Getting Houses Built

I have been banging on for years about the naivety of assuming that releasing more greenfield land for housing will lead to a big increase in housing supply. The big house builders, who dominate the market to an unhealthy extent, have no great interest in significantly increasing supply. They will build the number of homes they want to build and which they think the market will support; but if they are allowed to build them in the countryside they will do so, rather than building them in towns.

Now CPRE’s housing researcher, Luke Burroughs, has written Getting Houses Built, a report that pretty well confirms this view, backed up by plenty of hard evidence. It strongly suggests that questions of land availability or housing targets, which dominate both debates on housing and the politics of planning, are side shows relative to the question of who is going to build the houses.

There is an increasingly influential narrative on housing, familiar to any reader of the Times or Financial Times, that goes something like this. We need to build 250,000 or more houses a year, around double current output. There may be lots of brownfield land, but some of it needs remediation or is in places people don’t want to live. The need is urgent and if we are to solve the housing crisis we must develop more greenfield land, in particular the land around the towns and cities where people most want to live. That means building in the Green Belt and reforming planning policy so that local people cannot stand in the way of necessary development.

It is surprising how few of the clever people peddling this line stop to ask who is going to build the houses, surely a first order question that must be answered before we consider the second order question of where the houses should go. Once we start to build 200,000+ houses a year, we may need to make difficult choices about where they go. But until we sort out how to get them built we will continue to fall short however many impossible targets are imposed (there have been many) or planning reforms introduced (there have been many and the Chancellor is now promising more) or impossible targets imposed (ditto).

The analysis in Getting Houses Built is not anti-developer. The big house builders act rationally and in the interests of their shareholders. It is not their fault that in Britain, unlike much of Europe, land acquisition and house building is left almost entirely to private companies. They can make big make profits but they also bear significant risks.

The need for developers to maximise profits on each housing unit has seen them adopt business strategies which focus on land trading as much as on actually building houses. Once they have secured land, they build at a rate that will hold up prices. This puts extra pressure on the countryside as land still to be developed on a site with planning permission is removed from the estimate of a local authority’s housing land supply, meaning that it has to allocate land or approve new developments elsewhere.

Getting Houses Built has a number of proposals for improving things. It argues for giving local authorities a bigger role in acquiring land by reforming compulsory purchase provisions and implementing ‘use it or lose it’ measures against those (generally not house builders) who are sitting on land without  developing it. The intention would be to remove from the system some of the volatility that suppresses supply. It would also have the effect, potentially, of improving design and encouraging custom building by SMEs.

One of Luke’s earlier reports, Better Brownfield includes a case study of Vauban a 40 hectare, 2,000 home urban extension to Freiberg in Germany. The local authority bought the land at close to current use value; ensured a tramline into Freiburg; then sold the individual plots to small builders and groups of residents. It is hard to imagine similar developments in England, and that is a pity.

The report argues for making the development process far more transparent, including through the compulsory registration of all land ownership, options and sales agreements with the Land Registry. At present, land is often traded, as it were, under the counter. Much of it does not enter the open market, making it hard for small builders to get a look in. Developers buy between 10 and 20% of their land from each other, and having bought a parcel of land the new owner will often renegotiate planning permissions, further delaying the process of getting houses built and, in many cases, lowering the quality of schemes and the number of affordable homes in it.

If they really believe that a lack of developable land is the main thing holding back house building, it is amazing that the advocates of planning reform are not keener to throw some light on the extremely opaque business of land trading.

Transparency should extend to the vexed question of ‘viability’. Negotiations around viability delay many developments, with house builders whittling down planning obligations (design standards, the number of affordable homes, support for infrastructure) on the grounds that they make a scheme unviable. But there is no agreed methodology for assessing viability and much of the data is redacted on grounds of commercial confidentiality, making it impossible for a local authority to assess its accuracy. There is now a growing ‘viability industry’, with agents incentivised to reduce developer obligations.

The report proposes  that in order to increase transparency and speed up house building, there should be an open book approach to assessing viability. Guidance should be given on assessing viability, with a single methodology to reduce uncertainty and give greater clarity to developers (who are obliged to game the system as it now stands), local authorities and land owners.

Finally, the report has recommendations for improving the identification of potential sites for new housing. Only 8% of planning permissions for new houses are for sites of under 10 units. These tend to be developed much quicker than larger sites (22 months from planning permission to completion, compared to an average of 47 months for schemes of more than 250 units). Much more effort should be made to identify small sites for development (CPRE hopes to do some work on this).

If the Government is serious about building more houses while at the same time fulfilling its manifesto commitments to protect the countryside, it should seriously consider the practical proposals in Getting Houses Built and other recent CPRE reports on supporting small and medium-sized builders and improving the viability and quality of brownfield development. We really are trying to be constructive. Alternatively, it could take its lines from a handful of think-tanks who want to have yet another round of planning reforms (‘one last push’, as generals used to say a hundred years ago). This will be diverting. But it is unlikely to result in a single extra home being built.

4 Responses to “Getting Houses Built”

  1. 1 oldbrock2014 July 6, 2015 at 4:49 pm

    Well said!! I have been saying the same thing for many years.

  2. 2 Lawrence July 6, 2015 at 7:48 pm

    Refreshing that the CPRE might be moving to a more liberal, pragmatic vision that might actually see quality homes built where people want them. Not having an alternative plan is something I’ve moaned about plenty of times.

    The existing CPRE (et al) “brownfield, brownfield, brownfield” stance which has poisoned the debate at ground level. Councils and residents are now totally blinkered into believing all house building is bad. Things have gotten so bad even small-scale brownfield redevelopment where I live receives a flood of objections!

    Scarcity of land is still a major cause of disfunction in the land market, where only wealthy firms can speculatively buy and trade land at inflated valuations. Limit land to a few large developable patches and naturally the price goes up to the point where only a few can afford it, it’s not rocket science it’s economics 101.

    Far too late to influence this government though, they only know how to pump billions of public subsidy into the existing housebuilding model, along with hyping up mortgages and house prices to pacify the NIMBY vote. Any hope of long term integrated planning or garden cities has been kicked into touch for at least 5 years.

  3. 3 George Rowley July 7, 2015 at 9:58 am

    I for one completely agree with Lawrence.
    The scarcity of land is often still a major cause of disfunction in the land market. Added to which is a cloak of secrecy that is in place around who owns the land in the United Kingdom. There is no legal obligation for institutions to disclose their land holdings. Added to this problem is the issues surrounding the Crown Estates and the Royal Estates. Who for their own nefarious reasons wish to keep there land holdings a Secret from ordinary individuals like myself.

  1. 1 Yet More Planning Reform – So Who Wins This Time? | Aireborough Neighbourhood Development Forum Trackback on July 10, 2015 at 9:48 pm

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