ao link
Twitter
Facebook
Linked In
Twitter
Facebook
Linked In

You are viewing 1 of your 1 free articles

Oliver asks for more: a look at the Letwin Review

Sir Oliver Letwin was tasked in the Autumn Budget last year with working out why it takes so long to develop large housing sites. This week he published his report, and Peter Apps rakes through the detail.  Picture by Rex Features

Linked InTwitterFacebookeCard

What was the review about?

The accusation that large developers ‘land bank’ – hold on to large sites in order to increase their value – has dogged housing policy for years.

As recently as February 2017, when its Housing White Paper was published, the government was muttering about confiscating land from developers which built too slowly.

This review, by Conservative MP Sir Oliver Letwin, was designed to assess if builders really were land banking, and what could be done about it.

What did he find?

Sir Oliver’s conclusion is presented in Budget documents as an exoneration of large builders. “The review found no evidence that speculative land banking is part of the business model for major house builders,” says the Budget documents.

But it isn’t quite as simple as saying there is no problem.

As trailed in a draft report in June, Sir Oliver did identify a problem with the speed of build-out on large sites – which he said take an average of 15.5 years to build out, and longer in London.

This, he says, is a result of what developers call the ‘absorption rate’, ie how many homes can be sold into a local market without overwhelming the demand to buy.

This was exacerbated by the ‘homogeneity’ of the homes that private builders were developing on these sites – essentially, they build too many of the same type and size home for outright sale.

So what does he think should be done about it?

Sir Oliver did not think that forcing developers to sell these homes more quickly (and therefore more cheaply) was a desirable solution. “This would, in my view, create very serious problems, not only for the major house builders, but also, potentially, for prices and financing in the housing market and hence for the economy as a whole,” he says. Instead, the answer is to increase diversity on large sites.

This means ensuring large sites (which he defines as sites of 1,500 homes or more) should be required to have “a diversity of offerings”. This presumably relates to the size and type of the homes – but also the tenure.

More shared ownership, more build-to-rent and more social and affordable rent will mean less dependency on sales rates and a faster build-out.

The proposal to achieve this is quite radical. A new set of planning rules should be adopted for large sites in “areas of high housing demand”, which require developers of large schemes to provide a range of offerings.

This would be determined through a new planning policy document, with a national expert committee established to advise local authorities and arbitrate disputes.

The government would then bend the arm of house builders to comply by making all government funding conditional on the builder accepting these requirements.

This would include the offer of Help to Buy for any purchasers. Local authorities would also be given the power to designate land for ‘large site’ development only.

They should also have the power to compulsorily purchase this land at a value which takes into account the new diversity requirements (read as: higher levels of affordable housing). He also recommends that councils could use development corporations to effectively develop the sites themselves, in partnership with private sellers.

It is worth emphasising that this does almost certainly mean large developers accepting lower profits. The homogeneity of type and tenure which exists at the moment is a result of chasing the highest return per square metre. Margins are lower on other tenures.

What happens next?

The government will formally respond to Sir Oliver’s recommendations in February 2019. It has moved to cool any fears in the market by saying sites with existing outline planning permission will not lose funding or access to Help to Buy if they don’t accept new diversity requirements.

Sir Oliver himself recommends that the powers be in force by 2021.

But this does limit the impact the review can have at speeding up existing stalled sites.

However, it appears the government is ready to act. In a press release accompanying the review, housing secretary James Brokenshire said 15 years is “far too long” to build out new sites and “it is clear action is needed”.

The government also said changes “could be brought in quickly” through ministerial statements and secondary legislation.

All eyes then on the announcement in February.

What does the sector think?

The big builders may keep their counsel to see how the government responds, but the large developing housing association subset of the social housing sector is cock-a-hoop.

It isn’t difficult to see why – the kind of developer that this favours is a housing association, able to deliver a variety of tenures and attract long-term, patient investment to support it.

Last week, Clarion, the UK’s largest housing association, was announced as the developer for a 7,500-home scheme in Norfolk – the largest site it has taken on to date. It is one of several housing associations to take on schemes of this type.

Responding to the Letwin Review, it says: “We are in favour of incentives to accelerate development, if we can strike the right balance and ensure landowners are not discouraged from releasing land. We now look forward to the government acting on the review and introducing policies to help us to deliver the homes this country needs.”

Mark Washer, chief executive of Sovereign, adds: “If the Letwin Review is fully adopted and the government implements it and actually reflects some of the provisions and recommendations in the review – particularly around land value capture – in the Spring Statement, then I think that there’s some real hope that the momentum that’s been created over the summer might actually deliver.”

Autumn Budget 2018 - full coverage

Autumn Budget 2018 - full coverage

All our Autumn Budget 2018 coverage in one place:

The Autumn Budget lacked the ambition we need Philip Hammond’s Budget fell short for housing, writes Melanie Rees

There were no big fireworks but the Budget offers an opportunity to deliver The Budget leaves associations facing a choice and we must now deliver, argues David Montague

Names of new housing association strategic partnerships revealed Homes England has released the names of the eight housing associations that have just signed strategic partnerships with the government.

Budget a missed opportunity on housing, says NHF Reaction to the Autumn Budget from several organisations, including the National Housing Federation

Budget small print reveals significant announcements for housing Housing policies contained in the Autumn Budget and background documents published yesterday will have a large impact, if they actually go ahead, writes Jules Birch

Hammond’s extra Universal Credit cash is welcome – but we need homelessness specialists in Job Centres too The Autumn Budget must not become a missed opportunity to put in place measures to prevent homelessness, argues Ruth Jacob of Crisis

Hammond announces extra funding for Universal Credit: Philip Hammond has announced plans to pump more money into Universal Credit in the Autumn Budget today.

Help to Buy equity loan scheme extended to 2023 for first time buyers:The Help to Buy equity loan scheme will be extended two years to 2023 for first time buyers only, with new price caps set for each English region.

Housing Live - the Autumn Budget 2018 as it happened: Live-blogging from Jules Birch reveals how the Autumn Budget unfolded and what it means for housing

OBR: scrapping council borrowing cap will deliver only 9,000 new homes: Scrapping the borrowing cap will deliver only 9,000 new homes over the next five years, the Office for Budget Responsibility (OBR) has said.

Letwin: builders of large sites must accept more ’diversity’ of tenure: Builders should be required to accept suggested levels of affordable housing for large sites in order to receive government support, including Help to Buy, a major review of housebuilding has concluded.

Chancellor announces strategic partnerships with nine housing associations: Nine housing associations have signed new strategic partnerships with the government to deliver over 13,000 homes, Philip Hammond has announced.

Stamp duty scrapped for buyers of shared ownership homes worth up to £500,000: Stamp duty will be scrapped for first-time buyers of homes for shared ownership, the chancellor has announced.

 

Autumn Budget 2018 - the key housing policies at-a-glance

Autumn Budget 2018 - the key housing policies at-a-glance
  • £1bn to help fund the implementation of Universal Credit over the next five years
  • £500m in Housing Infrastructure Fund to unlock a further 650,000 homes
  • The next wave of strategic partnerships with nine housing associations, which will deliver 13,000 homes
  • British business bank guarantees for SME house builders
  • ‘Simplification’ of process to convert commercial properties to new homes
  • Providing funding to empower 500 neighbourhoods to allocate homes to local people in perpetuity
  • Help to Buy equity loan scheme extended by two years to 2023 and limited to first-time buyers
  • Retrospective inclusion of first-time buyers of shared ownership in stamp duty relief
Linked InTwitterFacebookeCard
Add New Comment
You must be logged in to comment.