I am really delighted to be here, both as a minister and as an honorary RICS fellow.
For most of my professional and political career our housing markets have been dysfunctional. Year after year we have been building half the homes we need. It’s a record which we would not tolerate in any other market place.
So (as an incoming government) we wanted to take a different approach. To have a housing strategy which unlocks both supply and demand; which boosts both freehold and rented, and which recognises the need to build new homes, whilst also making the best of redundant land and empty properties.
That is why I very much welcome the analysis of the recently published RICS Housing Commission. You are absolutely right to stress the need for a longer term vision, which reaches across the tenures.
So today, I should like to respond to some of the themes from the Commission’s report and set out our ‘forward thinking’ to boost supply, help homebuyers and tenants and call on housebuilders and housing associations to raise their game.
Speeding up development
The pace of housing development has, for many years, been far too bureaucratic and slow. And the cost has helped drive up prices and rents.
That’s why we have made radical reforms to the planning system, not least through the new National Planning Policy Framework. The early signs are positive, with the latest figures showing a 20% rise in the number of new homes granted planning permission. Indeed the net addition to the housing stock overall has seen an 11% rise, the best in 4 years.
But there’s much more to do, not least as development control is only one of the regulatory barriers that developers face. That’s why we are broadening permitted development rights and setting out Lord Taylor’s plans to rationalise 6,000 pages of planning guidance.
But simplifying the regulatory framework isn’t the government’s only role. Where there is market failure, we can intervene to unlock development, whether through recoverable investments, or by making surplus public sector land available.
Since I started this job last September, I have been keen to unlock those large sites, that have got stuck in the system. To that end, we announced last December the creation of a £474 million Local Infrastructure Fund, to make long term recoverable investments.
I am pleased to say we’re making excellent progress, with over 45,000 homes unlocked, on 5 different sites.
A good example is Cranbrook, near Exeter. It’s the first new settlement of its kind to be built in Devon, for 600 years. We have provided a £20 million recoverable loan which means the whole development can proceed, the homes along with the schools, the town centre, the shops and the workplaces. The roads will be built alongside the new railway station, thus ensuring that we are developing a real community and not an anonymous housing estate.
And there’s more to come, with another 14 schemes currently in hand, which we believe have the potential to deliver another 35,000 homes.
But we cannot rely just on building new homes, to meet our housing needs. We must also ensure that we make best use of redundant land, and empty buildings.
The New Homes Bonus, for example, has rewarded councils for getting 55,000 empty homes back into use. Indeed, over the last 3 years there’s been a net fall in the number of long term empty homes, by some 40,000.
Or take surplus public sector land. So far, we have been able to free up land with capacity for some 47,000 homes. But we recognise more can be done.
So from April 2015, the Homes and Communities Agency will become the default disposer of central government’s surplus land. This will help provide a more consistent and professional approach, to a process which I know many people feel is unclear and slow.
In addition, a Strategic Land Review will identify further surplus public sector land and set a disposal target for 2015 onwards. The review will include a key role for local communities and businesses in challenging the government to release more land, including through a Right to Contest. (I’d welcome your ideas, for speeding up the whole process.)
I said at the start that we are tackling both supply and demand. Indeed for a market to work, there needs to be sufficient demand to stimulate development.
Equally, many people still require support, to secure the home they need.
That does not mean returning to the bad old days, before the credit crunch. The regulatory rules then were completely inadequate, with self certification of incomes and 100% mortgages. We’re not going back to that.
But there is a role for government.
Our Help to Buy equity loan scheme, is a good example. It’s about helping people plug the deposit gap and its proved tremendously popular. I can tell you today, that in its first 12 weeks, since being launched, just shy of 7,000 reservations have been made. And with over 400 house builders signed up and most of the major lenders on board, it’s clear that Help to Buy is living up to its name.
Over the last few weeks we have heard from many major builders that Help to Buy has boosted their sales. Good. I welcome that. Now, I want to hear what they are going to do to speed up their building rates.
I will therefore be inviting the leading builders to meet with me so they can tell me how they intend to turn this new demand into more homes. It’s time they raised their game. They tell me that’s what they want to do. Let’s make that happen.
Longer term role for rented sectors
So far, I have focused on the owner occupied market. But the rented sectors (private and affordable) matter, despite being overlooked for many years. (Indeed, under the last administration we saw the number of social homes fall by 420,000.)
So, that’s why we’ve decided to take a different, longer term approach.
We are currently in the middle of our Affordable Homes Programme to build 170,000 more affordable homes by 2015. And so far we’re bang on target, with over 84,000 homes completed.
Our approach to funding this (however) is radically different to previous governments. We have set our investment and rental policies, so that for every £1 in grant, we have secured £3 in private investment.
But just as importantly, we have sought to provide a long term framework to encourage even more investment, into both affordable homes and the private rented sector.
Thus, in the Chancellor’s recent Spending Round announcement, we have set out the grant regime for funding affordable homes, right through to 2018.
And on rents, we have set out a clear, 10 year rental policy of Consumer Price Index +1%. The gives people the confidence to plan their investment for the short, medium and long term
And the result is that (in addition to our current programme), we will, from next year, accelerate our annual building rate (for affordable homes) to 55,000. This is a fastest annual rate of building, for at least 20 years.
To date several housing associations have responded well to this challenge. Take London and Quadrant. Last year by making £11 million in operating savings, they were able to generate enough funds to develop an extra 10,300 homes.
Or take Sovereign Housing. They have taken a new strategic approach to stock rationalisation. They have acquired or transferred over 4,000 homes since 2004, which has enabled to them to achieve an annual efficiency saving of 5%. This has been used to reinvest for both services to residents and a pipeline of over 3,000 affordable homes in the next 3 years.
But we need more housing associations to step up to the plate. Our next phase of Affordable Housing will involve what we’re calling ‘something for something’ deals.
In return for the next £3.3 billion in grant, we’re calling on housing associations to bring forward ambitious plans. Plans which maximise their own financial contribution and help us build the extra homes we all want.
Now housing associations tell me they’re up for it. Great. But now we need to turn this into action. That’s why I will be calling a summit early in the autumn, to hear how they intend to turn their ideas into new homes.
Private rented sector
We are similarly ambitious for the private rented sector.
In recent years, demand has been growing rapidly with 3.8 million households now living in private rented accommodation. Indeed 1.5 million new homes have come into the market in just 7 years.
This growth has been welcome, but much of it has so far come from small scale, buy to let landlords. Now is the time to move further and faster, particularly by bringing in other new players into the market.
Put simply, we want a bigger and better private rented sector. A sector in which large scale and experienced institutional investors have a significant role.
Small scale individual landlords have a role of course, but if you look at mature markets such as Germany, Switzerland and the US, institutional investment in the private rented sector is much stronger than it is here. Evidence from those markets shows that where institutional investment is strong, the costs are driven down and the sector becomes more professional.
So we’ve implemented the key recommendations of the Montague Review.
First, the Built to Rent Fund is designed to stimulate building, by supporting off the shelf investment opportunities. Worth £1 billion in total, it’s proved highly popular in the market, with bids in the first round capable of delivering up to 10,000 new homes. The first contracts are due to be signed later this summer and we have now confirmed there will be a second round of bidding, which will start from September.
We are also providing multi-billion pound debt guarantees, to underpin investment in both the private rented and affordable housing sectors.
The Affordable Housing Guarantee Scheme is worth up to £3.5 billion and is being run by Affordable Housing Finance, part of The Housing Finance Corporation. This will then enable housing associations to borrow and (when combined with the £450 million in grants) could help deliver up to 30,000 new affordable homes to rent. This is over and above the 170,000 already planned by 2015.
Now, at the same time, the £3.5 billion Private Rented Sector Guarantee scheme will offer direct guarantees to a wide range of housing providers. The full application process is about to open and we’ve already had expressions of interest.
And subject to demand, both the affordable and the private rented sector schemes, could be boosted by a further £3 billion, which we’re holding in reserve as those schemes mature.
A better sector
However, I also want this to be a better sector, especially for tenants.
The Housing Act 1988 has helped create the right regulatory framework for the sector, one which has enabled more people to invest, in more and better stock.
Indeed the quality of privately rented homes is improving dramatically. In 2003 the proportion of homes in the sector with damp stood at 22%. The latest figures has seen that fall to just 4%. In 2006, the proportion of non-decent homes in the sector stood at 47%, nearly half. Just 6 years later in 2012, it dropped to 25%. That’s a substantial change in a sector that’s growing.
And perhaps most interesting, satisfaction levels of tenants with their privately rented home are now higher than for council homes.
Now this is not to say that every privately rented home is satisfactory. Many are not and some are dreadful. And that is why we are cracking down on rogue landlords, people who routinely exploit their tenants.
So, in addition to the £2.5 million we have provided to increase enforcement activity to tackle ‘beds in sheds’. I’ve now written to all local housing authorities inviting them to bid for a share of £3 million funding to tackle the problems, that rogue landlords cause.
And there is another area which needs improving. The quality of service from some letting and managing agents.
Whilst the majority of letting agents offer a perfectly good service, I am well aware that a small minority who act in a way which ranges from incompetent to downright illegal.
So that’s why we have now introduced primary legislation which will require all letting and managing agents in England, to belong to an approved redress scheme. This will enable tenants (and indeed landlords) the means to pursue complaints; the opportunity to drive out the cowboys (who give the sector a bad name) and also a chance to raise standards.
I want to take this opportunity to commend Peter Bolton King (and others from the RICS) in leading the call for this change. I tried (unsuccessfully) to get the last Labour government to do this, so I am proud that, as a Chartered Surveyor and now as Housing Minister I have now been able to right that wrong.
So ladies and gentlemen.
If we are going to reverse the past failures in housing, we need to take a comprehensive approach that is broad in scope and long in vision.
One that boosts not just supply but also demand. Which helps tenants, as well as home buyers. And one which recognises that alongside new homes, we need to make the very best of existing land and empty homes.
There is no single solution here. And nor will we overturn a generation of undersupply, in a single Parliament.
But I strongly believe that we are making good progress.
We’ve unlocked 45,000 homes on sites, which have been stuck for years.
We’re creating a bigger, better Private Rented Sector.
We’re building 170,000 affordable homes.
And now we’re committed to accelerate this to the fastest rate of building, for at least 20 years.
There is lot more to do. But I believe that we can ensure that people have the homes that they need, now and for generations to come.