Here’s a really interesting and eminently delieverable vision for Kent’s Creative Coast, which fits neatly into the Terry Farrell/KCC Vision for Kent. 

I really hope Paul Carter and Kevin Lynes give it their support.

There are some stirring sound bites in 21st Century Kent A blueprint for the county’s future, a vision for Kent in 2030 produced by Farrell’s on behalf of Kent County Council. There are some details which seem problematic; for example, Terry’s concept of a continuous Coastal Park might struggle with the road stone and bitumen coating plant on the beach in Whitstable Harbour, which I help run, not to mention other more industrial seaside uses in Sheppey, Ramsgate, Dover etc. But overall the picture is appealing. The problem, as apparently Terry himself pointed out at the launch, is how to get everyone to buy into the vision and how to get some delivery on the ground. This latest Vision has a good pedigree. Last year we had the framework for regeneration, Unlocking Kent’s Potential, which itself complemented Vision for Kent from 2006 and which points out that

“At more local level, each district (and in some cases groups of districts) prepares a range of community and economic development strategies and statutory local development frameworks reflecting local priorities in the context of Vision for Kent”.

No lack of vision then (or perhaps Visions even) and I hope that we can now expect some leadership from Paul Carter, Kevin Lynes and their colleagues at County Hall to turn those visions of the future into real positive change for those areas in the county with shockingly high levels of deprivation and poverty.

Ken Livingstone’s latest job, as BD columnist, seems to have got off to an interesting start. As he puts it:

“The headache for Bob Kerslake and his team is to balance the competing pressures to lift the construction sector out of recession without adding to Britain’s sub-standard housing stock. Better to take the time to redesign and improve those schemes the HCA is taking over, rather than build homes that residents will be dissatisfied with as well as failing on sustainability.“

It seems even Amanda Baillieu has now changed her mind and agrees that, “While it would be irresponsible to let every housebuilder go to the wall, those bailed out by the Homes & Communities Agency should have to demonstrate that what they’re proposing to build is of an acceptable quality“.

I do hope that the HCA will make sure they at least do that through the next round of Kickstart due diligence.  Indeed, given that none of the major housebuilders and not many of the smaller ones have actually gone bust perhaps HCA should review whether Kickstart remains an appropriate programme for government funding. HCA say there is a change of emphasis in Kickstart 2 toward more gap funding and less assistance with liquidity issues but perhaps the sector is no longer a worthy recipient of state handouts. Perhaps, as Ken suggests, HCA should be demanding more for their (our!!) money.

So why won’t the house building industry increase supply to match demand (see “my post” below and Christine Whitehead’s piece in particular in CABE’s report “Who should build our homes?“)? I never really understood why nobody asked this question, when affordable housing policy switched almost wholly to relying on section 106 contributions. The interesting thing about the current housing market, where price inflation is pretty well flat and supply is close to meeting demand (surely a normal market in any other sector), is that all of the house builders are moaning that conditions are tough. As one, they blame the lack of easy mortgage finance for curtailing demand (see for example Bellway, Berkeley Group, Persimmon, Barrats, Miller Group) and Keith Miller, CEO of the Miller Group, put his finger on the button saying,

“Volumes are low but the demand has fallen a long way as the money to buy is not as readily available and the balance with supply is now much more in line. However, if we are to see any degree of long-term stability, it is crucial that the housing market gets a continuing supply of mortgages.”

Rather than long-term stability relying on supply being roughly in balance with demand, Keith, and I suggest most of his peers, see stability occurring only when readily available finance fires up demand to race ahead of supply.

Actually the open market now is pretty stable in real terms; there is modest demand, which the industry is matching in supply and prices are rising at close to RPI. In this market house builders have to work hard to maintain margin and competitive edge, much as happens in most other industries. What they would prefer is double digit price inflation because life becomes a whole lot easier. The inflation of end value over the life of a medium size project will account for a substantial proportion of the margin; basically you make money just by turning the handle.

So if demand increases, which it probably will when easy finance or some other trick to overcome the fundamental unaffordability of home ownership occurs (another blog here I think), why would house builders want to increase supply to match? Of course they will a bit, but “long-term stability” is predicated in their minds on demand racing ahead of supply. In any location there are only so many people prepared to buy a new house, so why flood the market? House price inflation becomes inevitable but that suits the house builder model just fine. The problem is that this kind of market has shown itself to be neither stable nor sustainable in the long term.

This article in the FT, outlining British Land’s new “Buy-to-Let” fund, neatly sums up the difficulty with the rental market. The fund is targeting a rental income yield of 3.5% gross, hoping to deliver a 2% dividend. The exciting numbers though come from capital growth, where they are targeting 14.5% per year. It doesn’t take much to realise this latter figure is BL’s forecast of house price inflation in central London in the £500k to £5million bracket. The model is based not on the performance of the residential rental market but rather on annual inflation of the value of the underlying asset – it is in essence the same model as the good old buy-to-let clubs and in the short to medium term assumes the rented property will be sold rather than retained in the rented sector.

If this is the sort of interest that HCA have uncovered in their Private Rental Sector Initiative, I wonder how they expect to ensure that long term considerations take priority over short term capital gains.

I’ve now read today’s edition of BD and what do you know, Ellis Woodman has made some sensible comments despite his boss. Even MP’s are getting in on the act.

I don’t usually read the editorial in BD but this one came to my attention today. Apart from the obvious factual errors (firstly, CABE is just as much an “arm of government” as HCA; it’s sponsored by DCMS and part funded by CLG; secondly all of the housing schemes in Kickstart were originally intended for the private market not the social sector – developers are having to turn some of their private housing into additional social housing to get Kickstart money), Amanda seems to be saying that it is quite okay for the HCA to build sub-standard housing because of the pressing need. This is what happened in the early 1990’s and the result was public money wasted on crap housing much of which has now become unusable. Luckily, according to Amanda, we can spend the Kickstart money on replacing it with an equally short term quick fix of crap housing.

Paul Morrell is already right; contractors and their house building subsidiaries already dominate major construction projects and it seems a little optimistic to expect their architects to do much about it. The man holding the purse strings will get built what he wants regardless of who “designs” it. The real tragedy is not the commissioning of the schemes as Amanda suggests but that they were granted planning permission, when their design was so poor as to warrant refusal.  But perhaps, the planning officers and members who approved them can be absolved from responsibility because they needed to deliver housing numbers and these were the only schemes to come forward. Actually I’m beginning to rather like your argument, Amanda; it works in pretty well every circumstance. And yeah, lets blame the bloody architects; they need a good kicking.

I missed this comment from CABE making much the same points as my post below but in slightly more measured tones.

CABE’s latest thought piece, “Who should Build our Homes“, is out now. Six of the great and good “… tell us what they would change to deliver more housing, better designed, at affordable prices”. What seems singularly lacking from any of the solutions offered is an analysis of what sort of housing people actually want. The following quotes were the closest I could find to an approach which might include the consumer of the housing proposed:

“Housing in multiple occupation needs to become an option of choice for the many, rather than the few.” (Dickon Robinson)

“Central government cannot do it all – people must see that they or their children or others they care about will benefit from building more, better designed and more sustainable housing.” (Christine Whitehead)

“However, what is also needed is some additional input from the wider public to ensure that the design and management approaches being sought align with the qualities that people really want for their neighbourhoods.” (Peter Studdert)

“We seem to be a nation obsessed with home ownership – even Labour ministers view it as the single most significant route towards upward social mobility. The result is that renting is regarded as second best. This is an attitude that both central and local government needs to change.” (Liz Pearce)

“Developments currently too often fail to reflect the needs and contexts of the local community. Housing is a fundamental need and one that individuals should be encouraged to group together to fulfil for themselves.” (Stephen Hill)

“Sustainability will increasingly form part of a business brand for developers, as consumers and clients at all levels demand higher quality in sustainable design. Developers will be called upon to create a coherent proposition for consumers based on offering a high-quality way of life underpinned by principles such as zero carbon and zero waste.” (Pooran Desai)

There’s an awful lot about how “public attitudes” need to change or be changed but precious little analysis of what those attitudes might be; what are the drivers affecting the purchaser; what sort of housing actually might have a market. Savills Research published a really telling paper in 2007 called “Occupier Demand Survey Report“. It revealed the features which were important for prospective purchasers as follows:

Four out of the seven most important features related to ‘Location’, whilst ‘Size/Layout’ (of individual properties) ranked well down the list, the most important (‘Size of Rooms’) only making it in at no.12 in the chart. Basically people buy in neighbourhoods which they like, near good schools and which they perceive as safe. That people want to buy rather than rent is an obviously sensible choice given the incredibly helpful tax regime, the historic capital gains generated from housing and the likelihood of that trend continuing. I don’t see any of this changing in the near future. People don’t value eco-friendly features, at least not enough to pay for them; they don’t want to share in any great numbers, or build their own; they don’t want to rent, and why would they when buying delivers untaxed capital gains on both their capital and the value of the mortgage.

In this light, I’m not sure what the benefit might be in suggesting that these attitudes need to change or be changed. Of course, were this to happen, then we would be living in a different world, where currently perceived problems might no longer exist. But the point is we live in this world were these attitudes are dominant (they really are) and where we need to balance what people demand with what, as a society, we can afford to be delivered. As for the proposition that it is the role of government to change what people want, isn’t that putting the cart before the horse just a little? Perhaps it would be more honest to say that government needs to take the tough decision and legislate to require better designed neighbourhoods, more eco-friendly buildings, and to provide appropriate funding to deliver sufficient new homes to meet need (I’ve never understood why anyone thought the private sector would produce sufficient homes so that house price inflation would disappear – that’s not in their interest, is it? – but that’s another blog!). Actually that might meet our needs for good housing and leave the market to meet our demands, within the constraints of well-designed neighbourhoods and homes and low levels of energy consumption, for anything better.

So well over 50% of the Kickstart funded schemes are such poor quality that they scored less than 10 points on the Building For Life assessment. To put that in perspective, the Affordable Housing Survey, produced by CABE and commissioned by HCA showed only 21% of schemes built between 2004 and 2008 were “poor” (i.e. less than 10 points), so Kickstart is funding more than twice as many poor quality schemes than were previously funded.

Never mind that HCA NAHP conditions require all funded schemes to score at least 12; never mind that, as Sir Bob K has often repeated (here and here for example), high quality design will be a pre-requisite for funding; it’s clearly more important that house builders are provided with tax money so that they can deliver rubbish housing in poor quality housing estates that we can knock down again in twenty years time. After all that’s precisely the pattern we know and love, where failing estates from the 70’s and 80’s are being “regenerated” with new estates designed to fail within the same timeframe. Just think of all the work we’ll have in 2040-2050.