The real issues for planning new homes in London

The idea of preventing (or limiting) wealthy investors – of any nationality – from acquiring London properties is folly, and a complete diversion from the real issue: we are not building enough houses.  It defies logic to make London a more difficult place to invest, when London is the self-styled home of international commerce.  That is a good thing, and fundamental not only to our economic recovery, but long-term growth.  Frankly, whether a Russian oligarch lives in his £50m pound property or not has little bearing on the average Londoner.

What does count is that we are not building enough ‘£500,000’ family homes.  That is partly a consequence of an over-reliance on flatted developments as the colour of the property owners’ passport, but also, the overall pace of development.  Flatted developments require forward-funding to make them viable.  If we don’t want units snapped up in Hong Kong (or London) property fairs, the free market or the state will need to think more laterally about how a developer is expected to fund a hugely complex, multi-phased scheme and balance the risk-reward.  And even if it is funded without foreign investment it will be substantially skewed towards smaller units.          

With a housing scheme, a developer can ‘build one and sell one’, which means the cash flow is much easier to manage. With a flatted scheme, a developer typically has the full outlay on a block without the sales returns. That is why off-plan sales appeal, as it can finance a scheme. When an entire development can be forward-sold in a single weekend (typically at an oversea property fair), it’s not difficult to see why that is appealing – but crucially, it provides the funding partner with the confidence to put the development finance into a scheme. 

If we genuinely want affordable (in all meanings of the word) family accommodation, we have to stop misleading the public that the likes of Vauxhall-Nine Elms-Battersea will make a material difference.  It won’t.  It will revive an under-utilised area of the Southern banks of the Thames, and it will result in some very smart residential buildings. but it won’t, for example, be any cheaper than existing properties in what has already become a gentrified area. 

The existing use value of any brownfield site in zone 1 or 2, coupled with the planning costs of development (s106 contributions and community infrastructure levy) create a high hurdle rate for viable development. That necessitates building to high densities, which means going upwards, and with a disposition towards smaller units. The inevitable consequence is a housing product attractive to investors, but financially prohibitive, and largely unsuitable, for families. It partly explains the sustained interest in London’s Victorian housing stock; it may be narrow cold and rickety, but it has four bedrooms and a back garden. How many of London’s next generation of flagship redevelopments will be able to make that claim?

The real opportunity lies in a managed release of employment land in ‘mid’ London, and appropriately sited new build schemes on the periphery of the City, close to existing rail and tube stations and existing facilities.  That will not be universally popular.  But If the planning system coordinates the release of these sites through development plan allocations, they can throttle the uplift in land value, and dictate the make-up of sites.  Additionally, property investors are less interested in houses, and there is equally less demand for developments that are not perceived to be in the shadow of Big Ben and Tower Bridge.

A final point.  The availability – or otherwise – of 50,000 homes in London is a great sound bight.  It represents roughly what we need to build every year to keep up with demand.  We are building roughly 20,000 homes.  That is the real madness.  

Cross party consensus on tackling London’s housing crisis

Congratulations to Quatro for putting on an excellent debate on ‘Tackling London’s Housing Crisis’ (12th November), and to some really insightful contributions from Cllr Ravi Govindia (Leader of Wandsworth Council), Sir Steve Bullock (Mayor of Lewisham) and Cllr Stephen Knight (GLA and Richmond Council).

Apart from giving credence to the old adage ‘never mix liberal democrats with property developers and alcohol’ (best not ask), the evening provided cross-party clarity on the need for action in the Capital.  All speakers acknowledged that difficult decisions need to be taken, and perhaps surprisingly, all recognised that if we are to return to anything like pre-World War II delivery rates, the Green Belt cannot be viewed as sacrosanct. Cllr Govindia staunchly defended the right for foreign investment in London property – and foreign residential ownership, whereas Sir Steve Bullock was anxious to move the focus away from home ownership to renting, particularly PRS. Cllr Knight felt that the priority was on addressing London’s acute need for affordable housing. 

So where does the debate take us? I would suggest it takes developers into town halls. Difficult decisions do need to be taken, and whilst the London Plan (and borough local plans/LDF’s need to be respected and considered, the opportunity exists for developers with landholdings – and ambition – to move the agenda on – and in the short term.  The GLA has an important role in providing leadership, guidance and pragmatism; what price protecting a worn-out shed site when we need to build 50,000 homes a year? (not my figures – I was saying 35,000 last week, but those of the assembled politicians).

Those with the vision are likely to reap their own rewards…

Green Belt – Friend or Foe?

The age old debate rages on – why should the Green Belt make room for future development when government policies have historically been put in place to protect it?

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The answer? This depends on which one of these statements you agree with:

1.       There is no housing crisis.

2.       There is a housing crisis.

The Government has previously stated that while the Green Belt is an important protection against urban sprawl, councils can review local designations to promote growth. Councils are actively encouraged to use the flexibility set out in the NPPF to tailor the extent of Green Belt land in their local authority area to reflect local circumstances with regards to housing need. However, there are concerns amongst the Conservative grassroots that the Government are losing voters who believe that the protection of the Green Belt is being completely ignored, and that the Government is pressurising local authorities to increase housing targets when in their opinion, there is no housing shortage or insufficient land supply.

The facts cannot be ignored.

First time buyers are increasingly struggling to get on the housing ladder; the average age of first time buyers is now 40 across many parts of the Country. Many have to rely on subsidies from parents, which essentially means that only a small proportion can really afford to buy a home without help. Many more homes (and affordable homes) are needed.

There is an increasing population. This is partly down to immigration, yes, but also down to the fact that the population is ageing. Importantly, people are choosing to stay in cities with families further increasing the urban population. Do you remember the Specials single – Ghost Town? They wouldn’t write that song today.

The problem of housing need is also compounded by the fact that people are living their lives differently. Older people are staying in the family home long after the children have left. Many more people live alone these days and Englishmen and women tend to demand a castle (that is, a spacious house rather than a one bed flat), and I don’t especially criticise them for that. I wouldn’t want someone telling me to move.  Whatever the reason for the increase in the demand, housing need must be quantified to ensure housing growth is realistic.

There is also simply not enough Brownfield land available. Brownfield sites which are vacant or available in places where housing demand is high are in very short supply. People forget that Brownfield sites do not just magically become available when they are needed.

The recent recession has led to many sites receiving planning permission but not having the funds to be implemented. Those who criticise so called ‘Land Banking’ should be reminded that developers are businesses. Simple as. If they are not going to be able to make a profit when they sell the houses then there is no economic sense in building them. In any case, the recent economic recovery is witnessing these sites increasingly come forward.

In London especially, these facts are heightened. Despite this increased growth, why is London the only major world city that is not expanding in land area? And at what point does the absence of an availability of family housing reduce the attractiveness of a global city?

London and the other major urban areas of England should not be left behind because housing provision is hindered by a reluctance to face facts and review the Green Belt.

These issues are explored further in an excellent article in the Guardian entitled ‘Build on the green belt to solve London’s housing crisis’ by Colin Wiles: http://gu.com/p/3jzgz

Fight to Save England’s Beauty?

It is ironic that The Sunday Times chose to print and report a letter of endorsement of the CPRE’s ‘charter to save our countryside’ from a collection of the Country’s literati in the same week that it also highlighted the MoD’s intent to sell the Household Cavalry Barracks in Hyde Park. The publication of both serves as a magnifying glass on the difficulties facing planners and developers in meeting our national housing requirements.

The basic premise of the CPRE’s argument is not new.  The Government is giving preferential treatment to ‘virgin’ (it’s always evocative) greenfield sites over brownfield options (factually not correct); there are numerous empty homes up and down the country waiting to be put to use (ditto), and; planners and developers have no imagination (quite a generalisation).  The typical claim is that much better use should be made of ‘derelict urban sites crying out for investment’, and that we should be building affordable homes in the right places, rather than executive homes.

Which brings me nicely to the Cavalry Barracks.  The Sunday Times speculate that the six acre site will probably have a market value of circa £500M, which (as ridiculous as it is to say) doesn’t seem unlikely based on comparable land values in prime Central London.  Taking a rudimentary rule of thumb, the Barracks might deliver in the order of 800 homes.  That equates to a pro rata land value of £625,000 per unit – and that’s before a single unit has been designed or built.  It’s also before a single penny has been contributed to the Mayor or Westminster City Council through financial contributions (obligatory).  So even if an altruistic developer were to purchase the site and to provide them all as ‘affordable’ dwellings, there wouldn’t be a single unit available for less than seven figures.  A much more likely scenario is that any development will look to outdo the performance of One Hyde Park, which has seen price per sq. ft. levels exceeding £7,000.  So a 700,000sq.ft. two-bedroom flat could cost about £5 million. And that’s before anyone questions the social cost of one of the Capital’s favourite landmarks being permanently lost to redevelopment.

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I have never disputed the strength of the CPRE’s conviction, and I continue to maintain that they are the best organised, and most effective property pressure group bar none.  But the picture depicted in the Sunday Times article is just plain lazy.  For example, we are told that the Country is about to embark on an unprecedented, and excessive, construction programme.  Firstly, it is not unprecedented.  We managed it after the Second World War when the Country had come through a much greater crisis, and the housing stock delivered during the 1950’s continues to be recycled to provide much needed accommodation for hard working families up and down the country.  Secondly, it is not excessive: the homes we need to build are the homes we need.  What a luxury for some of our fabled writers and artists to complain about their changing landscape when at least three generations (the last, the current and the next) cannot get on the housing ladder.  How many of the signatories to the CPRE’s campaign cannot afford to buy their own home?

The likes of the Cavalry Barracks are clearly exceptional instances, but I have yet to see a brownfield site deliver a combination of more family units, more affordable accommodation, provide more investment in infrastructure, including health and education, than a greenfield alternative.  They are very rarely executive enclaves, whereas many brownfield sites becomes just that; that is often the price of regeneration.  The country urgently needs the property industry to put forward as powerful a case for development as the CPRE makes for preservation.