‘Here’s how we’ll realistically achieve 300,000 new builds a year’

During the mid-noughties the government started publishing more accurate house building figures and since then we’ve had a much clearer idea of how effective politicians have been at ‘getting Britain building’.

Laid bare, the figures do not look good. Since 2006 it has taken five governments, 10 housing ministers and many billions of pounds to – in effect – tread water.

The number of homes being built every year is at the same level as the early 1980s, official figures show and despite the more aggressive approach of the Cameron and now Johnson governments to make the dials twitch, we are a very long way off achieving the 300,000 annual total much touted by successive housing ministers.

At this week’s Conservative conference in Manchester, Housing minister Esther McVey claimed the UK was on track to build 220,000 homes.

It breaks down like this; in England the number of housing association and private new build completions for 2018/19 is 169,700, 20,300 in Scotland, 5,900 in Wales and 7,100 in Northern Ireland.

This is a total of 203,000; the rest is conversions largely driven by the increase in office to residential conversions via Permitted Development rules.

At a glance…

  • The government has pushed almost every button it can to raise the number of new homes built in the UK every year, but what next?
  • Build to Rent has the potential to increase provision, but it’s early days.
  • A ‘third say’ which marries, pension funds cash, government-owned land and Home England grants is now being heralded as the best way forward to ramp up new homes building while maintaining quality.

To achieve this, the Tories have been pressing every housing button and should be applauded for their efforts.

Billions have been spent on Help to Buy and other indirect and direct subsidies; its affordable homes programme has been re-purposed via the recently-minted Homes England and the planning process has been streamlined and made faster.

Despite all this, among developers there is a growing number who believe that a much more radical approach is needed if we are going to build another 80,000 homes a year by the mid-2020s, which is the current government’s aim.

The idea is, essentially, that they want to see a holy housing trinity between government land and policy, pension money and developers to create the synergy to significantly ramp up house building.

Third way

One of the flag bearers for this point of view is Scott Black, Managing Director of Crest Nicholson Regeneration, who has outlined to Dealmakerz his vision of how this ‘third way’ would work.

“The bottom line is that there is a need for housing and the supply and demand balance is completely wrong and has been for many, many years which is why our house prices are much higher than in Europe and in the States and elsewhere,” says Black.

“This has priced many people out of the market, but they still need somewhere to live so it comes back to supply and demand and we need to address it.

“But we’re not going to find a solution by building more private open market houses when we’re always building fewer than demand generates because that imbalance will still exist.”

Black says a new model of financing new homes provision needs to be adopted in the same way Build to Rent has been embraced.

This, he points out, is an ideal housing provision model for those who can’t afford to buy or get a deposit together; don’t qualify for affordable housing; or who don’t qualify for a mortgage. 

“It’s an institutionally-owned, highly-quality and properly-managed private rental sector with a focus on customer experience and customer journey and it has to be a good thing for tenants,” he says.

He also says it’s good for Crest Nicholson and other builders too because Build-to-Rent operators pay up front to secure their units including both M&G and Prudential, with whom Crest Nicholson has now completed seven big PRS schemes around the UK.

Profit margin

So what other new models is Crest Nicholson trying? One is grants for non-106 grants awarded via Homes England, an approach Crest Nicholson has employed most recently at its Centenary Quay development in Southampton.

To make shared ownership work at that site Black and his team have worked with Homes England to effectively provide the company with its profit margin.

It’s been given these grants at other sites too, enabling it to complete bulk sales to registered housing providers such as Clarion, Thames Valley Housing Association, A2 Dominion and others.

Pension funds

“But the next big step, I believe, is to persuade more of the pension monies from the likes of M&G, Prudential, Legal & General and local authorities pension funds to be employed in the market,” he says.

“There’s a huge amount of money out there and over the long term house building continues to be stable which you chart that back to the 1800s as an 18-year cycle.

“What I’m trying to say is that housing is a relatively safe long-term bet for pension money so if we can find a way, which I am sure we can, where government land is brought into play with pension money and Homes England funding then we can pre-sell a whole range of tenures into those pension companies who would then hold those assets.

“Then we can build that stock to a much higher quality, at a much quicker rate and also invest in the supporting infrastructure and services such as schools, road improvements everything that is needed to sustain a development properly.

“If you can pull all that together then you have a solution. But it requires partnership, money, land and the developers. It is not beyond the wit of man to make that happen.”

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