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Tony Pidgley CBE: The housing market and its future

The housing market and its future: how do we meet demand?

Thursday 29 November, 2012

"I've been asked a very simple question: how do we meet demand? Well there's a very simple answer: build more good homes, fast.

Over the last ten years, the UK population has increased by over 3 million. These people need somewhere to live.

During the 1960s, we built 300,000 homes a year. In the 1980s, we built 180,000. Fewer than 115,000 homes were built last year.

In London, last year, only 18,000 were built. Savills estimate we'll have a shortfall of 50,000 in the capital over the next 5 years.

Now of course there's an important discussion about delivering the right development in the right place. But fundamentally, there's a massive under-supply of housing.

And though all of us here might get that, it's not commonly understood or accepted out there. Believe me!

There is simply not enough urgency. Not enough drive. And not enough support from the public when it comes to tackling the crisis.

So I'm going to focus briefly on 4 issues we should tackle over the next 12 months:

  • First, investment.
  • Then mortgages.
  • A bit about planning.
  • And finally, communities.

So let's start with investment. We need to show that housing can lead the recovery. In London, the impact of delivering the shortfall of 50,000 homes would be:

  • 80,000 new jobs
  • and £18 billion for this country's GDP.

What unlocks all this is investment. Government funding has been slashed and it's not coming back any time soon. At some point, we might see the proceeds of 4G phone licences funding affordable homes. But right now, we need alternative sources of capital.

One of those is from international investors. They play a critical role in tackling London's housing crisis. International investment is often the difference that makes development viable.

It supports cash flow early on. It underpins the provision of public amenities and affordable housing. It creates jobs. And it generates very significant revenue for the Exchequer.

And yet we attack it! The Government is considering changes to the way we tax UK property that will drive investors away. These could be announced in the Autumn Statement next week and the Finance Bill on 11 December.

I'm not suggesting special treatment for people at the top end of the market. It's about a simple, stable tax system. A system that makes everyone pay their fair share and also makes it clear that Britain is open for business.

Let me bring this alive - Berkeley has secured one billion pounds of international investment in the last 5 years.

This underpins £260 million worth of Section 106 agreements and three quarters of a billion pounds in tax that we've paid over this period.

Of course it's good for us as a business. But it also creates jobs and homes. It creates growth and prosperity. It's what will keep London a cosmopolitan, world-class city.

So we need to attract investment - and right now the crucial issue to address is taxation.

So that's the first thing that will help us meet demand. The second is mortgages.

First Buy and New Buy are good initiatives. I support them. But they're limited in scale.

The real challenge is mainstream lending by the banks, and here we have a problem. If the FSA insists that the banks must increase their capital ratios, it's going to put a break on lending.

If the Nationwide and others have to put more money aside, they will lend less. And if they lend less, we will build less.

There is capacity in the industry to increase production. But most developers are not rushing to build because they aren't confident they can sell.

And simply put, that's the second big challenge for the next 12 months.

The third issue is, of course, planning.

We've had a revolution in the planning system over the last 2 years. My own view is that now we need a period of stability. We all need a chance to get to grips with the changes. Get Local Plans in place. And start to implement the presumption in favour of sustainable development.

The appeals system itself has got to reflect the spirit of the NPPF. I'm not sure that happening at the moment. And we need inspectors to be able to give 'minded to grant' decisions.

Instead of just saying yes or no to appeals, it would make a lot more sense to go back to the old system where they can tell us that a scheme is approved provided we make the following changes. That would often speed up development considerably.

I also think we've got to strengthen councils. It's no good to us as developers if a local authority is on its knees. We need them to have the capacity and confidence to show more leadership and make decisions quickly.

And we need councillors involved much more - and much earlier - understanding proposals and saying what will work and what will definitely not.

My last point is about communities.

I think that as an industry we are not very good at selling development. We need to communicate the benefits of housing much more powerfully.

There is a great story to tell about making better places. Just look at somewhere like Kidbrooke Village. It's an incredible transformation of an estate where people feared to go into somewhere that you'd love to live.

And that's not unique to Berkeley. The quality of housing across the sector has improved dramatically in the last ten years. But we need to get out there and tell people. We have to offer communities much better reasons to support development.

At our best, we all deliver a lot more than housing. We create fantastic homes in amazing places.

Our latest research - for example - shows that residents on Berkeley developments feel safer, happier and more neighbourly than people living in other similar places. Their ratings are better than those for the rest of London and better than for Britain as a whole. They feel they belong, they regularly talk to their neighbours and they plan to stay in the community.

It's proof that new housing has come a long way. It can help deliver growth. And it can create strong communities.

Our challenge is to get the investment, and get on site."

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