Examination of Witnesses (Questions 101-119)
MR BRIAN SALMON, MR ALISTAIR CHANT, MR MARTIN JEWELL AND MR PETER COBB
TUESDAY 25 JUNE 2002
101. Can I welcome you to the second of the Committee's session on affordable housing and could I ask you to identify yourselves for the record.
(Mr Salmon) I am Brian Salmon; I am from the Berkeley Group and I cover the town planning of the Group.
(Mr Chant) I am Alistair Chant from Berkeley Homes plc, a division of Berkeley Group and I am Managing Director of the Partnership Homes Division which is responsible for regeneration and affordable housing.
(Mr Cobb) I am Peter Cobb; I am the Group's Architectural & Planning Director from Fairview New Homes.
(Mr Jewell) I am Martin Jewell; I am Planning Director of Fairview New Homes.
102. Do any of you want to say anything by way of introduction or are you happy to go straight to the questions?
(Mr Salmon) We would like to make a very short introduction. The main problem identified is that affordable housing that was once being provided by new council housing is not now being replaced by housing associations or by the provisions of planning gain. Firstly, the house building industry and now the whole development industry is being asked to shoulder this whole deficit. Housing and affordable housing provision are the responsibility of the Government, but the house building industry has shown that up to 25 per cent of new housing can be affordable when supplied on larger sites subject to planning gain issues not being excessive and an appropriate social housing grant figure being provided. However, as one moves from 25 per cent towards 50 per cent, simple economics demonstrate that the cost of providing affordable instead of private housing progressively reduces the residual land value. The effect reduces the propensity for the site to come into the market because progressively the existing use or alternative uses become more viable or the owners may decide to shelve the site for another decade when better opportunities might be possible. Previous attempts by the State to capitalise on development land value have failed. The first in 1947 was 100 per cent and that was repealed in 1953. The second was 40 per cent, Land Commission in 1967. The third was development land tax in 1976 and that was repealed because of the resultant shortage of land. I believe that rising house prices and the reducing figures for affordable housing starts, demonstrated by the Government's statistics, show that a shortage of financially developable sites is resulting as planning gain in the form of affordable housing moves up the percentage scale. I believe that this downturn in land supply is not inevitable and I suggest one way forward by which the Government could address this situation. The Government should grasp the development opportunities available from urban regeneration which was sparked by the Urban White Paper. Berkeley and others have proved that this is a viable development format. New policies should be proposed, perhaps through a revised PPG1, to prioritise the redevelopment of brownfield sites. These policies should be extended to a presumption in favour of developments on brownfield. An increase in the amount of Government funding for both remediation and affordable housing is essential to allow this to go forward. A significant increase in the overall land supply situation is needed so that the affordable total can increase proportionately. The 25 percentage figure for affordable housing will ensure certainty and therefore encourage the industry to raise the level of production. Thus, the development industry would be able to assist in reversing the downward trend and begin the process of providing economically viable affordable housing. Unfortunately, nothing in the Government's Green Paper or the Planning Obligations Paper is designed to satisfy these objectives.
103. Do you want to add anything or are you happy for us to go straight to the questions?
(Mr Cobb) We had a number of points to make of a practical nature in relation to the actual delivery but it might be best to introduce those through our questions, Chairman.
104. You have answered this question in part, so perhaps I will look to Fairview instead. Do you accept that the number of completed homes is at the lowest since the 1920s and would you tell the Committee why you feel the numbers are so low at a time when the demand for housing is so high?
(Mr Cobb) I do not think there is any basis to refute at all the proposition that the numbers of new homes being built, either in the public or the private sector, is at an all time low; so we are with you on that one. In terms of trying to define what the reasons area, I think there are probably three. They start with a very limited supply of the raw material which is land and a very highly competitive market for that land. They move into a process which seems to me almost designed to frustrate rather than actually enable planning permissions coming forward in a timely fashion and, when we get to the point of actual implementation of a permission, there is a raft still of second and tertiary legislation that still needs to be overcome before that permission can actually become implemented and, when we arrive at the implementation stage, certainly as far as my company and I think as far as the industry is concerned, there is a profound skills shortage at an operational level and, to be blunt, we could build more if we could actually find people to do it.
105. Basically, the industry has not trained people for years and years, has it?
(Mr Cobb) There is a complete lack of skills which goes right through not just the industry but I think goes into secondary education as well where I perceive that it has become unfashionable to actually take up a skill rather than trying to pursue something that is perceived to be more academic. Although the reality is that, with the market as it is now, you could get a very, very good income working from a skills base, yet secondary education seems to discourage that.
106. That is obviously going to be music to the ears of education and employment ministers! On your first point, you talked about the limited supply of land being one of the key factors. Yet we have had evidence from other witnesses saying that you, the builders, are actually hoarding land until land values go up and up and up and the value of your stock goes up. How would you answer that allegation?
(Mr Salmon) That is something which does not fit with the way in which the Berkeley Group operate. I can say that the Berkeley Group does not do that. Once we have planning permission on the site, we process it out as fast as the local marketplace will allow us to.
107. So you are saying that you do not do it, but what about your competitors?
(Mr Cobb) We can say, as far as Fairview is concerned, that we certainly do not. We do not carry a land bank in any way, shape or form.
108. Both of you are the good guys but do other people hoard land?
(Mr Cobb) I cannot imagine the economic mind-set of anyone who actually hoards land. We live in an economy which is by no means dictated. We are at the moment unquestionably enjoying a relatively good run but, for most of us older than ten, we can remember the early 1990s and late 1980s, and things will go down as sure as they have gone up. I think one of the issues that makes people perceive there to be a lag in delivery of housing and a claim that land is being hoarded is that a lot of the sites that certainly we look at are large sites. The largest site we have developed in the last five years is 1,350 units. On the day we get that planning permission, somebody somewhere records that as a site with permission. It takes us probably another six to nine months to obtain a whole raft of subsidiary permissions, approvals and so forth before we can start and, on the day we start, we are building one unit; day two, we are building two; and day three, we are building three. However, we are probably never building more than 150 to maybe 250 a year. That means that that site, on day one, has a land bank of 1,350 units but we are still trying to optimise it as quickly as we can. In any industry where there is a huge lag between the point of acquisition of the land and the actual delivery of completed units, inevitably there is a massive amount of stock tied up within that process. I am not aware of any one of my colleagues in the industry who is actually sitting on land.
109. What about the farmers? Are there people who own the land who are waiting to negotiate with builders to sell it who are actually hanging onto it, or the banks or whoever owns the land?
(Mr Cobb) I think that, as far as land owners are concerned, every land owner now, certainly in this day and age, perceives his site as having value. Nobody sells their land independently anymore. They all run off to valuers, agents and everybody else to assist them. It is a very `protection' environment. Everybody is so litigious; everybody needs to get a second or a third opinion and any valuer is probably going to advise his client that it is worth holding out and that there are other ways of maximising value: run it through the development process, perhaps get a permission on it first before you trade it.
(Mr Chant) I think it is the timing for both the private landowner and a public sector landowner.
110. There are throughout the country and certainly down in the south-east lots and lots and lots of sites that have outline residential consent. Would it be helpful if a time limit were put on outline permission?
(Mr Salmon) They already are. An outline planning permission has a finite time.
111. They are five years and, if we brought it down to two years, would that sharpen things up a little?
(Mr Salmon) It certainly would not sharpen us and our colleagues in the building industry because, as you have already heard, we buy and we build out. It may sharpen up some landowners, but the basis goes back to the development plan. Is there actually sufficient accessible land identified in development plans to meet the demand?
Sir Paul Beresford
112. Going back to the supplier, could and should the Government use mechanisms to try to encourage demand in areas of low demand and take the steam out of areas like the south-east where there is excessive demand?
(Mr Salmon) I think there is a broad economic problem here where the London Mayor has set this out in his London Plan where he is pointing to London being the key to the whole country and he is seeing the economic base here as needing provision. There is a very strong argument and I cannot see an argument which will lessen the impact of London to the advantage of the rest of the country. We are in a world economy.
113. Should the Government not be using the planning mechanism to ?
(Mr Chant) The problem there is the overriding relationship to a planning driven mechanism to an economic driven mechanism towards the economics of the country and a London base because obviously the demand and supply of housing fits around the demand and supply of the industries coming in for employment and the services. I think it is a far wider agenda and I certainly do not think we are qualified as house builders to outline the strategy. We can respond to a planning framework but I think it has far wider-reaching remits.
114. In the evidence from Berkeley Homes, you talk about the negative culture and planning obligations leading to delays. Could you both give one example of something that could be changed.
(Mr Chant) The culture regarding planning obligations especially Section 106 and particularly referring to affordable housing, where there is emerging guidance coming forward which may be contrary or different from the actual wider planning policy which is specific to a region, is that there is a significant delay from getting a resolution on a planning consent to having a legal agreement in place which is viable and deliverable within an authority. I think that is the culture which is coming forward which is delaying, firstly, a planning consent being released and, secondly, the actual units being provided.
(Mr Salmon) If I can just add to that. A piece of research that I did, which I think I have put in my written evidence, was that, in about 1999/2000, we had 16 large planning applications processing through the various different local authorities and we had an average of 101 days as the length of time it took from the resolution to approve to the actual signing of the 106 agreement. That is a delay of three months on the whole of the housing production.
115. What was the reasonable time for those to be approved?
(Mr Chant) What would be or what should be?
116. It is all right saying that a local authority was wasting time, if you like, but we could argue that possibly some of the time was taken by your lawyers and advisers. Should it be done in three weeks, in a month or less?
(Mr Salmon) When I believe it should be done is before the planning permission goes for a resolution to approve; so that those arguments are all settled at the same time as the design arguments and the other points.
117. What role to you think private house builders should be playing in providing affordable housing?
(Mr Cobb) The private sector has to act as an enabler. If the current system is to stay as it is, our perception is that local government and, to an extent, national government have moved away from being a housing provider and therefore leaves either the RSL or it leaves the private developer as the enabler. The issue that we would then want to develop is how far that enabling role goes from one where it actually allows the provision of a facility on site and how far it moves before that provision becomes nothing more than a taxation burden which is held purely by the housing developer. That, for us, is probably one of the biggest single issues as to where government, both at a national and local level, enters the scene in terms of assisting and funding because the thrust at the moment of local policy is that not only should the housing developer be the enabler but that he should be the provider in a full financial sense as well.
118. I take it that you would agree with your colleague who thinks that 50 per cent is too much?
(Mr Cobb) It is difficult to set arbitrary scales but it has to be said that at around about the 25 per cent mark which we have been operating with, by and large, since about 1994/95, unquestionably developments are coming forward and are producing an affordable housing content within them. All the economics seem to point to the fact that eventually, if you load the process overtly, you will simple strangle it.
(Mr Chant) I think this is where the overlap is causing problems. I think that the developers' role is to respond, quite clearly, to economic agendas to bring forward sustainable, mixed tenure, new developments in our towns and cities and those developments should include a range of tenures to meet a range of housing needs. Our role is to then not be the funders of that. Yes, we will fund the development of it but then people will buy it for purchase as investors, but then the RSL would come through as partners with the investment either from the housing corporation or from their private sector investors to help deliver the affordable housing. That is where the cross-over is causing problems at the moment.
119. How do you think affordable housing should be defined?
(Mr Chant) Affordable housing should be quite wide. It is very difficult to have a broad definition; it should be specific to a scheme and location and that need. However, it should be broad, it should include social renting, shared ownership accommodation with the investment of grant and without the investment of grant, which will affect levels of affordability. It should include key worker accommodation with clear understanding who key workers are and how they are defined. Is it by income? Is it by work base? It should also at times include student accommodation and other means of affordable housing if there is a particular need with that scheme in that location. It needs to be broad.
(Mr Jewell) Can I try and be more succinct. I think there are three elements. One is financial limits; secondly, it is to an adequate standard; thirdly, it has to be accessible and available. I think those are the three elements in any definition of "affordable". I would actually commend what is in the London plan because there is a very succinct definition which says that affordable housing is housing designed to meet the needs of households whose incomes are not sufficient to allow them to access any appropriate housing in their borough and it seems to me that that says it all.