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House building and the disastrous impact of 'Big Society'
Distortion and spin is tearing apart an economically and socially vital industry - house building - at a time of great need and fragility, writes Linton Chiswick.
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More FTSE charts & pricesby Linton Chiswick on Aug 27, 2010 at 00:01
Distortion and spin is tearing apart an economically and socially vital industry - house building - at a time of great need and fragility, writes Linton Chiswick.
Statistics by themselves, of course, mean almost nothing. The message is in the interpretation; the part that gets beaten all out of shape by vested interests. Money, social interest groups, politics: it only takes one to spin the data. And if the data pertains to the building industry you’re really in trouble, because you’re dealing with all three.
Lack of new homes
This week, SmartNewHomes – which lists 85% of all new builds – took the opportunity to point out that the number of new homes added to the database has, for the second consecutive month, reached a record low, and to point the finger at Communities and Local Government Secretary Eric Pickles and his Government’s proposed changes to planning law.
The Coalition’s policy on housebuilding is – certainly – not only ambiguous, it’s also, for the time being, missing. While the cost of development land is rising (up 20% on the year, according to Knight Frank), developers face radical changes in the system that risk making building on the plots much more difficult.
The new rules will devolve planning power to the people. Planning strategies and regional targets will be out. In the country, communities themselves will have the power to say yay or nay. Recently added detail suggests an incentives system will make it pay for councils to be 'onside' with developers, by matching any additional council tax raised from homes built during the current parliament. Housing minister, Grant Schapps, portrays the system as a positive freedom (he’s quoted as claiming, 'Up and down the country there are entire communities eager to give the go-ahead for new developments in their area.'). Really? With any local vote requiring as much as 90% agreement before permissions’ granted, expect to hear more nays than yays.
Fewer rather than more
Of course, we won’t know before the end of 2012 at the earliest (even the consultation paper isn’t due out until October). In the meantime, a useful clue as to communities’ desire to build can be gleaned from the behaviour of local councils and builders themselves in the vacuum that’s been left since the Coalition made known its intentions.
In Wokingham, ear-marked for four major developments, residents have demanded a reduction in housing numbers, and it sounds as if Conservative councilors are prepared to concede to their wishes. Ashford, Milton Keynes and Southampton – areas of crucial housing shortage – have seen 42,000 new homes scrubbed since the election. Local councils in the South West have cancelled the building of almost 60,000 new homes.
Distortion and spin
Shapps’ portrayal of the new laws as a positive freedom rather than negative 'nimbies’ charter' is all part of the distortion and spin tearing apart an economically and socially vital industry at a time of great need and fragility. Devolving difficult or unpopular decisions to a micro-geographical level isn’t about a Big Society, it’s about Little England. Giving small, conservative rural communities and outlying second homers and retirees a 10% veto on development, and painting that as making it easier to build where people want homes is classic politically-motivated double-speak.
Tenuous claims
Not that either side could ever be accused of playing with a straight back. Returning to those SmartNewHomes figures. Steve Lees, SNH’s marketing director, has been quoted widely, overtly linking the numbers to Government policy. 'On assuming office, CLG Secretary Eric Pickles was quick to sweep away the Regional Spatial Strategies [RSSs] that formed the basis of the previous administration’s housing policy. In its place, however, is a policy vacuum – a nightmare scenario for the industry. The result has been a dramatic decrease in the number of new homes coming on to the market: The figures for July show a new record low in the number of new homes for sale for the second consecutive month.')
Lees’ vision of the future might be spot on, but are these figures really 'the result'? These are homes that should have been planned before the credit crunch, built (or not) during it, at a time when loans were being withdrawn, tools downed. To suggest that this data can be linked to current policy initiatives is surely as absurd as the attempt to portray, say, official data showing house building in the second quarter of 2010 84% (yes, that's 84%) higher than in the first quarter of 2009, and 13% higher than the first quarter of 2010, as a Coalition success.
We’ll never know how many houses might have been built under the old system, but it’s fair to assume the industry was likely to be bruised, in any case, by lending issues, high land prices, a recession that could only bring down property prices and further thin the numbers of potential first-time buyers. The developers are aware of that. As are the politicians, and the welfare groups.
But what’s truly laughable is that the Government feels the need to pretend not to know that what people really want… more affordable housing, just as long as it’s nowhere near them.
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28 comments so far. Why not have your say?
james dunford wood
Aug 27, 2010 at 10:30
Not sure I can play anything with a straight back. Straight bat - that's a different story.
report thisJOHN WOMBWELL
Aug 27, 2010 at 11:01
Funding is the main problem we are having in the SW . We have 3 schemes ready to go with reservations from purchasers but funders are few and far between.
report thisNina Lister
Aug 27, 2010 at 11:03
This piece is completely spot on
report thisJohnyCash
Aug 27, 2010 at 11:05
Surely a 'straight back' is a heterosexual football defender?
report thispedant landlord
Aug 27, 2010 at 11:10
Straight 'back' is bad enough, but whatever is this strange word 'yay'? I assume he means yea. Surely there should be some requirement for basic literacy for people to get a job like Linton Chiswick's?
As a rural dweller who has seen so many picturesque areas blighted by unsympathetic developments, I can see some merit in these proposals. It's not so much a veto local people want as some say in the design and density of new housing.
report thisGaz Tops
Aug 27, 2010 at 11:19
If you look at websites like emptyhomes.com, it appears as though there could be as many as one million empty homes in England alone.
If, and granted that is a big if, that is the case, then why bother with new homes. Surely we should be concentrating on bringing these existing homes back into use.
Before anyone complains about the prospect of living in a run-down house - please bear in mind that these figures include properties that have gone unsold. Not to mention the governments cash assistance to anyone who does bring a disheveled home back into repair.
report thistomatoman
Aug 27, 2010 at 11:27
Development land prices escalating........WHERE and WHY? Forget London, and simple economics say land values should be DROPPING in a big building freeze!
Now some facts.........anyone who took the slightest interest in new house build activity around the country will recall everything crawling to a halt LONG BEFORE Gordon was trying to dictate a National housing quota. The party's over for the developers for ANOTHER three years, at least.........plenty of time for the new planning process to find its feet by RATIONAL DISCUSSION locally, NOT BY DICTAT from the developers' friends.
report thisAdvisor
Aug 27, 2010 at 11:29
The Southampton information is wrong.
House building has been running at double the Southampton targets over the last seven years or so.
As in many other cities most of this recent development has been of (usually small; one or two bed) flatted housing. A good proportion of this remains unsold, and some has been started but not completed.
The new-build Buy to Let flats market collapsed in Southampton around 2005.
The unaffordabilty of most of the new stock relative to prevailing incomes means that Southampton demand for new housing is weak.
The urgent need is for affordable three bed family houses - a requirement that the commercial speculative house-builders are not equipped to fulfil.
report thisJonathan Court
Aug 27, 2010 at 11:56
The writer appears to discount market forces. Hopefully the new Goverment will not try to distort these like the last. Certainly the country would do better with less direct tax on working people, so that consumer spending/investment could be driven by people with a work ethic.
report thisAnonymous 1 needed this 'off the record'
Aug 27, 2010 at 12:02
'only bring down property prices and further thin the numbers of potential first-time buyers' - Erm I fail to see the correlation here. There are a huge amount of viable homes that aren't populated, where people become populace, so does employment, cities didn't just appear this is how it started (I say this before people moan and reveal what they actually want is to live in london!).
Every development I have seen in my area in the last 12 years has been for £675k homes (which haven't sold) they appear as a statistical house in the horrendous world of 'statistics are lord' however they do nothing for the need for affordable housing. It does however line the pockets of the developers (unscrupulous bunch of cowboys) and of course thier 'chums' in the council. This is the ugly truth.
report thisrich cooke
Aug 27, 2010 at 12:09
The problem isnt just the planning system. Those of us that have been working in it for years know that it is an absolute shambles and Pickles is just making it worse. That is taken as read, but we have to work with it.
There is enough consented land out there at the moment but it probably needs replanning ( not flats but houses).
What is really the problem is the lack of any funding. There are very few banks willing to lend to developers/builders and so nothing gets built. The main reason they wont lend (apart from the fact that they dont have any money themselves) is that they dont think there is a market mainly because they wont lend to the purchasers either!
Everything I have built in the last three years has sold immediately but to buyers who dont need much funding . All our development funding comes from private individuals who generally have received a 10% plus return for their trouble.
I suspect that is the future for the smaller housebuilders.
report thisS M
Aug 27, 2010 at 12:13
Building yet more houses in the overcrowded SE, sounds like a good idea.
Why not incentivise the use of underoccupied buildings, those unoccupied and brownfield sites?
Yes I know the building industry has a huge political lobby..
report thisRaymond Hurley
Aug 27, 2010 at 12:23
Without the constant pressure of immigration,the UK could manage it's housing stock quite easily.
Should we really be expected, to lay the whole country under a blanket of concrete, in order to accommodate any one who wishes come and live here.
Stricter immigration control would cure most of our housing problems (and many others probably)
report thisJohn Lacy
Aug 27, 2010 at 12:37
When we've finally covered the whole country in concrete and tarmac and have to resort to eating each other because there's nowhere left to grow any food I'm sure that everyone will be pleased that they've got a 3 bedroomed affordable house!!
Linton it's time that people like you looked to sustainability rather than berate the incompetent politicians (who will destroy far more than they create) about the lack of new homes. There are plenty of homes in the country--it would be far more sensible if the government and local authorities concentrated on getting the jobs and the people to where the housing already exists.
report thisdavid harrison
Aug 27, 2010 at 14:06
John Lacy
If you live in a house your just as guilty as your comments.concrete/tarmac
People need affordable houses, our rate of new build is pathetic
report thisF Fuchs
Aug 27, 2010 at 15:07
The party newly in power is likely to crowd-please for a while; I daresay lots of conservatives' new friends have nimby inclinations. Also, the conservativegovernment is relaxed about funding for housebuilding because rich people, its old friends, pay cash.
report thisAnonymous 2 needed this 'off the record'
Aug 27, 2010 at 16:50
I very much doubt development land has increased in value even in the overdeveloped southeast. I certainly wouldn't rely on KF's figures.
report thisAnonymous 2 needed this 'off the record'
Aug 27, 2010 at 16:57
Rich Cooke stop falling in to the Banks won't lend trap. The Bank's have hardly any money to lend as they have been made (quite correctly) to reduce their loan to deposit ratios and to hold more capital. Therefore what money they have available they are certainly not going to route into the property bubble.
What needs to happen is for land prices to correct as they make most developments unviable without a further rise in house prices.
Also there is not a shortage in housing stock only a shortage in affordable housing stock. Homeless rates are not rising, first times buyers who can't afford to buy are simply renting from investors who helped push prices beyond the level of first time buyers.
report thisPaul T Smith
Aug 27, 2010 at 17:08
Much of this article is based upon a 20% increase in building land prices in the last 12 months. A year ago building land prices had slumped, with some areas unsaleable. What is a mere 20% increase in comparison?
report thisJohn H
Aug 27, 2010 at 17:43
The scheme should enable locals to veto inappropriate development, a lot of which has been approved by councillors who live somewhere else and don't have to suffer the consequences of their approvals.
report thisJohn Gardiner
Aug 27, 2010 at 19:19
Any available land it now seems goes for a large premium. Whether for the "horsicultural" brigade with the outside chance of making a killing one day, or the out and out development land. The reason is plain to me. There is no other safe medium for ones spare cash which can keep abreast of inflation. We all know the old adage " they don't make it any more".... land that is.
The strange thing is that there are no end of folk willing to shell out loads of dosh for land, but no one is willing to shell out loads of dosh for new property.
report thisMalcolm Martins
Aug 27, 2010 at 21:12
In the Norwich area there are 11,500 homeless families needing 3 bedroom houses.At the same time we have a surplus of flats which have been built in the last 15 years, many were buy to let. We need good planning to correct this, but the new government policy has allowed local nimbys to block development.
report thisjohn brown
Aug 28, 2010 at 12:49
Who has seen any marches in the streets with placards saying I cannot get my new house..
No thatis not happenning and over 1 million sellers have not got interest in their present properties.
The deamnd for New homes is not from the £165-1million I want to buy one people -its houses to accommodate those on average salaries with no Deposits or immigrants who need a place to live.
This the real TRUTH- The facts are we can adapt , and manage when we require with the house we are already trying to own. housing was a Churning procedure - Jones theory-keeping up-Your house gets bigger with your financial ambitions. This will require to stop for many as the Noughties and before are seen as profligate and now is about Housing for need, thus it will be social housing-simliar to the 60/70s and we need to design to avoid ghettos and manage to avoid people dispute.
More worrying we could see communities built on nationalities given immigration, even if starting with diversification it can easily lead to polarisation as has hapened in USA
Planning and development- the big society ignores some sections have bigger beliefs and attitude than others -The market test of who can afford to live here is far more realistic.
report thisRobin McEvoy
Aug 28, 2010 at 16:47
Malcolm Martins, if you come back to this - where are all these 11,500 homeless families in the Norwich residing at the moment? In tents in the fields? Or in rented accommodation? In which case they are not homeless.
report thisAnonymous 3 needed this 'off the record'
Aug 28, 2010 at 19:25
There's an incredible shortage of housing in this country, over a million houses currently and increasing rapidly. The empty houses don't matter, half are only empty for less than 6 months for probate or refurbishment before heading into the sales channel or back into use, and the other half are not available for sale or use anyway. Without a change of law to forcibly confiscate them, which is not going to happen, they may as well not exist.
With population increasing rapidly both from immigration and birthrate, and current housebuilding at around one third of the levels needed just to keep up or keep prices stable at today's levels, the affordability crisis can only get worse.
Rent is now also increasing rapidly as buyers are locked out of purchasing by sky high deposit requirements, and the consolidation of wealth in the hands of the property owning classes (natural Tory core voters) is accellerating.
The coalition know full well that they can't get re-elected if house prices (and then inevitably the wider economy) crash again, thus the introduction of this NIMBY Charter.
A couple of years of even lower housebuilding will ensure prices recover and maintain an upwards trajectory throughout the next couple of election cycles.
We are sowing the seeds of the next boom today, and there's little anyone can realistically do about it.
report thisrich banker
Aug 28, 2010 at 19:40
a nimbys charter.........
report thisMark Brown
Aug 29, 2010 at 15:43
Reference to a policy vacuum strikes a chord. Maybe its the looming Comprehensive Spending Review or the summer break, but a growing number of fields of public policy are afflicted by a lack of direction despite the dismantling of the previous administration's policy structures. RSSs are a good example.
This lack of direction not only threatens to distort and destabilise the housing sector, it also poses a growing risk to economic recovery given the importance of an active (affordable) housing market.
Can the Government get on with its main taks of making and implementing policy?!
report thisLeander
Sep 04, 2010 at 00:48
The essentials for house pricing are the same as for anything else: supply v demand. Uncontrolled immigration under the Labour government put yet more strain on prices and as long as we are forced to remain in the EU this will continue.
The present government will make matters worse if they continue their policy of stopping small scale building on garden land. If we don't want to build on green field land, where else is there? Allowing locals to veto building will just about stymie the whole thing. It lacks common sense.
A serious crisis is looming. Last year saw lower new house building than at any time since the end of the second world war
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