New approaches to land disposal and funding for house building are coming forward to meet the ever-widening gap between the number of homes being built and the growing number of households.
The slump in house building has meant that only a third of the homes needed are set to be built this year. This has increased concerns over meeting the challenge of providing enough homes for the growing population. This, of course, was not even being met during the boom times. The downturn has also revealed weaknesses in funding models for affordable housing, which policy-making needs to alleviate in future.
At the centre of the discussions is an enhanced role for affordable housing providers as developers of a range of tenures. A series of seminars run by the Town and Country Planning Association (TCPA) in different cities over the past six months has brought together a number of ideas that could inform planning for the upturn.
These are outlined in a collection edited by New Homes Marketing Board chairman David Pretty, published with the Smith Institute last week (Planning, 2 October, p3). Pretty attributes the ongoing housing shortage to the slow rate of public sector and affordable house building in recent years, rather than private sector failure. He points out that affordable housing construction has increased over the past ten years but has still not regained the levels attained in 1980.
Pretty is critical of the government's reliance on private house builders to meet most housing requirements. He recognises that the recent slump has left private sector firms bruised, but is convinced that their basic approach is sound and will be part of the revival in development once mortgage funding becomes available again.
TCPA chairman Lee Shostak believes that the upturn will take time, even after the recession ends. He envisages systemic changes, with the public sector using the value of its land to promote a range of housing schemes. The Homes and Communities Agency (HCA) is looking at ways to use its funds and land holdings. Housing associations could play a central role as community builders but they will require fresh funding models. Public agencies, meanwhile, will need to adopt more flexible approaches to land disposal.
Over the past few years, cross-subsidy from private developer contributions has become the major source of funding alongside the affordable housing grant. "Section 106 funds have dried up with the recession and the affordable housing grant may fall with the likely public expenditure cuts after the next general election," says TCPA chief executive Gideon Amos. He argues that associations should be more entrepreneurial.
Amos sees an opportunity for planner-developer organisations that own and revitalise land to come into their own. These would be based in the not-for-profit sector and could be housing associations. They would build a mix of private homes for sale and social rented housing, maintaining a long-term interest in the finished developments. Their partnership with local authorities would ensure a supply of land with planning permission. At the very least, the TCPA is calling for local planning authorities to work closely with their housing colleagues to support such ventures.
In a recent report on land supply and social housing, the Chartered Institute of Housing (CIH) raised concerns that associations find it hard to compete with the private sector on price when purchasing sites. They also lack the necessary development skills. CIH head of policy Abigail Davies argues that local authorities should act as "matchmakers", bringing together parcels of land with appropriate delivery agencies.
Associations have experienced problems in selling shared ownership properties, which has made some wary about mixed-tenure schemes. The CIH study suggests that the dependency culture has come about as a result of associations being averse to risk. It highlights the need to augment their risk management skills.
Davies points out that developing market housing requires a different set of skills that many associations do not yet possess. In this light, the partnership approach with a private house builder is viewed as a much safer bet. Land banking by private house builders could be preventing land from reaching the affordable housing sector, the CIH report warns. However, it proposes that strategic land banking should be considered as a measure of supporting site assembly for regeneration and affordable housing.
One association that has kicked its dependency on grant funding is Places for People, which takes on mixed-tenure, mixed-use projects. Group chief executive David Cowans urges the HCA to use its funds to provide gap funding for mixed-tenure schemes. He suggests that it should take stakes in developments that could be gradually paid back as the private housing sells.
Cowans recommends that schemes should be large enough to offer a range of products and enable associations to shift their activities in response to changing market conditions. Under this model, residents would also be given flexibility to sell back a share of their homes or become full tenants according to changing circumstances. This model requires a funding and planning system that is capable of supporting changes in housing tenures. A long-term view needs to be taken on returns from land investment and more flexibility introduced with regard to how land is used over a 20 to 30-year period.
Housing associations are also in a position to take on a greater management role in neighbourhoods. Cowans believes that they should become facilities managers for the whole neighbourhood, a remit that could also cover shops and other community facilities. "Residents then only have one agency to turn to if there is a problem with anything in the area," he says. In the face of requirements to provide renewable energy sources, housing associations are well placed to assume long-term responsibility for maintaining these community facilities.
The upturn may be some way off but measures taken at this stage to get housing development going will set the pattern for many years to come. At the very least, they will ensure long-term benefit from public funds. The lessons from the last boom are being learnt so that when the housing market eventually takes off, the benefits will be widely shared and the impact of any subsequent downturn mitigated.
Mind the Gap - Housing Supply in a Cold Climate is available at PlanningResource.co.uk/doc
AGENCY TESTS MODEL
The Homes and Communities Agency (HCA) is keen to work with a wider range of house builders and developers to avoid reliance on a declining number of contractors, according to corporate director Trevor Beattie. "We are putting together consortia of house builders, registered social landlords and architects to take forward innovative schemes," he says.
This is linked to an approach that involves breaking up large sites. "Smaller parcels developed by a range of contractors will progress faster than a large site that is reliant on one contractor to build 1,000 homes," he reasons. "We want to encourage competition between house builders to improve design quality and environmental standards."
The Upton extension near Northampton is being developed in parcels of between 100 and 200 homes and this approach will be adopted on other schemes. The idea is that developers will be offered portfolios of around ten sites so they can benefit from economies of scale.
This approach is being pioneered by the agency's public land initiative. The HCA will share the risk with the developer. It will not expect upfront payment for the land but will get its return as homes are sold. "We will take a long term-interest in the development and share in the house builder's risk," says Beattie.
Agreements will be on a site-by-site basis. "Setting up a purpose-driven development vehicle would be too time-consuming," Beattie argues. The sites brought forward will be ready for development, with major services in place. The initial scheme is modest. The HCA expects about 1,250 properties with 500 affordable homes to be secured in the next three years.
Even so, the initiative has attracted interest from the private and public sector since its launch in May. "We have been approached by 30 local authorities considering adopting the approach," says Beattie. "We are working on a template that could be the pattern for our future partnerships with the private sector."
But Places for People group director David Cowans finds it disappointing that the agency is not putting more of its resources into the initiative. "The HCA should be using a large proportion of its funds on risk-sharing with the private sector," he maintains.