If at first you don’t succeed

Originally posted on July 13 on Inside Edge 2, my blog for Inside Housing

It may have important new provisions on housing and planning but the name of the government’s new productivity strategy rather gives the game away.

Described as ‘the second half of the Budget’, Fixing the Foundations was published by the Department for Business Innovation and Skills but includes chapters on housing and planning and welfare that amplify decisions taken in the first half.

But does the name remind you of anything? Go back four years and David Cameron himself was launching a ‘radical and unashamedly ambitious’ housing strategy. The title? Laying the Foundations.

Once they’ve stopped sucking air through their teeth, any builder will tell you that once you’ve laid the foundations and built on top of them, it’s enormously expensive to start to fix them. It’s also a pretty good indication that the foundations were pretty rocky to begin with.

But beyond the Freudian slip in the title don’t expect to find any acknowledgment of that failure in what amounts to a third housing strategy in five years.  To recap briefly, first came the localist one of 2010, scrapping Labour’s regional targets, introducing the New Homes Bonus and the National Planning Policy Framework. Next up was the ‘new Tory housing revolution’ promised by Cameron in 2011 and Laying the Foundations. Finally came the ‘home-owning society’ promised by George Osborne in April and fleshed out in Fixing the Foundations.

True to his promise, the key proposals amount to a strategy for home ownership in particular rather than housing in general. The introductory statement makes this abundantly clear:

‘The UK has been incapable of building enough homes to keep up with growing demand. This harms productivity and restricts labour market flexibility, and it frustrates the ambitions of thousands of people who would like to own their own home.’

Note that the housing crisis and its knock-on effects on the housing are now entirely about the aspiration to own. The problems of the millions of families forced to rent by unaffordable house prices and beyond the reach of Help to Buy and other ownership schemes have simply been magicked away.

As I noted in my Budget live blog last week, there is a real sense that rented housing only exists as a resource to be plundered to boost ownership (or more realistically to stem the decline). Housing association right to buy is one obvious example of this but cutting tax relief for buy to let landlords to level the playing field with home buyers is another.

Social housing is barely mentioned except in this context.  The strategy lauds the surge in right to buy sales since 2012 but does not mention one-for-one replacements. And it confirms that the government ‘will extend the same opportunity to buy to the tenants of housing associations through the Housing Bill’, a form of words that looks like it puts paid to any chance of softening the blow by the replacing the discount with an equity loan.

Beyond that, it also confirms something else I thought was foreshadowed in the Budget: ‘the government will take further steps to re-focus Department for Communities and Local Government (DCLG) budgets, focussing on supporting low cost home ownership for first-time buyers’. 
Prepare for affordable rent to be scaled back in favour of shared ownership, and potentially other ownership schemes. And don’t bank on the money going to housing associations given hostility from government and potential interest in shared ownership from other investors.

Finally, get ready for a big reduction in affordable homes coming through section 106 agreements. The strategy outlines the government’s commitment to 200,000 Starter Homes and reaffirms through planning policy ‘that section 106 contributions for other affordable housing, and tariff-style general infrastructure funds, will not be sought for them’. Section 106 accounted for around 16,000 homes in 2012/13 – more than 40 per cent of new affordable homes. A Starter Home target averaging out at 40,000 homes a year implies this could be wiped out.

This shunning of affordable rented housing is a big shift from previous strategies, though perhaps to be expected now that the coalition has been left behind. What’s more surprising is the absence of any mention of the private rented sector and Rent to Build, which was the main feature of Mark Prisk’s term as housing minister.

There is more continuity with previous strategies in the assumption that giving housebuilders what they want is the way to get more homes built. Starter Homes will enable them to get out of cumbersome section 106 agreements and best of all the document confirms:

‘The government does not intend to proceed with the zero carbon Allowable Solutions carbon offsetting scheme, or the proposed 2016 increase in on-site energy efficiency standards, but will keep energy efficiency standards under review, recognising that existing measures to increase energy efficiency of new buildings should be allowed time to become established.’

It seems that the 2016 zero carbon homes target that the government reaffirmed but tried to water down under the coalition will now simply be dumped in the skip marked ‘green crap’.

On planning, local authorities that fail to produce a local plan will first be embarrassed by league tables and if necessary see Greg Clark stepping in ‘to arrange for local plans to be written, in consultation with local people’. That’s a pretty stunning reversal of the original plan to incentivise them to approve more homes through New Homes Bonus and neighbourhood planning. However, I wonder how much practical difference this will make: housebuilders are already targeting councils without a local plan and using the presumption in favour of sustainable development in the NPPF to force through approvals.

The overall aim of building more homes must also be open to doubt. The document proposes a zonal system for brownfield land, with automatic planning permission for sites identified on brownfield registers to reduce unnecessary delays and uncertainty. My two concerns about this are, first, that it will simply drive up the cost of brownfield sites when the uplift value could have been captured for other purposes, and, second, that there is simply not enough useable brownfield land to cope with demand.

Throughout the document, the government quotes approvingly from research demonstrating the impact of planning constraints on housing supply and other growth. However, politics means that it does not follow the deregulating logic through to the key conclusion drawn by the researchers: selective development on the green belt.

Other than that, there are some new ideas to generate more homes. Densification around key commuter hubs sounds like it has potential (though not if those hubs are already operating at capacity). Allowing extra stories to be added to the height of existing buildings in London could promote the conversion of more houses into flats producing more homes in the process (though not if existing owners simply add extra bedrooms and home gyms to increase the value of their homes).

Overall, this document marks a big shift in strategy away from multi-tenure solutions to an approach that privileges one tenure over the others. Given the constraints it fails to address, it is likely to prove no more successful than the strategies that went before and I’m already looking forward to Rebuilding the Foundations in about 2018.

Despite recent signs of recovery at last, housebuilding is still stuck at around half the level required. But none of that will stop ministers claiming that their approach is working even as they fix the foundations of what went before.

If at first you don’t succeed… claim you did.