Originally published on June 25 on my blog for Inside Housing.
For all the headlines about Spitfire production and the wartime spirit, Sir Oliver Letwin’s draft analysis of build-out rates on large housebuilding sites focuses on one key factor above all others – and it’s one that could have huge implications for housing as a whole.
After visits to 15 different sites and discussions with people throughout the industry, he focuses forensically on the ‘absorption rate’ – the rate at which housebuilders can sell newly built homes in a local market without reducing the local market price.
This is not a surprise – it was also his focus in the interim update he produced in March – but he seems even more convinced of its importance now.
In his draft analysis, this is what underpins everything from the valuation model used in the RICS red book to the residual land value model that housebuilders use to calculate how much they will pay for land.
As he puts it:
‘We have heard from everyone we have talked to in the industry about these processes that, in all of these forms of land sale, the starting point of all participants is the residual value calculation. And that residual value calculation always starts with the assumed open market value of new homes in the local area – which is always fundamentally driven by the prices of comparable second-hand homes in the local area, and hence by the assumption that the number of new homes built in any given year in that area will not be large enough to put downward pressure on the price of second-hand homes in the area.’
In other words, anyone hoping that an increase in housebuilding for sale on large sites will reduce house prices will come away disappointed since the entire model is designed to ensure that this does not happen.
Originally published on June 12 on my blog for Inside Housing.
At times in the last year it’s seemed that all a politician has to do to end homelessness is say ‘Housing First’ three times, take a trip to Finland and announce a new initiative.
All three do feature in the plan published by Crisis this morning but alongside a 10-year strategy that challenges the politicians to take a harder road to a real destination – if they choose.
Everybody In: How to end homelessness in Great Britain was developed following an international evidence review of what works here and abroad, a consultation with over 1,000 people across Britain and newly-commissioned research to fill gaps in the evidence.
Crisis, which celebrates its 50th anniversary this year, warns that there are currently 160,000 people facing the worst forms of homelessness in Britain but that if we continue as we are this number will double over the next 25 years.