Will the government eventually respond to the Elphicke Review by boosting housebuilding by local councils?
While Red Brick has understandably concentrated on Labour’s Lyons Review, in the past week submissions closed for the more limited review being carried out for the government by Natalie Elphicke, due to report later this year. It’s limited because it focuses only on local authorities (both as housebuilders and as facilitators of housebuilding) and doesn’t go much wider. But more especially its remit specifically excludes any options that would involve more borrowing or changing the borrowing rules. So, can it achieve anything?
One of the few bright spots in recent housebuilding statistics was the number of new starts by councils in the first quarter of this year (1,090). Described by Eric Pickles as part of a ‘resurgence’ in housebuilding, he claimed the overall level of new starts was due to Help to Buy and higher council starts were down to increased right to buy receipts. More realistically, while it would be encouraging if council output were now to start to increase significantly, there are a number of reasons for being cautious. The first is that this is only one quarter’s figure. Second, we have the fact that the new Affordable Homes Programme virtually excludes social rented schemes, whereas councils want to build around half their new output for letting at social rents (according to research last year by ARCH). And third, as pointed out by Red Brick before, while right to buy receipts are increasing they are nowhere near allowing full replacement of properties sold.
One test of the rigor of the Elphicke Review will be whether it examines the claims about reinvestment of right to buy receipts and makes any proposals to change the current rules. It’s highly likely that several submissions will mention this issue, as it’s high on the list of local authority concerns. In relation to new build, another common worry is that, unless the so-called ‘cost floor’ rules are strengthened, councils could find themselves having to sell newly built houses through the RTB in 15 years time and in the process make a significant loss. Some councils are thought to be hesitant about building within the HRA for just that reason, preferring deals which allow them nominations to houses built without being subject to the risk of falling foul of right to buy in future.
Another test will be whether, even though it can’t recommend changes in the borrowing rules, Elphicke does at least review the evidence for what relaxed rules could achieve and the scope for minor changes. After all, the government itself has offered minor concessions in the scheme it announced in the Autumn Statement which might release an extra £300 million of borrowing.
The Elphicke Review will only have credibility with local authorities if it avoids the blame game and the temptation to recommend further sales of the family silver. It’s right for Elphicke to look at ways in which councils can raise their game in encouraging development, but if it criticises poor performers it should also be clear that councils only carry a small part of the responsibility for the failure to build enough houses. It should look critically at the changes to the planning system which Pickles has imposed, including the ending of regional housing targets, rather than simply repeating and endorsing his endless criticism of recalcitrant councils. Its remit doesn’t extend to the role of developers themselves, but it can at least point to some of the endemic problems that see their share prices and profits going up while their output only increases with painful sluggishness.
Above all, Elphicke should point out that is deeply cynical of government to criticise local planning authorities for not planning for sufficient housing when it lacks an adequate housing strategy itself. The one the coalition published in November 2011, Laying the Foundations, was little more than a ragbag of recycled policies, not a strategy with targets and the means to achieve them.
Curiously, insofar as Laying the Foundations mentioned a figure of how many houses we need to build, it used the DCLG’s then official projections of increases in numbers of households, by 232,000 households per year to 2033. This would exceed Labour’s 200,000 target, and be within spitting distance of the 250,000 per year target often mentioned as being required. The problem is that private housebuilders have, since 1980, only built an average of 125,000 dwellings annually and on only four occasions did they exceed 150,000. Even if we suppose their output might be pushed up to 160,000, this still leaves a lot to be built by social landlords and clearly won’t be achieved with anything like current funding arrangements which struggle to deliver over 50,000 homes.
Elphicke should say that a step change in output can only be achieved with a clear plan, that sets targets and plausible means of achieving them, allocates responsibilities and finance, gets buy-in from the different parts of the industry and is properly monitored. This goes against the grain of how the coalition conducts housing policy, but unless and until someone does it the “deep, deep structural problems” that Mark Carney says afflict the British housing market will remain unsolved.