Corporate

March 1, 2017

Broken is in the eye of the beholder

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From the very outset, the recently published Government White Paper on housing left readers in no doubt as to the scale of the problem, declaring the current market firmly broken.

A very emotive term, “broken” is always a strong starting point when providing a raft of policies aimed at solving a deepening crisis, where answers have eluded many previous administrations. It’s the classic communications concept of identifying how the bad the problem is, while simultaneously putting yourself forward as part of the solution.

To properly assess the current state of the market, and to provide detailed reaction to the long-awaited Government paper, we convened an expert panel to focus specifically on the impact for London.

Journalists, industry professionals and members of local government attended, featuring a keynote from deputy mayor for housing James Murray, supported by an illustrious panel comprising Redrow CEO, John Tutte; Savills’ Director of Research, Susan Emmett; and Nigel Turner, Director of the think tank, Future Housing Review.

James Murray declared that talks were already well underway between the housing minister Gavin Barwell and the DCLG on a bespoke devolution deal for London following publication of the White Paper.

Drilling down into the details of London’s housing strategy, the Deputy Mayor outlined the GLA’s flagship policies on affordable housing, discussing the Affordable Housing Settlement and the more provocative Supplementary Planning Guidance. Mr Murray described the initiative as a clear, consistent approach with the 35% affordable housing allocation on viable sites giving housebuilders transparency over their contribution to the local community.

Redrow CEO, John Tutte, outlined both the opportunities and challenges facing housebuilders in London, including greater capital intensity, less opportunities to phase developments (often causing longer capital tie-up), and greater exposure to policy changes. He made the point that for Redrow and all housebuilders investment has to be attractive.

Describing the Housing White Paper as containing the right thrust, the Redrow CEO rejected its overly pessimistic title, arguing that some aspects have failed – notably planning. Despite contrary perceptions, Redrow’s chief also categorically rejected popular claims of land banking and deliberately depressing build out rates, stating that there was no financial incentive to do so especially in London. He was vehement that the biggest challenge for the industry was skills and urged the Government to resolve the issue.

Savills’ Susan Emmett, spoke of the much needed ‘tightening of the screws’ brought about by the whitepaper. She focused on the operation of the London property market within three distinct micro-markets – Prime Central London, as “its own creature”; Urban London as the “inner doughnut”, and suburban London, noting the overall rate of property price growth was slowing across the Capital with recently released Government data showing London house prices increased by just 7.5% in 2016, compared to 11.3% in Eastern England and 8.5% in the South East.

However, some parts of London have recorded double-digit growth – Susan made the point that demand currently far outstrips supply, and while many commentators say that 50,000 new homes are needed in the Capital each year, Savills believes to be closer to 60,000.

Nigel Turner made his position clear early on.  The policy to extend Right-to-Buy to housing association tenants was his bête noire.  Turner framed his objections in light of the affordable housing crisis. While policy makers accept that there is a major shortage of affordable housing, Right to Buy will see 84,000 houses sold off as in the next 4 years in England, with 17,000 in London alone.

Turner bemoaned the lack of a coherent policy from Government, condemning their reliance on the voluntary agreement with National Housing Federation, never-ending pilots and lack of formal consultation – as long as Government supported Right-to-Buy, Turner said, it couldn’t be serious in its efforts to alleviate the housing crisis.

There was also positivity from Turner – devolution. The Mayor of London has the power to encourage housing associations to exclude developments and homes from the Right-to-Buy extension.  Furthermore, the new generation of metro mayors, led by Sadiq Khan, are able to address the affordable housing crisis locally, without a party-political agenda. For Turner, it is up to them lay the foundations for a long-term solution to the problem.

One point of consensus though: the housing White Paper is very much more of a consultation document, rather than providing clear guidance on how the industry can build more homes in the immediate future. The devil will be in the detail however so we’ll need wait to see how effective the Government’s measures will truly be.

What’s next: Instinctif Partners will be conducting a range of Policy in Practice events throughout the year examining how policy is shaping the future of the UK. Look out for more information here.

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