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Callcut Review |
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England’s housebuilding industry is in shape to deliver the homes we need for future
generations and is capable of delivering 240,000 homes a year by 2016. Our challenge
is to deliver a supply of housing where it is needed, for those who need it, at a price
which is affordable for the homebuyer, which is commercially viable and which
contributes to our ambitious zero carbon targets.
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Land is key to housing delivery. Our Review has reached the conclusion that given
sufficient land, and subject to our recommendations, the industry and its supply chain
has the capacity to meet the Government’s objectives on volume, quality,
environmental performance and affordability.
Planning Policy Statement 3 (PPS3), published in late 2006, provides a sound policy
framework for ensuring that an adequate supply of development land is available.
A number of our recommendations build on measures already introduced by PPS3.
We recognise that it will take time for the effects of PPS3 to work their way through
the system and have made only minor recommendations designed to underpin its
objectives.
New settlements and edge-of-town development will be needed if the target is to be
met, but we must avoid urban sprawl: it is wasteful, both of valuable green space and of
potential value in our urban areas. Edge-of-town developments can often entail a less
environmentally sustainable lifestyle with commuting to work, access to services, and
leisure.We can do better.
Much more previously developed land, particularly in our towns and cities, should be
used and the proportion of green field development minimised. The strong imperative
for this is that unless we continue to regenerate our towns and cities they will decline
and in turn force more development out into our countryside.
Our towns and cities offer a huge potential for housing development and renewal: some
on former commercial or industrial land which can be brought into housing use, some
where the existing housing is of poor quality or makes poor use of the land. The scale
can range from a scattering of small sites to large areas where redevelopment can not
only contribute to housing goals but will make a major difference to the quality of life.
For the housebuilder or developer many of these previously developed urban sites are
not immediately attractive to build on. They are generally slower and more expensive to
redevelop and they may not deliver the returns which investors in housebuilding expect.
Such sites are also much more sensitive to cost increases, whether through build
inflation or increased regulatory standards and costs.
At a time when resources are stretched, the challenge for the Review has been to set
out the means by which we capture the potential of some of our nonviable inner city
areas and transform them into desirable places to live, whilst at the same time making
them commercially attractive to investors. This is turn will help secure private
investment funding for regeneration and community management on a much larger
scale and at a faster pace than can be achieved with public resources alone. It should
be a primary goal of public policy to secure that investment.
Developers and their shareholders consider such redevelopment as risky. They are
concerned that both housing and commercial value growth will not be delivered, or
sustained in the longer term. It is strongly in the interests of central government and local
authorities alike to address these risks, since that is the key to unlocking urban land which
is low in commercial viability.We have made a number of recommendations that should
provide developers and their shareholders with the confidence that they require.
To secure the required increase in housing numbers with the maximum use of
brownfield land, local authorities will need to work much more closely with developers.
Historically their relationship has often been one of mutual suspicion and mistrust. That
must change but can only do so if the basis of their commercial relationship is agreed
and fixed at the very beginning of the site identification process.
From that point, the local authority and the developer should have a common interest
in value creation and the delivery of projects that offer both physical and social
regeneration. Experience in the housing market renewal partnerships and from a number
of progressive local authorities elsewhere has shown the potential of such partnerships
especially in areas of low land value.We believe that this is key to housing delivery and
that partnership working between local authorities, developers and others should be
taken up much more widely.
Already more enlightened developers, housebuilders and local authorities have
recognised the opportunities that this kind of mature partnership can provide. Many of
our recommendations focus on creating this new partnering approach between
government and industry not as the exception but as the normal working culture.
Many local authorities have demonstrated strong leadership and expertise in working
with developers to deliver regeneration. Not all have the same skills; and there is a
danger, too, of delay while delivery structures are reinvented.We are recommending
specific roles for the new Homes and Communities Agency in facilitating partnership
working between the public and private sectors.
Value growth in regeneration areas does not occur immediately; it is secured over time
as values catch up. For this reason, some developers are looking at alternative business
models in which they retain a financial interest in the property, either through market
renting or shared ownership schemes. This is a familiar approach from the commercial
property sector and may generate interest among commercial developers. It has the
potential to introduce a significant element of affordability into new housing supply.
However, both developers and local authorities have expressed concern that regulatory
issues may inhibit its growth.We are recommending additional work to examine
whether these obstacles are real and how best they may be addressed.
The growth in housing values from a redevelopment scheme can quickly go into reverse
unless integrated within a settled and well managed community. This requires
organisation, long term resources and fully funded proposals for community
management which must be an essential part of a local authority’s brief to its
preferred partner.
We do not expect housebuilders necessarily to engage in community management
themselves, but to look for partners with the necessary expertise. Consequently we
expect many of the local authority’s “preferred partners” to consist of consortia of
deliverers such as housing associations, management companies and financiers.
The potential of both physical renewal and community management will not be fully
realised, and may fail altogether, if it stops at the boundary of the estate.Where
appropriate the scope of an area designated for physical regeneration should bring in
the wider community. This will not only facilitate community integration but will also
pump prime a market-led process of conversion, gentrification and smaller scale
“piggy-back” commercial and residential development, which is an essential
component of a market-led recovery.
This raises potentially difficult questions about overlap with services provided by the
local authority.We are recommending further work to ensure that this overlap does not
become an obstacle.
While we see partnerships between local authorities and developers as key to unlocking
the urban land supply that is needed to deliver housing growth, it is essential not to
neglect other parts of the market. In the past, it has been the smaller and medium sized
housebuilders who have delivered much of the volume growth.We must continue to
support and encourage this segment of the market and provide opportunities for the
small and medium sized firms to be part of the industry’s growth.We have made a
variety of recommendations to achieve this, including securing a supply of smaller sites
and ensuring that they are viable.
We have recommended that no general action should be taken to force the faster
build-out of land banks; we are clear that this will put production at risk, not add to it.
However, there is no reason why Government or other public agencies should not
stipulate faster build-out rates when disposing of land for housebuilding or within
partnering agreements, so long as they can justify any loss of value this may incur.
We have also made some recommendations for more transparency in the use and
status of land for future housebuilding.
Similarly we have not recommended that Government stipulate the use of specific
methods of construction. Our view is that over time the industry itself will determine
what are the most cost-effective techniques.We welcome the new higher performance
standards now being required by both the Housing Corporation and English Partnerships.
This is certainly the right approach to promoting innovation and quality.
In the current housebuilding market, however, there are insufficient incentives for
quality. The returns to housebuilders for investing in quality barely justify the effort.
In the drive for increased quality, we are recommending that within the next two years,
housebuilders seeking Government grants or other public subsidy must achieve
customer satisfaction standards which have been established by an independent led
survey. Efforts should be made to make sure this stipulation does not inhibit small and
medium size builders and developers.
The existing regulatory and warranty frameworks are an inadequate substitute for
market disciplines.We are therefore recommending new arrangements for design review
and for construction which incentivise good quality and impose real penalties for poor
quality.
One of the most challenging aspects of our Review was to consider the increase in
housebuilding alongside the Government’s aspiration to be world class in the delivery
of zero-carbon homes by 2016.
We conclude that with multiple technical options and long lead times in the production
supply chain, the industry itself will be stretched to meet the goals in this very tight
timeframe, but with the Government demonstrating strong leadership, direction and
being firm in its commitment, the industry and its supply chain, including construction
products manufacturers and energy suppliers, can meet our zero carbon targets.
We have provided a delivery timetable which shows a number of actions that need to
be set in hand now to make this happen. In particular we consider it is essential to
establish a delivery body which will lead and co-ordinate the efforts of all parties
towards the zero carbon target.
In conclusion, our Review shows clearly that the housebuilding industry and its supply
chain have the potential to deliver 240,000 new good quality homes a year by 2016
and to achieve the zero carbon targets. However, the industry is answerable only to its
investors and shareholders and not to the public interest. This is why most of our
recommendations are addressed to central and local government. It is their business, not
that of the industry, to deliver public goals.We are clear, however, that by following our
recommendations Government will put in place a framework of incentives and
opportunities which will create a strong commercial motive on the part of the sector
and its shareholders to deliver the Government’s targets for 2016 and beyond.
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