Friday, 10 July 2015

CPRE: 'Getting Houses Built' >>> supporting small builders and improving the viability of brownfield development

This piece from the Chief Executive of the Campaign to Protect Rural England has been re-blogged several times already
CPRE on housing | East Devon Watch
‘Getting Houses Built’: A View from the CPRE | Susie Bond
Blog by @ShaunSpiers1 on getting more houses built: there is a better way than 'one last push' for planning reform. : CPRE

... but as the argumentation is so pertinent to the debates around housing, here it is again - together with interesting comment:

Getting Houses Built

I have been banging on for years about the naivety of assuming that releasing more greenfield land for housing will lead to a big increase in housing supply. The big house builders, who dominate the market to an unhealthy extent, have no great interest in significantly increasing supply. They will build the number of homes they want to build and which they think the market will support; but if they are allowed to build them in the countryside they will do so, rather than building them in towns.
Now CPRE’s housing researcher, Luke Burroughs, has written Getting Houses Built, a report that pretty well confirms this view, backed up by plenty of hard evidence. It strongly suggests that questions of land availability or housing targets, which dominate both debates on housing and the politics of planning, are side shows relative to the question of who is going to build the houses.
There is an increasingly influential narrative on housing, familiar to any reader of the Times or Financial Times, that goes something like this. We need to build 250,000 or more houses a year, around double current output. There may be lots of brownfield land, but some of it needs remediation or is in places people don’t want to live. The need is urgent and if we are to solve the housing crisis we must develop more greenfield land, in particular the land around the towns and cities where people most want to live. That means building in the Green Belt and reforming planning policy so that local people cannot stand in the way of necessary development.
It is surprising how few of the clever people peddling this line stop to ask who is going to build the houses, surely a first order question that must be answered before we consider the second order question of where the houses should go. Once we start to build 200,000+ houses a year, we may need to make difficult choices about where they go. But until we sort out how to get them built we will continue to fall short however many impossible targets are imposed (there have been many) or planning reforms introduced (there have been many and the Chancellor is now promising more) or impossible targets imposed (ditto).
The analysis in Getting Houses Built is not anti-developer. The big house builders act rationally and in the interests of their shareholders. It is not their fault that in Britain, unlike much of Europe, land acquisition and house building is left almost entirely to private companies. They can make big make profits but they also bear significant risks.
The need for developers to maximise profits on each housing unit has seen them adopt business strategies which focus on land trading as much as on actually building houses. Once they have secured land, they build at a rate that will hold up prices. This puts extra pressure on the countryside as land still to be developed on a site with planning permission is removed from the estimate of a local authority’s housing land supply, meaning that it has to allocate land or approve new developments elsewhere.
Getting Houses Built has a number of proposals for improving things. It argues for giving local authorities a bigger role in acquiring land by reforming compulsory purchase provisions and implementing ‘use it or lose it’ measures against those (generally not house builders) who are sitting on land without  developing it. The intention would be to remove from the system some of the volatility that suppresses supply. It would also have the effect, potentially, of improving design and encouraging custom building by SMEs.
One of Luke’s earlier reports, Better Brownfield includes a case study of Vauban a 40 hectare, 2,000 home urban extension to Freiberg in Germany. The local authority bought the land at close to current use value; ensured a tramline into Freiburg; then sold the individual plots to small builders and groups of residents. It is hard to imagine similar developments in England, and that is a pity.
The report argues for making the development process far more transparent, including through the compulsory registration of all land ownership, options and sales agreements with the Land Registry. At present, land is often traded, as it were, under the counter. Much of it does not enter the open market, making it hard for small builders to get a look in. Developers buy between 10 and 20% of their land from each other, and having bought a parcel of land the new owner will often renegotiate planning permissions, further delaying the process of getting houses built and, in many cases, lowering the quality of schemes and the number of affordable homes in it.
If they really believe that a lack of developable land is the main thing holding back house building, it is amazing that the advocates of planning reform are not keener to throw some light on the extremely opaque business of land trading.
Transparency should extend to the vexed question of ‘viability’. Negotiations around viability delay many developments, with house builders whittling down planning obligations (design standards, the number of affordable homes, support for infrastructure) on the grounds that they make a scheme unviable. But there is no agreed methodology for assessing viability and much of the data is redacted on grounds of commercial confidentiality, making it impossible for a local authority to assess its accuracy. There is now a growing ‘viability industry’, with agents incentivised to reduce developer obligations.
The report proposes  that in order to increase transparency and speed up house building, there should be an open book approach to assessing viability. Guidance should be given on assessing viability, with a single methodology to reduce uncertainty and give greater clarity to developers (who are obliged to game the system as it now stands), local authorities and land owners.
Finally, the report has recommendations for improving the identification of potential sites for new housing. Only 8% of planning permissions for new houses are for sites of under 10 units. These tend to be developed much quicker than larger sites (22 months from planning permission to completion, compared to an average of 47 months for schemes of more than 250 units). Much more effort should be made to identify small sites for development (CPRE hopes to do some work on this).
If the Government is serious about building more houses while at the same time fulfilling its manifesto commitments to protect the countryside, it should seriously consider the practical proposals in Getting Houses Built and other recent CPRE reports on supporting small and medium-sized builders and improving the viability and quality of brownfield development. We really are trying to be constructive. Alternatively, it could take its lines from a handful of think-tanks who want to have yet another round of planning reforms (‘one last push’, as generals used to say a hundred years ago). This will be diverting. But it is unlikely to result in a single extra home being built.

Plus an earlier piece, also from Shaun Spiers:

Stop caricaturing CPRE as a crude anti-development lobby: a response to Martin Wolf

Friday’s Financial Times had an article on housing by its chief economics correspondent, Martin Wolf. I have a great, but unrequited admiration for Martin Wolf. He has a good record on climate change and I agree with much of what he says on housing, particularly that we should look seriously at property taxation, and that the government should build more houses or subsidise others to build them.
But I do not agree with his apparent belief that if more greenfield land is released, housing supply will significantly increase, and I particularly object to the suggestion that CPRE is part of ‘a corrupt arrangement whose result is to benefit the haves at the expense of the have-nots’.
CPRE has consistently argued that housing should not be seen principally as an investment – see, for instance, our Vision for the countryside in 2026 – and we acknowledge that long-term undersupply is one reason, though not the only reason, for rising house prices. As I wrote in October 2013, also in a letter to the FTin response to Martin Wolf, I wrote: ‘We need a sensible conversation about how the country can break its addiction to high property prices, but throwing insults at those who want to build more houses while minimising the loss of countryside is not a good place to start.   
My response to Martin Wolf’s article, printed in today’s FT, is below.  
I hesitate to criticise the great Martin Wolf, but his latest column (Britain’s Self-perpetuating property racket, 9 January) was not his finest.
Mr Wolf notes that housing output has fallen dramatically since the late 1960s. He acknowledges that in 1969-70 local councils built 185,000 dwellings, but blames today’s housing crisis largely on a shortage of land brought about by a baroque planning system and groups such as the Campaign to Protect Rural England – both of which existed when the country comfortably built more than 300,000 houses a year.
CPRE is indeed, in Mr Wolf’s words, a Campaign to Contain Urban England in that we do not want to see towns and cities unnecessarily sprawling into the countryside. The fact that England still has so much countryside should be a source of pride, not regret.
But we are unequivocal in our support for a big increase in house building, particularly by small and medium-sized builders, housing associations and local authorities. The big builders who now dominate the market have no interest in building the number of homes the country needs, however much land they are given. And the fact is that there is plenty of land available, particularly brownfield land, and plenty of land with planning permission that is not being developed. Land supply and planning are not the main problems.
Of course we should look at planning, but we must also consider how we tax housing (or fail to tax the capital gains on main residences); how the state funds social housing (or fails to fund it); the market failure of the house building industry; the quality of the houses and places we create (people oppose poor quality development); the infrastructure funding that comes with new housing (or doesn’t come) and a host of other things.
CPRE is up for a serious debate. Martin Wolf should stop caricaturing us a crude anti-development lobby.

Stop caricaturing CPRE as a crude anti-development lobby: a response to Martin Wolf | CPRE viewpoint

Here is Martin Wolf's original piece in the FT:

January 8, 2015 5:01 pm

Britain’s self-perpetuating property racket

Change will come only once people recognise how unjust this situation has become
n international discussions of economic policy, the British government likes to boast of the flexibility of its economy. In some areas, notably the labour market, the UK does have a relatively unregulated economy. But every country has its sacred cows, and Britain’s is housing. In planning, the UK persists with an approach that might be described as Stalinist. The difference is that, whereas Stalin wanted to make things happen, the UK’s land-use system is designed to do the opposite. It is spectacularly successful. If it had been in effect in the 19th century, none of the great British cities would now exist.
Here are two simple indicators. First, the number of houses constructed in the UK in the financial year 2012-13 was the lowest since the second world war, at just 136,000. Even in 2013-14, just 141,000 houses were built. In 1969-70, the corresponding figure was 378,000. This is a stunning collapse.
Second, this decline in output has not been due to any diminution of demand. This is demonstrated by prices. According to Nationwide Building Society, the ratio of house prices to average full-time earnings rose from a trough of 2.1 in 1995 to an all-time peak of 5.4 in 2007. It fell to 4.1 in the first quarter of 2009, still high by historical standards, before rising to 5.0 in 2014.
Collapsing supply and soaring prices: nothing could better indicate severe constraints on supply. Those who do not know better will say that supply is constrained because building land is limited in a small and densely populated island. This is true, but not for physical reasons. Only 11 per cent of England’s surface area is urbanised. The urban-dwelling majority do not recognise this because they travel so much more slowly inside towns than between them. The restrictions on land availability are man-made. They are due to a control system of baroque complexity that has not only constrained supply, but, far worse, has created a set of powerful vested interests in its continuation. Among those interests are local residents, homeowners in general and the banks that finance them. In a genteel British way, this is a corrupt arrangement whose result is to benefit the haves at the expense of have-nots. It is supported by pressure groups, such as the Campaign to Protect Rural England, which I think of rather as the Campaign to Contain Urban England.
One of the ironies is that the inability to build houses probably prevented a far worse economic crisis in the UK, since it prevented an expansion of supply and subsequent collapse in prices like those seen in Ireland, Spain or the US. But the long-run social and economic consequences are dire. These include massive transfers of resources across generations — and, within generations, to people whose parents own properties — which is arguably more important. They also undermine the ability of young people to afford housing and to form families.
Defenders of the system tend to refer to housing wealth as the product of savings. It is not
Moreover, the wealth accumulated by property owners is fundamentally unproductive. Defenders of the system tend to refer to this wealth as the product of savings. It is not. I understand this myself, since I own a house whose nominal value is perhaps 25 times as great as it was when I bought it 30 years ago, almost nine times higher after adjusting for inflation. This vast increase in wealth is not due to my endeavours. It is overwhelmingly the product of a rise in the value of land, which is the fruit of other people’s efforts, not mine.
Change will come only once people recognise how unjust this situation has become. This is not just about obstacles to becoming an owner occupier. High house prices will also raise rents. They will ultimately force people to live in more cramped conditions than would occur without limits on supply.
What is to be done? If a solution were politically easy, it would already have happened. It is not. I cannot think of a better example of the way in which controls tend to create a vested interest in their perpetuation.
The obstacles to moving to a more supply-friendly set of policies are huge. But the long-run consequences of continued population growth alongside such low rates of new building are likely to prove explosive.
The long-term aim should be to reform the incentives facing local authorities, the role of prices in land-use planning, property taxation and housing finance. Here is a set of challenges worthy of a reforming government. In the short run, given extremely low long-term interest rates and the high value of houses, government could either build more or subsidise building. In 1969-70, local authorities built 185,000 dwellings. Without going that far, governments could do far more.
Present arrangements do not work. It is time for something more radical.
Letters in response to this column:

See also:
We don’t need to destroy the Green Belt to solve the housing crisis | CPRE viewpoint
Debating housing in the Green Belt - Campaign to Protect Rural England

“Social housing is for losers” | East Devon Watch
Housing: scandal after scandal after scandal | East Devon Watch

Futures Forum: "Not a single home that could be described as "affordable" within government guidelines is being built, or is for sale, anywhere in Cornwall."
Futures Forum: 'England has space for at least 1 million homes on brownfield land'... and yet... 'There is not enough brownfield land to build the number of homes the country needs.'
Futures Forum: Identifying housing 'need' in East Devon: "Floodgates are open for developers"
Futures Forum: Central government, nudging the housing market and greenfield sites
Futures Forum: Persimmon, Sidmouth and greenfield sites
Futures Forum: Housing numbers in East Devon ... "The region, which is earmarked for 11,000 new homes..."
Futures Forum: The pressures to build on green fields: CPRE: "new out-of-town developments are top of the list concerns"
Futures Forum: The pressures to build on green fields: "the number of new homes is growing"
Futures Forum: The pressures to build on green fields: in the Southwest - "The lack of a local plan for meeting housing targets does not necessarily undermine the protection that our countryside merits."

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