Going to Scale: How a National Housing Fund can unlock Britain’s housebuilding capacity – Press Release

17^th November 2016

BETTER BUILDING: GOVERNMENT-BACKED FUND FOR UP TO 750,000 EXTRA HOMES WOULD END HOUSING CRISIS

Strict Embargo: 00:01 17th November 2016

 

The drastic shortage of housing among working people could be plugged with a Government-backed National Housing Fund of £100 billion over 10 years, providing up to 75,000 extra new homes a year, a report by the independent think tank ResPublica has found.

Nurses, firefighters and young professionals are all struggling to get on the property ladder with the number of new homes totalling only 143,500 last year – 56,500 less than the 200,000 needed each year over this Parliament to hit the Government’s own targets.

In its report, Going to scale: How a National Housing Fund can unlock Britain’s housebuilding capacity, ResPublica argues that the private sector will only build at the pace that it can sell but if the Government acted as a guaranteed buyer of new homes then confidence would grow and supply increase.

ResPublica says the creation of a National Housing Fund involving the Government, housing associations and developers would see £10 billion a year spent on at least 40,000 and up to 75,000 extra new homes for would-be renters and buyers who are economically active but unable to raise a deposit.
This would be a workable and realisable way of delivering the ambition for more homes which is expected to be outlined by the Government in a housing White Paper in the next few weeks.

Sir Michael Lyons, the non-executive chairman of the English Cities Fund and author of the Lyons Housing Review, said: “ResPublica’s latest report on housing supply adds its influential voice to those calling for a much more ambitious approach to building homes for the future. It rightly concludes that current efforts, largely focused on the Volume House Builders and immediate owner occupation, will not be enough to tackle the escalating mismatch between a growing population and the homes available to meet both need and aspiration.

“It is on the money in focusing on the need for new initiatives of scale, capable of securing a step change in house building. Its suggestion, from authors Callan and Blond, for a National Housing Fund backed by Government and capable of raising and investing £10billion a year through the larger Housing Associations (and why not the more go ahead local authorities too?) to build 40,000 extra homes pa is an example of the big thinking we now need.

“Our report of 2 years ago stressed the need for ambitious initiatives engaging all players in the challenge of boosting housing supply on a sustainable basis and thereby rebuilding the capacity of this vital industry. ResPublica has responded to that challenge with a practical idea capable of making a big contribution.”

ResPublica found the immediate gains from the proposed scheme are potentially enormous; adding 0.4% to GDP and providing some £2.4bn of tax receipts each year, as well as supporting 200,000 jobs.

The fund would also help smaller housing developers who could expand their business with a certainty of sales. ResPublica points to the fact that most of today’s major developers grew up as contractors for government in the 1950/1960s, under a similar guaranteed buyer scheme.
Some of the homes would initially be rented out by housing associations for five years but could eventually be sold to help people squeezed out of the housing market get a foot on the housing ladder, such as nurses, the police force, and teachers. Because they would be rented and not placed on the open market, existing sales by developers would not be affected.

ResPublica also found that previous schemes to help people into homes, such as Help to Buy, had only worked to a certain extent as the supply of properties was not strong enough.

“The idea of giving people help to buy homes can only work to its full potential if there is a ready supply of properties on the market.
“For too many years, successive Governments have failed to build enough homes, or enable enough homes to be built. This must change if we are going to address a problem which is creating a divide in society between those who can afford to enter the property market and those who are priced out – the haves and have nots.

“Our National Housing Fund offers the British Government a way to finally build the homes it acknowledges it needs. Through the notion of a guaranteed buyer – we reinvent the only formula that has ever enabled the state to build at scale. Crucially we will dramatically expand the capacity of two relatively dormant sectors, the SME building market and Housing Associations such that they too can build at scale and  open up the market for the millions who need it to work for them.”

Welcoming the report, Clive Betts, Labour MP and Chairman of the Communities and Local Government Select Committee, said

“Housing is one of the top challenges we face as a country. We cannot continue with record high rents, increasing homelessness and a generation locked out of home ownership – and we need to ask serious questions about how we can deliver homes at the scale we need.

“As the Communities and Local Government Committee undertakes our inquiry into this key issue, I strongly welcome ResPublica’s vital and innovate new report that sets out fresh thinking on housing in Britain, and I urge the government to pay heed to its important proposals”

Stephen Hammond, Conservative MP and a member of the Treasury Select Committee, will be a keynote speaker at the launch of ResPublica’s report. He said:

“The UK has had a housing shortage of all types of tenure stretching back decades. We have never built the number we need to provide homes for our citizens. Depressingly at the current rate of build the prospect for many millennialists of owning their own home is remote.

“If we are to meet our political aspiration to build more homes, we need a new solution. The Coalition and the Conservative Governments have provided some interesting initiatives on the demand side which have been helpful but not transformative. This new research and policy provides that supply side change. If the government is the  guaranteed buyer, through using Housing Associations, not only will there be a boost to GDP and create new jobs but there is the potential to build 40,000 extra homes per year. I hope that this idea from ResPublica will be at the forefront of policy makers’ minds as the wrestle with the problem of providing homes for modern Britain to live in.”

Toby Lloyd, Head of housing development at Shelter, said:

“This report from ResPublica adds yet another voice to all those calling on the government to get a grip on our housing shortage by investing in genuinely affordable homes to rent or buy.

“As the report explains, we cannot expect a handful of big developers to build all the homes we need. We must lift the barriers blocking our smaller builders and allow them to compete with other housebuilders on who will build the best homes for the community, not on who can pay the most for land.

“The government has the chance to turn things around, and we hope to see some bold commitments in next week’s Autumn Statement to build homes that people on lower incomes can actually afford.”

Dan Wilson Craw, Policy Manager at Generation Rent, which campaigns for professionally managed, secure, decent and affordable private rented homes in sustainable communities, said:

“The government’s attempts to date to stimulate house building have merely fuelled price inflation and made home ownership an even more distant prospect for most renters. To bring the cost of housing down, ministers need to find some ambition and ResPublica’s timely report gives them an idea of what that looks like. Without bold action now, the growing renter population faces decades of expensive homes and unstable lives.”

The National Housing Fund model

The National Housing Fund provides a secure and sustainable route to increased production of new homes. It operates in addition to the existing sales or grant-subsidised new homes market. For developers, it provides a guaranteed purchaser of new homes:

1. The National Housing Fund does not compete for sales with developers as all homes are rented for at least 5 years. This is a crucial positive distinguishing factor compared to the Starter Homes initiative. And they are sold to organisations which specialise and excel in successfully managing large portfolios of rented homes – housing associations.

2. Homes are let to economically active tenants who aspire to buy at a future date. This adds value to the rest of the development as the homes are owned by one well managed landlord rather than an eclectic group of investor landlords.

3. Where homes are subsidised, they are targeted at specific client groups, such as nurses, the police force, and teachers. Again, it adds value rather than detracts from the value of the stock as social rent often does in the eyes of some purchasers.

4. Therefore, the sales to the National Housing Fund do not diminish the value or pace of the sales of the developers’ own sales product.

5. Certainty of sales to the National Housing Fund will enable developers, especially smaller developers, to secure funding for their sites.

6. The certainty of sales will enable developers to produce at an accelerated rate. For example, rather than a production that allows for say 2-3 sales per month with 25 homes being produced over a year the developer could produce twice as many homes knowing the National Housing Fund will take up the extra properties.

7. This pre-sale will accelerate development as developers can pre-sell the first and second phases of developments establishing the essential presence on the site and giving it initial depth to the market for that development – thereby allowing the natural sales market to develop.

8. This will enhance the pace of development and the efficiency of the capital employed. It will provide smaller developers with a significant benefit enabling them to grow their business.

 

Notes to the Editor:

1. ‘Going to scale: How a National Housing Fund can unlock Britain’s housebuilding capacity’ will be launched at Committee Room 6 of the House of Commons on Thursday 17th November at 10 am.
2. The ResPublica Trust is an independent non-partisan think tank. Through research, policy innovation and programmes, ResPublica seeks to establish a new economic, social and cultural settlement. In order to heal the long-term rifts in this country ResPublica aims to combat the concentration of wealth and power by distributing ownership and agency to all, and by re-instilling culture and virtue across the economy and society.
3. For further details please call Oruj Defoite on 07866 685130 or email her on oruj@sogold.co.uk

Press enquiries to press@respublica.org.uk.

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