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We need a new funding model to tackle the ‘liveability’ crisis
Your Housing Group has carried out an analysis of how easy it is for people to find housing in different areas. Brian Cronin explains more and makes the case for change
This week, chancellor Philip Hammond will publish his Spring Statement, setting out his response to some independent analysis on the state of the economy, which I expect will point to an increasing risk of recession.
This will be blamed directly on the inability of our political class to agree a route out of the EU, kicking off another Brexit media frenzy.
One of the biggest issues I expect will be ignored is what all this means for the present crisis in affordable housing, and why we need a new model of development to stop it getting a whole lot worse.
As a former property man himself, the chancellor will know full well that the big private sector ‘volume builders’ that dominate our housing market are already slowing down output in light of Brexit uncertainty.
Contingency plans for a likely dip in the economy essentially involve slowing down, sitting tight, and seeing what happens.
“One of the biggest issues I expect will be ignored is what all this means for the present crisis in affordable housing”
While this may be commercially logical for them, any further slowdown in output will be disastrous for a housing market already delivering too slowly.
The more affordable end is a big concern because the big players simply cannot justify commercially a need to massively elevate their delivery of affordable homes, especially to rent, and in places where these are most needed, against the need to maximise returns to investors.
This is already the kind of market failure that should have prompted a government response.
There are sectors that can be called upon to build counter-cyclically, including local authorities and housing associations, which can both build in more economically uncertain times and in the areas that people, not investors, demand it.
To counterbalance the gap in private sector output of this housing, however, would require government funding on a scale that simply will not happen.
There are thus two issues that policymakers need to grip – and quickly. First is how much affordable housing is needed and where (because we still don’t see that government has a full grasp of this); and second is more imaginative solutions to bringing in investment for the delivery specifically of affordable stock, especially to rent.
First, we need a much better idea of where affordable homes are most needed and much existing thinking needs to be challenged.
We have just published the pilot phase of a new UK ‘Liveability Index’ that Your Housing Group will be launching later this year.
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Working with leading economists, we developed an analysis of each locality in the country in terms of how easy or not it is for people on average incomes to find housing that meets their needs.
Importantly, this meant housing that is affordable but also that provides proximity to the essential opportunities and amenities that regular people and families need, such as jobs, wages that meet the local cost of living and decent state schools.
This ‘liveability’ concept moves us beyond traditional thinking about what ‘affordability’ means (typically, housing costs as a proportion of income), and creates a much more realistic map of where affordable housing needs to be developed.
Once we know where development is most useful, we need much more imaginative thinking about ways to fund it.
I am currently working with a former Treasury economist on new funding models, which will both deliver a decent level of new build and also work even in turbulent or depressed economic times.
In short, the model needed is to bring in pension funds for investment, local authorities for the land, and housing associations to deliver and manage the stock for the long term – plus offsite manufacturing to deliver scale.
There are pockets of this kind of activity happening, but the problem is scale. Here, we see a strong role for government to play a facilitating role, which would include strategic land assembly.
“The model needed is to bring in pension funds for investment, local authorities for the land, and housing associations to deliver and manage the stock for the long term”
As well as creating a large swathe of new affordable units, this model could also allow local authorities to generate cash from land holdings without having to sell them off to private developers.
We have been having exciting discussions so far on this and will be publishing detailed proposals soon.
Above all, and if we can see past the Brexit media frenzy that will no doubt surround it, the Spring Statement should create a reality check where policymakers at last realise that very serious new thinking should be begun about how we meet the needs of the many thousands of people out there who simply want a decent, affordable home to live in.
Brian Cronin, chief executive, Your Housing Group
