|
Insignia, Finchley, north London: Barratt Homes’ regeneration of a former territorial army centre into 147 one- and two-bedroom apartments, half of which are for rent and shared ownership ,is in partnership with MHO. A new, smaller TA centre is to be built, and existing open space upgraded |
No one should doubt that the residential industry in 2006 will be dominated by debate and rows over how to provide more low-cost homes to help first-time buyers.
But as local authorities become more insistent on section 106 deals demanding more affordable housing, and the government announces a plethora of schemes ranging from the Starter Home Initiative through Key Worker Housing and now New HomeBuy, developers and industry experts remain bemused.
Increasingly, they are asking a fundamental question: can schemes such as shared ownership or shared equity (see panel, p91) really improve affordability within our current, cumbersome planning system?
“The consensus is that they can’t,” says Fiona Sadek, head of residential research at Colliers CRE. She cites two reasons.
First, affordability is worsening because the supply of homes is lagging far behind demand. “Recent history would dictate that the planning system at local level cannot solve this imbalance, not least because of extensive staffing shortages within local authorities,” she claims.
Second, government initiatives aimed at low-paid and public-sector employees ignore vast swathes of others. “Providing affordable housing through the local authority or registered social landlord route circumvents those who are not eligible to sign up to the housing register,” Sadek says. “In other words, there are a lot of ‘well-paid’ people who cannot afford homes within their local areas simply because of the market price of housing.”
Data from building society Nationwide shows how affordability has worsened in a short time.
In Q4 2002, the house price/earnings ratio in the UK was 4.73, with the average property price running at £115,940 and average earnings at £24,519. By Q4 of 2005, the ratio had soared to 5.78, with a typical home costing £158,745 and average earnings up only as far as £27,487.
Unsurprisingly, first-time buyers in Greater London find it hardest. Today, more than 66% of take-home pay for people in this area is eaten up in mortgage payments, compared with only 33% in Scotland. The situation is worsening elsewhere – in 2005, affordability deteriorated most in Northern Ireland, where mortgage payments account for 44.2% of take-home pay compared with 40% in late 2004, says Nationwide.
But even against this background, Dominic Grace, head of new homes at Savills, is wary of the government’s planning-led attempts to help first-timers.
“We’ve been here before,” he says. “Another year, another initiative. We all support schemes like the government’s New HomeBuy project, but it’s difficult not to be sceptical when one new scheme follows another while there’s been no improvement in mainstream planning processes.”
Off the record, six developers spoken to by Estates Gazette fiercely criticised the new initiative, saying it merely added to the layers of bureaucracy that lead to years of discussions at local authority level before planning permission is granted.
They each blame selected local authorities for insisting on too high a proportion of affordable housing in schemes – some mentioned London’s Hammersmith & Fulham, one of the toughest authorities when negotiating with private sector developers (see panel).
The result, claim the developers, is that builders look elsewhere to develop, thus actually creating fewer low-cost homes than would have been the case had lower proportions been demanded.
Other industry experts want much less emphasis on affordable quotas and instead urge simpler, more radical, alternatives.
Portfolio of reforms sought
David Pretty, chief executive of Barratt Homes, wants a portfolio of reforms including house-builders being given incentives to sell at sub-market prices to key workers without going through registered social landlords, discounted public land being sold off to residential developers, and a fast-track system being created to decide on planning applications by housebuilders using brownfield land.
Barratt and other builders have lobbied government to say that there could be a 10% rise in housebuilding volumes, with commensurate reductions in prices, if the planning process were simplified and speeded up.
Pretty says: “Planning and building approvals take, on average, between eight and 18 months, whereas 25 years ago the average maximum was 18 weeks. That, in a nutshell, shows how bad the problem has become. Planning at a local level has become totally bogged down in consultation, administration and regulation.”
Andrew Wells of Allsop says he favours a solution put forward by some local authorities in the North of England, which insist on “discounted market housing” as a planning obligation. The developer is required to build market housing and sell at, usually, 75% of its full value to qualifying owner-occupiers.
“It’s simple and straightforward and addresses the needs of those who cannot access the housing market at full value,” says Wells. “This has been particularly helpful in higher-value areas like York and Harrogate, where affordability is as much of an issue as in the Home Counties.”
He adds: “Faced with a choice of a dwelling available simply at 75% of market value [discounted market housing] or the alternatives of paying the same upfront price but with an interest-free loan [HomeBuy] or rent payable on the balance [shared ownership], it isn’t a very difficult decision to make.”
For others, scepticism about the government’s current planning-led initiatives is fuelled by the apparent failure of past attempts. “It’s an accumulation of planning restrictions that has led to the current crisis,” claims Jim Briscoe, partner at King Sturge.
Briscoe goes on: “Regulations applying to green belts, national parks, areas of outstanding natural beauty, coastal area protection zones, employment protection, conservation areas and densities all restrict supply and thereby push up prices. Right-to-buy exacerbated the shortage. Decreasing the supply of affordable housing has happened despite increasing the funding for affordable housing.”
And it is only a few weeks since chancellor Gordon Brown added to Briscoe’s list of onerous regulations. While, on the one hand, he announced in December a deal with mortgage lenders that would create more shared ownership schemes, on the other he talked of a proposed windfall tax on profits on land granted planning permission for homes.
Developers say this will be another financial, bureaucratic hoop they must jump through before building any new homes at all, at any price.
Affordable housing? The debate and rows have only just begun.
|
|
|
|
|
|
|
|
|
The scheme of 95 new homes being built on Heathstan Road, west London, next to the Westway and within a stone’s throw of the old Wormwood Scrubs prison, ticks all the government’s boxes on social housing, shared ownership and a lot more besides. It is on a brownfield site, is a high-density, six-storey block built within timber frames, is of a design that fits into the conservation area in which it is located, and is a prime example of public-private co-operation between developer John Laing Partnership and the Family Housing Association, a west London RSL. Most of all, look at its tenure. There are 51 homes for social rent, 34 for shared ownership and 10 for rent to key workers. Accommodation ranges from one-bedroom apartments to five-bedroom houses, and includes six homes that have been adapted for wheelchair users. Funding for the development came from the Housing Corporation and cross-subsidy provided by the FHA. The scheme replaces 60 former council flats and houses that have been demolished. The new development won planning permission in February 2004, just two months after the application was made, and JLP’s use of timber frames mean the project is scheduled for completion in mid-2006, only two years after starting. Stuart Miller, deputy managing director of John Laing Partnership, says: “Through good design and building innovation, our partnership with the FHA is increasing the number of affordable homes here by more than 50%. We’re helping a much broader range of people by providing a choice of homes, all built to the latest standards.” |
|
|
|
Shared ownership is when a registered social landlord, usually a housing association, builds or buys a property and sells a resident a share; the resident then pays rent on the part he does not own. In future years, the “part-owner” may choose to purchase a further share and could eventually own the whole property. The cost of shared ownership depends on many factors, including the size of the property and its location. To be eligible for shared ownership, the part-purchaser must be registered on a local authority’s housing register as having a housing need and must be unable to afford a suitable home on the open market. The HomeBuy, or shared equity scheme, is also intended to assist people to buy a home on the open market. If someone qualifies for the scheme, an RSL nominated by a local authority will lend an individual as much as 25% towards the purchase price of a new home. The individual must contribute the remaining 75% through a mortgage and/or personal savings. Unlike shared ownership, in which rent is paid on the amount owned by the RSL, there are no month-by-month repayments of the loan. Instead, the resident repays it when the house is sold or when the resident can afford to pay the loan back. This repayment will be 25% of the value of the property at the time of loan repayment. |
