Pan-northern infrastructure investment will ensure the North realises its potential

The government’s Northern Powerhouse appears to remain on the agenda, but polices towards housebuilding must match the rebalancing ambition, warns Carol Matthews.

‘The Northern Powerhouse is a vision for joining up the North’s great towns, cities and counties, pooling their strengths, and tackling major barriers to productivity to unleash the full economic potential of the North’.

So says the Government’s 2016 Northern Powerhouse Strategy, which sets out a clear ambition for the North to play a key role in the UK economy by becoming better connected.

Northern Local Authorities have responded by undertaking the Northern Powerhouse Independent Economic Review (NPIER), whereby ambitious growth objectives have been set for the whole of the North with an aim to narrow the Gross Value Added (GVA) gap between the North and rest of the country. By 2050, this could see 4% higher productivity, creating 850,000 additional jobs. Following this, Transport for the North (TfN) has brought out its own pan-regional sectoral plan, setting out the long-term transport investment needed to support this growth. And there is now mounting acknowledgement of the need to align other forms of infrastructure investment at a pan-northern level to ensure the North realises its potential.

So where does housing fit into this debate?

I currently chair Homes for the North (H4N), and we are intensifying our campaign to bring housing to the forefront of efforts to rebalance the UK’s economy. As an alliance of 17 housing associations, we recognise the North has a wealth of untapped growth potential and to unlock this we need affordable homes in places where the economy will grow. To add to a growing evidence based, we will shortly be publishing our own research, undertaken in conjunction with TfN, which will examine the housing ‘offer’ needed to underpin these growth ambitions – in terms of numbers, timing, and broad location.

The key headline is that to support the transformational growth of the North, we need to build two million homes (net) by 2050 – around 50,000 each year to 2027, and then 70,000 per annum thereafter, as the economy accelerates. These are probably the most ambitious housing figures we have seen for the North in a long time, an 8% step-up on 2014-17 completion rates to 2027, and then a 40% step-up thereafter. But as the research highlights, if we allow a gap to develop between economic growth and housing delivery, there is every chance that growth could be stifled. If the North continues to lose its ‘market share’ of new homes (despite having 28% of the country’s households, it is only building 23% of its homes) the consequences are clear. It will also lose its share of working age households, and the prospects of closing the economic gap will begin to fade.

So what are the prospects of this happening?

Whilst it’s undoubtedly positive that Government finally acknowledges housing as a key component of infrastructure through the National Productivity Investment Fund, the flip side is the way infrastructure projects are currently evaluated by Treasury, which puts the North at a huge disadvantage. ‘Green Book’ cost benefit analysis is king, and the difficulty of demonstrating short-term economic benefits, especially where there are significant land remediation costs, remains a major challenge. Government is now beginning to see the objective of housing investment in a very one dimensional way, as evidenced by last Autumn’s announcement about the targeting of Homes England funding and previous announcements about the distribution of social housing grant funding. Crude measures of affordability – essentially a backward looking measure which describes past market failure – are becoming decisive in allocating resources, compounded by the use of this measure in the national planning formula for establishing housing need (OAN). Under this approach, the North is only required to build 16% of the nation’s homes, 12% less than its current market share of households.

The truth is that the ambitions behind the Government’s Northern Powerhouse and housebuilding policies are in danger of becoming dangerously out of sync. Because there is no national spatial framework to shape infrastructure investment – as observed by Lord Kerslake’s UK2070 Commission’s interim report – it has become possible for contradictory policies on economic rebalancing, housing investment and planning to co-exist. This will simply reinforce the success of places which are already prosperous, rather than supporting more fundamental rebalancing which is at the heart of the Northern Powerhouse.

So with the prospect of some sort of spending review (once we know who is in charge!), we need to make the case for properly aligned housing investment and planning policies to long-term economic ambition, as set out in the NPIER and the Local Industrial Strategies currently under development. H4N will be noisy about this.

This will become even more important post-Brexit, where there will be huge expectations on whoever is in power to tackle the wealth and growth inequalities continuing to plague Britain, and which ultimately fuelled the desire to leave.

Published in Inside Housing on 21 August 2019.

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