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23/11/2016

Autumn Statement: Industry reacts to Housing Infrastructure Fund

Words: Simon Wicks
Homes / iStock_000020788340

Property industry bodies, private consultancies and third sector organisations have broadly welcomed the chancellor’s announcement of fresh funding for affordable housing and infrastructure.

Backed by a £23 billion National Productivity Investment Fund, Philip Hammond announced a series of measures that include:

  • £2.3bn Housing Infrastructure Fund to help build 100,000 new homes in high-demand areas
  • £1.4 billion to deliver 40,000 affordable homes
  • A ban on upfront fees charged by letting agents
  • Relaxation of restrictions on grants for alternative housing providers
  • £1.8bn Local Growth Fund money to English regions for infrastructure investment
  • £1.1bn extra investment in English local transport networks
  • A remit for the National Infrastructure Commission to recommend how to spend between 1 per cent and 1.2 per cent of GDP annually on infrastructure.

The chancellor called the measures “an investment in the economy for the future”. Overall, the industry was positive about the explicit connections between housing, infrastructure and productivity, but questioned the absence of detail in the chancellor’s announcements.

Reaction – affordable housing and the link to infrastructure

 

RTPI chief executive Trudi Elliott said the key to successful delivery of the infrastructure the chancellor envisages is to value the expertise of planners to plan in a strategic way. She welcomed the recognition of the connection between housing and infrastructure.

“The RTPI has consistently argued that housing and infrastructure need to go hand in hand and that planners are well positioned to realise the government’s vision of creating more productive communities throughout the country,” Elliott said. “We welcome the Chancellor’s infrastructure-led investment to boosting productivity and unlocking housing, and the shift of the housing strategy to include different tenures and more affordable housing. It is overdue and we need it urgently.”

Melanie Leech, chief executive of the British Property Federation (BPF), echoed Elliott’s sentiment, describing the plan to spend on infrastructure to bring forward housing the statement’s “hidden gem”. She continued: “Infrastructure spending is housing delivery’s silver bullet and the considerable commitment to invest about £2bn a year is therefore very welcome. The £1.7bn for accelerated construction on public land will also help upscale the modular construction sector, meaning a more efficient industry and the faster delivery of homes.”

The National Housing Federation (NHF), which represents housing associations, picked up on the announcement that controversial restrictions on funding for alternative housing providers would be relaxed, promoting a wider range of tenures and builders. Its chief executive David Orr said: “We have been calling on the Government to relax restrictions on existing affordable housing funding, so we are delighted with this announcement.

“Increased flexibility and extra investment will give housing associations the freedom and confidence to build even more affordable homes, including for rent, more quickly across the country.”

Orr went on to say that the NHF welcomed the changes to tapers in the universal credit which would help those households that are “just about managing”. However, they would challenge government on proposed changes to the local housing allowance cap for those receiving universal credit from 2019.

Reaction – ban on letting agency fees

 

The chancellor’s proposal to launch a consultation on a ban on fees charged by letting agencies – a major constraint on struggling renters, according to some – polarised opinion.

Housing charity Shelter saw it as an important victory for those struggling to afford to rent, let alone buy. Its chief executive Campbell Robb said: “Millions of renters in England have felt the financial strain of unfair letting agent fees for far too long, so we’re delighted with the government’s decision to ban them.

“Our recent survey found that nearly half of renters had been asked to pay fees that they thought were too high, with many having to borrow money every time they move, so this will make a huge difference to all those scraping by in our expensive, unstable renting market.”

The BPF’s Melanie Leech sounded a note of caution on behalf of her members: “Most large-scale Build-to-Rent landlords do not charge tenants fees and therefore they will not be particularly perturbed by the Chancellor’s announcement, but what is banned and how it works in practice will need carefully working through.”

Ian Thomas, co-founder of property lending and investment business Lend Invest, was less than happy, however. "Scrapping letting agency fees is surely at odds with the government's goal to promoting a healthy rental market,” he argued. “Landlords will be squeezed from yet another angle, while many tenants will eventually foot the bill.

"Letting agents should be expected to account for the fees they charge, not pass the cost of the work they do to landlords.”

Reaction – digital infrastructure

 

Aston University’s chair of optical communications Professor Andrew Ellis welcomed the chancellor's announcement that the government will invest £400m in fibre to the premises. This, he said, would go "a long way to tackling the digital divide" in the UK. “Technologies such as G.Fast, recently developed by major industry players, will serve cities and other densely populated sufficiently where distances to the nearest cabinets are relatively small, so government needs to focus its investment in areas less likely to be served by these initiatives. If targeted at traditionally harder-to-reach areas such as rural districts and market towns, this investment fund could give the economy a major boost.

“The commercial case for infrastructure development is lower outside urban areas, where service variability is also greatest, but the potential for economy growth is just as great. This means investment may need to be focused on larger operators that already have existing customers in these less densely populated areas."

Colin Sharp, senior director and head of telecoms at GVA, said: “Unfortunately we believe this only addresses the tip of the iceberg. Significantly larger funds and a smarter allocation, geographically, of faster broadband remains an urgent requirement. Internet speeds at 30 megabytes in UK cities are some of the slowest in Europe, and for an economy that purports to be one of the world’s largest, unless we are running closer to 100 mb, this will continue to present problems for the UK. The real challenge however is how to address broadband speed in rural areas where there remain multiple 'not spots'."

Reaction - more to be done

 

Other commentators picked up on the lack of detail in the chancellor’s announcements, particularly around infrastrcuture spending, or missing topics that they had hoped would be addressed in the statement.

Martha Grekos, partner and head of planning at Howard Kennedy LLP, noted: “This is quite a high level announcement as he [Philip Hammond] has not listed out what these infrastructure projects are and by how much each will be funded by (apart from the £110m for East West Rail) and how these infrastructure projects are to be prioritised. He has merely left these decisions to the departmental ministers.”

She said that “practical solutions” were needed to regenerate areas and unlock land for housing. Grekos also observed that the emphasis on tenures other than home ownership may well signal that the “golden age of home ownership” is over and that we need to “change our cultural beliefs by learning to rent”. For this to happen, however, the government would need to stabilise the private rental sector.

Peter Tooher, executive Director at Nexus Planning, remarked on the chancellor’s “cautious mood” but praised his emphasis on “addressing the productivity gap, investment and research and development, infrastructure and housing”.

However, he said: ““It will be interesting to see how the £2.3bn Housing Infrastructure Fund will work in practice to 'unlock' 100,000 homes in areas of high demand. To overcome frequently entrenched local objections to new homes, the fund would benefit hugely from some direct involvement from housebuilders and the community in making choices on how money is spent at a local level. This would be beneficial in managing housing growth.”

GVA chief executive Gerry Hughes sympathised with the chancellor’s constraints, particularly the wider economic and political context in which he is operating. Hughes suggested that Hammond had done well in the circumstances, but he could have gone further: “What is disappointing is that he has failed to abandon the right to buy policy completely. This is a major impediment to delivering new homes and facilitating much needed regeneration.”

The chancellor’s commitment to another controversial policy, on the other hand, was welcomed by the Home Builders Federation’s executive chairman Stewart Baseley. Describing the statement as a whole as “another step in the right direction”, he noted: “The commitment to Help to Buy, so critical to demand and thus supply, was also positive.”

Miles Barnard, managing director of infrastructure company Mouchel praised the chancellor's advocacy of infrastrcuture as a "real boost for the industry" and particularly the fact that the money is being "deliberately targeted in the most important areas". But, he went on: "In the same vein I’d also like to see the significant new funding in science and technology targeted in areas that most influence the modernisation of infrastructure, including driverless vehicles and big data.

“We still await measures on how we can increase the number of young people into STEM subjects, but committing to mega-projects, and getting them ‘shovel-ready’ quickly, will help make our industry an attractive destination for graduates and apprenticeships and retain existing talent”

John Hicks, director and head of government and public for AECOM, called for more to be done to "to give confidence to private investment for infrastructure". In addition to continued support for the Uk Guarantees Scheme, he said, we should also be looking at "municipal bonds, enhanced borrowing powers for cities and tax incremental financing".

“The missing component in today’s Autumn Statement was a new pipeline of transparent, viable projects for much heralded high-value investment, which the chancellor wants linked to productivity in order to secure public funding. Without this investors will not make the all-important final move. But the chancellor’s call for the National Infrastructure Commission to make recommendations on the UK’s future infrastructure needs could effectively hold up the publication of such a list."

Overall – a victory for a mixed tenure market?

 

Mark Farmer, chief executive of Cast and author of the Farmer Review into the construction industry [Modernise or Die], felt the chancellor had hit many of the right notes. “A tenure diverse housing market including affordable rent and shared ownership is crucial to underpinning more stable long term demand in construction and also can act as a catalyst for investment in innovation in house building which ultimately will reduce delivery costs," he said.

Lord Porter, chairman of the Local Government Association, also welcomed the emphasis on mixed tenure housing. But he called for the government to untie the hands of local authorities and enablethem to resume housebuilding at scale. “Only an increase of all types of housing – including those for affordable or social rent – will increase affordability and make it easier for working families to save for a deposit to buy their first home," he said.

“If we are to stand any chance of solving our housing crisis, the government’s forthcoming housing strategy must hand councils the powers and funding to resume their historic role as a major builder of affordable homes. Councils must be given a leading role in building of the new homes that are needed and help people live healthy and happy lives and build strong communities. This means allowing them to borrow to invest in housing and keep 100 per cent of the receipts from properties sold through Right to Buy to build new homes.”

Image credit | iStock

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