What now for housing? Unravelling the new Government Policies - - PowerPoint PPT Presentation

What now for housing? Unravelling the new Government Policies Thursday 15 October 2015

Agenda Alan Benson Senior Manager – Housing Strategy, Greater London Authority (GLA) Nick Duxbury Executive Editor, Inside Housing Andy Belton Chief Operating Officer, Notting Hill Housing Trust Daniel Kaye Director, Sheridan Development Management

WHAT NOW FOR HOUSING IN LONDON?

Alan Benson GREATER LONDON AUTHORITY 14 Oct 2015

“The shortage of housing is perhaps the gravest crisis the city faces.”

POPULATION GROWTH

London’s population reached its highest ever level in early 2015, passing its previous peak of 8.6 million people in 1939.

JOBS, PEOPLE AND HOMES

HOUSING SUPPLY

THE AFFORDABILITY CHALLENGE

THE AFFORDABILITY CHALLENGE IN LONDON

COMMUTER FLOWS

• 73% of businesses think London’s housing costs

are a significant risk to economic growth

• £1.04bn the value of economic growth (GVA) lost

every year through high housing costs

• £5.4bn the wage premium London businesses

faced in 2015 – equivalent to £1,750 per person additional salary to compensate for housing costs

• In sales, customer service and care, median rents

in London are close to or above 100% of the typical gross earnings of workers in these sectors

ECONOMIC IMPACT FIRST

TENURE TREND

“If you’ve worked hard and saved, I don’t want you just to have a roof over your head – I want you to have a roof of your own.”

“To build more homes that people can afford, give more

people the chance to own their own home and ensure the way housing is managed is improved.”

• Introduced Oct 2015 - Royal Assent Mar/Apr 2016
• Starter Homes
• Right to Buy and high value sales
• Self Build and PRS
• Housing management
• Planning changes

THE HOUSING BILL

• Defines Starter Homes

– New dwelling, first-time buyers, discount – SoS has considerable discretion to amend this

• Duty of LPAs

– General duty to promote Starter Homes – Specific duty to only grant planning permission when the fixed ‘Starter Homes requirement’ is met – Delivered via planning agreements, reducing other affordable housing and infrastructure provision – If LPAs fail to comply the SoS can issue a ‘compliance direction’

STARTER HOMES

• Gives statutory underpinning to the voluntary deal

agreed between the NHF and Govt

• Enables SoS, HCA and GLA to pay grants to HAs

to cover the costs of the discounts

• These payments can be made with conditions
• SoS will set out criteria for a new home ownership

standard, enforced by the Regulator

• HAs that do not enter the voluntary deal will be

required to make a “no worse” home ownership

• ffer to their tenants

EXTENDING RIGHT TO BUY

• Enables SoS to require Councils to make payments

to govt based on value of high value homes

• Designed to pay for the extension of Right to Buy
• LAs required to consider selling such housing but

can make bilateral agreements with SoS to reduce liability (in return for new build commitments)

• No detail about the scale of the payments – almost

all the detail is left open to the SoS to determine through regulations

HIGH VALUE COUNCIL HOMES

• Self Build & Custom Build

– LPAs will have new duty to grant “sufficient suitable development permissions on serviced plots of land” to meet demand in their area

• Private rented sector

– Banning orders for rogue landlords – Database of rogue landlords and letting agents – Rent repayment orders for offences – Recovering abandoned premises – HMO licensing; fit and proper persons test – Tenancy deposit scheme info to be shared

SELF-BUILD & PRS

• SoS will set the rent levels that landlords must

charge ‘high income social tenants’

• Landlords, assisted by HMRC, given powers to

collect data about their tenants’ incomes

• HAs will keep additional incomes, councils must

return it to govt

• Plus:

– Wide-ranging power for SoS to change social landlord regulation – Ending specific duty on councils to assess the housing needs of gypsies and travellers

OTHER HOUSING MEASURES

• SoS power to amend local development plans,

give direction to examiners and intervene directly to ensure all LPAs have plans in place by 2017

• SoS to define strategic applications by reference

to the London Plan or local plans – ie the London Plan can identify areas where the Mayor wants to be consulted on all/certain type of applications

• Devolving powers on wharves and views with

reduction of referral threshold to 50 units to come

LOCAL PLANS & THE MAYOR

• A new planning route: Permission in Principle

followed by Technical Details Consent

• SoS can, by a development order, grant PiP for

sites allocated in qualifying documents

• The development order will set out the type and

amount of development granted PiP

• The development order is likely to only include

housing, so may exclude mixed use

• May have significant implications for the number
• f schemes referred to the Mayor

AUTOMATIC PERMISSIONS

• LPAs required to compile and maintain a register
• f Brownfield Land suitable for housing
• LPAs to distinguish between these sites and

those it considers suitable for PiP

• Sites allocated for a non-housing use cannot be

placed on the register

• Allows SoS to grant consent for homes linked to

nationally significant infrastructure project

• Changes to CPO to speed process and reduce

costs and uncertainty

OTHER PLANNING ISSUES

Sadiq Khan

“I’m going to make the election in May a referendum on London’s housing crisis.” “I’ll be doing everything I can to stop this bill.”

Zac Goldsmith

“There is no doubt that housing is the number one concern in London.” “I will take a long look at the detail when the Bill is published”

THE ELECTION & THE BILL

• A New Homes Team at City Hall:

– Acting as a developer, building new homes for social rent, London Living Rent and for first time buyers

• Putting Londoners first:

– 50% affordable housing target for all new development and stop 'buy-to-leave' giving Londoners first dibs

• Getting more investment into housing:

– Develop 'London Home Bonds' and freedoms for councils to borrow to build

• Land for homes:

– Identify all developable brownfield land in public and private

• wnership and no building on the Greenbelt
• Private rented sector:

– London lettings agency – longer tenancies, responsible landlords and tenants, naming and shaming bad landlords and Mayoral powers on rent controls

SADIQ KHAN

• We need land:

– Use public land and redevelop social housing estates at much higher densities – but “The Green Belt is a red line”

• We need planning:

– Mayor and boroughs have the powers – but reluctant to

• verrule boroughs “unnecessarily”. “I will give local

communities the power to require the Mayor to call in unpopular developments”

• We need finance:

– Investment vehicle to flip foreign investment/pension funds from purchasing homes to into development

• Other issues:

– Improve design and work with communities to build homes that enhance communities – recreating street patterns

ZAC GOLDSMITH

SO WHAT’S NEXT?

What now for housing? Unravelling the new Government Policies Thursday 15 October 2015

Supply side

What do the government’s reforms mean for housebuilding and social housing?

How is housebuilding at the moment?

BAD

We are only building 131,000 homes a year - up 15% on last year. But starts are actually down 5%. Housing associations are building 20,000 a year and paying for a further 20,000, but now they will build less due to funding and rent cuts. Local authorities are building more than they have in decades. But the number remain feeble and there’s a huge skills gap.

• House prices in London have doubled in

a decade

• Average rents have risen 20% in 5 years
• But wages have only risen 5%
• London is now the least affordable city

in Europe and 4th only to Shanghai, Hong Kong and New York in the world.

• Business leaders are now concerned:

The CEBR has calculated the economy is missing out on £1.2bn of spend, and 11,000 jobs a year due to housing costs.

The result? A housing crisis

After five years of power, the message now is a bit desperate:

build more *homes.

*to sell (not to rent).

What is the government’s plan then?

Two weeks ago Communities Secretary Greg Clark told the National Housing Federation (NHF) conference he wanted to build ONE MILLION homes by 2020. That means driving development up by 70,000 homes a year. Even if he does this, that is 40,000 homes a year too few. We need to be building 240,000 homes a year - 1.2 million by 2020 just to keep up with demand.

What does the government want to do?

1.The government wants to build 200,000 Starter Homes a year and is allowing developers to build these instead of subsidised rent homes through S106. 2.It is extending the Right to Buy to 1.3 million housing association

• tenants. Replacement homes will be paid for by forcing councils to

sell higher value assets. 3.It is introducing Pay to Stay so higher earners (£40k in London and £30k outside) pay full market rates. 4.It is freeing up free markets to naturally meet demand. 5.It is out of ideas.

How does the government intend to do this?

NO

Will that get to 1 million homes by 2020?

Starter Homes will be sold to first time buyers under the age of 40 with a max value of £450,000. They are David Cameron’s bid to “turn Generation Rent to Generation Buy” There are three main problems with Starter Homes: 1.They aren’t affordable to many people 2.They won’t increase housing supply significantly 3.They divert funding from genuinely affordable housing

Why won’t starter homes work?

Here’s where Shelter says a couple both working full-time for the national living wage will be able to afford a 2020 starter home.

Shelter

Starter Homes: affordable for low earners?

Starter Homes: affordable for average earners?

Things get better for families on average wages – but most of London and the South East will still be off-limits.

Shelter

Even for families in the top 10% of earners, large areas of the South East will still not have starter homes.

Shelter

Starter Homes: affordable for high earners?

Starter homes: increasing supply?

The government wants to build 200,000 Starter Homes by 2020. It is also hoping builders will develop more homes as a result of not being forced to pay for social housing. Shore Capital has calculated that even if 50,000 are built each year, these will only lead to an additional 22,000 homes a year. This is because they are simply diverting funds away from genuinely affordable homes that would have been built anyway.

So where do housing associations fit in?

The definition of affordable housing will include Starter Homes. AHP funding earmarked for affordable rent could also be diverted to Starter Homes. As ‘affordable housing providers’ associations need to position themselves as the government’s delivery partners of choice. But the government doesn’t mind whether associations or developers build. Hence the NHF’s offer to government to extend the Right to Buy...

Extending the Right to Buy to HA tenants

NHF members representing 93% of housing association homes voted to voluntarily* extend Right to Buy (negating the need for legislation). 55% of members voted YES 45% did not support the NHF’s offer The government has accepted this offer

Right to buy?

It avoids an existential threat of privatisation. Board independence is maintained. It is a good financial deal: HAs will be fully compensated. Supporting the government has positioned the sector to deliver Starter Homes. Associations are supporting home ownership. It will lead to more homes being built.

Wrong to buy?

HAs will suffer reputational damage. They will lose social housing assets and long-term income. Many councils will find it difficult to work with housing associations. Labour and Lib Dems argue the Right to Buy would have won further exemptions had it been subject to parliamentary scrutiny. HAs run the risk that the terms of the ‘deal’ could be renegotiated at any time. HAs will be more vulnerable to commercial risks of the development cycle. HAs in low-value areas will struggle to replace homes one for one.

Will the Right to Buy deliver more homes?

If 1.3 million households eligible want to take up the Right to Buy AND If tenants can get mortgages to buy the homes and afford repayments AND If local authorities can sell sufficient assets to pay for them AND If housing associations are able to replace one-for-one within two years

• f sale…

...then MAYBE

How will it ensure this happens?

The Pay to Stay proposal is intended to incentivise more households to take up the Right to Buy. Pay to Stay is also beneficial to housing associations who will get higher rents. The government calculates this will go some way to filling the hole left by the 1% a year rent cut for four years. But local authorities don’t get to keep the receipts AND take a £42bn income hit.

Will housing associations continue to build?

Yes.

But they won’t be as affordable to low income households.

What type of homes will they build?

Inside Housing recently asked 120 housing association CEOs how likely it would be that they would build more shared ownership and market sale properties in response to the government’s rent cut. 20% said they were extremely likely 53% said they were very likely 16% said they were not very likely 11% said they were extremely unlikely So, 73% of the largest landlords will be more traditional housebuilders regardless the Right to Buy and Starter Homes policies.

What about sub-market rented homes?

We asked the same 120 CEOs how likely it was they would stop entering new agreements to build homes for sub-market rent. 11% said they were extremely likely 21% said they were very likely 46% said they were not very likely 22% said they were extremely unlikely So, a third of housing associations are likely to stop building sub-market rented homes.

What will landlords do to save cash?

59% plan to make redundancies, 52% plan to freeze recruitment, 61% plan to build more ownership products, 35% plan to build more market rented homes, 34% plan to find merger partners, 14% plan to collapse their group structures, 72% intend to cut back their non-core activities (work not related to housing management or development), 53% plan to share costs with other landlords.

Predictions for housing associations:

• 1. More mergers
• 2. More government attacks on executive pay
• 3. A greater push for transparency/accountability of performance
• 4. New sources of private finance introduced
• 5. Landlords taking on outsourcing roles
• 6. Surplus levy on organisations that do not invest in development
• 7. Greater emphasis on board standards
• 8. Less non-core social work
• 9. A small group of more commercial landlords will deregister

10.New non-housing association players will compete in the affordable space

Predictions for the market:

Homelessness will soar Housing starts will not increase significantly The government will reign in house prices using tax mechanisms Housing will be the defining issue in the 2016 mayoral election A form of rent “stabilisation” will be introduced in London David Cameron will fail in his pledge to turn Generation Rent into Generation Buy

THANK YOU

Nick Duxbury, Executive Editor, Inside Housing nick.duxbury@insidehousing.co.uk @nickduxbury

What now for housing? Unravelling the new Government Policies Thursday 15 October 2015

Andy Belton Chief Operating Officer

NHHT 15 October 2015

Notting Hill Housing – at March 2015

• c31,000 homes owned and managed with total

vacant possession value of £10.3bn

• Turnover of £400m with a Group surplus of

£121m

• Private sector debt of £1.25bn (£465m

undrawn)

• Successful development track record (7000 new

homes in pipeline)

• Strong and established management team
• Top regulator ratings for governance (G1) and

viability (V1) plus Moodys and S&P ratings

• Well positioned to withstand recent changes in
• perating environment

Group Turnover

£68.5 £76.8 £20.6 £118.1 £28.1 £34.7 £18.2 £6.1 £10.3 £215.5

First Tranche sales Outright sales Other Rented social housing Shared ownership Temporary housing Supported housing Student accommodation Market rent

Group Operating Margin

£28.8 £27.6 £8.7 £35.2 £12.5 £4.9 £4.6 £3.1 £6.8 £67.1

First Tranche sales Outright sales Other Rented social housing Shared ownership Temporary housing Supported housing Student accommodation Market rent

Housing Stock by Type

5000 10000 15000 20000 25000 30000 35000 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Social Rented Shared Ownership Temporary Housing Leased Housing Market Rent Intermediate Rent Student Accommodation Supported Housing Leashold Management Accounts 2014-2015 (1,531 of “Social Rented” is "Affordable Rent")

Location of New Development Schemes

Our Strategy

Challenges and Opportunities

• Generally, a shift in

perception perhaps?

• Affordability in London
• HA Right to Buy
• Rent Cuts
• Welfare Reforms
• Pay to Stay
• Mayoral election
• ‘Generation buy’

Effects of (-1%) Rent Reductions

Development Programme Costs and Grants (£m)

Continuity

• Same mission, vision and

values

• Continue to improve customer

satisfaction

• Our larger profits will cross

subsidise core work

• Continue to provide Affordable

Housing

• Cost Effectiveness (14%

savings)

• Modernisation
• IIP Gold

Aylesbury Canada Water

But also Change

• Address the needs of the

‘squeezed middle’

• PRS?
• A subsidised product – to

rent or buy?

• More home ownership?
• More partnerships?
• Consider a more

independent future?

What now for housing? Unravelling the new Government Policies Thursday 15 October 2015

Not so long ago in a galaxy really rather near………..

Daniel Kaye Director Sheridan Development Management

The Phantom Menace 2010-15

• Affordable rent, conversions, low grant rates,

welfare cap, bedroom tax, LHA averages, Universal Credit, NPPF, LEPs, Localism Act, Infrastructure & Growth Act, Vacant Buildings Credit, Permitted Development Rights, Help to Buy 1 and 2, CIL, budget cuts……..

The Empire Strikes Back 2015-2020

• Starter Homes, LDOs/brownfield sites, S106,

Pay to Stay, Tenancy Lengths, Rent Reduction for 4 years, RTB extension, Benefit cap reduction, shift of grant funding, 25% cuts, Help to Buy, Elected Mayors, NSIP Regime, Permitted development rights, Localism, Decentralisation, Immigration Act, Pension annuities, Tax change

• f Private Landlords…. and affordable rents,

conversions and …………

Galactic musings

• ‘Councils will no longer be able to insist on affordable

rented housing in planning agreements, following a radical change in government housing policy’

• ‘Councils 'struggle to meet emergency housing demand’
• ‘Expansion of office-to-residential conversions risks

'driving businesses out of London'

• ‘PM slams councils ahead of Housing Bill launch’
• ‘150 redundancies announced by Tameside housing

association’

• ‘The end of cheap bond finance?’
• ‘LGA warns against 'blanket' planning policy’

And……….

• ‘London councils face £13.3bn rent black hole’
• ‘Hitting home’ – Savills warn of build for sale exposure
• ‘The merger code’ – how timely!
• ‘Under new ownership - Forget social housing, any kind of affordable rented

housing is living on borrowed time in the wake of this year’s Conservative conference’ – Colin Wiles, Inside Housing

• Housing crisis is forcing out talent and hitting our businesses, say bosses –

John Lewis Partnership et al

• Housing & Planning Bill will place legal obligation on councils to deliver and

market Starter Homes – but what about affordable rent?

• Housing Bill: Property industry welcomes bold Local Plan measures but

warns of home ownership preoccupation - BPF

• This is a kick in the teeth for hard-up tenants - The Tories’ ideological sell-off
• f housing association homes will come back to haunt them – Melanie

Phillips, The Times

• London housing: Cost of flat sharing in the capital soars – Evening Standard

What kind of ‘Housing Jedi’ are you?

• Local authority and ALMO – London
• Local authority and ALMO – outside London in the SE
• Local authority and ALMO in the regions
• Local authority and ALMO – North by Northwest
• National HA, London HA, London and South-East HA,

Regional HA, Small HA, Medium HA, Large HA, LSVT, Charitable Trust

• New entrant

Are you a member of the Trade Federation?

• Developer, housebuilder, contractor, investor,

bank, building society, pension fund, institution, consultant, architect, surveyor, employers agent, QS, property manager, fund manager, engineer, recruitment consultant, IT systems developer, lawyer, accountant, tax specialist, planning consultant, urban designer, landscape architect…..

Galactic fault-lines, philosophy and new ‘old’ ideas!

• Generation Buy v Generation Rent
• Political and other definitions of affordability
• ‘Austerity economics’ v ‘Keynsianism reborn’ (Magpie Politics)
• What is your true philosophy and raison d’etre?
• Cutting costs and efficiencies
• Know your assets – worth, value, price and cost (Asset Register)
• More and different partnerships and innovations – THINK THE UNTHINKABLE and be

creative

• Risk management
• Don’t forget quality and longevity
• Don’t forget the fundamentals - residents, tenants, customers
• Differentiation/USP
• Housing needs assessments, housing demand and trends
• Regeneration beyond bricks and mortar
• TAKE CONTROL OF YOUR DESTINY

‘Back to the Future’ - 2020

• At least two London Boroughs merge – eg Sutton, Merton and Croydon
• Several authorities outside of London merge, along LEP lines
• A national/large HA forms a new form of partnership (merger) with a national house-

builder/contractors – Sutton Wimpey, L&Q Barratt, Peabody Wates, Home Dixon, Sanctuary Kier

• LAs share planning departments – Essex Councils’ Planning Services
• Starter Homes in London morph into Shared Equity and need more grant
• In SE – two tier Starter Homes supply
• Tory Party leader, George Osborne, announces the creation of ‘Homes for England

and Wales’ – direct Government intervention into building homes (People’s QE?)

• New funds enter the market on scale to deliver rented housing in partnership with

local authorities – locally regulated, not through the HCA? Like Octopus Investments in Doncaster

• More HAs diversify into property management services
• HA mergers, takeovers, stock rationalisation and stock swaps
• Garden cities continue to sound like nice places
• Star Wars Episode 8 is released …..

May the Force be with you…

THANK YOU

Development Consultancy, Project Management, Development & Regeneration Strategies, Town Planning, Strategic Asset Management, Housing Strategy & Analysis, Acquisitions, Disposals, Joint Ventures & Partnerships, Option Appraisals, Feasibility Studies, Risks Management, Development and Design Audit, Financial Viability Assessments Daniel Kaye, Director, Sheridan Development Management 07508 124 142 daniel.kaye@homecall.co.uk

Thank k you Any questions?