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What more can councils do to stimulate housing growth? Matthew Warburton - 28/11/2013

housing_graph_300Two weeks ago I reported that the Wolfson prize this year would be awarded to whoever puts forward the best plan for a new garden city. Last week, Ed Balls committed Labour to a new wave of new towns delivered in the traditional way by development corporations.

Both proposals start from the assumption that the housing growth needed nationally cannot be delivered within existing local governance arrangements. The assumption made is that councils as currently constituted lack the will or the capacity, or both, to stimulate the delivery of the 200,000 homes a year that is now the shared ambition of all three major political parties.

Park for now the fact that 200,000 homes annually is probably not enough to meet estimated need and stabilise house prices. Alan Holman's estimate of around 250,000 is robustly evidenced and convincing, as is his estimate that around a third of these need to be provided at sub-market rents. That only increases the scale of the challenge to councils.

The point that needs to be made, loudly and clearly, is that councils both want and are taking action to stimulate housing growth, and, with more help from the Government - much of it not involving any additional public spending - they could do much more.

A recent survey by the Smith Institute found that 64 per cent of councillors surveyed regarded building more social housing as a top priority. This confirms the results of our survey of council business plans last year which found 78% of councils with housing planning new building over the next five years, an annual output of 4,000-5,000 a year.

The survey found this could, however, grow to 15,000 a year if council HRA debt caps were lifted. However, councils have the financial capacity to build even more than this if allowed to borrow to prudential limits. It seems likely that other constraints - such as planning issues, land acquisition and assembly - kick in before financial limits are reached. Which means that any further adjustment of HRA finance needs to go forward hand in hand with broader reform of local government finance, planning and other key policies.

Councils also face attrition of their housing stock through Right to Buy. Current arrangements for replacing sold homes need to be amended to enable one-for-one local replacement.

Councils are less resistant to local housing growth than their critics sometimes claim. But where there is local opposition to new development it is often driven not by selfish NIMBYism but legitimate concerns about extra pressure on the local infrastructure, particularly roads and public transport, and on local services, particularly schools and the NHS. HRAs may have spare capacity to support new investment, but council General Funds have been hit by successive cuts in government grant, and are under extreme pressure everywhere.

The Government has introduced a variety of initiatives to help incentivise housing growth - the New Homes Bonus, an increased local share in business rate growth and a 5 year right to retain the proceeds of growth in the council tax base. These are all of some help but, arguably, not enough to support the local costs of growth and swing the overall balance of incentives.

The Government tends to a jaundiced view of councils as planning authorities, but a too-rosy view of private developers. Its recent Growth and Infrastructure Act focused on measures to liberalise the planning system and unblock sites held up, it assumed, by council-imposed restrictions. It launches repeated initiatives to release vacant public land for development, but has steadfastly ignored evidence of vacant land and development sites stalled by developers "waiting for market conditions to improve".

In a presentation to the ARCH AGM, Housing Director Barbara Brownlee revealed that her council, Thurrock, had granted 800 planning permissions for housing development which had not yet been acted on. This had motivated the council to set up an arms-length company to buy and develop stalled sites for a mix of homes for sale and market and social rent. There are also good arguments for council not to rely exclusively on section 106 powers to secure a proportion of social rented homes in new developments.

A more interventionist approach involving direct council participation as developer or partner in development may, by giving councils more say over dwelling mix and design standards, the relationship between market and non-market housing in developments, and arrangements for management and maintenance, in ensuring the creation of genuine and sustainable mixed communities. Bold and imaginative action by councils could help to unlock many more sites for development. But government action to penalise developers who deliberately hold land vacant should not be ruled out.

There are many small steps identified above that Government could take to help councils better meet the challenge of housing growth. Less easy to sum up in a manifesto soundbite, perhaps, than a new wave of new towns or garden cities, but at least as important in contributing to the overall imperative to double housing output from its current pathetically low level.

 

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