Homes on the high-street

We know that our high-streets are changing rapidly: but are they the right place to solve our housing shortage?

The government’s Portas Review was set up in order to look at the challenge of declining spending in town centres (with the rise of internet shopping often blamed) and rocketing vacancy rates in shops. Portas recommended re-booting  high-streets with government funding, cheaper parking and the introduction of ‘Portas Pilots’ to concentrate efforts in certain areas and get people shopping locally again.

The response to review was mixed however and it is interesting that in its latest assessment the government’s language has shifted to recognize the changing reality. There is a clearly a sense that we can have fewer, but better focused, shops on our high-streets, but that high streets could be used for much more. It recognizes that rather than fighting big trends like the rise of online retail, we should work with them and make the most of it.

This is where the housing shortage comes in. The government this week announced it was consulting on plans to make it easier for shop owners to convert their property into homes, with less opportunity for councils to block those conversions. In our latest report, Solutions for the Housing Shortage, we estimated that this policy could deliver 10,000 extra homes per year: a positive (if small) step towards the 250,000 homes per year we need in England just to meet demand.

It’s absolutely right that the government thinks about the changing nature of our town centres and how this can contribute towards a wider programme to relieve the chronic undersupply of homes. As the government rightly point out in their consultation, increasing the supply of homes on our high-streets would have the benefits of helping those who need a home but also increasing foot-fall for the remaining shops which could thrive.

However I would urge three notes of caution to these plans:

First, the value of residential property is much higher in many areas than the value of commercial property (because we have a housing shortage and an oversupply of retail space). This means that the private owners of retail units stand to make windfall profits by converting shops into homes.

We need to make sure that the public also benefit from that unearned windfall by ensuring that there is a way for local authorities to capture some of the “uplift” in value – either through affordable housing commitments or through compensation in the form of contributions to infrastructure. We’ll be looking carefully at the plans and arguing that wider public benefit must not be forgotten.

Second, we do need to make sure that as development happens it is not haphazard. Under these plans councils still retain some limited powers and we will see more homes but there is a risk that in some areas the scale of change will be hard to manage. There is a of course a balance to be struck here.

Finally, while this step is welcome, the overall scale of the challenge we face is enormous.

Getting to 250,000 homes per year requires a bold vision and won’t be delivered piecemeal. The Spending Review instead severely lacked that ambition, despite the rhetorical promise to get Britain building again. We’d love to see a bigger picture vision on housing supply from the government which tackles all the necessary elements. Not just the changing nature of our high streets, but also the different demand pressures across the country, declining public investment and the need to fix all parts of the house building system such as the land market which makes homes so unaffordable.

We’ve started to give an idea of what this bigger vision would look like (see graph below) and it’s time that government stepped up to the scale of the challenge with a comprehensive plan to boost housing supply.

  1. Shelter, you are great, but an “unearned windfall is NOT a loss to anybody! If it is spent then it supports jobs and taxes, and if it is invested then the concentration of capital can deliver even greater returns. Releasing value by re-grading property merely addresses a market regulation failure – everybody gains. Economics is only zero-sum when regulation fails.

  2. While there is a shortage of housing – I’m not sure how good an idea this is for the economy – the commercial property market is picking up at the moment, so holding on to commercial property might be more beneficial further down the line.

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