Building Boss Seeks Meeting With Housing Minister

The managing director of one of the UK’s most successful regional building companies, who earlier this year wrote to Prime Minster Gordon Brown appealing for action to prevent a complete halt to house building, is seeking a meeting with housing minister Margaret Beckett.

Karl Hick, head of Bourne (near Peterborough) based Larkfleet Group (www.larkfleetgroup.co.uk), wants to discuss issues including the impact of the ‘credit crunch’ with Mrs Beckett who was recently (October 2008) appointed by Gordon Brown as Minister of State for Housing in the Department for Communities and Local Government.

Just weeks into her new role she was due to meet industry leaders in London recently after Mr Hick wrote to follow up some of the concerns he raised with the Prime Minister. However, pressure of Parliamentary business meant she was forced to pull out of the meeting at the last minute.

Mr Hick said: “Mrs Beckett clearly has many demands on her time. It is disappointing that we were not able to meet last month but I hope we can do so soon. I think the house building industry has a number of important issues to raise with the government.”

Mr Hick has written to Mrs Beckett to outline some of these issues, including the impact which the financial crisis is having on funding for ‘affordable homes’ – homes built by housing associations for people who cannot afford to buy a house, even at today’s lower prices. Many of these homes are financed partly with money from the government’s Housing Corporation, with the housing association often seeking to borrow the rest of cash from banks.

Mr Hick said: “Many of these vitally important housing schemes are being held up because the banks are not approving the necessary loans – or certainly not approving them swiftly enough – despite the fact that there is very little risk because much of the money is coming from the Housing Corporation.

“Most of the major banks in this market are ones in which the government has now taken a large shareholding. I would like the government to use the influence it should now have to get the banks to honour their promises to lend at similar levels to last year.

“This would release funding to provide housing for some of the most vulnerable people in society. At the same time it would provide a core of work for builders such as Larkfleet at a time when the open market for new housing has virtually collapsed.”

Mr Hick also wants the government to put pressure on the banks to provide mortgages for ‘equity share’ schemes being promoted by housing associations. These schemes allow people to buy a proportion of a new home and rent the rest from the housing association.

Mr Hick praised the moves the government has made to help the open market for homes, including schemes such as MyChoiceHomeBuy under which some people have received up to half the price of the home from the government. The mortgage is paid off in the usual way with a small monthly fee payable on the MyChoiceHomeBuy share. However, funding has now temporarily ceased until spring 2009.

Mr Hick said: “The scheme has made new homes affordable for many more people in the area. At a time when house prices are lower than they have been for some time, paying perhaps as little as half the price makes it a great bargain.

“Unfortunately, though, the scheme has had major problems. There is far too much paperwork and the processing of applications is far too slow. Often, by the time people who want to buy a house find out if the government will put up cash under MyChoiceHomeBuy, their mortgage offer has expired and they have to start the whole process over again.

“We were among the first builders to get involved in MyChoiceHomeBuy, back in June, and we have yet to complete a single sale under the scheme.”

In his letter, Mr Hick also drew Mrs Beckett’s attention to other specific problems facing the industry such as the fact that, as part of the government’s plan to cut carbon emissions, new homes have to be built to increasingly tough standards. These standards are adding thousands of pounds to the cost of homes, making delivery almost impossible without substantial government funding. The problem is made worse by the fact that this increasing regulation and cost is coming into the market at just the wrong time of the economic cycle.

He also expressed concern about recent changes to the way in which commercial rates are charged on buildings. He says this is making forward planning of developments very difficult and is having a profound effect on the development of local economies – which will ultimately affect jobs. He acknowledges that Alistair Darling has made some helpful changes in the Pre-Budget Report but says that these do not go far enough.

Mr Hick hopes that Mrs Beckett will try to tackle some of these issues. He said: “I hope she will shake things up a bit in government. We need action swiftly if the house building industry is not to collapse totally.”