My Lyons list (or how to get 200,000 new homes per year)
Created on Friday, June 6th, 2014
by Peter McCormack
I welcome the fact that Sir Michael Lyons has been asked by the Labour Party to look at how we achieve 200,000 new homes a year by 2020. Recently private house-builders have cast doubt on the nation’s ability to hit this target. It has been done before in the 1940s, 1950s and 1970s, but it needs both public and private sectors working together to do it.
There is a desperate shortage of new homes and particularly ‘affordable’ homes. This year we are building only just over 100,000 as a nation and many of these are outright sale homes well beyond the reach of people on low incomes.
At least half of all new homes should be broadly affordable. By that I mean traditional social rent and shared ownership but also extended to a new sub market rent tenure which would offer households on lower incomes (say up to £30,000) a quality alternative to market renting with 5 year tenancies.
To achieve that we need action on the following eight points (My Lyons List):
- More land must be made available for housing. We have to break away from the slow process of the Homes and Communities Agency (HCA) disposing of land to a select few partners which inevitably favours the big private house builders. If we want more affordable housing then housing associations should be prioritised to lead on a proportion of this land. We can produce a range of tenures (including outright sale) on major sites and ensure that there is a better balance.
- We have to find a way to speed up planning. Housing is essential infrastructure for a modern economy. There has to be a streamlined process. At the very least a fast track appeals process should be in place. If a scheme is refused but has an officer recommendation for approval it should be considered by the Inspector within one month. Other appeals should take no more than three months to determine. It also seems to me that local enterprise partnerships (LEPs) should have a greater role in designating sites for housing that have economic significance.
- Good old fashioned capital grant has to replace subsidy via housing benefit. We need to subsidise the bricks and mortar not the rents to stimulate new supply. Housing associations will make that grant go further by cross subsidy but we need more grant to hit 200,000 homes. Reducing the £9bn (projected to be £11bn by 2019) benefit for private landlords is key. Even taking £1billion of that into capital subsidy would produce circa 50,000 new affordable homes per year. It could be done by reducing local housing allowances further. I recognise that this will have adverse implications for poorer households in private rented accommodation in London but new supply will compensate over time.
- Pension funds are a huge potential source of funding for new homes. Derwent Living was the first association to get direct pension funding into social housing. The sector could do more if the Regulator was more relaxed on the part indexed linked sale and leaseback models can play in a balanced loan portfolio.
- A further commitment to rent rises at CPI plus 1% would help. We currently have a commitment to 2025 but if this were extended to 2035 then pension funds would be more encouraged to come into the sector.
- We should have a British Investment bank which whould provide lending to associations for affordable housing infrastructure. This could be aimed at small/medium associations who have development capacity but who are squeezed out of the bond markets.
- House builders have used the recession to argue that section 106 commitments were unaffordable. They continue to do so even though the market is rising and the proposals in the Queen’s Speech this week announced that small schemes will not include an affordable requirement. This is wrong! We must also stop the viability tests and ensure a proper flow of affordable housing through section 106 and the community infrastructure levy. Section 106 approvals should be extended to include ‘ethical’ market or sub market renting of the type I described earlier.
- Loosening spending restrictions for local authorities to enable them to fund new affordable homes will be a big part of the solution. Many of the councils that we work with are brilliant partners but a number of them fail to operate proper partnership working for housing. Some larger urban authorities favour their own council housing or ALMOs to the exclusion of housing associations. This is understandable after years of stagnation in the council sector. But in some council areas association resources and expertise go unused and new housing production is delayed as councils try to gear up. Councils need to look at the wider picture if the 200,000 target is to be achieved. It could be that the Department for Communities and Local Government (DCLG) could encourage more effective enabling by reward and penalty. It may be crude central direction but achieving 200,000 will require some of this. That’s what happened in the 1940s/50s and 1970s.
I recognise that there is much more to the solution than this.
I have not commented on the private house building sector. I do think there is merit in the ‘use it or lose it’ approach to planning applications to force builders to make progress. In addition the current Government policy of trying to stimulate private supply by tax payer support for mortgages is a dangerous game of ‘boom and bust’. If we can significantly boost affordable housing supply to at least 100,000 out of the 200,000 new homes a year then this will surely help to bring house prices down, introduce market stability and make home ownership more affordable.
It can be done if there is a will!