The Lyons Housing Commission (the Commission) has published a new Update Report (Report) which builds on the comprehensive recommendations put forward in the Commission's report 'Mobilising across the nation to build the homes our children need' (October 2014). The Report sets out five recommendations to deliver a sustained increase house building and these essentially fall into three key areas of consideration: land utilisation, investment in developers and their industry and alternative housing options. We consider the recommendations and the Report further below.

The recommendations

The recommendations to Government contained in the Update report are summarised below:

  1. To increase supply of both market and affordable homes for rent and broaden the housing strategy beyond the focus on home ownership.
  2. Take a more ambitious approach to direct commissioning to deliver high quality housing; increase output and capacity through capturing land value to fund infrastructure; attract a more diverse range of partners into housebuilding and build a mix of homes for sale and rent.
  3. Work more closely with the industry in developing the model for Starter Homes to ensure an overall increase in homes and that the public subsidy of these homes exists in perpetuity.
  4. Ensure local authorities have the flexibilities and support needed to promote, finance and commission new homes; and give housing associations the certainty they need to plan long term.
  5. Ensure that Government policies place greater emphasis on championing the highest quality of design and environmental standards for new homes and the places in which they are built.

Utilising land

In January 2016, David Cameron announced he was directly commissioning housing on public land. This means the Government will assume the responsibility for development. The Commission sees this step as a way to tap into the capacity of the wider construction industry through increasing contracts from housing associations, regeneration agents and Local Authorities (LAs). The Report notes that the Government has recognised the importance of strengthening local government's ability to assemble land and drive progress on complex schemes and it encourages the Government to apply this approach more widely. The Report also notes the need for compensation on compulsory acquisition to allow a greater part of the uplift in land value to be captured to pay for infrastructure and for the benefit of the local community whilst still granting a fair return to land owners. HM Treasury guidance on best value for LA land disposals also needs to be revised to facilitate social and economic regeneration. The Update report also notes that implementation of the Manifesto commitment to give LAs a 10 per cent stake in public sector land deals would also provide a means of incentivising and resourcing development of public land.    

It is hoped this will encourage LAs to look at their available brownfield land, however the Commission did raise a note of caution over the amount of work required to remediate and prepare this land; this can be costly and time consuming, reducing the viability of the development.

It was recognised that Government needs to broaden their focus beyond land allocation and make sure LAs have a wider range of sites to develop, and ensure that building commences promptly once planning permission is granted.

The Commission comments on the importance of a LA having a good local plan with sufficient land to accommodate housing needs, which will assist with meeting the Government's building targets. The introduction of sanctions on any authority that does not produce an adequate local plan should provoke action in developing available land.

Investing in developers and their industry

In order to meet the housing target, building needs to increase from the current 155,000 homes a year (2014/2015) to 240,000. In addition to the pressure being put on LAs, the Commission states the need for 'extreme elasticity' in the house building industry.

The Report observes that after decades of a slow building market and unstable economy, house builders are cautious about growing their capacity too quickly. There is also an increasing divide between the major national companies, who have steadily increased output, and SMEs, who have failed to grow.

Viewing it as a potential way to diversify the industry and unlock small sites, the Commission supports the introduction of planning permission in principle (PPIP) and emphasises the need to support these SMEs. The Commission suggests that further financial investment needs to be explored, as accessing finance remains the main barrier for SMEs. The Report suggests that Government needs to work with the industry and lenders to develop a solution to the financing shortfalls.

Despite the constraints faced by SMEs, the Report notes that there has been nearly 40% increase in industry output in the last two and a half years, so supply chain and industry skills need to be monitored to ensure that capacity continues to increase with growth.

The Report notes that expanding modern off site manufacturing technologies in the UK could play an important role in alleviating the pressure of the shortfall in labour that the industry may face with the rapid projected growth.

The Report also acknowledges that the industry is investing in training up new recruits. Further, the Commission encourages developing an 'effective counter-cyclical strategy' to ensure that the housing industry can resist any further economic downturns.

Alternative housing options

The Government has a clear focus on supporting home buyers, however the Commission recognises that for many people, such as the disabled and those with intermittent employment, homeownership is not a viable option. It is critical of the Government's policy shift away from affordable rents to other tenures.

The Report highlights the real concern that the emphasis put on building to sell will decrease the availability of affordable homes to rent. The Government's addition of Starter Homes to the affordable housing definition the Commission notes is also likely to lead to gap in provisions for households that are not able to buy. The Commission questions whether Starter Homes will contribute to any increase in supply or purely be in place of houses built for sale at market value. The Commission suggests that the Government will need to work more closely with the industry in developing a model for Starter Homes to mitigate these risks and should ensure that the subsidy is linked to the property so that the benefit is retained in perpetuity rather than resulting in a windfall gain for a limited number of individual buyers.

The Commission's view is that in order to meet the 2020 targets, the Government will need to look beyond homeownership and realise the potential for investment in development of rental properties at scale, both subsidised and private rented. The Commission considers that this would contribute to increase build rates as well as greater resilience in economic downturns.

The Commission highlights large scale institutional investment in homes for rent as a viable solution, particularly in London where wider development could be explored and urban areas regenerated. It notes this would also be complimentary to the city's population of young professionals who may value proximity to workplace over homeownership.

Large scale rental projects would also improve the quality of homes currently on offer, which the Commission places great importance on. There is a risk that the urgency to build to meet ambitious targets could compromise the quality of developments; the Report makes it clear that quality should take precedence over quantity to ensure the solution to the housing crisis now does not become a problem of the future.

The concept of Shared Ownership homes is an alternative option that was suggested by the Commission in their initial report. The Update Report reiterates the importance of having a range of housing options (including more private rented and subsidised affordable rented) to ensure the market is less vulnerable to economic downturns.

The reversal of housing associations being classified as public bodies has been seen as a way to facilitate the above suggestions. By being privately run, the associations will have great control over their assets and can respond to the market needs more effectively, having greater opportunity to explore the above alternative housing options.

Conclusion

The overall message of the Report is that the Government needs to actively change the current house building strategy if they are going to have any chance of meeting 1 million homes by 2020. The Commission places importance on utilising newly devised strategies with stronger Government intervention. It is also critical of the presumption that building to sell is in the interests of the entire county.