We’ve all become accustomed to the housing crisis and there are plenty of statistics that illustrate its depth. Here are two: there are more than 300,000 people currently homeless in the UK; and the number of social homes we built last year was the lowest since the second world war.
The government has acknowledged the problem, and routinely refers to “our broken housing market.” But until recently there had been little sign of the systemic reform needed to fix it, just more targets and “initiatives” that haven’t added up to much.
That might finally be starting to change.
Communities Secretary Sajid Javid, in particular, has staked his name on transforming our housing system. Speaking to the Times last week, he didn’t pull any punches in targeting developers who sit on land and wait for its value to rise instead of building homes on it. “There is definitely some hoarding of land by developers,” he said. “The government needs to play a more active, more muscular role.”
A similarly robust tone has been struck by former Conservative Minister for Government Policy Oliver Letwin, who is leading a year-long review into “land banking” and the delay in homes being built after planning permission is already granted. “There’s definitely an issue… The delay on these big sites between the time when they’re completely ready to start work and the time when they’ve finished the last house is quite considerable,” he said.
Our research shows that Letwin is correct: the number of planning permissions granted has been accelerating far beyond the number of homes actually being built. For the thousands of homeless families suffering in temporary accommodation, or the millions of renters having to shell out huge chunks of their income for eye-wateringly expensive rents, fundamental change is needed now.
New measures to disincentivise unnecessary landbanking—such as levying taxes on unbuilt planning permissions—would be welcome, but not enough on their own.
Thankfully, there are other housebuilding options on the table. The government is currently re-writing the rules which dictate how homes are planned and delivered. Planning policy doesn’t often get the pulse racing, but it should: this is what determines the shape of the communities we live in.
We hope this rewrite will close a particularly murky and damaging loophole that undermines our ability to get affordable homes built. The “viability loophole” allows developers to argue down their affordable housing commitments if they threaten to lower the expected profit margin below around 20 per cent.
Introduced as a way of boosting developer profits and therefore keeping housebuilding going in the wake of the financial crisis, the continued existence of this loophole is madness at a time when house prices and developers’ profits are sky high—at a time when we urgently need all the affordable homes we can get.
Not only does the viability loophole lead to a dramatic fall in the number of affordable homes being built (up to 80 per cent according to Shelter research) but it also worsens the structural problems in the housing system by inflating the cost of land. Simply put, it encourages developers to overspend in the competition to buy land, knowing they can make the money back.
Thankfully, the indications are that Sajid Javid and the government have this loophole in their sights. But the real hope is that this is a sign of a growing government appetite for reforming some of the deeper problems in the system.
Labour shone a spotlight on these issues last week. The party announced proposals to reduce the cost of land by reforming land compensation rules which currently set its price. Reforming these outdated rules does not mean the government seizing lots of private land, or landowners getting less than fair market value: it simply means allowing the market value of land to reflect what local planning policy says is the right use for that site. If a site needs a school, a park and 30 per cent affordable housing to make it work for the local community, its price should take that into account.
Excitingly, this reform does not belong to Labour or any political party. It’s a solution that bridges political divides with support from the likes of Conservative MP Nick Boles and centre-right think tanks such as Civitas and the Adam Smith Institute. In fact, reforming land compensation rules featured in both the Conservative and Labour manifestos last year.
While it may be hard to see through the complexity of our housing crisis, the tracks have finally been laid to get us out of this mess. All it takes now is the continued courage of people like Sajid Javid to get us there.
