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 posted on May 14 on my blog for Inside Housing.
This week marks the 50th anniversary of what was seen until recently as the biggest disaster in the history of council housing.
At 5.45 in the morning on May 16, 1968, a cake decorator called Ivy Hodge put the kettle on for a cup of tea. A gas explosion triggered by a faulty connection to her cooker blew out the walls to her flat and triggered the progressive collapse of one corner of the 22-storey Ronan Point tower block in Newham in east London.
Four tenants were killed and several more had miraculous escapes but the fact that the explosion happened so early in the morning prevented an even worse disaster – most people were still asleep in the relative safety of their bedrooms rather than exposed to the collapse in their kitchens.
That aside, the most shocking thing about the disaster was that it happened in a new building and the first tenants had moved in two months before.
A public inquiry quickly established not just the fault in the gas connection but fundamental flaws in the large panel, system-built design. The collapse could have been triggered not just by an explosion but also by high winds and fire
That led to reform of the rules on gas safety and a shake-up of the building regulations to ensure that the structure of tall buildings became more robust.
Over the years, Ronan Point came to be seen as the high water mark of both council housing and modernist architecture.
As time went on the blame was increasingly laid at the door of architects, local authorities and even the whole idea of council housing. It’s certainly true that some designs were flawed and untested and that some councillors arrogant, self-aggrandising and even corrupt.
But some important factors are edited out of that account.
Originally published on April 17 on my blog for Inside Housing.
Dominic Raab’s comments about immigration and house prices may have sparked a furore but they also shine a light on something else about the recent history of housing.
Amid mounting pressure, on Friday the Ministry for Housing and Communities Local Government (MHCLG) published updated analysis that he had relied on for his claim that he had been told by civil servants that immigration has increased house prices by 20 per cent over the last 25 years.
When I tweeted about it, the man himself came back to me with this:
In fairness, he could have added that the increase was actually 21 per cent but, as I suggested last week, that is minor by comparison with the 284 per cent total rise in prices that happened between 1991 and 2016 and accounts for just £11,000 of the £152,000 increase.
According to the analysis, increases in real earnings were a much more important factor in price rises.
Look a little deeper, though, and the analysis does not really prove very much either way.
Originally published on March 13 on my blog for Inside Housing.
So, with unintentional irony, the inquiry into why it takes so long to get new homes built is itself taking longer than expected.
For all the advance speculation and ministerial statements in the last few days, the Letwin Review of build-out rates was not published alongside today’s Spring Statement.
Instead the former Conservative Cabinet minister published a four-page letter offering housing secretary Sajid Javid an interim update on the work of the inquiry focusing on what is happening on large sites operated by large housebuilders.
A ‘draft analysis’ will follow by the end of June offering a description of the problem and its causes but final recommendations will only be made in time for the Budget in November.
In truth, expectations that Letwin would be able to offer instant solutions within a few months were always likely to be dashed – not that this stopped ministers from pre-empting it with warnings to housebuilders to ‘do their duty’ in the planning announcements last week.
Perhaps significantly, the draft update has only one mention of the supposedly crucial issue of ‘land banks’, the nefarious practice by which housebuilders allegedly hoard land with planning permission until they can make the most money.
However, Letwin rejects most of their usual excuses too – everything from shortages of labour, materials and capital to problems with transport infrastructure, utility connections and constrained logistics on site.
He argues instead that the ‘fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the “absorption rate”.’
This is ‘the rate at which newly constructed homes can be sold into (or are believed to be sold successfully into) the local market without materially disturbing the market price’.
Originally published on my blog for Inside Housing on March 5.
Theresa May is a politician with a gift for saying the right things but somehow in the wrong way.
I’m thinking here not just of the obvious examples such as the ‘nothing had changed during the election campaign’ and the collapsing lettering of ‘Building a Britain that Works for Everyone’ during her Conservative conference speech last year. She does it even when she is most in control of what she is saying.
She did it in her first speech as prime minister when she dedicated herself to tackling ‘burning injustices’ but only succeeded in drawing attention to the fact they were the legacy of the previous six years of Conservative rule.
She did it on Friday when her big speech on Brexit rightly pointed out that ‘we can’t have everything’ only to prompt a German journalist to ask ‘is it all worth it?’.
And she did it again in her speech on Monday launching the new version of the National Planning Policy Framework.
Originally published as a column for Inside Housing on January 10.
What’s in a name? Only time will tell how important the change of departmental moniker will be but it was surely the minimum that Theresa May needed to do to show that housing now ranks as a top priority for her government.
The man in charge may still be the same (Sajid Javid) but both the creation of the Ministry for Housing, Communities and Local Government (MHCLG) and the order of the words in the title are significant.
By my reckoning this is the first time since 1970 that the word ‘housing’ has appeared in the title of the organisation and the secretary of state responsible for it.
In the 38 years since the Ministry of Housing and Local Government was abolished to create the Department of the Environment the name has been changed again and again to reflect different briefs and priorities.
Between Peter Walker back in 1970 and Sajid Javid in 2018 we’ve had 28 different housing ministers of middle and junior rank, a handful of them with the right to attend Cabinet but not vote in it.
Originally posted as a column for Inside Housing on December 22.
As in 2016, it seemed like nothing would ever be the same again after a momentous event halfway through the year.
The horrific Grenfell Tower fire on June 14 means that the headline on this column should really have read ‘nine other things about 2017’. Just as the Brexit voted has changed everything in politics, so it is almost impossible to see anything in housing except through the prism of that awful night.
That said, 2017 was another year of momentous change for housing, one that brought a few signs of hope too. Here’s the first of my two-part review of what I was writing about.