£38b Funding Fights Constraints On Housing Supply

£38 billion has been allocated to spend over the five years to tackle the housing shortage in the South of England and to boost the economic renaissance of the North.

The regionalised structure of house building and planning foreshadowed for England in Kate Barker's report on housing supply is now taking shape.

As Deputy Prime Minister John Prescott explained in his commentary on the significance of the Chancellor of the Exchequer's 2004 spending review, the Office of the Deputy Prime Minister (ODPM) has been allocated £38 billion to spend over the five year period 2003-08.

This huge fund will be applied to tackling the housing shortage in the South of England and in boosting the economic renaissance of the North.

Mr Prescott promises that this substantially increased funding - of the order of 4 per cent per annum in real terms - will bolster the United Kingdom's commitment to producing high quality and affordable homes across the country.

These resources, he said, would enable the Government to deliver 200,000 extra homes in London and the South East by 2016, as well as providing for sustainable growth.

What we must do, he said, is deliver not only housing but the infrastructure communities need.

"That's why in responding to the Barker Review, Alistair Darling (Secretary of State for Transport) and I are announcing a new Community Infrastructure Fund." As Kate Barker said, the purpose of this fund is to assist planning authorities in driving development forward where they encounter problems with land acquisition and infrastructure.

These are just the problems that regularly confront house-builders as they strive first of all to acquire sites for development and then attempt to build on them.

Kate Barker rightly identified land supply as the main constraint on the delivery of housing.

Her remedy such as it was lay in the sphere of planning policy but so far nothing much has been heard from the Government on this front.

Maybe some radical proposals are on their way but meanwhile large amounts of money are being committed into a system which admittedly exerts considerable constraint on the enterprise.

The aim is affordable homes but the countervailing forces both in terms of cost and accessibility are just as strong today as those which have already reduced house-building in England to an unacceptably low level.

They won't give way without practical measures for removing them.

According to Kate Barker's final report, "Demand for housing is increasing over time, driven primarily by demographic needs and rising incomes.

Yet in 2001 the construction of new homes in the UK fell to its lowest level since the second world war.

Over the ten years to 2002, output of new homes was 121/2 per cent lower than for the previous ten years." She did at one stage examine what influence taxation might have on the land market.

But she came to the conclusion that "taxing land values to raise the cost of not bringing land forward for development is unlikely to yield additional residential land supply given the effect of the planning system both in determining land values and restricting the use to which land can be put." On these grounds she came to the conclusion that planning remains the best method of resolving 'externality' problems and affecting developer behaviour.

Central to achieving change, she thought, was allocating more land for development.

"This certainly does not mean removing all constraints on land use, on the contrary the review advocates more attention to be given to ensuring that the most valuable land is preserved.

But house-builders would have greater choice as to which sites to develop, increasing competition.

And it would allow a quicker and more flexible approach to changing market conditions on the upside." Stronger role for regional planning authorities.

The Barker Report went on to recommend a stronger role for regional planning bodies.

This scheme of things is now in the formative stage both with the Department for Transport and the ODPM - Transport in administering the new organisation for the railways and ODPM for housing and planning.

From this aspect it is interesting to see the two departments sharing the Communities Infrastructure Fund.

Alistair Darling already intends to give additional powers to the Scottish Executive, the Welsh Assembly Government, the Greater London Government and the regional passenger executives which currently exist.

Whether railway devolution will go further than that depends on the outcome of the referendum on the new forms of regional government proposed for the North of England.

These decisions are due to be made in November.

If regionalisation succeeds as the Government hopes and intends, planning powers and decisions over land use will pass to new and single tier authorities.

Similar transformations of planning administration are likely to follow across the country.

As for housing, it is now plain that the principal engine of the 'sustainable communities' approach will be the Housing Corporation which under the action plan now being implemented becomes virtually an arm of the Office of the Deputy Prime Minister, rather as Network Rail has at the Department for Transport.

The Housing Corporation is the overall investor in the Government's housing programmes and is the regulator of what are called 'registered social landlords', comprising principally the housing associations and housing trusts.

These are the main agencies for affordable housing.

Both Parliament and the ODPM have agreed that the Housing Corporation should take on a national role in contributing to the regional framework now intended for implementing housing policy.

To prepare for such an important role, the Housing Corporation is setting up a new organisation, facing as it does the largest affordable housing programme in its history as well as regulating the growing housing association sector.

Overall investment levels, it is said, will be running at ?5 billion in 2004-05 and 2005-06.

The big picture for affordable housing envisages the housing associations and local authorities reporting to regional housing boards, as recommended by Kate Barker.

In turn the regional housing boards will advise Ministers on investment priorities for each region.

Thus a Department of State gains control over housing investment and its national disposition, similar to that which will apply in the field of transport policy once the new arrangements are in place.

What about the house-builders themselves, who may well feel overborne by this vast extension of administrative powers? The Housing Corporation does not dissent from Kate Barker in finding that the main constraint on house-building is land supply.

But it throws some of the blame for the shortfall in housing supply on the builders, for example due to competition which tends to be focused on land acquisition rather than a quality product, and lack of innovation compared to other European countries.

But it accepts the difficulties in delivering infrastructure to make development sustainable and the way in which the planning framework tends to hinder development.

The house-builders will be pleased to know that 25 per cent of the affordable housing now to be built under the direction of the Housing Corporation will incorporate modern methods of construction.

The constraints on land supply will not however melt away, even when confronted by cascades of taxpayers' money administered by high-powered public authorities.

Back to top