Jo Richardson explores the lack of adequate social housing in the UK, finding that it is partly due to planning and finance processes and insufficient capital funding from government, and partly due to rejection of new developments by local people and an inability to get developers to see that building social homes is ‘viable’. Negotiation with local people in the planning process for new housing, as well as possible learning and adaptation from long-running tax incentive schemes in other countries, could help solve the issue.
There is a long standing consensus that we are not building enough homes in England. There have been a plethora reports over the last decade starting with the Barker Review in 2004. Alan Holmans has recently analysed the 2011 Census and other data to suggest new estimates of housing need and demand to 2031. For the planning period to 2031, Holmans projects that there will be an approximate 20% population increase in that time giving rise to a need in England for over 240,000 additional homes per annum, of which about one third will require some form of subsidy to meet affordability needs. The current rate of building is delivering just under half of what is needed. The issue has been picked up as a key election issue for Labour with Ed Miliband promising by the end of a first term of a Labour parliament 200,000 homes a year will be being built.
There has also been considerable scepticism among academics and policy makers over the Government’s ‘Help to Buy’ scheme. The Royal Institute of Chartered Surveyors have suggested there should be cap on house prices to improve stability. The Government and the Bank of England are now in the process of agreeing a protocol to prevent a housing bubble because of Help to Buy. However, the fundamental problem is the lack of supply. There are two broad areas of complex and contested issues that have kept the supply low:
- Land supply, infrastructure + planning process
- Financing + affordability
There is a challenge in accessing suitable land for development and getting planning permission for new homes and other accommodation to be built. So-called ‘Nimbyism’ is not the only barrier in the planning process; although objection to new planning applications is a key challenge (and especially so for more marginalised groups such as for Gypsy and Traveller site development). Negotiation and conflict resolution approaches are one part of the solution in getting communities together to see other points of view in the contentious ‘need for homes’ versus ‘the countryside’ debate.
A further difficulty in identifying sites for housing development has been land-banking where permissions have been achieved but the owner has not started development, either because of assessments of viability or in the hope that rising prices in the future can be achieved by slowing processes down. This was an issue in Ed Miliband’s sights during his September 2013 Labour Party conference speech when he suggested that landowners with planning permission would either have to use it or lose it. However, under the current Government there seems to be some sympathy for developers still trying to negotiate down any planning permission conditions to provide affordable housing. Recently, Secretary of State Eric Pickles supported an Inspector’s decision upholding the appeal by a developer that the Tower Hamlets requirement to provide 30% of a new development as affordable housing was ‘unviable’. The Growth and Infrastructure Act (2013) has also brought in a new process of appeal on stalled developments seen now as unviable due to the affordable housing requirements placed on the developer.
The issue of financing development and ensuring affordability is a huge challenge for the delivery of housing. If developers insist that building social housing on ‘affordable’ rents (at up to 80% of market rents) makes a scheme unviable then other mechanisms to incentivise supply need to be found. Such measures of development viability need re-examining. They are based on a model used by the majority of housebuilders that sees resale value as the prime means for making a quick return on investment. This is known as the ‘current trader model’. The Callcutt Review in 2007 on housebuilding identified a longer term approach (e.g. an investor model). This would look at the return over decades from market and affordable rents. The political and social aspirational culture in the UK is, however, one of home-owning and this is borne out in the mechanisms which inherently value short term sale over long term rent which affects the viability of any given housing development.
Nevertheless, there is a clear need for incentives to get Britain building – particularly ‘affordable’ homes. Incentives to boost affordable housing supply should be considered because the existing system isn’t working. As part of an ESRC Knowledge Exchange research project, the Centre for Comparative Housing Research has been examining models of incentives in different countries including France and the USA. In France there are a number of conditional tax incentive schemes which in essence encourage individuals to invest in the building of new homes. In the USA there has been a system of low income housing tax credits (LIHTCs) for decades which provides an income related construction incentive if developers build a percentage of homes for those whose income is less than 60% of the area median. There may be discussion in America about how affordable these homes are (much as there is in the UK) and for the poorest there is still a need for personal subsidies too; but the attractiveness of the scheme is its seeming permanence and solidity – it has delivered over 2 million new homes in 25 years. Tax breaks for all types of suppliers and investors are used in other countries to boost the provision of affordable rented housing. They come with incentives to supply good quality, rent limited accommodation for those in housing need. Such an approach would be radically different from what we currently do in the UK. It could provide a fresh innovative approach to supporting affordable housing supply.
There is a lack of adequate housing supply in the UK partly due to planning and finance processes and insufficient capital funding from government, but also due to rejection of new developments by local people and a lack of imagination in levering in additional incentives to get developers to see that building social homes is ‘viable’. A range of policy responses is needed, including negotiation with local people in the planning process for new housing, as well as possible learning and adaptation from long-running tax incentive schemes, such as LIHTCs, in other countries. There isn’t a single answer to the delivery of housing, but a number of measures put together might get Britain building more affordable homes.
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Dr Jo Richardson is Principal Lecturer in the Centre for Comparative Housing Research at De Montfort University, Leicester. www.dmu.ac.uk/cchr @socialhousing