Labor plans to build 1.5m house – can it be delivered?

Residents of Northstowe in Cambridgeshire have been given many guarantees. The plan is for more than 10,000 new homes for 26,000 people as part of Britain’s first new town since Milton Keynes was built six decades ago.

Six years after the first people moved into the 1,480 homes built so far, there are three schools, a pub and some other amenities – but no shops or GP surgeries.

Labor has singled out Northstowe by name as part of a pledge to build 1.5 million homes in its first five years in power. At the end of August, it was revealed plans for a “new housing accelerator”, which Chancellor Rachel Reeves has described as “a task to accelerate stalled housing sites” like Northstowe.

It is not only reform planning that is the concern of the government. At this week’s Labor conference, Housing Secretary Angela Rayner to the BBC he wants to see “the biggest wave of council houses in a generation and what I want to measure”.

Workers hope that the grand housebuilding push will reduce prices – something sorely needed for many young people who cannot afford to buy or rent. Relative to annual income, housing has not been this expensive in England and Wales for well over a century. Meanwhile, the planning agreement the most number since the record begins in 1979.

But will Labour’s plan make much of a difference? Or does it risk making the same mistakes as the previous government? Talk to people in the industry, and you hear the concerns.

The proposed improvement planning is the most Labor has concentrated on so far. It wants to reintroduce housing targets for councils and make it easier for developers to build in so-called “grey” parts of the green belt.

“We will soon come up with a plan to speed up and speed up the planning process even more,” a housing department spokesman told the BBC. However, planning reforms can only achieve so much – no matter how far-reaching.

While Labor can change the policy about which type of site must get planning approval and employ more people to speed up planning approval, when it comes to putting spades on the ground, most new houses in the UK are built by a handful of large housebuilders. And the government cannot tell when and how much will be built.

When the economy is good and interest rates are low, home builders like to ship homes because they believe people will buy them. If interest rates are high, as they are now, they tend to slow down.

“The number of houses being built is closer to GDP than to the desire of politicians to build them,” said Peter Bill, author and housing journalist.

He described the 1.5m target as a “stupid promise” and pointed out that developers were not delivering services according to the needs of British people. Like any other business, they do it for profit.

This explains why major homebuilders have been delivering fewer homes over the past few years. Earlier this month, Barratt Developments, the UK’s largest housebuilder, posted a slump in completions in the latest results and said it will build even less houses next year. It said “cost of living pressures, higher mortgage rates and limited consumer confidence” were weighing on housing demand.

As for Northstowe, there is frustration with the government’s suggestion that the site is “stalled” and needs a planning task force to “speed up” it.

Sources close to the local council point to recent progress – Homes England, Keepmoat, and Capital&Centric signed an agreement to deliver 3,000 new homes and town centers in Northstowe in July – and say the pace of delivery depends on the market, no. planning system.

“There are no planning issues,” the source added.

Instead of blaming the planning system, some are accusing big housebuilders of land banking – sitting on sites that already have planning permission but refusing to build until they feel market conditions mean they can make maximum profit.

“One of the big problems is the monopolization of the housing market,” said Elizabeth Bundred-Woodard, policy director at the Campaign to Protect Rural England. “The big housebuilders don’t want to flood the market because prices will drop.”

He said the government could address this by encouraging smaller home builders, which he said were more supported by local residents especially in rural areas.

The counter-argument is that housebuilders are big “price-takers” rather than “price-makers”, because most of the houses bought and sold in the UK are second-hand.

The selling price of these second-hand homes rather than the whims of the big house builders determines the price of homes, he thought.

And developers will argue that they are not an obstacle. A spokesman for the House Builders’ Federation (HBF), a lobby group representing large housebuilders, described the idea of ​​land banking as a “myth”, saying what was holding back smaller housebuilders was “increased complexity, red tape, regulatory costs, and late in the planning process”.

The Competition and Markets Authority (CMA) sees that “red tape” and our reliance on big housebuilders are both wrong.

“Complex and unpredictable planning system, along with the limitations of speculative private development, responsible for the continuous delivery of new homes,” it was concluded after a one-year study into what big housebuilders control the market.

In other words, even if Labour’s reform plan could help move phones home, it probably won’t be enough.

Labor is also focusing on social housing. It also promises the biggest increase in social housebuilding in a generation, it aims to change the Rights to buy law to make it easier for councils to buy or build social housing with money made from sales.

“The only way you’re going to get anywhere near 1.5m is to throw billions of pounds into housing for the poor,” Mr Bill said.

For most of the 20th century, councils played a large role in building housing, delivering up to 80% of homes in some years, but between the 1980s and 2000s the delivery of social housing declined as the government opted for privatisation.

Today, the council is delivering some new homes, with many being delivered by large private house builders. Practically the only social housing that has been built in the last three decades is from housing associations.

If the council is given money to build social housing, campaigners argue it will get more rent money. The up-front investment required to do this may be more than expected, as the push to build a 1.5m house in just five years can cause material and labor costs to rise.

And even setting aside the issue of cost, council-built housing is not a silver bullet. The council’s lack of housing development expertise means that a good plan can quickly go wrong.

In 2014, Croydon council founded a company called Brick by Brick, which will provide affordable housing for residents. However, the company collapsed seven years later, with a board report citing this as a “deficiency in governance”.

Auditors say the failed venture is one of the reasons Croydon will go bankrupt in 2021. The council will declare bankruptcy for the second time.

“Poor company performance, combined with governance failures, has contributed to the council’s current debt position of £1.4bn in public funds,” a spokesman told the BBC, adding: “The council is now working hard to limit the losses it has incurred.” Croydon was sold in the final Brick by Brick property in June.

There is another way. In Northstowe, housing quango Homes England works in partnership with the private sector. The idea is that governments can reduce their own costs while also benefiting from industry expertise.

This is exactly what the Mayor of London is doing with private developer Pocket Living. Together, they build blocks of flats where all houses meet the official definition of affordable – 80% of the market value – for both rent and sale.

One of our flagship projects is in Croydon.

Paul Rickard, managing director of Pocket Living, believes the government should do more to help small businesses like his, which could help tackle the problem of housing monopolies.

“If the SME sector is not supported, it will die out,” Mr Rickard said, pointing out that the previous government had spent billions on the Help to Buy scheme, which effectively gave first-time buyers cash on the spot. buy.

He said the government could direct the money to social housing. “You can’t have subsidized housing without subsidies,” he said.

Partnerships also have faults. While Pocket Living homes meet the official definition of affordable, 80% of market value is still out of reach for many people.

Mr. Rickard calculated that twenty years ago when developers started building, about 40% of the target market could afford a Pocket Living home. Now, he thinks the number is less than 8%.

Some homes have been built that are more affordable, with prices based on local income rather than market value, which Pocket Living can deliver because of its “relatively low margins”.

However, companies still need to consider what makes sense from a business perspective. “There comes a point when a plan cannot be delivered,” Mr Rickard said.

In short, there are downsides to the whole idea of ​​standard housing delivery: changes in the planning system only do so much, social housing costs money, and private developers have to make a profit.

Others have suggested that a single-minded focus on building 1.5m homes over the next five years is not the right approach to solving the housing crisis. For example, a report from the Joseph Rowntree Foundation (JRF) published in March recommended that governments and councils buy houses from landlords so that they can be rented out at lower rents.

This will also be costly, but JRF says the council will make it back from rental income and from the money it saves not relying on landlords to house the most vulnerable through temporary accommodation – which has cost the council billions.

JRF said this can increase the development of social housing there, and it will help to give millions of people cheaper places to live, which is ultimately the problem at the heart of the housing crisis.

Ideas like this remain on the fringes of policy-making, and Labor still needs to deliver new homes in places such as Northstowe where homes can be built at scale to tackle the housing crisis. But solutions such as those from JRF show some of the options available. Millions of Britons who cannot afford to buy or rent their own home can thank the government for thinking outside the box.

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