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.  

A hole at the helm?

Councils are deleting the job of chief executive and sharing the responsibilities between officers and elected members. Saving money is a priority but should it be achieved through such a radical re-organisation?  

Thanks to Nick Vose for this who recently joined us as an Associate in the Engagement Team:

The latest council to decide to buy into the spin over fat cats at the top is Harrow, a local authority with a minority Conservative administration. After a trauma filled start to the festive period during which Council Leader Susan Hall set out a consultation that proposed the eradication of the top job, in order to save £1 million, chief executive Michael Lockwood announced his resignation.

His eventual departure in February would have cost the council £168,000 in severance pay, but the overall loss of a chief executive will prove far more expensive than the salary of the chief executive position which they eradicated overnight.

For those authorities that have already taken the bold move to remove a chief executive, the work left behind has been shared out between numerous senior officers and politicians. Already overstretched directors of services find yet more work on their plates, increasing the likelihood of failure. Meanwhile the function of strategic leadership is being placed in the hands of elected officials, whose views move (in theory) in-line with the political temperature of the electorate. Unlike officers whose role is to remain practical and impartial.

In the case of Harrow the duties of chief executive have passed down to Paul Najsarek, but he already has a job as Corporate Director of Community Health and Well-being. A vital role at a time of housing crises and a rising ageing population. He already had enough to keep him busy, but now he is expected to perform two-thirds of another job as well – we all hope he gets a pay rise!

The job of strategic leadership goes to the council leader, no doubt she was already doing some of the job, but leading a team delivering important public services is a skill developed over decades of managerial experience.

Importantly a political leader is not automatically a good chief executive and they won’t always be leader of the authority. Local government is already struggling to speak with one voice and make its case, further fragmentation of leadership at the top will only make this situation worse.

Ian Briggs, senior fellow in the institute of local government studies at Birmingham University, argues that chief executives play a crucial role in local authorities, as both figurehead and a balance to political considerations.

So… let’s not leave the ship without captain!

Only the development industry can solve the housing crisis

The main party conferences are over, and the latest Government reshuffle has quickly faded from the headlines.  Housing is a serious issue in need of attention but ministers do not appear to have a clear strategy for solving the problem.
Sadly, the situation in 2013 is like any other year. It has been about a quarter of a century since the UK was building anywhere near enough homes to meet its needs.  We are currently at around 100,000 per annum, while the estimate of need stands at 230,000 – not including the severe backlog.

This graph from the FT shows the huge decline in housebuilding since the 1950s, 60s and 70s:
Mark Prisk, the outgoing housing minister, was very effective at making things happen according to many in the sector. But he’s been moved to make way for a more media savvy operator, which appears to be unnecessary disruption for a policy which is driven by No 10 and the Treasury in any case. It is the Government’s role to create the right environment for new homes to be delivered but locally and nationally, it is failing.
Despite the Localism agenda and more supposed freedom for local authorities, councils are unlikely to get heavily involved in housebuilding ever again due to financial and capacity issues.  Conversely, our councils in their role as local planning authorities are sometimes actively obstructing new development. This happens through short term political decisions to reject schemes in the face of local objections or by not getting their local plans in order and allocating housing land in the right places. Meanwhile, housing associations do good work, but are generally reliant on others for funding and represent a small proportion of the new homes that are built.
Therefore, the only people who can really solve the national housing crisis are the private sector. It is up to developers to push the case for new homes and infrastructure – corporately and locally.

We cannot wait another quarter century for local and national government to get their house in order.