Philip Barnes – Blog

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It was great to speak at the Building Better Building Beautiful conference in Birmingham last week. The packed agenda ensured over 400 delegates and a huge number of interesting issues were raised. Superb day and cap tip to MHCLG.

As a housebuilder it slightly felt like being in the away end but there was huge value for Barratt to take away.

First and foremost was the commitment of Homes England to drive out Building for Life 12 as the means to help consider design when the public sector is selling sites or determining planning permission. There is a commercial interest here as Barratt has been using BfL12 for several years. In fact, despite being only c.8% of new homes built we have won more BfL12 design awards than the rest of the sector put together.

As with every design conference the walls and videos were adorned with exemplar housing schemes, many of which were in London. Indeed three of ours were showcased at Cane Hill, Derwenthorpe and Hanham Hall. But my pitch to delegates was that whilst every development needs to be good, not every scheme needs to be exemplar. Indeed how could they when two of the sessions focussed on how to drive up build rates via MMC and standardisation.

Effective local plan policies and/or masterplans, plus a capable housebuilder can deliver good design on every single site, especially if BfL12 is deployed effectively. But if you want an exemplar scheme you also need a committed, willing landowner as well. If a landowner (or the agent or land promoter) is solely interested in maximising land price, then the land market process will likely prevent exemplar being delivered. No matter how good the housebuilder or the LA.

Every site deserves good design but does every one require exemplar? No period of history has delivered exemplar on every site, and especially not when there has been a need to much increase the production of new homes.

Barratt agrees with George Clark who told the conference that if MMC is seen solely as the route to reduce costs then we have a problem. If MMC increases quality, increases speed and reduces costs as well then we have a solution.

For Barratt good design is more about culture than policies or standards. We believe that good design will help sell our product and contribute to customer satisfaction. As such we invest the time and the effort required to achieve BfL12. The culture starts at the top and permeates downwards. Driven always by our customers – the people who pay our salaries. The people who want our MMC homes (20% of volume) to look like our traditional built ones.

Standard house types came in for the usual panning all day. But Barratt has over 100 house types, all architect designed and with variants to cover modern, Victorian, Edwardian, rural and suburban sites. Many of the UK’s favourite places were built via standard house types and lazy stereotyping is perhaps unhelpful. Some of our poorer schemes have been where unqualified LA officers have interfered with our classically proportioned and architect designed elevations.

And when you are building 17,600 homes a year, reducing mistakes leads to happier customers. Forcing complicated unfamiliar designs, on our workforce, tends to lead to more mistakes, slower build and reputational risk.

Much was said about stewardship throughout the day. No one is going to disagree with the benefits of stewardship when looking at Letchworth or Welwyn. But stewardship (whatever that actually means) must not be regarded as a straight line to good placemaking. There are many public sector built estates which show there is no direct correlation.

The best people to steward a placed are the residents. There are no stewardship organisations in Gosforth or Otley but they are wonderful well managed residential areas. Yes, for new build, a residents management charge to maintain open spaces, will usually be required due to LA cuts. But the idea that stewardship trumps the creation of a design that residents love is folly in my view. Not that anyone said that!

And the best quote of the day was from Paul Watson, former Director for Development at Solihull MBC. Paul reminded us that quality is different from beauty. Something can be loved, cherished, full of character and extremely attractive, without being considered beautiful by anyone. Poor quality is never loved.



Some quick personal thoughts on the key trends likely to impact on housebuilders and housebuilding in 2019, in terms of:

  • Volume
  • Prices
  • Planning
  • Modern methods of construction
  • Design
  • Social housing
  • Private market housing by housing associations


As always, the key to higher delivery will be both more active smaller builders and more units from the major builders. Conditions for smaller builders are now better, not least more funding (and other) assistance from Homes England. Plus a policy focus on greater diversity to accelerate supply, via more sites for smaller builders and more builders on larger sites.

In 2019 we can expect more Homes England activity, and the Government response to the Letwin Review. Both should lead to more small housebuilders forming, securing funding and expanding.

For volume builders the key factors will be sales rates and detailed planning consents. A positive Brexit should lead to a strengthening of consumer confidence thus driving sales in the run up to the H2B changes. However, if sites don’t come through as builders have planned, either due to a local plan hold-ups, or delays to applications and planning conditions, it will be difficult to achieve planned growth. Especially as the flow of off-plan sites is likely to slow given the NPPF2 emphasis on the primacy of the development plan.

In contrast, if the NPPF2 emphasis on simplifying the planning system really bites then the leading builders will respond with faster delivery and more homes.


Will obviously leave it to the agency experts to make the price predictions, but suffice to say that we at Barratt are optimistic that prices should remain stable, barring a catastrophic Brexit. We don’t demur from the recent 2-4% predictions coming out of the leading lenders and agents. We do expect regional variations, as always.

The marketing and sale of a new home is the end of a long road from land acquisition, planning and build. A stable pricing outlook, for new home sales, will be important to volume builders maintaining their appetite for land investment and growth.


NPPF2 is a positive with both the new Standard Method and the Housing Delivery Test hopefully driving out more homes where they are needed most. They should also help accelerate local plan production which is so critical to delivering volume growth.

But whilst national policy is positive builders are increasingly frustrated by local process delays.

It feels like Government is thankfully spending more than ever on housing but the inability of this money to be translated into better resourced LA planning departments remains a mystery. When it comes to providing new homes for families, decisions delayed means homes denied.

In just three of our 27 divisions, we have seen 21 sites removed from draft plans in recent months, resulting in the loss of 500 homes per year. 20% of these were to be affordable homes for families in need.


NPPF2 in July emphasised design quality and recommended LAs to use Building for Life 12 (BfL12) as an objective yardstick for considering schemes. Good news for Barratt as we apply it on every site.

2019 will see further emphasis on design not least via the Building Better Building Beautiful Commission and new Homes England guidance relating to site disposals.

At Barratt we hope the focus will be on quality and placemaking rather than specification. Some of our poorer looking schemes result from over zealous urban design officers requiring jarring embellishments to our homes.

Modern Methods of Construction (MMC)

Barratt is committed to driving out MMC and is on target to hit our 20% by 2020 objective. Our MMC homes will look, feel and perform like a traditionally built Barratt home, in line with customer expectations.

In 2018 there has been too many new MMC homes being launched which are not up to the required design standard. They simply won’t get planning permission when proposed en masse, given the new design emphasis in NPPF2.

Faster build and less use of tradesmen must not be seen to to justify badly designed faddish homes, no matter how innovative they purport to be. There seems to increasing concerns about this and hopefully this will continue through 2019.

Social Housing

Hopefully 2019 marks the start of renaissance of a social housebuilding and the recent Shelter report promulgating the building of 3.1m more social new homes over 20 years should help.

Barratt has some fantastic relationships with a range of housing associations and stands ready to enter more partnerships which can open up more land and deliver more great places. As an example our JV with Places for People, at Brooklands, in Milton Keynes will continue through 2019 as a real social, design, and commercial success.

The overriding aim must be to build more inexpensive homes, irrespective of type, and it is hoped that 2019 is not characterised by battles between tenures.

Market housing by housing associations (HA’s)

When looking at HA competitors, it perhaps feels like 2016 was the “give us money” year, and 2018 was the “give us land” year. Clearly a simplistic personal external viewpoint! But buying land at a price which will help ensure a profit on the completed private home, is both tough and not for the faint hearted.

My view is that there should be no special pleading if housing associations are to compete head on with housebuilders in the fiercely competive and high risk speculative housing land market.

Yes, our build costs may be lower and our marketing resources greater, but that results from many years of taking risks and learning lessons. It doesn’t, in our opinion, provide a reason for the state to subsidise one part of the private market in relation to access to land. Especially as some HAs have already mastered the art.

Instead there perhaps seems to be great potential for housebuilders and HAs to work together more. The housing association skills in community engagement and social purpose could be of real synergy to our market-led build and sales efficiencies.

All in all 2019 looks to be a really exciting and interesting one for the sector. Obviously all predicated on the assumption of a reasonably sensible Brexit outcome. Fingers and toes crossed!

Personal views etc.



So recently I have been reading that:

  • The TCPA is reporting that affordable housing delivery is often harder in lower income northern areas, which entirely reflects Barratt’s experience;
  • UK now has the lowest levels of owner occupation in the EU, except for Germany, where there was an even greater imperative to build lots of post war rented housing;
  • The housing market would work better if we removed the ‘political preference’ towards owner occupation and abolished the ‘financialisation’ of housing.

Any reading of democracy would say that in a country where 86% of people want to own their own home, the so called ‘political preference’ is simply our elected leaders responding to what people want. Indeed, given the much higher rates of owner occupation across Europe there is an argument they aren’t doing it very well.

Not really sure what the financialisation of housing actually means. However, in a country where even new affordable homes are often built and paid for by private house builders, housing delivery can’t be de-financialised. If the vast majority of people want to own their home, and there are funders and builders willing to build them, there doesn’t seem much political logic in not supporting that. Especially if it is also a primary source of affordable housing.

Whether we like it or not, the aspiration for the security of home ownership is deeply ingrained, wherever in the world it is realistically available.

One area where financialisation is successfully encouraging new housing provision is the growth of private rented new build. The so called ‘wall of money’ is now driving out large numbers of city centre apartments. Perhaps the question is whether this supply/demand is being driven by the availability of funding, or the the lack of an affordable home ownership product which many people might prefer. Or perhaps a combination of both alongside a more footloose labour supply. One thing is sure, some of the recent PRS completions, (absolutely by no means all, and especially via PD) are the slums of the future.

Recent reading has also perhaps highlighted the increasing number of reports by a London centred commentariat, about a London centred housing problem but then claiming to present national solutions.

The reality is very different housing challenges between North and South, and the need for different ideas for both. Perhaps (dare we say) even a national, spatially based, housing strategy.

A national strategy which recognises that:

In the South:

  • There are way too few homes, of all tenures. Rising occupancy rates, significant population growth and affordability issues prove this;
  • Slum clearance, and ongoing gentrification and regeneration schemes have improved the quality of the stock, albeit not everywhere;
  • The massive housebuilding activity in the 1930’s, and the New Towns programme from the 50’s, has bestowed a legacy of relatively spacious owner occupier housing within reach of the capital.

Whereas in the North:

  • There remains huge quantities of poor quality homes, both public and private, unsuitable for today’s housing aspirations;
  • High proportions of rented homes, both social and PRS, especially within the core cities;
  • There wasn’t the same extent of 1930’s private build, so a much lower proportion of spacious housing with gardens that many families still want, within easy reach of the key employment centres.

In otherwords, a national strategy which recognises that the need for many more new owner occupier homes is perhaps as important in the North as it is in the South, albeit for slightly different reasons. Asking the North to become as economically successful as the South, but with a much poorer housing stock within reach of the city centres won’t work.

And not sure that the focus on delivering huge numbers of extra high density rented homes in the North is necessarily the right approach, unless of course the political imperative is simply to avoid any housebuilding in any locations where the ‘I was here first’ brigade may object.

And the current travails with SOAN are not adding to confidence in this regard.

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Holiday reading has revealed fascinating differences (and similarities) between UK and US nimbyism. The two sources were:

  • Research by UCLA revealing the true reasons why US nimbys dislike developers and development;
  • The superb book, ‘Snob Zones’ by New York Times journalist Lisa Prevost. It describes the uglier side of localism in some of the quaint towns of New England.

This post looks as those sources and draws conclusions on the lessons and potential implications for the UK.

Opposition to development or opposition to developers? (UCLA, Feb 2018)

In a nutshell this research concludes that the key reason local residents don’t like development is because developers make a profit. And lurking beneath it says there is also a “resentment of new people who might be a different racial or income group”.

Other key points in the report were:

  • In the US there is a long established negative cultural perception of developers as greedy or rapacious. Think; Its a Wonderful Life, or even Donald Trump. And more examples HERE ;
  • In a controlled experiment, resident opposition to a development doubled when the group were told that the developers would be making a large profit;
  • A vicious circle gets created whereby (a) development is unpopular, (b) zoning gets stricter, (c) development therefore gets riskier, (d) developers who are able to take on the risks make larger profits and (e) development becomes even more unpopular (see diagram, below);
  • The cycle is exacerbated as successful developers in strict zoning areas need deep pockets and a confrontational mindset. That mindset engenders the obvious counterpoise from residents;
  • The biggest financial beneficiaries of anti-development zoning are existing homeowners who are then able to behave as a highly effective cartel;
  • Despite the findings of the survey-framed experiment, the research found that nimbys disguise the true underlying reasons for opposition, “even from themselves”;
  • Whilst concerns over fairness may drive the anti-development mindset the researchers were not clear who actually benefits (or doesn’t benefit) from the supposed fairness created by preventing new homes.

The paper notes that, surprisingly, in a country where nearly everyone lives in a home built by a developer, the instinct in many areas is to punish the producer of that home.

Snob Zones, Lisa Prevost

This searing insight looks at a number of New England towns, and argues that, in some areas, the American dream of of “opportunity for all” appears to have been replaced by, “every town for itself”.

Prevost argues that localism is leading to shortfalls of housing, ageing towns, rising prices and hugely increased disparities and inequalities.

The book describes in captivating detail:

  • The upmarket Connecticut town where the zoning commission has ensured there isn’t a single apartment building or condominium in the town;
  • The town in Massachusetts where a small development of 4 ‘cottage apartments’, proposed in full accordance with the State policy to support lower income households, was rebuffed and rebuffed until the developer went bust;
  • The town in Maine where an affordable housing scheme by a local non-profit organisation was stalled by the zoning commission until the State funding ran out. Luckily the scheme got built and was actually accepted as successful by residents;
  • And another town in Connecticut where legal action by the State was necessary to overcome exclusionary practices by local officials.

Prevost concludes that the baby boomer generation is driving the opposition to development. Perhaps even without realising that encouraging more McMansions, whilst opposing more smaller homes, is increasingly out of step with younger aspirations. And therefore more likely to devalue their house.

Lessons for the UK

The first lesson is the pride we must take in the UK planning system. Generally transparent, accountable, rooted in a meaningful democratic process and free from malign influence. Talking to Barratt old timers, about the time when we had French, Spanish and US businesses, that is not something to take for granted.

And secondly, that however frustrating some UK nimbys are, we developers need to work harder to build trust and respect for our product.  Especially as perceptions of the sector are perhaps less negative as in the US.

Houses are becoming both scarcer and more financially important to their owners. We need to understand that and perhaps message to local residents on these concerns rather than just about the tilted balance or traffic congestion. And, however difficult, recognise that being confrontational in a confrontational process often doesn’t end well.

But if the US does precede UK trends and cultures then Snob Zones does not paint an attractive housing future. It foretells of increasing societal separation and greater polarisation between perceptions of conservation and new development. Watching UK suburban Council leaders proclaiming a need for less housing within 24 hours of new lower household projections isn’t grounds for optimism.

The possible rise of an “I was here first” mentality, focused on certain age and income groups, pulling up a ladder they were pleased to climb up themselves. Perhaps we need more granular research on the drivers and nature of localism and nimbyism in the UK.

Developers, planners, politicians, and others, with influence in addressing the housing crisis perhaps need to step up. An approach which restricts aspiration and access to capital appears only likely to store up trouble. Especially as the UK public debate appears to be moving away from the shortage of homes and more towards the profits of landowners.


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Some thoughts on the recent HCLG select committee report on land value capture (LVC).

First question is why even bother given that housebuilders prefer lower land prices and more LVC could help?

The answer is that that Barratt wants to build more homes and we see that much higher LVC could disincentivise landowners. Thereby presenting a threat to the necessary supply of land to support growth.

Good bits

The report is a credit to the committee in terms of the its depth of analysis and the balance in its presentation. The conclusions, from a practitioner’s point of view, are generally sound.

In particular, it is good to see the recognition of:

  • LAs needing to maintain up to date and deliverable local plans;
  • The scale and importance of existing LVC mechanisms, namely S106 and CIL plus the taxation of development, landowners and developers;
  • The benefits of a Local Infrastructure Tariff, perhaps as an alternative to CIL;
  • The folly in the oft-stated view that, on the continent, housing land is bought by the state at agricultural value;
  • The need for greater transparency in the viability and LVC process, something that Barratt has not resisted.

Good but familiar bits

Many of the other conclusions are equally sound but have been made by other select committee reports, so many times over my career, I am not sure they add much new. In particular the recommendations to:

  • Look more closely at the law and practice of CPO;
  • Encourage more LAs to use CPO more often;
  • Produce a new LVC mechanism which is “simple to administer without complicated exceptions” (Perhaps easier to say than do).
  • Spend more money on training planning officers;
  • increase the resources in LA planning departments.

Not so good bits.

Notwithstanding the above, there appears to be some areas, despite the depth of the analysis, where it seems that the Committee has not quite got it right. Obviously looking solely from the perspective as someone out securing sites and making planning applications.

For example, in the section on CPO I was pleased to be quoted (para 100) saying that, “many commentators simply ignore the both the Human Rights Act and the role of the plan led system”. But was then left disappointed that the Committee didn’t make any analysis of the role of the plan-led system prior to making it’s recommendations. Thus leaving unanswered, a key question namely:

  1. Should the LA buy the housing site at the end of the plan-led process, at agricultural value, in which case a two price market will be created, given that all other allocations will trade at the market value reflecting the allocation; OR,
  2. Should the LA buy the site at the start of the plan-led process, at existing use (agricultural) value. Thus creating the risk of not being allocated for housing by PINS, when compared to other sites, against the NPPF site allocation guidance. (Unless of course the process always ensures that the Councils’ site wins, North Korea style)
  3. Or somewhere in between?

More clarity is required on how the state can effectively be both (a) responsible for the fair operation of the plan-led process and also (b) a participant with risk money invested in the same process.

Secondly the Committee delved into the details of land valuation and then felt able to assume that c.50% of uplift was retained by the landowner and therefore, “our view is that there is scope…… to claim a greater proportion of land value increases……” However this conclusion proceeded a discussion on land values derived from out of date Government sources which themselves advise that they should not be used as market value estimates. And it remains unclear as to whether the fundamentally important issue of net to gross land values has actually been factored in. Neither in terms of (a) net to gross development area or (b) net to gross values, either including or not including S106 costs.

Thirdly the report references the threat of CPO as a means to drive down land values. From my seat that threat is hollow. Barratt often struggles to find LA resources to determine its planning applications on time so the idea that LAs can realistically step up to CPO’ing land for 300k homes, every year, seems fanciful. That means 000’s of sites every year. The reality is that most land will always trade on the open market, cognisant of local plan and NPPF policy.

Fourthly it is good that the Committee refers to a shift towards the victim of a CPO being, “provided with an equivalent replacement”. However that is also much easier to say than do, especially in areas of the North where the experience of the Pathfinder Projects confirms that this additional cost burden would likely result in an enormous gap between the price paid for the CPO land, and the subsequent open market value of the cleared site for new homes.  I recall once calculating the acquisition cost of a small estate of terraced homes, and then comparing it to the actual value of the cleared site.  Frightening.

And finally it was disappointing to see the Committee appearing to give credence to evidence referring to a £500 per sq ft (£5000 per sq m) CIL rate. That would simply end housing development in the UK

Sum Up

So three concluding questions from a practitioners perspective:

  1. The Committee confirmed the importance of the ‘no scheme’ world when valuing land for CPO. This is obviously straightforward when valuing a farmers field needing to be acquired for a new road junction, which opens up access to a new development area. But perhaps less easy when valuing land which, despite no current local plan allocation or consent, complies with NPPF guidance on where future housing allocations could and should be made. In that circumstance, what does ‘no scheme’ and ‘hope value’ actually mean in the real world of land valuation?
  2. With the impossibility of LAs being able to CPO the 000’s of sites for 300,000 homes per year, how can a two price market be avoided if the state wishes to CPO at land values well below the level which rational landowners will sell at?
  3. Will the more radical Select Committee recommendations actually gain any traction? Perhaps not given that Kit Malthouse was very clear in his evidence that the focus must be on letting the recent changes in the 2017 Act and NPPF bed in. Very sensible IMHO.

Final point is to agree with the lawyers. Both in the evidence to the Committee but also HERE (Simon Ricketts) and HERE (Richard Harwood QC). Namely that deliverable local local plans, with good policies focussed on creating great places, is the best way to “right price” housing land.

No thanks to further changes with potentially massive unforeseen impacts on housing delivery and yes please to up to date local plans which deliver infrastructure and great places.





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Lots of anger coming out of the Northern planning and housing sectors in recent months, much of it directed at both the Government’s approach to transport infrastructure and the standardised assessment of housing need. (SOAN)

Living in Northumberland, but constantly travelling the UK by public transport, the louder the transport voices the better. In simple terms there surely cannot be a greater transport priority than the Trans-Pennine route at the moment.

Ref SOAN, is the anger towards Government is correctly targeted?

NPPF2 indicates that an alternative approach (ie higher numbers) can be justified if it reflects future demographic trends and market signals. Therefore if any northern LA feels it should build more homes than SOAN, in order to better align housing targets with job growth targets, then there does not appear to be any fetter on doing so.

The starting point for preparing housing growth targets in local/ regional plans, whether in the North or the South, has always been the ONS household projections. From there an uplift has often be applied to ensure alignment of the housing and economic growth targets. Who could ever forget the Silver-Bronze and Silver-Bronze 2 scenarios which underpinned the North East RSS.

So the principle of ‘over providing’ on the basis of future economic growth has always been implicit and evidence based, with ONS projections as the starting point.

Therefore whilst there is much (entirely justifiable) concern about LAs recently “cutting” their housing numbers it must be remembered that the cut is being made by the LAs not SOAN.

The LAs themselves produced the original figures, based on job growth projections, and then the LAs themselves have now cut the numbers. Despite NPPF2 indicating that the higher homes target can be justified if it reflects future demographic trends. There has been no Government influence.

Ah…….. but the obvious response is that higher numbers above SOAN require “exceptional circumstances” to be justified. Therefore when looking at the recent Government/PINS responses to the Birmingham, Durham and Bradford local plans there is clearly little incentive for any LA to push the SOAN envelope where it butts up to Green Belt policy.

Which is the point.

The greater issue for the North is the ridiculously extensive Green Belt and its ridiculously tight inner boundaries, not SOAN. The North is choked by Green Belt to an extent beyond any other region in the UK outside London. We recently mapped all the development constraints within one hour drive of all our 27 Divisions. For our Leeds Office 80% of all open land is Green Belt. The highest equivalent figures for any other office outside the 3 Northern regions (excluding London) is 20.2%.

In Manchester:

  • The Green Belt is 45% bigger in area than Greater Manchester itself;
  • If the Green Belt were a tennis court, land for 1000 homes would measure 5 inches by 5 inches and it would take 1,800 years to ‘concrete over’ the Green Belt at 1000 new homes per year in the Green Belt;
  • Between 2000 and 2010 Munich had population growth 1/3 of Manchester but expanded its urban footprint by 7 times as much.

One wonders whether the architects of these Northern Green Belts, 40/50 years ago, really intended to create a situation where housing growth, in the 2020’s, in particular for families wanting homes with gardens, remains so hugely constrained due to their efforts.

Urban and brownfield sites clearly need to be prioritised, for example by building City Centre Build to Rent skyscrapers, but one wonders whether the housing futures of Munich, Lyon, or Rotterdam, et al, are so similarly dependent on the delivery of a rented apartment housing product compared with providing the preferred tenure/type choice of the City’s residents? And all because of a “say no” Green Belt boundary rather than a ‘say yes’ growth policy.

It’s all about local politics. The admirable political grit and determination of Newcastle and Gateshead, to regularly review Green Belt, and then prepare ambitious up to date plans, now needs to reflected in the likes of Manchester, York, Bradford and Merseyside. Has Tyneside been significantly harmed by building Newcastle Great Park?

Whilst there may be little cause for confidence at the moment lets not take the normal Northern response of blaming London instead of the difficulties of local politics and questionable Green Belt boundaries.

Final point. Green Belt is the most successful ever UK planning policy, in particular relating to the spatial containment effects around London and the impetus to urban regeneration in Manchester. Green Belts as a concept and planning tool must be protected. However, the current social impacts of such tight boundaries, and huge Green Belt extent, now needs to be balanced against both qualitative and quantitative housing needs.

The release of 2/3% of the worst and most accessible bits of current Green Belt seems sensible and NPPF2 helps by making clear that Green Belt LAs cannot shirk their housing requirements. Rather they are directed to:

  • Adopt a sensible sequential approach to Green Belt releases, starting with brownfield, then public transport and also considering whether compensatory benefits can be achieved.
  • Release brownfield Green Belt sites unless substantial harm;

Although referring to London alone, Siobhain McDonagh MP argued the point superbly on BBC Breakfast when responding to the recent CPRE report claiming that Green Belts (which doubled in size over the last 20 years) are under attack. (See below from 1.48 onwards).

In simple terms LAs must consider the social and sustainability consequences before adopting a “hands off” approach, irrespective of the unpopularity with existing homeowners. And there is nothing in NPFF2 to prevent them.

T’was ever thus.

If LAs want to cut ambitious housing targets because proposed Green Belt releases proved to be more politically difficult than they expected, then they can. But old, bad Green Belt boundaries are the cause of that, not SOAN.

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  1. Lyons, Redfern, Barker, Raynsford, Taylor, and now Letwin. We may have been short of new homes over the last 10 years but no shortage of reviews on how to build them.
  2. But one thing sets the Letwin Review apart from the others – the level of detailed investigation into how private housebuilders build out large sites. Digging deep into all the 17 sites under review, talking to the staff who build and sell the homes. Asking the right questions and getting the right answers
  3. So it came as no surprise that his interim review was accepted as a solid analysis. I tend with agree with both Civitas who described it as, “a strong diagnosis”, and David Montague the CEO of L&Q who said that, there was a Mexican wave across the sector that someone finally gets it”.
  4. Letwin has pointed to the need for greater diversification to achieve faster build rates on larger sites. Nobody is arguing against that. And despite the protestations in some quarters of disrupting and deconstructing the housebuilding sector there doesn’t seem to be any agency, review body or think-tank suggesting that volume housebuilders are not going to be crucial in achieving the 300,000 per year target.
  5. But even Letwin, like all the other reviews, does not appear to have studied the history of speculative housebuilding and housebuilders. Understanding the people and the businesses who built the homes and the lessons to be learned. With this in mind the post below is intended to assist the current policy debate on the structure of the sector.

1930 – 1955

  1. There is much to be learnt from the 1930’s, setting aside the obvious point that it predated the planning system. Speculative housebuilding, in the sense that the builder speculates that the land purchase and construction cost will be outweighed by future home sale revenues, began here. Prior to the 1930’s builders tended to be fixed price contractors acting for developers and landlords who were taking the land and sales risk. Land was cheap due the absence of planning and low food prices. The early pioneers included Ideal Homes, Henry Boot, Wimpey, Taylor Woodrow, Costain and Laing. Generally smaller builders, often from a contracting background, selling less than 1500 homes per year. They were all freely buying and developing large landholdings on the edge of cities, in particular London. The driver for was easy funding from building societies, who would also fund the customers mortgages. Prices were set by customer affordability and build rates were fast as the market allowed.
  2. The 1939-45 war and the 1945 election killed off speculative housebuilding until the mid 50s. During the war housebuilders turned to Government contracts, on decent margins, to help the war effort. Henry Boot, Costain, Laing and Taylor Woodrow  helped build Project Mulberry (the floating harbour for the D Day landings) whilst Wimpey, Henry Boot and other housebuilders worked flat out building airfields, military camps and barrage stations.
  3. The new Government in 1945 virtually banned speculative housebuilding by maintaining defence regulations, controlling the supply of steel and timber, requiring a licence for any private housebuilding and introducing a 100% Development Land Tax via the 1947 Planning Act. All new homes were to be Council houses. The remains of the entrepreneurial 1930’s speculative builders either took on housebuilding contracts for Councils or continued with general contracting work.

1955 -1973

  1. The 1951 Macmillan Government removed the controls and reopened market access for speculative housebuilders. Whilst the reforms took a while, by the late 1960’s the sector was spawning new names such as Barratt, Bellway, Whelmar and Broseley. Longer standing housebuilders such as Wimpey, Bovis, Leech, Bryant, Bellway, Bett and McLean grew rapidly.
  2. Learning lessons from post 1955 means looking at both the conditions which created growth and then the effects of downturns. The new planning system created opportunities for highly skilled entrepreneurs to use land buying and marketing skills to accumulate land and then secure planning consents, via by the 1947 Planning Act. Once achieved, the ‘rationing’ of these consents gave some protection against market saturation by competitors. At the same time customer demand for owner-occupation strengthened through the late 50’s to the early 70’s. Rapidly rising house prices transformed the sector from builders to marketeers – all selling the dream of home ownership, supported by positive policy.
  3. Total housing output rose significantly, from c250,000 completions in 1960 up to c350,000 in 1968. Drivers of private housing growth were economic growth, easier customer access to credit and no Green Belts (other than London). But also, and crucially:
  • High profile entrepreneurs like Godfrey Mitchell at Wimpey, Laurie Barratt, Tom Brown at Whelmar, Danny Horrocks at Broseley and Frank Sanderson at Bovis. They all took risks and they drove their businesses hard, sometimes targeting a flotation;
  • Bigger commercial contractors found the margins in housebuilding eyecatching and moved into the speculative housebuilding sector. Examples included Wates and Galliford.
  • In contrast to the 1930’s, highest growth tended to be in the North and Midlands given that the London Green Belt had diminished the ability to secure large sites on the edge of London – a deliberate policy linked to the development of public sector led new towns
  1. Speculative housebuilders grew significantly. Either organically, (Eg Wimpey) or through business acquisitions, (Eg Barratt) or by diversifying into other development activity such as commercial property and/or contracting.
  2. The oil price crash in 1973 brought the good times to an end. The subsequent downturn hollowed out the industry. Only a few survived intact including Barratt, Wimpey, Leech, Bellway and McLean, and all with dramatically reduced volumes. Many of those who had diversified into the speculative housebuilding sector from contracting either died or rapidly reversed out.

1974 – 1991

  1. Cash management was the key to surviving the 1973 crash. Those who ‘dashed for cash’ during 1971 and 1972 fared best. They had slowed landbuying land, slowed new home starts and focused on finishing and selling homes in the run up to the crash. They then nursed their war-chest and, when the market started to recover, were able to buy new land at much cheaper prices and hence started building again.
  2. Private volumes continued to decline during the mid/late 1970’s, but the 1980’s brought easier planning outside Green Belts, softer lending conditions and increasing customer confidence. Output soared as house prices rose.
  3. The good times of the 1960’s were back:
  • Contractors ploughed back in, inter alia, Costain, Laing, Lovell, Balfour Beatty, Alfred McAlpine, Mowlem and Amec;
  • Conglomerates entered and/or increased their speculative housebuilding presence including, P&O, Salveson, Trafalgar House and Beazer.
  • The speculative housebuilders grew again and diversified with even greater vigour – by opening offices in Spain, France and USA, by doing more contracting, and by developing commercial properties.
  1. And then Groundhog Day – the 1989 recession followed by Black Monday in 1991.
  2. All the contractors reversed out again, huge numbers of smaller housebuilders died, and those which were big and strong enough to survive, retrenched to core business.

1992 – 2007

  1. As with 1973, the Black Monday recession did huge damage but those able to survive came out the other side stronger by being able to buy land at recessionary prices as the recovery started. Tony Pidgeley set Berkeley up in 1976. By 1989 he was calling the downturn and started his dash for cash. The rest is both Berkeley and housebuilding folklore.
  2. So 1991 created the mindset that the only the big survive. This emphasis on size, strength and recession-resilience helped trigger a period of merger-mania. Inter alia:
  • Wimpey took over Taylor Woodrow, Alfred McAlpine and Bryant;
  • Beazer took over Leech,
  • Persimmon bought Ideal, Beazer and Westbury;
  • Barratt took over David Wilson;
  • Taylor Woodrow took over Wilcon;
  • Morgan Sindall took over Lovell.
  1. But the mergers and acquisitions raised issues. They are expensive and therefore usually reliant on credit. This creates a huge susceptibility if credit gets crunched, even more so if the customers for the new homes are also reliant on credit. And even more so again if the business has weighty land creditors due to land acquisitions made at high prices due to positive market conditions and highly restricted supply.
  2. And so it was as the sector grew significantly from the mid 1990’s up to 2007.

2008 – Today

  1. The GFC was the longest downturn of all. Whilst merger-mania had created some strong large businesses the key issue (other than no mortgages for customers) was balance sheet. Many of the mergers and land acquisitions had left large debt overhangs with limited cash coming in to repay. Therefore, in stark contrast to earlier recessions, some smaller builders, with less debt exposure were perhaps able to weather the storm slightly better. Perhaps Bellway, Redrow and Bloor as examples.
  2. But it was long cold winter for all. Many failed and without the Government support provided by Kickstart and Homebuy many more would/could have failed.
  3. The good news is that current market conditions and behaviours appear to show, hopefully, much greater resilience looking out to the medium/long term:
  •  Balance sheets are generally good and excessive lending appears curbed;
  •  Planning reforms are creating more land supply and hence moderating land prices. Hopefully this will continue via NPPF2 and ensure that land debts will not be a major problem if/when a downturn comes;
  • Mortgage market regulation has curbed reckless lending and low, or slightly rising, interest rates look the most realistic in the medium/long term;
  • UK banks are are in a resilient position and the global economic outlook is positive;
  • Optimism-biased approaches to land acquisition and future sales prices, previously often driven by high profile individuals, and often debt-backed, have moderated;
  • Homes England are well funded and playing a significant role in supporting sustainable housing delivery. This will help shape outturns across the cycle;

Conclusions and lessons

  1. So what would be they key lessons looking back at the who, and the how, of speculative housebuilding over the last 100 or so years:
  • Strong speculative housebuilders are the bedrock of housing delivery in this country and for those currently working in such businesses there appears grounds for optimism;
  • Its a tough, high-risk sector. History says that those entering from another sector often do not survive the next downturn, especially if raising debt. The profit potential is eye-catching in an upturn but the downturns tend to be deeper and harsher than other sectors;
  • For speculative housebuilders – diversification and excessive debt never appears to end well.
  • Strong recession resilience means knowing when to call the top. Thankfully this appears appear some way off hence why Barratt (and others) retain full commitment to our volume growth plans.
  1. The sector needs to be diversified to drive up delivery. Letwin confirmed that and history, particularly the 1930’s, demonstrates that. But let nobody be under any illusion that housebuilding isn’t a difficult and, at times, brutal, sector. The key lesson is perhaps that those who do it well need supporting. For those with less experience of this intoxicating cocktail of entrepreneurial land skills, building skills and selling skills, proceed with eyes wide open. Although much regulated, it is nakedly commercial and unforgiving, whilst playing a crucial role in delivering a basic human need which is in short supply. One thing is sure – got to be the most exciting sector of the economy to be working in right now.