SEPTEMBER 17 2021 – HOUSE OF LORDS BUILT ENVIRONMENT COMMITTEE – CALL FOR EVIDENCE ON MEETING THE UK’S HOUSING DEMAND – REPORT SUBMISSION BY FENELLA MAITLAND-SMITH AND DAVID BLAIR [COMMITTEE TO SAVE THE WEST OF IFIELD]

House of Lords Built Environment Committee – Call for Evidence on Meeting the UK’s housing demand

Response from the Committee to Save the West of Ifield

Fenella Maitland-Smith and David Blair

Background

The Save West of Ifield Committee was founded by local residents and interested parties to oppose plans by Homes England to develop land to the West of Ifield between the councils of Crawley and Horsham (West Sussex) for the construction of 10,000 homes and related infrastructure. It has representation from all major UK political parties as well as unaffiliated representatives. Whilst the group has a specific local interest, the consensus amongst the members is that its fundamental objection to the development relates to the implementation of housing policy at a national level and the local dismay at the plans is echoed across the whole of the South of England. Our interest in this consultation is to challenge the basis upon which such massive building programmes are being instigated in the face of local opposition. It is therefore beyond the SWOI Committee’s remit to respond to questions relating to the mechanics through which such transformative destruction can be achieved nor to the form in which the surplus housing stock should be delivered.

Response to questions

Q1. What is the current composition of the UK’s housing sector? How is the sector structured in terms of private ownership, privately rented accommodation and social housing? 

Officials in central and local government are best placed to provide statistics on the current composition of the housing sector, presumably based on the ONS’s compilation of UK and regional aggregates from local authority data: https://www.gov.uk/government/statistical-data-sets/live-tables-on-dwelling-stock-including-vacants

Q2. What social and demographic factors shape housing demand in the UK? What are the expected future trends in housing demand? 

The demographic factors are those used by the ONS in their projections of population and numbers of households: the number, size and type of households vs available housing stock, and how these change over time due to births, deaths, life expectancy, net migration, and regional migration.

Need for different types of housing will also depend on changes in social factors such as income distribution, changes in employment opportunities, and the extent to which fashion, taste, culture, etc. make different areas or house types more or less popular.

All the above are themselves affected by geopolitical events and pandemics as we have experienced in the UK.

Very important too are economic, political and financial factors, such as the ready availability of credit, low interest rates, loose lending criteria, investment behaviour, levels of foreign speculation, appetite for ‘buy-to-let’, appetite for second homes, etc. And government schemes to facilitate borrowing, investment, and home ownership. The UK economy is built on home ownership, which also encourages use of property for income generation (as an asset) so that those who can, buy multiple properties to rent out.  These two conditions operate against each other and create an apparent supply shortage for those wanting to buy.  Cornwall’s experience over the past year is a neat illustration. The incorrect conclusion is that more homes are needed.  More are built, however, which inflates the UK property bubble even further.  We cannot allow speculation and investment in multiple properties to be the driver of excess demand to buy, particularly by foreign investors in London and other cities.       

One fallacy being peddled to justify excessive house-building is that high house prices are due to a ‘crisis’ of supply, ie demand is outstripping supply and pushing up prices (as might be the case with everyday goods and services). This is the incorrect logic underlying the ‘affordability adjustment’ in the MHCLG Standard Method, but its effect is to significantly increase local targets where house prices are relatively high (by 50% in our own area). The Bank of England and others continue to publish research explaining that residential property has become an asset whose price is driven by investment behaviour – part foreign speculation, part ‘buy-to-let’, part appetite for second homes – facilitated by easy credit, ie low interest rates and looser lending criteria. Several Bank researchers show empirically that the housing price boom of recent decades has been driven by low interest rates, and that more responsive housing supply would not significantly have constrained the price boom of recent decades, nor will it do much to make houses more affordable from here onward. The affordability adjustment should be scrapped.

Many economists and commentators make the point that the volumes and types of new house-building in the UK are driven by commercial imperatives (ie developers and investors), rather than the benefit of local communities. This view is supported by a body of academic thinking (for example Piketty, Pettifor, Gallent, Ryan-Collins) and the following is typical of their views: ’In many advanced economies housing has becoming an overwhelmingly attractive asset-class to both domestic and international investors, with the result that values are hugely over-inflated. Demand has been unlimited not because of needs of families and households but because of the ‘wall of global capital’ of investment demand. The latter has in turn been accommodated by banking deregulation so that the supply of money has not only kept up but exacerbated these processes (at least until the aftermath of the 2008 crisis when regulation was finally tightened). The situation is further exacerbated by the emergence of the buy to let market, where wealthy individuals seek to invest surplus income. These processes support the interests of the wealthy but not the distribution of housing against need.

Policymakers turn a blind eye to these underlying forces, and fall back on the notion that market forces are the right means of delivering generalised benefits. In fact, it is believed that the wealth and wellbeing of the majority of households depends on a confidence in the continued growth in housing equity. While economic growth has stagnated over the past decade, policymakers have become increasingly reliant on expansion in the housing market, with new policies like ‘help to buy’ and ‘funding for lending’ designed to keep the show on the road. At some point Government has to accept that this is no way to run a housing market, let alone to run an economy. ‘

Q3. Does the Government’s target of 300,000 new homes per year accurately reflect housing demand? Is this target achievable? 

We believe that 300,000 new homes per year is an overstatement of the housing demand and is unacceptable for the following reasons:

  • ONS statistics show that the number of households in the UK has grown steadily over the past decade, by 170,000 or 0.6% a year on average. The number of dwellings has grown at the same rate, and the result that the number of dwellings continuously exceeds the number of households by around 4.4%. It’s not clear why a target of 300,000 new homes a year is needed, when the number of households is growing by 170,000 a year? Chart 1 illustrates this point. Perhaps government wishes to encourage an increased vacancy rate due to second homes and other vacant investment properties, particularly in London? Setting targets which so grossly overshoot ‘real’ demand, for the benefit of developers and investors, is unsustainable, undesirable and unacceptable.

  • 300,000 is an overstatement of genuine need to the extent that it is based on MHCLG’s Standard Method for calculating targets. First the fact that the population projection data are painfully out of date and take no account of Brexit, the pandemic, climate change measures, or changes in immigration policy. Targets are based on the ONS’s Subnational Population Projections (SNPP) for 2016, which are based on the 2011 Census, and the ONS are very clear that the projections do not attempt to predict the impact that future government or local policies, changing economic circumstances or other factors might have on demographic behaviour.  Given the ONS conducted a full population census in 2021, with results available in 2022/3, how can we or any planners or policy-makers place any weight on projections which don’t take account of Brexit or the pandemic? And shouldn’t the targets take account of the government’s own planned reforms to the immigration system which should reduce net migration?

  • The use of the ‘affordability adjustment’ in the Standard Method, significantly increases local targets where house prices are relatively high, based on the widely discredited argument that house prices respond to supply and demand pressures in a manner similar to goods and services. The Bank of England and others continue to publish research explaining why this is not the case; residential property has become an asset whose price is driven by investment behaviour – part foreign speculation, part ‘buy-to-let’, part appetite for second homes – facilitated by easy credit, ie low interest rates and looser lending criteria. Several Bank researchers show empirically that the housing price boom of recent decades has been driven by low interest rates, and that more responsive housing supply would not significantly have constrained the price boom of recent decades, nor will it do much to make houses more affordable from here onward. The affordability adjustment should be scrapped.

  • Building 300,000 houses a year for the foreseeable future will lead to an undesirable and unacceptable proportion of built-up land in the UK. In 2014, according to the OECD.Stat website, there were only 7 countries in the world with a population of a least a million that had higher proportions of built-up land than the UK: Singapore, Belgium, the Netherlands, Germany, Japan, Mauritius and Bangladesh. Currently around 6% of the UK is built-up, and around 9% of England. If the built-up area were to expand by 1% a year (consistent with 300,000 new homes) then the proportion of built-up land would double in 70 years. Considering the large areas of moorland and forest in Scotland, Wales and Northern England, this is clearly an unsustainable future for the country to be plotting for itself.

  • The idea that the entirety of the UK’s housing need should be delivered through building new homes does not appear to allow for increased use of vacant properties (currently in excess of 600,000) and this should clearly be a priority over new developments. Equally, there should be a strong emphasis on prioritising brown field development over greenfield. The natural restrictions imposed by trying to work within these naturally conservative parameters is likely to be successful in reducing demand for increased households.

  • A single raw number like 300,000 is a meaningless target when we know that whatever the overall number, it is crucially important to deliver the right mix of property types. The target should reflect the type of housing needed by communities, not the type and number demanded by developers and financiers.  

Q4. What is the balance of demand for new housing between homes for private ownership, privately rented homes, and social housing? How does this affect the type and tenure required of new homes?   

Q5. What can be done to ensure there is a good balance of new homes where they are needed across the UK? 

Regional targets should be set and agreed according to actual local need, the views of residents, and as part of wider regional policies such as the levelling up agenda and associated industrial strategy. The fact that regional targets are so heavily based on the totally flawed ‘affordability adjustment’ leads us to conclude that in reality the driving factors are profits for developers, and for those who lend to them and to mortgage borrowers.

It’s revealing that the 2020 changes in the Standard Method are not evenly spread by region. The chart below shows 2020 local plan requirements, average delivery, the current method (with and without the urban uplift) and the (now deceased) mutant algorithm. Why is it that the current method produces targets for the south and east which are higher than recent delivery in those areas, whereas targets in all other regions are lower than delivery? Why are the south and east required to continue delivering more and more housing, despite the levelling up agenda?

Source: Lichfields

The answer seems to be that these are the areas with the most expensive property where the biggest profits and least risky mortgagees are to be found. The use of the ‘affordability adjustment’ in the Standard Method helps to maximise these by significantly increasing local targets where house prices are high, and borrowers lower risk.

This one-size-fits-all application of a common algorithm also does not give sufficient weight to resident or community preferences. It is our perception that many, if not most, residents in the south are more strongly opposed to the scale of house-building, whereas opposition elsewhere may be less. In communities where investment and job creation are priorities, there may well be more support for improving the current housing stock and infrastructure. Unfortunately it seems to be the case that this UK house-building programme is targeting precisely the areas where the housing is least wanted or needed.

There is a danger that incentivising local councils to meet high national housing targets will result in councillors doing deals with developers that are focussed on creating concentrated wealth in the hands of the interested parties. In Horsham, for example, the Council conducted an assessment of local housing need, but is set to approve plans to build house volumes that massively exceed that demand despite overwhelming local opposition. The parish in which much of the development is to take place voted 89% against the development in a local referendum on the local plan. The fact that this has not been acknowledged by the local council has raised widespread cynicism about corruption levels and concerns about a democratic deficit.

Q6. Is the construction sector able to deliver the UK’s housing demand? What barriers are facing the sector? 

Q7. The Government has published its proposals for reform of the planning system. How can the planning system be shaped to meet housing demand? 

This was an opportunity for real change, towards proper regional level strategic assessments and reviews of need. Meeting the UK’s need ought to be a shared responsibility across all authorities to deliver something which makes sense across several agendas: housing, climate change, sustainable transport, the environment, community, etc. Really delivering for communities, rather than imposing developments in order to maximise profits for a few. Of course, not everyone will be happy with a different outcome, but as things are it’s more likely that the majority is upset, at the expense of the few hoping to pocket huge rewards.

As residents of the south east we believe that planning policy and process should be focussed on driving down the unsustainable projected housing demand, rather than trying to accommodate it. The housing density in the south is already at levels that pressurise our infrastructure and a further generation of increase will result in irreversible destruction to our heritage and environment. The government’s focus on climate change as the sole looming environmental disaster will soon come to be seen to be blinkered as the building boom reduces the quality of life of ever-increasing numbers of the population. We therefore view any further liberalisation of planning principles to be an act of vandalism.

What role should permitted development rights play in this? 

How might changes to Section 106 agreements shape the provision of social housing?   

How should communities be engaged in the planning process? 

Homes England should be stopped from riding roughshod over local authorities and residents.  Homes England’s remit is, in their own words ‘… to unblock [sites], get them shovel-ready and back on the market so that housebuilders and housing associations can build them out’. So they’re driving the gravy train for developers and their financiers that converts agricultural and recreational land into profitable greenfield sites. Central government buys the land and then leans on the local authority to drive the proposal through. And indeed our experience of Homes England is of undemocratic and heavy-handed practices such shady land purchases, selective and partial consultations, and presumption of success. So much for all the talk about consultation and community engagement in the NPPF.

Proposals to build should not be presented as faits accomplis to local residents. Rather residents should be consulted at several points in the planning process, by independent agents, not in exercises led by the developers. The development at Ifield has been presented as job-creating, environmentally-friendly and meeting desperate local housing needs, where in fact none of these is the case. The area already has high levels of employment and the jobs and homes being created are predominantly not for the local community, but rather to accommodate people making a lifestyle choice, or being forced out of London by lack of affordable housing caused by distorted investment in the London property bubble. The idea that building houses and industrial zones on a golf club and green fields, and tearing up ancient hedgerows, will increase biodiversity is patent spin.

If local communities are very clearly opposed to developments (around 90% of those polled living in the West of Ifield development zone oppose the development) this should not just be dismissed as nimbyism and the strength of opposition should be accorded some respect. The impact on rural communities of being enveloped by housing estates, motorways, building sites and clogged roads surpasses the positive impact on house movers obtaining a marginal improvement in their options.

Q8. What can be done to improve the quality of new homes? How can the design and aesthetics of new homes be improved? 

Q9. Is the workforce equipped with the professional, digital and other skills required to meet housing demand, for example in the construction, planning and design sectors? What can be done to overcome skills shortages? 

Q10. How does the Government interact with Local Authorities to deliver more homes? How can this relationship be improved?  

Q11. What are the main opportunities and areas of innovation for meeting the UK’s housing demand?