Kim Vernau, CEO of BLP Insurance, comments on their recent seminar organised in conjunction with the British Property Federation on housing supply now.
“Housing supply has not recovered to pre-recession levels even eight years on, nor is it is looking likely to rise to the target of a million new homes by 2020. Several capacity constraints prevent us from meeting needs, including lack of local plan provision, skill shortages, financial weakness in the social housing sector and lack of the mature purpose-built rental and self-build sectors present in other countries. The new Housing and Planning Act addresses only parts of the problem.
“Housing built for sale must now include 20% ‘starter homes’ sold at a discount. This won’t increase supply and may reduce the supply of affordable rental property, subject to the as-yet-unwritten regulations awaited. Sites must come forward faster through planning, yet only 31% of authorities have completed local plans. The Act allows government to permit development in the absence of plans, hoping to speed their creation in the teeth of local opposition. Yet even if sites were available, reliance on conventional on-site construction skills limits the volume possible after the loss of so many tradesmen and professionals in the recession.
“Affordable and social-rented housing meets local demand through allocation to those on the waiting list. This won’t happen with starter homes built to sell and the stock will drop further with right-to-buy extending to housing associations. Where unviable ratios of affordable homes are politically demanded, this may again depress supply. Local authorities may however become more entrepreneurial, joint-venturing with developers and using public land. Adding rental homes to school, healthcare and public office sites is a new concept of great interest. Opening up new land with infrastructure, or intensifying development where infrastructure exists, is possible but hard to finance up front.
“The Build-to-Rent sector is emerging but is strangely not seen by government as an important way to increase supply. The public is barely aware of it either. Yet it is the one way in which high-quality capacity can be increased rapidly. Rental units can be built at speed with offsite construction and let at speed also. Discounted units can be provided, allocated ‘invisibly’ so that residents are treated identically. The one big constraint is that Built-to-Rent can’t compete for sites with build-to-sell. Short of creating a new use-class, local authorities can harness the potential by joint venturing with Build-to-Rent developers on public land.
“That the UK also lacks a self-build market was brought up in discussion. Other countries have this as a major source of supply, using small builders, yet we don’t allocate sites for it as they do. Our expert panel covered wide ground but were clear that we must be firing on all supply cylinders to meet the million homes challenge”.