Bob Kerslake on the 3m housing target

As the credit crunch grinds on, the Government's plans to build 3 million new homes by 2020 is starting to look more ambitious by the month. Already, housing starts are 10% lower this year than a year ago.

So how is the new Homes & Communities Agency going to deliver those big numbers? And what is the likely trajectory of new housebuilding over the next decade? Those were my questions today to Bob Kerslake - chief executive designate of the HCA - at the Regeneration & Renewal national conference.

Here are Bob's answers - all interesting stuff:

1. The credit crunch is already having an adverse impact on new housing starts and completions. In other words, fewer houses are going to be built this year compared to the 200k in 2007. 2009 will also be "challenging".

2. It's too soon to know what the likely shape of the 2008-2020 trajectory will be, because of the current uncertainty. The annual rate of new-build (240k p.a.) is actually more important than the eventual 2020 target of 3 million new homes.

3. The big issue is the underlying imbalance between housing supply and demand. That's why homeownership is so unaffordable - because we haven't built enough houses, and the number of new households is increasing all the time. If we don't deal with that, then lots of people will be denied the opportunity of owning their own home. This is "massively damaging" to wealth and income inequality.

So what can the HCA do? Bob said they would try to help housebuilders deal with cashflow and risk. He also called for a bigger focus on the "mid-market" - not just homeownership or social housing, but the private-rented sector and shared-equity schemes. We'll be reporting on the importance of the PRS next month, with the Smith Institute.

Some other nuggets from Bob's speech....

• He is aiming for the HCA to go live by 1 December - a few months sooner than first planned.
• The HCA will be the largest regeneration agency in Europe, with a total budget of £16.8 billion over the next 3 years. It will have around 820 staff, including 500 from English Partnerships and 250 from the Housing Corporation.
• He has a target to deliver 180k affordable homes between 2008-11, at a rate of 70k by 2010-11.
• And, in response to concerns that the HCA might be too remote, he said: "We have to be an agency that is national, but works locally."

This was an important speech, at a critical time. As the 3 million target is coming under ever-closer scrutiny, Bob's comments are a big reminder that we do need to build lots more new homes. Not just because it's a Government target, but it's vital for our economy too. We're not going to deliver the new homes we need in the next couple of years, but we do need to be ready to ramp up the numbers when the housing market recovers - whenever that may be....

Comments

[AlanWenban-Smith]

Apologies for only just catching up with this - however, I think a comment is in order because you adopt such an uncritical approach to the Government's targets for new housing.

Have you looked at the NPHAU's regional guidance, just issued (July)? If you wanted a demonstration that increasing new housing numbers is a totally ineffective way of adressing affordability, look no further: when a 60% increase in output over 2007, maintained for 20 years, only gets affordability back to (unacceptable) 2007 levels, isn't it time to wonder whether you have the right policy prescription?

But(in the middle of a housing market nosedive) NHPAU courageously diagnose a 'blip' and the need to increase the dose still further. Doctor Pangloss rides again!

The presumption of ever-rising housing markets is surely dead, for several years at least. Present government policies seem increasingly out of touch with this reality, and planners need to be in the forefront of a radical re-think. Two suggestions:

1. With the housing market no longer a sure-fire source of (unearned) wealth for all, renting needs to be looked at in a quite different way, and with much higher priority. Once separated from speculation on capital values, renting is a rational life choice with its own rewards (eg less worries about maintenance/repairs, flexibility about jobs, neighbours, etc), rather than a residual for those missing the gravy train.

2. Looking after the affordable homes we have got (and ensuring that they are available for buying or renting) looks an increasingly important component of the policy mix (and plays into agendas for urban regeneration, economic agglomeration and reduction of car-dependency).

These responses clearly will not produce the additional numbers suggested by official household projections, but is this really the social disaster it is represented? The ‘housing numbers game’ is long overdue a re-examination, as the policy use of the projections has come seriously adrift from understanding what they do (and don't) represent.

The household projections deal in NET increases – the difference between new households forming and old ones dissolving. Politicians, policy makers, housebuilders and (sadly) many planners talk as though more NET households is the same thing as more NEW households. It is not.

A closer look at the figures shows that the largest NET gains of households are amongst the elderly (a recent 2006-2026 projection for the West Midlands projected a 62% net increase in households headed by over 65s, compared with only an additional 5% headed by under 30s). Elderly households are by definition NOT 'NEW': these are people (already housed) who have become first elderly and then single. This is not quite the picture (beloved of HBF and CLG) of wicked planners denying young couples a roof over their heads.

The Government's present obsession with more land for new building for sale (urged on by HBF) is likely to be totally counter-productive for those at the margins:

1. Providing more housing land will not deliver more homes for owner-occupation – it will merely ensure that the small number of new homes that can be sold will be built on the easiest (greenfield) sites. This will undermine urban regeneration - particularly of the cheapest existing stock, which is where new households look;

2. Contributions to affordable housing and infrastructure from surplus land values will be much smaller scale. More of these costs will have to be borne by the public purse.

Time for a re-think based upon the WHOLE housing stock and GROSS household change.

In case you are wondering where my interests lie, I am a planner who has spent his whole career trying to regenerate our major urban areas. For most of this time it was against the overt hostility of a Tory government. It is soul-destroying that a Labour Government seems hell-bent on going a so much further.

Alan Wenban-Smith
Urban & Regional Policy
0121 442 2341

[Dermot]

Alan - thanks for this.

Totally agree with your call for more renting. That's exactly what we called for in our recent report on the private rented sector - see http://www.centreforcities.org/index.php?id=522

Also agree that we need to do more to bring existing empty housing back into use. There were 663k empty properties in 2006, and even more space available above shops and other commercial properties. But the developers will probably need financial incentives to make the necessary conversions.

As I said in May, the 3m housing target is starting to look more and more unachievable - and there's a strong case for re-examining that number. Kate Barker's review is now 4 years old, and a lot has happened since then. We're thinking about this now, and will be coming up with some new ideas soon.

Finally, you're right that new housing will not on its own address the long-run affordability problem. As you say, new supply will always be a relatively small proportion of overall stock. The location and type of new housing is also critical. As our Home Economics report said, we need to build the right houses in the right places.