There is a growing consensus that public sector housebuilding is needed to help relieve the UK’s housing crisis.
Councils have found ways to build, particularly through partnerships with the private sector, despite successive austerity budgets hitting local authorities’ spending power
In the wake of the EU referendum, as private building slows, how can the public sector expand on this activity with little government support?
The partnership approach
“Local authorities should have a role, and some of the more enlightened ones are starting to realise that,” says David Cowans, chief executive of Places for People.
“They are putting in place exciting joint venture programs and using their assets and sites to leverage joint venture vehicles that will increase production.”
Places for People is working with Aberdeen and Birmingham councils to bring forward schemes. In both cases, the councils divide up the land and retain ownership of some of the units.
In London, Southwark has put in place one of the most ambitious council building schemes in the country. It aims to provide 11,000 homes across various tenures by 2043, and 1,500 by 2018. None of these are being built by the council alone.
“We use development partners and contractors,” say Mark Williams, a member of Southwark Council. “We have a lot of experience in management, and we are building up the capacity to build new homes at scale again.”
And the partnership approach is not restricted to urban boroughs. Kings Lynn & West Norfolk Council is showing how an authority with low land values can bring in a partner to provide development expertise, according to Ingrid Reynolds, director of housing development at Savills.
“The council is using a whole host of incentives to bring forward 600 units that would otherwise not have got off the ground,” she says.
This kind of arrangement allows councils to bring forward units despite budget cuts. It also allows them to retain, at least in part, assets that provide a long-term income stream.
The problems
But the practice of councils developing housing themselves does come with its own set of issues. To increase housing supply, it is not just a case of asking councils to build more.
First is the problem of material and labour shortages.
“To get up to that kind of capacity, we need more specialists in the industry,” says Anthony Lee, senior director at BNP Paribas Real Estate. “That needs a macro solution, rather than councils just developing projects. All that does is draw on the same pool of expertise that developers are using at the moment.”
And local authorities are suffering their own skills shortages – having not developed since the 1980s, they often do not have the building teams in place.
Then there is the question of whether councils should forgo development partners and build schemes themselves. “Are they best placed to do that? Do they know what the market wants?” asks Lee.
In the future
So how best to build on the progress made?
Councils need to be willing, and allowed, to take on more risk.
“A lot of the time, the public sector wants to transfer the risk to developers and that gets priced in accordingly. There needs to be more risk sharing,” says Reynolds.
Alongside this, to increase council cash, central government needs to continue its devolution agenda.
Williams says: “The key thing is to devolve power down to local authorities. The London Finance Commission report makes the case that items such as stamp duty should come to town hall level, to enable more infrastructure.”
But as those in the public sector have shown since the recession, perhaps the key is not to limit the players to any one model, and allow councils to build according to individual need and opportunity.
“Where they have the skills, there is no reason why they cannot do it themselves,” says Cowans.
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