It’s not just about Help to Buy
Posted: February 28, 2019 Filed under: Help to Buy, Housebuilding Leave a commentOriginally posted on February 28 as a blog for Inside Housing.
All the headlines this week are about Persimmon and Help to Buy but the issues with housebuilding are much bigger than either.
Yes, Persimmon is the most extreme example of the gains made on the back of state intervention, with profits of £1 bn and margins of over 30% to go with those huge executive bonuses that made it the poster child for corporate excess in the industry.
And, yes, Help to Buy supported almost half of its 13,341 private completions in 2018 and a major part of the rest of the industry’s output.
Public and media outrage has now reached the point where ministers feel they have to act and housing secretary James Brokenshire let it be known over the weekend that he has ‘become increasingly concerned by the behaviour of Persimmon in the last 12 months’.
Coping with climate change
Posted: February 21, 2019 Filed under: Climate change, Housebuilding, Uncategorized Leave a commentOriginally published on February 21 as a blog for Inside Housing.
Remember when England was going to lead the world on zero carbon homes?
Three years after that was meant to happen, a report published today (Thursday) by the government’s independent advisor on climate change reveals that instead we are going backwards.
The Committee on Climate Change (CCC) warns that ‘UK homes are not fit for the future’, with progress stalled on reductions in greenhouse gas emissions and efforts to adapt the housing stock falling far behind the risks posed by higher temperatures, flooding and water scarcity.
Improving the quality, design and use of homes will not just address the challenges of climate change, it says, but save people money and improve health and wellbeing, especially for vulnerable groups like the elderly.
Many of today’s headlines were generated by its recommendations that would mean no more gas boilers and hobs, with no new homes connected to the gas grid from 2025 .
However, the report as a whole has multiple and far-reaching implications for new and existing homes if the UK is to meet its legally binding target to reduce carbon emissions by at least 80% of 1990 levels by 2050.
Parker Morris and Homes for Today and Tomorrow
Posted: February 19, 2019 Filed under: Council housing, Housebuilding, New towns, Regulation, Uncategorized Leave a commentOriginally posted on February 19 as a blog for Inside Housing.
Listening to a new Radio 4 documentary about Parker Morris and space standards it is impossible not to feel a mix of nostalgia for an era of housing optimism and sadness that our ambitions have shrunk so much since.
As John Grindrod relates in Living Room, the title of the 1961 report was an indication that it was about much more than just a technical exercise in allocating space per person.
Work on Homes for Today and Tomorrow started 60 years ago this year but it was building on a 20th century council housing tradition that began 100 years ago and it was also looking to the future to ensure that homes were fit for it.
‘A good house or flat can never be made out of premises which are too small,’ said the report, which set out a much greater ambition for new homes:
‘An increasing proportion of people are coming to expect their home to do more than just fulfil the basic requirement. It must be something of which they can be proud and in which they can express the fulness of their lives.’
The 300,000-home question
Posted: February 11, 2019 Filed under: Housebuilding, Planning | Tags: Alok Sharma, NAO Leave a commentOriginally published on February 11 as a blog for Inside Housing.
Can the government meet its target of 300,000 new homes a year by the mid-2020s?
The target was announced to some scepticism in the 2017 Budget and a report just out from the National Audit Office (NAO) says with some under-statement that it will be ‘challenging to meet’.
In detail, the Ministry for Housing Communities and Local Government (MHCLG) commitment is to ‘support the delivery of a million homes by the end of 2020 and half a million more by the end of 2022 and put us on track to deliver 300,000 net additional homes a year on average’.
That means net additional homes so it includes conversions and change of use (less demolitions) as well as new building.
Statistics showing a 78% increase in homes on this measure since the low point of 2012/13 (from 125,000 to 222,000) certainly suggest that it is possible.
However, recovery from the credit crunch is one thing, an increase from more normal times quite another, and the annual increase slowed to just 2% in 2017/18.
What’s in the Budget small print?
Posted: October 30, 2018 Filed under: Council housing, Help to Buy, Housebuilding, Planning, Shared ownership, Uncategorized | Tags: Budget 2018, Letwin review Leave a commentOriginally published on November 30 on my blog for Inside Housing.
If you listened to the chancellor’s speech you may have thought this was a Budget that did not mean much for housing. As ever you may think again after reading the small print.
As I live blogged for Inside Housing yesterday, the big news in the speech was the extra money for universal credit that makes up for many of the cuts imposed in universal credit and delays the roll-out yet again and sounds like it will be enough to avoid a backbench Tory rebellion.
Elsewhere, Philip Hammond found £2.8 bn to bring forward cuts in income tax allowances by a year but he failed to find roughly half that to scrap the final year of the freeze in most working age benefits including the local housing allowance.
This was a clear political choice to go for tax cuts that overwhelmingly benefit the better-off over benefits that go to the poorest households.
Ahead of the next spending review, numbers crunched by the Resolution Foundation overnight suggest that the squeeze on everything apart from health will continue well into the 2020s.
However, the most interesting developments for housing came in the background documents published as Mr Hammond sat down.
Where next for Help to Buy?
Posted: September 6, 2018 Filed under: Help to Buy, Housebuilding Leave a commentOriginally published on September 6 as a blog for Inside Housing.
Take a quick look at any of the results published by the major house builders this week and it becomes clear just how dependent most of the industry still is on Help to Buy .
Barratt relied on Help to Buy equity loans for 36% of its sales in the year to the end of June – to put that in perspective all its other private sales only accounted for 31%.
In the past six months, Help to Buy accounted for 39% of sales at Taylor Wimpey and 36% at Bovis.
And a presentation to analysts by Redrow showed that 40% of its sales came via Help to Buy in the year to the end of June.
No wonder its chair Steve Morgan calls it a “godsend”and wants clarity about what happens when the scheme expires in March 2021.
A report from the Home Builders Federation (HBF) this week claims that Help to Buy has been an “unmitigated success”, ensuring the construction of 170,000 new homes in its first five years, while supporting 150,000 jobs and helping 137,000 first-time buyers on to the housing ladder.
But increasingly hostile coverage in the national press concentrates far more on soaring profits, pay and shares at the major house builders and wealthier buyers taking advantage of interest-free loans that they do not need.
Variety the key to faster build out, says Letwin
Posted: June 25, 2018 Filed under: Housebuilding | Tags: Letwin review Leave a commentOriginally 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.
Remembering Ronan Point
Posted: May 14, 2018 Filed under: Construction industry, Council housing, Grenfell Tower, Prefabrication | Tags: Ronan Point Leave a commentOriginally 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.
Five wasted years
Posted: April 17, 2018 Filed under: Housebuilding, Housing market, Migration | Tags: Dominic Raab, Eric Pickles Leave a commentOriginally 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.
Will Letwin be worth the wait?
Posted: March 13, 2018 Filed under: Affordable housing, Housebuilding, Land | Tags: Letwin review Leave a commentOriginally 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’.
Jules Birch 