Fears Government is just using housing for growth without proper plan

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government

Yesterday’s housing package felt like déjà vu. Another jumble of panic housing and planning policies trumpeted by Cameron and Clegg with shovels in hand, which many feel are only a short-term stimulus rather than an attempt at fixing the broken housing market.

Talk about panic planning. The Government spent a number of months consulting and drafting the National Planning Policy Framework. Then, just as its other attempts at economic revival are failing, it rushes in relaxations on conservatories and affordable housing. It’s hardly insightful, thought through or encouraging.

More so, many feel the Government is just using housing as an economic lever that responds quickly to creating activity and jobs. Fine and welcome, but the feeling is they don’t really care about affordable housing or repairing the broken market, as noted by Chris Wood, a partner at housing consultancy Altair.

"I don’t think this is about housing particularly. It’s about economic stimulus and it just so happens housing is an economic lever it can pull which creates activity and jobs more quickly. I don’t think they're concerned about affordable housing or repairing the broken housing market."

In particular, housing associations noted the absence of a number of key policy areas.

Where was the clarity on whether there will be affordable housing grant post 2015? Where was the update on its favourite policies to date – institutional investment and public sector land? Many in the sector feel that access to cheap land would be better than accessing cheaper money and are institutions really going to be queuing up to invest in housing when welfare continues to be scaled back.  

What we did get was a get out of jail free card for developers having to provide affordable housing on stalled schemes. The feeling here is that the Home Builders Federation has played a blinder for its members. As Carl Larter, director of new business & development at Midland Heart, says: “If I was Mark Clare at Barratt and one of my land directors wasn’t going back to the local authority making a case to abolish any affordable housing commitment under a section 106, they wouldn’t be working for me any longer. They’re already doing that anyway, this just opens the gate even further.”

While the National Housing Federation has fought hard for the £300m capital subsidy to build up to 15,000 homes – effectively compensating for the loss of affordable units through the section 106 relaxation – there is a fear the relaxation will go beyond the stalled sites.

Also contained in yesterday's announcement were plans to offer £10bn worth of loan guarantees which should reduce the cost of borrowing for housing associations, but is this the real issue? As Larter says: “Accessing funding is not the issue. It’s about gearing and available security, particularly for those associations outside London – it really is a big issue.”

Brian Johnson, chief executive of Moat, says parts of the package are welcome but wants clarity on whether there will be affordable housing grant post 2015 – which he says could soon start preventing schemes from going ahead. He also wants more joined up thinking between benefit policy and housing policy. He feels unless this is achieved, it could prevent institutions from investing in both affordable and private rented schemes.

“The loan guarantees could be helpful but the question is the likely impact on the cost of borrowing,” he says. “Those of us that have credit ratings are sitting just one step below the UK’s credit rating, so I don’t see it having a huge cost on the impact of borrowing. Does it reduce the amount of security we have to put against any borrowing we do? That could help actually, but that needs to play out. Does it affect the gearing limits on exiting loans? I doubt it. Will it affect the risk point we use internally to decide we should be doing more projects? I don’t know. There’s a bit to play out to determine how useful it is.”

Taken in the round, it's at least encouraging the Government recognises there isn't a straightforward solution, says former Housing Corporation boss Steve Douglas, now a partner at Altair. He feels it isn't as simple as blaming planning and affordable housing as the barrier to new supply.

He also questions whether the Government understands the key drivers to supply. "If you look at housebuilders’ profitability over the last few months we’ve seen statements from a number of them where we’re seeing they’re becoming more and more profitable, so it doesn’t appear fewer homes has any impact on profitability. I'm not entirely convinced more homes increases their profitability either." 

The National Housing Federation (NHF) gave key elements of the package a warm welcome yesterday but fears it is a short term fix.

Kevin Williamson, head of communities and wellbeing at the NHF, said: “I’d position the package one around growth and some stimulus in the short term rather than pretending it to be a major step forward in putting right the broken housing market.”

Ross Macmillan is the deputy editor of 24housing magazine