Healey: 'Public-private housebuilding relationships working better' » Housing » 24dash.com

Healey: Public-private housing relationships working better

Here is the full text of Housing Minister John Healey's speech to the Housing Market Intelligence Conference in London earlier this month:

"Thank you for inviting me to speak to you today.

"I know from my meetings with a huge range of people involved in housing - from big developers to individual builders on site - that the relationships in housing are working well. Government and housebuilders, the public sector and the private sector, all are reinventing relationships to deal with the pressures of recession, and working better together than in the past.

"This could be one 'silver lining' of the recession.

"And I want to pay tribute to the hard work of organisations like the National House-building Council, and to thank you for this.

"On the way in to the conference hall, Stewart Baseley told me that he'd been reading back over the speech he gave to this conference last year. In it, he introduced my predecessor Margaret Beckett, saying that 'a lot of people have remarked to [him] in the past week how frustrating it must be that we have another new minister in position with whom we now need to get acquainted'.

"I do understand that it can be unsettling to have a new Housing Minister. I hope that in the past four months I've been doing the job I have shown that a change of Minister doesn't necessarily mean a change for the worse.

"This is a chance - so let's get acquainted.

"I care deeply about housing.

"Both as a social good, and as a fundamental driver of this country's economy.

"Building the houses we need is a duty for Government, as well as a livelihood for you.

"As a Government Minister - first in skills, then in the Treasury and in Local Government - I understand how inextricably linked the fortunes of the country are with the state of its housing.

"As a constituency MP, I know how much it means for people to have a decent, secure and affordable home at the heart of their life and family.

"And I know how tough it has been for you working in housing during this unprecedented global downturn.

"Housing runs through the recession like a stick of rock.

"The recession, after all, started in housing, with the sub-prime mortgage crisis in the US. When the banks stopped lending, house builders and homeowners suffered directly. And the lack of consumer confidence has knocked house prices and sales volumes.

"Everything about the global recession affects you, your work and your business.

"Gone are the days when we worried only about how to keep up with rising land prices and housing demand.

"The global downturn demands a different approach in this financial climate which the Economist is calling 'the new normal'.

"In other words, not keeping up with demand, but stepping up to new challenges in the sector.

"And I am proud to be part of a Government which did step up.

"The unprecedented global downturn required unprecedented action - not just in the UK but worldwide.

"It's easy to forget now just how close we came to a catastrophic banking collapse before that point when Government did step in.

"This time last year, we were hours away from cashpoints refusing to give out money. We had the real fear of recession turning into depression.

"This needed Government to act, and act decisively. And we did.

"Our aim was to help the country through recession.

"We did not react as Government did in the 1980s and 1990s recessions, by stepping back to let recession run its course, and leaving recovery just to the market.

"Instead, we stepped in to help:

"Firms stay in business - 200,000 helped by our tax deferral scheme
"People stay in work - 500,000 jobs protected by our combined actions
"Families stay in their homes - 300,000 getting help or advice with mortgages over the last year.
"Indeed, The Times claims that action taken by world Governments following the G20 summit organised by Gordon Brown in London, marked the 'turning point in the global financial crisis'.

"We are not out of the woods yet. But the last year shows that strong Government intervention and intelligent public investment can help the country through the sharpest of recessions and soften the blows of the harshest economic storm.

"And we are applying the same approach to the housing market.

"The crunch in credit hit business, mortgage, development and secondary lending.

"Land values, house sale volumes, and house prices all dropped.

"Planning gain and section 106 agreements all but dried up.

"Rapid redundancies have been made in construction.

"So as the return on house sales went down with the housing market, and the cost of capital went up with the credit crunch, new housebuilding in the private sector dropped to levels we've not seen since the 1980s recession.

"We were set to invest almost £6bn this year and next to build affordable homes. But the first thing Gordon Brown said to me when he gave me this job in June was 'John, we must do more'.

"With his backing I was able to negotiate and nail the deal for our Housing Pledge - an extra £1.5bn over this year and next to build 20,000 more affordable homes, plus 10,000 new homes for private sale on mixed developments, creating an estimated 45,000 additional jobs in the construction industry.

"And we need to do more, because we still need more homes.

"We know that demand is still rising. It has merely been masked by the recession.

"That is why I am:

"Ready to back housebuilders kickstart sites stalled by the recession
"Ready to back housing associations willing to build extra affordable homes
"Ready to back Councils who want to build new Council homes.

"But the recovery has to be a partnership between public and private investment.

"I know that things are tough for you.

"The recession has weakened both demand and supply.

"New build completions are 16 per cent down on last year, 41 per cent on the year before.

"House prices are 15-20 per cent below the 2007 peak.

"As house builders, you are facing:

"Reduced land values
"Reduced access to finance
"Reduced viability of development; and
"Increased regulatory standards
"Confidence in the market is still low for everyone.

"Banks are rationing mortgages and requiring big deposits. There's a widening gap between buyer enquiries and mortgage approvals. And business lending is also tight.

"But Government is still investing in housing.

"Today I'm giving the go-ahead for 27 schemes which have passed the HCA's tough due diligence tests, for which I'm releasing over £50m Kickstart funding to build over 2,000 new homes.

"I can also announce today the release of a further £392m for Housing Associations to build over 6,000 affordable homes and to get a further 1,000 homes on stalled developments back on track.

"Gordon Brown and I promised more investment to build more homes. And we're putting our money where our mouth is.

"The cash I'm announcing today means that I have released over £1bn in Government help for housebuilding in the four months I've been Housing Minister.

"This is what it means to use the power of public investment to help the country through recession, by building the homes we need and creating the jobs to keep people in work.

"And, of course, the housing market relies on other sectors of the economy.

"We have to expect unemployment to continue rising into next year. This is always a lagging factor. Output is still subdued. Household debt remains high.

"All these factors mean that housing cannot simply bounce back to how things were before the recession.

"The key questions for us all must be: How are circumstances now and for medium term different? What are the implications for how we innovate and modify the way we do business together?

"In other words, how we reinvent and develop the relationships I talked of at the start.

"We could talk about the potential of Tax Incremental Finance, institutional investment in housing, steps to free up finance for business investment, greater public sector efficiency.

"But let me use just one example - building.

"The economy is recovering, but there's no going back to the pre-recession period.

"Relying on the ways we have built housing in Britain for the last three decades won't work for the future.

"Private housebuilders built 155,000 homes for sale in 2007 but totals plunged by more than half during recession, and are set to recover much more slowly than they fell. It was ten years before the housing market fully recovered from the 1990s recession.

"We can't just wait for the market to provide the homes people need in this country, and we can't just rely on the housebuilders to supply it.

"The challenge is bigger and more urgent than traditional housebuilders and their business model alone can meet.

"We have to innovate. We have to test new ways of funding and building the homes we need. I want to bring into housebuilding in Britain new firms, new skills, new techniques and new technologies.

"So I'm offering a New Deal for public-private housebuilding. New partnership terms in which companies take a smaller profit because Government takes more of the risk.

"We can cut back profit margins to a third of the traditional housebuilding model by taking site costs and risk out of new housebuilding. We can bring in construction companies new to housebuilding, who are builders not developers and used to contractor margins of 6 or 7 per cent rather than the 15-20 per cent norm for traditional housebuilding firms.

"I announced this as the Homes and Communities Agency's public land initiative (PLI) in June, as one of four parts in the Government's new £1.5bn Housing Pledge.

"I am now looking to new companies to bring a new competitive edge to the industry, as well as help accelerate innovation in the design and build, as our national challenge is not just to build more homes but to build greener homes in cleaner neighbourhoods.

"We are looking to test this new business model on HCA-owned land, with the first builders on site by April.

"We will provide public land, and take out upfront costs and risk involved in the site purchase and preparation.

"We will select a panel of approved firms, as direct delivery partners, reducing both your contract bidding costs and reducing procurement costs for public agencies that want homes built in this way.

"It is the £1bn I've released for housebuilding since June that has hit the headlines. But this part of the Housing Pledge, this reform has the most radical and far-reaching potential.

"Each step of this process has reinforced my belief in the importance of this initiative, and my confidence in its success.

"One hundred and fifty-two firms attended a seminar organised by the HCA in July, before the formal procurement started.

"The event took in traditional housebuilders like Barratt and Persimmon, construction firms like Kier, Skanska and Bouygues, and Housing Associations like Radian and the Southern Housing Group.

"This may not have hit the media radar but there is active interest in the PLI plan, including in Parliament. So today I am releasing the list of those companies attending this seminar and placing a copy in the House of Commons Library.

"I can also confirm today that 132 companies completed the pre-qualification questionnaire in August at the start of the formal procurement process and that the HCA have now shortlisted 40. Sixteen of these companies - more than a third - are construction firms looking to expand into housing development.

"I will announce final decisions on the firms that make the panel as direct delivery partners in December, with the first builders on site by April and the first 50 of the new homes finished within a year of that.

"That's the private side potential of this New Deal partnership. On the public side, where the HCA leads with their land I expect local authorities, RDAs and other public bodies to follow.

"Latest estimates show there is enough surplus public land in England to build 300,000 new homes; 100,000 on local authority land and many more on old NHS, military, transport or schools sites.

"The last year has been tough. For everyone. Every business, household and individual has had to respond to the pressures and to rework the plans and budgets we had before the recession.

"Last year, we heard a great deal from prophets of doom. The Sun reported a 'Housing crash', Moneyweek asked 'which country will go bust next?', and the Independent - with wishful thinking rather than accurate reporting - claimed that we were seeing 'the end of capitalism as we know it'.

"But we have proved that, with the power of public investment and Government action, we can get through.

"I said earlier that we need to think again about how we do business together.

"In my first four months in this job, I have met people from Bootle to Bristol who have benefited from Government help, and I have met the developers, builders and agencies who have delivered that help.

"Like Yuill Homes in Hartlepool, who handed Tracy Kerr the keys to her first flat through the HomeBuy scheme in partnership with the Homes and Communities Agency.

"Like Bellway in Liverpool, who worked with the local Council to help John and Paula Austin move into their first home, just two weeks before the birth of their first child.

"This active partnership between builders, developers, Local Authorities and Housing Associations must be the basis for the future.

"The public sector and the private sector working together.

"And as we emerge from recession, I am asking for your help to build confidence in the housing market and confidence in the industry. And, of course, I am asking for your help to build the homes that Britain needs now and for the future.

"Thank you."