Falling short, or aiming high?

Falling short, or aiming high?

Earlier this year, Shelter set out our case for a more sustainable housing supply system: New Civic Housebuilding. It’s a bold proposal for a new, and crucially additional, layer of housebuilding, based on reviving the civic principles behind some of the nation’s best-loved places.

We recognise that the speculative system is a vital source of much-needed new supply – but we’re increasingly cynical that it will ever deliver the number of homes we need in this country. It simply isn’t in its makeup:

Housebuilders are not in business to serve the public interest, except incidentally. Their primary concern is to deliver profits for their investors, now and in the future. – Callcutt Review of Housebuilding Delivery, 2007

As Philip Barnes notes in his recent blog, we do not believe that housebuilders are doing anything intrinsically wrong – they are operating perfectly rationally in order to meet their objectives. This view was further bolstered by the Communities and Local Government Select Committee’s report on its inquiry into capacity in the homebuilding industry, released last week. But this is not enough to solve the housing crisis and that’s why Shelter are calling for something new.

Philip identifies three key barriers to the implementation of New Civic Housebuilding: land values, the interaction between development corporations and localism, and the skills shortage. These are genuine challenges, but it’s time to grasp the nettle if we truly want to tackle the housing crisis.

A fairer approach to land value

This will be the biggest challenge in delivering a truly transformative approach. Philip notes that in Barratt’s experience, ‘most landowners tend to prefer high land prices rather than low ones’. This is undoubtedly true. But is it right to continue to allow landowners to extract the maximum possible value from their asset, where that means little left over for the quality, affordability, and infrastructure new communities need to thrive? The aim of New Civic Housebuilding is achieving a fairer trade-off between windfalls for landowners and benefits for communities. Fundamentally, we cannot sustain the sky-high cost of land in this country: we need intervention in the land market to bring down prices, allowing for more and better development of homes of all tenures. We’re not talking about taking money away from landowners – but reducing the amount of hope value they expect to receive on selling their land. Land prices should reflect what will actually be built on a site, rather than being pushed ever higher by speculative trading.

We set out the legal changes that would need to be made in order to allow this to happen in the report – under our New Civic Housebuilding proposals, landowners would be able to choose between taking an upfront return in exchange for selling their land (based on a benchmark land value plus compensation), or investing it into a development partnership and taking a longer term return. Over the coming months, we will be setting out in more detail how to incentivise landowners to participate in civic schemes.

Is localism fundamentally incompatible with development corporations?

Philip’s second argument is that a new generation of development corporations would be inconsistent with an increased focus on localism. This is an issue already identified by the Government, who accepted an amendment to the Neighbourhood Planning Act which gives the Secretary of State the power to appoint local authorities to oversee new development corporations in their area. This will enable far greater local accountability than there would be over new schemes delivered by housebuilders – and our New Civic Housebuilding proposals recognise the importance of directly involving local communities in design and planning.

New housing developments are more popular when they provide the homes that people actually want – high quality, affordably priced, and with the infrastructure and services needed to support them. Giving people the opportunity to be actively involved in the masterplanning and design of new places fosters local support. And ensuring that there’s a powerful, locally accountable delivery agency with a focus on community benefit in place to deliver that masterplan helps to make sure that new development delivers on the commitments made in the planning process.

Is our skills shortage truly insurmountable?

It’s certainly true that we have a skills shortage in the construction industry. Shelter identified this in our programme for the 2015 Government, and there will be further uncertainty around the impact of Brexit.

But much of the skills shortage in the construction industry is the result of the business models of major developers. They have adapted to high land prices and market instability by reducing cash flow needs, and above all by having extremely small permanent staff, instead relying on sub-contractors. In this situation, there is little incentive for the major housebuilders to recruit, train and ultimately employ apprentices at the scale needed to tackle the problem.

Skills are a major barrier – but best way to meet this challenge is to reform the construction industry by reforming the land market, which is what New Civic Housebuilding proposes. In addition, having another model of housebuilding operating alongside the speculative system will have a stabilising influence on the market as a whole, providing more opportunities for SMEs and new entrants, helping to train and employ construction workers and strengthen supply chains.

What’s next for New Civic Housebuilding?

We recognise that there will be barriers to overcome in order to implement New Civic Housebuilding. In the coming months, we will be examining the key challenges and solutions in greater detail. But we believe the crisis we are facing is too severe to keep on with the status quo. We need everyone to play their part in solving the housing crisis – including existing housebuilders. But they can’t do it alone. We look forward to working with the next Government to tackle the housing shortage, once and for all.

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