Brian Cronin on Northern Powerhouse Liveability
Everybody is talking about the housing crisis and how the market is in urgent need of reform. As well as a general shortage of housing across the board, arguably the biggest issue is the lack of homes that are genuinely affordable for people on modest incomes.
The big developers that dominate the market are simply not delivering stock that meets these people’s needs – a problem Government now recognises, but policymakers seem to lack an answer to.
The first challenge is to find out where exactly we need new homes to be developed that meet these needs. It isn’t a simple case of shoehorning a bit more affordable development into the more expensive places to live, we need to understand where it is difficult to access affordable housing and consider what opportunities the housing needs to provide access to, such as a healthy jobs market, wages that meet the local cost of living, and decent state schools. In other words, where is it that families on average incomes are most likely to struggle to simply ‘get on’?
This is where this report marks a new and important contribution by creating the first Northern Powerhouse Liveability Index. This unique research creates a new measure of ‘liveability’, which combines the availability of affordable housing with multiple factors that capture the quality of life and opportunity available for average earners. It ranks every local authority in the north of England, giving a new picture that challenges much existing thinking about where we need more affordable housing to be built.
This research creates a real picture of where we most urgently need to build new housing. The question then is what we do about it once we have that picture. And this is where we need to rethink the housing market itself.
The handful of large commercial developers that currently build most of the country’s housing simply do not meet the needs of people on modest incomes. Financed by speculators looking for a short-term gain, these providers are the people behind problems like land banking, where land sits for years with planning permission before any building starts, in order that the housing crisis makes the land more and more sought after over time. They also skew the commercial viability tests that accompany new development permissions in order to bias larger houses in more expensive areas where the profit returns are going to be highest.
To his credit, Housing Secretary Sajid Javid says he recognises these issues and will crack down on them, but it will take years to unpick all the planning rules to try to change the situation. This is where we need to look to housing associations to step in and play a major new role. We have good balance sheets, lots of experience managing affordable housing and the sector is becoming increasingly efficient. Best of all, we are not dependent on developing for-sale housing that delivers a high return in a short period. We typically manage lots of the rented stock people need and do so over a very long time, providing investors with a steady, long-term return.
This is perfect territory for institutional investors like pension funds and, linking up with housing associations, we could see a really transformative model where new affordable stock could be developed at seriously large scale. The fact that this does not happen already is a classic case of market failure, which Government could step in to fix; bringing investors who are unused to working with housing associations together through a new vehicle or framework for big investments in affordable housing for institutional investors. I believe this is an exciting new area of policy thinking and we at YHG will be coming up with new research on this front very soon.