Plan for housing industry next steps: Medium- to long-term
Whilst Government and many are looking at easing the pressing issues of what is happening right now and in the short-term, especially in the housing industry, they cannot forget the recovery in the medium- to long-term.
The real tests of the recovery and the housing market implications will come later in the summer and autumn as the harsh economic reality sets in. A lack of foresight for this medium to long term recovery could see a dip in upturn and see a ‘w’ recovery and not a hoped-for tick.
Many interventions into the housing market take time to embed, ensuring long term improvement and longevity means that those support systems need to be rooted by the time they are needed, which means they need as much focus right now as the short-term interventions.
Government must also ensure that they continue to keep the public at the heart of their interventions, the economy can only bounce back if people feel safe and confident enough to stimulate the economy. Government must look to their messaging to ensure they are injecting confidence in the economy without inflating it falsely. They must also look at the impact of wariness on sectors including the housing industry- where wariness can manifest into unaffordability through inability to gain mortgages with a small deposit.
Medium- and long-term interventions are needed across three key sectors:
- Planning and development
- Home buying and selling, including home ownership
- Private Rented Sector
Planning and Development
Modern Methods of Construction:
Before covid-19 and the lockdown the UK was already struggling with a supply issue, especially within affordable and social housing. This problem has not been eased by the impact of covid-19 and may have been exacerbated as more people may find themselves in need of more affordable or social homes.
In the ‘new world’ Government must look to technology and new ways of working and delivering products. Modern Methods of Construction (MMC) is one area that Government should now seriously look to not just fulfil the social home shortage, but as a way to stimulate the economy and provide jobs for those who may be in industries that are reducing staff due to the impact of covid-19. While MMC is not a panacea that will resolve all the problems in the sector, once fully embedded it will go some way to improving our capacity to meet need.
Government can, and must, support MMC directly through investment and indirectly through planning, education and construction and design quality standards and programmes, including encouraging and incentivising construction of MMC factories in areas of high unemployment as part of the Industrial Strategy. They must also They must strengthen their presumption in favour of MMC in public infrastructure schemes and support local authorities and housing associations through financial incentives and policy to meet housing need through MMC.
Government and industry need to collaborate to establish apprenticeships and training products, especially around reskilling the workforce that supports the rollout of MMC and encourage new entrants into construction.
The stage is set for MMC homes to achieve scale. The concept has potency in the generation of a new model of home design, selection, and consumption especially in the submarkets of sustainability, climate change, ageing population, social housing and build to rent.
In a statement to the country in early May Boris Johnson actively encouraged those within the construction sector to get back to work. Whilst RICS encourages a return to work for the industry, we would encourage this as an opportunity to properly examine the way we do things, and how things can be done differently.
We must think of the industry not just in terms of what will work now, and help in the immediacy, but what will work in the long-term for the industry. What will the houses we build now after covid-19 look like in 5 years’ time? With hindsight, will we look back on this period of building and show a need for more oversight?
In June 2020, about a month after the Prime Minister encouraged construction to go back to work, we marked three years since the Grenfell tragedy, and much has been discussed about this issue; but at the heart of these discussed is that the required standards are still not embedded. The basic idea that no matter tenure, type or height of housing, people deserve to feel safe is still not the predominate ideal in fire and building safety with the focus still on the hindsight of high-rise building safety.
The Government has announced their ‘build build build’ initiative but have still yet to address the plethora of issues around the lack of standards within permitted development rights. By pushing ahead with this direction of policy they are showing themselves as a Government that has not yielded the lessons of the past, and not embraced the need for standards at the heart of our house building industry.
In 2018, RICS research showed that residential quality was significantly reduced in permitted development schemes than schemes which required planning permission, even though it was possible to deliver viable office-to-residential schemes through the more stringent full planning permission process. There was also direct evidence of the profitability of conversions for developers and landowners, but little evidence of contribution to the additional public infrastructure required to support the quantity of additional housing seen in the case study authorities.
Government must therefore prioritise work around new build standards, and the new home ombudsman; they must keep standards and quality as the heart that drives the industry. Oversight on standards now, could result in negative hindsight later, but the true cost will be to those who live in the homes we are building now.
In a speech to Parliament before lockdown the Minister for Housing, Christopher Pincher MP, laid out his ‘Planning for the Future’ statement, expanding what had been announced the day before in Budget 2020. These changes have been delayed on account of the Covid impact, but we would urge the Government to implement these changes as part of a wide sweeping and thorough review of the planning system. The chance to develop a new normal should not be squandered, and allow for our planning system to accelerate development, not hold it back, while delivering good quality homes that improve and contribute to existing communities.
An area of focus and for thorough review is the flexibility offered through the discretionary planning system which hasn’t delivered the housing needed. We should now try policies which bring greater certainty. A move away from a discretionary planning system will reduce risk and cut down on unnecessary deliberation over matters which have already been deliberated on at the plan making stage. This is not about reducing standards. It about ensuring that development is delivered to the standard in accordance with a clear and certain plan.
The Government has made multiple attempts to speed up the planning process by extending permitted development rights (PDR). We do not support these announcements and believe that the very real opportunity to ‘Build Back Better’ is not being taken when it comes to new homes through PDR. The Government has still not addressed the many issues that still exist around permitted development rights and substandard homes, including building and space standards which were highlighted in the 2018 RICS report., Our findings are echoed in a MHCLG report released recently. While new houses are in theory welcome, they must be suitable as homes within the communities where they are being built. The UK must build back better now, not build and fix later letting those who will live in these converted homes suffer in the meantime.
The planning system is the cornerstone to actual housing delivery. The Government must focus on bringing all elements of planning including residential, high streets, transport and commercial into one holistic policy of placemaking and master planning.
RICS has long heralded placemaking and master planning which add value to a local area and, most importantly, can positively impact the health and wellbeing of an area. Building healthier communities eases pressure on local GP and NHS services, provides greater quality of life, and improves the wellbeing of the people who live there. RICS has two insight papers on this issue with case studies that show the benefits of placemaking and master planning, and we are currently working on a third paper which focuses on the intrinsic link between place and health.
The impact of our homes on our health is more vital than ever, and with the new normal likely to see more people working flexibly and spending more time at home, the way we develop must look to provide healthy homes and communities through our planning and development. People deserve a home that contributes to their health and wellbeing through great placemaking and the application of sound building design principles for the twenty first century living.
As well as being the cornerstone of development, planning can help ensure that our high streets remain viable. High streets can be rejuvenated through good master planning for housing. Planning for communities, and not just housing, means that retail, leisure and commercial aspects that make houses homes, and makes where we live our community, are seen as just as important in the planning and development stage. This includes the impact that not properly linking all these elements together through good infrastructure including pathways, cycle lanes, public transport and roads can make on an individual’s wellbeing, health and on the local economy.
Home buying and selling, including home ownership
Like most of us sitting at home in lockdown, Government has had time to reflect and reassess its priorities, and they must continue to reassess the housing market.
Whilst those at the helm of MHCLG have varied and changed over the course of the Johnson Government, there has been an unwavering singular focus on home ownership. There are currently many routes to home ownership and help for those to buy a house. The latest being first time homes which were consulted on earlier this year, and then 1500 homes under this scheme were announced by Chancellor Rishi Sunak in mid-July before a government reply has been released to the consultation suggesting great haste for this Government with little transparency on thought.
The varying results of previous avenues to ownership including Stater Homes, Help to Buy and shared ownership show a need for clear thinking from Government to ensure that any new routes implemented are successful and actually ensure they result in the intended outcome.
As we emerge out of the Covid lockdown and the market starts moving again, Government must take this time to thoroughly assess their home ownership offerings. They must look at what they have already implemented and work out if it worked, how it worked well; and if they didn’t, why. The varying results of previous avenues to ownership, such as including Stater Homes, Help to Buy and shared ownership, show a need for clear thinking from Government to ensure that any new routes implemented are successful and actually ensure they result in the intended outcome.
Private rented sector
We outlined that in the short-term Government must make clearer the process for how renters and landlords emerge out of rent deferrals, and the stay on evictions. This is still a vital short-term measure that is needed by industry. Renters must have clear paths to assistance whether that be advice on their rights or on advice on how to gain financial assistance. We would reiterate our concern that this has still not been done.
As we move towards the medium term, we maintain our long-held belief that the best solution for the issues attempting to be fixed by tinkering with PRS over the years, is for standards and regulation to be introduced across the industry. To encourage an efficient and balanced private rented sector, better standards and regulation need to be embedded into the industry, giving the security and conditions needed by tenants and to provide the clarity of good performance for landlords and agents. It is 12 months since the publication of Lord Best’s recommendations on the regulation of property agents. However, not only has Government not implemented any of Lord Best’s recommendations, industry is still waiting for Government’s official response to Lord Best’s report. Government must release their response to this report and begin to enact and implement its recommendations.
RICS and The Property Ombudsman (TPO) are working together with a Steering Group made of consumer and sector representatives, to develop a new consolidated residential agency and management code. This will incorporate ‘best in class’ existing material in sales, lettings and residential management (including documents such as the Residential Service Charge Code which is endorsed by the Secretary of State).
The new code is being developed by the Steering Group and will cover all aspects of residential property. In addition to a high-level set of principles, there will also be a number of other more detailed sections developed that are specific to various aspects of the residential property agency sector, such as sales, lettings and management. RICS and the Steering Group are preparing the Code so that it can be “handed over” to a new regulator once one has been established by Government as per the ROPA recommendation.
Covid-19 has highlighted many of the current shortfalls within the residential agency sector, with a number of examples of bad practice in areas such as building management and residential lettings, and the impact that this has had on tenants. It has also shown how a lack of transparency on what tenants can expect from agents has on how agents conduct themselves.
The current global health pandemic and subsequent lockdown has changed the way we interact with where we live. For this we need property and managing agents who we can rely on and trust, and regulation of property agents must be the top priority for Government.
Planning and development
A combination of acute housing demand and market failures in terms of cost, quantity and quality, are forcing the industry and government to look at MMC as a solution. The reason for such faith being placed on MMC can be attributed to three key elements reflecting the three principles driving the sector deal: Digitisation, Manufacturing and Performance.
This faith is demonstrated through Homes England who have already considered and are starting to provide affordable homes delivered through MMC. However, as MMC grows and more units come onto the market through this method of delivery there must be a program of consumer education. Industry understands MMC but for many consumers, including those looking to purchase or rent a home, a lack of understanding may deter them from considering a home delivered through MMC.
There is still consumer resistance, with an abiding image of post-war emergency housing rather than the reality of 21st Century technology delivering better quality, safer, and far more cost-effective homes at the same or, with upscaling, at lower cost.
RICS supports the focus on offsite construction and its ability to contribute to a multi-tenure holistic house building industry. As a public interest body would be happy to work with Government to ensure that clear and transparent consumer advice and guidance is developed and put into the market covering all elements of MMC; including valuation and home surveys. These are areas that RICS is already looking at in terms of our own guidance.
Planning and development is intrinsically tied to land availability, without land (beyond PDR conversions and upwards extensions, which RICS have concerns around) there is no development. With the Government being staunch on their policies of no greenfield and greenbelt development, RICS recommends a review of land classification and, more importantly, the introduction of a new land classification: “Amberfield”. This would create a pipeline of ‘ready to go’ land, increasing housing supply and promoting development opportunities, particularly SMEs house builders. Amberfield is not greenfield or greenbelt land, but brownfield land that is developable i.e. it is ready to be built on without any cleaning up or decontaminating therefore allowing for quicker development than usually expected with brownfield sites.
Local authorities and communities will have to work together to label sites favourable for development as Amberfield, and each local plan will have to include a set quota of amberfield, ready to be developed for housing, in line with their current identified housing need and their local plans. We would urge Government to look at how their current housing funding to local authorities to promote development can help provide Amberfield land including the ability for local authorities to use the funding to bring brownfield land to development ready.
The new classification will enable local housing needs to be met and would create a five-year land supply that works for communities and builders.
While both brownfield and greenfield play an important role in the current planning system, both classifications block or slow development, and local growth is being impeded by extensive battles to bring forward land. Amberfield will speed up the process and take out cost for both developers and local authorities – enabling homes to be built faster on the agreed sites. It will provide certainty to investors, and unlocking development opportunities.
The issues around the private rented sector and the concern of mass evictions, as well as the changes the Government made to the court system for post-covid evictions shows that the current system is no longer suitable for both tenants and landlords.
Any changes Government make to the PRS eviction processes must be done with strong engagement and involvement with industry, clear timelines and a proper review of all areas of the sector. This will ensure any new processes introduced and embedded are a balance between landlord and tenant needs.
RICS does support the removal of s21, but only when a viable alternative is established and embedded including significant reform to the court processes. The Government has yet to publish or consult on a viable alternative. Their most recent consultation ‘A new Deal for Renting’ is definitely not a feasible alternative. Only an alternative that includes thorough changes to the court processes can be seen as viable, now as we emerge from covid and with some changes already made is the perfect time for Government to look at changes to how the courts hear and handle eviction proceedings.
Government must look to prioritise streamlining and simplifying the court processes for landlord’s wanting to repossess their properties under Schedule 2 and urgently release their response to the ‘Considering a Case for a Housing Court’, call for evidence which closed around 18months ago.
RICS supports the creation of a new housing court as proposed by Government in the call for evidence, which would simplify and streamline the dispute resolution process. We welcome the transparency this would bring for tenants, landlords and leaseholders. We would also like to see Alternative Dispute Resolution (ADR) incorporated into a preliminary stage of adjudication, with the right to proceed to legal process. A removal of s8 without changes to the courts will result in unintended consequences that will disproportionately affect those most vulnerable within the PRS.
An area of significant financial and investment concern, especially as Government tries to encourage investment into the sector if they proceed with their New Deal for Renting without the needed court changes, is the outcome that a change to assured tenancies will have on the value of property. Rental properties are generally valued on their vacant property rate, if it is harder to gain possession of a property, these changes might well result in investment values of residential investment property falling at a time when our economy needs to try to recover.
RICS and industry is seeing many developments beginning to look at mixed tenure sites, and one of the areas that is increasingly being seen in these mixed tenure sites is Build to Rent. Changes introduced haphazardly into the PRS can halt these developments which will impact upon viability when developers were looking to ensure delivery of many needed housing tenures, viability of sites also ensures affordable housing delivery, another very needed element of the housing sector.
The private rented sector (PRS) plays a vital role in our housing market, having doubled in numbers of households in the last 20 years, Government must look to long term solutions that ensures safety of tenure and home for tenants whilst not burdening or impacting landlords and those who invest into the industry.
Kindly shared by Royal Institution of Chartered Surveyors (RICS)
Main article photo courtesy of Pixabay