At Shelter, we are convinced that a strong, proactive plan from government is required to get us building the 250,000 homes per year we need. That’s why, with our partners KPMG, we’ve set out a detailed programme for the next government.
So it’s welcome that the government and Labour are both running reviews into how more homes can be built. The government’s Elphicke review – which focuses on the role of councils in particular – will report later in the year. Labour’s independent review, chaired by Sir Michael Lyons, will publish its full report in September. Today however, the Guardian carries an interview with Michael Lyons setting out his initial thoughts.
From Shelter’s perspective, it looks like Lyons is on the right track. We’ve argued that cities need stronger powers and bigger budgets to take the lead in delivering new homes, which is a clear theme of the interview. And we’ve called argued for new interventions in the dysfunctional land market to bring land into the system at lower prices. Lyons’ recommendation of Urban Development Corporations looks strong – and sounds similar to our proposal for ‘New Homes Zones’, set out on p52 of our report.
The interview states: “The proposals would either require land to be sold close to its current use value or for private land owners to receive a lower initial profit, but receive more by taking a financial stake in the development”.
We think this is a smart approach, as by lowering the initial cost of land it’s much easier to finance affordable housing, quality green space and infrastructure. Shelter has underlined that point this week with our short-listed entry to the Wolfson Economics Prize to design a garden city. By capturing land value through an equity investment model it would be possible to fund 30% of the homes as social rent, sell the market homes at a discount, and provide quality transport and social infrastructure.
Of course, this model is far more effective in high land value areas and would require some subsidy, especially in lower demand markets. We also think that it needs to be strategic, rather than developer-led. In other words, cities should set out where UDCs or New Homes Zones should be, rather than waiting for them to be promoted by landowners and developers. The advantage of a strategic approach is making sure development links to transport and jobs and can be planned to the advantage of the existing community as far as possible.
Lyons also recommends raising the arbitrary borrowing cap on local authorities, to allow them to invest directly in new affordable homes. We have argued that this help to channel more investment into building genuinely affordable homes, and could also help expand the range of players in the business of building homes. While we need our existing house building firms to operate at full capacity, we will also need many new builders in the market if we are going to build the homes we need.
Lyons also hints towards an expansion of shared ownership, more land market transparency and help for smaller builders – all recommendations that Shelter has made over the last year.
There is also a hint towards making housing associations ‘unlock their balance sheets’ which sounds a lot like proposals to convert existing stock to less affordable tenures – not something we would support – but apart from that the proposals look impressive.
Over the next few months we’d like to see the Review focus on some of the hardest questions in housing supply policy:
- How do you negotiate a major development like Urban Development Corporations across local authority boundaries and how do you incentivise cities to set them up?
- How do you help housing associations to build more genuinely affordable homes, without forcing them to reduce the stock of genuinely affordable homes they currently hold?
- How do you counter the likely reaction of some sections of the population against higher rates of home building?
Shelter will be thinking hard about these questions over the coming months and we hope to see some of the answers reflected in both the Lyons and Elphicke reviews.