News and views from Paul Bull, the Labour and Co-operative Councillor for the St THOMAS Ward of Exeter City Council. Promoted by Dom Collins on behalf of Paul Bull, both of 26b, Clifton Hill, Exeter, EX1 2DJ.
The fund also includes £1.15bn of previously unannounced loan finance, made up of £800m of ‘long-term loans’ and £325m ‘short-term’. In total £2bn will be used for long-term funding for infrastructure, with £1bn administered for small and custom builders. The £3bn fund will enable 225,000 new homes. Housing associations will be able to bid for the fund.
£2bn Accelerated Construction Programme:
The Government will partner with contractors and investors to speed up development on public land.
Mr Javid said the Government will “create new supply chains using offsite construction” and encourage new models of building. The scheme is understood to be an expansion of direct commissioning policy implemented by the previous government. This scheme will enable 15,000 new homes by 2020, Mr Javid said.
Housing White Paper:
Published later this year containing “further significant measures” to allow the government to hit one million new homes by 2020.
Ministers have promised a package of measures to encourage urban regeneration and building on brownfield land.
Housing minister Gavin Barwell indicated again that the government may change the Shared Ownership and Affordable Homes Programme to include funds for sub-market rent.
Harsher penalties for landlords letting to illegal immigrants:
In her speech to Conservative Party Conference in October 2016, Home secretary Amber Rudd announced landlords knowingly letting to illegal immigrants could in future face jail, as opposed to the current maximum £3,000 fine.
Housing minister Gavin Barwell confirmed the government is looking to broaden the definition of Starter Homes to include other types of low-cost homeownership. Inside Housing has previously reported this could include rent-to-buy.
Focus on 100 ‘low supply, high demand’ areas:
The Government has identified 100 local authority areas where supply is massively behind demand. Mr Barwell said the government will work with councils to improve the situation.
Not to be confused with David Cameron’s plan to “Get Britain Building again” in 2011, or George Osborne’s 4-point plan to “Get Britain Building” in 2015, this announcement acknowledged there was “much more to do.”
And to drive home the point, it made this comparison of housebuilding rates: “In the 20 years from 1969 to 1989, over 4.5m homes were built in England. Between 1992 and 2012, fewer than 2.9m were completed.”
With that 1.6m shortfall in mind, Hammod and Javid will set out their plans in a White Paper this autumn and have already announced funds worth £5bn to boost small builders, and unlock brownfield and public land.
But could a far simpler solution be under their noses?
Why not allow local authorities to build homes again rather than force them to sell those they already own? After all, between 1969 and 1989, councils in England built close to 1.5m homes [33% of all homes built]. Between 1992 and 2012, they built less than 15,000 [0.5%% of all homes built].
For the past six years Theresa May has been at the heart of a Government that has presided over a housing crisis in this country.
• Under the Tories house building fell to its lowest peacetime rate since the 1920s [lxxix]
• There are over 200,000 fewer homeowners since 2010, the lowest rate of home ownership in a generation. [lxxx]
• The overall number of under-35s who own their home has fallen by a fifth since the Tories came to power [lxxxi]
• Homes built for affordable ownership since 2010 have decreased by 28 per cent. Homes built for social rent are at their lowest levels since official records began in the early 1990s : less than a third of the level they were at when Labour left government [lxxxii]
• England has over 2.5 million additional renters since 2010 who are paying £1,560 more on average every year in rent.
• 900,000 more families now rent privately than in 2010, including one in four families with children. [lxxxiv]
• The Conservatives have failed to deliver a promised one-for one replacements for homes sold through right to buy
– instead only one is being built for every eight sold. [lxxxv]
• Under the Tories rough sleeping has doubled and overall homelessness acceptances are up by a third since 2010.
• Theresa May has no answers to the continuing housing crisis under the Conservatives. They have made the dream of ownership a distant prospect for many families
Source: House of Commons Library, House of Commons research for the Shadow Housing team, September 2015
Department for Communities and Local Government, English housing survey 2014 to 2015, February 2016, table AT1.1,
The Conservatives’ six years of failure – including appendices with regional and local data since 2010 showing:
• rising house prices have outstripped wage growth
• homes sold under the right-to-buy aren’t being replaced
• homelessness is rising
• spending on housing benefit is increasing
The Tories’ extreme housing plans – including appendices with regional and local data showing:
• the forced sale of council homes will lead to a huge loss of affordable homes
• ‘starter homes’ will be unaffordable to people on ordinary incomes
• ‘pay to stay’ plans could mean big rent hikes for council tenants
• specialist accommodation is at risk from housing benefit cuts
Other useful resources
Appendix – regional and local data
Introduction – John Healey MP
After six years in power, the Conservatives’ record on housing is one of failure on all fronts.
Home-ownership is down sharply, with more than 300,000 fewer young homeowners since 2010, rough sleeping has doubled, private rents have soared, housing benefit spending has increased, and during the last parliament fewer new homes were built than under any peacetime government since the 1920s.
It is hard to find another area of public policy that is failing so conspicuously and comprehensively.
The Tories’ new Housing and Planning Bill shows they have no long-term plan for housing. It does nothing to fix their policy failures, and in many areas will make things much worse. So-called ‘starter homes’ costing up to £450,000 will be a huge let-down for people on ordinary incomes who need help buying a home of their own, there’s still no help for private renters struggling with high costs and poor conditions, the Bill ends long-term lets for council tenants and it sounds the death knell for new genuinely affordable homes.
After George Osborne confirmed in the Spending Review that he’s set to stop funding new homes for social rent – breaking a cross-party consensus stretching back a hundred years to the 1919 Addison Act – it’s clear the government’s housing programme is extreme and Tory Ministers have no long-term plan to build the mix of homes the country needs.
Labour is leading the fight to expose and oppose the worst of what the Tories are doing in Westminster, but the best hope for millions of people across the country at present is Labour in local government – our Labour councillors and councils campaigning to put Labour values into practice in their areas.
Ahead of the local elections this May, this campaign pack gives local activists the facts and figures they need to turn their fire on the Tories and make the case for Labour in the elections this May.
I hope you find it useful.
John Healey MP Labour’s Shadow Secretary of State for Housing and Planning
Labour’s record in government
If we don’t talk up Labour’s record in government – local and national – no one else will.
From Southampton to Sunderland, Crawley to Cambridge and from Bolton to Brighton, Labour councils are leading the way in helping to tackle the housing crisis.
Nationally, Labour can be proud of much of our record on housing between 1997 and 2010.
• Our record shows Labour is the party of home-ownership. While the number of home-owners has fallen under the Tories by more than 200,000, from 1997 to 2010 under Labour the number of home-owners rose by over a million [i].
• From 1997-2010 under Labour we built almost 2 million homes. Between 2009/10 and 2014/15 housebuilding under the Tories has increased at just 0.8% a year [ii].
• After years of high homelessness under the Tories, Labour cut homelessness by 62% from 1998 to 2010 [iii].
• Labour undertook the biggest affordable housing investment programme in a generation, committing £9.3bn over three years from 2008 and adding an extra £1.5bn in 2009. The Tories are set to invest only half that amount over the spending review [iv].
• In 2009, we launched the biggest council house building programme for over two decades, and more than eight in ten genuinely affordable homes built under the Coalition in the last Parliament were built under programmes inherited from Labour [v].
• After two decades of Tory neglect, Labour invested £22bn in decent homes, improving the housing conditions of over 1.4m council homes. By 2009, 86% of all council and housing association homes were brought up to a decent standard [vi].
• When the global banking crisis and world-wide downturn struck, Labour stepped in to help home-owners stay in their homes. Despite the much deeper scale of the recession, Labour’s mortgage rescue scheme meant that repossessions were over a third lower than in 1991 with the Tories, when Government did little to help and over 75,000 homes were repossessed [vii]
The Tories’ six years of failure on housing
The Conservatives spent the last Parliament blaming Labour, but now, they have their own track record in government. On housing, it’s six years of failure.
Failure on home-ownership
• There are 201,000 fewer home-owning households since 2010.
• The level of home-ownership has fallen since 2009-10 from 67.4 per cent to 63.6 per cent in 2014-15.
• The number of under-35s owning a home has fallen by 20% since 2009-10 [viii].
Failure on private renting
• There was no mention of private renters in the Conservative election manifesto.
• The number of people in the private rented sector has increased by 900,000 households since 2010. One in four families with children now rent privately – 1.6 million households.
• Private rents have reached almost £800 per month and continue to rise – an increase of 20 per cent since the same point in 2010. Rent now costs an average of £1,600 more a year than in 2010 [ix].
Failure on affordable homes
• Last year the Tories built the fewest affordable homes for over two decades – 9,590 homes for social rent compared with 33,180 delivered in Labour’s last year in office.
• They have failed to deliver one-for one replacements for homes sold through the right-to-buy- instead only one is being built for every eight sold.
• Their ‘affordable rent’ is not affordable to many families, particularly in London where it could swallow up to 84% of the earnings of a family on the average income, and require a salary of up to £74,000.
• The government have punished social tenants with the unfair “bedroom tax” which has affected half a million households [x].
Failure on homelessness and rough sleeping
• Over 54,000 people were accepted as homeless and in ‘priority need’ in 2014/2015 – an increase of 36 per cent since 2009/10.
• The number of children in temporary accommodation stood at over 100,000 at the end of 2015, up more than 50% compared to the same point in 2010).
• Rough sleeping has doubled since David Cameron became Prime Minister according to government figures, rising from 1,768 in 2010 to 3,569 in 2015 [xi].
Failure to get housing benefit under control
• The Tories have failed to get to grips with the root causes of housing benefit spending.
• Housing benefit spending has risen by £4.4bn in cash terms between 2009/10 and 2014/15 to over £24bn.
• The number of people who are in work and claiming housing benefit has more than doubled from 486,000 in May 2010 to 1.1m in May 2015 [xii].
Failure on building new homes
• Over the last Parliament Conservative Ministers presided over the lowest levels of house building in peacetime since the 1920s when David Lloyd George was Prime Minister.
• Half the number of homes were built last year compared with those needed – 124,490 home completions compared with the 245,000 homes independent experts say are needed [xiii].
The Tories’ extreme housing plans
The Tories have no answers to the housing crisis, and their extreme Housing and Planning Bill is set to make the problem worse in many areas. Labour is opposing this Bill every step of the way.
A let-down for aspiring home-owners
• The Tories’ plan to re-brand affordable homes to include so-called starter homes costing up to £450,000 in London or £250,000 outside London – out of reach for young people and families on ordinary incomes in most areas of the country.
• What’s more, starter homes will be built instead of new genuinely affordable homes to rent and buy – exacerbating the problem of high housing costs.
• The Tories voted down Labour’s plans to make starter homes more affordable to future first-time buyers.
Nothing for private renters
• The Tories didn’t even mention private renters in their general election manifesto, and they have no plans to tackle the high housing costs or poor conditions that some private tenants face.
• The Tories voted down Labour’s plans to ensure that all rented homes are at least ‘fit for human habitation’ – free of serious damp, vermin and safety risks.
The death knell for new social housing
• The housing charity Shelter estimate the Housing Bill could mean the loss of 180,000 affordable homes due to a forced sale of council homes, a failure to provide like-for-like replacement for homes sold under the new right-to-buy for housing association tenants, and the diverting of developers’ contributions into starter homes.
• The Bill also ends secure tenancies for new council tenants, replacing them with tenancies of two to five years.
• These measures come after George Osborne’s autumn Spending Review announced
no funding for new mainstream social rented homes – breaking a cross-party consensus stretching back to the Addison Act of 1919.
• The Tories voted down Labour’s plans to protect affordable homes to rent and buy.
A threat to supported housing for the elderly and vulnerable
• Crude cuts to housing benefit support could close vital housing for the frail elderly, homelessness hostels and refuges for women fleeing domestic violence. The National Housing Federation say 41% of all of this type of accommodation could be forced to close [xiv].
…and UKIP and the Lib Dems won’t stand up to the Tories on housing
• UKIP say they can provide opposition to the Tories but on housing they march in lock-step – UKIP’s MP Douglas Carswell has voted with the Tories time and time again on their extreme Housing and Planning Bill [xv].
• The Lib Dems agreed to the Conservatives’ disastrous housing plans in the last Parliament, including cutting housing investment by 60%. In this Parliament none of their MPs joined the Commons committee debating the Housing and Planning Bill.
Other useful resources
• John Healey’s Smith Institute discussion report on building 100,000 council and housing association homes, paid for by lower housing benefit spending:
• The Labour-commissioned Redfern Review into the decline of home-ownership:
Exeter City Council Labour Group’s proposals for Labour Party manifesto on “How to involve councils in increasing housing supply
In order to substantially increase delivery of new homes there is a need for some innovative and collaborative working between the public and private sectors as well as the charitable sector.
When considering the increase in housing supply it helps to consider the headline issues affecting the housing market and the context in which any market interventions are to be introduced.
Affordability (lack of it)
Growing demand (demographic changes, immigration, Help to Buy scheme etc.)
Supply (not enough being built, Right To Buy increasing)
Risks e.g. welfare reform
Subsidy is required somewhere, whether capital or revenue
Availability of land / high expectations from landowners of land value
We ought to be building around 220,000 homes per year. Housing output has remained around 120,000 for the last four years.
Current under supply arguably largely due to the planning system limiting the amount of developer land and the small number of volume house builders with developable land managing the amount of houses they bring to the market to maximise returns to shareholders.
The government is already doing quite a lot to stimulate development and locally there is evidence that the market is now working with houses being sold off plan for the first time since the recession. However, the challenge is how we make a step change in delivery and how do we release the public sector’s potential to increase supply.
Previous draft RSS – required Exeter’s growth with urban extensions including Cranbrook new town in East Devon (in excess of 22,000 homes at the PUA with 12,000 homes within the city). Exeter is running out of land, requires cooperation of neighbours.
Cranbrook, within East Devon, (up to 6,000 homes) successfully delivering this year 600 units. Within Exeter we are also on course for 600 units this year.
Exeter has built 94 affordable homes in total in the first eight months of this financial year and currently 351 affordable properties have started on site. 20 new Council Own Build properties are due to start on site in February 2014 with a further 200 units potentially being built in the next three to five years.
HRA borrowing cap headroom of £4.7m fully employed
Lessons from Cranbrook and Exeter’s Urban Extensions
In recent years Exeter City Council has been involved in a growth partnership with East Devon District Council. Exeter’s future housing growth has been directed in large part to the east of Exeter in East Devon District Council. This followed Regional Planning Guidance and Structure Plan policies. Following an initial period when East Devon was opposed to meeting this growth in 2003 East Devon begun to plan for delivery of a new town known as Cranbrook. 3,500 dwellings in a first phase, and eventually planned to accommodate 6,000 dwellings.
Outline planning permission was granted in 2005 and delivery finally commenced in 2011 following significant public sector intervention. Housing sales have been strong and approximately 450 starts this year. The public response has been broadly supportive, although at the local plan stage 14,500 letters of objection were received.
Cranbrook and other urban extensions (Monkerton, Newcourt and South West Exeter) being delivered in Exeter provide useful lessons in addressing the fundamental question of how we improve the supply of housing building in this country.
There is a long lead in time for delivery – Cranbrook was originally identified in the Devon structure plan and RPG10 in the late 1990s. The long lead in time adversely impacts on housing land supply and creates uncertainty in the local housing market. Strategic sites work against a local authorities land supply calculations and are far more challenging to deliver than more modest allocations. However, the prize in strategic allocations is they should be capable of delivering community infrastructure and self containment.
In Cranbrook’s case the public sector was required to de-risk the project by front funding infrastructure (£12m regional infrastructure funding and £40m of other funding); and removing third party ransom issues. Without the public sector de-risking the development the private sector would not have commenced development, and yet the land owners and house builders make a very healthy profit. The public sector simply achieves housing provision. However the house builders still control supply of new starts as per the more conventional sites. For example they could open up the site in more than one location to increase supply but they do not.
In terms of non housing uses this has only come forward because of public sector support.
Arguably Cranbrook was deliverable only through the emergence of the Regional Infrastructure Fund and investment from the HCA and the Local Infrastructure Fund. These measures are not typically available to local authorities. It demonstrates that the public sector can unlock problems and deliver strategic sites with the appropriate tools. However, it is not a good return to the public sector. The public sector has conferred value on the land owners because of the planning system and the public sector has de-risked development through RIF etc. Arguably a better model would be for the Councils to have power to identify an allocation and have the powers to CPO land at existing use value to assemble the land to deliver a strategic allocation and to use the increase in land values to off set the cost of infrastcrure and for the local authorities to deliver land parcels for the volume house builders. Thereby removing strategic land developers from the process of strategic sites. This will allow councils to provide land for self build on a larger scale and to increase supply of land coming forward.
In the absence of co-operation between local authorities growing urban areas like Exeter would need support to deliver strategic growth in neighbouring areas. A small number of new town type corporations under local authority control would provide a useful model to achieve delivery. The New Growth Points governance model provided a useful incentive to achieve growth but the initiative alone was not sufficient to make a real difference. The regional development agency and the HCA provide real capacity and financial resources to make a difference. Knowledge, capacity and funding mechanisms are essential to achieve a step change in delivery.
In Cranbrook the HCA investment in affordable housing is now returning receipts as a consequence of overage payments.
Local authorities negotiating position with developers can be weakened by a requirement to deliver housing. The community can lose out but Community infrastcrure levy will address this in part.
Providing councils with greater resources and powers to deliver their strategic sites in the manner of new town corporations and urban development corporations would provide a powerful alternative to the current model.
Land supply methodology makes it more challenging for strategic sites because of assumptions on build rates.
The public sector needs to find a way of realising the value from the land as a consequence of the planning system. This is particularly so for large scale sites as the cost of infrastructure is disproportionate to conventional sites.
Suggested points for the manifesto
Provide a strong policy commitment to CPO land for strategic sites to enable local authorities to acquire at existing use value, and to provide mechanisms for provision of early infrastructure to deliver development parcels to the market to overcome the rational behaviour of volume house builders in limiting supply
This type of intervention has to take place before the planning system allocates land or grants planning permission in order to capture the uplift in value to provide the required infrastructure. This type of approach has been used in the past with new town development corporations.
In terms of Councils building more:
Life the HRA borrowing cap for local authorities
Permit sharing or trading borrowing headroom between councils
Change the classification of debt so that it’s not included in national debt figures (ie use the General Government Financial Deficit Mode
The following highlights a number of initiatives for increasing housing supply, much of which is addressed by the CLG Parliamentary Committee report which considered options for local authorities to increase housing supply.
Encouraging the release and use of public sector land for development, through a ‘build now, pay later scheme’
The Affordable Homes Programme investment framework, which the government estimates will provide 170,000 new affordable homes by 2015
New Homes Bonus to incentivise local authorities to support development
Reforms to the planning system
Receipts from sales of properties under right to buy, ploughed back into reinvestment in new affordable homes
Get Britain Building Investment Fund providing finance on stalled sites that are ‘shovel ready’
New Build Indemnity Scheme to improve access to mortgages for new build properties in England
Conversion of office accommodation to residential (without the need for planning permission)
Council self-financing (HRA Reforms) since April 2012
It is worth dwelling on the self-financing ability of Council as this is one of the significant areas of housing growth that has the potential to be untapped subject to reform of the cap on local borrowing. Below are some salient points on self-financing and its potential impact on the housing market:
Councils now have self-financing since April 2012. According to ARCH [Association of Retained Council Houses] 71% of stock holding local authorities plan to develop new council housing – 20,000 to 25,000 units over the next five years.
Of those authorities that have indicated they are planning to undertake new build, 50% are planning to use Affordable Rents to help finance the new homes. The other 50% are planning to continue to use Social Rents.
The self-financing settlement also involved the imposition of a caponlocalborrowing. The cap is set significantly below the amount of borrowing councils could safely afford to repay. Most councils have some headroom within the cap to undertake additional borrowing, but some do not. The availability of headroom bears no relation to a council’s need for additional borrowing or to its housing needs.
A significant number of local authorities (39%) are considering new build outside of the HRA although many of these schemes are at an early stage. These include building through Arms Length Management Organisations [ALMOs], through Housing Association partners and through special purpose vehicles (SPVs).
ARCH, together with the LGA (Local Government Association), NFA (National Federation of ALMOs) and CWAG (Councils with ALMOs Group) are arguing for restrictions on borrowing to be removed to enable councils to gear up their investment programmes to meet housing need. ARCH estimates that, with the cap removed, councils would have the capacity to deliver up to an additional 60,000 homes over five years. This would require an additional £7 billion of borrowing which would be well within what councils could reasonably afford to borrow.
Examples of Councils developing within and outside their HRA and using different funding models:
Oxford City Council owns and manages around 7,800 properties and has borrowing headroom of some £19m. Prior to the implementation of self-financing, the council had already established a Limited Liability Partnership with developers Grosvenor to develop up to 1,000 new homes at Barton, 350-400 of which will be affordable.
The LA new build scheme, though limited to 108 homes, bred success in terms of the next phase of bidding to the HCA: AHP grant of £2.5m towards 112 affordable rent properties. The HRA is able to finance the balance of expenditure for these homes entirely from revenue in the early years of the business plan.
Through ongoing prudent management of the existing stock, significant resources are potentially available to be allocated within the HRA business plan in the medium term to acquire some or all of the affordable Barton properties upon completion. Purchase of the initial 60 properties has been provided for in 2015, again from revenue.
The focus is heavily on using the HRA as the delivery vehicle for LA build, taking advantage of future rent income for reinvestment. The future could potentially be one in which Oxford could add over 5 per cent additional stock to the HRA over the next 10 years.
The London Borough of Barking and Dagenham manages over 19,000 properties. The Council is embarking on a ground breaking venture with a private equity firm to deliver 477 new units by April 2015 on estates that have already been demolished as part of the options appraisal process. The scheme requires a Special Purpose Vehicle to be set up and will run for 60 years in conjunction with the equity grant and will let properties at a range of between 50 per cent and 80 per cent of market rent levels. The HRA will provide the day to day management of the units. In addition both HCA and LGA funding has been secured to deliver 285 HRA units at slightly above existing social rent levels to be built on sites where no previous housing has stood.
The debate on lifting the borrowing cap has been ongoing and a CLG Parliamentary Committee was formed to consider options for Local Authorities to increase housing supply. Following a committee meeting on 7 May 2012, the committee concluded that:
We have seen that local authorities, working in partnership, have the potential to make a significant contribution to the financing of new housing supply. There is, however, a risk that local government will not be able to make the most of this potential because of constraints placed upon it by central government. The moves towards self-financing under Housing Revenue Account reform are positive and could significantly increase the finance available for housing supply. However, the cap upon borrowing, the refusal to allow councils to share headroom, and the centrally-imposed Right to Buy proposals will all place restrictions on councils’ ability to finance the building of new homes. The local government sector should be trusted to manage its own finances in accordance with the Prudential Code. We urge the Government to give councils the freedoms they need to provide finance for new housing supply.
The committee addressed a number of suggestions and below is a summary of the Committee’s response to suggestions:
SUGGESTION 1) Lifting borrowing caps
Committee conclusion: ‘We recommend that the Government lift the cap on local authorities’ borrowing for housing, and allow councils to borrow in accordance with the Prudential Code. We are also concerned at the Government’s warning that it will “take action” if public borrowing increases as a result of Housing Revenue Account reform. It is important that it does not place any further constraints upon local authority borrowing for housing. The cap is already unnecessary, and further borrowing restrictions would have a detrimental impact upon the contribution councils can make to new housing supply’.
SUGGESTION 2) Sharing/trading borrowing ‘headroom’ between councils
Committee conclusion: ‘We are disappointed that the Minister (Shapps) has ruled out allowing local authorities to pool or swap Housing Revenue Account borrowing headroom. Such arrangements could help to make best use of councils’ borrowing capacity, enabling more homes to be built. In our experience, the Government is usually enthusiastic about local authorities collaborating, sharing services and pooling resources to achieve better value for money; we consider that it should take a similar attitude to joint working on housing finance. We recommend that the Government consult on proposals to enable local authorities to ‘trade’, swap and pool borrowing headroom. This should be subject to councils’ agreeing that any borrowing under these arrangements will still be in accordance with the Prudential Code’.
SUGGESTION 3) Change constitutions of Arms-length Management Organisations
Three models proposed by National Federation of ALMOs:
The first model involved “the ALMO having a much longer contract and on the local authority having a one-third (rather than sole) interest in the ALMO’s ownership”.
The second model was similar but also involved the transfer of some vacant properties or land, thereby giving the ALMO an asset base.
The third, and most radical, model involved a transfer to a “Community- and Council-Owned Organisation (CoCo)”. This model would see the ALMO becoming “the owner of the stock, but on a different basis to current stock transfers”
In Models 1 and 2, the ALMO is primarily still a management vehicle, but no longer majority-owned by the local authority. The authority could no longer award the management contract to the ALMO without a tendering process that complies with EU procurement rules. They would need to assess the risk that potentially another housing management provider could be awarded the contract. In Model 3, where the ALMO takes ownership of the stock, there is no requirement for a tendering process. But it would mean that tenancies would no longer be secure council tenancies. However, legal steps can be taken which effectively give all tenants the same security in future as they enjoy now.
Committee conclusion: ‘We consider that Arm’s Length Management Organisations should be free to adopt one of the new ownership models, subject to approval from the council and tenants. As well as promoting the involvement of tenants in the management of their housing, these models could also enable ALMOs to raise additional finance for the building of new homes (although any borrowing should continue to be affordable and sustainable). We are encouraged by reports that Gloucester City Homes will be consulting its residents on proposals to establish a ‘community owned, council owned’ organisation. We recommend that the Government give its support to those ALMOs wishing to adopt the new models, which would enable them to borrow prudentially to build more homes’.
SUGGESTION 4) Changing the classification of debt
Change the way Council’s debt is classified, so that it was not included within the national debt figures.
Use of what many European states use- the GGFD (general government financial deficit) model, which means that trading activities, such as housing, are viewed as off-balance sheet, off the national debt figures.
Committee conclusion: The Government argues that a cap on local authority borrowing for housing is necessary because of the need to reduce the deficit; by implication, a cap would not be necessary under the GGFD rules as such borrowing would be outside of the national debt. We are not convinced that the existing accounting treatment, or the cap, is justified. A change of rules would bring the UK in line with other European countries and enable councils to borrow on the same terms as housing associations. As we have already established, the provisions of the Prudential Code should be a sufficient control upon council borrowing. We recommend that the Government thoroughly examine a move to the General Government Financial Deficit rules and then consult on proposals.
Another means of potentially increasing new build homes would be to release public land for self-build initiatives.
The Coalition Government is a great supporter of self-build, they have set out their priorities and intentions for Self-Build in their 2011 policy doc ument Laying the Foundations: A Housing Strategy for England
‘The Custom Build industry is important for our national economy. It is worth approximately £3.6 billion a year, safeguarding and creating new jobs, strengthening the construction supply chain and making a real contribution to local economies. Currently custom home builders are building as many homes each year as each of our individual volume house builders, with around 13,800 custom homes completed in the UK in 2010/11’. (p.14)
The Government proposals to further self-build include:
Supporting the industry-led Action Plan  that has identified a wide range of proposals to help custom home builders and enable the sector to become a mainstream source of housing provision.
To unlock the growth potential of the custom homes market and double its size over the next decade, to create up to 100,000 additional Custom Build Homes over the next decade and enable the industry to support up to 50,000 jobs directly and indirectly per year. The Government intend doing this by:
Asking councils to establish the demand for Custom Build Housing in their area, and take positive steps to facilitate it
Helping home builders to access land which central government is releasing as part of its accelerated public land disposals programme. As part of this we will maximise, where possible, the use of our innovative Build Now, Pay Later model if there is market demand, it presents good value for money and is affordable
Continuing to work closely with industry to establish a one-stop-shop for advice and support to would-be custom home builders, helping them to take the first steps in building their futures
Appointing a Custom Homes champion to raise greater public awareness of the benefits of custom home building
Making up to £30 million available to support provision of short-term project finance to this sector on a repayable basis.
In order to assess the impact of the Government’s proposal the action plan drawn up in 2011 (see reference 2 above), the National Self Building Association has undertaken two updates, the second and most recent in August 2013. Their conclusions were:
Self build completions remain depressed.
Measures being progressed will lead to around 3,000 additional self and custom build homes being constructed.
Below is a summary of the Government’s achievements and priorities which help formulate some suggestions in which to lobby Ministers specific to Exeter
Policy AreaKey progress
Key priorities going forward
Land and Procurement Models
• Eight HCA sites identified so far (more expected)
• Growing local council and builder/developer/enabler activity to promote self/custom build opportunities
• Published specialist Guides on custom build planning issues, how small builders and developers can get involved in custom build, and a guide to public authorities promoting the many ways of encouraging group self/custom build projects.
• Launched a new ‘matchmaking’ database to help connect housebuilders with specialist custom build developers/enablers
• Secure more site releases – encourage HCA to continue to identify more sites including some larger ones (100+ homes) and engage with councils to identify self/custom build development opportunities
• Work with Government to bring together a more comprehensive list of public land and private sector plot information for self builders
• Visit large scale European projects in Autumn 2013 and disseminate experience of different business models to local authorities to enable them to better understand the end-to-end process
Lending and Finance
• Modest increase in lender activity
• Publication of Lloyds Banking Group report and ongoing commitment to support sector
• Launch of £30m investment fund which is generating fair level of interest (about half of fund is subject to bids)
• Revised £17m community-led project support fund launched by Government
• Peer-to-peer lending facility in development.
• Ensure that the Government’s Help to Buy scheme includes self/custom builders
• Host round table with lenders to encourage more self build mortgages
• Support industry initiatives to replace Government £30m fund when this closes in 2015
Further suggestions on ways to promote greater house building include lobbying for the introduction of Land Tax.
1) Land Tax – What is it?
Land Value Taxation is a method of raising public revenue by means of an annual charge on the rental value of land.
“Land” means the site alone, not counting any improvements. The value of buildings, crops, drainage or any other works which people have erected or carried out on each plot of land would be ignored, but it would be assumed that all neighbouring properties were developed as at the time of the valuation; other things being equal, a vacant site in a row of houses would be assessed at the same value as the adjacent sites occupied by houses.
Targeted at ‘unproductive wealth and speculation’
Would incentivise those who trade and sit on empty land to develop it for the common good. It would mean that the costs and proceeds of investment were more fairly shared.
It should be levied on all land except for that which lies under ordinary people’s homes. Very wealthy homeowners should pay, but those with limited incomes could defer payment where required. For it to work, all land ownership would have to be declared.
2) Land Tax – Key proponents:
Centre for Labour and Social Studies (CLASS)
Land Value Taxation Campaign
Land Value Tax Core Arguments:
1) CLASS Report: In land revenue: The case for a land value tax in the UK ; and
2) Land Value Tax Campaign Website 
Why supporters say it should be introduced
Targets unproductive wealth, encouraging capital investment in place of land speculation.
Would remedy long-term shortage of housing, encouraging developers holding on to land to actually build properties in order to make their ownership of land financially viable.
Could moderate house price inflation by the curbing of speculation on the price of land.
By taxing the value of the land itself and not the value of the buildings upon it (like Council Tax does) , the level of Land Value Tax will always be proportional to the level of investment and prosperity in the wider area- it is right that land owners enjoying their location in faster growing areas pay more for their land. Land Value Tax, by definition, bears lightly or not at all where land has little or no value, thereby stimulating economic activity away from the centre – it creates what are in effect tax havens exactly where they are most needed.
Hard to avoid or evade as land is fixed and tangible, efficient due to fixed supply, meaning that there is no substitution effect, and thus no deadweight or distortion.
Tax on labour, buildings or machinery reduces incentives for entrepreneurial or constructive activities, whereas a tax on the value of land no matter how it is occupied would stimulate long term investment.
Would supposedly end boom and bust- speculation created unsustainable booms, often followed by damaging corrective slumps. An end to speculation means an end to this cycle.
Already used in Denmark and Australia under the name Site Value Rating.
Land has no cost of production, why should speculation and scarcity drive up its value? Should be taxed according to relative prosperity of area as it owes all that it is worth to the wider community.
3) Land Tax – In Parliament
The Land Value Tax Bill 2012-13 began it’s passage through Parliament after being suggested as a a Private Members Bill by MP for Brighton Pavilion Caroline Lucas (Green Party). The Bill died as it failed to make it through before the end of the 2013-13 session. To see a draft of the Bill follow this link .
About the Bill: The bill required the Secretary of State to commission a programme of research into the merits of replacing the Council Tax and Non-domestic rates in England with an annual levy on the unimproved value of all land, including transitional arrangements; to report to Parliament within 12 months of completion of the research; and for connected purposes.
Other suggestions worth lobbying government assistant (financial or otherwise) to enhance the delivery of house building include:
Kickstarting an off-site revolution
Due to there being an insufficient number of homes being built to meet even current levels of demand, consideration needs to be given to ways in which new homes can be built more quickly and efficiently. At present housebuilders build rate is less than one new home a week per site. Off-site solutions offer increased speed of construction on-site improved build quality, much greater accuracy, safer working conditions, predictable in-use performance, and reduced waste in the manufacturing and construction process. Off-site systems and components however require investment in manufacturing facilities, which in turn require high-volume sales to make the business viable. In some cities (could be Exeter) some developers (Housing Associations, Councils, private investors) are increasingly building medium to high rise flats or rationalising older estates and having the potential to build more homes at quite some scale. This is a market where the use of off-site solutions is likely to be attractive as homes can be completed and brought to use more quickly (and in-use performance, including energy efficiency and upfront action to mitigate fuel poverty can be incorporated).
If the government could invest in the creation of manufacturing facilities on a local or regional level then there is the scope for the private, public and charitable sectors to all benefit and housing delivery could be accelerated and the standards of construction improved for everyone’s long term benefit.
It is worth noting that institutional investors could be key players in providing the ‘scale’ to support such a venture given their desire to enter the build-to-rent development sector. In this market where new entrants are investing for the long term and looking to manage risk to achieve assured levels of income, they are seeking suppliers who can offer certainty regarding quality, construction cost and in-use performance – the kind of characteristics that off-site solutions are best to deliver.
At a local level, the Council and Housing Associations have the capability to work much more collaboratively with the private sector in sharing risks, especially given that most housing associations have been restructuring into group structures that incorporate the charity alongside a profit-making arm, which ‘gifts; funds in the form of donations to replace government grant. By Councils and/or Housing Associations working with private developers beyond just being affordable housing providers but as equal partners, there are greater opportunities for more and larger developments and for real mixed and sustainable communities to emerge.
Lobbying the government for the removal of the borrowing cap on Councils will assist to promote such partnerships, risk sharing and the facilitation of larger and more sustainable communities.
Exit strategy for Help to Buy
The government’s Help to Buy scheme is a welcome approach to growing demand for housing but only as long as there is a clear exit strategy that helps avoid the dangers of a housing bubble. Since its announcement in July 2013, the number of potential buyers looking to enter the market grew at the fastest rate since July 2009. At the same time, house prices rose again, at the fastest rate seen since the market peak of November 2006. The second tranche of Help to Buy could magnify what has already happened and whilst the UK economy is seeing the very early signs of recovery, the last thing needed is a housing bubble to derail this slow and steady progress.
It is reassuring that the government has instructed the Bank of England to implement a strategy for using ‘speed bumps’ and close monitoring by the Financial Policy Committee, to avoid a potential bubble, however the government could consider other measures to control the further impact. It is suggested that the government considers specific measures to ensure that the Funding for Lending scheme should be explicitly for business expansion in the small and regional housebuilders.
House prices are too high relative to average incomes. There is no quick fix to this so a longer term solution needs to be found to address affordability. Increasing the rate of housebuilding helps, and this helps contribute to the economic recovery but this takes time and whilst mortgage availability is improving the private sector developers will only develop to meet market demand, so any policy that improves mortgage availability will lead to an inevitable increase in supply. However, developers will not deliver more than market demand, so it is unrealistic to expect this ot lead to an easing of house prices.
The Barker Review target of 245,000 annual new-build completions, surpressing long-term real house price growth to 1.1% is base on outdated analysis from 2004 but provides a useful aspiration. Given that market demand is unlikely to reach those levels (it only reached 150,000 in 2007), it is left to the public sector to delivery the majority of the housing need.
The lack of realistic priced homes also leaves the private sector to act as a longer tenure for those who remain priced out.
Unlocking Land through Local Infrastructure Funding
The Government’s Local Infrastructure Fund (LIF) launched in February 2013 is purposely earmarked to unlock large sites but given that funds need to be drawn down before March 2015, only shovel-ready schemes will be deliverable. This type of funding is to be encouraged but lobbying made to extend the timeframe and to also extend the funding scheme.
Local Enterprise Partnership Involvement
In his Government-commissioned report into a path of sustainable growth for Britain, Lord Heseltine heavily advocated a transfer of both funds and decision-making responsibility to the local level. He stated that a number of current schemes initiated by the Government, for example the Growing Places Fund, New Homes Bonus and Community Infrastructure Levy, are promising steps towards the kind of local rebalancing that the British economy needs. However, he also stated that ‘we need to go further and faster to achieve an essential rebalancing of central and local power and resources, extending not just to cities, but to local areas right across England’.
His first of 81 recommendations made is to create a single funding pot for local areas, without internal ring fencing which limits the spending flexibility of local leaders. The focal point of this local investment is the Local Enterprise Partnership (LEP).
Heart of South West LEP has scope within its Strategic Growth Plans and programmes for including similar funding schemes as the Local Infrastructure Funding (LIF), so the opportunity to use this approach could be multiplied on a sub-regional basis.
Localism Act 2011
The Localism Act allows Local Authorities to act as companies, in doing so they could provide housing loans for repayment or equity to facilitate more households into home ownership (therefore increasing demand for housing and facilitating supply by housebuilders or even the LA themselves).