Major Reform Recommendations for British Housing Construction
Britain continues to have its residential property shortages especially for affordable homes but the plans for 300,000 new homes built by the mid-2020's may be in jeopardy without the plans and financing that are so desperately needed according to review released by PropertyWire.
The House of Commons Public Accounts Committee reports that the number of new homes has increased every year since the 2012 and 2013 period. For 2017 and 2018 new builds accounted for 222,000 new homes when compared to 2005 and 2006 to 2017/18 with an average of only 177,000 per year. And while reforms have been made at the Ministry of Housing, Communities and Local Government (MHCLG) has the report states,
'... to the planning system, much more needs to be done and it still does not have a detailed implementation plan for how it will scale-up house building.'
‘The Department stresses that it wants a plan-led system with local authorities determining the shape of development in their areas through their own local plans. We welcome this outlook, which has the potential to engender a housing system which is both efficient and able to be tailored to local communities.'
'The reality is that local authorities are struggling to produce local plans showing how many, where and what types of new homes are needed in their areas, and fewer than half of authorities have an up to date local plan, and the Department is reluctant to take decisive action.'
The report concludes that almost £12 billion a year will be necessary for investment in infrastructure for housing developments with the cost being from public sources and a portion from developers. The report finds that local authorities have difficulty in negotiating with developers who typically can get lower contributions for infrastructure developments.
‘The system to get contributions from developers to the cost of infrastructure is not working effectively, and too often favours developers at the expense of local communities.'
‘Despite having introduced some projects to help, including encouraging small builders through the small builders guarantee scheme and reforming the planning system, the Department simply does not have the mechanisms in place to achieve the 300,000 targets.'
‘This is compounded by lack of detailed rationale as to why this target was chosen in the first place. It also lacks year on year projections on how it will ramp up house building, only illustrative projections which are not in the public domain. To make this even more concerning, the target does not align with the Department’s new method for calculating the need for new homes which shows that just 265,000 new homes a year are needed.'
A deadline of October 2019 has been proposed by MHCLG a new series of actions to build the target number of 300,000 new homes with year on year projections with new built home expectations.
For local authorities in December 2018 only 143 (42%) had an up to date plan for housing needs with 149 or 44% that had plans that were at least five years old and 46, or 14%, of local authorities that had no plans for their local housing needs. Also recommended by the end of 2019 detailing plans for intervention on local authorities that fail to have plans in place.
'Despite these significant gaps, the Department has made limited use of its powers to intervene in local authorities who have not produced a local plan. In November 2017, the Secretary of State wrote to 15 of the local authorities who did not have a local plan and in January 2019, made more direct interventions in two local authorities. But these figures barely scratch the surface of the significant number of local authorities which either have no plan at all or a very old one. The Department is avoiding decisive action.'
‘These interventions should include a range of ‘carrot and stick’ measures of support and penalties.'
When it comes to barriers for small to medium size (SME) house builders meeting housing target demand the Federation of Master Builders (FMB) Brian Berry, FMB chief executive tells PropertyWire:
‘SME house builders are continuing to face numerous barriers to increasingtheir capacity to build the homes that are needed. The recommendations inthe Public Accounts Committee’s report highlight that the planning system is delaying progress.'
‘It is completely unacceptable that sites are being stalled because planning departments are not dealing with applications quickly enough. Our members aren’t seeing any improvements in service since fees were increased in January last year, a policy the FMB supported.’
‘By allocating small sites for housing delivery in their local plan, local authorities will be reducing the burden of uncertainty for the nation’s smallhouse builders, and therefore speeding up housing supply through better diversifying the sector. Furthermore, we must not forget the highly positive impact that these local businesses have on their areas, offering employmentand training opportunities to local people.'
Mr. Berry also commented on the role of Government and coordination with small builders in financing:
‘Access to finance for SME house builders has undoubtedly improved over the last few years but the loan to cost ratio from most lenders is simply unviable for SMEs, especially the micro firms, building fewer than five units a year.’
The FMB found in its survey that respondents could increase output by 38% if a loan to value cost ratio was at 80%.
'Government must work with the finance sector to understand how lending to small house builders can be increased and improved. The time is now for the Government to heed to warnings of the Public Accounts Committee.'