During the covid-19 crisis, homebuilding was temporarily paused and Brexit and an economic recession is set to knock construction output further off course for the foreseeable future, directly affecting the capacity of the market to deliver. At the same time, the pandemic has increased the need for more quality, safe and affordable homes for Londoners.
Therefore, the public sector is facing a huge a challenge to deliver under extraordinary circumstances. But there are financial mechanisms from government available, planning reform in consultation, an appetite for collaboration and widespread public support for more homes. So how can the sector pull together to take advantage, accelerating homebuilding against the odds?
As part of FoL’s Covid response and recovery programme – Learning From Crisis – and in partnership with the G15, we invited three speakers to examine the challenges and opportunities ahead.
- Tom Copley, Deputy Mayor for Housing & Residential Development, Greater London Authority
- Geeta Nanda, CEO, Metropolitan Thames Valley
- Jackie Odunoye, Operations Director of Housing, LB Redbridge
Speaking with FoL CEO Nicola Mathers, the discussion started with two key questions: what are the biggest barriers for accelerating homebuilding and where are the opportunities for collaborating to do more with less?
For Geeta, new safety regulations and net zero targets have increased development costs; the cross-subsidy model where private sale balances the cost of affordable homes is fragile as new build sales have slowed; and proposed planning, housing and funding changes have created an environment of uncertainty, affecting investor and developer appetite for risk.
Jackie agreed and added that resident resistance to change, where high density developments are on their doorstep is also a significant challenge. So too is the gap between the core development skills and experience required by borough teams and the complexities of their expanding house building portfolios.
Brexit will only make the skills gap wider, says Tom. A larger proportion of our current workforce rely on their eligibility to work in the UK. Investment in skills and attracting new talent will be paramount in the short term. Tom also pointed to the government’s squeeze on local authority budgets, but that councils are more resilient and better equipped to handle this than in the 2008 financial crash.
One example of this is the will to collaborate. In 2018, the G15 published its Offer to London which sets out how G15 members and local authorities can work together to build more affordable homes and strengthen communities. All speakers agreed that there was real potential for this as the GLA, boroughs and housing associations are all working to meet affordable housing targets. There is also recognition that complementary skills exist in different organisations. Housing associations have been building affordable homes at scale for decade and can share that knowledge with local authorities many re-entering the market after a 30-year hiatus.
Agreements to share staff across organisations can protect against peaks and toughs provided there’s a way to navigate complex service level agreements which could hamper secondments, mentoring and work shadowing schemes.
The panel agreed that there was also an opportunity to leverage the collective buying power of London’s public sector. A ‘London Buyers Club’ could take advantage of economies of scale when procuring services or materials in bulk such as precision manufactured housing. There are already examples of this working in practice such as LB Redbridge’s joint procurement agreement with LB Waltham Forest. The trick will be if we can move this to a pan-London scale.
With government cutting planned spending on their affordable homes programme, it’s vital to understand and make use of other financial instruments.
Private pension fund investment can help deliver larger, mixed tenure schemes where ownership is retained by the landlord. Rent provides an ongoing revenue stream increasing the return on investment and decreasing risk. Tenants also benefit as it’s in the landlord’s best interests to maintain the building and encourage long-term tenancies with a high-quality, on-site service.
Housing Associations often take advantage of private equity schemes which don’t carry the same restrictions as public grants. Despite the government’s proposed reform to extend the shelf life of Right to Buy receipts and how much value the local authority can retain; they are still restrictive and their value is often insufficient to cover the costs of one for one affordable replacements.
More flexibility in how grants are used is needed so that multiple sources can be combined to deliver more homes. According to Jackie, a collective “can do no harm” message from councils, housing associations and the GLA to government might help release more finance to affordable home builders and remove restrictions on combining other funding sources.
Publicly owned land is another component needed to deliver more homes. The development barriers on existing public sector or council-owned land are much lower. TfL own over 2,000 hectares of land in London and plan to deliver 10,000 homes across 300 sites, often over and around their stations.
Where two authorities own adjacent land, they could pool their sites together and deliver a cohesive approach to placemaking where social infrastructure is baked into residential development plans. This is an easier route than compulsory purchase which is unpopular and often unviable for affordable schemes as landlords can add ‘hope value’ to the sale cost of their land.
An audience Q&A followed the panel discussion, raising some interesting points around accelerating homebuilding:
- The green belt is often cited as an area to build London’s much needed homes, but the mayor is not supportive and wants councils to make better use of brown field sites – converting commercial and industrial uses into residential. The loss of many high street tenants could also be an opportunity to deliver more homes in town centres and bring in oft-marginalised groups, such as older people into the action.
- Building to higher densities in outer London is an obvious area of growth but unpopular with residents. Boroughs must take time to properly engage with residents on proposals, demonstrate the benefits and high design standards, listen to and incorporate feedback and ultimately build trust that will benefit future proposals.
- A collaborative approach to London’s precision manufactured housing could help reduce costs and speed up roll out. The GLA is taking a lead role in this and scoping for the potential of a London factory to lower the entry barriers for affordable housing providers to use precision manufactured housing.
- Proposed changes to shared ownership schemes give buyers more flexibility with how much money they initially put in and can staircase their ownership stake. It also asks for more resource from landlords to provide repairs and maintenance for up to 10 years. These changes could make the scheme more attractive to buyers but less so to home builders who take on more of the costs.
- Larger housing associations don’t tend to suffer from the same housing development skills gaps as boroughs. They’ve been consistently building for many years and have grown large teams. The same may not be the case for smaller HAs but a joint GLA/L&Q initiative called Build London partnership is aiming to try to bridge that gap, helping smaller HAs take advantage of L&Q’s larger spending power and expertise.
- Public Practice and other initiatives designed to bring cross-sector expertise into local authorities is a very useful tool. There should also be more opportunities for experienced borough practitioners to “mentor” new and less experienced hires as they develop their skills.
Working with Altair, Future of London will be launching a new entry-level talent programme in 2021 that aims to diversify the housing and regeneration workforce. A 21-month programme with three placements across local authorities, housing associations and private-sector developers gives candidates cross-sector experience, connections and mentors. FoL is looking for host organisations to register before the end of the year. More info on the Emerging Talent Programme and how to get involved is available here.
Accelerating Homebuilding event resources
- The G15’s Offer to London, which sets out how G15 members and local authorities can work together to build more affordable homes and strengthen communities·
- The G15 Tenancy Sustainment statement which sets out how G15 members are committed to supporting residents to live well in their homes and work with local councils to develop positive housing solutions
- G15’s Offer to London: Working in partnership with local authorities – potential development management services – a service agreement which sets out how G15 members could support local authorities to meet their housing ambitions
For further information on the Learning From Crisis programme and other upcoming webinars, please visit the programme landing page here.
This event was supported by