The Government Housing Strategy - a much needed boost!
On 21 November 2011, the Government published its long awaited strategy on reviving the house building industry and the housing market. Although this has since been overshadowed by the Chancellor’s Autumn Statement, the strategy is clearly aimed at giving the wider economy a much needed shot in the arm.
The new housing strategy is set out in a 78 page document entitled “Laying the Foundations: a Housing Strategy for England”.
One of the core proposals is a new £400 million “Get Britain Building” fund (a revival of the “Kickstart funding” scheme introduced by the last Government) which is intended to deliver 16,000 new homes on sites which already have planning permission and where development has stalled. It is expected that 3,200 of these units will be for “affordable housing”. The Department for Communities and Local Government expect to issue a prospectus for the first round of bids from the new fund by the end of 2011. As the fund is earmarked for “ready to go projects” meeting certain criteria, it is hoped that the new money will facilitate the start of work on site by the end of July 2012.
The strategy also includes the introduction of a “Mortgage Indemnity Scheme” for first time buyers of properties in the new build sector. With mortgages underwritten by the Government, it is hoped that the scheme will allow first time buyers to secure loans on new build homes with only a five per cent deposit. It is hoped this will lead to an increase in the availability of 95 per cent mortgages. The lack of available mortgage products to first time buyers in particular has been one of the main stumbling blocks to the recovery of the housing market.
Other measures revealed in the strategy include:-
1. The release of more public sector land for house building.
2. Plans to force high earners living in social housing to pay market rents.
3. Moves to criminalise sub-letting of social housing.
4. The extension of the right to buy scheme for existing council tenants, with increased discounts of up to 50%, with the limited receipts to be ploughed back into the delivery of new affordable housing.
5. Greater investment in the private rented sector.
6. A £50 million funding pot to tackle “the national scandal” of empty homes.
7. £30 million funding support for self builders.
8. New measures to help elderly people to adapt their homes.
To date, reaction to the strategy has been mixed. To many, the proposals are a re-announcement of measures already set out by the Government. The Institute for Public Policy Research has commented that house builders building on public land using public money will displace activity from “regular sites,” leading to no net increase in housing output. Others have pointed to the fact that the strategy does not offset the already radical cuts in housing expenditure announced last year.
Nonetheless, the Government hopes that the policies will loosen up the market so that “lenders can lend, builders can build and buyers can buy”.
The affordable house building figures (released the day after the strategy was announced) reveal that just 454 affordable homes had been started in England in the first six months of the current financial year, representing a 97 per cent fall when compared to the same period in 2010. This was partly caused as a result of the change in the funding regime. Housing Associations (and other house builders) are unable to access grant for the delivery of affordable housing until the new “Framework Agreements” are signed with the Homes and Communities Agency. This process has, for most providers, taken longer than expected. With those agreements now in place, the Government is hoping for a dramatic increase in activity.
The delivery of new affordable housing over the next few years will, to a large extent, be dependent upon Housing Associations raising funds through the new “Affordable Rents Regime.” This will enable Housing Associations to potentially charge up to 80 per cent of market rent for dwellings on some new sites. The emerging danger is that those selling land for development may seek a higher price for the land- based upon the fact that the affordable housing units will realise a higher rental yield than was the case previously. This might mean that the additional rental income will not be channelled into the delivery of new affordable housing after all.
Locally there have been more promising developments. Exeter City Council have published a 15 year core strategy which has set a target to develop up to 60 hectares of land (in order to create new employment opportunities) with 12,000 new homes alongside. The core strategy includes a target for 35 per cent of new homes to be affordable dwellings. The plan is expected to be formally adopted in February 2012.
James Menzies is partner and Head of Social Housing at Stones Solicitors LLP. He can be contacted on 01392 666777 or at jamesmenzies@stones-solicitors.co.uk.