Housing policy needs to get radical

The message from the Tory Party Conference has been clear. Brexit does in fact mean Brexit and, in the words of our prime minister, Brexit means the UK will become “a fully independent, sovereign country – a country that is no longer part of a political union with supranational institutions that can override national parliaments and courts”.

The direction of travel has been set. The proposed destination – a liberated, outward facing, global nation at liberty to trade freely with our friends, to forge new partnerships and create new opportunities. A vision with, potentially, a huge amount of promise for the UK construction sector.

Getting there, however, may prove to be a bumpy ride.

A commitment by the chancellor to take “whatever steps necessary” to smooth the journey is welcome, and reassuring. And support for the housebuilding industry is a positive start, as it is ideally placed to provide a relatively swift shot in the arm to the construction sector - with economic and social benefit to boot.

Furthermore, the proposed, publicly-backed development loans have a proven track record at unlocking private housing investment. The Home Building Fund and Accelerated Construction Scheme will more than likely prove to be welcome additions to the portfolio of housing delivery initiatives.

But, predicted only to deliver 15,000 new starts through to 2020, do they go far enough?

Policy needs to be put in place to look after the vast majority of families that sit in the centre-ground and just want to buy an affordable home

A quick review of the statistics would suggest not. More than a decade ago, Kate Barker concluded that 260,000 new homes would need to be started annually to constrain house price inflation to 1%. In the 10 years to 2015, based on a projected increase in households of 1.8 million, Barker thought we would need to deliver around 2.6 million new homes to keep house price inflation under control. In reality, the number of households formed was around 20% higher than predicted and the number of homes built was 40% lower. Unsurprisingly, house prices rose by 25%.

Fifteen thousand homes over three years is welcome news but seems a mere drop in the ocean.

So what can be done differently? Well, back in the era of Ziggy Stardust, Formica and flares, it was not uncommon for councils to deliver in excess of 100,000 new homes annually. The contribution they make today pales in comparison but the desire to build, and the financial capacity to do so, is there. Research by the Association of Retained Council Housing suggests that lifting the cap on local authorities’ borrowing capacity has the potential to release additional investment of £7bn over five years - enough to deliver 60,000 new homes. And yet the cap remains in place.

Building reported last week that Lord Porter, leader of the Local Government Association, showed his support for this approach, expressing a view that the Treasury should allow councils to use their housing assets as collateral to finance new housebuilding. He said “We need to get back to the 1950s when the state delivered half the homes we needed and the private sector delivered the other half”. Labour seems to be in agreement, with Jeremy Corbyn echoing the sentiment at his party’s conference.

How this is delivered will be key, though, as returning to the age of council housing may, as planning minister Gavin Barwell puts it, serve only to “sharpen inequality” in society. He wants to live in a society where people get to own their property. This is an admirable aspiration but ignores the reality – certainly in the South-east – where home ownership is falling. In London, many of the houses being delivered by developers are beyond the reach of the average family’s pocketbook. Supply dictates that house prices continue to rise and so more people accept that renting is the only option.

Policy needs to be put in place to look after the vast majority of families that sit in the centre-ground and just want to buy an affordable home. Using council assets as leverage to develop doesn’t have to mean that rental property is the only answer; these properties could be sold also. The key is unlocking publicly held land for the benefit of the public.

The recent procurement of Transport for London’s property framework provides a tantalising glimpse of the potential power of harnessing the public sector’s asset base. Partnering with 13 experienced property development companies, TfL plans to deliver 10,000 homes across 300 acres of land over the next few years in its first investment phase with the objective to generate £3.4bn in non-fares commercial revenue to invest in improving rail infrastructure. A win, win situation.

As we steer a course toward hard Brexit, now is the time for bold reform and action to ensure our nation is prepared for the challenges that inevitably lie ahead. Housing is a fundamental need and a pillar of social cohesion. It is a necessary constituent to happiness, aspiration and prosperity. It is time for a new approach. It is time to shed the shackles of a model beset by market failure and to stop tinkering around the edges.

I look forward to the publication of the government’s housing white paper later this year. Its billing suggests it will announce “further significant measures” to help towards the ambition of delivering one million new homes by 2020. For the good of post-Brexit Britain, future generations and the construction sector, I truly hope it delivers on this promise.

James Clark is a partner for Core Five