housing & economic growthdoc.housing.org.uk.s3.amazonaws.com › presentations... · atlas...
TRANSCRIPT
Housing & Economic Growth
Opening plenary: Maximising potential to create housing
and economic growth
Speakers: Peter Jones
Head of Area – Berkshire, Swindon, Wiltshire, Homes and Communities Agency
Stephen Aldridge
Director for Analysis and Innovation, Department for Communities and Local Government
Chris Walker
Senior Economic Advisor, Department for Communities and Local Government
Stuart Ropke
Assistant Director of Research and Futures, Department for Communities and Local Government
Chair: Lindsay Todd
Chief Executive, Radian
Delivering the Government’s housing ambitions
Peter Jones,
HCA Head of Area
15 January 2013
Current situation: we always need
to do more Demand for housing growing
Supply not growing fast enough
Housing remains unaffordable to many
Markets still shaky and developers
wary, though profits rising again
Ageing population = changing needs
Local partners at front line of meeting
this need and managing impacts
Housing supports economic growth
Government recognises this and is
pushing to do more
Autumn announcements
September package:
Single shop window for public land
Centralising ownership: programme from other public sector bodies
Support to unblock large scale stalled sites: enabling
Autumn Statement
Around £225m to accelerate large sites
£190m for investment in public sector land sites and enable quicker disposal
£100m to bring forward public sector sites for development
“We play a key role in Governments ambition to make the best use of
public land to benefit communities”
Local large scale projects
Cranbrook, East Devon
New town of 6,500 homes
First phase well underway;
school and energy centre
complete
£20m investment in Phase 2
Delivers new town centre,
primary and secondary
school
Accelerates delivery from
300 to 500 homes a year
Working with partners on
other local large scale
projects
Land with a capacity of 100,000+ homes has been identified across government departments
Public Sector Land Programme
The HCA land work
Other peoples land
HCA land and programmes
Economic assets Get Britain Building Land Disposal and
Development Accelerated land
disposal Large scale sites
Public Land
Delivery support to DCLG
on public land programme
ATLAS (planning support on
large sites)
Alignment of landownerships
and structuring complex
transactions
Local alignment and support
including City Deals and GPF
Use of standard
models and toolkits
Common issues barriers across all land types (include upfront infrastructure
costs, cash flow, demand and market risk, leadership continuity and political will)
so delivery needs to be brought together
Fast moving picture: much to get
to grips with
HRA reform
Growing role of public land
Unblocking large sites
More support for affordable
housing
- More funding and guarantees
New models and tenures
- PRS, rent-to-buy, Affordable
Rent
Planning and strategy context
Responding to NPPF
- Especially building capacity on
viability and land supply
Ensuring Local Plans are robust
Understanding why sites are
stalled - Finance? Viability? Demand?
Neighbourhood Plans
LEP growth plans
Tenancy strategies
Impacts of welfare reform
Responding to Green Deal
Making best use of the PRS
City Deals: Localism in action
Joint Investment Board – LMDC and Board
– Bristol Public Property Board
– Work towards combined authority – Sheffield, LCR, Newcastle
Housing Investment Fund/revolving funds
Joint investment planning
Aligning HCA assets to deliver economic growth priorities
Recycling HCA receipts from disposal of assets: – Exceptionally for GM and Birmingham
Wider public land and property role
Continued HCA enabling support
But we can’t take our eye
off the ball
AHP is well underway
First six months of 2012, we
completed 11,981 homes and
started on site with a further 5,243
SSW delivered 26% of completions
and 29% of starts
Negotiating schemes, allocations,
rents, planning…..
Renegotiating S106?
Working locally to take advantage
of opportunities (Custom Build)?
All this in a tough climate
Reduction in resources and funding
Tight borrowing restrictions
Some new (and old) opportunities:
- New Homes Bonus (growing)
- Regional Growth Fund (more announced)
- Growing Places Fund
- HRA headroom (plans underway)
- Build to Rent Fund
- Business Rate reform coming
- More infrastructure funding announced
- New investors entering the market
- Public land
This creates opportunities to
innovate
PRS developments – funded by
local pension schemes?
Working with LEPs on new
Growth Plans and to strengthen
links between housing and the
economy
New governance and delivery
models, pooling resources and
working across areas
Continuing innovation in
partnerships, JVs and PPPs
Using local authority land
We’re here to help
Providing commercial support and expertise to help: – Unlock land
– Put together deals with the private sector
Helping develop, refine and deliver local plans for housing and growth: – Aligning assets and bringing
together funding streams where appropriate
Assisting with funding bids
Planning support: – Including on large sites, S106
renegotiation
Contact Details
Peter Jones – Head of Area,
Berkshire, Swindon, Wiltshire
0117 937 7242
homesandcommunities.co.uk
/HCA_UK
/homes-&-communities-agency
17
HOUSING AND GROWTH
Presentation for the Housing and Economic Growth Summit
Ageas Bowl, Southampton
15th January 2013
Stephen Aldridge
and
Chris Walker
18
The purpose of this presentation is to set out:
1. An overview of the current macroeconomic situation
2. Housing’s contribution to the economy
3. The role of housing in supporting economic recovery
4. Housing’s contribution to longer term economic growth
19
1) Macroeconomic overview
20
GDP fell sharply during the recession – by around 6% - and
is yet to return to pre-recession levels
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
Ch
an
ge
in
GD
P s
inc
e 2
00
8 Q
1 (
%)
GDP
London in
particular, but
also the South
East and the
South West,
appear to have
experienced a
slightly
shallower
recession than
the rest of the
country
Data Source: ONS
21
The economy continues to recover, but more slowly than
expected
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2005 Q1
2006 Q1
2007 Q1
2008 Q1
2009 Q1
2010 Q1
2011 Q1
2012 Q1
Qu
art
er
on
Qu
art
er
GD
P G
row
th (
%)
GDP Growth Average growth (2000 Q1 - 2008 Q1)
Average growth (2008 Q2 - 2009 Q2) Average growth (2009 Q3 - 2012 Q3)
The slower than
expected
recovery is a
product of:
•A greater than
expected impact
of the financial
crash on GDP
•Commodity
price inflation
that has reduced
real incomes
•Global/euro
area
uncertainties
Note: 4th Quarter preliminary GDP estimates will be published on 25 January.
Data Source: ONS
22
The latest forecasts from the Office for Budget
Responsibility suggest growth will remain below trend until
2016
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
2011 2012 2013 2014 2015 2016 2017
An
nu
al
GD
P g
row
th (
%)
Actual OBR Forecast
Recovery from
credit booms
and busts can
take longer
than other
types of
recession,
because of the
time it takes to
de-leverage
debt
Data Source: OBR
23
However, both the OBR and Treasury note, there continue
to be significant uncertainties and risks surrounding these
forecasts
There are significant global uncertainties, including:
1. Euro area – economic momentum remains weak and tensions from the crisis
are still evident
2. United States – although the “fiscal cliff” was avoided, the deadline for
agreement on spending cuts has been delayed until 1 March, and agreement
on raising the “debt ceiling” is still required
3. Growth in developing countries - has slowed. Although, the latest indicators
suggest growth, notably in China, may be starting to pick up once more
These factors are impacting on business confidence and investment in
the UK, and on UK exports.
24
In contrast to output it is worth noting that employment
levels in the UK economy have been more buoyant and
now well exceed pre-crash levels
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
Ch
an
ge i
n E
mp
loym
en
t an
d G
DP
sin
ce 2
008 Q
1 (
%)
GDP Total employment
Since early 2010
the public sector
has lost 600,000
jobs. However,
the private sector
has created 1.2
million new full
and part-time
jobs – 500,000
more than
predicted.
Youth
unemployment
has also been
falling recently,
down 72,000 in
the latest quarter
Data Source: ONS
25
Employment levels are above their recession levels in
London. However, the South East and South West are yet
to see unemployment return to pre-crash levels
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
Ch
ang
e i
n e
mp
loym
ent
fro
m 2
008
Q1
(%)
South East South West London
The East of
England has
seen the highest
increase in
employment
levels since the
recession, an
increase of over
3 per cent. The
North East and
North West have
also seen
increases in
employment, of
1.9% and 0.8%
respectively
Data Source: ONS
26
The Government has put in place a number measures to
support economic growth
In the short term, it has sought to:
Ease credit and funding constraints
• Providing £375 billion through quantitative easing, by the Bank of England
• Setting up the Funding for Lending Scheme, to reduce the cost of credit
• Creating a business bank to help small firms in particular access finance and support
• Investing £600 million alongside £650 million from the private sector in four new funds that
will lend to mid-sized companies
Promote infrastructure investment
• Providing up to £40 billion in government guarantees to ensure that priority projects in the
infrastructure pipeline can raise the finance they need
• Switching resources from resource to capital programmes: £5.5 billion in the Autumn
Statement
Boost exports
• Increasing export finance for small firms: £1.5 billion in the Autumn Statement
• Increasing the resources available to UKTI to support more
small and medium size exporters
27
The Government has put in place a number of measures to
support economic growth
For the longer term it has sought to: Maintain and increase investment in science and innovation • Protecting programmes in the 2010 spending review • Providing £600 million of extra resources in the Autumn Statement for Research Council infrastructure,
and facilities for applied research and development (R&D) • Creating a new generation of ‘catapult’ technology and innovation centres • Creating a Patent Box, with greater tax relief for creative sectors • Encouraging the development of a “Tech City” in London – home to 200 high-tech companies Invest in skills and education • Providing £1 billion pounds in the Autumn Statement to expand good schools and build 100 new free
schools and academies, and a further £270 million to improve further eduction colleges • Taking the number of apprenticeship starts to almost 1 million Back major infrastructure projects • E.g. HS2, the Northern Line extension, road and rail projects across England Put in place a more competitive tax system • Reducing corporation tax from 28% to 24%, with legislation to reach 21% in 2014 • Reducing the top rate of income tax from 50% to 45% Reduce unnecessary and inefficient regulation • Moving to a one-in-two-out rule for new regulation: building on reduced burdens on business of £850
million per annum so far
28
2) Housing’s contribution to the economy
29
Construction output contributes around 8% of GDP.
Housing – including, building and maintenance and repairs
– accounts for around 3 per cent of GDP
Contribution of housing to construction output (%)
2.5%
14.8%
5.7%
11.4%
65.7%
Public new building
Private new building
Public repairs and
maintenance
Private repairs and
maintenance
Other construction
Contribution of construction output to
UK GDP (%)
8%
92%
Construction Rest of the economy
Data Source: ONS
30
House building has fallen since the recession. Although,
there has been some increase in net additions over the last
year
-
5,000
10,000
15,000
20,000
25,000
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Valu
e o
f n
ew
ho
usin
g c
on
str
ucti
on
ou
tpu
t (£
mil
lio
n)
0
50000
100000
150000
200000
250000
Net
ad
dit
ion
s
Value of new housing construction output Net additions
The fall in
construction
output
contributed one
fifth of the
overall 6.1%
contraction in
GDP following
the financial
crash
Data Source: ONS and DCLG
31
255,000
260,000
265,000
270,000
275,000
280,000
285,000
2006 Q1
2006 Q3
2007 Q1
2007 Q3
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
Gro
ss V
alu
e A
dd
ed
(G
VA
) o
f U
K E
co
no
my (
£ m
illi
on
)
Quarterly GVA (excl. construction, extraction of oil and gas, and financial services)
Indeed, if construction, North Sea oil and gas and financial
services are excluded, the economy has broadly returned
to pre-crash levels of output
Of the current
approximately 3%
gap between current
GDP levels and peak
GDP levels
construction makes
up around 43% of
the gap, and within
this housing makes
up 18%.
Financial services
and extraction of oil
and gas make up
34% and 26% of the
gap respectively.*
*Note: the numbers sum to over 100% because output excluding these sectors is now slightly above the peak level
Data Source: ONS
32
3) The role of housing in supporting economic recovery
33
Housing can play a key role supporting recovery
• The sector has spare capacity – meaning it can grow without creating inflation
• It has strong job multipliers, as building and repairs and maintenance are labour
intensive
• Job growth helps to underpin aggregate demand for goods and services within the
economy
• Housing construction does not rely heavily on imports, which drag on growth
It is estimated that there is a supply chain multiplier in construction of 1.78, i.e. 1
construction job supports 0.78 jobs elsewhere in the supply chain.
For every £1 million of new housing output, 19.9 workers are needed for a year. For every
£1 million of housing repairs and maintenance 30.8 jobs are supported.
Source: Scottish Government, and Construction Skills and DCLG analysis
34
The short term prospects for UK growth are highly
dependent on creating the right conditions for greater
investment, including in housing
Summary of the OBR’s central forecast
Source: HMT
35
A number of factors have been holding back greater
housing investment
Demand-side barriers
• Lending – banks are less willing to lend as the perceived risk of house
prices falling is higher
• To reduce banks exposure to this risk, higher deposits have been
demanded
• The cost of borrowing for banks has increased due to uncertainty in
the economy, and higher risk aversion in the financial sector
Supply-side barriers
• The fall in house prices has reduced the financial viability of building,
leading to stalled sites
• Reduced access to investment finance, particularly for smaller
suppliers
36
The Government has put in place a range of policies to
support the housing market in the short term
Demand-side
• The NewBuy scheme, enabling households to access 95% mortgages for new build homes
• FirstBuy, supporting first time buyers by providing an equity loan to reduce the size of the
deposit and size of mortgage required
• Creating a debt guarantee scheme for up to £10 billion to support affordable housing and
private rental homes
Supply-side
• Introducing the Get Britain Building fund to unlock building on sites with planning
permission
• Supporting the release of public sector land and reducing planning delays to accelerate
major housing projects
• Affordable homes programme with new affordable rents
• Increasing the maximum discount available for Right to Buy – for the first time, all the
additional sale receipts will be recycled back into new affordable rented homes
37
The Department monitors the impacts of all initiatives and
broader measures impacting on the housing market
Demand-side
• Funding for lending (mortgages): “The availability of secured credit to households was
reported to have increased significantly in the three months to mid-December 2012,
driven in part by the Funding for Lending Scheme. A further significant increase was
expected over the next three months” BoE Credit Conditions Survey
• NewBuy Guarantee = could help up to 25,000 additional sales over 3 years, 2,000
reservations so far
• FirstBuy = up to 27,000 first time buyers by 2014, 10,000 reservations so far
Supply-side
• Get Britain Building = unlocking up to 16,000 new homes, nearly 9,000 already under
contract
• Public Sector land = land for 100,000 homes; land sold for 33,000 affordable homes with
new affordable rents
• Affordable homes programme: target = 170,000 homes by 2015, approx 70,000 so far
• Right to buy one-for-one replacement, estimated = 20,000 homes by 2015, 200,000 Right
to Buy enquiries
• Large sites = to support 50,000 new homes
Source: DCLG estimates
38
4) Housing’s contribution to longer term economic performance
39
The current rate of housebuilding is not keeping pace with
the number of new households, which is primarily driven
by population growth
-
50,000
100,000
150,000
200,000
250,000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Net
ad
dit
ion
s t
o t
he h
ou
sin
g s
tock
Net additions Projected average household formation (2008 - 2033)
Over 70% of the projected
increase in the number of new
households is from population
increases.
Alongside this an ageing
population will lead to a greater
number of single person
households.
These are not forecasts, but
projections based on socio-
demographic trends
Data Source: DCLG
40
Housing plays a key role in supporting long run economic
growth through interactions with the labour market
An adequate supply of housing in the right places is needed to:
• Ensure housing is affordable and that workers can be retained in and attracted to areas
where the jobs are. Unaffordable housing risks raising labour costs and undermining
business competitiveness and productivity
• Support geographical labour mobility, lower levels of unemployment and increase
output
• Support the realisation of agglomeration economies – the increases in productivity
associated with geographical clustering of populations and economic activities
41
There is not a strong correlation between the affordability
of housing – measured by house prices divided by incomes
– and the supply of housing in an area
R2 = 0.0002
0
10
20
30
40
50
60
70
80
0 2 4 6 8 10 12
Affordability ratio, 1998
Com
ple
tio
ns/1000 p
opn,
1999-2008
Not only are we not building enough houses, there is some evidence that we are
not building houses in the right places, reflected in a poor correlation between
demand (measured by affordability) and new building supply.
Com
ple
tions p
er
1,0
00 p
opula
tion
Source: DCLG internal analysis
42
Enablers • Introducing a simplified National Planning Policy Framework that creates a presumption in favour of
sustainable development • Supporting LEPs via the Growing Places Fund which provides up-front funding to get local
development under way • Capital infrastructure fund for large sites • Establishing a £2.6bn Regional Growth Fund leveraging in over £13bn of private investment • Creating 24 Enterprise Zones across the country to support both new and expanding businesses New Partnerships • Working with local areas to create 39 Local Enterprise Partnerships (LEPs), aligned with functional
economic areas, to play a key role in driving economic growth • Agreeing 8 City Deals and a second wave Incentives • Delivering a New Homes Bonus that rewards local councils when they provide more housing for
their local population • Community Infrastructure Levy –15% or 25% to go to local communities (depending upon whether
they have a neighbourhood plan) • Giving local authorities a direct stake in local economic growth by allowing them to keep 50% of the
local business rates revenue • New freedoms e.g. Tax Increment Financing
The Government has put in place a range of local growth
measures to support the housing market and broader
economic development over the longer term
43
The Heseltine Review could lead to further measures,
including:
• Central government budgets supporting growth being put into a single funding
pot for local areas
• LEPs developing a long term strategy and business plan to bid for these funds
from central government
Government is considering the report and Lord Heseltine’s recommendations and will
respond in the Spring.
However, the Autumn Statement announced that the Government will devolve an increased
proportion of growth related spending on the basis of strategic plans developed by LEPs, in
line with Lord Heseltine’s recommendations.
44
Summary and key messages
• The UK economy has come out of recession more slowly than expected – the result of a
range of international and other factors, including problems in the Euro zone.
• OBR forecasts suggest the UK will progressively return to trend growth rates by 2016.
• Construction and housing, North Sea oil and gas and financial services have contributed
significantly to the recession and sluggish recovery.
• Construction/housing investment has a key role to play in supporting economic recovery
in both the short term and the long term but there are both demand side and supply side
risks.
• The Government has taken a range of measures to promote growth both in the housing
market and generally – including putting in place a new regime for enabling local
economic growth.
• The evidence suggests recovery from credit booms and busts takes longer than other
types of recession because of the time it takes to de-leverage debt but the framework for
future growth is in place.
Stuart Ropke
assistant director, research and futures
15th January 2013
Maximising potential to create
housing and economic growth
Overview
• Why do we need more homes?
• What are the barriers to more development?
• What role can local authorities and LEPs play?
• Increased devolution of funding = more homes?
Population growing
(Office for National Statistics, Subnational Population Projections, Sept 2011)
…and changing too
(Department for Communities and Local Government, Live Table 420, Nov 2010)
The politics of housing and growth
How does building affordable homes
help the UK economy?
Type of Impact
How does building new affordable homes impact GVA?
A £1m investment in affordable homes will generate £2.41 m in the UK economy in total.
A GVA multiplier effect 2.41.
How does it impact incomes?
For every £1 of salary from employment generated by investment in affordable homes, a total of £2.46 of salary will be generated in the UK economy in total.
An income multiplier effect of 2.46.
How does it impact employment?
For every 1 FTE jobs generated by investment in new affordable homes, a total 2.51 jobs will be created in the UK economy.
An employment multiplier of 2.51.
Source: CEBR report for National Housing Federation 2013
So why aren’t we building more
homes?
• Industry remains
risk averse
• Welfare reform
• Funding
uncertainty
• A 1 year CSR
The role of local authorities and
LEPs
• Make the case for
development –
promote and prioritise
the role of housing
• Release land
• Use New Homes
Bonus
• Invest in their own
right
Will devolving funding help?
• City deals huge
potential
• Some concerns
– Flexibility
– Transparency
– Accountability
– Ensuring homes built
in the right places
• Does it make sense?
Conclusions
• The case for housing has been made and heard
at a national level
• Government has acted but yet to see real step-
change in production
• Unlikely to change while uncertainties remain
• For rhetoric to turn to action, concrete action
required
• Could devolution of funding work to get more
homes built?
Housing & Economic Growth
Your feedback is
important to us!
Thank you for attending and
please don’t forget to
complete your evaluation
form and hand it to a
member of Federation staff
before you leave.