occupied homes. The imbalance between the two is too great to accommodate within a single residential land-use class. But that could change as buyers become scarcer and renting more popular.
Other shibboleth-busting notions the commission might have tried include the politically suicidal notion of abolishing tax-free gains on private homes. Or a separate land-use for build-to-rent. Without those measures, the creation of build-to-rent will rely on councils securing this use contractually with developer and investor partners.
The Future Homes Commission’s recommendations are a useful crowbar to pry apart ineffectual consensus. It is also a sign the RIBA is engaging in real issues productively, not just feathering the nest of the profession, which has been perceived as despising housebuilders and the private house market for a long time, and so been excluded until recently from provision of the most popular built typology while sneering from the sidelines.
Times have changed. This month Barratt, the name most synonymous with house-building thanks to the eponymous Sir Lawrie’s 1970s TV advertising campaign, sponsored the charity Article 25’s exhibition of architects and artists’ drawings at Somerset House in aid of disaster relief. That, and the commission’s report, is welcome evidence that the class-based rift between the artisan housebuilder and the professional architect is at last ending. That must be good news for British housing.
Lee Mallett is co-editor of Planning in London magazine and consultant to Taylor Wimpey and London & Quadrant on Chobham Manor housing scheme in the Olympic Park.