Sir Oliver Letwin’s letter is encouraging for those of us who want greater diversification to ensure we are building the homes that are needed, writes Carol Matthews.
The Times recently trumpeted that house-building is back at pre-crash levels. In many cities you can’t see the sky for the construction cranes.
Houses are certainly being built – but that doesn’t mean that those who need homes are getting them.
Britain’s over reliance on a small group of big volume builders has left potential homeowners and tenants alike dependent on developers who prioritise profit margins over potential homeowners and residents.
Fortunately, those who want to see the U.K. get the homes it needs may have found a new ally in Sir Oliver Letwin.
Sir Oliver has been commissioned to “explain the significant gap” between the demand for homes, land allocated to developers and the resultant sluggish build-out rates.
Sir Oliver’s report will be delivered in the summer, and in a recent letter to the Chancellor and Housing Minister he sets out his interim findings.
Sir Oliver suggests that the main reason build-out rates are so slow is a system that allows a developer-led preoccupation with ensuring that the absorption rate maintains the market price and profit margin.
This, he explains, is partially due to the lack of competition in the market – resulting in homogenous builds that offer no variety in cost or type of tenure.
Encouragingly, he also raises one of the most troubling issues that can arise from these deliberately slow build-out rates: that this can sometimes result in the delayed build of social and affordable housing, as these units are often dependent on cross-market subsidies raised by sales.
Sir Oliver’s letter takes a long, fair look at some of the big issues in housing today. I look forward to reading his report in full in the summer; but we should start thinking about the solutions to the issues he raises now.
There are, of course, no one-size-fits-all solutions to Britain’s housing crisis. However, a lot of the issues that Letwin settles upon could be alleviated through greater diversification of the housing market.
I may be biased, but housing associations have a huge role to play. Sir Oliver identifies lack of variety in tenure and price-point as a key issue.
Housing associations have a long history of building mixed tenure sites – ensuring that there is a home, tenure and price suitable for a range of inhabitants.
Sir Oliver rightly takes issue with the deliberately slow build-out rates of the largest developers.
But if housing associations are to prove that we can do any better, we must first have access to the land.
Giving housing associations greater input regarding the development of large sites of land, and an increased strategic role at a local level, would go some way to speeding up the UK’s build-out rates – and higher build-out rates means more homes.
Additionally, Letwin touches on the issue of low build-out rates impeding the construction of social and affordable housing.
We have a two-fold solution: a combination of more housing association-delivered homes supported through direct investment, and the implementation of a set of guarantees to mitigate against developers slowing the delivery of affordable units until the rest of the site generates enough profit.
As chair of Homes for the North, an alliance of the largest housing associations developing in the North, my only qualm with Sir Oliver’s, otherwise excellent, letter is that he doesn’t acknowledge that there are different barriers to house-building in different places.
In many parts of the North, regeneration is still a vital component in a drive to create the type of housing offer that will support economic development.
It’s wholly necessary, and comes with its own complex challenges: the cost of the assembly of land in fragmented ownership, site remediation and infrastructure costs, to name but three.
Housing associations have a proud track record as regeneration experts, and we’re ready to tackle these challenges.
If we work with the public sector bodies, such as the City Region Combined Authorities, we can build with steady, assured growth in mind – especially if we can work within a more flexible and integrated investment framework, one where long-term flexible deals are supported with outcomes-based funding.
It is hard to overstate the importance of building homes in the North.
A lopsided housing market that only focuses on issues in the South East will feed into a lopsided economy, and in order to encourage regional and northern growth, homes must be built in areas that are on the up – not in areas that are already there.
If we’re serious about closing the economic and productivity gap between the North and South, then we need to be serious about building homes that meet the needs of all of Britain – not just the area that circles the M25.
I’m really encouraged by the focus and clarity of Sir Oliver’s interim findings, and I look forward to hearing what he has to say on the vital issue of homes for the North.
As published in Inside Housing on 26 April 2018.