1 Introduction |
1. Ensuring that there are enough homes available
to meet the nation's needs should be a key priority for any government,
but for many years house building levels in England have been
far too low. The Minister for Housing and Local Government, Rt
Hon Grant Shapps MP, himself told us that he did "not think
we have been building enough homes in this country for a very
long time". It
is clear that we need to see a step-change in housing supply,
but the new homes the country needs will not be delivered unless
there is sufficient money available to pay for them. This report
considers the steps that can, and should be, taken to make more
finance available for the building of new homes.
2. Mr Shapps stressed that predictions of housing
need were "hellishly difficult to make", pointing by
way of example to the impact that the Government's immigration
policy could have on the number of homes required in England.
He said that, according to the "last study" he had seen,
232,000 new homes per year were needed.
This is the average annual figure for the projected growth
in the number of households in England between 2008 and 2033.
Levels of household formation are determined by a range of social
and economic factors. The Chartered Institute of Housing (CIH)
told us that this household growth figure had to be considered
on top of the "assessed backlog at any one time".
The CIH referred to a study that estimated households in housing
need commissioned by the previous Government and published in
November 2010. This
study set out projections that showed "backlog need peaking
in 2009 at around 1.99 million householdsequivalent to
8.8 per cent of all households, before falling back gradually
until 2021". The forecast was based "on continuation
of relevant existing policies and on judgements about the likely
path of the wider economy going forward".
The CIH referred to a reconsideration of assumptions and suggested
that "the forecast of an easing backlog is now much less
likely to apply, because of the likelihood that the market will
not recover rapidly and that the rented sector will grow little
in gross terms".
3. Table 1 below shows provisional house building
completion figures in England for 2011. Such figures would suggest
that England is currently building less than half the number of
homes it needs to meet levels of household growth. Mr Shapps,
however, pointed to the provisional New Homes Bonus figures for
England for the more recent period, October 2010 to October 2011,
which showed that the Bonus was paid in respect of 159,000 properties.
This figure includes 22,000 long-term empty properties brought
back into beneficial use.
In a Written Answer to Rt Hon Nick Raynsford MP in February 2012,
Mr Shapps said that the remaining 137,000 included new build and
conversions. The source data did not distinguish housing converted
from existing stock from the newly-built housing that is the focus
of this inquiry.
Moreover, while these New Homes Bonus figures may paint a somewhat
more positive picture of the total number of homes being delivered,
they would still suggest that there is a deficit of over 70,000
homes when compared with levels of household formation. If the
backlog is also taken into account, the deficit becomes even greater.
Table 1: Permanent
dwellings completed, England, by tenure, 2011
Figures are provisional and subject to revision.
4. Table 2 below shows house building completion
figures in England for the last two decades. It shows that completions,
in particular those by private enterprise, have fallen dramatically
since the 'boom' years of the mid 2000s. The data also suggest,
however, that even during those years, when it can be argued that
there was plentiful finance available, the figures never came
close to delivering the levels of housing the country now needs.
Moreover, they show that in the last twenty years, the private
sector has never delivered more than 150,000 homes per year. This
suggests that potentially radical changes of policy and alternative
sources of finance will be needed if housing supply is ever to
reach levels of demand. Indeed, as owner occupation has been falling
as a percentage of total tenure since 2003, some of these new
approaches will need to be targeted at rented housing.
Increasing housing supply would also provide an important economic
2: Permanent dwellings completed, England, by tenure and financial
BARRIERS TO HOUSING SUPPLY
5. Our evidence indicated that the availability of finance
was one of the biggest current barriers to increasing housing
supply. In particular, witnesses were concerned about limitations
on mortgage finance. Regenda Group, a housing association, argued:
Increasing the availability of mortgage finance is critically
linked to the issue of housing supply as building rates will only
increase if there is confidence that sales will take place post
Peter Williams, Director of the Cambridge Centre for Housing and
Planning Research, said that there was "clearly a capacity
constraint in the mortgage sector now and going forward for at
least five years, and possibly longer, which really has a big
implication for the shape of UK housing provision".
The Council of Mortgage Lenders anticipated "only a gradual
progressive improvement in affordability pressures and credit
availability, and therefore much slower recovery in property transactions"
than had been projected by the Office for Budget Responsibility.
Some witnesses also pointed to issues raised by the availability
of development finance. The Home Builders Federation (HBF), for
instance, said that "funding is very restricted for many
SMEs [small and medium enterprises] in the sector who often rely
on project-based bank funding". It added that "if funding
remains restricted, this could restrict the industry's ability
to meet expanding demand".
Given that the financing challenges are likely to continue,
new sources of finance will be important both for making up the
housing shortfall and providing longer term solutions. Our report
will consider whether there are alternatives to traditional sources
of debt finance that can help to fund the building of new homes.
6. We also heard from witnesses that there were various constraints
preventing them from accessing the finance that was available.
Representatives from various sectorslocal authorities,
housing associations, private landlords and investorsall
pointed to particular regulatory, legislative or governmental
issues that made it harder for them to finance house building.
We will consider in more detail some of the key constraints and
how they might be eased or removed.
Availability of land
7. Some of our evidence considered the availability of land
to be a barrier to housing supply. G15, a group of London housing
associations, for example, said: "The supply of genuinely
developable land is low and action is needed to increase the supply".
In particular, the evidence emphasised the importance of public
bodiescentral government departments and agencies and local
authoritiesmaking their land available for development.
In this report we will consider as a recurring theme the ways
in which the public sector can support the financing of housing
development through the provision of land; in doing so, we will
be mindful of the assertion made by Shelter that:
new approaches to both land and finance will be required. Increasing
the supply of either land or finance in isolation will not work:
additional land supplied without finance will not be developed,
and additional finance without land will simply inflate prices.
8. It is important to consider finance and land availability
in harness. These issues may also link in with planning. We heard
from some witnesses that the planning system was a constraint
upon housing development. John Stewart, Director of Economic Affairs
at the HBF, said that planning was "a major obstacle",
pointing to the findings of Kate Barker's review of housing supply
and his experience of talking to house builders.
Other witnesses took a different view about planning, with Cllr
Clyde Loakes, Vice Chair of the Local Government Association's
Environment and Housing Board, saying that it was "certainly
not" a key barrier to increasing housing supply.
We have already examined the planning system in this Parliament,
in particular through our inquiries into the Abolition of Regional
and The National Planning Policy Framework.
In this report, we do not propose to look in detail at planning
issues, except where they have an impact on the financing of new
THE GOVERNMENT'S STRATEGY: LAYING THE FOUNDATIONS
9. On 21 November 2011, the day we held our first oral evidence
session, the Government published Laying the Foundations: a
Housing Strategy for England. Giving evidence to us on 30
January 2012, Mr Shapps told us that the strategy set out "over
100 different ways in which we intend to fix the gap".
He identified from the strategy four particular measures: the
Right to Buy; plans to build 100,000 homes on government land;
the new build mortgage indemnity scheme (later branded as the
NewBuy guarantee); and planning reform.
A further measure in Laying the Foundations related to
the establishment of a "Get Britain Building Fund" to
"support building firms in need of development finance".
The 2012 Budget announced that this £420 million fund would
be increased by a further £150 million.
John Stewart said that the fund was "not a panacea [...]
but where development finance is the primary constraint this should
Focus of report
10. We will examine some of the key measures put forward in
Laying the Foundations, but will also take a longer-term
view and consider the potential for broader changes of policy.
As Peter Williams told us:
We all struggle to understand why housing supply does not respond
more effectively than it does. There is clearly a package of issues
around that, but it is extraordinary how the private sector output
has remained remarkably constant, all through the cycles, without
responding to what normal markets would respond to.
There is clearly no 'silver bullet' with which the housing deficit
can be removed; nor can we rely solely on private enterprise,
which, in recent timeseven during the 'boom' years of the
mid 2000shas not built more than 150,000 homes per annum
in England. A range of solutions is needed, across all tenures
11. Our report will focus on identifying additional sources
of finance to support house building. It will consider whether
there are constraints on housing finance that can be removed,
whether there are 'traditional' approaches to financing that can
be given greater support, and whether there are new and innovative
ways in which new housing can be funded. It will look at the contributions
to be made by the public and private sectors, as well as not-for-profit
housing associations. It will also consider the ways the various
sectors can work together to make the most effective use of the
12. We received over 60 written submissions, from housing
associations, local authorities, academics, think tanks, charities
and representative bodies, amongst others. We explored the themes
emerging from our written evidence in four oral evidence sessions
between November 2011 and January 2012. In the course of the inquiry
we visited Birmingham and Dudley, to see at first hand the steps
being taken to address the challenges of housing supply, and the
Netherlands, to consider whether there were lessons from the Dutch
approach that could usefully be applied within England. We are
grateful to those who supplied us with written and oral evidence,
and to those people we met on our visits. Particular thanks are
due to Birmingham City Council, Dudley Metropolitan Borough Council
and the British Embassy in the Hague for arranging the visits,
to the Royal Institution of Chartered Surveyors who held a briefing
session for us at the start of the inquiry, and to our specialist
advisers, Professor Christine Whitehead OBE of the London School
of Economics and Political Science,
and Philip Jenks of Phil Jenks Consultancy Ltd.
1 Q 320 Back
Q 322 Back
Department for Communities and Local Government, Household
Projections, 2008 to 2033, England, November 2010, p 1 Back
Ev 110 Back
As above Back
Glen Bramley, Hal Pawson, Michael White, David Watkins and Nicholas
Pleace, Estimating Housing Need, research commissioned
by the Department for Communities and Local Government, November
2010, p 10. Back
Ev 110 Back
Q 321 Back
HC Deb, 1 February 2012, col 66WS Back
As above Back
HC Deb, 27 February 2012, col 36W Back
Department for Communities and Local Government, Live tables
on house building: Table 244: Permanent dwellings completed,
by tenure, www.communities.gov.uk Back
Department for Communities and Local Government, English Housing
Survey: Headline Report 2010-11, February 2012, p 47 Back
See, for example, Ev w32 [Riverside], Ev 154 [National Housing
Department for Communities and Local Government, Live tables
on house building: Table 209: Permanent dwellings completed,
by tenure and country, www.communities.gov.uk Back
Ev w46 Back
Q 2 Back
Ev 123 Back
Ev 89 Back
See, for example, Bank of England, Financial Stability Report,
Issue No. 30, December 2011 and Financial Services Authority,
Retail Conduct Risk Outlook, March 2012. Back
See, for instance: Ev 95 [Local Government Association on the
cap on local authority borrowing]; Evs 144, 145 [Residential Landlords
Association on taxation in the private rented sector]; Ev w46
[Regenda Group on how the treatment of historic social housing
grant constrains housing association borrowing]; Ev 107-108 [British
Property Federation on barriers to the establishment of Real Estate
Investment Trusts]. Back
Ev w34 Back
See, for example, Ev 155 [National Housing Federation], Ev w55
[Place Shapers], Ev w39 [Waterloo Housing Group], Q 66 [John Stewart]. Back
Ev 83 Back
Q 45 Back
Q 44 Back
Communities and Local Government Committee, Second Report of
Session 2010-12, Abolition of Regional Spatial Strategies:
A Planning Vacuum?, HC 517; Department for Communities and
Local Government, Government Response to the Communities and
Local Government Committee's Report Abolition of Regional Spatial
Strategies: a planning vacuum, Cm 8103, June 2011 Back
Communities and Local Government Committee, Eighth Report of
Session 2010-12, The National Planning Policy Framework,
HC 1526; Department for Communities and Local Government, Government
response to the Communities and Local Government Select Committee
Report: National Planning Policy Framework, Cm 8322, March
Q 320 Back
Q 320 Back
Department for Communities and Local Government, Laying the
Foundations: A Housing Strategy for England [referred to hereafter
as Laying the Foundations], November 2011, p 9 Back
HM Treasury, Budget 2012, March 2012, para 1.221 Back
Q 47 Back
Q 3 Back
Professor Christine Whitehead declared the following interests:
Advisor to the Board of the Housing Finance Corporation; independent
research for Shelter, RICS, JRF, the Housing Futures Network;
Project for the European Investment Bank on housing finance for
affordable housing; fellow of the Society of Property Researchers;
Member, RICS. Back
Philip Jenks declared the following interests: NED, Chartercourt
Financial Services-New non bank lender and mortgage servicer;
Phil Jenks Consultancy Ltd-current clients with housing links:
Mill Group, UKAR; recent previous clients: CLG, HCA, Lloyds Banking
Group, Metro Bank, Pocket and NPS, plus unpaid support to both
FSA and BSA; Board Member, Leeds Building Society. Back