“Wishful thinking dressed up as public policy.” That verdict on government efforts to sell off public sector land could hardly have been more dismissive. Is there a better idea to fuel housing provision? This week, from a surprising source, one emerged.
The Public Accounts Committee is the most influential House of Commons select committee by a distance. And it was scathing this week about the government’s failure to collect data on the results of its oft-trumpeted public land sell-off.
Announced in June 2011 with the intention of releasing enough public land to build up to 100,000 new homes, overall responsibility for the policy sat with the Department for Communities and Local Government.
DCLG has failed, the committee says, to track the number of homes built on sold-off land. It did not determine whether sales were conducted at fair value, nor did it record overall proceeds.
The upshot? By the end of March 2015, the government had disposed of land with capacity for an estimated 109,950 homes, according to DCLG. And what happened to the land post-sale? That we don’t know.
No wonder the committee is asking questions about how effective the government might be in delivering by 2020 at least £5bn of land and property sales and enough land for 150,000 homes.
Yet the shortcomings identified by the PAC are of relatively minor consequence in the battle to hit the target set by housing minister Brandon Lewis this week to deliver one million homes during this parliament.
Accelerating construction is of paramount importance. And building more homes to rent has to be part of the answer too. So far, no compelling, detailed case has been made about how and why it should be. Helpfully, this week the IPF stepped into that vacuum.
According to its research, PRS-led housing schemes can be delivered 2.5 times faster than homes built only for sale.
The study said that for a hypothetical 1,000-home London scheme with a land cost of £50m, the absorption rate of housing for sale means it would take 10 years to finish, assuming 100 sales a year. A PRS-led scheme with a 70% allocation to rental units, assuming five lettings a week, could be occupied within four years.
Now it may be that we have been a nation of homeowners. But we are changing: Uber, Netflix and their ilk are seeing to that. And no one, not least the IPF, is saying PRS will replace home ownership: it is at pains to point out the private rented sector should exist alongside traditional housebuilding.
But even if we accept that cultural sands are shifting, there is another factor at play that will make or break PRS: returns on rented schemes need to improve.
The research highlights the considerably lower rate of return on PRS-led developments – averaging a potential IRR of 7.5%, compared with 17.5% for housing for sale.
The solution, says the research, needs to come in the form of more flexible planning frameworks at the local level. These need to recognise that private rental housing built at scale is more affordable than housing for sale, with local authorities accepting discounted market rent in lieu of social housing and pricing public land accordingly.
The case is made by British Land head of residential Jean-Marc Vandevivere on our new weekly residential pages this week (p56). Next week former housing minister Mark Prisk picks up the baton in his new regular column, arguing the old housing model is dead.
There’s sense in what the IPF says, especially when more than 200,000 homes a year need to be delivered to meet that one million target. But there is no silver bullet; a range of solutions, thoughtfully applied, is vital.
