TODAY might have marked the beginning of the end of the housing crisis. Top housebuilder Taylor Wimpey was due to announce £500m of new investment and housing minister Caroline Flint was poised to reveal details of the government's market rescue package.

Instead things got even worse. Taylor Wimpey was forced to admit that the new investment the markets had expected only two days ago was not coming. 'In the light of current market conditions we have not been able to conclude a satisfactory transaction,' it said in a trading update [go here to download details and its presentation to City analysts]. It also announced the departure of its finance director, a £550m write-down on the value of its landbank and the loss of another 300 jobs. 

The situation is especially shocking since Taylor Wimpey is also a significant presence in the troubled Spanish and US housing markets. It thought it had learned the lessons of the US crash by cutting spending and jobs quickly but plainly even it has been caught out by the speed of the deterioration in conditions here.

Elsewhere in the construction industry, it was more doom and gloom. The RICS said workload in the private housing sector was falling at the fastest rate in the history of a survey that began in 1994. One housebuilding expert predicted that 100,000 jobs will go in the industry this year.

Cue the lifeboats. Flint revealed the bare bones of the market rescue package on the Today programme this morning [go here to listen again - but you'll have to scroll through to an hour and 15 minutes in]. There would be an additional £270m - she admitted this would be reallocated from the existing budget - to buy up unsold homes and there would be flexibility to bid for further rounds of the money on what sounded like an ad hoc basis rather than quarterly. And, as widely trailed last week, Housing Corporation payment terms would be changed so that builders get paid more up front. 

The details just announced here confirm that the £270m is part of the existing £8.4bn Housing Corporation budget for 2008-2011 and brings the total amount of that allocated to £3.6bn. A 'new national clearing house' would be set up so that housebuilders can approach the Corporation with proposals to sell unsold stock to housing associations - building on the £200m already announced (and reallocated from the existing budget). 

There would also be 'increasing flexibility around when providers can bid for funding' from the £8.4bn budget and be able to come up with proposals at any time rather than waiting for the quarterly bidding round. 

The good thing about the package is that flexibility - the room for manoeuvure that it leaves to bring funding forward to buy up unsold land and homes and do more in future. Further details may yet emerge but my instant reaction is that, compared to the housing market rescue package of 1992, this one is still puny. As a reminder, the then Conservative government came up with £577m of new - not reallocated - money for associations to buy up unsold homes. The results were far from perfect but the rough equivalent at today's house prices would be more like £1.5bn. 

The situation in the housebuilding industry now is even worse than it was in 1992. As an illustration, share prices have fallen so low that the government could comfortably afford to nationalise the leading companies (as Daniel Thomas noted in the FT yesterday). Crazy idea or not (and all their land would be publicly owned...hmm), the crisis surely calls for more than shuffling money around here and a bit more flexibility there.

Posted by Jules Birch, July 2

Posted in Finance, Housing associations, Housing market, Housebuilding

AS the government's housing agencies work on the market rescue plan demanded by housing minister Caroline Flint, one consolation is that at least they have some inside knowledge of the market where prices are falling fastest.

New figures from the Nationwide this morning show that prices in Sheffield - the old stomping ground of Homes and Communities Agency chief executive Sir Bob Kerslake - have fallen an amazing 17% in the last year. That gives the city the dubious privilege of topping a league table ahead of Belfast (-11%), Birmingham, Manchester and Coventry (all -9%).

The second quarter figures give the first regional picture of the housing market crash. The Nationwide said prices were down 0.9% in the UK in June, 6.3% in the last year and 7.5% since their peak in October.

Unsurprisingly, given its spectacular price rises in the last two years, Northern Ireland is leading the way down with an 18.6% fall in prices since the second quarter of 2007. Scotland is the only region where prices are still higher than a year ago. Prices fell in Wales and all 10 English regions, with the downturn spreading to London and the South East.  

The big question now is how much further prices will fall. Housebuilders already seem to be factoring in a 15% decline - the amount by which Taylor Wimpey cut the valuation of its landbank yesterday. However, as Brian Green argues in his blog on construction and economics, the problem for them is that nobody really knows when the bottom will be reached.

The Nationwide argues that transactions are the key to house price movements and they are plummeting. Bank of England figures for mortgage approvals yesterday showed they were down 28% between April and May and 64% on a year ago.

Mortgage lenders tend to look on the bright side, so the outlook from chief economist Fionnuala Earley qualifies as distinctly bearish. 'With house purchase transactions so far below their long term trend it seems unlikely that there will be any rapid turnaround in housing market fortunes in the coming months. However, as prices continue to fall affordability measures become more favourable for those in a well financed position to be able to buy.'

Posted by Jules Birch, July 1

Posted in House prices, Housing market, Housebuilding, Homes and Communities Agency

BY a perverse irony, news that housing starts are now down 52% on a year ago arrives in the same week as the government gets advice that its targets of 2m extra homes by 2016 and 3m by 2020 may not be enough to meet demand.

In a report published this morning the National Housing and Planning Advice Unit (NHPAU) advises housing minister Caroline Flint that these are the only lower level of what is required in regional spatial strategies. The upper level is  2.3m by 2016 and 3.5m by 2020.

NHPAU chair Stephen Nickell made a valiant attempt to justify the new figures on the Today programme this morning under sceptical questioning from Jim Naughtie [go here to listen again].  There might be a severe credit crunch in the short term, he argued, but increased supply was needed to stop prices escalating in the long term. 

But Cllr Keith Mitchell, the Conservative chairman of the South East Regional Assembly, had a simple description for the new higher figures. He used Yvette Cooper's term for councillors who were resisting more homes: 'bonkers'.  

The chances of meeting even the lower of the NHPAU targets seem somewhere between remote and slim. The time when the government could confidently proclaim the need for more homes and the strategy for delivering them backed up by the Barker and Callcutt reviews and the NHPAU's advice seems more like 12 years than 12 months ago.

Even at the time the argument seemed questionable - in particular it seemed to ignore the effect of mortgage finance (the credit splurge that preceeded the crunch) and the difference between demand and need.

Now, with mortgages unavailable, the housebuilding industry in a state of collapse and planning authorities dominated by Conservatives who don't even need to say nimby, the delivery mechanism seems fundamentally flawed.

The only response at the moment seems to be to hope that the mortgage market will 'return to normal'. Something more radical than that is needed - and soon - if we are not to lurch from a credit crunch to a new affordability crisis.

Posted by Jules Birch, June 25

Posted in Affordability, Planning, Housebuilding

IF any of the developers behind the shortlisted eco-towns thought that they could simply greenwash some standard designs and add the odd windmill a report today from a government advisory panel wil give them a rude awakening.

Experts on the eco-towns challenge panel set them a whole series of challenges from examining the impact of oil at $300 a barrel to quantifying how the transport strategy wull contribute to a 80-90% reduction in CO₂ emissions. 

The experts include architects and transport planners as well as environmentalists. And while they found some proposals to be 'encouraging', 'impressive' and displaying a 'strong vision', others left them distinctly underwhelmed. Transport and employment emerge as key concerns.

At Curborough in Staffordshire, 'at the moment the ‘eco’ element feels like an "add-on" to an existing application rather than embedded in the concept' and widening a nearby road risks residents continuing to rely on cars. 

Promoters of the Rossington scheme in South Yorkshire are told they have 'an excellent ambition to be a UK exemplar, but can the development work in this location?'. And the experts tell the prospective developers of New Martson in Bedfordshire that 'an eco-town should be a trailblazing development, although at present the New Marston bid looks like a typical commercial scheme' and lacks a sense of identity.

The Ford scheme in West Sussex is praised for strength of vision but told to abandon plans for a new bypass as 'not consistent with sustainable principles'. Promoters of Weston Otmoor in Oxfordshire are asked to explain what will stop it becoming 'commuterville'.

The criticisms are certainly rigorous enough to give confidence that the schemes that are eventually successful really will be eco-towns. But even that won't be enough to stop local objections. The real challenge could be to show whether they still stack up economically once they have raised their game on sustainability. 

Posted by Jules Birch, June 23  

Posted in Environment, Housebuilding

OPPORTUNITY or threat? The most confusing thing about the credit crunch is that it's both at the same time.

Even as some housing associations are champing at the bit to buy up land and homes from builders at a substantial discount, others are warning of the section 106 deals drying up and risks to cross-subsidy of their programmes from new development for sale. 

Keith Exford of Affinity Sutton, newly crowned as the number one developing association, tells this week's Inside Housing that the market slowdown means it's unlikely to stay there. The triumvriate of housing agencies work on the market rescue plan demanded by the government and try to work out ways of ensuring that risks are not simply transferred from builders to associations. As work starts on the £1bn Olympic Village there is still no sign of the public-private partnership that was meant to lead the way.

And though the market turmoil means it should be possible to buy unsold homes on the cheap, associations warn that grant rates will have to rise. Add in to that that the cost of building materials will almost certainly continue to rise thanks to a falling pound and rising commodity prices, and you have a recipe for confusion.

But housebuilders unsurprisingly see the situation in much starker terms. Seen from their perspective, this is a crisis that threatens to become a disaster and the government needs to act now.

Given all that, it's not surprising that we are still groping for a solution. At the top, the government still seems wedded to its outdated home ownership agenda. Some intereresting new ideas are being put forward by the CIH and National Housing Federation. There are some positive signs from the Homes and Communties Agency, English Partnerships and the Housing Corporation even though it doesn't seem the best time to be looking for leadership in three different directions.

Amid all the confusion, some clear thinking is needed - even if that means scrapping all of the assumptions behind the current investment programme and starting again. The world has changed.

Posted by Jules Birch, June 20

Posted in Housing associations, Housing market, Housebuilding