Philip Barnes – Blog


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ADDRESSING THE HOUSING CRISIS – THE HOUSEBUILDER’S PERSPECTIVE

“Chapeau” to the Homes for Britain campaign. Their incessant campaigning at each of the three party conferences certainly seems to have worked in highlighting the housing crisis and raising the profile of house building. Housebuilders  have often been the enfant terrible of the housing sector so to see the Prime Minister specifically highlighting Government support for them was frankly amazing.

But the delivery of new housing is not about rhetoric on the conference floor. Its about getting 8 or 10 local politicians sitting on a planning committee being willing to take the tough unpopular decisions to support the Planning Officers advice and recommend approval.

Even beyond that a key issue is to grant permission for developments which are actually viable and therefore will get built. The reality is we are not particularly short of planning permissions granted in the boom times. It’s an increased supply of new post recession viable consents we need.

Often the housebuilder view is silent in the twittersphere or blogosphere – they are too busy trying to buy sites, get planning, build houses and, most important of all, SELL THEM!

So it’s great to get a perspective from Neil Milburn a Land Director at Barratt on the current issues and opportunities as he sees them. His thoughts are in italic below and provide an interesting contrast to the developer perspective from Mark Dickinson of Banks (see earlier post on 21st September) Unlike Banks Group, Barratt actually have to build and sell houses at a profit rather than just secure planning permission.

Let’s start with the good news. Barratt now  has money to spend on buying land, promoting sites and building for sale. We had virtually nothing between 2009 and 2011 so what’s changed?

Firstly we have dealt with the financial issues associated with the mass of land contracted at bubble prices before the recession. In simple terms we have either written down our losses or moved away from some unviable deals. GBB finance, FirstBuy and NewBuy also provided a much needed lifeline when we needed it most.

Secondly as land is our raw material we now need to top up our pipeline of viable sites. If not we go out of business. Thirdly we have changed our focus to family houses in good locations where the demand is strongest and our customers are able to get a mortgage. The banks are very choosy about where they will lend as well as who they will lend to.

And finally we sense a planning opportunity. A more positive culture amongst both Officers and Members.Our 3 main concerns at the moment are viability, inconsistency and NIMBYsOn viability it is a ongoing frustration that whilst policy clearly recognises the importance of viability many planning officers do not recognise the need for a builder to budget for at least a 20% profit and a landowner to expect at least £200k per acre to sell their land. These are the recognised thresholds and the profit assumption is specifically identified in the Government’s viability toolkit. Banks will simply not lend against a development appraisal showing less than 20% profit and landowners will simply not sell unless they are sufficiently incentivised. Yet we still get some Officers claiming that any positive profit assumption should be acceptable and any land value above agricultural value is sufficient incentive. It seems that many officers understand acceptable levels of contractor risk and profit – after all Local Authorities have been the clients of building contractors for many years. But often they don’t recognise that levels of risk and profit for speculative development need to be be much higher to such developments viable.

Inconsistency is frustrating but unfortunately is something we have got used to living with. Different Officers behave differently and different committees behave differently. But when you are making multi million pound commercial judgements it can be extremely difficult and costly when similar policies on similar sites get applied so wildly differently. The hard nosed financial rationality of housebuilders makes for a difficult clash with the irrationality of the UK planning system. Often the key issue is the leadership quality and culture of the Chief Planning Officer. In our experience this can influence the behaviour and outputs of both Officers and Members. It’s easier for us to do business with a strong effective Chief Planner.

In some areas NIMBYISM seems, to us, to be out of control. Localism has created a perception that if you don’t want to have housing in your area you are empowered to stop it. No evidence needed. No logic or arguments needed. No reference to planning policy or housing requirements needed. Just don’t want it so power of veto applies. Local politicians are understandably confused. Their default position is, naturally, to back what they perceive as the electorate view. The internet means that limited objections quickly go viral and appear out of all proportion to the wider view. When we engage it simply allows hyperbolic and often personal insults to be made without the ability to respond effectively or rationally. 

We actually have no problem with residents expressing objection to our schemes. Arguably they are doing what is only natural to protect their perceived property rights and values. Our issue is with Localism – a system which appears to guarantee that private property interests can automatically override the wider social and economic need for new housing. In this regard the Governments proposed introduction of a new “Muscular Localism” allied to several pro-housing anti-Nimby speeches at all three party conferences is much welcomed.

And to finish on another positive. We as an industry have largely sorted our balance sheets. Whilst we are not exactly flush with money we are ready to invest and build again. If we get support from the planning system we can create masses of new jobs at no cost to the exchequer.

Many thanks to Neil for his comments. As always any comments welcome.


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ECONOMIC WOES TRIGGER THOUGHTS OF PESETA RETURN

“8 o clock will be fine. We used to do 2 sittings but since the crisis we only have one”

So said the owner of Baiziki, arguably the best Indian restaurant in Palma. Like many businesses in Majorca it is struggling. Previously packed out each evening it is now on restricted hours with less than half the tables occupied.

Last weekend was the MAMILs annual Majorcan cycling trip. The scale of the worsening economic crisis was clear to see. The first thing you notice are the benefits to tourists. With such a dramatically weakening economy the local businesses seem to be in a race to cut prices and attract custom. Traditional bars in the squares of beautiful rustic villages were often asking less than one Euro for coffee and less than one and a half Euros for a large beer. Way cheaper than even last year.

Apart from the more modern hotels supported by trade from the major tour operators it was clear the vacancy rates and prices were low. A 3 star 1970s hotel with swimming pool and sea view was coming in at around 15- 20 Euros per person. One wonders where this race to the bottom will end. Once vibrant streets in downtown Palma are now half boarded up whilst groups of unemployed youths gather in cheap bars and local parks – more visible than in England given the weather.

A few steps away from Palma Cathedral and its bustling seafront and you sense a tired atmosphere in a city too big for its economy. But more worryingly was the atmosphere of hostility to Germany. In one bar we saw a picture of Angela Merkel stuck on a blackboard accompanied by grossly offensive remarks which were easy to translate. In the airport toilets anti – German graffiti was common as it was elsewhere in the towns and villages. For an island so reliant on German visitors the counter productivity of this is obvious.

Where it all might end was signalled clearly when we went to pay the hotel bill on the last morning. Despite it being twelve years since the single currency our bill was presented in both Euros and Pesetas. A statement of intent indeed.


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NORTH EAST REVISED POPULATION PROJECTIONS

The 2011-based Subnational Population Projections (SNPP) were published last week. These update the previous 2010-based SNPP. They are derived from the Census 2011 data and therefore provide more accurate data regarding both the current size of the population and projected rate of population growth over the next 10 years.

There are two graphs below. The first shows whether the current population, identified by the Census, in each LPA is larger or smaller than it was projected to be by the 2010-based SNPP. The population in Darlington and Gateshead is significantly larger than it was projected to be.

The second graph compares the projected growth of the population over the period 2011-2021 from both the 2010-based SNPP and 2011-based SNPP. This is the data that LPAs will be required to use when establishing a housing requirement, and is fairly positive. It shows that the projected rate of growth from the 2011-based SNPP is higher in every NE LPA than in the 2010-based SNPP. It is significantly higher in Durham, Newcastle, Sunderland and Middlesbrough.

This is only a first glance at the data – we will need to do more analysis of the projected change in age ranges and the components of change to properly understand the data and its implications. For example, the data for Newcastle is showing that the city will continue to experience a large decline of its domestic population despite an overall picture of significant population growth. To slow or reverse this trend, which is a key objective of the draft CS, the Council would need to build more homes than are required simply to accommodate the overall population growth. This trend, or others, might be experienced by other North East LPAs.