UK Collaborative Centre for Housing Evidence – Written evidence (UKH0055)
This submission covers most though not all questions raised by the Inquiry. It is a collective response from six academic members of the UK Collaborative Centre for Housing Evidence (CaCHE). The submission was supported by Gareth James and edited by Ken Gibb. CaCHE is a research consortium involving a dozen universities and other non-HEIs. Our work is all-UK, crosses disciplinary boundaries and is organised around several themes, including, relevant to the current inquiry: housing economics; housing markets; and, space, place and planning. The key points from our evidence may be summarised as follows.
This response is a collective one from the UK Collaborative Centre for Housing Evidence (CaCHE). CaCHE is a research consortium involving a dozen universities and other non-HEIs. We were established in 2017 with core funding from ESRC, AHRC and the Joseph Rowntree Foundation. Our work is all-UK, crosses disciplinary boundaries and is organised around several themes, including, relevant to the current inquiry: housing economics; housing markets; and, space, place and planning. Further information about our work and our publications can be found at: https://housingevidence.ac.uk/.
CaCHE is pleased to have the opportunity to respond to the request for written evidence for this inquiry into meeting UK housing demand. We have assembled several colleagues who have contributed to the submission – Professors Geoff Meen, Chris Leishman, Flora Samuel and Kenneth Gibb, as well as Dr James White and Dr Phil O’Brien. The submission was supported and co-ordinated by Dr Gareth James. This is a multidisciplinary response embracing, economics, planning, urban design and beyond. While we have tried to keep our answers short, and indeed have left some of the questions to others, we hope you will forgive the overall length of our response.
We have left this for others to answer.
The first part of CaCHE’s response refers to the important distinction between housing demand and need. In the case of housing demand, social and demographic factors are only one part of the story[1]. Equally important, particularly in the case of owner-occupation, are the economic influences. General macroeconomic policies have a strong impact on housing demand. Explicit housing policies, for example Help to Buy support, generally have more limited effects and housing outcomes are more usually the by-product of wider fiscal and monetary policies. Indeed, some of the most successful policies for housing throughout history have not been aimed directly at housing. These include advances in medical knowledge and improvements in sanitation in the 19th century; technological improvements to railways and roads, which in the 20th century allowed suburbanisation; advances in urban design and their contribution to slum clearance; and the effects of financial deregulation in the 1980s. In addition, long-run growth in the economy has been crucial to the improvement in housing conditions and the increase in demand.
The predominance of macro policy over housing policy is not new; nor is it confined to the UK. Housing is always likely to take second place to wider macro objectives such as the control of inflation and stabilisation policy. The position of housing is also weakened by the fact that it has no single champion within government co-ordinating policy. In the English case, housing policy is technically the remit of the Ministry of Housing, Communities and Local Government; but the Bank of England oversees policies concerning mortgage debt and interest rates; policy involving taxation or subsidies needs the agreement of the Treasury; the Department of Work and Pensions has a key role in housing affordability through the housing benefit and Universal Credit systems; the Department for Business, Energy and Industrial Policy oversees the construction industry; and the National Infrastructure and Project Authority is in charge of major initiatives, many of which involve housing. In none of these Departments is housing the sole (or in most cases the primary) concern. Consequently, housing policy can appear incoherent and inconsistent, with unintended consequences for housing demand.
Therefore, the demand for owner-occupied housing is primarily a response to its price, monetary and fiscal conditions, the growth in the economy which affects real household incomes, and available housing subsidies. A consistent body of research[2] finds that the growth in real incomes, the level of interest rates and the availability of credit (including the ability to meet deposits) strongly affect both housing demand and house prices. These factors influence demand not just by first-time buyers, but also by current owners moving up-market and investors in buy-to-let properties. The English Housing Survey (EHS) shows that 772,000 households owned second homes in 2018/19 (3.3% of all households, concentrated primarily in the higher income groups). The EHS also shows the proportion of households deemed to under-occupy housing on official definitions, based on the number of bedrooms relative to household composition. These indicate that whereas the proportion of households under-occupying in the private rented sector has fallen from 18.4% in 1995/96 to 15.4% in 2019/20 (and from 12.1% to 10.2 in social renting), the proportion in the owner-occupied sector has risen from 39.4% to 52.3%. These are primarily a response to economic conditions and the distribution of income and wealth, rather than demographics.
There is little reason to expect these fundamental factors to change in importance in the future. In addition, however, greater numbers working from home may affect the distribution of demand across localities. We return briefly to this issue below[3].
But demographics remain important, particularly in explaining the distribution of demand; the age and gender distribution of the population underlie the official household projections, which, in turn, form the main input to local estimates of housing need discussed under Question 3. Four issues related to demographics have received particular attention and are briefly discussed: (i) housing demand by older people; (ii) demand by young households; (iii) demand by migrants; (iv) population shifts to cities.
Demand by older persons is important because households headed by someone aged 65 or over are projected to account for an increased proportion of all households, reaching 36% in 2043. Housing for older people was considered by the House of Commons Communities and Local Government Committee in 2018[4] and called for a national strategy and the provision of more housing suitable to their needs. In addition, “right sizing” potentially releases larger homes for younger households. However, in practice, there are few incentives for older households to move. Owner-occupier housing costs are low (since only a minority have mortgages), and the majority of households over the age of sixty do not move to smaller properties. Even though the incomes of retirees are generally past their peak, the majority are not income poor. Some may be constrained by the absence of suitable smaller properties, but the failure to “right size” is a rational market response to low housing costs and low returns on alternative assets as an investment at a time of low interest rates.
At the other end of the age spectrum, demand by young households has also been a focus of attention. The younger age groups, in fact, are less likely to form households at all in response to affordability problems. Although it may be the case that preferences have shifted towards renting in the short term as a life-style choice, the main constraint on achieving home ownership remains an inability to save the required deposit, a goal that becomes increasingly out-of-reach if house prices rise faster than savings. Furthermore, gross weekly earnings of the 22-29 age group have risen at a slower rate than employees as a whole[5].
Housing demand by migrants remains controversial. According to the latest population projections, between 2018 and 2028, 27% of UK population growth is projected to result from an excess of births over deaths, but 73% results from net international migration[6]. But it cannot be concluded that household formation and the demand for housing will increase proportionately. Migrants cannot be treated as a single group: levels of wealth and social customs influence both, but, as a generalisation, it appears to be the case that it takes many years before migrant tenure patterns approach those of the domestic population.
Across England as a whole, the size of the population relative to the number of dwellings has experienced a long-run decline. However, over the last twenty years, different areas have experienced different conditions and the ratio has increased in almost all the London boroughs, and many major cities, including Coventry, Nottingham, Brighton, Manchester, Birmingham and Leicester. These reflect a number of influences including an improved preference for city living, particularly amongst the young. However, an important question (for which it is too early to provide an answer) is whether these trends are likely to be reversed in the light of more extensive working from home and a reduction in commuting.
In the latest (2018-based) official estimates, the projected average increase in the number of households in England is 150,000 per annum between 2018 and 2043. This represent a significant reduction from previous estimates – 159,000 per annum in the earlier 2016-based projections and 210,000 per annum in the 2014-based projections. At first sight, therefore, given that household projections form the basis of local authority needs assessments, a target of 300,000 new homes per annum appears excessive. But the target represents a political judgment rather than a purely evidence-based technical assessment.
Nevertheless, there are still good reasons to believe that housing demand is considerably higher than the household projections might suggest. A reduction in the household projections does not necessarily imply that the target should be reduced if the objective is to improve affordability; from our response to Question 2, demand depends on economic conditions as well as on demographics.
In fact, national planning guidance requires planning authorities to take account of affordability in local needs assessments. If affordability, measured by the local ratio of median house prices to earnings[7], is greater than a threshold value of 4.0, then authorities are required to make an upward adjustment to estimates based purely on household numbers. In practice, only four authorities in 2020 had ratios below the threshold. The logic is that increases in housing supply above the published growth in new household numbers is necessary to improve affordability. This, in turn, might permit a further increase in new household formation.
Furthermore, the increase in housing demand does not arise only from new households. Increased demand also arises from current households who want more or larger homes as their incomes rise. This adds to price pressures. At a technical level, this is an increase in demand which can be met by improvements in the existing stock as well as by new homes, although distinguishing between the two in practice is difficult.
In summary, the combination of these factors implies that the demand for homes is considerably larger than that implied by the latest household projections alone, particularly since the aim is also an improvement in affordability. The cost, however, is that the requirements will be greatest in high-priced areas, notably in the south of the country and probably on greenfield sites.
Whether the appropriate figure is 300,000 is more difficult to judge. It is certainly the case that large, sustained increases in housing supply are necessary if the objective is to improve affordability (although there are other ways of achieving this aim through monetary and fiscal policy). But, even then, it is most unlikely that increases in supply alone could bring house price to earnings ratios even close to a value of 4.0. Across England as a whole the ratio has not achieved this level since 1999. But the rise since then has been the result, at least partly, of the fall in nominal interest rates. At lower interest rates, households can afford more housing which is capitalised into house prices. This is one illustration of the problems caused by using price to earnings ratios as a measure of affordability – it may overstate the inability to meet mortgage payments[8].
Furthermore, it should be noted that the objective of 300,000 homes is set in terms of net additions to the housing stock, rather than new completions. In 2019/20, approximately 244,000 net additions were achieved in England with a similar number in 2018/19; the average since 2000/01 has been 180,000. Therefore, in recent years, net additions have begun to move towards the target. However, in 2019/20, only 220,000 were new completions, whereas 27,000 were obtained from ‘changes in use’, for example, residential properties converted from previous office developments. At its peak in 2016/17, 37,000 net additions came from changes in use. It appears unlikely, therefore, that the 300,000 target is achievable without a significant continuing contribution from this source (see also Q7 below).
We have left this for others to answer though elements of answers to 2 and 3 do address it in part.
The answer here is also linked to Q10 and the ability of local government to accurately derive and then deliver on need and demand requirements locally. What also needs to be done should include upskilling and updating planning so that we have a comprehensive mapping system for the whole of the UK. Greater Manchester Combined Authority is a leader in this area (GMA, 2019)[9] but there is work to be done in bringing existing ‘passive’ data sets together with ‘active’ citizen generated social value maps to deliver a holistic picture of where different kinds of outcomes are happening, where they are happening and how they should be changed (Hatleskog and Samuel, 2021)[10]. This is the focus of the Better Places Toolkit an Innovate UK project currently led by Stantec with the University of Reading (Stantec, 2021)[11]. Going forward maps need to be central to ensuring that there is a balance of new homes built across the UK and that the homes are built on sites with adequate connection, jobs and facilities. Increasingly parametric design tools will be used to build accessibility into the maps, for example the impact of a motorway on people accessing facilities.
Currently Local Plans are made every five years of so meaning that they are almost immediately out of date. Technology will allow for the emergent field of adaptive planning using real time and constant data input to assist with the making of transparent, evidence based and democratic decisions (Harrison, Galland and Tewdr Jones, 2021)[12]. A digital map based system will be key to ensuring a good balance of homes and types of homes across the UK.
To answer this question we draw heavily on two recent CaCHE evidence reviews published by Payne et al (2019[13]) and Leishman et al (2020)[14]. The Leishman et al (2020) evidence review emphasised the importance of understanding micro-economic perspectives on the housebuilding industry. We note that previous reviews, including Barker (2004) and Callcutt (2007)[15] had stronger emphasis on understanding the relationship between housing supply on aggregate, and housing affordability outcomes. More recent work has pointed to the importance of sales and build-out rates in contributing to declining housing affordability. We also note that although Letwin (2018)[16] came to a similar conclusion, the report itself only cited one of the important studies that were published in the period between Barker and Letwin, and thus missed an opportunity to emphasise the strength of the research evidence on this issue.
The first important study in the series was by Adams et al (2009)[17]. This examined the question why housing developers appear to build-out their sites so slowly in the UK, despite facing apparently very strong demand for housing. This study found that the intensely competitive conditions found in UK residential land markets, with up to 20 developers bidding to acquire a single site, meant that successful housebuilders were compelled to assume that house prices would continue to rise post land purchase. Having made these assumptions and ‘won’ the competition for site acquisition, developers are compelled to build out slowly to allow rising prices to deliver required returns. Indeed, housebuilders use sale prices as a means of controlling the sales rates.
Other commentators have made similar arguments. For example, KPMG and Shelter (2015)[18] emphasise that competition occurs at the wrong stage in the housing development process, i.e. during the land acquisition process rather than at the point of house sales. The result is that firms are driven to minimise build costs and maximise sales prices by building slowly. This mechanism is an obvious barrier to the ability of the construction industry to gear up and deliver higher rates of housing supply.
The organisation of the housebuilding industry is also important. The Adams et al (2009) study found that housebuilders cannot easily vary planned build-out rates as a consequence of the way construction activities are organised on site. A second study (Adams et al, 2012)[19] found that UK housebuilders try to minimise direct open market competition when sourcing development land. They do this by relying on their own networks of contacts built up over years and decades. These networks deliver opportunities for identifying and acquiring development land. It follows that new entrants to housing markets (either start-ups or expansions within the country) are disadvantaged since they lack such connections.
Later work in this vein is summarised in the Payne et al (2019) evidence review. This emphasises that UK housing developers tend to use options and conditional contracts to acquire land for development. Additionally, many use the land use planning process to target their options on land that has a higher likelihood of being released. We think this is important because there are many published studies that have attempted to estimate the costs of the UK’s various planning systems on land supply, housing costs, and housing price growth. Yet, the evidence in Payne et al (2019) serves as a reminder that the land and housing markets are much more complex than some of these studies suggest. Outcomes do not simply reflect ‘market’ versus ‘planning’ interests, but there are important interactions even within the market interests. In other words, it is in the interests of housebuilders to lobby for the release of land under their control, and to work against the release of land controlled by their competitors.
In summary, our view is that the principal barriers facing the housebuilding sector are:
The relationship between planning and development is crucial in ensuring that the supply of new housing meets demand. Planning offers benefits in the form of improved sustainability, health, and quality of life, in exchange for restrictions placed on the right to use and develop land. Two major factors inhibiting the rate of housing development, and which can be controlled by the planning system, are risk in the development process and the price of land.
Residential development is a lengthy process that requires substantial investments – usually using finance – to be made over periods of fifteen or more years and in which there are many variables at play, including uncertainties over the nature of land as a highly heterogeneous asset and the strategies of other actors, including landowners and other developers. The largest single cost to housebuilders is land, the price of which is strongly determined by local house prices. We will outline two alternative means by which developer risk and land prices might be reduced, using a more liberal and a more interventionist mode of planning, noting the benefits and costs of each.
Much of the debate around planning reform has focused on a perception that less restrictive land use controls that offer greater certainty to developers would increase the rate of housebuilding. The argument underlying this approach is that if the right to develop a given site is a legal certainty, then ‘planning risk’, or the risk of failing to be granted planning permission, is eliminated and if much more land is made available to build on then its price is driven down. At present developers can control the supply of new homes within a local market with the aim of maintaining house price levels by virtue of being one of only a few players within that market, as identified by the Letwin Review[20]. But if land were more readily available and planning risk were reduced then this strategy would become problematic because other developers could more easily buy land and could build at a faster rate as part of a strategy to compete on quantity of sales rather than profit margin.
This hypothesis hinges on the reforms described being effective in lowering market entry barriers for SME builders, raising competition between volume builders, and giving developers cause to alter their business model. Also crucial is that sufficient land can realistically be made available for development as to reduce prices. Land is by its nature fixed in location and land markets operate according to locational factors such as proximity to jobs and services. There is inevitably only a limited quantity of land that can be released for housing development at any given location, so making more development land available at accessible locations usually means not only releasing more land but planning development around new infrastructure.
The approach outlined above aims to raise the rate of housebuilding while accepting that this comes at the expense of being able to coordinate new development in a way that gives sustainability, health, and quality of life benefits. More interventionist approaches to planning aim to accelerate the rate of housebuilding while also reaching these public policy goals but accept that funds to achieve this must either come from state investment or from a redirection of land value. To a greater or lesser extent, interventionist approaches have a strong public role in land allocation, assembly, and infrastructure implementation. At the extreme end of the scale are the New Towns programme in the UK or the approach that used to be dominant in the Netherlands and is still very common there. This entails a public body buying land, establishing a road layout, laying down infrastructure and selling plots to developers, thereby removing the great majority of the uncertainty that developers are presently subject to. Liberated of these risks, developers work to a different business model, buying ready-to-build plots and operating at a lower profit margin. The strategy of slowing the build-out rate is less appealing because competition between developers has shifted from the land market to the housing market and can in any case be thwarted by the inclusion of clauses in plot sale contracts stipulating a window in which development must take place.
The downside of this approach is that these risks are shifted to the public sector. While the public sector is better equipped to bear them and can do so in a way that does not restrict the housing supply, the financial burden is substantial and can be overwhelming during a downturn. This eventuality occurred in the Netherlands following the Global Financial Crisis, when municipalities with extensive land holdings – bought using finance from a public bank – were unable to sell them.
An interventionist approach can be applied in a less costly and less risky form however, using various means to lower the cost of public land purchase and to control the land supply[21]. The instrument with which we are most familiar in the UK is compulsory purchase, which was, pre-1961, completed at existing use value and has, since 1961, incorporated ‘hope value’ into its overall land valuation. It is direct and effective but is also procedurally complex and lengthy. Pre-emption allows a public body the right of option on a piece of land should it be put up for sale but does not allow that public body to force a sale. It is used by Dutch municipalities to direct urban growth in the long-term strategic planning of new housing. Also in the Netherlands, once a land use plan – which can be as detailed as a masterplan – is in place the landowner is bound to either develop their land in accordance with the plan or to sell to a firm or individual able to do so. The land use plan is therefore a powerful tool that can be used to dictate the pattern – and to a lesser extent the quantity – of new housing built. This contrasts markedly with the utility of the land use plan in the UK planning systems, which has only an indicative function with respect to location. Finally, in Germany land readjustment is used to assemble land from multiple owners into a single developable site. This enables planners to shape housing developments according to the logic of the existing urban form, the pattern of infrastructure and the internal coherence of the development, rather than their being determined by landownership patterns.
Permitted Development Rights
The freedom to change the use of a building from office or retail to residential without the friction of planning regulation follows a straightforward market logic that any site or building should be allowed to be in its most valuable use. This can be a logical and helpful process where market conditions have changed, as for example where longstanding retail units are no longer viable. There is, however, the potential for significant harm to be caused through the exercise of this freedom, due to the non-market qualities of housing and the inefficiencies of the land market. Housing is not only a market good but a fundamental need that must – it is widely accepted – be provided in a condition above a certain standard. It is for this reason that access to daylight and suitability of location are regulated for residential development and conversion by the planning system.
Buildings providing office space in particular may be located in their most appropriate position relative to local suppliers and workers and yet at the same time be less valuable in their present use than if they were converted into housing. Their value relative to housing should not automatically be taken as a market signal that their use should be changed. House prices are to a great extent detached from the supply and demand conditions of local areas due to their being heavily influenced by demographics, interest rates, and investment markets. Moreover, space is not frictionless and the exit of office space from a local market according to the logic presented may well mean that commuting times become stretched and interactions between firms inhibited. In a perfect market such imbalances might be corrected for over time but this is a highly unrealistic proposition in property markets that are in reality never seen to be in equilibrium.
How might changes to Section 106 Agreements shape the Provision of Social Housing?
Affordable housing is the largest individual item paid for by developer contributions, making up around two thirds of the total for 2018-19 in England[22]. A key element of Section 106/75 contributions is that they ensure that affordable housing is provided on the same site as market housing, helping to achieve mixed communities and enabling affordable housing providers to deliver new homes without buying development land on the open market. The latter is a considerable hurdle to provision in higher value areas where housing associations struggle to compete against commercial housebuilders.
Recommendations for the reform of Section 106/75 agreements have focused on their negotiated nature, as partly bespoke arrangements organised on a case-by-case basis that can be complex and time-consuming, especially for smaller local planning authorities and SME builders. The difficulty in eliminating negotiation from the developer contribution process stems from the difference between the uniform nature of a standardised levy and the highly variable needs of heterogeneous individual sites. If developer contributions are no longer to be tailored to development sites then local planning authorities must have the tools and capacity to plan and implement infrastructure alongside new housing. This is an arrangement potentially well suited to an interventionist planning system of a form outlined earlier in response to question seven. Where local planning authorities are able to strongly dictate the spatial pattern and urban form of new development, by assembling land and masterplanning sites, infrastructure can be costed and delivered in advance.
By contrast the Section 106/75 process is suited to the nature of the UK planning systems, in which the spatial pattern of development is not dictated by the local plan, where the infrastructure needs of a proposed development are determined on a case-by-case basis, and where developers are expected to implement infrastructure themselves for adoption by the local authority. Section 106/75 agreements have a number of other advantages, chief among which is that they have raised increasing sums of developer contributions for affordable housing provision, these having risen from £1.9bn in 2005-06 to £4.7bn in 2018-19 (Lord et al., 2020). Also beneficial is that, once the uncertainty of the negotiation is out of the way, Section 106/75 agreements are legally binding contracts that guarantee to developers what is required and will be provided onsite.
Community Engagement
The way in which communities engage in the planning process is problematic. Planning consultation whether for Local Plans or specific projects is perfunctory, reaches only a small constituency, piecemeal and difficult to engage with. There is no attempt to collate the information from consultations into a body of knowledge on what the community think and want. The AHRC Community Consultation for Quality of Life project led by the University of Reading with support from CACHE began in July 2021 aims to set out a blueprint for community consultation both face to face and digital in the four policy contexts of the UK. Working with the digital consultation platform Commonplace the team aim to deliver a map based consultation platform that will enable communities to feed information into local social value maps on an ongoing basis. The maps can then be used to test public opinion on projects and developments and to promote digital democracy. Using technology to make consultation easy will free up important resources for the key task of widening participation.
2020 evidence compiled in a government-sponsored UK Collaborative Centre for Housing Evidence report called Delivering design value: the housing design quality conundrum, concluded that the design quality of new housing is stubbornly low in the UK and broadly fails to meet the aspirations of policymakers. This key finding was based on a qualitative study of five UK local authorities and ten housing developments and included some 50 interviews, site observations, plus a review of policy documents, planning application data.
Before suggesting what can be done to improve the quality of new homes, it’s important to reflect on why the design aspirations set out in policy are so rarely met. Delivering design value found the UK’s planners to be passionate about creating well-designed places. yet powerless to challenge the status quo. National and local design policy is frequently overlooked because other policy objectives routinely take precedence over design. There is chronic underfunding for design skills and training in UK local authorities planning departments and siloed decision-making leads to conflicting design advice being offered to housebuilders and their agents.
Delivering design value also found that the responsibility for poor design outcomes is shared with the housebuilding industry. The dominant volume housebuilders have a razor-sharp focus on profitability, use tried and tested site layouts and house types that lack design value and are particularly resistant to making design investments in areas where land values are low. This latter problem is compounded by the fact that local authorities often feel compelled to approve poorly designed housing, fearing they will miss their housing delivery targets if housebuilders choose to develop in a less demanding council area.
Delivering design value makes wide-ranging recommendations on what can be done to improve the design quality of new homes (see here). In summary, action must be taken to translate the policy rhetoric on design into actionable, measurable and well-funded design policies and solutions. The report’s principal recommendation is that housing and neighbourhood design principles should be regulated by government in ‘design value standards’ that embed the value of design in regulation, mirroring the status of building standards. These standards should be simple and readily translatable into detailed design policies and guidance that support local authority planners to champion creativity and diversity.
Regulated standards should also be used to encourage change in the housebuilding industry. National government should be more fervent in its criticism of housebuilders and the complicit roles that planning consultants, architects and other built environment professionals play in facilitating poor practice. Tax incentives, government-backed loans and other measures should be introduced to limit volume housebuilder power and encourage a more diverse industry (e.g. SMEs, housing associations, community land trusts, community-led partnership, etc.). Ensuring a minimum number of small- or medium-sized developers on larger multi-developer sites should be considered, and local authorities should be support by government to directly prepare sites for development so they can assume stewardship.
The approach to housing land allocation is a key factor facilitating poor design and should be rethought so it is less developer-driven, more community-led and based on sustainable development principles. Local authorities should allocate a wide range and mix of housing sites in their local plans, at different sizes and scales, and in different locations to achieve a balance of tenures and dwelling types. Brownfield land should be prioritised and the appropriateness of proposed site for new housing (i.e. technical impact assessments) should be completed during the local plan process, rather than as part of the planning application process (see for further information: Wright and Tolson, 2020). Too often, local authorities allocate large out-of-town greenfield sites because volume housebuilders already own or have an option to develop it, thus making it the simplest route to meeting housing delivery targets.
When sites are allocated for housing growth, a corresponding masterplan should be a prerequisite. Masterplans should not be theoretical exercises, but a means of delivering design value standards spatially. Local authorities should be required to establish a masterplan for all allocated housing sites and should engage widely on their contents with local people and other stakeholders, including housebuilders. It is crucial that masterplans are not based solely on housebuilders’ proprietary viability calculations and challenging issues, such as site layout highways design and adoption, the location of parks and open space and the amount and location of affordable housing, should be prescribed early in the masterplanning process and not left open for future negotiation.
None of the above recommendations are possible without more direct investment in local authority design governance, and this should be prioritised. In the absence of direct funding, however, local authorities should also seek out innovative ways to build design capacity and find ways for officers to gain easy access to design expertise, such as: sharing specialist resources with neighbouring local authorities; charging higher fees for more comprehensive pre-application discussions with design officers; using planning permission conditions to fund a design officer’s time on larger projects; and, establishing a design review panel composed of expert panellists based in the local area who volunteer their time for free. Increased funding for design governance should be understood as a critical route to making better planning decisions in the context of the housing crisis, The Climate Emergency and the impacts of the Covid-19 pandemic.
In short no, not to achieve demand in sustainable housing. A wholesale review is needed of skills delivery across the sector to ensure that it can deliver on social, environmental and economic value as well as retrofit. Even the National Federation of Builders recognises that contractors may have to ‘adjust their services’ to fit new ‘green’ funding streams. (NFB, 2019, p. 13)[23], something that will require a change of ‘outlook and behaviour’ (NFB, 2019, p. 20). The NESTA Going Green report suggest a need for a new category for industries relating to their level of ‘eco-transformation’. This implies the existence of a class of individuals who assist with that transformation, both in industry and education. Rather like the way in which advertisers segment their market NESTA use the taxonomy ‘leaders, neutrals, followers and laggards’ to categorise industry. ‘Leaders and neutrals, or the green sector, are responsible for 7 per cent of UK emissions and account for about 55 per cent of total employment’ while the ‘followers and laggards’ account for the other 93% of emissions and 45 percent of employment. Unsurprisingly the majority of laggards are in areas that suffer from least investment. The authors identify ‘real estate’ as a ‘neutral’ and suggest that particular incentives need to be made by government to get this category on board. Unsurprisingly ‘construction’ is in the ‘laggard’ category and is likely to be ‘forced to restructure itself to be more green (Kapetaniou and McIvor, 2020, p. 16)[24].
The Ministry of Building, Innovation and Education (MOBIE), offers dedicated modules to learning organisations that would give students direct experience of these new kinds of facility. As MOBIE CEO Mark Southgate observes of lack of interest in construction careers. “Millennials don’t want to go there, they want to use those design skills, they are intrinsically digital and design, and we’ve got to tap into that.”(LABC, 2020)[25]. In short the construction industry needs to change to become more attractive to a diversity of people. Key to this would be increasing alignment between construction and more successful and dynamic industries such as the creative industries.
Making MMC mainstream will require considerable upskilling of the construction team (LABC, 2020). An inability to innovate is particularly serious among small builders. This is what makes the Mass Bespoke project based in Leeds so remarkable (Bauman and Harker, 2020)[26]. The team here are collaborating with local builders to develop very localised forms of digital construction using a panel system to create bespoke building solutions. Targeted research funding would enable more such localised collaborations to develop.
There are many examples of knowledge gaps between construction and other related sectors, particularly as housing delivery and housing itself becomes more digital. Bitterman and Shach-Pinsly identify a knowledge gap between the disciplines of computing, architecture and healthcare. ‘Architecture and town planning have been much less involved with smart house technologies, although they will be the professional group that will be responsible for designing and implementing smart homes and the future smart city’ (Bitterman and Schach-Pinsly, 2015, p. 266)[27]. There are pockets of housing research happening within the digital industries, for example Microsoft’s work on digitally enabled care or the work that is going into developing augmented reality experiences for potential home buyers and others.
Turning to design, the value of good design is often poorly understood in local authorities and tends not to be championed by senior council executives or integrated into decisions about allied issues like health and social services, where good design can make a positive difference to the long-term wellbeing of communities. To ensure better design decisions are made during the planning application process, local authorities should ensure that the creation of well-designed places has status and is upheld and is therefore worthy of funding and support. This could lead to more integrated teamwork among council experts and a greater emphasis on training local authority decision-makers about the value of design and the way in which design informs decision-making in the housebuilding sector. At the same time, the championing of design a corporate level would give local authority officers the confidence to make bolder decisions when exercising design discretion. In this respect, the statutory role of the ‘chief planning officer’ that was recently introduced as part of wider reforms to the Scottish planning system and the current proposal in the English planning White Paper to have a ‘chief officer for design’ in English local authorities, potentially represent steps in the right direction.
Housing development is often subject to ‘value engineering’ meaning the quality of a scheme given planning permission ‘on paper’ is not reflected when the project is constructed. Housebuilders should therefore be required to place greater emphasis on design quality when they rank contractors and make procurement decisions. This would go some way to ensuring that design is considered throughout all stages of technical design and construction. As a condition of planning permission, housebuilders should also be required to hire a single a skills person who is responsible for overseeing the design of a scheme from start to finish.
The reform of the local government finance system is urgent and that ‘it is not just a technical issue’ but will ‘have profound implications for the type of country England is’ (Amin Smith and Phillips, 2019)[28]. Housing delivery needs to be recognised as a health intervention with improved links between the health and planning policy agendas (APPG for healthy homes & buildings, 2018)[29].
There are many ways that local authorities can generate income but they need authority, expertise and capacity to do so (for example local authority led development, second homes tax, land tax, land value capture, raised planning fees). First and foremost the government needs to invest in local authority planning departments to enable them to update what they do in the light of technological change, most notably GIS mapping, AI and coding. The total expenditure on planning by local planning authorities is now just £900 million a year across England. More than half of this is recouped in income (mostly fees), meaning that the total net investment in planning is now just £400 million, or £1.2 million per local authority. This is fifty times less than local authority spending on housing welfare, and twenty times less than estimates of the additional uplift in land values which could be captured for the public during development (RTPI, 2019, p. 3).[30]
Government needs to free up local authorities to be more innovative in the funding and delivery of local authority built housing. Investment in MMC and modular construction by government would make the use of novel methods of construction less risky, encouraging their use. If major growth in local authority housing was allowed it would mean that construction companies would feel confident that they will receive the steady stream of contracts necessary to make investment in innovation worthwhile.
Beyond the recent welcome freeing up of council housing borrowing rules in England (a necessary but not sufficient condition to restart council housebuilding to any sort of scale), councils are now experimenting with delivering housing through other means, including through semi-independent housing companies (Hackett, 2017)[31] and in partnerships with the private sector (see, also: White, et al., and their design report for CaCHE, op. cit).These council-owned companies providing a mixed portfolio of housing tenders had, until 2018, been given little attention by government as a way of driving up supply (Hackett, 2017, p. 4). However, they are now beginning to produce significant numbers of new homes, which are likely to exhibit both high design quality and to be policy compliant. As much as 95% are building on their own land. The motivation for local authorities delivering new homes include: diversifying the housing market, improving stock for private renting, producing tenure neutral new homes, and directly improving design and sustainability (UK Gov, 2018)[32] (Hackett, 2017).
Several dimensions of innovation have been suggested in the earlier answers (e.g. recommendations for improvement in new build design in Q8). Here we briefly note other connections to innovation as issues within our substantive research programme:
Regarding modular or off-side construction – our colleague Dr Sarah Payne is currently leading a major CaCHE project on MMC. We will also be undertaking futher work on post occupancy surveys with respect to the experience of contemporary housing design (White).
Ken Gibb led a study on Scotland concerned with the wider economic, social and health impacts associated with social housing linked the appraisal expected benefits pf such investments directly to Scotland’s national performance indicators[33]. There is considerable scope to make more, systematic use of social and environmental impacts in planning and new housing decisions.
The Housing demand focus should not let us ignore the existing housing stock, often in poor quality, lacking in the private sector any real joined up approach to repair and improvement (see Preece, et al, 2021)[34] nor the need for significant net zero retrofit work, especially again in the private sector (see current research led by Jennifer Harris on the minimum energy efficiency standard in the PRS and by Gibb on retrofit evaluation in tenement flats).
September 2021
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[1] The question only asks about housing demand. Housing supply raises further issues addressed in the House of Lords Economic Affairs Committee housing report of 2016. Building more homes (parliament.uk).
[2] See Meen and Whitehead (2020), Chapter 3.
[3] Climate change potentially has radical implication for housing demand but is beyond the scope of this evidence.
[4] House of Commons, Communities and Local Government Committee, Housing for Older People, Second Report of the Session 2017-19, Cm 370.
[5] See Meen and Whitehead (2020), Figure 4.5.
[6] ONS: National Population Projections: 2018-Based. National population projections - Office for National Statistics
[7] In fact, there are major problems in the use of price to earnings ratios as a measure of affordability. See Meen and Whitehead, Chapter 3.
[8] This does not mean that there is no affordability problem for first-time buyers. But the difficulties relate more to meeting the required deposit.
[9] GMA (2019) Greater Manchester Infrastructure Framework 2040. Greater Manchester Authority. Available at: https://www.greatermanchester-ca.gov.uk/media/1715/greater-manchester-infrastructure-framework-2040.pdf.
[10] Hatleskog, E. and Samuel, F. (2021) ‘Mapping as a strategic tool for evidencing social values and supporting joined-up decision making in Reading, England’, Journal of Urban Design. doi: DOI: 10.1080/13574809.2021.1890555.
[11] Stantec (2021) Better Places Toolkit. Available at: https://www.stantec.com/uk/projects/b/better-places-social-value-toolkit.
[12] Harrison, J., Galland, D. and Tewdr Jones, M. (2021) ‘Regional planning is dead: long live planning regional futures’, Regional Studies, 55(1), pp. 6–18.
[13] Payne, S., Serin, B., James, G. and Adams, D. (2019) How does the land supply system affect the business of UK speculative housebuilding? An evidence review, UK Housing Evidence Centre.
[14] Leishman, C., Frey, J. and McGreal, S. (2020) Micro-economics of housing supply, UK Housing Evidence Centre.
[15] Callcutt, J. (2007) The Callcutt Review of Housebuilding Delivery. Department for Communities and Local Government: London.
[16] Letwin, O. (2018) Independent review of build out rates: final report, London: MHCLG.
[17] Adams, D., Leishman, C. and Moore, C. (2009) Why not build faster? Explaining the speed at which British house-builders develop new homes for owner occupation, Town Planning Review, Vol. 80, No. 3, 291-314.
[18] KPMG and Shelter (2015) Building the homes we need: a programme for the 2015 government.
[19] Adams, D., Leishman, C. and Watkins, C. (2012) Housebuilder networks and residential land markets, Urban Studies, Vol. 49, No. 4, 705-720.
[20] Ministry for Housing, Communities and Local Government (MHCLG) (2018) Independent Review of Build Out: Final Report. London: MHCLG. (See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752124/Letwin_review_web_version.pdf.)
[21] Satsangi, M., Hoolachan, A., O’Brien, P., Dembski, S., Dunning, R. and Lord, A. (2020) Housing Land Allocation, Assembly and Delivery: Lessons From Europe. Scottish Land Commission. Available at: https://www.landcommission.gov.scot/downloads/5fbcd40ea1aee_HOUSING%20LAND%20ALLOCATION,%20ASSEMBLY%20AND%20DELIVERY%20-%20LESSONS%20FROM%20EUROPE.pdf. (Accessed 17/08/21.)
[22] Lord, A., Dunning, R., Buck, M., Cantillon, S., Burgess, G., Crook, T., Watkins, C., Whitehead, C. (2020) The Incidence, Value and Delivery of Planning Obligations in England in 2018-19. Ministry of Housing, Communities and Local Government, August 2020. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/907203/The_Value_and_Incidence_of_Developer_Contributions_in_England_201819.pdf. (Accessed 13/08/21.)
[23] NFB (2019) Transforming Construction for a Low Carbon Future. National Federation of Builders.
[24]Kapetaniou, C. and McIvor (2020) Going Green: Preparing the UK workforce for the transition to a net-zero economy. NESTA.
[25] LABC (2020) Modern Methods: Where are the skills?, LABC Warranty. Available at: https://www.labcwarranty.co.uk/blog/modern-methods-of-learning-how-are-the-builders-of-tomorrow-learning-about-offsite-construction/.
[26]Bauman, I. and Harker, K. (2020) ‘New Infrastructure for Communities Who Want to Build’, in Social Value in Architecture. London: Wiley (Architectural Design, 90), pp. 38–45.
[27] Bitterman, N. and Schach-Pinsly, D. (2015) ‘Smart home - a challenge for architects and designers’, Architectural Science Review, (3), pp. 226–274.
[28] Amin Smith, N. and Phillips, D. (2019) English council funding: what’s happened and what’s next? Institute of Fiscal Studies. Available at: https://www.ifs.org.uk/publications/14133.
[29] APPG for healthy homes & buildings (2018) Building our Future: Laying the Foundations for Healthy Homes and Buildings. Available at: https://healthyhomesbuildings.org.uk/wp-content/uploads/2019/04/HHB-APPG-White-Paper-V2.pdf.
[30] RTPI (2019) Resourcing Public Planning. RoyalTown Planning Institute. Available at: https://www.rtpi.org.uk/media/3415870/ResourcingPublicPlanning2019.pdf.
[31] Hackett, P. (2017) Delivering the renaissance in council-built homes: the rise of local housing companies. Ths Smith Institute. Available at: http://www.smith-institute.org.uk/wp-content/uploads/2017/10/The-rise-of-local-housing-companies.pdf.
[32] UK Gov (2018) Government announces new generation of council housing. Available at: https://www.gov.uk/government/news/government-announces-new-generation-of-council-housing.
[33] https://housingevidence.ac.uk/publications/the-impact-of-social-housing-economic-social-health-and-wellbeing/
[34] https://housingevidence.ac.uk/publications/housing-policy-and-poor-quality-homes/