Is government investment going to deliver housing, by Chris Brown

Prime Minister Theresa May repeated the phrase 'the good government can do' numerous times at last month's Conservative Party Conference, a change from her predecessor's 'enemies of enterprise' complaints.

At the same time, the Department for Communities and Local Government announced an extra £5 billion for housing. Most of this sum has been announced before, with a lot not used because the housing policies it was originally committed to failed to deliver, but there is a reason for this.

Government inevitably struggles when it comes to joined-up delivery. The planning system was originally designed to allow the state to get things done. In recent years, it has become the victim of the ebb and flow of ideological battles between those children in the playground shouting that "the market knows best" and those squealing that "government knows best".

The reality is that neither side is great at making nuanced trade-offs between individual greed and the greater good. But if you have an objective like building more homes that people can afford to live in and that make better places for everyone, simply offering a few loans and investing in developing small amounts of public land might not sound like a high-impact policy.

And the amounts involved are quite small. If spent on land and building, they would add an additional four per cent to the country's housing supply by 2020. Government will hope to attract private funds and revolve the money, but it might not all be spent and it might also displace private funding. So, on its own, it isn't a hugely significant policy.

Some £3 billion of the total is for loans, which have to be provided in accordance with state aid rules. There is a one-size-fits-all EU-wide matrix that correlates the borrower's financial strength and the amount of security for the loan to calculate the allowable interest rate. This provides loans for big companies at a cheaper rate than from the banks. But for the community groups and small developers that the government says it wants to encourage, the interest rates are so high the schemes are either not viable or cheaper lenders can be found.

It will fall to the Homes and Communities Agency (HCA) to spend most of the £5 billion. But the HCA is in the midst of a restructuring under a new chairman and interim chief executive, presumably to provide cover for criticism it might face under its long-finished but unpublished triennial review.

The missing part seems to be the planning system. Local authorities' capacity to utilise the planning system could be worth billions. If the public sector could buy land for housing at or around existing use values and ensure its delivery through means other than selling it for speculative housing for sale, it would provide the only realistic chance of any of the government's well-intentioned targets being met.

Chris Brown is executive chairman of developer Igloo Regeneration.


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