3m homes by 2020: mission impossible?

It seems a long time ago that the government set a target of building 3 million homes by 2020. The current issues within the housing sector have called some to begin to question whether such a target is still valid. What can we do to ensure that the target is met? and what are the barriers to it being achieved?

The case for 3 million homes

It is firstly important to reiterate that the arguments for the expansion of housing numbers remain. People are still living longer, they are still choosing to live in different household sizes, and we are still experiencing inward migration. There is still demand for housing as is shown by the growth in private renting yields. We must therefore continue to argue for the growth targets to remain in place as they are still needed.

Key barriers to meeting the target

Planning The green paper outlined the importance that the planning system plays in achieving the growth target. Of the 2 million homes that are due to be completed by 2016, over 50% is dependent on major planning intervention. Yet we do not have in place many of the strategies that were required in the 2004 Planning Act. Unless this is rectified there will not be enough land coming through the planning system. This is especially important in the current situation when anyone developing housing is likely to consider lower densities as a safer option when developing land. If densities are reduced then more land will be needed.

Market conditions It is difficult to see when the current market will improve, but it undoubtedly will at some point. Until that time comes, we will see a slowdown in starts and completions. This is likely to hit all areas including affordable housing as it is estimated that 60% of affordable housing comes through planning gain. It will especially affect regeneration schemes as many are dependent on the cross subsidy that comes through open market sales subsidising affordable social rent homes. It will also have an effect for a long period of time. Experience shows that it is a lot easier to slow down the construction industry that it is to start it up again, and those people currently being made redundant may have found themselves work in other industries when the time comes for them to be recruited again.

Regulation When house price inflation was with us, projects were able to withstand many of the “add on” costs which come with building housing in this day and age. We are now faced with a number of new additional costs.

New sustainable code levels are being introduced and we move towards zero carbon, as well as other proposals in the pipeline. These are coming at a time when projects are proving difficult to produce with existing regulation.

What can be done to mitigate these concerns?

On planning, the first task is to ensure that regions and local authorities meet the target for producing the plans and strategies so that land can be released over the next few years. This is especially important where the government has identified growth points and areas. The second area to speed up land production is the use of land in public ownership. The sooner we move away from a highest price wins to a system that values quality outputs the better. Imaginative ways to dispose of land which see receipts being deferred to the end of project should also be considered. The public body which owns the land will still receive a receipt, but it may come as the project is completed. Local Housing Companies offer a way forward and should be encouraged as they appear to offer the kind of public private partnership that we need right now.

On regulation, we need an honest and open dialogue about the “real” costs that current legislation demands. This isn’t a plea that we stop looking to improve the way we build, but simply a request that we are honest about the costs, and acknowledge that we may not be able to have the housing numbers and the regulatory requirements if the costs don’t add up. One body that can assist the situation is the Housing Corporation. By looking again at using the National Affordable Housing Programme in as flexible a way as possible, plus speeding up decision making where ever it can, it has an absolutely crucial role in assisting with maintaining housing outputs.

Finally, it’s good to talk. It’s especially good to talk during difficult times and when you face challenges. To meet the 3 million homes target will require everyone in the housing industry to work in harness. As a starting point, the more we can discuss, perhaps argue, and eventually agree a way forward across different sectors will be critical in us meeting the ambitious growth target we have been set.