Philip Barnes – Blog


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Crisis Over

After 6 months worrying, it finally happened last Sunday. Yes with housing consents and starts rapidly rising we heard the first arguments that the housing crisis is now solving itself, therefore no need for any nasty spending increases or unpopular tweaks to planning policy.

It came on BBC Sunday Politics when Andrew Neill quizzed Emma Reynolds (Shadow Housing Minister) in relation to the recently published Lyons Review. If you look at the chart below you can see why.

Crisis

The Lyons Review has a target of 200k new homes a year, c40K less than the generally accepted need of 240K. If current trends continue we should hit 240K consents a year in 2017. If the trend line for starts continues we should be at 200K new homes a year by 2019; 1 year earlier than The Lyons Review target of 2020.

Luckily for all of us who see the scale of the crisis close up, Emma Reynolds gave a stout and skilful defence of both the need for change and the recommendations in Sir Michael’s report.

As a planner I know that consents data is hugely misleading. To illustrate, in Q2 of 2012 there were c24,000 consents on c800 sites. In Q2 of 2014 there were c62,000 consents, also on c800 sites. The current trend is for bigger sites not more sites. And those of us that actually deliver homes know a site for 50 units does not necessarily sell more homes in a week than a site for 150 units. Housebuilders call a site an outlet, and what the industry needs is more outlets to sell more homes. Extra units but with no increase in outlets can assist security of supply but doesn’t, in itself, guarantee increased new homes output

With affordability worsening, and homelessness increasing in most areas this is absolutely the wrong time to think that the crisis is easing or solving itself. Prioritising housing delivery in both funding and policy terms is needed more than ever. The Lyons Review is a very good way to start that conversation.


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DO WE HOUSEBUILDERS MOAN TOO MUCH?

I sense a mismatch between us housebuilders and many others in the housing and policy sphere. It seems that we builders are too often moaning about how the public policy treats us whilst others argue that we have been supported by Government too much, especially as the market and our profitability strengthens.

So where does the truth lie? Clearly that depends on your standpoint and political priorities. Let’s explore.

There is no doubt that with housing output collapsing to less than 30% of need the Government needed to kick start private sector housebuilding activity. The credit crunch and subsequent price falls meant it was almost impossible, in many parts of the country to build and sell a house profitably. Costs were static but there were virtually no purchasers able to secure a mortgage. Firstbuy and Kickstart blew air on the embers and arguably prevented a wholesale collapse of the housebuilding sector north of Watford. From there Help to Buy came and stimulated both demand and supply of new homes. Its continuation until 2020 provides confidence to continue investment in the process of land purchase, planning promotion, construction and sales. Starts are up and planning consents are their highest since 2007.

Alongside the financial assistance a wide range of other policy levers have been pulled relating to inter alia, planning, public sector land and small builders.

So no housebuilder could reasonably claim that we haven’t been targeted for help or that this hasn’t positively affected our balance sheets. Why? – because we provide a public good for which there is a calculated and recognised need related to household growth.

And it is this “calculation” or regulation of need which is usually the cause of housebuilder concerns.
Our product is considered by many to cause harm. Especially by those who do not wish the area of the UK covered by homes to rise above the current 2-3% of our land mass. The state (nationally) created the planning system to provide nationalised state control of our output – operated both locally and nationally. The problem is that the calculated needs are rarely met as the state (locally) focusses on the overriding electoral pressure to prevent the perceived local harm rather than meeting the wider need.

There is no sanction for not having a plan let alone failing to meet need. Many applications are a battle – for Barratt it takes an average of 70 weeks from the first pre application meeting to being able to start construction. Longer than the whole construction and sales process for our smaller sites. The crux of the housebuilders constant lament is not the existence of the planning system but the need to turn the dial slightly more towards meeting the housing need rather than simply avoiding the perceived harm. NPPF has helped enormously but the uniquely English obsession with the urban containment (aka stranglehold) around most of our key cities is simply not a sustainable approach to assist future generations.

Time and time again I hear people who don’t actually build houses say the planning system is not the key issue. They are wrong. In a recovering market we can and will build more houses if we have confidence that land will be released where it will meet need and address demand. At present the planning approach to the edges of our major cities of London, Manchester, Birmingham, Oxford, Bristol and others gives no confidence in this regard. I would urge those cities to look at the examples provided by York and Newcastle recently.

So back to the question – do we housebuilders moan too much? Unquestionably yes but perhaps slightly understandable as we get lambasted for not building enough, for making too much profit, for not providing enough affordable units and receiving too much Government support. Yet the way we see it is that we could and would build more if, as Cameron Robb of Shelter said recently, the system could provide more land more quickly and more cheaply into the hands of those who actually build houses.


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THE PLAN LED SYSTEM

The plan led system has long been a source of intrigue. Along with Green Belt it is one of those immoveable aspects of British planning that seems beyond criticism.

First source of intrigue is because it must be the biggest misnomer in British social policy. 24 years after the plan led system came in we still don’t have many plans. Only 57% of local authorities have an adopted local plan and only 15% have a post – NPPF plan, namely one that can be described as up to date. I recently heard someone from York City Council confirming that within two years they should be able to adopt the first plan for the City since 1956. Newcastle, as a major regional capital currently has the 1998 UDP as its adopted policy document.

Planning must be the only area of policymaking where national policy is more fleet footed than local policy. As a housing specialist we seem to get brand new national policy every few years. Since 1992 we have had 3 versions of PPG3, plus PPS3 and now NPPF. In contrast the pace of local plan production seems to sit somewhere between glacial and snail.

The second thing which causes intrigue is its purpose. It’s clearly not to speed up housing delivery as average annual output in the last 25 years has been roughly half the level of the preceding 25 years.

I guess its attractiveness lies in the innate desire of us planners and policymakers to prepare plans. Perhaps giving us an attractive sense of control over the rapacious developers. It also seems so similar to our North European cousins with their high quality urban extensions and so divorced from the sprawl and unplanned development in the Southern Europe, Ireland or the US.

A comprehensive district-wide local plan offers us the chance to control the future of a whole district or town or even City. It allows us to draw a map where some areas are shaded brown for housing and other areas are shaded green for countryside or purple for employment etc. Then, once the plan is finished you simply say yes to a housing application if it is shaded brown. The brown areas are carefully sized to accommodate all the homes we need for the next 15 years. Not too small and not too big.

Job done. Housing applications on brown = Yes. Housing applications on another colour = No.

But it hasn’t quite worked out as planned – pardon the pun. Firstly, unlike our North European cousins sometimes we see the preparation of the plan as the end of the job – other than to sit back and monitor what others to to make it happen. Completely different in Holland or Germany where the plan is simply the catalyst for local and central government to roll up their sleeves to work with the private sector to make the plan happen. The 1991 VINEX programme in Holland planned 455,000 new homes in new suburbs. By 2008 they were built.

Secondly, the plans, when written, simply didn’t get implemented. In response the Government then asked LAs to prepare strange “plans lite” documents like urban capacity studies or SHLAAs. These were aimed at defining the off-plan sites which could nevertheless be deemed suitable for housing in order to drive up housing output – in particular on brownfield sites.

Unfortunately, over ambitious Employment Land Reviews, the recession and the abolition of “garden grabbing” largely put an end to these “plan-lite” “windfalls” as a significant source of supply.

Now the “in my day” bit.

I can remember, just, what it was like to work in a local authority before the plan-led system. The local plan team prepared local plans for areas of major change or areas where particular control was needed. In my authority about 5 local plans covered about 20% of the area. The development control team was then trusted to say “yes” or “no” to housing applications based on whether the site and design complied with general national and local policy objectives or criteria-based policies. Namely whether or not it was a good development. It all seemed to work quite well. Certainly I found development control was an exciting place to work constantly making tough judgement calls on interesting applications. There were no housing caps – simply a loose application of the 5 year supply based on supply estimates compared to past build rates.

So what happens now? Nothing – as the plan led system appears sacrosanct and we all need to work within it. But that doesn’t stop old timers like me hankering for a planning system which either:

a. enables local government to quickly prepare district wide plans and then get involved in making delivery with pace happen, or,
b. focuses local planning effort on areas of change and then considers other applications on their sustainable development merits rather than the colour it is shaded on a big map.


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NIMBYISM – A RIGHT AND LEFT COALITION?

Sometimes it takes an overseas perspective to make you realise something fairly obvious. And so it was for me when reading the Planetizen interview with Ben Ross about how the Maryland Purple Line mass transit project had tackled the issue of Nimbyism when developing the http://www.planetizen.com/node/69135.

As well as the usual important stuff about feedback,transparency and mobilising supporters Ross brought home to me that the reason Nimbys are so powerful is that, unlike nearly any other political cause, Nimbyism is a coalition of both the political right and the political left.

It’s the same in the UK when trying to address the housing crisis. When it comes to delivering the homes we need, most people recognise that (for good or ill) this is dependent on private sector housebuilders. This requires the release of large numbers of brownfield and greenfield sites.

That requirement for greenfield site releases to be built by private housebuilders creates problems for both the left and the right. And because it so much easier to oppose something than to create something the inevitable result has been a huge undersupply of housing.

For the right the problem is obvious. Population growth and housing aspiration is focused most heavily in the South East where tory constituencies dominate and there is little brownfield land outside London. Greenfield housing is unpopular and MPs and local councillors queue up to denounce the evils of concreting over the countryside. As they articulate the need to halt the rapacious developers, little mention is made of a housing crisis described by Nick Boles as immoral.

For the left the problem often seems to be profit. From what I hear in cross-sector “round table discussions”, I sometimes get the sense that some on the left regret the fact that volume housebuilders need to play a key role in addressing the housing crisis. It sometimes feels as though the message is that if housebuilders must be allowed to build, then they should be rigidly controlled and restricted to brownfield urban sites!

The tone is often the same. An evidenced case relating to the quite obvious capacity (as a nation) to release small amounts of land to house the nation is met with hyperbole about urban sprawl and housebuilders wanting to tear up the planning system. Quickly followed by descriptions of fabulous urban regeneration schemes across the UK and Europe. Without any realisation that we housebuilders equally regard them as fabulous (indeed delivered many of them) but are simply pointing out that regeneration is only one of the levers we need to pull in order to address the housing crisis. Others are required.

More plans, more control, more research, more organisations, more regulation, more studies, more planning often seems to be the safe approach without any hard evidence that more state-side control actually leads to more delivery.

With the left and right up against us – no wonder we housebuilders have under delivered!! But, instead of moaning – what can be done about it?

Firstly I need to immediately exempt Ministers and Shadow Ministers from the broad generalisations above. From what I see and hear Nick Boles, Emma Reynolds and Kris Hopkin understand the issues clearly and work tirelessly working out solutions to try and deliver more homes. Despite the obvious political difficulties.

Secondly we housebuilders, at times, need to focus more clearly on solutions and ideas rather than just describing the dysfunctional outputs arising from a fairly dysfunctional system.

Nobody in housebuilding is arguing for a liberalised Spanish/Irish – planning system or an unregulated land market. But perhaps we need to work ever harder on identifying what we do stand for. Would Martin Luther King really have had as much impact if he titled his 1963 speech as, “I Have a Nightmare?”

Thirdly we all need to remember the importance of robust hard evidence. At present in the housing debate there is too much articulation, and insufficient demonstration, of the points being made. Whether you agree or disagree with the content the recent Shleter/KPMG report – it’s a robust evidenced contribution and a good first salvo in the run up to May 2015.

THOUGHTS ON THE SHELTER / KPMG “HOMES WE NEED” REPORT

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It’s now 11 months to the election. Thankfully, housing will finally dominate an election campaign for all 3 parties. All no doubt promising more building but without saying exactly where.

Over the next few months all those with a vested interest in seeing more (or less) new homes will be publicising their suggestions for what should go in the respective manifestos. The first salvo came from Shelter/KPMG publishing “Building the Homes We Need” recently. Although the first, I strongly suspect that not much else will be better researched in the months ahead. This is an important well-presented piece of work demanding considered responses from across the housing sector.

Whilst I certainly do not speak for Barratt as a whole I am happy to provide some personal observations.

Let’s start with the stuff I really like.

Firstly it’s clearly underpinned by a huge amount of research and consultation. This allied to its crisp narrative and super use of informative charts and graphics means it commands respect.

Secondly the recognition of the need to get land to these housebuilder more quickly and cheaply is apposite. The report notes that the residual land value model all housebuilders use helps drive high land prices and encourages speculators to enter to the land market occupying a (high value) space between the landowner and the housebuilder. Housebuilders are competitive and land is the raw material we fight hard for. Therefore when a landowner is focussed only on achieving the highest land value (not irrational) then infrastructure and social spend can suffer as housebuilders do what they can to give the landowner what he/she wants – the highest possible price – in order to secure control of the site.

Conversely there are many examples where Barratt have worked with enlightened landowners primarily driven by the need to create quality and legacy. Again not irrational. This allows us to focus more easily on the qualitative elements. For example at Derwenthorpe at York (Joseph Rowntree Foundation) and Cane Hill in Surrey (Homes and Communities Agency) the product has been truly outstanding.

However the report skilfully and honestly articulates that these examples are perhaps the product of enlightened landowners and housebuilders rather than a “natural” output from the current system.

Thirdly the focus on more custom build, more self-build and more small builder activity is welcomed. Lending difficulties, the recession and our unduly complex planning system has driven many small builders out of business. At Barratt we support the “Help to Build” proposals in the report and would like to see more small builders back. Why?

  • They don’t compete with us
  • They train people for our industry
  • They often pioneer new housing in areas which haven’t  had any in recent years. When local communities see that new housing brings in nice new families (rather than a calamitous fall in local house prices) it can “pave the way” for us

Fourthly it goes without saying; the proposals for New Homes Zones are supported albeit more detail, in particular in relation to the role of the landowner may be useful. Similarly recognition of the need to make some Garden Cities actually happen and to release land from Green Belt is all good and sensible stuff. As is the suggestion that LEPs (in the absence of anything else) get involved in driving “larger than local” strategies to meet housing need in functional economic areas.

Fifthly measures to fund early infrastructure provision and create less market volatility cannot be argued against. Similarly funding proposals to switch funding from benefits to bricks, to create a Housing Investment Bank and relax regulations in order to encourage more local authority and institutional investment in housing.

And finally I completely agree with the following narrative on page 10:

“City and town leaders have few incentives or tools to build consensus and infrastructure provision remains largely independent from housing. This means that support for new housebuilding can easily wilt in the face of local opposition”

Strategic planning provided local politicians with a “scapegoat” or “fig leaf” in relation to really big, difficult and unpopular strategic housing decisions. At present it is arguably unfair to ask local councillors to take such decisions- let’s remember that the average size of a local authority ward is 5,500 people.

So where was I crinkling my nose as I was reading? It was in relation to the argument that there should be no wholesale reform of the planning system. This would seem impossible if some of the key recommendations of the report were introduced, namely new Home Zones, a new strategic planning layer, Green Belt swaps, Garden Cities and cross boundary needs assessments.

Overall though, hat-tip to the authors for bringing a lot of issues together and making an effective cri de coeur in relation to increased supply.

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LONDON’S GETTING BETTER AND BETTER….. THE ONLY LOSERS ARE LONDONERS

One of the “perks” of this job is that I get to sit in on lots of discussions about the causes, symptoms and solutions for the UK’s housing crisis.

Two things always tend to strike me. First how many people claim to have discovered the single “silver bullet” which, when addressed, will solve the crisis. And second how London centric the discussions often
are.

In respect of the former the reality is that there are huge number of causes and possible solutions. Every lever needs to be pulled right now rather than just one or two which suit the politics of the proponent.

In respect of the latter the London focus is entirely understandable. The participants usually live in London or the South East and are often personally affected by the incredible dynamics of the London market.

Rather than one simple cause of the London overheating it seems, at this particular moment, that there are a range of positive forces making London more and more attractive as a City. This is generating housing demand from numerous sources relentlessly pushing the market upward. What are these forces and would it be sensible to try and hold them back?

The first is undoubtedly the dramatic rise in the quality of London’s schools. 20 years ago they were a basket case – now thanks to a range of investment programs (The London Challenge, Pupil Premium, higher teacher salaries, Study Plus) they are perhaps the best in the Country. No longer do young families flee London in order to give their kids a chance in life. This means even less homes on the market available for others.

Secondly overseas investors want to invest here. The political stability since The Glorious Revolution in 1688 is in stark contrast to, inter alia, Ukraine, Thailand, Greece or even France. This confidence and investment in our country is helping to get new homes built. Any idea that investment which gets homes built, is somehow unwelcome, seems folly to me. Once built they are occupied by Londoners and absorb market pressure.

Walking round London is simply different to walking round other UK cities. You can feel the economic confidence – on the street, in meetings and during economic discussions. The policy challenge is how best to harness a speeding recovery.

In the North East the challenge remains to stimulate one. Without available jobs in the regions the traditional flight of 28-35 year old teachers, planners, engineers, nurses, lawyers, etc from London simply isn’t happening anymore. Their houses aren’t becoming available.

Throughout the 90’s and 00’s London haemorrhaged these families to the Midlands and North. They helped take up the huge amount of public (and private) sector jobs in the regions being created by a Government spending boom. Those opportunities don’t exist any more as the economy and public sector employment has reduced. Meanwhile there is evidence that public spending and employment in London has actually increased – perhaps understandable as managing growth takes more resource than stagnation or decline.

London’s ever improving cultural attractions, facilities and public transport is also, itself, driving housing market pressure. As arts, transport and sports budgets get slashed in places like Newcastle those relying on such opportunities seek them elsewhere. I know of two, wealthy baby boomer couples who have downsized to two smaller properties – one in the North East and one in London. Why? – firstly to be closer to nest-flown children but also because they want to see good shows, visit great exhibitions and eat at busy restaurants. In areas that are vibrant any night of the week. Plus the capital growth of the last 2 years in London (compared to the North East) means the investment has made obvious financial sense.

SO – in London we have better schools, a successful growing economy, more public sector jobs, ever improving cultural attractions and more investment confidence. Clearly all great news?

EXCEPT that all of this upward housing market pressure means it is becoming virtually impossible for Londoners to gain access to decent housing without baby boomer backing. The average London house price is nearly 10 times annual salary and rents are rising 8 times faster than earnings. Last year the national average salary went up by £261 whilst the average house price went up £16,000.

At the risk of walking well trodden ground the answer must be a dramatic increase in housebuilding including a truly radical appraisal of the role and function of Green Belt in many of the outer London Boroughs. Public and private sectors working together – sharing risk by taking advantage of (hopefully) a relaxation of the local authority lending cap. It means finding underused rail stations and building attractive garden villages and cities there. After the endless rhetoric is it now time for action?

Plus a more positive policy focus on rebalancing the economy of the country. Shifting national public functions and jobs away from the areas of housing shortage and towards areas in need of jobs and investment is a welcome start and would not harm London. This shift could help kick start, an ultimately necessary, private sector resurgence in the North.

Clearly its much more complex than this but, as a dyed in the wool northerner, this seems more sensible than pursuing measures to inhibit the global economic success and attraction of our capital city.


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TIME TO REFLECT ON THE PAST, PRESENT AND FUTURE OF THE PLANNING SYSTEM

The TCPA Annual Conference at The Liberal Club came as blessed relief recently. A time to reflect on the past, present and future of the planning system. An enjoyable and valuable time out from the cycle of meetings, presentations, train journeys and hotel check ins. I still can’t quite believe it’s only been 4 months since I was lucky enough to take on this national role.

The conference also allowed me to reflect on all the various land, housing and planning presentations I have seen since joining Barratt. I came to the conclusion that one of my favourites was by Andrew Carter at a fringe event at the Labour Party conference. Why? Well firstly because he reflected many of my own views (obviously essential) but he also provided interesting new evidence on the subject. In particular Andrew made the point that whilst in his view the land, housing and planning systems are dysfunctional – everyone behaves rationally. No sector or grouping can be described as irrational given what is front of them.

Planners tend to behave rationally in my experience. The problem is that planning departments are massively understaffed and they sometimes get asked by local politicians to take decisions which feel to them (and us) as irrational.

Local politicians behave rationally in a localism world. Their job is to get elected. New housing is unpopular so they are often opposed to it. They get elected by a small community. They reflect what that community wants rather than what is required by the duty to cooperate or some “larger than local” planning issue. They sometimes berate developers, again perfectly rational because many communities don’t want development.

Housebuilders also behave rationally. We have to build houses (clue in title) and we have to do it profitably. No job for me if we don’t. We face an under resourced planning system and a shortage of adopted plans. We also have perhaps too little risk appetite. Why? Because many of us nearly went bust 5 years ago. Again perfectly rational when you consider planning consent costs are roughly £2m per 1000 houses – from pre app to construction. Therefore we are now compete trying to outbid each other to buy land from either the public sector or the land promoters who have taken the risk to secure planning permission. We then try to build and sell in a way which ensures we make a profit – for the reason given above. Again all rational.

Local communities tend to behave rationally. It is a peculiarly British trait that when it comes to retirement planning we often place some reliance on the value of our prime asset – the home. As such when the housebuilder comes along to build houses at the end of the street we think it might adversely affect the value of our home. Especially if we are not too far off retirement age. The thinking is that if planning permission is NOT granted then I can afford gold standard retirement provision. If permission IS granted it might be silver or bronze. Of course the reality is that new homes tend to lift local house prices but the fear and subsequent action cannot be described as irrational without compelling evidence to the contrary.

So what can be done? I don’t think that an overhaul of national planning policy is the answer. Looking back to days of PPG3 and PPS3 you would have to be a monumentally churlish developer to say Nick Boles hasn’t done a great job in delivering NPPF and NPPG in the face of huge opposition. Much of it from his own party! Sure there remain difficult issues at the local and “larger than local” level but in this modern multimedia world I suspect even the most hard-nosed planner and housebuilder accepts that a policy of forcing millions of homes on an unwilling Middle England would be difficult. Between 1947 and 1950 alone the state rocked up at 11 separate communities and told them all they were the now the fortunate recipients of a massive New Town. Personally I can’t see that being replicated going forward without major political difficulties if not civil unrest. Yes we need a more strategic approach but waving a New Town wand will be hard.

In the meantime NPPF tells us that if a Council doesn’t have a plan or a 5 year land supply it may be more difficult to defend a refusal of permission. In my view this way better than what we had 5-10 years ago.

For me the answer is that there is not one single answer. There are many levers to increase housebuilding and they all need to be pulled right now. Thinking about the most important themes at I am again drawn to the one of the key questions in Andrew Carter’s presentation. Namely how do we get more land into the hands of housebuilders earlier and at a price which make it easier for us to build beautiful developments with abundant social, physical and environmental infrastructure? Remember we actually want to do that because it means our homes sell more quickly and nobody should under-estimate the importance of early return on equity in delivering a profitable development. Debt is expensive.

The other theme for me is collaboration. Especially as there are no way we housebuilders can deliver what is needed on our own. I am doing more work in Scotland and they do seem to have cracked this consensus nut better than down here. Perhaps some lessons to learn. Also I am struck by the cross-sector cross party support for the brilliant “Yes to Homes” campaign. Anyone fancy launching a “Yes to Planning” campaign which focuses on how, when planning is done well, it delivers growth and beautiful places.

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