TIME FOR PUBLIC AND PRIVATE SECTORS TO WORK TOGETHER TO SOLVE THE HOUSING CRISIS
Published 23 November 2016
The shortage of housing is probably the biggest challenge facing any British government – and yet it is largely private-sector developers who must deliver the numbers of new homes necessary if we are to scratch the surface of a problem which has the potential to derail the economic and social aspirations of any political party.
In the past, politicians have been quick to blame developers for the problem, accusing them of sluggish progress in building out sites with planning consent, often rolling out the clichéd charge of ‘landbanking’. In turn, the private sector has pointed to a slow and obstructive planning process, a shortage of suitable land, and difficulties in raising finance in what remains a high-risk investment area.
So it is good to see a new initiative which seeks to remove some of the mudslinging and bring together the public and private sector for the ‘greater good’.
The planning landscape has undoubtedly improved over the past few years; the number of housing units granted planning permission has risen sharply and is well documented. But whilst the number of new homes actually being built is also rising, politicians are frustrated that the rate of delivery has not matched the acceleration in planning consents. As Communities Secretary Sajid Javid has said, “People can’t live in a planning permission – we need to find ways to incentivise developers to use planning permissions.”
With a private sector background, Javid claims to understand business, and his solution has been to launch a £3 billion ‘Home Building Fund’, with the aim of providing incentives for developers to ‘build out’ entire sites, far quicker than traditional phasing would allow.
The Fund will make available loans from £250,000 to £250 million to help meet development costs, mitigate risks on certain sites, encourage innovative building techniques and encourage swift development. These loans will be at commercial rates, but crucially they will be more flexible, and the criteria for lending are likely to be more favourable, especially for smaller house builders and contractors (many of which have fallen victim to the risk of finance in recent years) for whom access to development finance has been a major barrier to development opportunities.
Alongside this, there will be finance for infrastructure projects at the larger end of the scale, to encourage an increased pace of construction on sites which might otherwise be built out in phases over a long period. Strategic development by the local authority to unlock potential sites in key areas will play a significant role.
An interesting proposal included within the fund is one whereby the Government is looking at guaranteeing sales values of the completed units to developers building new homes on publicly-owned land, following the announcement a couple of weeks ago that a number of large former Ministry of Defense sites are to be released to residential development.
All of this is good news, especially for smaller house builders and those trying to secure their first step on the property ladder. As ever though, the devil will be in the detail and it will be important that these incentives are applied to the appropriate sites, and local authorities, who will largely be responsible for the delivery of the Fund, have a thorough understanding of market values.
If we are serious about solving the housing crisis, we must stop the mud-slinging between public and private sectors and accept that they must work together to deliver strategic development. The Home Building Fund is a welcome first step towards that aim.
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