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02/05/2019

Why we need to start talking about regeneration

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Delivering housing / iStock-166225668

The drive to meet housebuilding targets need to be integrated into a broader conversation about the regeneration of communities, argues Tim Reade

Regeneration is essential to ensuring the long term survival of our towns, cities, rural communities and coastal centres, but it needs to be balanced and done with the community.

Residents worry about outside investment leading to business being driven out, the identity of their community being lost, and in particular housing becoming unaffordable.

Quite rightly, as key community stakeholders, the concerns of residents need to be fully considered and understood in order to ensure projects are fit for purpose.

This is one of many reasons why regeneration should not have a singular focus on an output, whether a new highway or business centre, but should seek to address the wider social, qualitative, environmental and strategic outcomes for communities.

Regeneration should be inclusive, and housing is a key part of the picture. It is widely acknowledged that the undersupply of housing is a complex problem, and it is true to say that its resolution will have a significant impact on our ability to ensure the future prosperity of Britain.

Currently we are falling far below the estimated 240,000 to 340,000 houses which need to be built every year according to the House of Commons Library Tackling the under-supply of housing in England briefing paper.

"It is no wonder there is divergence of opinion over how best to tackle this wicked problem"

However, overcoming this issue has proven difficult. While the briefing paper proposes to create four streams of focus; building the right homes in the right places, strengthening the ability to build homes at pace, widening the range of house builders and construction methods, and helping people now with more affordable housing; this is only the broad direction of travel.

It leaves many of the big issues which currently weigh down the market unresolved. When considering the number of variables that can influence housing numbers, and the number of housing sector stakeholders who have a role to play in housing provision, it is no wonder there is divergence of opinion over how best to tackle this wicked problem.

Let’s take the subject of ‘land banking’ as a clear demonstration of this point. For several years now, there has been frustration at the number of sites held by house builders that have not been built out. A 2012 report by Molier commissioned by the Mayor of London found that across 210,000 existing planning permissions for new homes in London, 55 per cent of these were held by house builders and 45 per cent were held by developers who were non-house builders.

The long game sometimes played by developers and land owners with strategic land holdings no doubt has an impact on the numbers of houses being built. But to what extent is this a significant factor in the wider context?

The Independent Review of Build Out Rates by Sir Oliver Letwin did not believe land banking to be the primary factor in build out rates. Rather it was pinned on the ‘absorption rate’ which is when homes can be sold into the local market without materially disturbing the market price.

Some critics could point out that this still comes down to these companies operating in a way which maximises profits, without pushing forward a solution to the current housing crisis. And there is clearly some issue with the current approach of the private market when the average build out time is 15.5 years.

The solutions put forward in the report to this issue are focused on diversifying supply, particularly in large housing developments where homes are being built to the same specifications and end up only appealing to one section of the market.

"It can sometimes seem an overwhelming issue. However, when we look around the country there are many local authorities taking inventive approaches to undersupply"

A significant shake up is put forward in the report to create change, using land value capture to encourage property developers to get with the programme. Among the recommendations made in the final report is for local authorities to gain the power to compulsorily acquire large sites. These purchases would be at prices which reflect the value of those sites once they have planning permission and a master plan.

While there is not yet clarity over whether the government will accept these recommendations, some action is clearly needed. It can sometimes seem an overwhelming issue. However, when we look around the country there are many local authorities taking inventive approaches to undersupply.

At the upcoming CIPFA Property Conference on 10 July we will be taking an in-depth look at Salford City Council, who reduced its vacant housing properties from circa 6,000 to circa 2,000 in only a few years. Their approach may not be enough to replace the estimated 340,000 homes which must be built each year until 2031, but local placed-based action is an important part of solving this national problem.

What can be clearly seen however, is that by itself the private market simply cannot or will not deliver the scale of house building required to solve the current shortfall in supply. Authorities will need to find new ways to bolster supply and support local residents, even as debate continues to rage over where government should focus its funding and which barriers to housing delivery are more important than others.

Tim Reade is head of property advisory services for CIPFA, the Chartered Insitute of Public Finance and Accountancy

Photo | iStock


Attend the conference

Victoria Hills, the RTPI's chief executive, will be speaking at CIPFA's Property Regeneration 2019 conference in Birmingham on 10 July, running concurrently with CIPFA's Public Finance Live conference at the same venue. A discount is available to RTPI members.

 

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