Government support for house price inflation

Last week the DCLG published a report 'More people owning their own home'  (https://www.gov.uk/government/news/more-people-owning-their-own-home) and I emailed the Department to find out whether any research had been carried out into the question of whether the demand side stimuli, on which the previous Chancellor had been so keen, was having the effect of making housing less affordable thereby making schemes like 'help to buy' necessary?

I was pleased to receive the link to a report that had looked into this particular scheme:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/499701/Evaluation_of_Help_to_Buy_Equity_Loan_FINAL.pdf

I only have the equivalent of an A Level in economics and read the financial pages of various newspapers for over 40 years so perhaps I should defer to the judgement of the eminent authors.  However, the report supplied by DCLG seemed not to answer my question but to actually make it more pertinent.  So I have sent the following email asking whether my take on the findings of the study is correct?

Dear ****

Thank you sending me the report commissioned by DCLG to assess the
'additionality' attributable to  Help to Buy Equity Loans.

The brief was actually not to address my question on the impact on
house prices of lending money to potential purchasers but does give
some clues.

The report emphasises and seems to support the operation of the 'market' and confirms
that the housing market is 'demand led' and that the researcher's approach/analysis  is 'market
led'. However, the plaudits for the scheme are that it would resist
downward pressures (ie a fall in house prices - which some/many people would welcome) and support 'house price appreciation' (making housing less affordable) so that the loans would be repaid! So the answer to my question as to whether the scheme maintained/inflated house prices is
"yes" (and based on deliberate interference in the market).

The report then says that an additional 43% or more dwellings were
built due to the scheme.  It does not answer my question as to how
many more people would have been able to afford to buy or rent if
house prices were say 20% lower in the absence of the inflated prices that could
be asked/paid as a result of the scheme? Of course the developers included in
the study responded by saying that those houses would not have been built.
However, that is because there is no requirement for planning permissions to be
implemented AND most if not all developers have paid prices for land
that factor in existing or inflated house prices.

So, am I right to conclude from this research that these demand side
subsidies all go to those who sell land to developers? and that
actually more people would be able to buy land and houses at the lower
land prices that would result in the withdrawal of the £10 billion
subsidy? Or has this thesis not been tested?

Regards

I don't think that a degree in economics (or PPE) is required to see the effect on prices of fueling demand without increasing supply, which is good news as Gavin Barwell the new Planning and Housing Minister has a degree in Natural Sciences. He should be sharp enough to question the purpose and effect of this interference in the housing market and (as a Tory) see the need to build the small houses and flats at prices which people could afford based on the levels of local earnings.

Yet another housing consultation

In my haste to respond to the latest select committee inquiry into housing supply (a couple of hours spent repeating all the old arguments, I missed the opportunity to comment on the last such investigation carried out by the House of Lords.  This concluded that the need was for 300,000 new dwellings each year for the foreseeable future.  The Lords are keen on Councils being able to build, but the fundamental point continues to be missed - the need for smaller dwellings aimed mostly at potential down-sizers. 

The latest consultation can be found here and is open until September.


http://www.parliament.uk/business/committees/committees-a-z/commons-select/communities-and-local-government-committee/news-parliament-2015/homebuilding-launch-16-17/

HOUSE OF COMMONS  

COMMUNITIES AND LOCAL GOVERNMENT SELECT COMMITTEE ON  -

Capacity in the homebuilding industry

Questions

1                 1. whether the numbers of builders and types of firms in the homebuilding industry is sufficient      to  meet housing demand

2. the structure of the homebuilding industry, in particular the role of small and medium-sized developers
3. housebuilders' business models and how risk and uncertainty affect incentives to expand
4. the sustainability, size and skills of the building industry workforce
5. why fewer homes are being started and completed than the number of planning permissions being granted
6. the extent to which current planning approaches cause delays to the building of new homes
7. innovative approaches to increasing the housing supply, for example self-build, off-site construction and direct commissioning by central government and local housing companies
8. the role of development finance and how it can promote or constrain housing investment

Response

(Questions 1 to 8, excluding 7)

There are many interested parties better qualified than me to respond to these questions.  However, the point should be made that the difficulty in meeting housing needs starts with these being wrongly defined. What is required is a better distribution of the housing stock that means creating a better balance between the size of households (about 2.4 and going down) and houses - with one and mostly two spare bedrooms.

Housing will never been fairly distributed while it is treated as a commodity.   It will be hoarded by those with the means and rationed by the housebuilders to sustain prices.  It is very unlikely that a select committee would recommend Government adopt the level of regulation of prices and rents that would be required to ensure a fairer distribution of housing so the recommendation should be to build only smaller dwellings.

These would be cheaper to build in terms of land, materials and labour and subsequent running costs (with an eye on fuel poverty) and more conducive to neighbourly behaviour than the unsocial or even anti social housing being provided by the volume housebuilders.  Small housing is more affordable and an increase in supply concentrated in one market sector might actually have a influence on price. 

The key is to provide attractive alternatives to the 8 million elderly households looking to downsize - and release larger homes on to the market.

There is a need for a model to show how many new dwellings would be required if aiming to make the level of occupancy more efficient rather than to aim to provide a new dwelling for every new household. The dynamic of downsizing will mean a significant number of sub-divisions of larger dwellings to meet the declining household size.

Response to Question 7

The Committee should be provided with all available information about self and custom building and the associations of individuals looking for serviced plots and putting their names down on the registers being kept by the local planning authorities.  To make any real contribution in terms of numbers LPAs should be reserving parts of larger allocations and sites being granted permission.  By linking supply and demand (the self builder is the consumer and the supplier with an incentive to complete asap) theses houses are more likely to be delivered than those being drip fed into the housing market.

Summary

Readers may have specialist knowledge to help the committee.  However, I feel that the same question will be asked until Government has the courage to treat housing stock as a 'commons' which needs to be regulated rather than a jungle where the fittest (richest) prosper at the expense of the weakest. 

Article 50 and material considerations

A couple of things have emerged from the Brexit debate of interest to planners - apart from the possible brake on house sales and construction.

It is extraordinary that those urging citizens to vote for a substantial change to the circumstances affecting both them and their country could do so with si little by way of a 'plan'.  Accepting that preparing a plan would not have been easy given the uncertainties in what the EU might offer as a leaving present, this would suggest that a two stage vote should have been proposed.

The second curiosity is the apparent lack of understanding of the role of Parliament as the ultimate decision -taker.  Every planner knows that decisions are only lawful if based on all material considerations (starting with any up to date plan) without any false or misleading information into account.  Yet we have a string of MPs (reflected by the media) claiming that the result of the Referendum should be paramount if not actually binding. The 2014 Referendum Act made the Referendum result advisory, and this must now be put into the balance with any obvious falsehoods (for which the blame must be placed on those responsible) and even the circumstances which seem to have changed as a result of the possible Brexit.

Perhaps most important for e Member of Parliament would be to continue to represent all their constituents and the interests of the country as a whole (I wonder whether this is in their oath?).  This must include the over 10 million people choosing not to vote in a one off referendum (placing their trust in better informed elected representatives) as well as the over 10 million too young to vote.  Their interests should not be overridden by the narrow majority of those choosing to vote.

A planning decision based solely on what a parish council might say without taking into account representations from other interested parties and also the professional judgement of experts would be open to legal challenge.  The Article 50 debate (hopefully not a trigger pulled by the Prime Minister) should show how all and only material considerations are taken int account.

Cultural cleansing

Those of us concerned with the conservation of our built heritage are generally motivated by a concern that were substantial elements that represent periods or events from our past to be lost or substantially damaged, so would our ability to recall the substance and significance of parts of our history and identity.  The term cultural cleansing was used to describe the attempts by Isis to destroy the temple and Palmyra in Syria but this is only at the extreme end of a process that will go on purposefully and accidentally around the world.

Clearly the cultural heritage is at greatest risk at times of regime change when through officially sponsored vandalism or simply neglect buildings and monuments can disappear from the landscape, with littel chance of return.

In the UK the former airbase at Upper Heyford in Oxfordshire represents what Historic England consider to be the best preserved remains from the Cold War in the country. Who knew that? Since the United States Air Force flew out  in 1994 there has been an almost constant debate about how the site should be treated.  This debate has been conducted mainly through the planning system; a succession of plans for the area (Oxfordshire and Cherwell District), applications and appeals supported with evidence in the form of studies, surveys and design briefs.  Without going into the detail of these proposals and decisions, the 'facts on the ground' are ample evidence that the authorities at local and central government levels are indifferent to the future of the site. While many of the buildings and structures have legal protection (Listed Buildings and Scheduled Monuments) and the flying field has been designated a Conservation Area,  a visitor to the site will see new housing encroaching into the hardened cold war landscape, cars being parked on runways/taxiways, businesses being run from Hardened Aircraft Shelters across the site (with their commercial traffic),  the local police force training on the runways, and no obvious way to appreciate the heritage site. In fact an internet search might reveal the minibus tours which are run by volunteers during the summer.

While the site was sold by the Ministry of Defence for about £26 million, this represented the value of the existing housing on the site. The rents from these and businesses has probably paid back this outlay and more - even before the number of houses to be built at Upper Heyford was increased threefold.

Enthusiasm for history has not yet caused the necessary of concern and outrage to safeguard the site, possibly because the Cold War is filed under politics in high stree bookshops, a subject with substantially less appeal.  By the time it becomes important to use the site as an instructional monument to assist in understanding the Cold War and subsequent relations with Russia the site will have been 'cleansed' of its power to inform through changes caused by collective carelessness and indifference carelessness. There remains some hostility to its preservation in the District Council which thought that the scar on the landscape could and should have been removed (like the fate of Greenham Common).

The Expert Panel supervising the additions to the list of World Heritage Sites are aware that the Cold War is not yet represented and recommended that research be carried out to see which transnational sites should be considered to be of 'universal value'.  This research remains to be done and, meanwhile,  the cultural cleansing of Upper Heyford continues making it harder to imagine it being used to perpetrate nuclear war resulting in a possible nuclear holocaust. 

Self or custom building - registers and duties

The Housing and Planning Bill became law on 12 May although there will be many further regulations putting flesh on these bones.  Apart from repeating my complaint that this legislation addresses any number of matters that could simply be dealt with by applying new policies and actually includes non-problems while missing the real ones - we should not expect anything less from  Government which believes that the planning system is the cause of so many problems which are actually beyond the powers conveyed by the 1990 Act (as amended).

However, there is section 10.  This greatly improves on the Self and Custom Building Act which imposed a duty on LPAs to hold registers of those interested in self building.

When formally brought into force, the H & P Act will require LPAs to permit serviced plots in numbers to match the numbers of interested individuals and associations of individuals (I was told that this was the Government's attempt to show that co-housing should be encouraged) registering within the previous 12 month period.  While it might be the case that some  of those on the registers will go out and make applications on land to meet their own needs, I cannot see any substantial demand being satisfied without plots/land being reserved on sites allocated in development plans or being permitted on a speculative or ad hoc basis (eg when there is no up to date development plan).

A lack of plots being provided/permitted by the LPA could become a very strong argument in favour of permission being granted on sites brought forward by individuals or groups.

My assumption is predicated on there being enough publicity given to both the registers and the duties that then arise for numbers to reach the levels predicted by the associated lobby groups.  In my village 145 out of about 1000 households said that they would be interested and 50 said that they would be interested in co-housing.There does not appear to be much of a downside to registering - British citizen over the age of 18 - although LPAs can impose a reasonable charge for administering the registers and some are trying to require some local attachment (probably illegal but might be used when distributing plots if insufficient to meet all the registered need).

Finally, to put this in context, the Government wants self and custom building to make a very substantial contribution to housing supply.  The volume builders are unlikely to build more than 50% of the 250,000 dwellings said to be required (DanthePlan is uncertain about this if all new housing was 2 bedroomed - see previous blogs on under-occupation).  The Government is committed to 200,000 new dwellings per year.  When more than this was being built the 'extra' was provided by council house building and small builders.  The latter suffered in the 2007/8  crash and are slow to return but might assist with some of the custom building. Some councils are forming building companies (that might escape the right to buy). However, it will take a monumental effort for  the current level of self building to grow from 10% of 120,000 (ie 12,000) to the 20% of 200,000 (50,000 dwellings) per year that the Government has in its sights.  Let alone the 50% experienced in many other countries.  So get on the register(s) and get building.

Some thoughts on neighbourhood planning

Since getting out of the way of the naighbourhood planning enthusiasts I have been trying to help from the sidelines with the same messages that were rejected when working inside the tent - as chair of the parish council and its planning committee.  Possibly 2000 NDPs are under way or have been made and all will be different in significant ways.  However, I am writing this blog in case the experience in my village has any similarities to others and might have some lessons for the unwary.

The first and most important point to be made is that there is evidence of the NDP not being read or understood by those seeking to apply it to developments in the village.  At the first committee when a significant development was being considered after the 'making' of the NDP the councillors had not brought their copies along and had not the first idea which policies were relevant and, when they were introduced from the public seats, how they should be applied.  This leads on to the next point that is the diffiiculty in drafting policies. I have blogged before on the need for policies to be proscriptive (what should not be done, prescriptive (what should be done) or permissive (what could be done). The neighbourhood planners have bequeathed the district council a plan with policies that do not mean what they had hoped but are pressing very hard for the intended meaning to apply.

Having been delegated the power to produce development plans (by the Localism Act 2011) the neighbourhood planners have taken it upon themselves to negotiate with prospective developers of the allocated sites. There is complete confusion about whether this is a rather detailed consultation (on behalf of whom it is not clear) or some form of negotiation on which the developers could reasonably rely.  Having voted on an NDP which is being interpreted in ways which could not have been anticipated at the time of the referendum, the village residents are now being 'represented' in respect of matters that were not even mentioned in the NDP.  Attendance at the meetings of the parish council or the implementation committee (of mostly non-parish councillors)  is possible but an opportunity taken up by one or two people.

The Localism Act did not foresee the extent to which local people would depart from planning practice as it has developed over the last 70 years.  The theory that the basic condition of conformity with strategic policies in the local plan (if one exists) does not appear to have prevented the neighbourhood planners from re-defining and supporting ribbon development (that was proscribed in the NDP), from successfully objecting to a development that was not allocated but which accorded with all other NDP policies (i'll come back to the main transport policy), and have decided that the development of two thirds of an open space at the centre of the village preserves or enhances the agricultural and rural  character the conservation area.   The committee has an interesting use of the term 'consensus' which seems to refer to the two or three people engaged in the negotiations with developers (or is it a consultation?).

Just on the question of transport a policy requiring new developments to 'reduce traffic' survived both the examination and scrutiny by the LPA that had been limiting development in the village due to a serious bottleneck on the main route out.  This policy is routinely ignored by the PC, implementation committee and the LPA.

My warning is that it will be hard to dissuade those who have prepared neighbourhood plans from wanting an active role in the implementation. However, these people are unlikely to have any experience of this exercise while assuming that the localism agenda if not the legislation gives them the authority for doing so.  This is an unequal 'contest' and the concept of consulting or negotiating 'without prejudice' seems to be beyond the comprehension of this very small number of enthusiasts.

None of this is 'sour grapes' from somebody squeezed out of the NDP process but a question as to how much of accepted planning practice (re ribbon development and conservation) is being re-written.  The very sad thing is that where innovation is required, for example in respect of local food systems, affordable housing/community land trusts, group self/custom-building, low carbon transport, the opportunities are being missed.

Inspector rules that food is a planning matter

Much as I would like to share my comments on the Housing and Planning Bill I am afraid that the ideology of the Government has come up against the rather deeper knowledge in intelligence of the Lords and it is impossible to know what the outcome will be (ie when the Commons vote on the amendments).  

So this blog goes back to the subject of food and rejoices in the fact that the Inspector charged with examining the VALE OF WHITE HORSE DISTRICT COUNCIL LOCAL PLAN PART 1 has issued a number invitations for further comment.

INSPECTOR’S REQUESTS FOR INFORMATION FROM THE COUNCIL

"Has the Local Plan 2031 Part 1 adequately addressed the needs of the food production industry as per paragraph 161 of the NPPF?"

To make this intelligible the relevant extracts from the National Planning Policy Framework are included in this blog: 

"Business

160. Local planning authorities should have a clear understanding of business needs within the economic markets operating in and across their area. To achieve this, they should:

●work together with county and neighbouring authorities and with Local Enterprise Partnerships to prepare and maintain a robust evidence base to understand both existing business needs and likely changes in the market;

and

●work closely with the business community to understand their changing needs and identify and address barriers to investment, including a lack of housing, infrastructure or viability

161. Local planning authorities should use this evidence base to assess:

●the needs for land or floorspace for economic development, including both the quantitative and qualitative needs for all foreseeable types of economic activity over the plan period, including for retail and leisure development;

●the existing and future supply of land available for economic development and its sufficiency and suitability to meet the identified needs. Reviews of land available for economic development should be undertaken at the same time as, or combined with, Strategic Housing Land Availability

Assessments and should include a reappraisal of the suitability of previously allocated land;

●the role and function of town centres and the relationship between them, including any trends in the performance of centres;

●the capacity of existing centres to accommodate new town centre development;

●locations of deprivation which may benefit from planned remedial action; and

●the needs of the food production industry and any barriers to investment that planning can resolve."

My comments to the Inspector are as follows:

"1.      This policy cannot have been complied with without also demonstrating compliance with para 160 that refers to LEPs and changes to business needs.  In fact the OxLEP is aware of the need for ‘starter farms’ [1]but this does not seem to have been conveyed to the LPA.  The LPA response to the inspector’s question relies on the CE/SQW Report that does not address changes to the local food systems or the barriers to change that, as implied by this question, a ‘sound ‘ local plan would need to address.  The ‘robust evidence base’ required by para 160 and which should deal with the role that food and agriculture plays in housing, soils, biodiversity, as well as employment and business is entirely missing.

2.      The ‘barriers to investment’ that the draft plan has failed to identify or address let alone ‘resolve’ include the affordable land for new farm enterprises, the associated and affordable housing, and the components of a low carbon food system in terms of production, processing and distribution.  The LPA response is not and could not be that para 161 is irrelevant but, despite have received representations throughout the plan preparation period, changes to local food systems were simply not investigated.  The ‘business as usual’ approach to food systems is not only contrary to the NPPF requirement to consider changing needs, but contribute to locking-in the existing systems and make change much more difficult.  Sound planning is expected and required to avoid  this trap and positively plan for the future.

3.      The consequence of this omission (not only causing the plan to be unsound) will be that the changes necessary to reduce the carbon emissions from agriculture will be made much more difficult if not impossible to achieve. The plan must be able to show how it would contribute to the achievement of sustainable development and mitigate carbon emissions.[2]  Given the significant scale of carbon emissions from agriculture (and subsequent processing and distribution) the 60% reductions to carbon emissions required by 2030 will not be possible if the plan does not deal positively with this issue.

4.      The necessary changes anticipated by paras 160 and 161 are likely to involve an increase in new farms and farmers who without modifications being made to the plan will not find it possible to access suitable and affordable land or associated housing." 

I hope that my blog conveys the idea that the main problem with the planning system is that it puts people off and despite the reduction of reading load represented by the NPPF, few people actually read it and use the good bits in advocating the necessary changes to bring about sustainable development.  In this case the Inspector is asking how the draft local plan meets existing Government policy.

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[1] Creating the environment for growth OxLEP 2-15  p63

[2] ss 39(2) and 19 of the Planning and Compulsory Purchase Act 2004 (as amended)