What Does the UK Green Party Propose Be Done to Increase UK Housing?

The Greens and several other organisations default to building on previously-used land for much-needed housing. But there are grey areas between brown and green.

The environmental and social justice mission of the UK Green Party may seem in conflict relative to the critical housing shortage in the country. The lack of places to build as imposed by green belt and greenfield protective measures runs gobsmack into the need to build more than one million homes to alleviate the shortage, one that is attributed to rough sleeping and other societal ills.

It’s a complicated conundrum, to be sure. Inadequate building has been decades in the works, and the results affect people in the UK at all levels. Further, global economics play a role in how wealthy foreigners are snapping up English residential properties as financial instruments, effectively so given the year-upon-year, double digit valuation increases of prime property assets – especially in London, but in other parts of the country as well.

Those who build homes - investors employing real asset funds to buy land and assemble sites, for example - encounter the same questions. And frequently the response from the Green Party, the housing charity Shelter UK, the Campaign to Protect Rural England (CPRE), the Department for Communities and Local Government and many elected officials is to instead build on brownfield land. Estimates run as high as 1.5 million homes could be built if every inch of brownfield land were used for housing.

But few take an absolutist view of this. Shelter argues for a hybrid approach, using both brownfield and greenfield land to build because the immediate needs are so pressing. Others have made the case that some green belt land fails to live up to its objectives, that it would be better to build where environmentally unfriendly activities (refuse dumping, chemical-intensive farming, etc.) could instead be replaced with quality housing while urban brownfields are converted to parkland.

Some points about brownfields and house building in the UK should be included in the discussion:

• Only one-third of the number of brownfield sites cited by the CPRE and Green Party estimates are located in London and the South East, the areas where the housing shortage is most acute.

• Brownfield compared to greenfield development already favours brownfields at a ratio of 2:1 (i.e., it is already happening where economically viable).

• Brownfield development can require decontamination, which “can be a legal minefield, involving unpredictable long-term liabilities for developers,” according to the Institute of Economic Affairs (IEA) in a blog published in 2014 (“Don’t count on brownfield: it won’t solve the housing crisis alone”, by Kristian Niemietz).

• There can be tax benefits to clean-up costs for decontamination efforts, “but the tax situation is so complex that developers cannot readily assess to what extent they will be able to make use of those options,” says the IEA blog. The objective analysis land fund managers make when selecting sites by default must reduce uncertainty in order to attract investors.

• Further, some but not all brownfield sites are located near infrastructure (roads, water, utilities, schools, hospitals) that could support a community of decent housing. In some cases the new infrastructure costs could be prohibitive even while the location would be undesirable to residents and from a green perspective (e.g., no access to public transport).

The Land Trust, a land management charity that owns and manages more than 1,000 hectares of public open space - a mission arguably aligned or complementary to that of the Green Party - takes a mixed position on this. Its director of operations, Matthew Bradbury, published a statement in 2014 that planners and investors with an interest in UK land might take to heart: “The real solution will involve a complex range of options. It’s true to say that we should be focusing on improving brownfield land, as the cost to communities of leaving it as brownfield can be significant – it impacts on health, anti-social behaviour and many more aspects of our quality of life. But to suggest that the housing crisis can be solved by building on brownfield land alone is both naive and unrealistic.’”

It’s a matter of pragmatism that drives Bradbury’s approach - a strategy that some might agree with but which is likely to work expeditiously in a market-driven system. Investors indeed act rationally, and that includes seeking third party advice such as through independent financial advisors who can assess an investment from a purely economic evaluation. But as the debate continues on greenfield and brownfield development, it’s clear that broader social considerations can influence investors as well.

The Current State of Lending to UK Homebuyers: Options and Constraints

Difficulty in finding loans has plagued would-be homebuyers since the 2008 financial crisis, but things have improved. Interest rates may stay low through 2015.

For homebuyers in the UK, it’s a combined state of feast and famine.

How so? A combination of low interest rates and Government-sponsored home ownership programmes make it a good time for working people to buy a home. The problem is the short supply of homes relative to demand: this translates into rapid home-price inflation – by as much as double digits in both London and other high-demand cities in England, Wales, Scotland and Northern Ireland.

The Bank of England determined in its May 2015 meeting to keep interest rates at 0.50%, in response to very slow growth in the size of the economy (0.3% in the first quarter of 2015). This was slower than the last quarter of 2014, which triggers concern that the economic recovery is slowing down. The earliest that economists predict a rate increase would occur would be the first quarter 2016.

Those planning to purchase a home should take note. And perhaps, given the potential hike in the next year, they should act soon if they can afford it.

But the bigger problems haunting those in the market to buy are the prices of the homes themselves. Double digit increases might happen in the remainder of 2015 due to supply shortages, greater confidence following the May 2015 election, and foreign buyers who snap-up properties without actually living in them (treating built homes as an asset class). Anyone wanting to jump on the property ladder is seeing that first step rise up higher and higher.

Investors in development - particularly on the homebuilding side, such as managers of UK property funds who buy land on which to build - watch all such trends closely. What all find encouraging are the various Government schemes to support homebuyers, the essential purchasers of new homes in the pipeline. In brief, those programs are:

Help to Buy: equity loans - Here, the government lends as much as 20% of the value of new build homes

Help to Buy: mortgage guarantees - These will be available through at least 2016, enabling lenders to offer mortgages for 80% to 95% of the home value.

Starter Home initiative - Aimed at stimulating the construction of 100,000 new homes on previously used (“brownfield”) land, it will forgive section 106 obligations, which on average add £15,000 to the costs of new homes. More than 31,000 people had already registered for the scheme as of March 2015.

Right to Buy - The programme to enable council house tenants to buy with discounts of £75,000-£100,000 off the market value of a home.

Some will argue the problem is less about financing than about land being released for building. UK land investing requires local planning authority approvals to be successful; once released, investors can develop the infrastructure and work with homebuilders to deliver housing. With financing increasingly available – and a robust employment rate – that is proving more viable than in the past decade.

Investors in land effectively deliver a civic benefit as they seek to maximise return on their own assets. But all investments should be considered with the guidance of an independent financial advisor.

Hospitals to Homes: How the NHS Selloff Alleviates the UK Housing Shortage

As healthcare delivery is made more cost-effective, the National Health Service is providing room for new housing. And it doesn’t stop with hospitals.

Necessity is the mother of invention. That’s why homes are now being built out of empty hospitals in London. And if some visionaries have their way, they'll be built on top of them - and perhaps also above operating schools, libraries, and government administration buildings.

These solutions are among many being proposed as a means to address the critical housing shortage in London. There is clearly a desire to continue living in the Capital City - demand far outstrips supply of the housing stock. The greenbelt restrains building outward so the logical conclusion is to build up, on top of what’s there already.

The most visible example is the $470 million renovation of St Bartholomew’s Hospital, situated in the heart of London near St Paul’s Cathedral. When completed in 2019, Barts Square, as it is now called, will include 235 modern apartments in 19 buildings across a 3.2 acre site that saw the pioneering of X-ray machines, was where radiation treatment for cancer was first introduced in England, where the Luftwaffe destroyed laboratories and operating theatres in 1941 and where Queen Elizabeth II opened a new wing less than 20 years later. The new incarnation of the site will be a mixed-use development of residential flats and complementary retail, restaurant and café use. The design of the new buildings, some with preserved hospital facades, is respectfully contextual with the surrounding neighbourhood, largely historic warehouses. Starting price for flats will be £750,000. St. Bartholomew's will continue to exist as a specialist cancer and cardiac centre with 65,000 square metres of floor space in new 17-storey towers, right next door to the former buildings in densely populated East London.

Barts Square isn’t the only hospital being redeveloped into residences. Investment money engaged in capital growth planning has wisely considered the plight of the National Health Service: shifting methods and locations of care leaves the NHS with an estimated 20.5 million square feet of unused assets at a time when the Service is running a £330 million deficit. In the space of 16 months (April 2013 through July 2014), the NHS sold off 105 properties for £51 million, including the release of land that has been used to develop 838 new homes. The property services director of asset management for the NHS told The Wall Street Journal that the long-term plan is to release enough strategic land to facilitate development of 100,000 new homes in short order.

Such creative repurposing of structures might go a lot further than this. WSP, the London-based global engineering services consulting firm, proposes building new housing on top of other types of existing structures. The firm’s white paper on this, “Building Our Way Out of a Crisis - Can We Capitalise on London’s Public Assets to Provide Homes for the Future? (November 2014), says that it would be possible to construct 630,000 residential units on the city’s existing municipal building sites. Acknowledging the financial, planning, design, environmental and political challenges to such proposals, it surveyed London residents if they would consider living on top of various functioning services. The survey showed that 63% of Londoners would be happy to live over a library; 59% would live over other (existing) flats; 44% would live above a government administration building; 31% over a legal court, 23% over a hospital; 23% over a school; 19% over a fire station; and 8% would even consider living over a prison.

These are not pie-in-the-sky ideas. WSP was the structural engineer for Beekman Tower, a 76-storey, 898-unit luxury residential building that sits on a five-storey public (free, American-style) school in New York City. The development was completed in 2011.

The WSP survey shows that people are willing to live in creatively developed places. And by how architects, developers and builders - and their investors - are now acting, it’s clear that free market mechanisms are responding in kind. Joint venture partnerships could be how these are financed - although assemblages of investors of any kind more typically work with raw land. But that doesn’t have to necessarily be the case. Investors are accustomed to working with local planning authorities (LPAs) that can grant or deny zoning changes. Topping off a school or library or replacing a hospital will require planning consents as well. Importantly, a residential application raises the value of the land and the neighbourhood, an important consideration to LPAs.

With a growing population in London as well as other cities in the UK, and frequent resistance to development on greenbelt land, these alternative means of development are opportunities for all parties, including investors. But as with all types of investment opportunities, investors need to consult with an independent financial advisor to identify when the investment risk fits an overall portfolio strategy.

UK Housing Crisis: Where there’s a will, there’s not necessarily a way

By: Chris Westerman

Politicians have “forgotten” that housing policy is central to economic and social wellbeing and regard housing as a “private good, not a public service”. I should note here that these are not my words, but those of David Orr, President of the National Housing Federation, at their 2014 conference this week. Are they an accurate assessment? Probably not totally fair given the raft of Government initiatives during this Parliament aimed at boosting house building.

Nevertheless, the NHF’s strong rhetoric and the formation of the ‘Homes for Britain’ coalition pressure group are symptoms of the UK’s housing crisis. But it isn’t just campaigning groups that are making noise – think tanks, businesses and the public have all recognised the problem and are set to make housing policy a central theme in next year’s general election. Indeed, a recent poll from You Gov showed that housing is one of the top five most important issues for voters.

This is for good reason – the housing crisis is costing us as a society, and the evidence pointing towards this conclusion is compelling. The CBI recently published a report stating that the UK’s “chronic” housing shortage is costing consumers £4 billion a year due to the impact of above-inflation house price rises. Shelter found that there are now more than nine million renters in private rented accommodation, including almost 1.3 million families with children. It also reported that in England, more than 81,000 households were found to be homeless during 2012/13.

David Orr’s speech at this year’ NHF conference raised some important questions: are we prepared to live in a country where homeownership is an exclusive members’ club, reserved for the wealthiest in society? Is the current, or indeed the next, Government willing or even equipped to deliver the volume of housing needed?

Despite the housing crisis being recognised as a cross party issue, recent polling found that 80 per cent of people don't believe any of the main political parties will effectively deal with the housing crisis. Signs that the Labour and Conservative parties are committed to working towards a solution are visible, even if strategies have yet to be elaborated. Labour have promised that the UK will be building 200,000 new homes a year by 2020 if they win the 2015 general election, and the Conservatives have indicated that policies to combat the crisis will be included in their manifesto.

Nevertheless, what concerns the house building industry is the severe shortage of ‘shovel ready’ UK land. This shortage can be attributed to a number of factors such as planning issues, insufficient investment and a shortfall of expertise within stretched local authorities. This issue, if left unaddressed, will seriously undermine any housing policy that the next Government takes forward. Lucent, as a UK land site assembly specialist, is currently driving forward a solution to this problem and is looking to see it put into practice on a national scale.

The strategy works by Lucent undertaking the acquisition, design, master planning, promotion, consent and servicing of strategic sites through the planning process. Only then does Lucent sell the land on, cutting out the risk to housing developers. Lucent is also pioneering a new method of private-public sector partnership with local authorities in England, such as Allerdale Borough Council in Cumbria. While the Council invests its surplus land and shares its knowledge of the needs of its communities, Lucent invests money and the professional skills of its team to secure planning permission as well as to liaise with potential developers and potential purchasers for individual sites. By working in partnership the strategy encourages a more efficient and entrepreneurial approach to land release from local authorities.

Ultimately, it seems that when it comes to Westminster’s approach to the housing crisis there is a will, but not necessarily a way. The major political parties need to elaborate on how they intend to fix the deficit of shovel ready land. It is clear that the housing crisis will be at the top of the political agenda, and at the forefront of the Nation’s mind come the election next year. The Party which understands the intricacies of the issue, engages with organisations looking to solve the problem, and promises a tenacious solution will have the upper hand in the debate.

Stagnation or innovation? It’s time for regulators to decide.

By Anthony Brindley

They say that necessity is the mother of innovation. With the housing crisis sitting stubbornly at the top of the political agenda for months now, countless think tank studies, business manifestos and government reports all point to one conclusion: the UK needs more housing, and this needs to happen sooner rather than later.

The start of September saw the coveted £250,000 Wolf son economics prize go to David Rudi in, an urban designer, for his plan to expand 40 UK towns and cities with ‘garden city’ extensions. From one side came high praise, that it was an innovative and viable plan, a bold and daring solution to the housing crisis – from the other, outcry that it was simply nothing more than urban sprawl. Indeed, Brandon Lewis rejected the plans saying that the Government would have nothing to do with it. The principal objections to the plan stemmed from the proposed expansion into the green belt, attracting fierce criticism from Lord Rogers of Riverside and the Campaign to Protect Rural England.

We should take note here, as this episode epitomizes one of the most prominent issues of the housing crisis today: as a nation we all agree that we need more housing, but there is no common view of the solution. How, against such a complex political, social and regulatory backdrop, can we free up the land which the nation so desperately needs for development? How can we promote innovation in the face of regulation?

Less than 10 per cent of UK land is developed, yet the availability of ‘shovel ready’ land still remains at a premium for house builders for several reasons. The CBI recently released ‘Housing Britain’, a manifesto report that demands the construction of 240,000 homes each year within a decade. In it they question why, as a nation, we are protecting green belt areas at the expense of meeting our housing needs. There needs to be a debate regarding the purpose and need for the greenbelt, after all, the metropolitan greenbelt was designated in 1935. A slightly more flexible greenbelt policy may be the way forward.

We cannot neglect efforts to encourage the development of our town’s and city’s brown field sites either. According to the National Land Use Database, in 2009 there was 5,756 hectares (an area twice the size of Leicester) of brown field land suitable for housing and owned by local authorities. It is estimated that this could accommodate 291,000 homes. The CBI argues that there is not currently enough of a pipeline of brown field sites to build on in urban areas however. We have heard a significant amount of talk coming out of Westminster regarding brown field regeneration, but so far we have not seen much progress. Giving local authorities greater incentives and authority to release unused land would certainly help, but the issue remains that there is often a lack of both investment and professional skills to coordinate the release of this land to private developers.

Despite efforts to streamline the planning process, legitimate developments are still coming undone at the planning stages. After buying land, developers must agree a number of issues with local authorities before securing planning, next fulfilling a list of "pre-commencement conditions" once outline permission is granted. The Home Builders Federation has estimated that around 185,000 developments are stuck at this point. Obtaining planning is an expensive business, and can often cut out small and middle sized developers.

So we find ourselves faced again with the earlier question: how can we promote innovation in the face of regulation?

As a UK land assembly specialist Lucent is currently working in partnership with Allerdale Borough Council in Cumbria to help bring housing development and other investment into the area. While the Council invests its surplus land and shares its knowledge of the needs of its communities, Lucent invests money and the professional skills of its team to liaise with potential developers to secure planning permission and potential purchasers for individual sites. By working in partnership, this method lowers the planning risk to the developer, and encourages a more efficient and entrepreneurial approach to land release from the local authority. Only eight months old, the partnership is already seeing fantastic results with confidence and interest in the model opening up new channels of business for both Lucent and Allerdale Borough Council.

The UK is in the midst of a crisis. Research from the National Housing Association recently revealed that parents’ hopes for their children’s futures are clouded by fears they will never afford their own home. Many believe that the main political parties are not doing enough to deal with the housing crisis.

Necessity is the mother of innovation, and the good news is that the UK has always had plenty of it. However we need government to recognise innovation when it sees it, and help it along.